JMC Projects (India) Limited (KPIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Kalpataru Power Transmission Limited and JMC Projects Limited hosted by DAM Capital Advisors. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors. Thank you, and over to you, ma'am.

Yes. Thank you. Good morning, everyone, and welcome to the Q4 FY '22 Earnings Call of Kalpataru Power Transmission and JMC Projects. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. Amit Uplenchwar, Director of Group Strategy and Subsidiary Operations; Mr. Ram Patodia, President, Finance and CFO; and Mr. S.K. Tripathi, Managing Director and CEO of JMC Projects. I'll now hand over the call -- floor to Mr. Manish Mohnot for his initial remarks, post which, we'll open up the floor for Q&A. Over to you, sir.

Thank you, Bhoomika, and good morning, and a warm welcome to everyone for the KPTL and JMC Q4 and Full Year Earnings Conference Call. Trust each one of you and your families are keeping safe and are in good health. The initial few minutes, I will focus on my thoughts on the strategic aspects of the business. And later, I will share the notable highlights of our financial and operational performance. The operating environment continues to remain challenging with the recent geopolitical conflicts, high commodity prices and disruptions in supply chain. In the midst of these headwinds, we have made notable progress on many strategic fronts. In line with our efforts to prioritize growth in the core EPC business, we have significantly scaled up our T&D and civil businesses during the year. We have also enhanced our international reach and achieved significant breakthrough in securing large-sized EPC orders. By doing this, we are consistently improving our competitive position and business mix with emphasis on segments and markets that have higher growth outlook and better margin profile. Our consol order book visibility, including L1, is at an all-time high of over INR 40,000 crores. In financial year '22, we have entered 4 new countries, taking our global footprint to 67 countries. We have improved our market standing by securing high-value projects in the T&D, water, B&F and urban infra space. In the T&D business, we have secured single largest order till date in a history of INR 3,276 crores in the South America market. It's not Brazil. Additionally, we secured our first international order for the B&F business in Maldives and oil and gas pipeline projects in the Middle East. JMC's Water business has achieved record order inflows of INR 3,286 crores in '22, significantly expanding its geographical reach within India. In the road business, we have won 2 new projects in Africa valued over INR 2,200 crores. In the urban infra business, we had L1 in a large-sized airport project in Asia and has emerged as a top bidder for a metro rail project in India. The average size of most of our recent order wins, including the ones which we are L1, is over INR 900 crores. Moreover, around 75% of these orders have price variation clause or are long term in nature, which will very well safeguard us from the current volatility in the markets. Our subsidiary Linjemontage has reported good growth in revenue and profitability since the acquisition in March '19. We have almost doubled the size of the business. In Fasttel Brazil, we are strengthening the organization alongside integrating the systems and process in line with KPTL, and they have reported a loss for Q4. In line with our vision and efforts to become a leading EPC company, the Board of KPTL approved the scheme of merger of JMC with KPTL in February '22. This is a significant milestone for both the companies to unleash its growth potential and drive the next phase of growth. The merger will help integrate diverse EPC capabilities in the high-growth segments and markets. The merged entity will benefit from operational and cost synergy arising from scale and size of the combined business. The merger will also enable us to bid for large-sized complex projects along with improved management bandwidth. Moreover, the combined entity will have a strong balance sheet and financial flexibility to invest in core EPC business to create long-term value and achieve our vision of a USD 3 billion revenue organization by 2025. The process of getting necessary approvals for the merger are underway and progressing as per schedule. The merger is expected to be completed by Q4 F '23. In financial year '22, we've also made considerable progress on our deleveraging journey with improvement in working capital management, record number of project closures and completion of divestment of T&D BOOT assets. We have reduced the consol net debt by 45% from '20 levels. Our net debt is at INR 1,902 crores with a net debt-to-equity ratio of 0.43x. We have been successful in reducing our debt alongside pursuing business growth, CapEx and M&As over the past few years. We are working hard for resolution of our road BOOT assets and anticipate favorable results in the coming quarters. We expect to complete restructuring of Wainganga road project in the first half of this year as we have received majority of approvals from the lenders. Simultaneously, we have started refinancing construction of Vindhyachal road project. We expect the cash outflows to come down with the completion of restructuring of WEPL. In regards to our Indore real estate project, we have achieved sales of around 60% of units and received cash flow of around INR 160 crores from project till date. We plan to complete the balance sale in the current financial year. Now let me predict -- now I'd like to provide you with key highlights of our financial and operational performance. At KPTL consol level, we have delivered robust performance with top line growth, stable margins and notable drop in debt levels. Our consol revenue grew by 1% in Q4 and 14% for full year to INR 14,777 crores. Our revenue growth was on back of strong execution in B&F, water and international T&D subsidiaries. Revenue of LMG Sweden was INR 1,191 crores, and Fasttel's revenue was INR 548 crores for full year '22. LMG has achieved a revenue growth of 12% Y-o-Y with improved profitability. Our consol EBITDA margins remained under pressure with the elevated level of commodity price and other input pressure. EBITDA margin was 7.3% in Q4 and 8.6% in financial year '22. Our PBT was INR 157 crores in Q4 and INR 696 crores in financial year '22. PBT margin for full year '22 was 4.7%. Our PAT was INR 115 crores in Q4 and INR 535 crores for full year '22. Consol net debt was at INR 1,902 crores, which is a decline of 17% compared to last year. Our net working capital has improved from 102 days in '21 to 98 days in '22. Our consol order inflows was INR 18,161 crores in '22, which is a growth of 11% compared to previous year. Our consol order book as on 31st March was INR 32,761 crores, up 17% Y-o-Y. Till date in financial '22-'23, we have received new orders of INR 3,819 crores. Additionally, we have L1 of around INR 4,200 crores spread across water, urban infra and T&D business. The Board of Directors of KPTL has recommended a dividend of INR 6.5 per share, which is in line with our dividend policy of 15% to 20% of PAT as dividend. At KPTL stand-alone level, revenue was INR 2,010 crores in Q4 and INR 7,062 crores for financial year '22. Our revenue declined due to lower order inflows during the first half of the year, lower dispatches in the T&D business and slow project progress in a few oil and gas pipeline projects. T&D revenues, including Linjemontage and Fasttel, grew by around 8%, and railways revenue grew by 2%, while oil and gas revenue declined by around 20%. We were able to maintain EBITDA margin of 8.5% in Q4 and 9.2% for financial year '22. We have prudently made provisions for CTC account by -- cost on account of high commodity costs on existing projects, and we have provided INR 418 crores on CTC losses in Q4 for the next year. Our lower revenue growth and fall in EBITDA margin has led to fall in PBT NPAT. Our net debt has declined by 47% Y-o-Y to INR 414 crores. This is in line with the guidance to be a significantly lower or negligible debt company. KPTL, along with Linjemontage and Fasttel, received orders of INR 8,159 crores in '22. Our closing order book as on 31st March '22 at stand-alone is INR 15,759 crores. We have received new orders of INR 1,626 crores till date in the current financial '23. Additionally, we have an L1 position of INR 1,500-plus crores largely in our T&D business. I would like to highlight a typo in our investors presentation on Slide #14. T&D's share in total capital stand-order book is 71% instead of the typo of 61%. Please note that. In JMC stand-alone, we reported strong revenue growth of 16% in Q4 and 45% for full year '22 to INR 5,353 crores. Our revenue growth was driven by robust execution in B&F and Water business. JMC's EBITDA business (sic) [ margins ] were at 8.5% in Q4 and 7.9% for full year '21. Our EBITDA margin was impacted given higher commodity and other input costs. We expect margin to improve going forward as most of the projects have price escalation provisions in JMC. Our PBT before exceptions and ECL provision was INR 66 crores in Q4 and INR 166 crores for full year '22. ECL provisions and exception items pertaining to road BOOT SPVs have impacted profitability for full year '22. Our net debt at INR 640 crores at the end of March '22 is much lower compared to the net debt of INR 512 crores in the previous year. The increase in debt is on account of growth in working capital, CapEx and investment in road BOOT assets largely towards repayment. JMC received record order inflows of INR 10,199 crores in '22 and order book that is a high -- all-time high of INR 17,139 crores at the end of March '22. JMC has also received new orders of INR 2,193 crores till financial -- till date in '23. There's additional L1 provision of around INR 2,700 crores. Going forward, we'll continue with the strategy to drive sustainable and profitable growth by: one, accelerating growth in core business; second, building efficiencies to improve competitiveness; third, sharpen capabilities by improving integration of JMC and KPTL; and strengthening balance sheet through debt reduction, exit of noncore business and efficient capital management. Let me now conclude with the outlook and guidance for the next year. Despite the near-term headwinds due to fluctuations in commodity prices, geopolitical uncertainties and high input costs, we remain favorably placed to navigate these challenges given our established EPC capabilities, strong order book, robust balance sheet and well-diversified business mix. We expect consol revenue to grow in excess of 15% for next year with PBT margin in the range of 5%. We will target consol order inflows of over INR 21,000 crores for full year '23. We will continue with our deleveraging journey by actively looking to exit noncore business and improving our capital management with further target debt reduction of around INR 300 crores to INR 400 crores in financial year '23. With this, I would request the moderator to open the lines for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Swarnim Maheshwari from Edelweiss Securities.

Yes. Congratulations for managing in such a tough environment. Sir, my first question is, I mean, if you can just spell -- if you can just give us some more color on this INR 3,200 crores of single ticket order that we have taken. What is the nature of this order, if this is a EPC contract? And what's the time line? I mean, just trying to understand from the risk perspective, to be honest, because it's quite a big ticket size order.

Sure. So Swarnim, this is an order of around 700 kilometers of a T&D line end-to-end EPC to be delivered in Chile. This order has 3 components. The first component is engineering, design and necessary approvals, which will continue for the first 12 to 18 months. Then we start with the EPC project, which needs to be delivered over a period of 36 to 42 months. The entire order, whether it's designed, whether it is procurement, whether it is construction is with [ them ]. The client has responsibility for environment and ROW, which will be done by the client in that part of the country. So the order has to be executed over a period of 5 to 6 years. It's a large -- 2 large developers in that country, and we have to do the end-to-end EPC.

Okay. But -- okay. You mentioned the execution period is 5 to 6 years.

So as I said earlier, first 18 months is primarily engineering and design. As such large orders, engineering and design takes time, right, and -- which is a significant component where we'll have to put all the efforts. And post that, the execution will start. So from a revenue perspective, there's only less than 10% of the orders revenue which comes in the first 18 months and balance after that.

All right. And safe to say this would be funded by multilateral agencies?

So this is a business that's funded by 3 large developers in that part of the world. I wouldn't be able to give you the exact names, but they are developers whose net worth is in the billions and billions of dollars, right? So they have won a transmission project, and we are the EPC project. They are very, very large developers. They're much bigger than any organization we have in our country.

All right. Okay. Got it, sir. Sir, secondly, in one -- in the last quarter, we had mentioned that the execution had got postponed to Q4 because of some delay, and it was a strategic call on delay in dispatches. But I think the Q4 still continued to be same in terms of execution challenges. We can understand on the margin pressures and all because of commodity, but I just wanted to better understand on the execution front.

You're right, Swarnim. Q4 also, we had some challenges, right, primarily on supply chain logistics issue more than anything else. As an organization, we have not delayed anything because of commodity pricing, and that's why we continue to take CTC losses. But supply chain continued to be a dampener, right, availability of -- and the entire Ukraine thing happened. And then the China thing happened where the vessels got blocked, all of that. So supply chain continued to be a challenge. We see that challenge continuing even in the current quarter, and that's why I'm targeting more growth at a consol level of 15%. KPTL stand-alone could still have growth challenges in the current year. We're definitely growing because it's a degrowth compared to the previous year, and we have visibility of order book. But yes, supply chain disruptions continue to be a challenge while we speak now.

[Operator Instructions] The next question is from the line of Narendra Mhalsekar from IIFL Securities.

Sir, with regards to your guidance for 15% plus sales growth at consol level, like is it fair to assume that this growth will largely be driven by JMC portfolio as T&D continues to face execution headwinds? And if you exclude the HVDC order inflows for T&D have fairly been weak, so what would be your guidance for the stand-alone business in inflows and revenue for FY '23? And also, what is the sort of fixed price contracts -- share of fixed price contract in your order book? And how do you see the stand-alone margins going from here with the lows of 8.5% seen in 4Q?

Excellent. I think you've asked me all the questions in one, which is good. Okay. So let me go step by step. Yes, you are right. I think a significant portion -- percent of the growth comes from JMC. So our internal target is KPTL will grow in the range of 10% to 15%. JMC will grow at the range of 15% to 20%. Why are we confident of that 10% to 15%? Because we have also received some orders in the last few weeks, which we have declared, where delivery can start immediately. So confidence of 10% to 15% is visible because the visibility on that in the current order book is good, right? Second, where do we expect margins to be? So as we have declared at a consol level, we expect PBT without any exceptions to be in the range of 5%, right, which converts to an increase in -- if you look at on a consol or a stand-alone basis, an improvement of closer to 15% to 20% compared to what we have reported today. At the EBITDA level, we expect both the companies to be in the range of 9%. We are not projecting 10%, what we have seen in the previous year as of now, because although we have seen some softening in commodity prices last 2, 3 weeks, but we would still like to wait for a few more because steel is something which is very volatile. We would still like to wait for a few more months before we revise those targets. On -- so 1, 2, 3. Then you had a question on that visibility on T&D. I think the visibility on T&D has improved significantly in the last 3 to 4 months, driven by a lot of factors. One, international funding agencies have started bidding for projects again. They have started funding projects again, and that's a big thing in the international market. Second, on domestic market, you're seeing a lot of states coming out with projects and even PGCIL coming up with cost-plus, which all of us are aware of, the entire [indiscernible], which is a big thing for PGCIL, where we should have a reasonable share. So with that, I think achieving that 10% to 15% growth for KPTL in the current year would not be a challenge. The last question you had was on the INR 21,000 crores order book target. I think as of now, it's equally divided. Both the companies have a target of being in the range of INR 10,000 crores to INR 11,000 crores of fresh order inflows. As of now, today, we have visibility of around INR 7,500 crores, including what we have declared today. And our own view is that achieving that INR 21,000-plus crores should not be a challenge given the current visibility. I hope I answered everything. Is there anything I left? 1, 2, 3, 4, 5. Yes, I think I've answered it.

[Operator Instructions] The next question is from the line of Parikshit Kandpal from HDFC Securities.

So my first question is on the CTC provisions.

[Operator Instructions]

My first question is on the CTC provisions. So how much of CTC provision has been taken in the fourth quarter of FY '22?

Parikshit, I think I just declared that number. We have taken a provisioning of INR 118 crores primarily in KPTL on a lot of projects where based on the commodity price of 31st March, we have taken some provisioning. We follow this policy driven by our corporate governance norms as well as driven by the requirements of auditors, where we look at the pricing as of 31st March. We do believe that there could be some savings in this once -- looking at the current meltdown in commodity, which we have seen over the last 2 quarters. But our provision is at INR 118 crores in Q4 on CTC.

So at the 31st March prices, sir, so what kind of margin does the price will remain at that level? So what kind of margins -- so you say 9% is what you are guiding on. But if the prices remain at that level, so is it right to assume that we assume almost double-digit margins in the 31st March level?

So Parikshit, as I said, I just don't want to comment on that at this stage because the volatility is so high. We saw steel coming down by INR 2,000 last week. We don't know what's going to happen tomorrow. What we are clearly guiding is a PBT margin at the consol in the range of 5%, right? And that's something which we are guiding, looking at everything what we have looked at today. We would come back with revised guidance on margins if we see this volatility, meaning a reduction in prices, continuing. Clearly, if it continues to go down, you'll see margins going up. But I just don't want to comment on it right now because it's completely externally driven, not driven by any one of us either on the call or in the room today.

Sure, sir. Sir, my second question is on the Kohima transmission monetization. So if you can reconcile in the cash flows, how it is getting reflected? Because part of it is funded through debt and then through loans and advances, structured debt and then as equity. So how is it reflecting in the cash flow, if you can just reconcile that?

Amazing question. I'll have to come back to you on this, Parikshit, whether it comes from cash from operations or cash from investments. My own understanding would be, and I'm going to take help of Ram on that. Ram?

From investing activities.

So the entire thing comes -- so what our CFO has confirmed is the entire thing comes from cash flow from investing activities.

Because I just see that about INR 157 crores has come in from the proceeds from sale of subsidiary and joint ventures. So I understand it was about INR 500 crores, which has come to us. So if you can -- Ram can help us. If he doesn't have it handy, maybe later in the call, if he can just tell us how [indiscernible].

So that equity, what -- to the extent we have an equity, that wouldn't come in cash flow from investing activities. Ram, maybe you could answer this.

Yes. And then there's a loan amount also, which is a forming part of -- recordable from this buyer, which is also forming part of my investment actually. So we divided that entire cash flow into 2 or 3 lines based on the requirement as per accounting standard.

So maybe basing it on a smaller book, we might be able to give you the details.

Sure, sir. Sure. And sir, just my last question, so the Linjemontage joined Fasttel. So you did mention about the revenues. The revenues have fallen in the fourth quarter. You mentioned there's a growth in Linjemontage, 11%, 12%. So if you can just comment on why the revenues are falling in the fourth quarter for both entities? And what is the total annual profitability of these 2 entities at the EBITDA level and the [indiscernible] level?

So I think it's just a mix of orders more than anything else. Q4 for Linjemontage just continues to be a quarter where weather impact is also there. But it's just a mix of order book more than anything else for both of them, right? As far as next year is concerned, we expect both the business to grow only at a single-digit level, okay, because Linjemontage has grown significantly over the last 3 years. They have doubled themselves in 3 years. And normally, after 3, 4 years, it's time to revisit growth, get the team in well, standards and processes. So Linjemontage, we expect a growth of only 5% to 10% in the current year. As far as Fasttel is concerned, we have taken a loss provisioning of around INR 27 crores in the current year, in financial year '22, with a number which is closer to INR 35 crores in Q4. With this, we do not believe that Fasttel would have any losses going forward. This is all as far as losses are concerned because the whole order book is delivered. They're today sitting on orders which they have won in the last 6 months only. So going forward, Fasttel also, we -- in fact, we expect EBITDA to be positive more in the range of 8% to 9% only. As far as both the business together are concerned, we do not expect them to grow beyond 5% to 7% in the current year.

Okay. And what was the EBITDA margin of LMG, sir, Linjemontage for FY '22?

So the -- it was in the range of -- so if you look at gross and net, and I'm saying net because there's some put/call options for which we have to do a provisioning, so at the net level, it continues to be in the range of 6% to 7%.

Okay. Okay. And both these entities remain debt free, right? There's no debt on...

No. So Linjemontage remains debt free. It has surplus cash. They've also declared some good dividends, which you should see in our books coming into Q1. As far as Fasttel is concerned, they have a small debt, which has come up in Q4.

[Operator Instructions] The next question is from the line of Bharat Sheth from Quest Investment Advisors.

Manish ji and S.K.T. on excellent performance in challenging time. Now on the merger, I mean, the large part of the FY '23 have been, I mean, asked by the people. But so if you look at a 3-year perspective postmerger, I mean, we have stated that we expect INR 100 crores benefit in operational side. Is that a fair understanding?

Yes.

And this will be more of a front-loaded or back-loaded saving? And how much could be the saving in finance cost -- I mean, overall finance, if you look at, I mean, only core business?

So a significant portion of the savings will be in the finance cost. It's not that -- so if I divide this saving into 3 areas, one is finance costs, second is operational efficiencies, right? So a significant portion will be in finance cost because today, the rating of the 2 divisions are different. The profile of debt is different, all of that. As far as operational efficiencies are concerned, we do not see significant reduction happening in people cost because with the growth, I think we'll be absorbing all the people we have. We will actually have to recruit more people. So -- but we expect operational efficiencies to come in, making sure that we have the best of the processes, making sure that there's focus on delivering before time. And that's going to be a big advantage also. That's why we're saying INR 100 crores to INR 150 crores saving, which is what we have projected looks visible. And that's also there in our final margin guidance. If you look at it, we are at around 8.6% consol EBITDA in the current year, and we are saying we'll be in the range of 9%. That's visible thereof.

Okay. Okay. Fair. And this 8.6% is despite, I mean, writing off 9%, may further -- if commodity prices sustain at this level, then there could be some benefit. Is that fair understanding?

So our write-off at the EBITDA level is minimal. I think the write-off is more behind EBITDA. At the EBITDA level, we have hardly any write-offs, right?

Yes.

Okay. Okay. Sir, and coming to now on this, where we have, say, in your initial opening remark, we have received 1 L1 in airport side in Asia also, which has been given on the Slide #4. And we were also in tunneling projects. So what are the status of this new area of verticals that we are entering?

Yes. So Bharat bhai, S.K.T. here. So airport, yes, we are L1 in a large airport in Asia. I will not give the specific details, but this is a sector which we have been trying to get in for a long time in India as well as the international. And we see a good visibility of this business building up in Africa going forward. And that is why we have built on a single large EPC project, which builds us the -- brings us the [indiscernible]. Coming to the -- your second part of the question, the tunneling, yes, strategically, we are trying to enter this business. But currently, what we have here -- Manish here said in the opening remarks, we are L1 in a large metro project, which is basically an elevated corridor, which we have executed in the past also.

Okay. And we are L1 in one tunneling project...

Just to add to that, yes. Just to add [indiscernible].

See, we were, I mean, L1 at the end of Q3 in one tunnel project. So what is the status of that project?

So Bharat bhai, that project is still in question with government, where the -- some security clearances are -- have been raised by the government because we had a Turkish partner. We are trying to resolve that problem. So it's still -- matter is in the court. This is under sub judice.

Okay. And Manish, see...

And Bharat bhai, this road, we have not taken in our L1 numbers, right?

This tunneling project.

This tunneling project.

Okay. Okay. Okay. Fair. Manish, you said that is this gross borrowing -- I mean, net borrowing is -- at consol level is INR 1,900 crores. So how much is at core level? And if we really reduce -- I mean, divest, I mean, some of the road projects, so this INR 300 crores, INR 400 crores savings, what you are talking is over and above if we divest some of the borrowing may go out?

So at core level debt, if you look at KPTL and EPC together, KPTL and JMC together is around INR 1,100 crores net debt. We have not taken any proceeds from divestment into our target INR 300-plus crores reduction in net debt. If that happens, it will be over and above that. This INR 300 crores to INR 400 crores comes only out of internal efficiencies, working capital, project closures and a focus on being lowly leveraged from a long-term perspective. So we have not taken -- yes, we have taken Indore in this because we expect a lot of cash flows to come with it. We have targeted around INR 125 crores of cash flows to come out of Indore in this current year, and that is included in this INR 300 crores to INR 400 crores number.

Okay. And any update on -- with this restructuring and divestment plan of the road as well as our logistics business?

So I think what I mentioned earlier also, we are in advance stage of discussion with bankers on both of them. We've got all the approvals, except one bank, post which, we will apply to NHAI. We're expecting we are pushing to get that approval in the next few weeks, post that NHA, whatever time it takes. As far as refinancing is concerned on one of the projects we've got, there's a couple of proposals from large bankers and NBFCs. We're working on that also. And hopefully, Q2, we should be able to give you clarity on that. As far as Shubham Logistics is concerned, I think that's something which could take some more time because that business has headwinds which are very different today. With the increase in wheat prices and commodity prices, you're seeing warehousing revenue come down by closer to 25% in Q4, right, because people are just exporting. But yes, last Friday, the government has banned export of wheat, and that would have an impact. But as of now, we kept that on a back burner. I don't see that happening in '22, '23, for sure, and we have not budgeted for anything out of that in our targeted debt reduction. But yes, we have declared that as noncore, and it's only a matter of time that we start looking at it as a strategic investor or any other option for that business.

Okay. And last question, postmerger with the strong net worth, so how much incremental, I mean, say, on the project bidding side, separately, if we are bidding only for, hypothetically, INR 500 crores or INR 1,000 crores from JMC, so post that, how much of that we can increase?

So today, we don't have a challenge from a bandwidth perspective of bidding for any size projects. But yes -- but strategically, we are saying that we would be bidding for high-value projects only, merging the strengths of engineering and civil across the 2 companies. We will be one company, and we should be declaring the name soon. Strategically, our focus is we will continue to bid for large projects only. Unless strategically, we need to address a new entry strategy, new country strategy, any of that. But the focus will be shifting to bidding for large projects only.

Last question, Manish. We said that 74% is with the price escalation, I mean, whatever order we have won. So my belief is that in international, it's a fixed price contract. So these things are changing from here on?

Yes. We've seen -- we have also -- recently, we have signed an international contract where the client has a principal increase for a variable price. So slowly and steadily, we are pushing clients. I'm not saying that we've been successful a lot in saying that this kind of volatility is something we as contractors can't absorb. And we're pushing this domestic and international. Have we succeeded? My view is out of the last 5 contracts, we have succeeded in 2, right, which is not bad, but we would have loved to succeed in all 5. So it's a mindset change, which will happen over a period of time. And for all you know, this commodity meltdown happens and we come back to reasonable levels, the push could be different. But yes, we are pushing for at least the volatility being absorbed by the developers instead of the EPC contractors.

The next question is from the line of Prem Khurana from Anand Rathi.

My questions are with respect to JMC. So just -- I mean, to begin with, when I look at our order backlog and look at the composition, infra is almost around 53-odd percent now. I think when we embarked on this journey to kind of diversify our order backlog, I mean, we used to be around 10-odd percent on the infra side. The idea was going to go to 30%, and we have come to almost 53%. Given the fact it might become a part of the order backlog now, so -- and then at the same time, your private sector F&B seems to be making a comeback now with residential real estate cycle going good. So do you see this mix to sustain at these numbers? Or do you get to see -- the thought process where, I mean, the private F&B could again become larger than infra going forward? And also, if you could share your thoughts on how the international and domestic mix change. It's become -- I think, as of now, it's around 22% international, which used to be negligible for us. And given the fact that we're looking at some more international geographies, fair to assume, I mean, that international would also -- could also go up even further?

Yes. So going forward, the B&F is getting a lot of traction domestically. But we are also expanding B&F also now on the international foray. And few successes have been there. And going forward -- so to answer your question, this ratio of the B&F private-driven will get -- keep reducing because our focus today, domestic side, we have huge opportunities on the government side. And the international also, our 100% projects are multilateral funded or so-called the government funded. There's nothing private funding. Now with the increased size in the order booking, which is now being driven by the international and water, this ratio will further get skewed. And -- but B&F also will grow, along with the other government opportunities. So to answer your question, the non-B&F, nonprivate business will keep on increasing proportionately going forward the next 2 to 3 years horizon.

Sure. And it is unlikely to have any change in the working capital cycle that we get to have and if it is, let's say, comparison between private and public? Or does the working capital cycle, I mean, you assume it will be the same, right, with both the segments?

It will remain same, and it keeps changing based on the market condition. And we keep moderating it, depending on the market condition, right? So whether -- so we moderate the order inflow. If we find that cash flow inflows are tight, then we go and focus somewhere else. I think it's more of a moderation seeing the overall situation of the sectors.

Sure. And sir, I mean, in this order backlog, almost INR 17,000-odd crores, how much would be water orders and possible to share, I mean, how much would be bought out component in these waters? I mean, because there, the margin really should be lower than, I mean, what we make with the pure EPC projects on the bought-out components. Possible to share, I mean, how much is order backlog in this and how much is bought out a portion in these water orders?

So water will be -- out of INR 17,000 crores, water will be about INR 7,000 crores. Out of this, the bought out will be almost 70% of the -- this will be bought out. Most of the water contracts, they are covered by the escalation. But recently, due to the very sharp clip in the commodity prices, the indices, they've never moved so quickly as the commodity prices. And that is why we have seen some erosion in the profitability. But as the market stabilizes, I think the water contract, the margin -- overall margin profile is better than the average what we are showing for the company as a whole. And we see this kind of visibility to continue at least for the next 1 to 2 years.

And just 2 more, if I may. One more, I mean, essentially on -- if you could share the status on the asset sale that you would be already -- that you were planning to sell. Where are we in terms of our efforts now?

So asset sales at the moment, see, the current situation, we are not seeing any traction in the market realistically. But we have reworked on the strategy now. One asset is already terminated. There, we are working with NHAI and the bankers to settle the termination payment. So that cash outflow -- yearly cash outflow is a stock. The WEPL, there, we are already -- we briefed in the manager's brief that we are working on the restructuring. Something should happen in the Q1. The BEPL, it's sort of self-sustaining, and we are going for the refinance there. Hopefully, that should happen, say, in the next 2 quarters. And Agra, Aligarh, any in the BEPL is a small asset. So it is self-sustaining. So these 2 assets now with the current revenue spectrum, which has now touched to about INR 58 lakh per day, right?

Yes.

So there is -- so if you look at these assets, including repayments, they are -- we need a revenue of about INR 66 lakh. Last year, they were only INR 47 lakh. And now they are at about INR 58 lakh per day. If this trend continues, it significantly improves the health of the -- both portfolio, and our obligations to fund more and more reduces. So this is our overall strategy here. One asset we will refinance, one asset we will restructure, and one asset we are trying to settle with the NHAI on the termination payment.

Sure. And just one last, I mean -- so I think in your earlier remarks, I mean, you spoke about kind of getting into newer segments. So would that mean you need to kind of incur some more incremental CapEx, I mean, over and above what we generally get to have in terms of run rate? So you spoke about, I think, underground metro, and you're getting into airports as well in that area. So you're going to kind of take up some more orders on airport side in Africa. So would that need you to kind of incur CapEx which is in excess of, I mean, the run rate generally that we get to have with us?

So we are trying to balance the overall portfolio. If I look at water, they don't require any CapEx, and that is what we are leveraging to build other businesses, right? So if the Water business requires only 3%, CapEx may be underground and the airports, they require 10% to 15% level of CapEx. We are balancing both that so that the overall CapEx investment remain in demand. And anyway, with the merged entity going forward, we will have the better ability to fund the CapEx, which are -- particularly in the underground project, which are very capital intensive. And that is what currently the -- our strategy to fund the capital-intensive projects and rebalance the portfolio on the CapEx side.

Sure. How do we kind of target -- and if you could share the absolute number for FY '23 in terms of CapEx? And that will be my last question.

CapEx number for FY '23.

So on a consol basis, we expect CapEx to be in the range of INR 300 crores for FY '23.

The next question is from the line of [ Jainam Shah ] from Equirus Securities.

Sir, my question is related to the road assets of the JMC. So sir, if you see that the Kurukshetra that we have given the termination notice to the NHAI, and we have also provided for some of the provisions in our books, so I sort of wanted to know how much investment is still there in our books for the KEPL in terms of equity plus loans plus some cost equity if we have.

So KEPL, everything is provided. There is nothing left to be provided in KEP. And our investments today stand at a number closer to 0.

Okay. And sir, any amount to be received from NHAI would be directly going to the lenders for the repayment of the loan. So there will not be any incremental payment from our side in the coming 1 year, like in the formality of this combination.

So that is our best endeavor. As per the concession provisions, NHAI is supposed to pay to the lenders what is due to them. But knowing NHAI, it is a journey we have to travel with them. I'm sure you understand the way the NHAI conducts on these issues. So we have received the engineer recommendation, which says that with the full debt obligation, all the bankers can be paid off. NHAI is evaluating it. We are working with them, and we'll come to know in -- by the end of this quarter how NHAI is going to handle this issue.

Okay. Okay. And sir, any adjusted equity kind of thing that we are expecting to get back? Like -- although we have provided everything, but any kind of positive cash flow we can expect from this asset?

No. No. No.

Okay. And sir, you said that we were requiring INR 66 lakh for the -- these 3 road assets for the overall repayment of the 3 road assets. So are we factoring into any major maintenance into that INR 66 lakhs or any major maintenance will be over and above that? So what I believe is that there might be some major maintenance cycle in upcoming 1 to 2 years for one of the projects. So I just wanted...

So let me rephrase what I have said. INR 66 lakh is the subsistence revenue, including the debt obligations, right? And currently, we are at INR 58 lakh compared to the INR 47 lakh of last year. So there is a lesser pain now to manage these assets. That is the point number one. As far as the major maintenance is concerned, this is to be funded separately, which is not part of this number, right? And we don't have major repair obligations, which are there maybe in '24, '25. But there also, we have taken a strategy where we are spreading the major maintenances because if there was no traffic last 7, 8 years and there was no revenue, there's no immediate need to do the major repairs. And those repairs, we are spreading over a period of 2 to 3 years strategically in order to contain the funding requirements.

Okay. Okay. Got it, sir. And sir, if we just take a scenario that the said financing of WEPL take some more time, then any -- how much funding is expected for FY '23 as you have done INR 81 crore for this FY '22? So any ballpark number for the upcoming 2 years for this funding? Like is it like INR 8 lakh in 2, 3, 60 days, something like that?

So last year, our total funding in these SPVs was to the extent of INR 140 crores. This year, it is to be -- expected to be in the range of about INR 80 crores, INR 70 crores to INR 80 crores, depending on the -- how the revenue comes on the full year cycle.

Okay. Okay. And sir, the INR 140 crores there you have told versus INR 81 crores reported into the presentation, so this balance, INR 60 crores, is for the Kurukshetra, if I'm not wrong.

Yes.

[Operator Instructions] The next question is from the line of Teena Virmani from Kotak Institutional Equities.

Sir, my question is related to KPTL stand-alone. We have seen a sharp increase in the working capital requirement for KPTL stand-alone. So what exactly contributed to that sharp increase? And going ahead, how do we see that panning out for the company? So are the CTC provisions, which are taken for around INR 118 crores, are they part of the working capital? Or is it part of the overall expenditure which the company has reported?

Teena, I think you've answered a few questions yourselves, which is good. So let me first answer the last one. Yes, provisions continue to be part of working capital, first. Second, why has the working capital days gone up? There are 2 specific reasons. One, we have focused on not increasing our customer advances given the interest rates, given our low debt level right? That's a conscious call if not -- and focus, not increasing customer advances where the interest rates are much, much higher. And second, consciously, last 2 quarters, we have also made sure that creditors' payment is much higher than it would typically be. So our creditor days have come down significantly at a KPTL stand-alone level. Both are conscious efforts, right, given the low interest rates and given that we have a low debt. As I said earlier, on a consol basis, we are targeting to be in the range of 90 to 100 days as far as net working capital is concerned, and we're pretty confident we'll be there.

So sir, even if I address this creditor days and another adjustment related to CTC provisioning, then also the working capital cycle is much higher. So going down to almost around 90 to 100 days would require a correction of somewhere in the range of 35 to 40 days of correction from the current levels of FY '22. So do you think it is possible in the next 1 to 2 years when we know that the environment is a little volatile?

I'll just be very clear on what I said. On a consol basis, we expect 90 to 100 days. As far as KPTL is concerned, we will continue to be at a slightly higher level. And the current environment, because we are still -- with that low debt and all of that, we are still not taking too many customer advances. So from 134 days, we definitely plan to bring it down to levels of 120-odd days in the next year or so. But it's not going to be significantly lower. At JMC, it will be lower. And consol, we should be in the range 92. So from 134, our target would be getting it down closer to 120 levels by the end of next year.

Okay. Got it, sir. And then my second question is on overall consol revenues. Like if I see overall consol revenues are around INR 148 billion for '22. And stand-alone number -- if I add up the stand-alone numbers and JMC numbers, there is still a shortfall. So where is the shortfall coming through? Because stand-alone INR 70.6 billion and JMC is around INR 55 billion. So where is the gap coming in from? Because Shubham you mentioned that there are challenges on the growth side. So what exactly is contributing to this gap between consol and these 2 entities?

So I think the biggest gap is KPTL Sweden, Linjemontage, which is closer to INR 1,100 crores. Then there's Kalpataru Brazil, which is close INR 500-plus crores, and then there's Shubham Logistics. So if you add all of that, because stand-alone, Linjemontage and Brazil are not reported in the revenue. So if you add all of that...

Okay. So this is not part of your revenues on a stand-alone basis?

Perfect. Put together, they are around INR 1,700 crores plus, Sweden and Brazil. And then you have Shubham also at around INR 120 crores.

Okay. My last question is regarding the guidance for the JMC. So given the fact that the order inflow for the company was quite good and order book is also very good, so why such a conservative guidance of around 15% to 20% for JMC? Is there any kind of delay that you see from the customer side to go slow or in terms of payment otherwise? Like I mean, we see the order book is fairly strong. So I believe the growth should ideally be much more than 15% to 20% for JMC.

So I think you are right. Looking at the order book, the numbers could be much better. We just want to be slightly conservative at this stage, right, because there are these global issues happening, all of that. But you're right. Last year also, we had guided JMC to be in the range of 20%, and we have done 40%, right? So current year also, we believe that this could come up, but we would just like to wait for 1 more quarter to be sure that what numbers would come up. But yes, you're right, 20% minimum is visible. It will go up beyond that only.

The next question is from the line of Parikshit Kandpal from HDFC Securities.

Just on the loss funding, sir. So last call, you have said that about INR 15 crores to INR 20 crores will be the recurring loss funding. Now it's again INR 70 crores, INR 80 crores number, which you have mentioned this quarter. So just if you can break up this number, is there any major maintenance included in this? Because you were expecting some INR 150 crores of major maintenance in FY '23. So does that include that?

Can you repeat your question once again?

Just on the loss funding, you said that in FY '23, about INR 70 crores to INR 80 crores of loss funding will happen. So just wanted to understand from the last quarter call, you had said that about INR 15 crores to INR 20 crores will be the loss funding on a recurring basis, and there could be some things which will come up on major maintenance in FY '23. So this INR 70 crores to INR 80 crores, does it include any major maintenance?

Yes. So out of INR 70 crores to INR 80 crores, about INR 20 crores to INR 25 crores towards the maintenance obligation, right? And the balance will be towards the loss funding.

The number seems to be on a higher side, sir, because we were looking at settling down the loss funding on a recurring basis to about INR 20 crores. So does it have an impact of delay in the restructuring of WEPL, that's why this number is higher? So I just wanted to understand what would be the normal recurring loss funding from hereon after the WEPL restructuring.

So you are right. Currently, the numbers were -- because the restructuring thing, if it gets delayed by another quarter or so, that is why these numbers, we have still kept a little on higher side, depending on the outcome with NHAI.

But on a recurring basis, what could be the loss funding, sir, including major maintenance and the delay and assuming that the restructuring of WEPL will happen? So from there on, how much will be the recurring loss funding?

Right. So if it happens, there could be a reduction of another INR 10 crores to INR 15 crores.

And on FY '24, how much would be the loss funding after restructuring there?

'24, we can come back to you, confirm with the revised working because all will depend on the traffic scenario, right? So it will be wild to guess -- putting any number now. But if the number goes, as I said, the subsistence revenue is at the level of INR 66 lakh. If it crosses that, then we have a lot of problems solved on these projects.

So I'll just give you a different perspective to it based on what S.K.T. said. INR 66 lakh versus INR 57 lakh, we have a shortfall of closer to that INR 10 lakh, right? And if I put that number, assuming things don't improve that, then we're looking at a INR 35 crores to INR 40 crores funding only for debt management and interest. If the number INR 58 lakh goes up to INR 62 lakh, great. If it comes down significantly, it is something. But as of now, if you look at the numbers given by S.K.T., there's a half mix of MMR, and the balance is INR 35 crores to INR 40 crores is what will go out for maintaining the cash flows on these 3 assets.

But sir, what should be the guide for restructuring on this number? Is it different from...

So ideally, if it happens the way we want it, this number of INR 40 crores could come down to closer to a single-digit crores getting into the next year. But as I said, ideally, right, because there's the final negotiation that's happening with the bankers, so a few things up and downs can happen. And that's why I just want to restrict that for maybe a few more quarters because the moment it is done, we'll come back to you at the first instance to tell you exactly what the number would be.

Okay. And my second question is on the elevated cash levels in the balance sheet, close to about INR 900 crores. So why are you keeping such high cash levels? And what do you intend to do with that cash?

So I think this cash level is only -- stay at the quarter end and the year-end primarily for various reasons, which I just don't want to discuss on the call because we have banking limits which we need to utilize and all of that because we have huge limits. So typically, at quarter end and year-end, you'll always see that we have high cash levels for a few days in our balance sheet.

Okay. Last bit on the lengthened [indiscernible] data, net cash data, which you have mentioned and also if you can mention about the pledges. So earlier, the promoters have guided a pathway towards reducing this pledge. So where are we on the journey of reducing pledge? And when can we see some concrete actions happening there [indiscernible]?

So we continue to be on the date which we had given in the December quarter. We believe that starting Q2, the pledge will start coming down. That's what the promoter have told us, given the increase in sales and the kind of traction which the real estate has. So we don't see pledge coming down in Q1. But what we have been given or informed by the promoters is that starting Q2, the pledge will start coming down.

And the net cash status at the KPTL level, if you can just comment there?

Net cash?

At the KPTL level. We were trying to reduce the debt to near 0. So if you can just give some color around that.

Again, it would be difficult to give you a rank number at KPTL. As I said earlier, on a consol basis, and that's a better way to look at it, we expect debt to come down by INR 300-plus crores. And significant amount of this would be at KPTL because Indore itself, we're expecting INR 125-plus crores. So -- but it's good to look at it on a consol basis because hopefully, by the year-end, then we declare this will be one entity.

But Indore, how much is the revenue and the whole cash flows, including what is unsold, which we can realize from that project now?

INR 250-plus crores.

INR 250 crores?

Yes.

The next question is from the line of [ Thomas George ] from -- an individual investor.

Mr. Mohnot, congratulations on a very successful set of results. I have just a small question in terms of looking prospectively after the merger. What will be the employee size of our company, both the companies put together?

Mr. [ George ], so we are currently at levels of around 7,500 people on the merged entity. Given the growth prospects, we believe this could slightly go up. But our own projections is we should be in the range of 7,500 crores -- level as far as employees are concerned.

As there are no further questions, I now hand the conference over to Ms. Bhoomika Nair for closing comments. Over to you, ma'am.

Yes. I would just like to thank everyone for their participation and particularly the management for giving us the opportunity to host the call. So thank you very much and wish you all the very best.

Thank you very much, Bhoomika, and thank you, everyone.

Thank you. Ladies and gentlemen, on behalf of DAM Capital Advisors, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.