Kalpataru Projects International Limited (KPIL) Earnings Call Transcript & Summary

Good morning, everyone. On behalf of DAM Capital, I would like to welcome you to Kalpataru Power Transmission and JMC Projects Q4 FY '21 Earnings Call. The management today is 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, JMC Projects. I'll now hand over the call to Mr. Manish Mohnot for his opening remarks. Post which, we'll open up the floor for Q&A. Over to you, sir.

Thanks, Bhoomika. Welcome, everyone, and very good day to all of you. I trust each of you and your families are well in safe. I'm thankful to you for attending this earning call of KPTL and JMC. The year 2021 was a remarkable year for KPTL despite a challenging business environment led with pandemic and volatility in commodity prices. KPTL and group companies have delivered a resilient performance with higher stable consol revenue, profitability and order book for the year 2021. Our consol net debt as on March '21 is at the lowest level in the recent past. Despite the pandemic, we were successful in closing transactions of Alipurduar and Jhajjar transmission assets. Simultaneously, we have scaled up the international business at KPTL and JMC and have entered 5 new countries, including establishing local presence in Brazil. We now have global footprint in 62 countries. Additionally, we have made considerable progress on restructuring of road BOT assets. Before I move into details on our financial and operational performance, I will share a quick update on key strategic initiatives, particularly related to our long-term assets and subsidiaries. We have received major approvals pertaining to a deal of Kohima-Mariani Transmission asset and expect the transaction to close by end of June '21, this quarter itself. We are in advanced stage of restructuring for Kurukshetra and Wainganga road BOOT assets and expect the process to get completed by end of June '21. Again, this quarter itself. We have received active interest from large investors from our Vindhyachal road BOOT asset and expect this sale to be completed in financial year '22. We expect to have a nonbinding offer in the next few months for this asset also. JMC has reported highest ever order inflows and order book in financial year '21. JMC entered into 2 new countries last year and have won a large international order in Ethiopia, which was declared yesterday. JMC will continue to leverage KPTL strengths to gain strong foothold in international market and will continue to reinforce its leadership position in the focused businesses in India. We've completed the acquisition of Fasttel in Brazil in April '21 with an opening order book of INR 670 crore. Brazil is one of the largest T&D market, and we're confident to make a strong presence there in the next few years. Our Sweden subsidiary, Linjemontage has reported strong numbers, with revenue growth of 84% in financial '21 and 100 bps improvement in EBITDA margins. Since the acquisition in 2019, we have scaled up Linjemontage business with twofold growth in revenues and 3x investment in profitability. We've completed sale of 35% of total units on our Indore real estate project. Due to COVID, sales was affected in the last quarter. However, we expect the balance units to be sold in the next 12 to 18 months. In case of Shree Shubham Logistics, we're getting good interest from large active players and PE funds given the improvement in performance. We expect some concrete output during the current year. All these steps evidently demonstrates a clear focus to improve the core EPC business and build a strong financial position to invest in future growth. Additionally, we put a lot of efforts on strengthening our organization by building a strong leadership team. We continue to be at the forefront of investing in digital technology and automation to bring efficiency in every sphere of our operations. Coming now to the financial performance, first at KPTL consol level. Consol revenue for quarter 4 '21 grew by 16% on back of strong execution in T&D, B&F, Water and Urban Infra business. For full year '21, our consol revenues have reached at a record level of INR 12,949 crores with a Y-o-Y growth of 2%. We have sustained double EBITDA margin of 10.9% in Q4 and 11.4% for the full year on a consol basis. Our EBITDA margins were impacted due to commodity price and COVID-related costs. The details of which will come later on. However, our consistent focus on costs has helped to limit the fall in margins. Our exceptional item for '21 is in relation to divestment of Alipurduar and Jhajjar transmission assets. PBT after exceptional items grew by 199% in Q4 and 46% for the full year. PAT for the full year has improved by 70% to INR 662 crores. Our consol net debt is one of the lowest in recent past at INR 2,300 crores, which is a decline of INR 115 -- INR 114 crores compared to last year. Our financial year '21 was one of the best year in terms of order inflows. We have received record orders of INR 16,359 crores in '21, with the year-end order book of INR 27,900 crores. And additionally, L1 position of around INR 2,300 crores at a consol level. Now the numbers at a stand-alone level, KPTL stand-alone. Our revenue grew at -- to INR 2,337 crores for Q4, largely on back of good performance in T&D. For full year '21 revenue declined marginally to INR 7,671 crores due to disruptions caused by COVID pandemic and lower dispatches due to container availability. For full year '21, T&D revenues, including Linjemontage grew by around 12%, oil and gas and railways declined by 14% and railways has declined by 10%. We continue to maintain double EBITDA margin of 10.4% in Q4 and 10.5% for full year '21. PAT for Q4 increased 21% to INR 130 crores. And for full year, it improved by 33% to INR 615 crores. Our net debt is at INR 756 crores adjusted for interest-free loans received towards sale of our ATL. Our finance cost as a percentage of sale is at 1.4% for '21, well below the guided range of 1.5%. Our order inflows for KPTL stand-alone was at INR 8,443 crores, with year-end order book of INR 13,890 crores. Our L1 as on date is around INR 1,300 crores. JMC stand-alone, we have recorded higher sales quarterly revenue INR 1,349 crores, a growth of 44% compared to Q4 last year. Our growth has been driven by robust execution in B&F, Water and Urban Infra business. Our full year revenue reached INR 3,689 crores, with a marginal decline of 1% compared to last year, even with that first quarter being written off due to COVID. We have scaled back to double-digit EBITDA margin of 10% in Q4, given persistent effort to control costs. Our full year EBITDA margin declined to 9% due to COVID-related expense rise in material prices. PBT grew by 67% in Q4 to INR 80 crores. Full year PBT was INR 102 crores. Our PAT improved to INR 60 crores compared to a loss of INR 34 crores in Q4 last year. Net debt at JMC's lowest level in past few years of INR 512 crores at the end of March '21. Focused efforts on collection and project closure has led to improvement in working capital. JMC received record order inflows of INR 7,900 crores in '21, taking its year-end order book to INR 14,000 crores at the end of March '21. During the current year, JMC received orders of INR 3,034 crores, including order of 2,204 crores declared yesterday. Our L1 at JMC as on date is around INR 1,000 crores. In our road BOOT projects, average daily revenue was INR 53.4 lakh per day. Toll collections in Kurukshetra road project was affected due to farmers' agitation. In Q4, we made an additional investment of INR 45 crores in our road project, taking the total investment to INR 866 crores at the end of March '21. At Shubham Logistics, revenue in '21 was INR 149 crores, a growth of 13% with EBITDA of INR 46 crores and PAT of INR 5 crores for the entire year. As guided earlier, we achieved profitability for full year. We expect SSL to improve its profitability going forward. Coming to guidance for year '22. Our well-diversified current order book provides good visibility for growth in '22. We expect KPTL's stand-alone revenue to grow in the range of 10% to 15%, and JMC revenue to grow by 15% to 20%. Our consol revenue should be growing by more than 15% for year '22. This is with the belief that the COVID pandemic will not continue to be more disruptive than what it is today. Given the uncertain environment and emergence of second COVID wave, it will be difficult to provide for any order inflow guidance. However, it will be our endeavor to match order inflow at the same level as financial year 2021. We will be happy to provide this guidance by the end of Q1 once we have a lot more clarity in the external environment. KPTL and JMC will target to maintain double-digit EBITDA margin of 10.5%. We are actively working to reduce our debt at both stand-alone and consol level. We remain committed to have significantly lower debt and be almost a debt-free company at KPTL standalone level by the mid of '21 itself. We anticipate near-term challenges in the business environment, given the emergence of second wave of COVID. However, we are confident that our capabilities, proximity to our clients, our experienced team and shared commitment of employees will enable us to eliminate the storm. With that, we can open up the call for questions. Thank you, everyone.

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

Congratulations on good set of numbers. First question is on the order growth. So -- in the last year, so order backlog of KPTL has not been removed. So large part of order book growth in the combined entities coming from JMC, and JMC's foray into international market. So if you are still guiding for a 10% growth despite saying that the orders will largely remain muted Y-o-Y, the inflows will remain muted Y-o-Y. So what will be the confidence that we will be able to do 10% growth in KPTL? And also if you can highlight on both the companies, how is the order [indiscernible] looking right now? So can you touch upon that?

Sure. So if you look at the order inflow growth in the previous year, right, and when we speak of KPTL stand-alone, we also include Linjemontage because that's a transmission business. If you look at '19, '20, our entire order inflow was INR 6,500-odd crores and 2021 is at INR 8,500-odd crores. So if you look at it today, where we are closer to INR 14,000 crores and to grow at 10%, we're talking of INR 8,500 crores kind of number. Our typical order book is 18 to 21 months. So from that perspective, growing at 10% to 12% should not be a challenge with visibility on the order book. Second, I think we see a lot of orders coming in into different segments of the business. The transmission line international, I think we are focused a lot more. Railways, we L1 in 2 large orders, closer to INR 900 crores. One of them was at JMC, which got declared and one at KPTL. Oil and gas, we bid for a lot of tenders. The issue is the delay, right? Suddenly, April, May, we've not seen any movement in tenders for reasons known to all of us. So our problem is that given that, we're not sure that whether things would start opening up at the client end even in June or July or -- we don't know that. But given last year, April, May, June last year was similar, but still we were able to catch up and build the entire order book in 9 months. So there's visibility in the sector with our reach and with our capability to execute, I think we should be comfortable on growth, and I think we should be at least targeting more than what we have got in the current year. The precise number is difficult just because of the delays at the client side.

So any impact on the execution because of -- sir, if you can just also touch upon the labor availability at the site? And are you seeing any migration happening there? So both for JMC and KPTL. Can you touch upon that? That'll be my second question.

So while the disruption has been very different this time as compared to what we saw in the previous year, but the good part is we've not seen many labor disruptions at the site. People continue to stay at site unlike last time where the people moved back because people have been taken care. So majority of our sites are operational, but it gets impacted because of the restrictions at a state level, right? There are some restrictions at Karnataka, some at Tamil Nadu, some at Maharashtra, but labor has not moved out. Confident -- we're -- we -- as of today, we have more than 90% of the labor, which we had at the end of March, both at KPTL and JMC. So that's not a challenge as of today.

Just last question on the raw material, sir. So if you can quantify an impact of raw material would have taken during this quarter impact on margins? And also on your entire order inflows, is there anything that is unhedged or any one-off projects where between the L1 and LOA, there has been a significant time lag and which could result in a big hit going ahead? So if you can just provide on your forward positions, if there could be one-offs or onetime write-offs which may come in because of sudden overarching in the raw material prices?

So I think the volatility in commodity prices obviously has got us completely of that, and I'll be very honest about it, but this is something which none of us expected. While we speak, we have built a huge CTC provision in Q4 already in KPTL and JMC. So we have done a huge CTC provision for the increase in raw materials, and that's why EBITDA margins have slightly dropped in Q4. It's difficult for us to estimate that what could be the impact, but we believe that even at current levels of raw material, we should still be at double-digit margins. Beyond this, if it continues to grow like this 10%, 15% every month, then we'll have to recast our margins and we'll come back to you at the end of Q1. But even as of today, we believe a double-digit margin should not be a challenge for us.

What was the provision which you take, which you took this quarter on the cost, raw material cost?

So CTC provisioning across all projects was in the range of INR 150 crores at a consol level.

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

Congratulations for good set of numbers. Continuing on the previous question. So on the input cost inflation, sir, it would be useful if you could help us understand breaking up KPTL and JMC separately, percentage of projects which have fixed-price contracts, percentage of projects which have variable price. And how are we able to price -- pass on the inflation? Also, we have seen some cases, peer companies, where they have bid for projects. The order came in 3, 6 months after that and that has resulted in losses. So are we seeing any of such situation? So it will be useful to understand on the input cost inflation in detail.

Sure. So Bhavin, let me just divide this both for KPTL and JMC. So if you look at KPTL's order book today, right, approximately 60% of our order book is fixed in nature, 40% is variable, where there's a price variation clauses. And to that extent, I think we have covered at least on the commodity prices. If you look at the JMC order book, more than 90% of the order book has a price variation clause or has free supply of material from clients. So there's minimal impact coming out of this. There's hardly 10% which would have an impact, which is primarily the international projects. Now going to the second question that what is it -- do we have any surprises? Yes, we also had contracts Q1 last year for which we have done the CTC provisioning already on steel, on aluminum and copper. A lot of our exposure on aluminum, copper effects, we are hedged. And we're not completely open on that. But on steel, we cannot hedge, and that's an impact which is visible. Do we have any surprises? We've built in some provisions already in costing. But if this continues the way it is, a dent could be there, but we have provisions which makes us -- which gives us a confidence that we should still be at double-digit margin. So in terms of the biggest impact to us would come only from steel, not as much from the other current -- other commodities. And that's something which we are cautiously watching for JMC, for KPTL. For JMC, even that impact will be minimal because it's a pass-through to a great extent. But for KPTL, that's the biggest impact. If you were to quantify it, we approximately have, let's say, 180,000 tonnes of steel orders in hand, and we would have inventory of 30,000, 40,000 tonnes already at our plant. So 120,000, 130,000 tonnes, if you want to put a number to it, you could put a number to it. But as of today, looks like even with that, we should be able to take care of our double-digit margins.

Sure. That's useful. The second thing is on the working capital. We did see working capital of KPTL [indiscernible] on that. And secondly, the customer advances that we have, what percentage is interest bearing and what percentage is interest free?

So if you actually look at our customer advances as of now, right, and since you raised this question, it has reduced by closer to a INR 400 crores compared to where we were in the previous year. So consciously, during the current year, and I said this is at the last time also, we have stayed away from customer advances because the interest rates are very, very high. That's one. Second, more than 50% of our customer advances our interest-bearing and interest ranges from 10% to 12% depending from client to client. Our advance from customers is closer to INR 900 crores, and more than 50% would be from domestic, which would have an interest cost, which is 10% to 12%.

And about the working capital increase that we have seen. How should one expect it going forward?

So working capital increase for the current year, if you really look at, it has comes from 2 components, right? One is our customer advances, which we've reduced significantly. And second is the creditor payments outflows, which is much higher than what we had seen in the previous year. So that was a conscious call of the management that whatever is outstanding should be paid at the earliest, given the current environment of COVID. So if you look at it, these were the two things which impacted. Our debtor days are at similar levels. So if I have to give you a number, third quarter '21, our debtor days was 182, now we're at 178. But inventory days have slightly come down. So net working capital days is that increase of 14 days, 71 to 85, is primarily driven by these 2 components, which is reduction in customer advances and increased payments on our 2 trade creditors. I believe we should come back to the 75, 80 levels by the end of the current year.

The next question is from the line of Renu Baid from IIFL.

I just wanted to understand one thing back on the margin side, given that when we had INR 100,000 crores plus of orders from TBCB projects, so have -- just related to the entire provisions, related to the gap up on the costing side for steel and other materials have been fully provided for or there are some cushion for under recoveries yet as we speak today?

So Renu, the CTC provisioning as on 31st March has been fully done. Beyond that, volatility, obviously is in-built in the costing to a certain extent. But if this volatility continues or if the increase in price continues like the way it is, then we might not be provided even until the end of the project but a significant portion, right, a significant portion of the movement between the time we had bid to 31 March has been provided in our books of accounts already.

And what is the value of this provision in Kalpataru books? You mentioned consol is INR 150 crores in 4Q. For KPTL standalone, what is the value?

Approximately INR 140 crores out of INR 150 crores is at KPTL standalone.

Okay. And -- so basically, if broadly, we look at that knocking of this impact that we see in the next year. You're actually guiding for double-digit margins. So broadly, how are they looking at the profitability in some of the non-T&D business portfolio for us both in railway as well as oil and gas? How are we progressing on that side? And subsequently, as we are also looking at international T&D orders, to what extent are we seeing the mix of supplies being met through domestics in the supplies or they are being met through international because there is steep difference between the prices -- between domestic and international steel prices. So if you can help us get some perspective on that side?

Sure. So let me first answer the first question, right? Our margins on oil and gas and railways. So our margins on oil and gas has reached double-digit for the last year. Full year, they were at double digit. They are more in the range of 10% to 12%, and they have delivered margins which was budgeted, and I believe they'll continue to be doing that for the next year also. Railway margin was slightly impacted, one, because of the reduction in revenues as well as because of all the disruption. So our railway margins was at levels of 5% to 6% at a PBT level, right? These are numbers I'm giving you at a PBT level and not necessarily at EBITDA level. Railways margins, we do not see significant improvement in the current year also, given that there's an order book which is historical order book that needs to be delivered. But they are good order books, so growth there will not be a challenge because as of now, that's only division which has order book, which is beyond 2 years. On your second question, international versus domestic. See, our focus on the international business is lot more on EPC projects, right? And on EPC projects, there's a steel component impact is very, very minimal. So typically, international EPC projects, steel would be -- the tower component would be not more than 20%, 25% of the entire project. And in that, if you look at the steel component, it will further go down. So to us, that is minimal impact, right? And our focus continues to be on the international projects because at the current levels, obviously, we're budgeting with the increased price in steel. So today, if we are budgeting for projects, as we're bidding for projects, we expect steel to go up, and we're including that in our costing. So whatever we bid for the last 3 months and what we continue to bid, I don't think, I hope -- sorry, let me use the right word, I hope that we don't have a challenge in the steel prices there. But as of now, I think we believe that, with the current levels of steel, if we start bidding from now, we should not have challenges on maintaining our margins.

Okay. And simultaneously, when you look at business growth, broadly T&D orders have come through, but execution has still been fairly weak. So segment-wise, across the core portfolio, how do you look at the execution mapping up, especially growth coming in the oil and gas, rail as well as the core T&D business for us?

So our significant -- let me divide this question to two. One is our order book inflow for the year. So if you look at our order book inflow for the year, 75% of the order book came in TL business, right, including LNG. So there's 45% TLI, 23% TLD and 7% LNG. So around 75% of our order inflow in the current year came from the TL business, and the balance was railway and pipeline, 13%, 13%. From an execution perspective, if you look at it, right, if you look at the broad numbers from execution perspective, the TL business, right, which includes Linjemontage also grew by around 11% for the year. Last year, they did around INR 5,400 crores. This year, they did INR 6,000 crores. Our railway and oil and gas business degrew, right, primarily because the first -- they are very labor incentive, right? First 4, 5 months, they had huge issues because they don't have as much supply as TL business has. And TL business, you can catch-up on supply easily by making the plant run at double shifts and making bought out in all of that. But the railway and oil and gas business degrew by 12% in the current year. So previous year, significant growth -- the entire growth came from T&D. And even next year, our own assessment is that TL business will continue to grow at the range of 8% to 10%, while oil and gas and railways would be in the range of 10% to 12%.

Sure. Right. And now looking at the group level. So how are we now that the JMC Projects also have started to see restructuring as well as some asset sale movement there? So how should we look at the broad framework of both these entities in the group structure? Any progress on that side or road map in terms of time lines that you have in your mind?

No. No, I don't think we still have clarity on that in any form. That's the call what the senior management has to take. Our focus right now is to make sure that operationally, both the companies start doing very well, reduce the capital employed, reduce the debt, come back to that high double-digit EBITDA numbers and focus on utilizing the skills and strength of KPTL so that JMC can also grow at a much faster pace. Right now the focus is around operational profitability and growth improvement for both the companies.

The next question is from the line of Bharat Sheth from Quest Investment.

Congratulations on good set of number in challenging times. Sir, I have a question on this JMC. With new order and everything currently, our order book is -- with L1 is in -- around INR 18,000 crores. So from, say, medium-term perspective, 3 years, can we double the JMC turnover? And which segment vertical will drive that and that additional growth will be margin accretive or dilutive, looking at the commodity cycle?

SKT?

Yes. It's a good question. With the order book, INR 18,000 crore, we are definitely looking at around 20% growth every year. So within 3 to 4 years, we should be doubling the -- our number that is getting crystalized. Coming to the question of margin, yes, this INR 18,000 crores, the drivers in the growth will be the B&F, water and international. B&F has been historically has a good margin. Water is definitely where our margins are going to improve and international. So subject to how the COVID and the commodity prices pan out, our -- the 2 key businesses which will drive the growth, they have definitely a potential for the higher margin. But we have to, at the same time, be cautious on the commodity pricing.

Okay. And sir, I mean, what exactly JMC has done to strengthen its process team and balance sheet to take such kind of a growth? And second thing, on how do we see the trend of, I mean, interest as a percentage to sales, I mean, going ahead?

That's right. So we have been, I think, last 1 year during COVID period, and even before that, the processes strengthening has been on a full drive. And in last 1 year, a lot of management bandwidth has been added at a senior level, so all divisions have been carved out separately. Number of people have been inducted, international division had been separated out. So we are very cautious this time that with the growth, there is an adequate management bandwidth, right? At the same time, on the processes side, we have synergized our processes with the KPTL, the way they have been working. And I think these two, the management addition width last year as well as the focus on the processes, we are sure that we will be able to handle the growth. The second on the interest part, our international projects, they have the decent advances. As well as last 1 year, we have increased every corner on the working capital customer outstanding. And that has, if you look at our interest cost has even marginally come down from the last year. And going forward, I see further improvement in the interest rate. So we may be lower by another 100 basis points or so going forward.

Okay. Great. Sir, only a last question, I mean on the tax rate, I mean, in JMC this year is around 30%. So FY '22 what level and even sir, for Manish ji, for KPTL also Q4, we have seen a very high effective tax rate.

So Bharat, the tax rate is driven by a combination of some international projects, where typically, the tax rates are higher than what it is in India now.

Correct.

And a lot of time, those get invested in the cost, right, because until the last year, we were different, right? India was among the highest, so we never had that issue. But today, a lot of international countries have tax rates which are higher than what we pay in India, and that additional tax we have to pay in those countries. So with that, I think we normally have tax rates which is at least higher by 2% to 3% because that's something which will continue to be based on the regulations of those countries.

Okay. So -- and JMC, I mean, tax rate is around 30% for full year. So next year, how do we see?

It will be the same Bharat. It will be in the same range.

[Operator Instructions] The next question is from the line of Deepak Narnolia from Birla Sun Life Insurance.

Sir, am I audible?

Yes, Deepak.

Congratulations on good set of numbers. I wanted to do one thing there that I see that your order inflow for the year has grown up by 30%. Last year, it was somewhere around INR 6,500 crores and which has grown up to INR 8,500 crores this year. And this year, sales is also muted with a 3% decline, but, sir, order book has not grown up in that level, like order book is only 5% up. So I was wondering if you have canceled some order in the year or what?

No. So to be precise, if you look at the revenue growth, right? So the revenue growth was 7,700, right? So if you look at from a differential perspective, right, your order increase is only around INR 1,000 crores. There could be a few hundred crores of orders which get changed because of reduction in scope. So typically, that's the nature of our business, right? There's not been any significant order cancellation after it reached the order book. A few L1s got canceled during the year. One L1 in the Middle East country of around $30 million was canceled, but that was never taken into order. There is some reduction in scope, right? So when you do alliance, typically, there's some reduction in scope, which would be in -- not even getting into beyond INR 100 crores, which would be double-digit number crores. Otherwise, it should reconcile. What you need to also look at is, this number includes the LNG order book also, Linjemontage also. So you need to add that also, right? So if you reconcile that, you'll see that it would tally. For a few, maybe INR 50 crores, INR 70 crores, INR 80 crores, that is basically a reduction, which could happen because of changes in scope, nothing beyond that.

Okay, Linjemontage is somewhere around INR 1,000 crores, no?

Yes.

And in INR 6,500 crores last year's order, that order is not there?

That was much lower than compared to the current year. Much lower. There was, but it was much lower.

Okay. And sir, this year, this year your tax [indiscernible] crores and...

We are missing you. I can't hear what you're saying. Sorry, the line is not clear. I can't hear about your saying, Deepak.

So what I'm saying that this year, your total absolute tax is somewhere around INR 2,200 crores. So does it include the additional tax on your exceptional item related to the gain on transmission assets?

Yes, it does. It does include the additional tax on the exceptional item also, both capital gain as well as the deferred tax asset created for the advance which we have got. So it includes that also.

So if you exclude that, then tax is in the normalized range of somewhere around 27%, 28%, correct?

Yes. For sure. I think we believe that tax rate should -- would continue in the range of 27% to 28%.

And sir, next year, growth, you are talking about somewhere around 10% to 12% including the T&D and this non-T&D business, correct?

So for the TLD business, the transmission business, I expect growth to be double digit.

Growth to be?

Double digit, 10% to 12%. As for the oil and gas and railways, which have not done so well in the previous year, I expect growth could be in the range of 15%.

And sir, I remember in the past, your growth guidance for T&D was -- you were not expecting any growth in T&D business.

So that number which I gave you is for the TL business as a whole. I did not -- you did not ask me for separate numbers. The TLD business growth has not been very high. Significant growth has come from TLI and international subsidiaries.

T&D and TLD is separate or what you are saying?

Yes. I gave you growth. I'll just explain this again. I gave you growth for TL business as a whole. If you divide this to TLD and TLI, I expect TLD business to grow only at the range of 5% to 7% for the current year. I expect TLI business at a rate of 12% to 15%. And hence, the average growth should be in the 10% to 12%.

So international will have a good growth, but domestic will have very muted growth, correct?

I say -- yes, I'm still very -- domestic growth would be inflation driven, not beyond that for me for the current year also.

And then what the progress in that, the road assets and SSL, Shubham?

So on Shubham, we have appointed advisers. We're still expecting some -- the final thing we're expecting maybe by June, July, we should have all the interests coming in. Post which, we will take the final call what we need to do. As far as the road asset is concerned, we said earlier, 2 of the road assets we are digging them to structuring with that, which we expect should happen in the next 30 to 60 days. It should have been done by now. But last 30 days, unfortunately, there was disruption because of people working from home. One of the road assets we're looking at some buyer who seem to buy it, and that's also a discussion at advanced stage. We expect the nonbinding offer in the next 30 to 60 days. And the fourth one, we'll look at it once this 3 appear because the fourth one still is not losing any cash.

[Operator Instructions] The next question is from the line of [ Ranjit Subramanian ] from ICICI Securities.

Sir, if you can give some color on the revenue breakup for FY '21, how much is steel domestic, how much is steel overseas, railways and oil and gas?

So I think I just gave that breakup. I'll repeat again. The total TL business, the details we'll have to take from the team is around INR 6,000 crores. And the total infra business, which is railway and oil and gas is around -- the balance around INR 1,700-odd crores. No, sorry, around INR 2,600 crores -- and okay, that's -- so if you look at total, sorry, because it includes consol. So TL business stand-alone is around INR 5,000 crores and infra business, which is railways and oil and gas is around INR 2,700 crores.

And this INR 2,700 crores is evenly divided between the both?

So railway is around INR 1,500 crores, and oil and gas is around thousand INR 1,200 crores.

Okay. And both this railway and oil and gas, we are confident of around 15% kind of growth, given the low base this year?

Yes. And plus a reasonably good order book, which is visible right now.

Okay. And Shubham had posted some loss this quarter. Is that something to worry about? How is the trend out there in Shubham?

No, I think at the operational level, if you look at the operational numbers, it did not have a loss. The loss primarily came in due to some provisioning because of a few receivables, which were historical and that was a requirement because of Ind-AS. So otherwise, we expect Shubham to improve from here onward. Their targets for the next year is at least margins, they would be doubling, if not increasing beyond that at a PBT level.

And regarding the sale of your transmission assets, what is the current status? And will this net cash situation, guidance of first half, is that something which we can really look forward? Or you see some risk in that guidance also?

So as of now, we've received majority of the advances on our sale, which is planned to CLP. We had already signed a binding offer with them. Majority of the regulatory approvals have come. Majority banking approvals have also come. 2 or 3 approvals are pending, which our team expects should come in the next 2, 3 weeks. The process of -- the process have already started in terms of transferring the asset to CLP. We're pretty confident that by June end, we should be able to complete the transaction because majority of the approvals have come as of today. And once that inflow comes in, we're pretty confident that we'll be closer to 0 debt or negligible debt at a KPTL standalone level.

The next question is from the line of Rishikesh Oza from RoboCapital.

You said you'll be selling one of your road assets. And could you please share the time line for the sale of that asset?

So as I mentioned earlier, we're expecting it to happen in the current year, hopefully by Q2, Q3, but a nonbinding offer might happen as early as maybe in the next 60 to 90 days.

Okay. Great. And also you will be restructuring 2 assets, right? So if you can like give any number, how much will you save in finance cost after the sale and the restructuring together?

So unfortunately, the numbers are still confidential. I think we stick to our earlier guidance of saying that post the restructuring, the cash requirement from JMC to the road assets would come closer to 0. That's a commitment we had done, but unfortunate things got delayed. So once the restructuring happens and the divestment happens, we believe that at least for the next 5 years, there will be no cash infusion on the road assets.

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

Am I audible?

Yes.

My question was on JMC. So essentially, I mean, this year, we've done exceedingly well in terms of new order additions, I mean, of almost around INR 7,900-odd crores. Just if you could share your thoughts as in -- I mean, this kind of number has been made possible, if it is because of through -- there's an improvement in throughput, I mean, your success ratio has gone up or there were more tenders in the pipeline, which is why we could benefit more? Why I want to understand this is [indiscernible] because, I mean, you spoke about some kind of uncertainty in FY '22 on order addition. So I mean, if it is -- as of FY '21 was essentially because of your success ratio going up with the similar kind of number of tenders that you bid for, then there's a high chance that you would still be able to make good in FY '22 even with a fewer tenders? And has there been any change in the way we approach these tenders now if it is -- as if, I mean, the success ratio has gone up?

Yes. So Prem this order book has been not by chance. It has been -- the work has been going on this front from last couple of years, whether it is in terms of identifying the market, building the capability, identifying the customer, building the execution strategy and then taking the job, right? So I will break it in 2 parts. On the domestic part, it has been basically the water side business, which we have been building from last 5 years. Of course, there has been a spectrum of opportunity along with the capability, so we decided to build on. Similarly, on the international side, we have been working from last 3 to 4 years based on the KPTL footprints in the various countries, where we have worked on the projects, broaden the maturity, and hence, they got included in the order book. And the B&F has been our traditional growth point, where we have the capability and the market, both. To answer your question, it has been bidded in a strategic way. And going forward, at least these 2 new areas, the water as well as the international, there is a strategic plan and there is a visibility where the order book can be built, and we have the delivery capability. At the same time, what I'm saying is there are certain sectors where we are cautious, and we will be cautious, but we will be looking for the right opportunity to jump on if they are available.

Sure. And sir, as I see it, I mean, when I look at the order inflows that you've been able to manage this year, I mean in FY '21, almost 54% is of B&F private and surprisingly, B&F government is negligible. So is that a conscious decision to go little slow on B&F government or again, I mean, it was by design -- I mean, by chance, only that, I mean there were more orders on B&F private side, which is where we could make it -- have more option B&F private side? And if you could also give us the construct in terms of B&F private where we include, what, residential or more of commercial this time around?

So Prem, if you look at our historical order book mix, our B&F has been -- so within the B&F, the private sector will be almost 70%. And that is basically primarily comes from our south operations, where we have built over last 15 years. And there, in spite of the COVID, we have seen the growth in the revenue project launches as well as the liquidity. And hence, we have gone and build a further order there. B&F -- so this will be the B&F breakup. Government side, there has been a very intense competition. And we have taken a conscious call to keep away from there. As I said, we will be looking for the right opportunity there. And if there's opportunity we think that is good enough and yield into the good margin, then only we'll go there. Otherwise, we are not running after the government projects. So to answer your question, yes, it is by design and by conscious choice.

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

Yes, sir, just a follow-up, sir, on this INR 140 crores of provision which you have done. So where is it reflecting because if I add it back above EBITDA, so your margins will look at 15%. So if you can just clarify on that?

So it's reflected in the respective head. Some would come in material, some would come in erection, depending upon -- it's a provision, whether it's for bought out or it's for raw material or it's for -- so it's reflected in the respective hedge where the cost includes. So it's primarily in material costs where it's already included.

But then on the top line of the stand-alone INR 2,300 crores, INR 140 crores will be about 5%. So the EBITDA margin -- adjusted EBITDA margin would have been about 15% during this quarter?

So we also had a lot of closure of projects which happened in Q4 because of which a lot of provisions got released on all those projects which got closed. So if we have not provided that, definitely -- but because of project closures, we have got a lot of provisions which got released and that got adjusted against this. But if we've not provided, it would have been at the level of 13% to 15% for sure.

Okay. Just the last bit on the promoters pledge reduction plan, so debt reduction plan, which was like given few quarters back. So any update on that? Because I think by March, we would have to reduce by INR 150 crores, will have to reduce against these pledges. So any guidance on that? Are we on track? And how much has happened? And -- because even by next December, we would have to reduce it by another INR 150 crores if that is the plan. Any update on that?

Yes. So I think as far as the promoter pledge is concerned, the promoters have targeted to reach -- to reduce their pledge levels to around 40%. When we spoke, they were at around 58% of the holding was pledge. Right now, it's around 50%. From whatever we've been given to understand from the promoters, they're on track to make sure that by December, this reaches levels of closer to 40%.

The next question is from the line of Swarnim Maheshwari from Edelweiss.

Sir, just one question. On the real estate side, sir, so what's happening at the Indore real estate project I think we were expecting the OC very soon. So what is the total inventory left over there and total monetization that we expect from the Indore real estate project?

So we have seen some sales in Q4. We had sold around 5 or 6 units in Q4, which we had informed at the call last time. So if you look at the total units which we have, including shops and all of that, we have around total 129 units. We have sold to date 46 units. Again, when I say sold, the cash flow is still not come for a lot of them because the cash flow is back ended. We have -- if you look at it from OC status, we have 5 towers, out of which we have received OC for 2 of them. One of them is at the final stage, should come any time. Actually, 3 of them. One of them is expected any time and one might get delayed. Our total investment is around INR 390 crores in that project, and we believe that over the next 12 to 18 month, the entire project should get sold. Clearly, we're seeing some disruption in the last 2 months because of this new wave of COVID pandemic. Last couple of months, we've not seen much sales at the project, and we would revisit what is the kind of value we have in this project, maybe at Q1 or Q2.

Fair enough, sir. So out of those 46 units, what is the total cash flow we have received if you have that handy? Otherwise, I can take the offline also.

I do not have that handy. You might have to take offline with the team, please.

The next question is from the line of Deepak Poddar from Sapphire Capital.

So I just wanted to understand, you mentioned that on the road at the JMC level, the road BOT project, so we are -- we'll be able to monetize some of the road asset by second quarter or third quarter, right?

One of them, not some, one.

One of them. And so what is our debt deleveraging target? Basically, how do we see our debt by FY '22 and FY '23? So how do we see our debt?

So our debt target reduction at a consol level, we are hoping to reduce our debt by anywhere in the range of INR 800-plus crores in the consol level. A significant portion coming from the sale of KMPL project at KPTL and some portion coming from the road asset, plus leveraging our existing balance sheet to make sure that we can further improve our working capital. So on a consol basis, we are targeting a reduction of closer to INR 800 crores of debt by 31st March '22.

And at the stand alone level?

Stand-alone level, as I said, KPTL would go closer to negligible debt. And JMC debt reduction, they have done significantly well, so I don't see significant debt reduction at a stand-alone JMC level happening in the current year because with growth coming in, I think they will each other help from working capital perspective. So significant debt reduction would happen out of KPTL sale of asset itself.

So at the JMC, INR 700 crores, INR 750 crores, what the current level?

Should continue at the same level. I don't see that reducing significantly.

Okay, okay, understood. And sir, on the JMC level, so how do we see the margins into FY '22?

SKT?

Yes. It will be digit range between 10% to 10.5%?

The next question is from the line of Sandip Verma from Axis.

Sir, basically, I wanted to know the current operational efficiency in JMC and KPTL because of the current COVID situation. So -- and are you experiencing similar labor migration issues, which we had faced in last financial year.

I think I've already responded to this question, but I'll respond again, you might have missed it. As of today, we've not seen huge labor migration happening. Labor continue to be a site. But yes, we have seen some disruption because of local shutdowns in a lot of states quite well because the material is not allowed, and the movement of people is stalled, but we've not seen labor shortage like the way we saw it last year.

So what would be the current operational efficiency then? At what level you are operating compared to Q4 level?

So it would be very difficult to give you a number because very different at different projects. So giving you a number is going to be difficult. But it's not as bad as what it was last year is something which I can say. But if you -- it is very different to different projects. For example, projects in Bombay, the operational efficiency could be as low as 20%, 30%, whereas projects in South India, it would still be as high as 80%, 90%. And all our rural project still is at 70%, 80%, 90%, 100%. So it's very different at a project level. But as of today, we don't see huge impact coming because of this COVID as for the current quarter. A larger impact would come on from containers availability and shipments. So that is still a challenge for us. So -- and that would be a lot more at KPTL, and that's something which we are very closely watching because that could be a larger impact than the impact of labor shortage for the current quarter.

All right. And sir in -- so what is the liquidity that the company is mentioning in order to avoid the situation -- if the COVID situation aggravates. So will the company maintain sufficient liquidity?

So I think you can see from our number, our debt equity is at the lowest level in the history of both stand-alone and consol, and we have good available limits with banks which we can utilize. We have hardly utilized a lot of our limits. So I don't think we'll have any challenge on the liquidity front as far as KPTL or JMC or the consol group is concerned.

The next question is from the line of [ Abhijeet Anand ] from Emkay Global.

A question for Manish sir. So ignoring all the COVID things that are happening. I want to have an understanding over a 2-, 3-year perspective, what could be an ideal growth for KPTL and what could be the drivers for that?

So I just missed one question. I heard the last time of what would be the ideal growth. But the first part I missed, so growth numbers...

My question is like over the next 2-, 3-year perspective, what would be KPTL growth prospect.

So if -- from a KPTL perspective, we believe that the current year, '21, '22, in terms of growth, looking at a historic trend, would not be very, very exciting because we had some challenges on World Bank ban, and we're not able to bid for a lot of international projects, and that's why we're targeting growth only at the level of 10% to 15%. From a long-term perspective, 3 to 5 years, we see huge opportunities on the following. We see our oil and gas business on the international side doing very well. As of today, they are prequalified in more than 10 to 11 countries, and that's an opportunity we will capitalize, which would get into revenue in '22, '23 and later on. We see railways international, again, utilizing the skill set of transmission and growing on the international side in a big way, which would be a second big driver for growth. Third, some of our international subsidiaries, whether it's Linjemontage or Fasttel, we believe that the growth can be much higher than what we've even seen in the last 3 years. Transmission international, we had a challenge which I said earlier, hence, we were not able to bid for a lot of projects. We will be out of that challenge by -- hopefully by October, right, because that's the schedule date, and then things should start improving there also. So from a 3-year perspective, growing in the range of 15% plus for KPTL including the international subsidiary should not be a challenge as of today without compromising on EBITDA and by improving growth. So if you can see our return on capital employed in the last 4, 5 years have grown from 14% to 20%. And the target is to take that to levels of 25% by 2025. And that is all the entire team is working on.

Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Ms. Bhoomika Nair, for closing comments.

Yes, thank you very much, sir, for -- and the entire team for giving us an opportunity to host the call and answering all the queries. And I would like to thank all the participants as well for being on the call. Thank you very much, sir.

Thank you very much. Thank you, everyone.

Thank you. Thank you. Thank you.

Thank you. On behalf of DAM Capital [Audio Gap]