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

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of Kalpataru Power Transmission and JMC hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors Limited. Thank you, and over to you, ma'am.

Thank you, Divya. Good morning, everyone. I would like to welcome you to the Kalpataru Power Transmission Limited and JMC Projects Limited 2Q '22 earnings call. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. Amit Uplenchwar, Director of 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 to Mr. Manish Mohnot for his opening remarks, post which we'll open up the floor for Q&A. Over to you, sir.

Thank you, Bhoomika, and a very good morning to everyone. Thank you for joining us today for the KPTL and JMC Q2 Earnings Call. I have on the call with me S.K. Tripathi, MD and CEO of JMC; Ram Patodia, CFO and President, Finance, KPTL; Amit Uplenchwar, Director, Group Strategy and Subsidiary Operations; Azad Shaw CFO, KPTL, along with me on the call. I hope you and your near -- dear and near ones are doing well and keeping safe. Before moving to the financial details, let me first provide brief update on the key events of the quarter. This was a challenging quarter from a cost perspective as steel and other commodity prices, along with international freight, continued to witness an upward trend. For instance, between March '21 and now, steel prices have moved up by minimum 20%, while aluminum has increased by almost 30%. Similarly, freight charges to different parts of Africa and Latin America have more than doubled. Given such a situation where our margins have been under pressure, we've strategically realigned our dispatches as for the feasibility of the project execution cycle. Despite challenges, we saw broad-based top line growth led by strong execution in B&F, Water, Railways and the international T&D subsidiaries. Linjemontage, the Sweden subsidiary, reported revenue growth of 28% Y-o-Y in Q2 '22 and 17% in half 1 '22. Coming to an update on our road BOOT assets. As you may know, toll collections from our Kurukshetra road BOOT assets had been adversely impacted since the last 6 quarters due to the ongoing farmer agitation. As a result, in accordance with provisions of the concession agreement, we issued a notice termination for the asset during this quarter. With regard to Wainganga asset, we have received consent from its vendors for restructuring and in final stages of completing the required formalities. This quarter, in our financials, you will see that we have provided for expected credit loss with respect to loans given to KEPL and impairment in equity value of KEPL and WEPL. We have a lot of receivables from NHAI in terms on legal matters, which we have not accounted in books, and they will be accounted once the legal -- the arbitration cases are already declared in our favor. Our divestment of [ industrial ] road asset is under progress. We plan to complete this transition in the second half of this fiscal. With respect to other assets, we are progressing well on closure of transition of Kohima-Mariani transmission line. For this, too, our target is to close it in H3 of '22. We witnessed good sales traction in Indore project and till date have completed sale of 40% in the total salable area. We're aiming to complete sale of the remaining units over the next 10 to 12 months with significant cash flow coming in by December '22. On order inflow and order book, our consol order book, including L1, stands at an all-time hiring of INR 35,700 crores, and we have received orders worth INR 9,800 crores till date this year on a consol basis. Our restriction on KPTL for bidding for World Bank Group funded-projects ended on 6th October '21. Since then, the company started bidding for World Bank and other funded projects, though we continue to be on the monitoring phase. Now that we are strategically focusing to take our non-T&D business to international markets, moving out of the [ brand phase ] should help us to strengthen our international order book in the next few quarters. Now coming to the financial performance, first at KPTL consol level. Consol revenue grew by 17% to INR 3,549 crores. EBITDA margin in Q2 was 8.5%. Our EBITDA margin was impacted mainly due to adverse commodity prices and higher freight costs, as I mentioned earlier. Further, the divestment of ATL adversely impacted our margins by almost 160 basis points. During Q2 '22, we have provided for expected credit loss of INR 49 crores towards loans advances given to Kurukshetra Express Private Limited and impairment of intangible assets in Wainganga Express Private Limited of INR 15 crores. Our decline in EBITDA and exceptional items has led to fall in PBT and PAT. Our consol net debt at INR 2,810 crores is a decline of 18% compared to the same time last year. At KPTL stand-alone, revenue for Q2 was affected due to lower dispatches in T&D business and unseasonal and prolonged range in certain areas impacting oil and gas business. Our T&D revenues, including Linjemontage and Fasttel, grew by around 15%. Oil and Gas declined by around 50%, and Railways grew by 11% in Q2 '22. Linjemontage, Sweden reported revenue of INR 268 crores with growth of 28% and faster Fasttel, Brazil recorded revenue of INR 223 crores in Q2 '22. Despite lower revenue growth and impact of commodity, we're able to maintain EBITDA margin of 9.4% in Q2 '22 and 9.8% in half 1 '22. In Q2 '22, exceptional items towards impairment of investment in relation to Indore real estate project of INR 45 crores. Our lower revenue growth fall in EBITDA margin and exceptional item has led to falling PBT and PAT. Our net debt is at INR 1,149 crores at the end of September '21. Our debt levels remain elevated, given higher inventory levels and lower collection in Q2, which is normally a cycle in our business. We are targeting to reduce our stand-alone debt substantially with the help of inflows from sale of Kohima transmission asset, receipt of inflows from Indore assets and focusing on project closures and optimizing our working capital. KPTL received orders of INR 2,000 crores till date. Additionally, we L1 in around INR 1,800 crores. We have with these delays and finalization of tenders. However, we expect ordering momentum to improve in the next few months. Our stand-alone order book at the end of September '21 was at INR 12,397 crores. JMC stand-alone revenue grew by 64% to INR 1,321 crores in Q2 '22, driven by robust execution in B&F and Water business. JMC's EBITDA margin was impacted due to rising material costs and nature of job mix. Most of the contracts in JMC have pass--through clause into the [indiscernible] maximum extent will be built in the later period. JMC has provided for impairment against equity investment of INR 98.3 crores and expected credit loss of INR 179 crores with respect to Kurukshetra road assets. Additionally, there's an impairment of INR 15.4 crores towards investment in the Wainganga road asset. Our net debt at INR 700 crores at the end of September '21 was similar to June levels despite a robust growth in turnover. JMC received order inflows of INR 7,959 crores till date, and order book is at an all-time high of INR 18,700 crores at the end of September '21. In Q2 '22, we have made an additional investment of around INR 29 crores in our road projects, taking the total investment to INR 956 crores at the end of September '21. We continue to adopt a cautious approach in bidding with a goal to minimize risk and deliver profitable growth. The increase in commodity price, rise in freight cost and supply chain disruptions continue to post near term challenges. However, our strong and diversified order book provides good visibility for our future growth from a long-term perspective. With that, we can open the call for questions.

[Operator Instructions] The first question is from the line of Renu Baid from IIFL.

Yes. Yes. Challenging results. So my first question is execution has been muted, and to a good extent, that was also the constraint last fiscal when compared to some of the peers we'd had headwinds. So if you can help us understand what was the quantum of revenue slippages owing to the various logistics and other issues which you've highlighted. And what are we doing to broadly mitigate this kind of slowdown or, I would say, relatively muted influence from some of the end markets, where the portion of civil has been increasing, be it in the rail segment and otherwise? And do you perceive that some of the opportunities in the civil segment have been looking far more brighter than for pure engineering P&D operations that you have been having in P&D and daily [indiscernible]? And so from that perspective, is JMC's presence in those portfolio constraining growth for Kalpataru? And under this backdrop, by when do you plan to finally merge both the entities so that JMC can garner a higher share of the pie and, to that extent, Kalpataru also is able to derive better shares from the end market?

Renu, I think you had 5 questions but all very, very pertinent. So let me start with the first one. We have delayed dispatch of revenue of approximately $20-odd million on account of freight issues, on account of high steel prices, on account of -- and all of them has been aligned with the client. So none of them has been something which has been unilaterally. So closer to $20 million approximately of revenues got deferred, which should happen in Q4 or beginning of next year, right? That's the first thing. Second, yes, we have been cautious in taking orders in our core T&D sector, given that they are all fixed price in nature, and steel volatility was beyond at least our imagination, right? They look like stabilizing now. October, again, we saw prices going up. We've not seen anything in the last 2 weeks, but we do not know. We continue to have an order book of the old price steel of around 80,000 tonnes, which we will deliver in Q3, Q4. We have been cautious on our margins also. So on a CTC basis, we had an opening CTC loss provision of INR 146 crores, if you all remember, is now at INR 157 crores. So we have increased our CTC provisioning looking at the steel and aluminum prices at the end of Q2 September. Now the third question was do we see civil business having a lot more opportunity. Yes, definitely. And I think we've been speaking about that for the last 4 to 6 quarters that JMC's growth looks like happening much bigger and much faster because the civil space has a lot more opportunities, one; a lot less risk because majority of the contracts have a price variation clause, second; a lot less competition in some of the segments because the big guys continue to deliver, focus on delivery, and that's an advantage, third. But at the same time, just to answer your last question, is there a constraint in terms of JMC growing the order book or focusing on revenue? I would say no. The constraint is only in terms of building a team, right? Because all of this required a team which needs to be built, and which does not happen overnight. So we are not saying no to orders because of any constraints from a banking side, from a limit side or from any other side. We are conscious, but there's no constraint. So if there's opportunity by which we have to grow JMC order book further by 25%, I do not see any constraints. The last question, yes, you need to start looking at the consol results a lot more because now you'll get a flavor of what we are together. As far as the larger strategy of merger is concerned, that's something which the senior management and Board will take a call over a period of time.

Got it. And also, secondly, on the real estate side, since the business also has been an upswing, so what is the status with respect to Promoter's plan to deleverage? And do you believe there could be a possibility that they could deleverage faster or quicker than their initial plans and release the entire pledge or that doesn't seem to be on their mind?

So my discussions with the Promoters have been that they are on track to reduce leverage by December, what we had promised, to take it 2 levels of 40% and then further, by March, reduce it further. So we expect that March, we should be back to the old days of only 20% to 30% being pledged. But December targets are intact. They're pretty confident of achieving what they had committed to us in terms of reducing pledge by December to significantly [indiscernible].

And if I can ask one more on -- can you help us understand how is the domestic T&D and the ordering on the Rail EPC side? And are we seeing increased competition on the oil and gas, given that KEC also recently entered the space with a smaller acquisition?

Let me answer the last question first. I think oil and gas still continues to be limited competition. KEC required a company which is already in competition, so it's not additional competition, right? It's better to have competition which is strong and similar mindset people. That's better than having small players. So that -- as far as T&D is concerned, yes, we are cautious, and I don't see a lot of visibility in terms of order book in the next at least 12-odd months. And I've been conscious about this for the last 2 years. I think T&D domestic will continue to grow only at 4%, 5% level. We are looking at some orders on a EPC with a few private sector players, including Power Grid. We're looking at a few STBs orders and neighboring countries, and neighboring countries, now that we're allowed to bid for ADB and all funded projects, we should be getting some orders there. But still the growth there, I do not see it growing more than 4% to 5% max 7.5%. As far as railway sector is concerned, there have been intense competition in some tenders. And I think that will continue to be the plan for the next 3 to 6 months at least. But our focus is a lot more international on that. And we are targeting at least to win one large international project by the end of the year, on the railway segment.

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

My first question is on the Indore real estate project. So we have seen a big uptick in the real estate sector for the last 12 months So just wanted to understand why -- what was the need for taking this write-off in this project? That was my first question.

Yes. So Parikshit, Indore, I'll just give you a quick background of the Indore project. We have 5 towers there, right, where we've got OC for 3 of them, one of them expected soon, and the towers are fully complete except one tower, which is up to 6 floors. So see few people have come to stay. We were holding price levels at a particular point, given the one Kalpataru brand and given the location of the project. But we saw that at a different price level, the sales are moving much faster. To give you a perspective, in the month of September, we sold 10 units -- 9 units, right? And we expect to sell around 15 more units in this quarter. We got inflow of around INR 30 crores in the month of -- first 2 weeks of October coming from that project. So conscious call was taken on saying that instead of holding back the price levels, let's focus on sales. So we reduced our target price levels on residential from upwards of INR 10,200 to INR 9,200 per square feet. And we reduced our target price on shops from around INR 26,500 to INR 20,000, and we saw huge sales coming in. So a conscious call was taken of saying that there's so much cash flow stuck on that project that it's better to get that cash flow out instead of focusing on the higher price levels, which, in some parts of the country, you're still not able to get. So based on that, the call was taken, and we got [ nice on ] track to do a valuation report also, which came in with the relevant numbers. Based on the valuation report, auditors believed that there would be a provisioning required, which was done at an Energy Link level and then it can saw it's visible in the -- and at the KPTL level, although it does not have any impact on consol numbers, but on a stand-alone numbers, it has a impact. So we -- with this confidence, we said, "Let's go ahead," and we're pretty confident that more than INR 100 crores of cash flow should come on this project by March itself and significant amount by December. So target is INR 100 crores plus cash flow by March and balance by December. As of today, we have sold around 40% of our -- in square feet terms, we've sold around 40% of the space, and we're targeting to sell around 20% in the next 2 quarters itself, if not more.

Okay. And what will be the relevant market -- macro market pricing there? So you're selling at almost close to [ INR 9,000 ]. So what would be the relevant market prices there in that [indiscernible]?

Sorry, I missed it. Your question was not very clear. Can you please repeat that. Sorry.

Can you said you have taken down the pricing. So I just wanted to know that you are selling at INR 9,200, per square feet. So what will be the relevant market pricing? Is it similar? Or you are still at a premium? So that -- I just wanted to understand whether the sales velocity will be maintained and -- or do you need to further take further price...

So our -- majority of our last 5 sales have been more in the range of INR 9,600 to INR 9,800 that I have the data in front of me. Last 5 residential flats, we sold higher than INR 9,400, slightly higher than that. So we believe selling at this price should not be a challenge at all because the neighboring market is in the similar range, plus/minus INR 500, depending upon the brand of the project, depending upon amenities, depending upon completion versus under construction. But plus/minus INR 500 is the band in the neighboring localities. Actually, it's more minus than it's plus.

My second question is on the pledge shares. So I remember last time when the Promoters came on the call, they had committed to about INR 150 crores, worth of pledge will be reduced by March '21 and another INR 150 crores by December 2021. So how are we progressed on that? So out of the INR 300 crores of commitment, how much has been reduced? And what's the plan for the balance to be reduced?

Yes. So just to give you a perspective from a percentage pledge of promoter holding, right? So 31st March '20, the percentage of promote holding pledge was around 57%. 31st March '21, they reduced it to 50%, as was promised. 30th June '21, it came down to 45%, which was 45.9%, which was promised. And 30th December, they are clear that it will be at around 40%. And as I said earlier, there's a plan that by March, they will further reduce it, right? Whether the 40% will become 35% or 30%, we still don't know clarity, but by March it will come down further. But by December, the plan of reducing the pledge from 57.5% when they came into count to 40%, 45% is already done, and the balance 5% should all happen in the next 2 to 3 months.

My last question is on further write-offs in the road asset portfolio. So we are on the cleaning of our books now potentially ahead of slightly merger. I just wanted to understand what kind of potential like write-offs can happen again because you did touch upon that you're looking to monetize one of the assets. So by this year, I mean how much further income is expected? And with that mostly will be done with all the major write-offs and on the investments which we have made in real estate or in Indore assets?

Sure. Let me answer this. Let me answer this, and then maybe I'll -- so I'll go step by step, Kurukshetra, I think we have done everything, right? Our books, we only have a small amount, which is an arbitration claim, which we have already won. So Kurukshetra, there can be only an upside with some minimal expenses till NHAI takes over, which will be very minimal in nature. As far as WEPL is concerned, looking at the current scenario, looking at the traffic up to last month, we do not believe that will require a write-off at least for the next defined period of time. And with restructuring approved by bankers, the probability of write-off on that project is very, very low. As far as VEPL is concerned, as we said earlier, there's a prospective buyer. We're confident of signing the binding term sheet in the month of November itself. And based on that, there could be some hit required, which is the difference of the equity value they are offering but a very minimal hit versus what is in our books. I'm not able to quantify it because of the confidentiality clause, but it will be very minimal in nature. As far as the fourth road asset is concerned, I don't think that road asset requires any write-off. It is cash positive and it has a 7 years left. So we don't see any issues coming on that. As far as Indore is concerned, as I said earlier, we've already taken our books up to INR 9,400. We're selling at INR 9,600 to INR 9,800 level. So a further impairment provision looks like -- looks highly unlikely unless there's a COVID 3, which I hope there's no COVID 3 or COVID 4, anything like that, but highly, highly unlike. So from a provisioning perspective, if you ask me personally, except for VEPL, which will not be provisioning, which will be -- if we sell it off, is there a difference between the equity value offered by them, and there could be some small amount, except that I think we are done with everything.

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

Yes. Sir, first -- yes, sir. So first, on order intake side, I think it's been about first half, and we are tracking a bit on the weaker side. So you did mention that you are actually conscious on the TLD orders. But really just wanted to understand, we had earlier given a guidance or you were confident of achieving about INR 9,000-odd crores of intake. So the second half, including the [indiscernible] that you see, so we do see something like about INR 5,000 crores of intake in the H2? And what is the overall ordering pipeline like?

So Swarnim, on guidance and order book, let me just take you through the entire right from consol to KPTL to JMC. So if you see our consol order book guidance, inflow for the year was around INR 15,000 crores when we started the year. We're now revising it to a minimum of INR 18,000 crores on consol. It could go even up to INR 20,000 crores. So INR 18,000 crores to INR 20,000 crores is a consol order book guidance as far as KPTL consol is concerned. On a standalone, yes, KPTL was guided for INR 9,000 crores. As of today, pretty confident of reaching INR 7,000 crore to INR 8,000 crores because we -- now we've got out of the World Bank embargo, and we're seeing international tenders. We're seeing good uptick in Middle East. We've seen good uptick on international tenders on oil and gas and railways. So pretty confident of INR 7,000 crores to INR 8,000 crores. We will try our level best for INR 9,000 crores, but pretty confident of between INR 7,000 crores to INR 8,000 crores. With this order book guidance in terms of revenue growth, obviously, there will be a challenge. So we're revising the stand-alone KPTL revenue growth to 5% to 10% from 10% to 15% on annualized basis. But as far as consol is concerned, we still continue to be at 15%-plus, and we still continue to be guiding EBITDA margin in the range of 9% to 10% on a consol basis. So I know in first 6 months, we have done only 8.4% margin on a consol basis, but we're pretty confident that from here, unlike -- unless steel again goes up by, let's say, 20% or some of those things happen, we're pretty confident because we have provided for CTC losses. As I said earlier, we have around INR 157 crores of CTC losses in books on 30th September. So we're still guiding consol in the range of 9% to 10% and wanting to take it back to double-digit getting into the next year.

Got it, sir. Got it. And sir, on the overall ordering opportunity size right now, is it about, what, INR 50,000, INR 40,000, INR 50,000 crores? Sir, if you can just give some flavor over there.

Yes. So if I get into different segments, right, if I get into T&D with improved visibility post our embargo, we're bidding for INR 15,000, INR 20,000 crores, itself in the next couple of months in different parts of the world, including Latin America, including Sweden, including Brazil, all of that. Oil and gas, there's been some delays, but we now see tenders coming up a lot more international. Today, as of today, we qualified in 6 countries internationally and KPTL stand-alone. So oil and gas now, Middle East looks like a very good opportunity. So we see approximately INR 2,000 crores, INR 3,000 crores of tenders happening there in the next -- this quarter itself. Railway, similar number. As far as JMC is concerned, we're seeing very good traction on B&F in the Southern India, right, where we are among the largest ones today. Southern and Northern India, we're seeing a lot of traction coming in. Water continues to be very, very bullish, and in the Water segment, you'll see orders of INR 10,000-plus crores happening in this quarter itself. Urban Infra, we are L1 and one large project, and we're seeing a lot many more projects coming in metros as well as highway. So we are cautious on that, given the size of the project and given the kind of competition, but there's opportunity. If you ask me together, in Q3, we should be bidding for around INR 40,000 crores to INR 50,000 crores in Q3 itself at a consol level.

Got it, sir. Got it. Right, sir. And sir, you did mention on the previous participant's question about the merger. I mean just if you can just actually share some thoughts, what would be the possible synergies over there? It's -- I know this is still at the early stage, but if it can just actually give something relevant there.

Sure. So again, as I would repeat, this is something which the Board and the senior management will take a call at an appropriate time, right? So that no one expects that's going to happen today or tomorrow or day after, right? It's something that the Board will take the final call. From a synergy perspective, I think there's a lot of synergy in utilizing the skill sets of KPTL and JMC on composite projects, whether it's composite on Railway, whether it's composite on Water and Oil and Gas, whether it is international front where KPTL has been there for more than 15 years, JMC's been there for over the last 3 years, we are in 60-plus countries, they are in 5 countries, and there's a huge opportunity there, whether it is not on the banking side, whether it is on the entire cost front in terms of having a common team on all the support functions. And the last and the most important, whether it is on bidding for much larger projects. Today, if you see our average project size is typically in the range of INR 250 crores to INR 1000 crores. Internationally, sometimes we are, we bidding for $200 million. But -- so it's our ability to build for much larger projects could be very different. But while we're looking at all of this, I would mean like to repeat that this is something which we will be presenting to the Board at an appropriate time, and it's a call of the Board on this matter.

Clear sir, clear. And sir, possible costs synergies, would you have come to that? I mean, just to refer is we understand that this is extremely, extremely early stage, but would you have done any kind of work over there.

So I think there would be definitely costing synergies all the aspects, I've said. Our internal target is a minimum 100 basis points improvement, by doing that. But the exact number, we will be able to quantify once we're closer to if at all, whenever it happens because our support functions and banking and all of that, we could easily get a 100 basis point advantage at a EBITDA level.

The next question is from the line of Ajay Sheth from Quest Investments.

Yes, I have just one question. We have been talking about that we have claims on our road projects. I just want to understand: number one, what's the quantum of the claims we have? Number two, what's the status right now? And number three, when do you think it can frutify and strengthen the balance sheet of JMC or a consol level?

[indiscernible] you want to take that?

Yes. Yes. So Ajay bhai just to give you the overall perspective on the claim, on the road side, we already have a awards of about INR 250 crores, which are is in the court, and we can see some time line maybe 2 to 3 years when the maturity starts. Apart from that, on the BOOT assets, we have large claims of about INR 1,700 crores. And we can see the first award coming in by quarter -- first quarter of the next year, by April, May. And the second award we can expect by the Q2. So this is -- this is where overall position. And by December end, we can see the next year, December, we can see the finality on the INR 1,700 crore basket, the awards coming in.

So if my understanding is correct, are you trying to say that this INR 1,700 crores, we have already taken the write-off in JMC books. And if it materializes, let's say, by December next year, it will strengthen to that extend to our net worth and balance sheet?

No, no, Ajay bhai. So let me tell you, as I said about INR 250 crores to INR 300 crores claims are already in the court. They are the post-award stage, right, so as and when they keep coming, that will get into directly into the bottom line and it will strengthen the balance sheet. So this is one stage, you can say the advance stage. Second stage, which credits the claim INR 1,700 crores, which are there in the arbitration, right. On that, I just said that the awards will start coming in from the quarter 1 of the next year, and they will go up to the December next year so that we will be able to see what we are able to fetch out of the INR 1,700 crores, maybe 50%, 60% of that. But again, these awards will get into the court process. And Ajay bhai, as you know, I mean, we are conservative until and unless we do not see the money. We are not taking this into the balance sheet these numbers.

No, no. Fair enough, fair enough. I'm not...

Let me add Ajay bhai, let me add to your question, right? From an accounting perspective, yes, whatever awards we get will directly get into P&L, right? Once the client is not contested because as of today, all expenses incurred on all these projects have been taken to P&L in some form or the other. So whatever awards come in, if it is at the highest level and there's no contest on the client will directly hit -- will directly be a positive aspect in the P&L.

So that's just to clarify once more. I understand now what the both of you are saying, just to understand once more. Let's put hypothetical situation. I'm not talking about the actual situation. And I understand your conservative policy of not recognizing in P&L unless and until the finality becomes a reality. Let's have a hypothetical situation that award comes in our favor, and the government decides not to contest into the court of law okay. So is my understanding correct that this INR 250 crores plus, let's put it up or 50% of INR 1,700 crores to around INR 800 crores additional. So that INR 1,000 crores will be like both cash flow as well as we'll go into the profit and loss amount. Bottom line, maybe whatever it is?

So Ajay bhai, let's not quantify that number. Any number from INR 250 crores to whatever that number would be, yes, INR 250 crores definitely looks like a minimum number. But yes, whatever that number is, whether it's INR 500 crores, INR 700 crores, INR 900 crores, INR 1000 crores, INR 1200 crores whatever that number is. Yes, you're right. It will come in cash flow. So INR 250 crores -- some of the INR 250 crores have already come in the cash flow, not the entire amount, but then the balance amount will all come into cash flow and P&L.

So mainly, I will...

So I will add this one thing here. So Ajay bhai, so INR 250 crore is our claims from the roads which are in the court, our overall claim basket, which is there in the court, is to the tune of about INR 400 crores plus. Whether it's B&F awards and this and that, and they will start trickling in any -- as I said, from 2 years to next 3 years coming into the -- and against this, all expenses are already entered for, right? So that basket is INR 400 crores not INR 250 crores.

Yes. So just to finalize this discussion, and I don't want to just mess around. I understand what you are saying. But over a period of next 3 to 5 years, this -- whatever claim comes in, without any commitment from your side, can make KPTL consol level absolutely debt-free?

So Ajay bhai, that, anyway, we have plan on the EPC front, at least, we still continue to be on plan KPTL stand-alone closer to being debt free by 31st March '22 and JMC plus KPTL on the EPC pie side being very low on debt by 31st March '23.

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

Congratulations on a good set of numbers. Sir, my question is related to JMC projects. So sir, as we have done could go around our execution during 1H where in COVID was there during 1Q and monsoon was there during 2Q, so are we changing our overall revenue assumption for FY '22? Or are we stick to that around 25% growth on the basis of FY '21?

So we will remain in the range of 20% to 25% as conveyed earlier.

Okay. And sir, the margin has been impacted during 1Q and 2Q, and there has been some lag impact because of commodity prices. So are we stick to that double-digit EBITDA margin for the whole year? Or it will be just for the 2H, and there will be -- I mean, 2H will be having double-digit margin, and overall FY '22 will be having single-digit EBITDA margin?

So second half will definitely have the double-digit margin. But overall, the margins will be under pressure due to the commodity and lag in the escalation realization from the customers. So it would be anything between 9% to 10%. That is -- we can expect at the year-end.

Okay. This is like the FY '22 overall level, right?

Right. Right.

Okay. Sir, just wanted to know about one clarification about the debt numbers. So sir, there has been any change in the line item for the current portion of debt, like it has been added to the borrowings or it is part of the other because as we see the face of the balance sheet, there has been a short-term debt and long-term debt for the JMC, which is actually the same as shown in the investor presentation, whereas in the annual report, current portion was part of other current liability. So that is to be added to the number or it has already been added.

Azad, can you take that question?

This is little change accounting fundaments because of that there is a reclassification of current maturity of debt. So it's only a reclassification, which is making a difference. Otherwise, there is no change.

No. So -- but the point you're saying is, do you need to add this to the numbers which we have in our investor presentation? No. Investor presentation already has -- includes that as debt itself. So you don't need to add anything of current maturities into -- that's already included in the investor presentation and the debt number shown.

Okay. So basically, the borrowing that has been faced on the balance sheet will be inclusive of current maturity going forward, which was not the case earlier.

Yes. Perfect.

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

Congratulation Manish Ji and Tripathi Ji on doing well in challenging time. Sir, I have a question on JMC. Hello?

Yes. Yes.

Sir, can you give some color on the bid pipeline and for next 2, 3 years perspective revenue growth? Because you said that balance sheet will not be a challenge for growing but team building -- so if you can elaborate more. And recently, like as presentation, you announced that we have forward into a tunneling business. So how we are funding the vertical in JMC?

Yes, Bharat bhai. So as I see next 2, 3 years horizon, all the business segments the B&F, we see a very robust growth in private as well as the government on both the sides. Infra, I don't have to say there is a huge opportunity, but it's a very competitive space. So there, we will be very cautious to grow. Water, as I said in earlier conferences, there is a huge opportunity, domestic as well as international. And it will lead the growth along with B&F going forward? And the international, as conveyed -- I mean I said earlier that there is a robust growth in the order book, as well as we can see the further very strong pipeline overseas for JMC in case of the road and water projects. And overall, if I sum it up, we can see 15% to 20% growth year-to-year going forward, say, for next 3 years. So even if you look at our current order book, which if I take the L1 position, it is at around INR 24,000 crores. And at year-end, we should tender at about INR 6,000 crores -- INR 23,000 crores, which will take us next year again to 15% to 20% growth. So Bharat bhai, to sum it up, if we can look at 15% to 20% growth going forward because we will be very cautious in terms of the booking the orders. We'll be focusing building the team and protecting the bottom number rather than only looking at the top line.

[indiscernible] this tunneling business. So where we are, what stage we are and how do we see that opportunity in that business?

So Bharat bhai, tunneling business, overall, India next 5- to 7-year total opportunity size is about INR 1 lakh-crores. And this is both the underground metro as well as the inside tunneling, right? So that is why we have entered this segment. But as I said, we will go cautiously. And with this sector, as I said, the road sector has become very competitive. But these niche sectors, the underground sector, they are -- still, we can see a limited competition. And hence, we decided to get into this sector. But as I said, we will enter cautiously, look at 1 or 2 projects and then try to build the portfolio going forward.

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

So the question is on Kalpataru, where we are seeing a declining trend in orders, slowing execution, drop in margins, increase in working capital and negative cash flow. So -- because we have been highlighting a large part of our order book has been through a pass [indiscernible]. Could you just give us an overall picture, where do you see the execution in the order flow, especially on the Kalpataru side and especially on the working capital and the cash flows?

Sure. So let me just first provide clarity on net working capital. So on net working capital level, I -- we have not seen a significant change. Yes, if you're comparing on the year-end, normally Q2 always is high in our business, and then it corrects by the year-end. So if you look at net working capital days last year, Q2, was 96 days. Now we're at 97 days. First quarter '22, we were 103 days, so it's reduced. Yes, year-end was 86 days, but that's the nature of our business. The maximum collection happens in Q4, and that if you pick up the last 5, 6, 10 years, you'll see that. So working capital as far as KPTL is concerned stand-alone is under control. We do not have much challenges on that. And we continue to be clear that we have a cash inflow expected out of Kohima and Indore of INR 800-plus crores coming up in the next 2 quarters, which will help us reduce our debt significantly. Minimum INR 800 crores. It could be higher than that. On a growth perspective, yes, there are challenges. And the challenges came in from every aspect. One was bidding at what price levels to make sure that you don't lose money because steel, as I said, went up by closer to $20,000 in the last 6 months, right? Will it come down? I don't know the order. Aluminum, yes, we can hedge. The day you bid, you can hedge the aluminum you can hedge copper, but still, you can't do anything. Do we see stability? Yes. last one month, we've seen stability in our ability to go and not improve that price in our costing could start. But otherwise, it was becoming more and more difficult to determine what price levels you need to bid for steel, which is at times closer to 30%, 35% of your project costs. So we were conscious on that. And we had good visibility for 18 months. So we said, "Let's not really go aggressive on taking orders where you do not have visibility." Third, you -- all of you are aware about our World Bank embargo, which got -- which ended on 6th October. We're now bidding for all those projects. So that will also provide us an opportunity to bid for a lot more international projects. So with all of this, the current year looks like challenging. On 3 aspects, margins, I think we should still be okay, given that we've taken CTC provisions, so 9% to 10%, easily doable. We will target and see whether we can get it back to 10% level as there is no further volatility in the steel prices. Top line growth, yes, we had guided for 10% to 15%, but realistically, to me, it's more 5% to 10% levels now on an annualized basis. Order book, there is visibility, but I'm still not being very gung-ho it for the next 6 months, and that's why we've limited ourselves to INR 7,000 crores to INR 8,000 crores from the earlier INR 9,000 crores. We should also appreciate that the opportunity in games is so huge, right? So today, from a consol perspective, better to utilize the flows, where you see profitable growth, right, and not necessarily drive only a particular segment at a given point of time. From a long-term perspective, I see we're getting back to that double-digit growth and double-digit margin into next year at a stand-alone level. And I'm pretty confident about it because now you see a lot of tenders coming out, the CapEx cycle coming back, oil prices going up, oil and gas opportunity is improving, P&D international improving our -- both our subsidiaries are seeing good traction margins improving on both our international subsidiaries. So with that, pretty confident of coming back to that 10% to 15% for the next year. But will we be as high as 20%, 25% for JMC looks difficult. Consol, definitely 15% to 20% would happen in the current year as well next year.

The next question is from the line of Teena Virmani from Kotak Securities.

My question is regarding the CTC provisioning, which you had taken at the end of FY '21 for the order book at that point of time. Now I missed out on that commentary of yours, whether you have made any further provisioning to take into account the current up move in the steel prices in the current quarter or in 1H. Or will any further provisioning be required in FY '22 itself to take that -- to take higher steel prices into account?

So just to give you a perspective on CTC provisioning. At the year-end, our provisioning was closer to INR 146 crores. For the first half, we have in-built an additional loss of INR 80-odd crores coming out of steel, freight and other commodities, which has already hit our P&L. Plus, we have provided for INR 10 crores of further provisioning on orders, which needs to be delivered in the next 2 quarters. As I said earlier, I have 80,000 tonnes of steel of the old order book yet to be delivered. So as of today, as of 30th September, we are at around INR 157 crores of CTC provisioning on losses. Our own assessment is that this should be enough, unless we again see steel coming up in a big way. And then also, our assessment is that we should be able to utilize this entire provisioning in the current year, and hardly anything should flow into the next year because the majority of our old orders which are at lower prices on steel will all get completed in the current year. So as of today, we're confident, with this, we should continue to be at our margins of closer to 9.5%, 10%. And if steel prices improve, we could further improve on the margins -- or if steel prices reduced. Sorry. When I say improve is reduced for us is not going up for us.

Right. Right, sir. And my second question is regarding the T&D asset approval stage. At what stage is that process right now? Because it seems to have been delayed by a couple of months. So when can we actually see it closer to finalization?

So just to be very precise in your question, we have exactly 2 approvals pending. I just don't want to get into the details. The entire team is focused on doing it. My own assessment is that we should get this approval in the month of November. Otherwise, everything is online. The line is commissioned. We're getting 100% -- it is 100% direct that we're getting on a month-on-month basis. So we're pretty confident that any time between November 25 to December 15, we should be able to close the deal. These 2 approvals, while Diwali this week things might not happen, but getting into next week, I think, personally, I'll also be focused on making sure that this come into place. But we are 99.9% confident that we should be able to close the deal by 31st December. And when I say close the deal, it's money in the bank.

Got it. Got it, sir. And my last question is limited to the bookkeeping side. If you can just repeat the revenue number for oil and gas and railways for the current quarter.

Sure. So just give me a minute. From a revenue perspective, all segments have seen the growth. Clearly, that's why there's a degrowth on -- so if you look at Q2 '22, our T&D business, excluding LNG -- including LNG and Fasttel is around INR 1,593 crores. Our Infra business, which is rail is around INR 370-odd crores; and oil and gas, around INR 160 crores.

INR 160 crores?

Yes. For the quarter, Q2 '22. And all of that have seen growth because overall, there's been a degrowth. So all of them have degrown except for Linjemontage, which -- and Fasttel because Fasttel came in the first time, and Linjemontage showed a very good growth.

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

Sir, the first question is on JMC. So what is the margin guidance which you see now for the full year FY '22? EBITDA margin.

Yes. So as I said earlier in the call, Parikshit, it will -- margins will be under pressure, but we are confident of maintaining it at the year end between 9% and 10%.

Okay. For JMC stand-alone we're talking about here, sir?

That's right. That's right, except the exceptional items.

And next 2, 3 years, you said the growth could be about 20% to 25%. Even the order book is strong...

Yes. So 15%-plus, 15%-plus, definitely, right? And then as I said, our more focus will be on improving the bottom line, building the teams and stabilizing the growth.

The other question is on loss funding now. So I think by this year end, you have major loss funding support required projects, merger or maybe restructured. So what kind of loss do you suppose will go on for the next 2, 3 years for the balance portfolio?

Kandpal, I missed your question. Can you repeat the question?

Just asking you what kind of loss funding support will be required for the portfolio now after March 2022 once the asset WEPL gets restructured? So one of residual launch funding will be required on an annual basis for the BOT portfolio.

So Kandpal, if you see last couple of years, it has been in the range of INR 70 crore to INR 100 crore plus. We see it coming down it substantially with the KEPL now going for the termination. But there will be some involvement when it comes to the handing over to the asset to the NHAI. Riva has clarified earlier that will go for the asset sales, so that will stop; as well as WEPL, we see -- we may see very marginal. So the range of INR 70 crores to INR 100 crores may come down. I'm not giving a number. But anything between 25% to 30% of the previous years, what we have been issuing.

So I'll just add to this. I think getting into the next years, we expect the inflows will be in the range of max INR 10 crores to INR 20 crores. That was just for some debt repayment. Otherwise, not beyond that. Azad, am I right?

Yes.

Because they're more on the next year, '22/'23.

Is it -- INR 10 crores to INR 20 crores, is that right?

Yes. Yes. Max.

Okay. Just lastly on the World Bank, you said that embargo has not gone away. So just want to know what kind of opportunity if you can quantify opens up on the living side for KPTL.

No sir. As I've said, we're not bidding for the last 1 year because of the embargo. And on a lighter note, even if I were to bid, I would have only lost money with all the [indiscernible]. So somewhere there is God and somewhere there is -- but anyway, that's on a lighter note. On a serious note, all African projects now we've started bidding. We're seeing a lot of projects coming up in Middle East also, and we're seeing a lot of projects coming in CIS countries also. And as I said, on the international front, I see bids of INR 15,000 crores to INR 20,000 crores happening in the next 3 to 4 months, significant amount on the T&D space. So now there's nothing about whether to bid or not. It's all about saying that at what price levels to bid because there's no limitation of anytime today.

Okay. Just one last thing to state on the KPTL project. So now it's given the termination notice. So how the thing works now, so you have to recover on your equity investment. So how do you recover it? What could be qualified? What amount can get qualified contractually when this kind of force majeure happened? If you can just give some sense on that and the time line when we can expect [indiscernible] to come in. At least on the equity investment, I'm not talking about the claims which may take longer just on the equity part.

So Kandpal as per the concession provision, the fourth major under which under the farmer agitation, it falls in a category where we are supposed to get 110% of the adjusted equity and the debt due to the banker. This is the contract provision, but reality is that the NHAI will not give up this very easily, and we have to go through a process of resolving this with the NHAI based on this concession provision. It is the question of time. NHAI may settle it or they may take an arbitration route. Now -- so concession provision is very clear. We have to get back about 110% of -- not about, the 110% of the adjusted equity, and the debt due has to go to the banker.

And we have written off everything. So the entire equity has been written off all of our loan term advances last funding everything. So nothing remains on the balance sheet, and the investments are underneath the loans and advances side on this effect, right, only the right observation [indiscernible].

You're right. Right. So everything has written off. And if you are hearing the earlier in the same call that we have the claims, and as and when they mature, they will have -- that is the only positive which is left out now for to recover the lost equity and the -- which will compense the balance sheet.

Sorry. I'll just add it [ Kriti ]. I think we still have a small amount of INR 47 crores in our books, which is where an arbitration claim we've already won, if you remember that, right? While we've not taken into P&L, but that much amount still lies as our investment in KEPL form of loans. So INR 47 crore is a precise number and for which we have an arbitration team already in our favor. So besides that, everything else has been written-off.

So it's back-to-back protected with arbitration claim, so [indiscernible].

But it's not come in P&L still because of our policy when we don't take this in P&L, but that's amount still shown against KEPL.

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

Just pertaining to KPTL. When you -- I mean oil and gas as well as Railway, Infra -- international opportunity? And second thing, how do we plan to leverage size of Linjemontage or Brazil subsidiary going ahead?

Sure. So Bharat bhai, as far as -- as I've said earlier also, oil and gas with oil prices looking up. You've seen a lot many more tenders coming up, both domestic and international. And you are aware for the last 2 years, we've built a big team to focus on oil and gas international. We were L1 in 1 large project, but we lost it for some reasons more local to that country. But we are very focused on that. There's a big team on tendering, on operations, which is already in build for the last 2 years. And I'm pretty confident that's a huge opportunity going forward. I'm not able to quantify that today. As I said earlier, around INR 3,000 crores worth of tenders to be bid in the next 3 months. But beyond that, our focus right now is to get ourselves qualified in as many countries to get one international project and focus on execution because the first one always gives you a challenge and then grow from there. As far as Railway is concerned, you see -- we're seeing a lot of opportunities on electrification, but yes, with intense competition. We're seeing some opportunities coming on composite projects also, and metro continues to be one focus area where JMC and KPTL could work together. Also, on the international front, we have seen traction in 2, 3 African countries where we have submitted our bids. And I'm hoping that before the year-end, we should have one big project coming out from the international geography also. As far as Sweden and Brazil is concerned, our focus on Linjemontage continues to be extending our presence in Sweden, plus look at the neighboring countries, primary Norway, Denmark and Finland, where we see a lot of opportunities coming on replacement of transmission assets. And we'll continue to focus on that from a 2- to 3-year perspective. As far as Brazil is concerned, they had a limited order book when we acquired them. Luckily, they don't have any losses of the past because that was already inbuilt in the valuation. But we're seeing some good traction on building a team there on bidding for larger projects. So I -- for the next 1 year, if you ask me what is the focus on Brazil, it's about improving the team, getting the processing systems in place and looking at sustaining the current revenue. We look at growth going in from '23 onwards as we did earlier in Sweden also because the first one here, it's very important to get a culture which is very similar [Audio Gap] happy about the opportunities by a good team of 150-odd people, very low debt numbers, focused on delivery. And we believe that post '23, this a business which can easily give us a 15%, 20% growth, if not more. And we're also using the subsidiary to look at opportunity in the neighboring countries in Latin America. We have submitted a couple of bids. But that's more from a long-term perspective. Short term, it's got -- make sure they deliver what they've committed, build processes, get the team in place and start focusing on growth from '23 onwards.

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

Yes. I would just like to thank everyone for being on the call and particularly the management for giving us the opportunity to host the call. So thank you so much for answering and taking time out for all the [indiscernible]

Thank you, everyone. Wishing all of you a very happy and safe Diwali. It's a good week of festivities. We all need to enjoy this. Wishing all of you very happy Diwali.

Thank you.

Thank you.

On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.