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

Ladies and gentlemen, good day, and welcome to Kalpataru Projects International Limited Q3 FY '24 Earnings Conference Call 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. Thank you, and over to you, ma'am.

Yes. Good morning, everyone, and a warm welcome to the Q3 FY '24 Earnings Call of Kalpataru Projects International Limited. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. S.K. Tripathi, Deputy Managing Director; Mr. Amit Uplenchwar, Director Group Strategy; and Mr. Ram Patodia, President Finance and CFO. At this point, I'll hand over the floor to Mr. Mohnot for his initial remarks, post which, we'll open up the floor for Q&A. Over to you, sir.

Thank you, Bhoomika. Good morning, everyone, and welcome to the Q3 FY '24 Earnings Call of Kalpataru Projects International Limited. I will start with the key highlights of our performance for the quarter, then follow that up with updates for each of our business verticals. The current financial year is a pivotal year for us as it has set the tone and foundation for robust performance for the merged entity. We have reported a strong quarter with consolidated revenue growth of 22%, EBITDA growth of 13% and PAT growth of 32%. So in Q3 '24, our stand-alone revenue was up by 18%, EBITDA growth by 13% and PAT is a whooping 30% growth. The growth is largely on back of improved execution and healthy order backlog position. We have seen a good inflow of high-value orders during the year, as we have successfully forayed in underground tunneling with one project in Kanpur Underground Metro and additional L1 in Bhopal Underground Metro. Further, we have also secured largest B&F quarter for constructing around 13 million square feet of residential building project on design-build basis. We are also favorably placed in a large airport EPC project in India. In addition to these marquee projects wins, we continue to strengthen our presence in T&D business in India and overseas markets. All these orders will help us to solidify our market position and capabilities going forward. On back of these large order wins, our order book had a record high of INR 51,753 crores. Our order inflows, including L1 of INR 6,000 crores, stands at over INR 24,000 crores for the current year. With this, we have almost achieved 95% of our targeted order inflows for the full year '24. Our consol EBITDA margin is at 8.7%, and the stand-alone EBITDA margin is at 8.3% in Q3 '24. Our EBITDA margin is in line with project mix and reflects our consistent effort towards capability building and resource augmentation in order to support future growth. Our debt and working capital in our core EPC business continue to remain aligned with revenue growth and business mix. Our net debt in our core EPC business stands at INR 2,784 crores, with working capital days at 112 at the end of Q3 compared to 117 days for a similar period last year. Our finance cost as a percentage of sales remained stable at around 2% at a stand-alone level. We expect net working capital days of around 100 days by the year-end as we move closer to the financial year. Coming now to our business verticals, beginning with the T&D business. Our T&D business performed exceptionally well with revenue growth of 30% in Q3. The growth is driven by robust project progress and healthy order backlog. The T&D business witnessed a renewed optimism backed by rising adoption of renewables, increasing demand for power and need for upgradation of T&D infrastructure. The T&D segment is set for multiyear growth with robust tender pipeline in India and international markets. We have secured orders of around INR 7,500 crores to date in our T&D business and additionally have L1 of over INR 3,000 crores. The majority of L1 orders in T&D business are from India. Our T&D order book stands at INR 19,367 crores at the end of December '23. On the international subsidiaries front, in LMG Sweden, we have reported revenue of INR 237 crores in Q3 and INR 664 crores for 9 months financial year '24. LMG's order book at the end of December '23 stands at around INR 2,100 crores. LMG has also successfully improved its capabilities in the substation business and improves its market presence by addition of new clients. In Brazil, Fasttel's revenue reached INR 560 crores for 9 month '23 with a Y-o-Y growth of 77%. We continue to focus on organization strengthening and closure of existing projects. Fasttel's order book stands at INR 435 crores, and additionally, they have L1 of around INR 300 crores. We expect that T&D business to deliver good and sustainable growth going profit -- going forward. Moving to our Buildings and Factories business. The business reported growth of 9% Y-o-Y in Q3. During Q3, progress on a few projects, especially in Chennai, were impacted driven by heavy rains. We expect to improve our revenue in Q4. Our B&F business continues to witness robust ordering momentum as we have secured orders totaling around INR 6,450 crores, resulting in a closing order book of over INR 12,000 crores. We continue to improve our competitive position and capabilities in the B&F business as we have secured large price design-build building projects and improved presence in airport, data centers and industrial projects. The business outlook in the B&F segment looks very promising across residential, commercial and institutional buildings. Additionally, emerging areas like data centers, airports and industrial plants also present a good opportunity for future growth. Our Water business has achieved strong growth in the revenue by revenue growth of 52% in Q3, led by healthy project execution of water supply projects. Our order book stands at around INR 11,400 crores at the end of December '23. The business outlook in water supply, irrigation and water treatment projects remain very strong, and ordering activity is expected to pick up getting into next year. In our Railways business, we continue to focus on project closure and selective order booking given increase in competitive intensity. Our revenue for Q3 is INR 281 crores, and closing order book stands at INR 3,750 crores. In our Oil & Gas business, we have achieved revenue of INR 200 crores in Q3, a figure close to the same quarter last year, primarily due to the lowering ordering in the domestic market. We are working to expand our international reach in the Oil & Gas business with focus on MENA region, given the large capital outlay to expand and upgrade the existing hydrocarbon infrastructure in that region. In our Urban Infra, we reported revenue growth of 130%. The growth is driven by a combination of execution new projects and claim receipts in older projects. We have made a major breakthrough in our Urban Infra business with 2 underground metro rail tunnel projects. This will pave way to improve our competitive position and capability to bid for such large projects going forward. Additionally, the recently announced union budget has increased the capital outlay for infra development to over INR 11 lakh crores. This will lead to enormous opportunities in the urban mobility segment. We are focusing on opportunities in elevated and underground metro rail, expressway, elevated corridor, et cetera. We believe that Urban Infra will act as a major contributor in growth going forward. In our road BOOT projects, revenue per day has improved to INR 50 lakhs per day in Q3 as compared to INR 52.6 lakhs same quarter last year. Similarly, for 9 months of FY '24, revenue of road BOOT projects has improved to INR 57 lakhs per day compared to INR 53 lakhs of similar period last year. The growth in revenue is largely driven by increase in traffic. We have infused around INR 59 crores in the first 9 months of FY '24, largely towards repayment of debt. For our Indore real estate project, till date, we have completed sale of around 70% of the inventory. In the current financial year, we have collected INR 43 crores from the project. We are awaiting clarity on TDR and FSI policy, which in turn will determine the development of additional built-up area and the balance proceeds to be collected from this project. However, we remain committed to complete and close the project by end December '24. On the outlook front, the business environment remains very optimistic with large capital outlay and spend on infrastructure development in India and select international markets. In this backdrop, our diversified business mix, proven competencies and strong financial profile give us enormous flexibility to be selective and focus on opportunities that align with our ethos of profitable growth and improving and maintaining the strength of our balance sheet. We continue to target consol revenue growth in the range of 20% to 25% and PBT of around 4.5% to 5% for full year '24. With this, I will request the moderator to open the lines for Q&A. Thank you, everyone.

[Operator Instructions] The first question is from the line of Deepak Krishnan from Kotak Institutional Equities.

Just wanted to check on your revenue guidance, you gave it at 20% to 25% and some deferral of real estate revenue. But what gives us confidence? Because first 9 months, we are only at 19%. If you want to sort of reach or will we be at the lower end because of the 20%, how do we look at that? That's my first question.

Deepak, typically, Q4 revenue for our businesses are extremely high. And given the order book visibility, we believe that our Q4 growth itself should be in excess of 25%. Now if Q4 growth is in excess of 25%, we could be anywhere in the range of 21%, 22% on an annualized basis. As of today, looking at the January numbers also, we're pretty confident of reaching those numbers, subject to anything unusual which happens in the next 2 months. If you look at historically also, typically, Q4 is always 30% to 30% plus of our revenue, and that's what similarly we expect in the current year also.

Sure. Maybe just on the order backlog and the [ outlier ] outlook, how do we look at the execution time lines for this INR 51,000 crores? Should we look at like the standard plus year or because it's shifting more towards T&D, the execution can also move faster? And just maybe related to that, as T&D prospects increase, should the margin profile also go back towards the last couple of years' levels? How do you look at the margin and revenue from a medium-term perspective?

This is from a revenue growth perspective. Deepak, it's very different for each of our segments, right? So typically, when I look at the T&D segment, typical order book is 2.5 years to 3 years. It's not beyond that. When I look at water, its typical order book execution cycle is 2 years to 2.5 years. Similarly, Building & Factories is more in the range of 2.5 years. So if you ask me from the profile of order book, there's hardly less than 20% order book which will be more than 3 years. Everything else has to be delivered in the next 2 to 3 years. So -- and that's where we're pretty confident of growth going forward also. As far as margin profile is concerned, obviously, margins are -- should be continuously improving given the increased size in revenue, given the optimism which will come in overheads and interest cost. And that's what is visible in the current year also when you look at on a quarterly basis. We believe that this trend should continue getting into next year also, but we'll be able to quantify it maybe by the end of Q4 or beginning of Q1 next year.

Next question is from the line of Parikshit Kandpal from HDFC Securities.

Congratulations on a good quarter, sir. Sir, my question -- first question is on the JMC. So the intent of the merger was also to take JMC International. So if you can highlight post-merger, what kind of order wins or what kind of total addressable market opportunity have we seen and how much of that has been converted? So if you can give some sense on how the TAM has increased for us beyond T&D in the international market. And going ahead, how do you see this panning out?

Parikshit, yes, you are right, one of our intent of merging the 2 entities was to take all our non-transmission business segments on the international front. We continue to explore those opportunities in roads, in Building & Factories as well as on Oil & Gas. If you go back to our order book, roads, we already had a couple of very large wins in the previous year where we are focused on delivering. In the current year, we got into specials on a large Building & Factories project in which we are executing. We're already executing 2 large projects in Maldives while we speak. We are further strengthening our capabilities and competencies in some more geographies as far as Building & Factories and roads are concerned. So parallelly, we continue to explore opportunities not only in these 2 segments, but even Oil & Gas. So we have already created several inroads by qualification in a lot of segments, in a lot of countries. My own belief is that as early as Q4, you will see some large wins coming in and at least some segments which are non-T&D in the international front. We will continue to focus on a lot more segments going forward in the next year. Parikshit, it's also very important for us to realize that some of our segments are very CapEx intensive, right? So when I look at our Buildings & Factories segment, when I go international, they are very CapEx intensive as compared to, let's say, our T&D or Oil & Gas segment. We also would like to balance that while we look at growth on the international market. So while we -- our vision is clear, we are pouring into all of this, but the speed is at different levels, depending upon the opportunity, depending upon the CapEx mix and depending upon the maturity of the markets.

Okay. Sure, sir. Sir, my second question is on the subsidiary, the entity, the international entities, Fasttel, Linjemontage and Shree Shubham Logistics. So if you can help us with the 9-month performance, like how much would have been profit or losses in these entities?

Sure. So I think we have this data already in our presentation, which is on the website, but I'll give it to you again. On a 9-month basis, if you look at Fasttel, they have done revenue of around INR 664 crores with EBITDA of INR 21 crores and PBT of INR 11 crores -- on Linjemontage, sorry, that was Linjemontage at a Sweden level, INR 664 crores, EBITDA of INR 21 crores and PBT of INR 11 crores. If I look at Fasttel, they have done INR 560 crores revenue with EBITDA of just INR 1 crores and negative PBT of INR 35 crores. Negative PBT had a large amount of a bank guarantee encashment, which happened in Q2 of around INR 18-odd crores. As I said earlier, we expect Fasttel to get into that breakeven level at a PBT level itself getting into next year. And Linjemontage should be doing much better given that they have very good visible order book, and they foray into new segments with new clients.

And Shree Shubham?

At the Shree Shubham level, we have done INR 81 crores revenue for 9 months with EBITDA of INR 17 crores and a negative PBT of INR 10 crores, very similar to what they did in the previous year 9 months.

Okay. And just last question, sir, on these pledges and the promoter shareholding. So if you can you give us some sense, have the banks or the lending institutions brought in some covenants on how these will behave? Or is there any embargo on the -- that pledges will be capped, the promoter shareholding should not go below certain levels? If you can just refresh us on that.

So there are no specific covenants in terms of saying that what should be the promoter holding or pledge. But yes, there's a kind of a discussion which has happened, where the promoters have promised that, one, pledge will go below 40%. And while we speak, they're already at closer to 39% or 38%, right? Correct me if I'm wrong. So that's my understanding. The pledge has been reducing every quarter. Even the last month, we saw a reduction of closer to 2% on pledge. So the underlying commitment from the promoters in the pledge will not go up, whatever happens, and they don't intend to sell any more of the stake. Those are the 2 underlying promoters or kind of verbal things. It's not something in a return kind of note with bankers.

Next question is from the line of Gaurav from IIFL Securities.

So sir, as we are phasing out in our election -- phasing in an election year, so how do we see our closing order book for the year? And what could be your order inflows for 4Q and 1Q '25, if you could just highlight some of the points on that part? And specific segment like which are the segments which we are seeing traction because railways has been sort of muted for us for quarter 2 now.

So Gaurav, as I said earlier, we expect all our L1 orders to get converted to order book in Q4, which means that we should be getting orders in excess of INR 6,000 crores in Q4. And with revenues of similar numbers, we should be ending the year with an order book of around INR 50,000 crores to INR 53,000 crores or in that range. As far as Q1 is concerned, it would be early for me to comment on that because, typically, during election quarter, you might see some slowdown in a few sectors but not -- it might not be across the board. So when I look at the international order book, there will be no impact. Whether I look at the B&F private sector, there will be no impact. Whether I look at orders from the central PSUs, whether it's Power Grid, IOCL, GAIL, any of them, there shouldn't be any impact. Difficult for me to quantify at this stage the Q1 likely order inflow or impact. But at the year-end, we expect order book to stay at the range of INR 50,000 crores to INR 53,000 crores.

Okay, sir. Sir, next question is basically on the margin. So we have seen a marginal improvement in the margin in the 3Q to around 8.3% on the EBITDA level. So sir, how do we see that trajectory going forward? And which segments are contributing to the margin for betterment of margins in the coming quarters? Or are we seeing any sort of improvement in FY '25 also from this level -- or from this point of view level?

I think we continue to be being on our estimates of PBT in the range of 4.5% to 5%, and we stick to that stand, what we had given at the beginning of the year. We believe that, that is what is achievable on an annualized basis in the current year. Getting into next year, we definitely believe there will be improvement in margins. But the exact quantification, I'll be able to do at the end of the Q4 call because all the business plans have been done now. But clearly, a visible improvement should be seen at a PBT level.

Okay, sir. And sir, could you just highlight on like what sort of order inflows we expect in railways from FY '25 because there has been some slowdown from quarter 2 now? If you can just highlight on the railway part, like how are we seeing this on the order inflow front?

Sure. So on the Railway segment, while there are a lot of tenders, which are coming out, the competition has become very, very intense. On an average, we are seeing 15, 16, 18, 20 players also bidding. We've been very conscious of not going to order book by compromising on profits. We already have a very good order book there, and our focus there is more on delivery and closure of projects. Personally, I do not see that segment being very bullish into next year, similar to, let's say, some of our other segments where I'm very bullish. The focus on railways even next year would be take specific targeted projects and make sure that you focus on delivering on existing projects and closure of existing projects. While we say so, on the international front, there are 3 or 4 countries where we have now got qualified for railway projects also. We will continue to pursue that. But typically, international projects takes their own duration of conversion, but that will also be an additional focus for us as far as Railways business is concerned.

Next question is from the line of Bharat Sheth from Quest Investment Advisors Pvt. Ltd.

Congratulations on good delivery. Manish-ji, I have 2 questions. One is on this, we are seeing a big opportunity coming 5 years for India as well as internationally. And what we have been getting, feeling that execution is becoming challenged and particularly skilled labor force availability. So what are our strategy to improve that in order to execute within a time line and no cost overrun? So what is our strategy? And what are -- how are we going to meet those challenges?

So Bharat, I think you are exactly -- got out our biggest challenge going into future. Yes, you are right, availability of labor and resources, not only labor, resources across the entire segment is the challenge today. We're seeing attrition in the rate of 15% to 20% over the last 2 years across all our businesses, which was not there in the last 5 years. Our focus is very different. Our focus is we're trying to create a strong workforce with assurance over the next 12, 24 months in terms of giving them work irrespective of monsoon, irrespective of any other segment. So one, we're trying to source in people, which are more long term in nature, whether it is subcontractor level or at a labor level. Second, on the international front, we're trying to bring in people not only from the Indian segment, but also neighboring countries to India. So there are a lot of resources available in neighboring countries, which are very good, which are equipped and they have been now used for a lot of our international projects. Now there's a lot more focus on training and skill development. Over the last 1 year, we have done more than 2,500 people, they have been trained on various aspects of skill development or any of those. So that's the third focus on making sure that we train as many people. I know all of them we can't retain, but whatever we can retain is good for us. This will be a challenge and this will be a challenge given the election euphoria also and primarily in the month of April and May. But as an organization, we'll try and make sure that at least we focus on doing as much in March; and then April, May, make sure that labor-intensive projects are not so much in focus.

And sir, can you add into that? I mean, how much automation can really improve our efficiency or -- and what are we doing for the next couple of 3, 4 years or 5 years time line?

So Bharat, automation will play a big role across all our segments. As of now, today, if you look at it, what we have done over the last 3 years, we'll continue to build on that on various aspects. One, I could start with utilization of drones across all our businesses, whether it is on survey, whether it is on stringing, whether it is on project monitoring, all of that. Second, utilizing means using shuttering and staging at a very advanced level. Today, 90% of projects, we work on aluminum shuttering, where the cycle time comes down to 7 to 8 days compared to a normal 15 to 20 days in normal shuttering. Third, if you look at on the welding front in oil and gas and water and all of that, we are using automatic welders more than manual. Fourth, if you look at urban infra, focus is a lot more on the newer machinery, newer equipment, whether it's on PBM or any of that, where productivity would be very different. So across all segments, right, from utilizing of AI tools to utilizing things at the site, there is a continuous improvement. That will continue to be our focus. And if you look at our fixed assets, last 3 years, you'll see that we have invested closer to INR 1,000 crores in fixed assets, whether in the form of shuttering, plant and machinery or investment in any of the new things. And that is visible in our profitability also. Compared to any of our industry plans, you see that we have been much higher even on such a large scale because all this automation is helping us improve our productivity.

Okay. And last question is on -- about the working capital or borrowing. See, it is not, I mean, at the desired level, which you are typically is always giving -- bringing down to below 95 days. So it's still high. So how do we really want -- because in future also for higher growth or higher base, we'll require a lot of working capital. So how are we going to bring down overall borrowing or remaining at the current level?

So Bharat bhai, as I mentioned in my opening speech, we are targeting closer to 100 days of working capital by end of Q4. Typically, Q2 and Q3 working capital goes up. That's the typical nature of our business. If you see last year also, Q3, it was 117 days. Q4, we came down to below 100, right? That's our target in the current quarter also, and the team is aligned and working towards it. That is as far as working capital is concerned. As far as focusing on debt, I think a lot of focus continues on getting rid of some of our non-core assets or divesting some of our non-core assets. So whether it is Indore, where we expect closer to INR 150-odd crores to come, INR 150 crores or INR 200 crores to come in the next 6 to 9 months. Also, our infusion in all our non-core sector has reduced significantly. If you look at infusion, that will also help us in bringing in working capital. We also continue to focus on divesting one of our large road assets. The mandate is already given, and we continue to speak to people to look at those options. So with all of that, I think debt, we will be able to easily manage, and our internal target on working capital is to keep it below 100 days on an annualized basis. Quarter-on-quarter, sometimes things could be very different.

Next question is from the line of [ Dhruv Aggarwal ] from Niveshaay Investment Advisors.

Congratulations on a very good set of numbers, sir. So just wanted to understand your view on T&D segment on like domestic and international front. What kind of traction do you see in the next 2 to 3 years, excluding the current order book that you have? And like where is the higher margins like, on the international orders or like on domestic orders, sir?

Okay. We have seen the traction on T&D change significantly in the last 6 months in the domestic market. If you go back to my own calls over the last 2, 3 years, we have been very, very subdued on growth in domestic T&D. Last 6 months, we have seen huge orders being planned by REC and PFC on the entire renewable integration, whether it is in Western India, Northern India or even in some pockets of Southern India and the new regions, which was expected to come in soon, whether it is Northeast or the North. We've already seen orders of closer to INR 40,000 crores being highlighted by REC, PFC for bidding in the next 3 to 4 months, which is near or closer to 3x of what we have seen in the last couple of years. So with this, I believe that at least the T&D segment for the next 2 to 3 years clearly looks like an opportunity where we would have a big advantage. On the international front, our focus continues to be more in Africa and LatAm, even with some focus on Middle East. We are now seeing funding agencies coming back in Africa on majority of the countries. All these funding agencies during COVID had a different view on some of these countries given the revenue shortfall in those countries. But now lately, last 3 to 6 months, we've seen a lot of tenders coming up in a few markets, primarily LatAm and Africa where international agencies are coming back. Given the trust of funding by international agencies, we expect that international markets also should do well. As far as profitability is concerned, I think whether it's domestic or international, we continue to be working at a similar level of profitability, which is at 9% to 10% or 9% to 11% at an EBITDA level and 5% to 6% at a PBT level.

Okay. One more question related to that only. Sir, do you see any competitor on the international order front, like on international front?

So we do see competition in various countries across the globe. It's very different in different countries. In MENA, typically, it's Indian and the local Middle East players. When you go to Latin America, it was Spanish players, Indian and a few global players. When you go to Africa, it's primarily Chinese and Indian. Yes, competition continues to be what it is. But given that we've been in this market, some of these markets for 10 years, 15 years, you clearly have an advantage in terms of the labor force, the knowledge of the geography and region and the costing. But competition continues to be what it was in the past. We've not seen as intense competition as in railways. So it's not like we have 20, 25 players. We'll have 6, 7, 8 players on all projects, whether it is domestic or international.

Okay. All right, sir. Sir, like while executing the orders on the T&D segment, what is the biggest challenge that you see, sir?

So I think the challenge is different in domestic and overseas market. I think the domestic market, the challenge continues to be on approvals, whether it's on right of way, whether it's on environment and forest clearances, which are happening much faster compared to the past, but those challenges continue to be delaying projects on the domestic front. On the international project, the challenges are more, the larger framework, like the Red Sea issue where freight gets impacted or any unexpected event which happens everywhere. While we protect ourselves through ECGC cover and all of that, but challenges are very different depending upon the country and depending upon the projects.

Okay. Sir, just last one question, sir. Like said that if T&D has increased the investment for deploying transmission infrastructure, including transmission line substation to INR 4.75 trillion from like Q4 INR 2.44 lakh crores previously. So can you give some color on like how do you see the demand to roll out from this increased expenditure? And what kind of market share can Kalpataru be able to attain from this? And what kind of EBITDA margin you can expect, sir?

So on the T&D front, typically in the domestic market, we've been into that range of 15% to 20% market share in the last 10 to 15 years. A few years could be a plus or minus. And I believe that we should be in that space as far as the T&D space is concerned going forward. On your question on the huge expansion, which has been planned, that's exactly what I said earlier, that next 2, 3 years, we will see a huge growth in the T&D segment. And we will have to just make sure that the supply chain does not get locked up and those are available to deliver. As far as margins, I said earlier, we continue to be bidding in that range of 9% to 10% EBITDA with 5% to 6% at a PBT level.

Okay. So like my understanding is correct, like 4.75 -- from like INR 4.75 trillion, you will be able to attain 16% to 20% of market share, right, sir?

Yes, over the next 3 to 5 years. This is not a number which is happening in 1 year.

Next question is from the line of Vaibhav Shah from JM Financial Limited.

Sir, one clarification, our guidance on the revenue side and the PBT margins are -- is on stand-alone level, right?

Yes. Yes, our guidance is more at a stand-alone level of growth of 20% to 25% in Q4 and PBT in the range of 4.5% to 5%. But very important to understand, a lot of our core transmission projects also now get into consol. So slowly getting into -- looking at the long term, you have to start looking at consol numbers. So if you look at Q3 also, there's closer to INR 250 crores of revenue in consol numbers, which comes from Saudi, which comes from Tunisia, which is also a subsidiary route. So I think going forward, it's important for us to look at the consol numbers because now majority of numbers are core business. The road SPVs or Shree Shubham is hardly any number. So right now, yes, the guidance is more on a stand-alone, but going forward at the consol level also, we will be targeting margins in excess of 4.5%.

Okay. Okay. Sir, secondly, what CapEx have been in 9 months and what are our plans for the full year and next year?

So our 9 months CapEx has been closer to INR 200-plus crores. We expect to do another INR 100-plus crores in Q4, could be slightly more than that. We have not still finalized our CapEx plan for next year, but it definitely looks like being higher than the current year. It might be in the range of INR 400 crores to INR 500 crores given that we have pulled into underground metro, which also requires some CapEx. And we're looking at some international projects also in non-T&D segment, which might require some CapEx. So current year, we should be in the range of INR 300 crores to INR 350 crores. And getting into next year, it's going to be higher than that. I'll be able to quantify that at the end of Q4, in my analyst call for Q4.

Okay. And sir, lastly, on the underground metro opportunity, we would be bidding in JV with another player, but the entire work will be done by us?

So I think it's a JV, proper JV, where work will be done by both the partners in the form -- and with the JV has devised. It could be a different proportion of work. It would be different segments of work, which we will be working on. But it's not that we would be doing the full work. It will be the JV's responsibility. And based on whatever the JV agreement has been signed, we'll be working on that.

So particularly in underground projects, you would also be doing the tunneling portion?

Yes, we will be doing the tunneling portion for next year, and we are investing in a TBM machine also, which I've said earlier that there will be a CapEx going in for TBM machine also.

So it could be in the range of INR 50 crores to INR 100 crores, the TBM part for next year?

Yes, sure. It could be even more than that. Let's see what -- how many projects we win, but definitely in the range of INR 100-plus crores.

[Operator Instructions] Next question is from the line of Arafat from InCred.

Congrats on great set of numbers. Sir, my first question is on the divestment. So if you can say in terms of each divestment [indiscernible] and what is the time line to divest other assets like Shubham Logistics. And also Indore will be completely out of business. And what you are expecting from all business?

So as I mentioned earlier, Indore projects, we expect to be fully divested by December '24. We have sold off closer to 70% of our inventory. The balance should be sold off quick maybe in the next 3 to 6 months. By December '24 internally, we are planning to be completely out of Indore. As far as road assets is concerned, the largest asset, WPL, we have already appointed bankers -- VEPL, sorry. We have already appointed bankers, and we have a non-binding offer right now in which we're working on. We believe that in the next 3 to 4 months, we should get some clarity on that. As far as the other 2 road assets are concerned, they have a smaller lag life left. One of them is 7 years. One of them is 9 to 10 years. We have not yet looked at divesting them at the current stage. But once we are done with the big assets, we will look at that also. As far as Shubham Logistics is concerned, clearly, we believe it's non-core to us. But we don't think the divestment will happen in the next 12 to 15 months. That could be something which we would target in '25, '26, given the situation in that business today, where things have to improve significantly, hopefully, post elections. So we believe that, that diversification could happen only in '25, '26, not before that.

Okay. Fine, sir. And lastly, on your promoter holding, so for the past few quarters, pledges are coming down, but promoter holding itself is not coming down. So on that, sir...

Sorry, I missed that. Pledge is coming down, but sorry, I missed the second part. Pledge is coming down...

Promoter holding, if you look at the promoter holding, is it coming down?

So I think promoter's holding came down, one, because of the merger; and second, because something they sold around 6 months ago. There's no movement in the last 2, 3 months. But we have seen pledge coming down. So there was a further reduction of 2% in January. Now pledge is at around 38%, 39% level. So we see continuous reduction in pledge, and you should see further reduction happening in the next 2 months. So I think we'll only see a downward trajectory on that and hopefully a significant downward trajectory going into the next 6 to 12 months.

Next question is from the line of [ Thomas George ], an individual investor.

Mr. Mohnot, it's good to connect with you and the team again. Just have a query on future incubation of businesses. Do we see any of our businesses within the overall holding of our company being listed either overseas or in India in the very long term? And what is our view on incubation of new businesses at a couple of new projects?

Thomas, on the first question of any of our businesses in the domestic and international front getting into an environment of listing or capital raising, as of now, I do not think we have any such plans at least for the next few years, whether it is the Swedish entity or the Brazilian entity or any of the others. As far as incubation of new business is concerned, we would continue to explore opportunities within the value chain where we exist. So whether it is a transmission value chain or the Urban Infra or the Building & Factories or the Oil & Gas or Railways, we will continue to explore opportunities within the value chain, whether it's on manufacturing, whether it is on, let's say, automation, whether it's in investments and small players who are doing excellent work in this value chain. Beyond the value chain, beyond the 6 existing businesses which we have, we do not believe that we need to diversify in the next couple of years given the huge opportunity in this business basis. We also are conscious of the fact that any new incubation and diversification requires also huge capital, right? It starts with some infusion of equity, then taking those 3, 4 projects and then building everything. As of today, at least from a 2-year perspective, we believe that the segments where we exist have huge opportunity in domestic and international, and we'll focus on those segments only.

[Operator Instructions] Next question is from the line of Lakshminarayanan K G from Tunga Investments.

A couple of questions. So first, in terms of your B&F vertical in India, what has been the order book in the B&F vertical in India?

So if you look at the B&F vertical in India, our order book as of 31st December is around INR 12,000-plus crores. In the current year, we have won orders of around INR 6,500 crores in the B&F vertical. Additionally, we have L1 in some orders. So our closing order book right now is around INR 12,100 crores.

And this will be executed over a period of what time?

So our typical B&F orders are in the range of 2.5 years to 3 years. So my own view is a significant portion of this order will be delivered in the next 2 years with some portion getting into the third year. There's nothing which is beyond 3 years as of now.

And what are the major wins you have got just the last 9 months?

So in the last 9 months, as I said earlier, we have had wins in industrial engineering. We have had win in a data center. We have L1 in a large airport. We've taken up huge residential projects in Southern India, which is on a design-build basis. We've got a couple of education institutes. So it's across residential, commercial, education, data centers, airports and industrial projects. It's a mix of all of them.

Got it. Got it. Is it -- in the places where you have won, what has been the -- who have been your typical competitors in some of your top 2 or 3 range in terms of sizes, the ones that you spoke about, data center or the other industrial one? Do you find competition from smaller guys or are these the L&Ts and the subsidiaries?

I think we see competition from everywhere given on the size of the project. If the project is, let's say, INR 1,000 crores plus typically, it's 4 or 5 large guys who come in. If the value is less than INR 500 crores, you see 8, 9, 10, 12 bidders also. But the good part is it's healthy competition. We do not see any more people bidding at irrational prices or very low prices. So even if you win or lose, you win or lose with a few percent here and there. And that's positive for the industry as a whole because healthy competition will help all of us do better.

And where -- I was just glancing through some of these requests of information, and I see that there are these recent conditions these days in terms of continued profitability at a PBT level, better network, better completion record without any delays. Is that something helping you to get more projects where these other switch players lose out in a sense that are you getting -- is the industry getting consolidated in the B&F in India?

So I think all the industry players have that credibility of network, profitability and execution. So to me, at least the large 10, 12, 15 guys, we see them doing extremely well, which includes us also. Definitely, the entire RERA mechanism has helped us in the B&F segment. And this is the residential segment where cash flows have improved given that the deployment of utilization is governed as per RERA regulations. So definitely, that's helped on the cash flow front. But as far as competition is concerned, I think the large players are the good players who have been doing well, continue to be competitive across all segments.

Got it. And what's the typical returns you've made? What is the kind of ROEs you made in this segment, whether it is above your normal as a consolidated level or is it below the normal -- below your company average?

At a B&F level, typically, our ROCE is slightly higher than, let's say, some of our other segments like Railways and Oil & Gas. It's very similar to T&D, more in the range of 16% to 18%. At EBITDA level, this business clearly does better than some of the other segments. But at a PBT level, they are back to those 5% to 6% levels.

And what is your differentiation in this thing other than your technical capabilities? Is that something which you bring to the table that others don't bring in because you're sitting on a very good order book compared to the revenue run rate you have? What is the -- any distinct differentiation you have in that extent?

I think it's a combination of 4 or 5 things, combination of our long relationship with a lot of private sector and delivery over the last 10 years and in various aspects of the business. Second, our availability of a huge labor workforce, which has worked with us for decades together. Third are our ability to acquire and retain resources across all levels. Fourth, our design and build capabilities, which we have built over the last 4 to 5 years. Fifth, our own values in terms of delivery, where we have delivered on every project and you will not find a single project, which we have not delivered irrespective of COVID or increase in steel prices or whatever else. So combination of 5, 6 things with that reputation of delivering on or before time has helped us achieve what we are today.

Okay. May I squeeze in my other question or 2?

Sure.

Sir, in this, how much of your projects will be fixed or fixed price projects and how much you would have some kind of a variable mix in?

Today, if I look at the total order book, fixed projects are around 35% on a total INR 51,000 crores order book if you look at it, and variable projects are around 65%.

And this will be true for the B&F segment also.

So B&F would be different. B&F, the fixed portion would be more than 90%, and the variable would be closer to 10% -- sorry, I said opposite. The variable would be closer to 90%, I correct myself, and the fixed would be closer to 10%. I correct myself.

Lastly, sir, yes, in terms of the size of the B&F, right, so in the country, where would you stand in terms of your either order book or in terms of the size of operation to just to get a sense of proportion in terms of where you are -- as you're in India? Are you on the top 5 or in the top 3?

So we've not done a kind of a benchmarking across with all players, but we personally internally believe that we definitely in all segments where we are today, we are 1 among top 5, all segments, which whether it is T&D, whether it is B&F, whether it's Oil & Gas, whether it is Railway. And now the way we're getting into Urban Infra, very soon, there, also we'll be into the top 5 over the next few years.

And we see that because of RERA, things are eased up in terms of you can construct and the cash flows are secured. But when it comes to the other PSU or quarterly PSU, some of this public infrastructure, especially in the B&F space, do you think the ease of doing business and getting the payments have actually considerably improved in the last couple of years? I mean, how do you think about those things?

I think we've not had challenges on even cash flows from many of the PSUs. So I don't think that over the last couple of years, post the entire COVID environment, even during COVID, I think the PSUs helped us a lot. We do not see any challenge in terms of the large centralized PSUs. At a state level, a few states, we've had some challenges given elections and government changing all of that, but it's only a timing issue. It's not something which we are worried from an overall long-term perspective.

[Operator Instructions] Next question is from the line of Anwani Amit from PL Capital.

My question is on the pipeline. So you mentioned the robust pipeline in T&D domestic by REC, PFC of about 40,000. I just wanted to understand if -- do you have chopped out what could be the pipeline for next 12, 18 months? And this 40,000, does it include any large HVDC order of component? And similarly for international orders also, if you -- if possible for you to give a color in any major geographies with respect to the T&D pipeline for Kalpataru.

So Amit, have we drawn the exact pipeline from a next 12- to 15-month perspective, my answer would be not getting into details the way we have gone for the first 3 to 6 months. The next 3 to 6 months is a number which I have given. It includes a few HVDC projects also, which are already there in the PFC, REC list of projects to be bidded. It could be maybe 3 months. It could be slightly beyond 6 months given elections, which could be happening in Q1. But the path, which is visible given that the -- whether it is through the budget outlay or whether it is through the Power Ministry's plan is that next 2, 3 years, you'll see huge opportunities in the T&D segment. So that is clearly visible. We've not quantified things beyond the numbers, except for the larger plans, which are already available on the government website. As far as the international market, again, as I said earlier, the 3 markets where we focused on, LatAm, South Africa, and Middle East, traction has improved significantly. And growing that business at a 15% to 20% minimum will not be challenged for the next 2 to 3 years.

Sure, sir. And my understanding, so with respect to non-core, we'll be able to wind up only Indore this year and rest of the projects will take at least 2 years?

No, Indore as well as we should be exiting one of our road assets, the largest one, VEPL.

So in FY '25, is this what you are targeting?

Yes, our internal target definitely is '24-'25.

As there are no further questions, I would now like to hand the conference over to Ms. Bhoomika Nair from DAM Capital Advisors for closing comments.

Yes. I would like to thank all the participants and particularly the management for giving us an opportunity to host the call. Thank you very much, sir, and wishing you all the very best going ahead. Thank you very much.

Thank you, Bhoomika. Thank you, everyone.

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.