KEC International Limited (KEC) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the KEC International Limited Q3 FY '25 Earnings Conference Call. Today on the call we have with us Mr. Vimal Kejriwal, Managing Director and CEO; and Mr. Rajeev Agarwal, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vimal Kejriwal, Managing Director and CEO from KEC International Limited. Thank you, and over to you, sir.

Thank you, Ryan. Good morning. We welcome you all to the Q3 earnings call of KEC. I will begin with an update on the key development during the quarter and thereafter talk on the performance highlights for the quarter and 9 months, along with the highlights of the respective business units. In line with our strategy and targeted timelines, we are pleased to share the successful transfer of our Cables business to KEC Asian Cables Limited, a subsidiary of KEC, effective 1st January 2025. This significant milestone reflects our commitment to unlocking our growth opportunities and creating long-term value for the business. As part of our efforts to diversify into high potential products, we continue to make substantial progress on multiple fronts. During the quarter, we successfully commissioned the first phase of the aluminum conductor plant at our Vadodara facility, with the final phase on track for commissioning by end March 2025. Additionally, the capital investment to produce e-beam and elastomeric cables is advancing well with production for this facility expected to commence in Q4 next year. We are confident that the strategic realignment, coupled with our focus on product diversification, will drive significant growth, strengthening both revenue and profitability for the cables business in the years to come. With a robust order book and a sustained increase in tendering activities in the T&D segment, we initiated a debottlenecking program to enhance our manufacturing capacities at some of our plants with no investment. After successfully completing capacity expansion of Dubai plant, we have now expanded the Jaipur plant and are currently working on increasing the capacity at our Jabalpur plant. On completion of the Jabalpur plant expansion, our total capacity will go up from 4,22,000 metric tons to 4,68,000 metric tons per annum. This strategic capacity enhancement positions us to effectively meet the growing demand across India as well as Middle East. During the quarter, we rebranded our railways business as transportation business. This change reflects our strategic vision to align with the global trends and positions us to strengthen our focus on delivering advanced and sustainable solutions in the transportation infrastructure sector. The name transportation better represents the breadth of our offerings and is in line with other global EPC companies. Now coming on to the financial performance. We continue to witness strong momentum in order intake with YTD order inflows surpassing a record level of INR 22,000 crores, an impressive growth of over 70% year-on-year. Notably, a substantial 70% of this order intake has been secured by our T&D business across India and international markets. Additionally, we hold an L1 position of over INR 4,000 crores, primarily in the T&D sector, positioning us to exceed our order inflow guidance of INR 25,000 crores for the year. Our order book remains healthy and well diversified, standing at INR 37,440 crores as on date. Combined with our L1 position, our total order book and L1 stands at over INR 41,000 crores. In terms of revenue growth, we have achieved revenues of INR 5,349 crores for the quarter, a growth of 7% vis-a-vis Q3 last year. With this, our revenue growth stands at 9% for 9 months. We have delivered a strong growth in EBITDA of 22% in Q3, and 20% in 9 months. Our EBITDA margins for Q3 expanded by a solid 80 basis points, reaching 7% compared to 6.2% in Q3 FY '24. This is our highest quarterly EBITDA margin in the last 3 years. For 9 months, margins improved by 60 basis points, rising to 6.616% in the same period last year. The revenues and margins could have been better, but for the deliberate moderation and the execution of water projects due to delayed payments from the clients, continued labor shortage, depreciation of the Brazilian currency and external monsoon in certain regions of India, water payments have started coming in, which would provide momentum to the ongoing projects. Additionally, the Union Budget announced has extended the Jal Jeevan Mission until 2028 with an enhanced outlay of INR 67,000 crores. This increased commitment is expected to fast track project execution and unlock greater opportunities in this segment. During the quarter, we have successfully reduced our interest cost as a percentage of revenue by 10 basis points in Q3, and 30 basis points in 9 months, bringing our interest cost down to 3.2% for Q3 and 3.3% for 9 months. We have significantly enhanced our bottom line with PBT growth of 32% in Q3, and 65% in 9 months. PBT margins expanded by 60 basis points in Q3, reaching 3% compared to 2.4% in Q3 last year and by 90 basis points in 9 months, rising to 2.6% from 1.7% last year. We remain committed to managing our debt levels and maintaining a strong balance sheet. Net debt including acceptances stands at INR 5,574 crores as of December 31, '24, a reduction of INR 471 crores versus vis-a-vis December 31, 2023. While our debt levels could have been lower, delays in collection from certain water and railway projects have impacted the pace of reduction. However, we remain confident in further optimizing our debt position by the end of the financial year. Now coming to the specific businesses. Our T&D business has achieved revenues of INR 3,175 crores in the quarter, a healthy growth of 17% vis-a-vis Q3 last year. The growth has been delivered on the back of strong execution across projects, especially in India. On the order intake front, the T&D business continues to experience exceptional momentum, achieving a remarkable growth of over 2x with YTD new orders of over INR 16,000 crores, secured across diverse geographies, including India, the Middle East, Africa, Americas, CIS and Australia. During the quarter, our India T&D business has secured several key orders and L1 positions from PGCIL, including a prestigious order in the HVDC segment. This order further strengthens our budgets in the HVDC market, where we are already executing our HVDC terminal station project for a reputed private client. On the international front, we have made notable strides securing substantial orders across diverse regions, including the Middle East, SAARC and CIS. The order in CIS has reinforced our presence in that region and further diversified our order book. In SAE, the business ensured top-level revenues of INR 309 crores for the quarter, degrowing by 9%. The degrowth in revenue was primarily due to a steep depreciation of the Brazilian currency against U.S. dollar by more than 20% over the last 1 year. The business is witnessing significant traction in order inflows with YTD inflows surpassing INR 2,100 crores, an impressive growth of more than 3.5x. These orders are for the supply of tower, hardware and poles, and they span across the U.S., Mexico and Brazil. With this, the business goes a strong order book and L1 position exceeding INR 2,300 crores. We have successfully managed to maintain our debt levels at INR 300 crores, reflecting a reduction of INR 100 crores from March 2024 levels. The overall tender pipeline in the T&D sector remains robust, both in domestic and international markets. We remain highly optimistic about the growth of our T&D business, driven by the increasing demand for power and the government of India's steadfast focus on expanding renewable energy projects. On the International front, we continue to see promising opportunities across regions such as Middle East, Africa, CIS and the Americas. Notably, countries in the Middle East, particularly Saudi Arabia, are prioritizing investments in energy transition and T&D projects, further strengthening the outlook for the region. With a large order book and L1 position in the T&D exceeding INR 25,000 crores, coupled with rising, tinkering activity across regions, we expect the business to maintain strong momentum and continue to grow in terms of both revenue and margins in the coming quarters. Our Civil business achieved revenues exceeding INR 1,100 crores during the quarter. As mentioned earlier, the growth has been somewhat constrained by the ongoing labor shortage and the deliberate moderation in the progress of water projects primarily due to delayed payments. However, the business has strengthened its order book with YTD orders totaling over INR 2,100 crores, spanning across industrial, residential and defense sectors from prestigious clients. During the quarter, the business has also diversified its customer base, adding renewed clients in the industrial segment. Focus on moving up the value chain -- focusing on moving up the value chain, our business is increasingly targeting EPC turnkey projects in the industrial segment and others, including NEP and finishing work in the residential segment. The outlook remains positive across all segments with a strong order book and L1 position of over INR 9,700 crores. We are confident that the Civil business will continue to be a key growth driver for us. Our Transportation business has achieved a revenue of INR 456 crores for the quarter, degrowing by 30%. The business continues to make strong progress on the completion of the existing projects with 15 projects successfully completed till date. A notable milestone for the business is its entry in the roadway segment, securing an order in JV of the design, supply and construction of our passenger offerings in the Northeast. Additionally, the business has secured new orders of over INR 2,100 crores in the conventional technology-enabled areas of metros and other emerging areas. These include a significant order in the prestigious Train Collision Avoidance System, TCAS, segment under Kavach, which aims to enhance the safety of Indian Railways with world-class technology. We remain cautious in our approach to order intake in this sector, considering the margin profile, working capital scenario and execution complexities of this business. Most of the orders secured during this year do not involve execution on mainline tracks that require blocks from the client, the challenge we are currently facing in the completion of some of our existing projects. The government's ongoing focus on strengthening infrastructure is expected to drive momentum in our Railway business going forward. We are strategically excluding certain international opportunities also. Our Cables business has achieved revenue of INR 406 crores, a growth of 6% year-on-year. While revenue growth could have been higher, it was impacted by an unfavorable metal ratio skewed towards aluminum. The business continues to demonstrate strong order booking, momentum across diverse segments, including T&D, railways, metro, solar, metals and data centers. In renewables, the business delivered revenues of INR 238 crores, a robust growth of more than 50%. The execution of existing projects is growing well -- is progressing well with notable milestones achieved during the quarter. The business successfully commissioned the third phase of the 500-megawatt solar project in Karnataka, bringing the total capacity commissioned to 200 megawatts. Additionally, 3 solar sites were commissioned for a leading auto ancillary company in India. Work has also commenced on the recently secured 500-megawatt solar project in Rajasthan, which will be commissioned in phases starting with March 2025. With a strong order book exceeding INR 1,000 crores, the business is well positioned for continued growth. In oil and gas pipeline, the business has delivered revenues of INR 76 crores for Q3. Growth has been subdued, primarily due to slowdown in tendering activities. However, the business has widened its footprint by securing its first order in the composite space, including design, supply and build. Looking ahead, the business remains focused on exploring international opportunities and strengthening the necessary prequalifications to increase the addressable market size. Two days ago, the Finance Minister presented the Union Budget 2025, reaffirming that Government's commitment to economic growth is a substantial boost in capital expenditure. The budget allocates INR 11.21 lakh crores for the infrastructure, reflecting a 10% increase from the previous year. If you add the CapEx by the public sector enterprises and also the grants with the central government gives to states for capital expenditure, it aggregates to over INR 19 lakh crores or over 16% increase from last year. We welcome this forward-looking vision, which places a strong emphasis on power, transmission and distribution, renewables, water and urban infrastructure. This strategic focus not only strengthens the nation's infrastructure landscape, but also align seamlessly with our growth aspirations creating substantial opportunities for growth. In conclusion, I would like to emphasize that the outlook remains healthy across most of our businesses with a formidable and diversified order book plus L1 of over INR 41,000 crores, improved execution visibility and a robust tender pipeline of INR 1,50,000 crores. We are well positioned to deliver sustained growth in the coming quarters. Thank you. We are now open to take questions.

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

Congratulations on a decent quarter. So my first question is that, the sales -- the ordering has been driven by T&D. So how do you see next year? Do you think this kind of performance can repeat, are there enough opportunities in the market, both in domestic and global. So if you can help us understand that the demand scenario on the T&D side in the next 3, 4 quarters?

Thanks, Parikshit. I think we are very positive on the T&D scenario. And especially, I would have only said 4 countries, but right now it will be 3, which would be India, Saudi Arabia and Abu Dhabi. We were talking about Americas also, but I think with all the tariff wars going on, we'll just wait and watch what happens. Although we clearly see that there will be a lot of infra spend in America also. But primarily today, I think India, U.A.E. and Saudi will drive the growth, and we are very confident that the growth would continue. In fact, what is going to happen, Parikshit, is that, this year, we got a lot of orders. We also had legacy orders, which we were working on and which were completed. Now that all that is getting over, we will be able to focus a lot more on the orders which we have secured in the last 12 months or maybe earlier. So which will also add a flip to our revenue and margin profile and transmission going forward.

Sir, out of the INR 16,000 crores of inflows from T&D, do you have a number on how much will be the HVDC share in this?

HVDC, the order intake would probably be around INR 600 crores, INR 700 crores right now, but we also have L1s, okay, in that sector. So maybe we'll cross INR 1,000 crores or more overall. Right now, when we are bidding for a couple of more ones, then 1 which has been awarded to a private sector client also is talking to -- we are looking at that part also. So I don't know where we'll end up, but I think it will be decent. In addition to that, Parikshit, is that, there's some very large HVDC tenders which have come out in the Saudi Arabia also. I think there we'll be focusing on those also.

This Khavda, are we -- did we get anything from Khavda, the Power Grid package?

We are doing a lot of work there. Actually -- that is about 5 or 6 projects in that area or maybe more.

Is it part of L1? Or is it already part of your firm order book...

No, they are under execution. In fact, a part of that will get commissioned in this March.

Will this Power Grid Khavda package, which Power Grid got that INR 25,000 crores...

I'm not sure, but we have got 3 or 4 packages. 1 in KPS 4, then KPS 3, then the exchange rates and everything else. So we have got, I think, 4 or 5 packages from Power Grid, then we are doing a project for NTPC. We are doing a project for GIPCL. So I think, as I said, I think we have 6 or 7 or maybe 8 projects and the new HVDC is also coming there.

Okay. And the other question is on, if I see your revenue between Q1 and Q3, it has gone up almost by INR 830 crores, INR 840 crores, and your debt has also gone up by INR 830 crores. If I minus the proceeds from the QIP, which is INR 870 crores, that is almost flat from Q1 to Q3. So if you can help us understand, I mean, if this QIP would not have happened and that would have been substantially higher. So just give us a little more granularity on the working capital side on current assets and current liabilities. Is it you are paying your payables down? So why is this -- I mean why the entire revenue growth has gone into working capital?

So maybe Rajeev can talk in detail, but broadly, if you look at it, I think they reduced our debt by around INR 200 crores, okay, if we adjust the QIP. And as I said, the primary reason for that has been fewer receivables, which we thought we will be able to liquidate. Like water, I don't think anyone expected that -- till now water moneys always used to come on top and all that. There was a considerable -- I think we have more than INR 500 crores of receivables in water, which should not have been there. To me, that is one clear [ desk ]. Secondly, on the railway side, we were expecting a lot more faster settlement of our disputes and issues with them, which has not happened. So we have an AR and also an impact on the margins. We would have loved to have a slightly higher margin. But because of the slowdown on the -- or I'd say, the delayed results of some of our arbitration or resolutions, et cetera. So some money did not come in. And I think lastly, although Afghanistan, we have received more than INR 450 crores. We were hoping that we will get another INR 100 crores, INR 200 crores from Afghanistan on that quarter, but that has got delayed now to Q4. I think these 3 or 4 things put together have -- put, I think, almost a pressure of around INR 1,000 crores in a way on our collections, which should have happened in a normal course, and that would have been reflected in the numbers. I hope I answered your question, Parikshit.

Yes. Sir, last question on revenue guidance for now, 9 months you have done a growth of 9%, so versus 15% guidance now, what kind of number you're looking at for the year as a whole?

So we're still hoping to do 15%, but I don't think the way things are happening, depending upon how my supply chain is able to push more numbers, I think we could end up anywhere between 12% to 14%.

The next question comes from the line of Renu Baid Pugalia from IIFL Securities.

A few questions from my side. First, if you look on the revenues upfront, YTD growth is similar to flattish as we also have seen a marginal drop. We have marginally downgraded your guidance from 15% to 12% to 14% range. So how should we look at these 2 businesses stacking towards 4Q? And given the order backlog, how is the outlook for FY '26 for both the Civil and the SAEs in the business?

So I don't have the exact number of guidance for individual business for next year, but definitely, Civil will grow. SAE, I don't see it growing too much because one is, the currency depression is still continuing. And it's a finite business, which is dependent upon the capacity of the plants. So SAE will keep on growing by 5%, 6% year-on-year, provided the currency remains stable. If the currency strengthens, we can see a better growth. Civil, in my view, will grow by almost, let's say, 15% or so next year. And what you not asked, overall, I think we are still working out on numbers, but we will definitely have a growth of at least 15% for the company next year.

So among the downgrade, you think the big missing piece would be Civil because you are initially expecting double-digit growth in Civil revenue and YTD has been flattish. So the labor issue, in your view, has impacted this part of the portfolio more severely than the others?

So Renu, there are 2 issues. One is clearly the labor issue, which has impacted mostly the residential and the industrial part of the revenues. And secondly, as I said, water is part of our Civil revenues. So water has been a disappointment in terms of the payments, and consequently, we try to work on it. But I think after some time, most of us have had to slow down the business, okay? So these are the 2 major reasons. We have an order book. So I don't think it's an issue. If you look at my numbers versus the order book, our execution ratio is not our standard KEC ratio. But then -- because of followers here, what we are doing, we are trying to catch up on that.

Got it. Secondly, if you see the growth in T&D orders have been pretty impressive. You've highlighted a very strong pipeline as well. So with that share increasing in the backlog, when do we expect the margin profile of our portfolio improving on a consol basis? There's still just about 7% on the margin side with respect to guidance. So when do we see those margins anything closer to double-digit levels?

So Renu, if you look at it in transmission, we are almost -- I think we are already at a double digit, okay. The issue has been on the non-T&D where, especially on the railways where we have been seeing a much slower recovery in the margins. And also Civil, we had planned, as you rightly said, a higher growth than what we did. So we had built a much larger organization. So we are now having the reverse impact of leverage on the Civil EBITDA as well as in Railways, so that's impacting us. Given that, as I said earlier that we expect our T&D ratios, this quarter, we are already at 59% revenue, 9 months was 57%. Next time, I'm very sure, we'll cross 60% -- maybe we will reach even 60%, So I don't have the exact number, but we should reach there. Given that, the margins will definitely go up. We had earlier been talking about 9% to 10%, I still don't know where we will be, but I'm sure it will not be very different from the 9%, at least baseline which look out.

Correct. And on the competitive intensity, you think, given the way the market has come back on the growth side in the core T&D portfolio, both domestic and international, the current bid margins are turning to be much better than what would have been expected in the normal cyclical upturn? Or just still tight in terms of competitive pressures?

I think the margins are in line with FY '25, whatever the margins we've got, which was significantly higher than the earlier margins. And we expect those levels to continue going forward. Also looking at the volume of business, both in India and as I said, Abu Dhabi and Saudi. On the competitive intensity, it's because of the amount of work which is there. Clearly the competitive intensity has mellowed down a lot on the larger value orders, let's say orders above INR 500 crores or so, okay? So clearly, I think we are seeing a benevolent -- sort of environment on the competitive intensity for larger T&D orders, especially from Power Grid, I will say.

Got it. And lastly, if I can. The impact of U.S. tariff war that you've seen on China, Brazil, Mexico, at this point in time, those early, how do you assess its impact on SAE as well as the Dubai facility, which we have for our tower supply.

So Dubai as of now, does not service U.S., so it will not have any impact today. The servicing of the U.S. orders are done from our Mexico plant and the India plant. And I think what we have done, one is, let me just -- what we have done in the last few months is that we have converted all our orders to Ex Works, both in Mexico as well as in India. So even if the duty -- actually materialized right now, they postponed the duty by 1 month. Then it will still not impact our current orders. Going forward, in any case, I think our India factory was not competing with Mexico or -- China was not supplying to U.S. in any case. Our competition is more with Turkey. We'll have to see how the geopolitical equations work out between Americas and Turkey. But if there is a duty imposition of 25% in Mexico, I think the India plant will definitely get much more orders than we have -- we have repeatedly seen that supplies from India are more profitable than the supplies from Mexico, that's 1 part. The second part is that if you look at our current order book, I think almost half of our order book are for local supplies. In Mexico, we are seeing a lot more projects coming up on the back of the green energy, where we are actually getting -- since the last 6 months or so, we have got a lot more local orders in Mexico. So in an unlikely event that we have to give up the U.S. market for some time, I think today, we have got enough orders either on Ex Works basis or for the local supply. So I don't see any impact. And I don't think that continues for a longer period, maybe 3 months, 6 months still Trump has his way. So I don't think today -- are we worried today? No, we are not worried today.

And if at all you see, you see some positive tailwinds for the overall portfolio from India and Dubai facility for exports. And then the impact on SAE because of local opportunities.

Absolutely. Completely.

The next question comes from the line of Vaibhav Shah from JM Financial Limited.

Sir, firstly, on the revenue side. So for the Civil segment, we have seen some weakness in the last couple of quarters. So Q4 should also be a similar weakness we would see, given the delayed statements in the water segment?

No, I think, Water, as I said, that some payments have started happening. We just got almost INR 150 crores or more in this month, January, okay? And hopefully, with the announcement in the budget were -- I think last 2 budgets, I did not hear, but this time we heard a lot of Jal Jeevan Mission and saying that we want to ensure that every house has a water connection. I think this will push the funding in the [ Civil ] business. If that happens, there is enough of tailwind in this particular business. So I think going forward, Civil should show better numbers.

So Q4 also could be a flattish quarter in terms of revenue for Civil?

Q4 will have some growth, definitely, okay? It will not be flat that I'm very clear.

Okay. And sir, also we had open for future orders in JJM, maybe over the next year?

I think what we will do -- Vaibhav, we'll have to wait and see how this translates into actual cash flow, okay? I don't think we are going to jump tomorrow. We will wait and see that whatever INR 67,000 crores they have promised, out of that, how quickly does it have an impact or push and look -- starts revenue and cash flow starts happening, then we will decide. But I think we are optimist that some INR 25,000 crores or whatever number, they have gone back to INR 67,000 crores, and there's a clear statement of intent. So I think it should turn out to be good. And also what is happening is that the current tenders, which have been talked about are from, I'll say, reasonably decent states with good financials of their own. So I think if something should happen good.

What would be your JJM order book right now as of December?

I think it's roughly just about INR 2,000 crores.

Okay. And sir, lastly, on the margin side, you said that we still maintain that 9% to 10% guidance for '26, but they are confident to achieve the lower end at 9%?

Yes, I think that's what I was saying that we had earlier said 9% to 10%. Too early to right now do it. I think maybe at the end of quarter, Q4, we should be able to do it. But I think on the lower end, I think we are reasonably more confident than on the upper end today, but maybe we'll have a chat after the Q4 results. By the time we'll know also how things are panning out. We have a benevolent cost environment today with metals and all being stable, steel -- steel and cement being at the lower end. So I think -- let's wait for a couple of months, but I think this should be okay.

And lastly, working capital, we still maintain that 110, 115 days target for March?

Yes, I think we are quite confident to maintain about 110 days of target for the year-end.

The next question comes from the line of Samarth Khandelwal from ICICI Securities.

Congratulations on achieving a good set of margins in the T&D payment and overall. My question is on the Transmission & Distribution side. Firstly, how is the order prospects coming in specifically for the T&D, and are there any hiccups that we see in execution of the T&D order book that we have?

So I think the order prospects are very good. We were discussing it earlier also. And the way things are happening and now that government said, from 500 gigawatts they want to do 600 gigawatts in 2032, and the new NEP policy and all that. We are very clearly seeing and with our discussion with Power Grid, and I think they'll be having an investor meet today or tomorrow and you can see the numbers which they are talking about. I think we are very positive on the T&D side. You asked on the execution. Execution, I think, I'll say is improving on T&D. We were having a lot of ROW issues more than -- on Rajasthan and Gujarat. I think some of them have been resolved now. So that is something which will continue for some time. But supply chain is slowly easing out. We are seeing some more conductor supplies and some transformer et cetera happening, plus our own conductor manufacturing has started. So I think that will help us on the revenue side in T&D.

Sir, if you could put a number on top of INR 1,50,000 crores, how much would be for the T&D -- for the pipeline?

Out of the total of INR 1,50,000 crores, normally, we have clearly around INR 50,000 crores. I don't have the exact number right now, but it's broadly around that.

Sir, next question is on the balance sheet side. If you could help me understand what exactly is contract sets? And how is it different from trade receivables?

So contract as such, essentially, there are 2 components to this. One is revenue, which has been taken, which has not been billed to the client due to the milestones not having been achieved. So that's one part. And second part is the margin adjustment as per the construction contracts guidelines, which is the AS7 guidelines, wherein whatever individual margins on the components gets adjusted towards the overall contract completion. So these are the -- as per the AS7 methodology, the margin adjustment rule, which is prescribed by the accounting standards for construction companies. So these are the 2 components which are classified as a contract assets.

Sir, last question, if I may squeeze in. On the Kavach, what is the value of the Kavach order? What is our scope of work that we'll do? Is this with the Kernex that we have a tie-up?

Yes, it's broadly with Kernex, some are EPC, some are on the supply side. So we are doing some EPC work, and we are also working with them on the supply part of it where they are doing the overall integration.

The next question comes from the line of Bhoomika Nair from DAM Capital.

Sir, we've seen a very strong 9-month order intake, particularly coming from T&D. Now as we move ahead, how do you see the trend kind of continuing both for international and domestic markets? And also if you can talk about the competitive intensity. So on T&D as also on terms of civil, because civil has seen as a significant slowdown in the current year in terms of order intake. So these two parts, if you can just talk about first.

So as far as civil is concerned, we have not seen any major increase in the competitive intensity or something, okay? I think what is happening is that based on our last 5, 6 years experience, we have become much more selective on what orders we are taking, what clients we are working and the size of the orders. And that has slightly, I'll say, narrowed down our universe of pipeline, which is the basic thing. I don't think we have seen any change in the competitive intensity. It's not very high, okay? And especially if you look at orders beyond INR 500 crores and all that, typically, there would be 3 or 4 people. It's only when you come down to INR 300 crores and all, the number remains the same, but the quality of competition changes with a lot more local payers coming in where then you don't have -- where you will not stand a significant chance of winning it at your margin level. So civil, I think continues where it is. If you want to take more orders, we can take by dropping margins by 100 basis points. I don't think we are in that game right now with T&D doing very well. As far as T&D is concerned...

In civil, where do you see the order intake for the year? And how is it kind of moving ahead, which areas within civil are you seeing more ordering activity? Where are you getting the comfort of the margins and payment terms that you're looking for?

So civil, I think, ordering or inquiries are coming more from the residential part and the industrial part of it, okay? And off late, we have seen some more coming on the hospitals, et cetera. But broadly, it is residential and industrial. And industrial also, I'll say, more or less, it's still metals and mining, okay? It's all focused more on steel and aluminum and all that. And we're not seeing a widespread inquiry across all the businesses or all the verticals, but it's more steel. Residential, there are lot of inquiries. And residential is an area where your steel and cement are actually on pass-through costs, et cetera. So where you can maintain the margins wherever they are, if you are able to execute it well. And that has been a little bit of a challenge with us with the labor shortage. And this is why we have been going a little bit slow. And as I said, Bhoomika, especially with T&D growing at that level and all that, I think we are happy that we don't take marginal orders.

Sure, sure. Sir, on T&D, if you can talk about international and what is the pipeline in domestic? Obviously, the ordering pipeline is very strong. How is the international pipeline and the competitive intensity as well out there?

So international pipeline, especially on the Middle East, is very good, okay? As I said, Saudi and Abu Dhabi are 2 countries where we are very -- areas where we are very well focused. And we are seeing a huge pipeline. Saudi has come out -- had a 2030 projection, now they come out with 2040 and all that. So I think they are doing very well. Abu Dhabi, we are seeing a lot of work coming on the back of oil and renewables. And actually, to me, Abu Dhabi has been a surprise because of all the recent orders which were announced in Middle East, all are in Abu Dhabi rather than in Saudi. But Saudi has a very, very strong pipeline. So as far as competitive intensity is concerned, I think Abu Dhabi on the larger orders, like India, has very little competition, hardly 2 or 3 people. And then because we have a factory in Dubai, we have some sort of an inherent advantage in Abu Dhabi. Saudi depends upon contract to contract. But typically, there are 3 or 4 serious bidders. The bidders keep on changing. But typically, we have seen 3 or 4 serious bids in every tender. But clearly, the intensity has come down, the pressure on margins has come down while quoting.

Right, right. Got it, sir. Sir, the last bit is on the working capital, which expanded because of water and all of that. Now with the government really talking of -- giving more allocation towards water, do you think that the working capital will actually come down? And where do you expect the year-end debt and interest as a percentage of sales settling at both for this year and next year?

So Bhoomika, we are expecting the debt to go down by at least INR 500 crores, if not INR 1,000 crores. That's what we have been discussing internally. But at least [Foreign Language] we are very clear that we will be able to generate cash surpluses during Q4. The debt should definitely go down. I don't think I have any doubt about that piece. Interest costs, I think we are at 3.2% right now? 3.2%. So I think we are still hopeful that and because of our large revenue, which we're expecting in Q4, it should end up below 3%, Rajeev?

Yes.

So I think around about 2.9% we should be able to achieve.

The next question comes from the line of Teena Virmani from Motilal Oswal Financial Services.

Sir, my questions are related to Railway and SAE. When we see the order inflow for both the two divisions, order inflow for 9-month period has been very good. On Railway, you talked about the Kavach-related opportunity. So my first question is related to this Kavach-related execution. Will it also be having a relatively comfortable working capital? Or will it be similar to the previous Railway-related projects where working capital challenges were seen and you had slowed down on the execution side?

So Kavach is much better, I think, contract in terms of cash flows. Also, most of these contracts, Teena, are for 6 months to 12 months. And what happens is that if you work on, let's say, 10 locos or 20 locos and all that, then you can get...

Ladies and gentlemen, we have lost the line of the management. Please stay connected. Thank you.

Yes, Teena, why don't you continue? Sorry, we got disconnected.

Yes, no problem. So on Kavach, you were talking about the execution time frame.

So I said that Kavach, the projects are, I think, less than 12 months. And the payment happens in blocks where the Railways gives you certain locomotives, certain stations and all that, and that happens pretty quickly. I think the lead time is only on getting the basic equipments, which have started coming in. So I think even the current order, we will start getting in some revenue hopefully in this quarter itself. And cash flows are pretty good for these projects.

Okay. So in this case, how would the revenue scale up happen for the Railway division, given the way that order inflow has also been good and the payment cycle will also be better in this particular set of projects.

So if you look at our order intake for this year is around INR 2,000 crores, what we are generally seeing is that these orders are a large part of it is towards the metro part of it, where we are doing power supply and ballastless track. Then we've picked up one very large order on tunnel ventilation, which has a large component of supplies. So we think we'll have some fast tracking of revenues, but I don't think it will be very fast. Okay, Railways have its own style of working. So I think next year, again, our revenues in Railways will be flat or at best, maybe 5%, 10% growth, not more than that. But revenues from the new projects will start coming in quickly.

Okay. So maybe a 5%, 10% kind of sustainable growth can still be seen in Railway segment revenue?

Sustainable [Foreign Language] but I think right now, we are looking at, seeing the problems where we are, first trying to close all the old projects, et cetera. So I don't think we are pushing for revenue on railways right now or for the next year. But going forward with the plans which the Government of India has on railways, et cetera, the sustainable growth should be much more than that in the long term.

Got it. And on SAE, sir, SAE inflow also has been very good for the 9-month period. So why is it that the revenue growth will only be to an extent of 5%, 6% for SAE going forward?

So what happens in SAE is that you get very lumpy orders, and these orders are to be executed over 2 years and all. So typically, in SAE, the cycle from the -- for the developer is 4 to 5 years. So there, similar to U.S., the orders you get is, I'll say, at least with 8 to 9 months ahead of when you were supposed to start delivering. So these orders also will not get delivered in 1 year, number one. Number two, obviously, since it's a product supply order, it's also constrained by the capacity of the plants. And right now, I don't think we are expanding the tower part of the plant. We've expanded the hardware plant. But so I think it will be constrained by that. I don't think -- at best, probably it may go to 10%, but I don't think -- I mean, 5% to 6% is a reasonable number to take.

Okay. So these inflows would be spread over a period of, let's say, 3, 4 years?

Not 3, 4 years. Now it will be -- now we already started manufacturing. So I think next 24 months, these orders will get executed, especially in Brazil. Mexico is normally very quick, okay? Brazil gets executed over a time. And we have L1s also. So we'll get some more orders, which will come for execution around Q3, Q4 of the next financial year.

I mean my main question is then the revenue growth should be slightly better than 5%, 6% if the prospect pipeline and inflows are good.

It depends upon how the currency also behaves. We are also factoring in there could be a further depreciation of the currency. So in local currency, maybe it may be higher. But when you translate into USD and all that, it may go down, unless rupee also falls equally.

Got it, sir. And my last question is related to the debt level. You talked about a reduction of somewhere around INR 500 crores by Q4. But what would be your outlook for debt for, let's say, in the coming years, FY '26, '27 and going forward? Because your order inflows for the whole company as a whole have been very good, and execution will also ramp up in the quarters following quarter 4. So would the debt not move up further from the current levels or maybe from the levels of quarter 4?

So Teena, Rajeev Agarwal this side. So basically what we are seeing, on a conservative basis, we should go down at least by INR 500 crores to INR 600 crores. So that means the debt level for March will be around INR 5,000 crores. But in a best case scenario, I think we can go down to INR 4,500 crores. In fact, the way we are looking at the collection and which has panned out in the month of January, at least for the water, we had collected almost INR 160-odd crores from the water in January itself. So going by that, probably we should be in a position to improve our debt level less than INR 5,000 crores. But let's hope trend continues in the remaining 2 months also. Plus there are other collections, which are likely to be collected and some claims are yet to be settled in the Railway business. If all of these come -- get settled in the next couple of months, I think our debt levels will be better than INR 5,000 crores and probably we can reach to about INR 4,500 crores. So that is what we should expect the debt level between INR 4,500 crores to INR 5,000 crores for the quarter ending March.

And then in coming years, '26, '27?

So for '26, '27, Teena, we are actually expecting the growth, as Vimal has guided, for 15% growth, although we are still working out on our budget for the next year. But we expect that, given the kind of an order book that we have, around 15% growth definitely next year. So I don't think that we will be able to reduce the debt level significantly considering the growth level of 15% for the next year.

[Operator Instructions] The next question comes from the line of Shrinidhi Karlekar from HSBC.

So you're seeing strong order prospects pipeline in the Middle East. Wondering would it be possible to compare and contrast the margin profile as well as working capital profile for the large projects in the T&D business?

If you look at the margin profile, I think margin profile would be virtually similar, okay? Because all of -- both India and international now are on fixed prices, et cetera, the time lines are similar from 18 to 24 months and all that. And I would say even competitive intensity is virtually similar. So the margin profile would be similar, I'll say. As far as working capital, et cetera, or the cash flows are concerned, typically, I think India has better. If you look at the NWC also, the India NWC is half of or maybe even better than that of international. And the primary reason being at least in Saudi, there's a 20% retention. So that money, you will get only once you complete the project, whereas in India, the retention is much lower, and in many cases, you are allowed to draw the retention against bank guarantees. Also, what happens is that, I'll say, the transit period and all that are much lower in India. Factories [Foreign Language] and then you can bill it, et cetera. So in a way, you'll have at least another 1 month or so additional time line by which you can bill and collect. So typically, in today's scenario, at least India is significantly better than international, okay? But we are working on the international to see how do we bring it closer to India. I don't think we can reach the India numbers, but it will definitely improve. When Rajeev that debt levels will go down, one of the items was that we were really working on how to reduce the NWC in international.

Understood. And sir, second question, you have seen strong orders on domestic T&D. Just wondering one of your industry peers kind of indicated that there has been some deferral in awarding from both Power Grid as well as state transmission utilities. Just wondering, did you also see awarding deferrals because projects bidding are coming out higher than the budgets?

So typically, we don't bid for state transport, so I'll -- state transmission, so I'm not able to comment on that part of it. As far as Power Grid is concerned, I don't think we have seen -- I think the only project which if I ask me, which I know of has been the HVDC in Rajasthan where the prices were very high as compared to the estimate. So that went for a rebid amongst the developers. Otherwise, I have not seen a single project which has been rebid on account of prices, okay? Delays, I've not seen -- if you ask me, I don't think we have seen any significant delays in the award of the projects. Sometimes what happens is that because of the availability of land and ROW, et cetera, we have seen that the BPC and all that keep on changing the route or make some changes in the substation location, et cetera, which may cause some deferral, but I don't think it is significant. So I'm a bit surprised if someone has said that. At least we don't subscribe to that view.

Understood, sir. And sir, last one, there is a sharp jump in JJM funding in budgets? Sir, just wondering, should we read that as a very strong order prospect? Or should we largely read it as more payments to the contractors of already awarded projects and consequently better execution?

For me, it is both. And also, let me clarify that the last year's allocation in the budget was similar, but they did not spend the money. The spend was hardly, I think 40% of that, let's say, 40% of that. So they have just reiterated the same budget number as last year. But I think I did see a lot of -- a large statement of intent saying we want to ensure that every house has a water connection. So I do presume that this has the backing of the PMO, et cetera. And so this money would actually start flowing into the states and to the contractors. So it would help us in the current execution and hopefully in getting new business, which we had actually gone slow.

The next question comes from the line of Ashwani Sharma from Emkay Global.

Sir, my question is again on the opportunities in the railway, more specifically to Kavach and the oil and gas pipeline. So out of this INR 1.5 lakh crore that you mentioned, how much is oil and gas, how much is Kavach, if you can just give us some sense.

I don't think I have the breakup right now with me, and you can speak with Abhishek later on to get some breakup.

Okay. Secondly, there have been a lot more talk on the railway -- the labor issues. Can you just give us some more granular idea of what is the challenge that we are facing and when do you see this getting typically -- normalized?

I don't think anyone can tell us when it will get normalized. It's a serious issue. And the basic problem still is not -- I'll say, not of getting people but of retaining people. Typically, what used to happen is once a labor or a technician came to a site, he would work for 11, 12 months and then go back for annual and then we'll pray that he will come back. Now off late now, we are seeing that people are going back in 3 months, not turning up and all that. So attrition of labor has become a serious issue across all the industries. Also one of the major reasons would be the MGNREGA money, which they are getting and also the freebies, et cetera. So I think the entire industry and everyone has been talking about it saying what needs to be done. So we're trying to take long-term steps of providing better incentives for them to continue to work for longer period retentions and other things which the industry, as a whole, is working. Hopefully, it should start improving with all these efforts. But when it will become 0, it's difficult to answer.

And sir, lastly, just to confirm. You mentioned FY '25 revised guidance is 12% to 14% revenue. Is that right?

Yes.

But sir, in that case, our ask rate for Q4 will be around INR 7,500 crore of number. I mean, are we confident to achieve that, sir?

Yes, that's how we said the number based on that.

The next question comes from the line of [ Subramaniam Yadav ] from SBI Life Insurance.

Sir, can you just give some number on the legacy Railway orders where the margins are lower? How much would that quantum be in our order book?

So I think we still have around 15, 20 orders in the Railways, which are, I say, 95%, 97% complete. [Foreign Language]. So I think in the next maybe a quarter or 2 maximum, we should be able to physically complete all the legacy orders, okay? What will remain would be the commercial closures where a lot of them have got, I'll say, disputes and which are related to -- some of them are in dispute resolution boards and some of them are in arbitration, et cetera. So commercial closure of this probably will continue for 1 more year. So we'll see definitely some issues are continuing for 1 year on the commercial side. Physical side, they'll get over. The value physically, the balance value would be probably INR 100 crores, INR 200 crores or maybe in that region. I don't think the value of these orders, the balance work to be done is very high. It's just the closure, which is taking -- which is causing a lot of pain and time.

Okay. And sir, what would be kind of margin in this thing -- orders?

I don't think these orders have any margin, which is why you can see, I've said that our Railway margins are close to or maybe double digit, and our overall margins are 7%. So these are -- right now, most of the legacy orders will not have any margin.

Okay. And sir, what about the last 2 quarters, this quarter and last quarter, we have seen some traction in the Railway order, how are the margins there?

So now whatever orders we take are on a normal margins, they range from 8% to 10%, 12%.

Okay, 8% to 10%. And sir, how much would be Kavach order in this?

I don't have the exact number, but it would be around INR 700 crores, INR 800 crores or so.

INR 800 crores in last 2 quarters?

In the INR 2,000 crore order book -- order intake, which we set for railways this year, I think INR 700 crores or INR 800 crores are the Kavach orders.

The next question comes from the line of Sagar Gandhi from Invesco Mutual Fund.

Sir, my question is again on the working capital side. So you highlighted...

Sagar, I do apologize to interrupt you there. Could you please speak up? Your audio is too low.

Yes. Am I audible now?

Yes, yes, go ahead.

Yes. So sir, I mean, the amount which is under contention on the receivable side for the water and on the Railway side, if you can quantify that, that will be great.

So on the water side, it is roughly about INR 500 crores or so. And Railways it's difficult to quantify because there are few claims which are yet to be settled with them. But we do expect roughly about INR 300 crores -- INR 250 crores to INR 300 crores amount to be received from settlement of these claims.

And sir, of the INR 500 crores water number, you said INR 150 crores is already received in January?

Yes, yes.

The next question comes from the line of [ Gaurav Uttrani ] from Axis Capital.

Sir, just maybe to ask on that, like our order book is majorly composed of T&D now like 55% of the order book, and we are very selective in taking orders on the Civil side or, say, for any of the other non-T&D segments. So if that segment isn't performing as per expectation in FY '26 and challenges such as for labors and supply chain challenges continue for power T&D, so are we positive on achieving our revenue guidance of 15% in FY '26 if other segments are not performing and a slowdown in T&D segment if you see any sort of...

Gaurav, we have taken into account all that, and that's how we have talked about this number. So I think we are very confident. But I said that actual numbers will probably we'll talk about more once we do our Q4. But with the current order book plus L1 of INR 41,000 crores, I don't see any challenge of achieving at least 15%.

Okay, sir. Got it. And sir, specifically on the oil and gas segment, you mentioned about there's been some inquiry in the domestic market from steel manufacturers and all. So are we seeing any order conversion on that side? And apart from that, on the African region, you said about qualification of -- second qualification on that region. So what is the progress on that part?

I think we're talking about two different things. One is the oil and gas business where we talked about getting some orders in Africa and doing composite work, et cetera. So I think we are seeing some more tenders coming out of the oil PSUs in terms of India and a little bit in Africa. When we talk about metals and all that, that was for our Civil business, where we said that on the industrial front, we are seeing a lot of inquiries coming from the metals industry.

The next question comes from the line of [ Saket Kapoor ] from [ Kapoor and Company ].

Sir, when we look at our 9-month business revenue breakup, the decline which we see in the transportation, oil and gas segment, what should we outline going ahead for the fourth quarter? And I missed your numbers or the revenue, how are the revenue execution going to be as a whole for Q4, sir?

So Saket, what we have said is that we were still hoping for a 15% increase overall, which right now looks a little bit difficult, challenging by 1% or so. So what we have now said is [Foreign Language] for the whole year, okay, which effectively means at least 22% or 23% in Q4. That's the number we have been talking about now for the revenue in Q4.

Right, sir. And taking these 2 segments, in particular, [Foreign Language] transportation and oil and gas [Foreign Language]? And sir, the key reason why our oil and gas pipeline segment has shown a significant decline and this is particularly to the Spur, the company which we acquired, the business that we attribute from there?

Saket, [Foreign Language] for whatever reason, tenders [Foreign Language]. So it is not a question [Foreign Language]. So that is the reason why we are not getting orders but, as I said, now we are seeing some more tenders coming in. Hopefully, it should improve. But I'll not say that -- and you should also keep in mind one thing that it's a very small portion of our revenue. [Foreign Language] then this revenues may become larger. [Foreign Language].

And lastly, sir, cable segment [Foreign Language]?

[Foreign Language] because of the difference in price of copper and aluminum, most of the clients are shifting to aluminum. [Foreign Language] so which is why the revenue growth has shown very muted growth, okay? Coming to aluminum conductor, we just commissioned the plant. So the revenues will now start coming in. Q1 -- Q4, we'll get some revenue. Hopefully, Q1 onwards, we should start getting full revenue. [Foreign Language] quarter-on-quarter [Foreign Language].

Right, sir. Lastly, sir, Agarwal ji, [Foreign Language]?

Saket, quarter [Foreign Language] I don't think significant number, but YTD the gain has been about INR 21 crore.

Okay. And sir, EBITDA [Foreign Language] one-off arbitration [Foreign Language]?

Quarter 1 [Foreign Language].

The next question comes from the line of Abhijeet Singh from ICICI Securities.

So my question is on our expectation of margin expansion in FY '26 by about 150 to 200 bps. Sir, what is the incremental delta that will lead to such kind of expansion? Like we have mentioned, we are already about double digit in T&D. And the other bigger piece in the order book is Civil. So do we expect Civil margins to catch up or something else?

So I think there are 3 or 4 things which will happen. One is, obviously, the T&D margins, as I said, we are almost at double digits now. So -- and with most of the legacy orders in T&D getting completed, we don't see any negatives in T&D happening. So that will obviously be the primary driver. Civil, I think we had a few large orders on metros where the margins have been not very great. And I think most of these orders are getting awarded this March. Out of the 4 lines which we are doing, I think 3, we'll hand over fully to the clients in Chennai and Delhi. So that part of it where the revenues were there but we were not getting so much margin will come down. So what will happen is next year, the Civil EBITDA will also grow. And thirdly, I think on the Railway side, because we have got new orders which are at a higher margin, and if we are able to execute them well, which we are confident, then the railway margins also should start showing something better than what they are. So I think we have three this -- and fourthly, which what we've not discussed, at least at the PBT level, we do expect that the interest cost will come down significantly. So if you go down further beyond the EBITDA, then we expect the PBT to improve much more. And the other thing -- Abhijeet, the other thing which Rajeev is saying is that today, T&D is at 59% for the quarter, 57% for 9 months. So we expect that next year, probably it should to be around 65% or so, at least above 60%. So that -- and that's at a higher margin. So I think that will, in a way, combine together to help us in bridging the margin gap, which we're talking about.

Right, sir. Sir, also on the Railway side, like last 2 quarters, we have seen the order book inching up sequentially after a fall of about 5 to 6 quarters. Now -- and 9-month order inflow has been dominated by the Kavach orders. Sir, what gives us confidence that these orders from Railways are better in terms of the working capital profile compared to what we saw in the last 2 years?

So Abhijeet, what has happened is that in the last 2 years, most of the orders were on an EPC basis on electrification and speed upgradation, et cetera. And most of them had required us to work on the, let's say, speed upgradation on the Bombay-Delhi track. Bombay-Delhi track is a very, very -- you hardly get 5 minutes, 10 minutes between trains. But the promise in the tender was that we'll give you 4 hours, 5 hours of block every day. Unfortunately, that has not materialized. That is the reason why we are losing money and with the arbitration and all that is happening. What has happened is that now most of the orders, in fact, virtually all the orders which we have taken are either to set up, let's say, doubling of a line or gauge conversion where the existing line is shut down or we are doing a tunnel ventilation, power supply, ballastless in metro. So in short, most of them have got no dependence on us getting a shutdown from the Railway or a block from the Railway. So once that is there, I don't think execution is a challenge if you have an open field to work on, which is why I think we are very confident that whatever we are doing now would be executed well.

The next question comes from the line of Uttam Kumar Srimal from Axis Securities.

Sir, you have mentioned in your Railway transportation business about ropeways. So just wanted to understand what kind of opportunity we are looking at in the Ropeways segment? And what would be the margin in this particular segment, particularly in Ropeways?

The margin, so at the time of bidding, we bid at a similar margin of not less than 8% to start with on all the businesses. So difficult to say because this is a very small order, [Foreign Language]. But I think the opportunity today, if you look at government has been talking and they have announced at least -- I have a list of at least 15, 20 projects in Ropeways. The issue is that we'll have to see in what format and how they come. They were -- earlier, they were supposed to be all on an EPC basis, then government converted some of them on HAM, et cetera. So it would depend upon the final model in which the projects will come. Right now, there's a very large tender we are talking about in Himachal Pradesh, which is on EPC. So I think we'll have to wait and watch the opportunity. We just wanted to put our foot in because the work is similar to what we do in transmission of setting up posts, et cetera, and shrinking and all. And we have some good technology partners also. There are very few in the world. So we thought that let's see, it's a new area. And now that it has been given to NHAI, we do expect that it would be contractually good.

Okay. And sir, in the Civil segment, you have mentioned about some defense orders and all that. So what kind of defense orders we are trying to get?

So what we have got is actually more civil in the defense. So these will be residential and office complexes and all that, yes, and commercial parts where we have the command centers and all that stuff. But it's more or less civil along with obviously some finishing and all that, but it's primarily civil jobs.

Okay. Now sir, coming to the last question with regards to tariffs. Suppose the tariff is levied, so what kind of impact we will have on our -- primarily on our balance sheet and profitability moving ahead?

[Foreign Language] almost more than half is consumed within Mexico. So what we are supplying to U.S. is, let's say, $20 million, $30 million. We are expecting to increase the supplies. Let us see what happens. [Foreign Language] It's not only for me. The positive part, which I was talking earlier, is maybe that may divert a lot of orders to India. And typically, we are seeing the India orders to U.S. and all are more profitable. So I think we'll have to wait and watch the impact. I personally do not see looking at our Mexico business into U.S. being impacted by [Foreign Language]. So I think we are happy. The other thing what you have to understand is Mexico order [Foreign Language] clients who wanted Made in America as they call it. [Foreign Language] government utilities [Foreign Language] we were buying a lot of steel from America and then giving it back to the American market. So I think we will have to find a solution for that because [Foreign Language]. If you asked me, am I worried, right now we are not worried. We have to wait and see what happens. And the impact for us are the numbers are very small.

The next question comes from the line of Harshal Mehta from SmartSyncServices.

Congratulations on good set of numbers.

Thanks, Harshal.

Sir, so in last con call, you mentioned that our existing Kavach project might be completed in next 3 or 4 months. So any update on that? Were we able to conclude that project?

I don't think we have completed finally [Foreign Language] But have we completely closed, I don't think so. I don't have a clear update on it, but I don't think so. [Foreign Language].

Okay. And the new projects that we have got on the Kavach part, are they on the same lines, as in related to railway tracks and stations? Or they are also related to wagons also?

So it's not related to wagons, but it's related to locos. So a large part is also on the installation of the equipment and the software in the locos.

Understood. And this is also in the JV -- with our JV partner, right?

Yes, we are working with Kernex, yes.

The next question comes from the line of Mayank from AMSEC.

Sir, one clarification on the conductor part. Are we going into the AL-59 for the aluminum?

Yes, we're already manufacturing AL-59, yes.

Where we will be competing with the top 2, 3 players, which is approved with the Power Grid.

So to me, Mayank, it's not a question of competing, it's supply.

And sir, on the renewables, just wanted to understand what would be our scope of work in terms of per megawatt [Technical Difficulty]?

Scope of work [Foreign Language] except the module -- we don't get into the module supply part of it. Minus the module supply, we do everything. But model installation [Foreign Language] so the scope includes our job with -- where the models are supplied by the client. The rest, we do everything, both on the AC side and the DC side.

The next question comes from the line of [ Riya Shah ] from Aequitas Investments.

My first question is in terms of the water project, the collection issues we are facing are majorly from the center or the state projects.

So ma'am, the client is the state for us. But what happens is if you look at the funding of these projects, typically 40%, 50% comes from center and the balance comes from the state. Depending on each state, the ratios are slightly different, but probably you can say, half-half. So I do not know where the problem is. Sometimes when we talk to them, they say center is not giving, and when we talk to center, [Foreign Language] state is not ready to give equal, so we are not dispersing. So it is a little bit of a cat and mouse game. I think it's -- now I think it's improving because the work is suffering.

Got it. And then on the Railway, you mentioned that we have a certain labor issue. So typically, how do we employ these labors? So are there some agencies, organized, unorganized players, how do we go about it?

So we did not talk about labor in Railways. We are having a major problem of labor in Civil and partly in T&D. But what happens is that we have 2 types of contracts. One is we employ a labor contractor and you give him on a piece-rate basis saying this much foundation, this much this, and you pay him per cubic meter or whatever way it is. And that's the way it is. But wherever the work is sporadic and there are issues and where it may not be economical for contractors to come in, we do hire labor and technician against the contractor, but it could be on a time rate rather than a piece rate. So these are the two models which we follow.

Okay. These are all organized players? Or your local unorganized players you...

Most of them would be unorganized. But now looking at the issues which we are facing, we are seriously looking at saying should we move to some more organized players, which obviously would be more extensive and all that. But I think with the continued shortage, we may have to do that.

Got it. And on the oil and gas, you mentioned seeing a little slowdown in orders. So typically, what kind of projects are we seeing slow down in?

So these would be projects from, let's say, linking from the port to the refinery or to consumption centers or wherever CGDs are coming then they may want to have gas lines going in from the refinery or the depots and all that. So they are basically cross country running across 3 or 4 states, et cetera. So getting the right-of-way approvals, et cetera, have been taking time. And I don't know for some strange reason, we did see a slowdown in the overall market, okay? But now I think there's a lot of talks saying that -- they had talked about the national grid of -- international gas grid, et cetera, which now they are again talking. So hopefully, we are hopeful that business will improve.

So oil and gas would typically be for private CapEx-led, right, not public CapEx?

So most of it would be on the private -- public CapEx, which would be, let's say, Indian Oil, ONGC, Oil India, et cetera. But there are some which have been talked about in the port connectivity, et cetera, where private sector may come in. Also, what is the other piece which we are doing is the slurry pipelines, which are for steel production. So we are doing a very large slurry pipeline for one of the private players.

Okay. And in terms of Railways, you mentioned that Kavach will be the new trigger for us. Going forward, how do you see this sector apart from Kavach growing? And what were the issues you currently faced, if you could just elaborate on that?

See, the government even in this budget has allocated INR 2.52 lakh crores for Railways, of which our addressable market we said was around INR 1.11 lakh crores. So business [Foreign Language]. On the question of how the contracts are executed, I think all the contractors are facing serious concerns, serious problems with the Railways, Railways are looking at it saying what we will do -- need to do to improve it. If they do that, then I think it will become a big area. Otherwise, then you are picking up selective order where the contracts are much better, payments can be faster, is not linked to very long milestones, et cetera. So I think that's the reason why our Railway order book has been going down because we have been very selective looking at the history and then the problem which we are facing today.

The next question comes from the line of Saket Kapoor from Kapoor and Company.

Sir, when we look at our line of operation and the segment, our PAT margins hover around this 1% to 2% mark. So what steps is the management taking or in the anvil? And what should be a sustainable PAT margins taking into account we are leaders in the T&D segment? So if you could give us some color, sir, how should this PAT margins shape up going ahead? And also for equity raising, sir, are we looking further -- to raise further equity?

No, I don't think we are looking at raising any further equity. Sustainable PAT margin, my view could be anything around 4% to 5%. And on the steps, very clearly, we are talking about the EBITDA going up by at least 150 basis points sort of next year. Then we talked about interest costs going down and a lot more revenues are coming from Middle East, where hopefully, the tax rates are slightly more benign than India. So I think below the EBITDA line, both on the interest cost and also on the tax part, we should have some beneficial impact. So EBITDA [Foreign Language] so I think the PAT [Foreign Language] improvement [Foreign Language]. Improvement in PAT, Saket ji, would be more than the improvement in EBITDA [Foreign Language].

[Foreign Language] PBT significant increase [Foreign Language] year-on-year. It is a growth definitely. Sir, [Foreign Language] other expenses line item [Foreign Language] so that is also -- that has also shown a growth [Foreign Language] key elements [Foreign Language] if we take that other expense line item as a percentage?

Saket, [Foreign Language].

Okay. And lastly, sir, cable segment [Foreign Language] in the category of cables where we operate and ESG segment [Foreign Language] already?

[Foreign Language].

Conductor, sir, [Foreign Language] next quarter [Foreign Language].

[Foreign Language].

Okay, sir. [Foreign Language] exactly last year, government was unable to spend the allocated amount. So what could have been the reason, sir, on allocating INR 70,000 crores and spending only INR 29,000 and then creating a total ecosystem where all EPC players are facing issues? So what has resulted into the -- because the government revenues do not reflect in the same direction? They have gone up significantly. So if you could explain...

[Foreign Language] She will be able to tell you as to why the money has not been spent when the contractors have done work. [Foreign Language].

As there are no further questions from the participants, I now hand the conference over to Mr. Vimal Kejriwal for his closing comments.

Thank you very much for your continued interest. And I think as I said that we have a large order book in L1. So I think we are very confident of delivering on growth in the coming quarters. Thank you so much. Thanks, Ryan. Thank you.

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