KNR Constructions Limited (532942) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the KNR Constructions Limited Q2 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. S. Vaikuntanathan, VP Finance, KNR Constructions Limited. Thank you, and over to you, sir.

Good morning, friends. Good morning, everyone, and season's greetings to all of you present on the call to discuss the financial results for Q2 and H1 FY '22. Along with me, I have Mr. Jalandhar Reddy, Executive Director; Mr. K. Venkatram Rao, General Manager, Financial Accounts and Strategic Growth Advisors, our Investor Relation advisers. I would like to highlight a few industry updates first, and then we will discuss the company's performance. Despite multiple headwinds, especially due to disruptions caused by the second wave of COVID-19, the pace of highway construction remained robust. During H1 FY '22, 3,824 kilometers of highways was built compared with 3,950 kilometers on a year-on-year basis. A similar trend was observed for contract awarding. During H1 FY '22, contracts for 4,609 kilometers were awarded compared with 5,052 kilometers year-on-year. The pace of highway construction should approximately at 22-kilometer per day during the same period. And Transport Minister Hon. Nitin Gadkari has set a target of 40 kilometers per day for FY '22, which we believe is achievable only whereby a significant fall in with COVID-19 cases and the strong pickup in the execution during H2 FY '22. Post collection has been showing a significant recovery in the past few months and has, in fact, shown a robust growth on subsequential basis. This is largely driven by increased passenger vehicles and goods movement due to the festive season and higher commercial value movement -- vehicle movement, driven by a significant recovery in the economy. This momentum is expected to accelerate further going forward. Over the past few years, NHAI and government have undertaken various reforms for the road construction sector. This has resulted into quick turnaround time, a pickup in execution pace and improved balance sheet of companies in road construction sector. With the more reforms and initiatives in the pipeline, we expect the pace of highway construction is expected to pick up further. Hon. Prime Minister Narendra Modi recently unveiled the PM Gati Shakti National Master Plan for multiple modal connectivity. The plan initiatives are centralized to portal comprising all existing and planned infrastructure initiatives of as many as 16 central ministries and departments. With this initiative, the entire process of infrastructure [ creation ] is expected to be streamlined beginning from land acquisition to implementation; connections between local, state and national government bodies and corporate to this initiative. NHAI has recently announced that in order to boost successful [indiscernible] of composition of land for land acquisition to property owners, it will introduce a new system where the amount will be transferred directly to the beneficiaries' account through the public finance management system. This will also avoid the blocking of thousands of crores in banks for months, which can utilized for transaction. Now coming to the key updates for the company. The project execution phase continued the momentum during the quarter. As mentioned in the previous con call, the workforce trend has reached a pre-COVID-19 level and the company is not witnessing any shortfall in the workforce. The percentage of physical progress as of 30th September 2021 for the HAM project is as follows: Chittor to Mallavaram is at 94%; Ramsanpalle to Mangloor is 97.8%; Trichy to Kallagam is 81.9%; Magadi to Somwarpet is at 45.9%; Oddanchatram to Madathukulam is 39.2%. During the quarter, the execution was primarily driven by HAM projects. Out of the INR 579 crores, revised equity of 5 months for all the 5 HAM projects, the company has already invested INR 457.24 crores as on September 30, 2021. The incremental equity requirement of INR 635 crores be infused to INR 2,700 crores, INR 2,030 crores and INR 135 crores for FY 2022, '23 and '24, respectively. You can refer to Slide #37 of the investor position for detail on each HAM project. Now I take you -- I'll take you through these key highlights of the quarter in terms of order flow, PCOD, risk rating and an update on stake of -- stake sale to Cube Highways. Firstly, on order inflow, the company received an order for the widening of existing service roads of Outer Ring Road, Hyderabad on Bill of Quantities basis worth INR 312.8 crores and received 1/2 of this for a value of INR 1,041.5 crores. The company has received the PCOD for 3 projects as follows: KNR Tirumala Infra Limited achieved a PCOD as on 10th of May 2021, which is 142 days ahead of the schedule, including 90 days of extension of time and eligible for a bonus; KNR Srirangam Infra Limited achieved a PCOD as of 30th of March 2021, which is 89 days ahead of the schedule, including 90 days of excess of time and eligible for a bonus; KNR Shankarampet achieved a PCOD as on September 2021. The stock holders approved 100% stake sale of KNR Shankarampet Projects Private Limited, KNR Srirangam Infra Private Limited and KNR Tirumala Infra Limited into [ QI ]. I will now touch briefly upon the equity investment and total consideration to be received as follows: For KNR Tirumala Private -- Infra Private Limited equity investment for the company stood at INR 177.1 crores while the total consideration to be received is INR 280.1 crores, implying a book value of 1.2x more approximately. For KNR Shankarampet, the equity investment by the company [indiscernible] INR 125.7 crores, while the total consideration to be received is INR 136.3 crores, implying a book value of 1.1 approximately. For KNR Srirangam Infra Limited, the equity investment by the company stood at INR 89.95 crores, while the total consideration to be received is INR 111.2 crores implying a book value of 1.2x approximately. The cumulative equity investment in these projects stood at INR 392.3 crores, while the total consideration to be received is [ INR 450.5 crores ]. With the additional amount of inflation of INR 142.7 crore, which has been all start to gain [ at the year ] with that the return would be 1.5x approximately. For more details, you may refer to on Slide #28 of our investor presentation. Also during the quarter, India Rating has revised its rating on long-term brand facilities from the company to Ind AA, and the short term rating was reaffirmed at Ind A1+. The total collections for the Bijapur project, that is [ ManapakBarodi ], the collection in Q2 FY '22 and H1 FY '22 has been INR 7.4 crores and INR 19.4 crores approximately. Now turning to the order book position. As on September 30, 2021, the company has an outstanding order book position of INR 6,511 crores. The EPC road projects and HAM projects constitute 53% to the total order book, while irrigation project constitute the remaining 47%. Price-wise, 82% of order book is on third-party clients and the balance, 18%, is from captive HAM projects. The third party order book on -- or non-captive order book [indiscernible] or 82% of the total order book position is skewed between state government contracts with 69%, whereas 2% is from central government and balance, 11% order, is from [ other players ]. The total order book for each of these is INR 11,594 crores, including 3 new HAM projects and 1 EPC project. With that, the irrigation comes to 27%, roads 28% and HAM 45%. Please refer to Page #32 of the investor presentation. During the quarter, the company has advanced an amount of INR 50 crores for acquisition of land at Hyderabad for collateral purpose but at a later point, the management took a decision to buy it in [ promoter of home company ]. And accordingly, the advanced amount was paid back by the promoter-owned company during the quarter -- during the third quarter, and the transfer of advance will be adjusted upon the registration of such property. Hence, there is no financial impact on the KNR PL. We also want to clarify that KNR PL is not intended in real estate activities. We have recently executed a loan [indiscernible] some HAM projects in Kerala. The [indiscernible] then submitted the loan documents directly and we are awaiting for the 5 letters from NHAI. The company proposed to acquire quarry lands in Kerala and the availability of quarry materials or various cap and 2 new HAM projects in Kerala require approximately 40 lakhs metric tons -- metric per ton. Acquisition of quarry and the [ NCR ] quarry land will be used as a capital consumption. The running rate per acre of land in Kerala is running to proceed [ growth per acre ] when compared with the other states. It's much -- the other states are much less. It is also at a time that the residual value of the quarry is much above the project rates. On publish of the project, the quarry can either be retained or subleased for other projects or can be sold. There are recent routes in Kerala where infrastructure projects are delayed due to nonavailability of metal and stone aggregates. The investors can refer to [indiscernible] dated October 22, 2021, where the Kerala government has said that one of the infrastructure projects, core projects, is delayed by 2 years due to one-off store aggregates. And the KNR field management, they don't want to catch up with this problem, so they have taken a decision to acquire the quarry land. They have -- the [indiscernible] division has been taken to acquire approximately 90 acres of quarry land with an approximate [ INR 1 crores ]. The above acquisition of quarry land will be through investment in subsidiaries and acquisition of the company of the LLP's holding quarry lands due to the restriction of land holding and through the landfilling at [ South ] Kerala. The legal rating is under process. The current order book position is robust and provides visibility of execution over the next 3 years. Robust project pipeline and ready DPR, detailed project reports, onto Bharatmala project should accelerate the project awarding activity going forward. The process of submitting 10 bids for the road project is currently under way. The average ticket size of the tender for each project is about INR 1,000 crore to INR 1,200 crores based on the shortlisted project for the bidding pipeline. For FY 2022, the company is targeting another order inflow of INR 2,000 crores minimum for the remaining part of FY 2022. I will now request Mr. K. Venkatram Rao, our GM, to present the results for the quarter and our year ended September 30, 2021. Over to you, K. Venkatram Rao.

Thank you, sir. Let me take you through the Q2 and H1 FY '22 stand-alone financial performance. I will start with the quarterly highlights first. The revenue for the quarter grew by 26% year-on-year to INR 7 6 crores (sic) [ INR 756 crores ]. EBITDA for Q2 FY '22 witnessed a growth of 35% to INR 168 crores as compared to INR 124 crores in Q2 FY '21. EBITDA margin in Q2 '22 stood at 22.2% and an expansion of 154 bps. The net profit for the quarter was INR 95 crores as compared to INR 49.8 crores in Q2 FY '21, a growth of 91%. The revenues for H1 FY '22 grew by 38% year-on-year to INR 1,496 crores. EBITDA for H1 FY '22 witnessed a growth of 42% to INR 311 crores as compared to INR 218 crores in H1 FY '21. EBITDA margin in H1 FY '22 stood at 20.8% net profit for H1 FY '22 was INR 168 crores as compared to INR 90 crores in H1 FY '21. Let me quickly take us through consolidated performance. The company records a 28% year-end growth in the total revenue from INR 656 crores in Q2 FY '21 to INR 842 crores in Q2 FY '22. EBITDA came in INR 178 crores in Q2 FY '22 as compared to INR 171 crores in the same period last year. EBITDA margin in the current quarter stood at 21.1%. Profit after tax stood at INR 73 crores in Q2 FY '22. The revenue for H1 FY '22 grew by 40% year-on-year to INR 1,649 crores. EBITDA for H1 FY '22 witnessed a growth of 26% to INR 380 crores as compared to INR 301 crores in H1 FY '21. The EBITDA margin in H1 FY '22 stood at 23.1%. Net profit for H1 FY '22 was INR 181 crores as compared to INR 196 crores in H1 FY '21. Now coming on the standalone balance sheet, the company continues to maintain a strong balance sheet during the quarter. The company borrowed INR 100 crores short-term working capital as there was a delay in the realization of receivables from the irrigation project. However, the company has repaid entire INR 100 crores post 30th September after the receipt of money from the irrigation government of Telangana. The working capital days stood largely stable at 45 days compared to 44 days on a year-on-year basis. The consolidated debt as on September 30, 2021 is INR 1,375 crores as compared to INR 734 crores as of March 31, 2021. The net debt to Q2 around September 30, '21 stands at 0.6x as compared to 0.3x as of 31st March 2021. With this, we can open the floor for question and answer.

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

My first question is on this land value you had given -- the company has given advance. So what was the reason behind company extending this advance for this land? And then what happened after? What was the realization? And why was it reversed later on? What was the process behind it?

See, actually, no. When HAM was coming and the company was [indiscernible] that for the collateral security purposes where they can buy the land. Because when the limit also goes up, then we have also, due to collateral security [ first start that ] we can buy for that purpose. Subsequently, the addition has been taken by the management that no, it's not the right time to buy the KNR CL. And so -- is that you ask, Parikshit? [indiscernible] to accommodate to buy the sale and money has been given back. We have lost -- see, now we are referring to the Kerala BOT Project also, where, in the next quarter, we may have to buy investment of around INR 90 to INR 100 crores sort of quarry land in Kerala. And as we explained to you, there is a scarcity in land in Kerala, and some of very widely hit in Kerala because of the stone quarries, which has already been highlighted in the [ multiple paper ] for the second state issue. So the people can refer to that. So we don't want to get into some cash [indiscernible] situation because our projects in 2 Kerala project is totaling [ INR 17,450 crores ]. And if we have to wait for the [indiscernible] quarry and our profitability will be delayed and all of our projections also will go for a tax. So having this into account, the decision has been taken that let us concentrate in this coming quarter for the investment of quarry land in Kerala, which is very pertinent, very important part of the project, and which will also boost the availability of the land with scale, the quarries which can be used for a capital purpose. So only that is a major vision that has been taken place.

And sir, one more correction I would like to issue for this thing, if there is a small amount we wanted to invest into that land, let's say, around INR 50 crores, then another INR 5 crores for the final registration we wanted to spend. But later, we thought [indiscernible] real estate company, but for our smaller pockets, we would be requiring collateral securities. Nowadays the bank guarantee limits are to be given in a very expensive way. As you know that [ 77 ] years each bank guarantee or performance guarantee is tucking in. So the limits are -- need to be increased going forward year-on-year. So with every kind banks are asking us to place some new collateral securities. For that purpose, we wanted to take that. But again, as VP Finance said, the entire investments are going into the HAM projects. So definitely, we are now deferring. And I don't think we'll get such situation to invest in the future also.

No, sir. The question was not from talking to invest into industrial land or quarry land, but this was a non-industrial at non-quarry land, which the company was intending to invest. Historically, we have never seen KNR investing into real estate. You have some land bank in the company, but it's like totally directionally changing the company. I mean, does signaling to the market is that you're changing your business model and you're getting into commercial real estate, so which is not our business. So I just wanted to understand are there any reassurance from you that in future, this [indiscernible] at all, and we are not looking to do anything there with respect to real estate in the KNR listed level. Just wanted your point.

Yes, 100% we have already discussed and every time we are supposed to buy some quarry lands and other lands and which are even earlier purchased quarry lands for the project's purpose, lands are still lying with us. So definitely, there is no meaning that we invest into new projects and new irrigation projects. However, we never intend to develop any real estate projects, and we don't have any intention. Leave for the purpose of the collaterals and all small pockets, we may take but -- now we are deferring to take it because going forward, most of the HAM projects are going to be like the company. So definitely, we do not want to waste any single penny towards the investment of -- other than our lookouts. I mean to say other than the company performance non-project thing.

My second question is, historically, we have seen that promoters do invest at a personal level in real estate and then eventually, what happens is that the real estate becomes big and then eventually the real estate entity gets impacted, either the share gets lost to raise loans. So just wondered if you can just clarify even in the first level, do you have any major plans of developing real estate and does that have any impact on [indiscernible]?

Actually, it is 100% no, because we do not have time in doing our own business. And rather than just for a family settlement, my father, Mr. K. Reddy, who's our MD, he's taking the property just for his investment sake, but I think we never intend to double up or neither he is interested in developing it, because it leads to a lot of time devotion and all other. And one thing is that our expertise is not into real estate that we understand very well. Will just bought the property. And as of now, many properties were purchased. But none of the property was developed and we never intend to develop. I can give assurance to you that even in our personal level, we are not developing. If we want anything, we may give it to a professional developer and let him handle that. And none of the proceedings or for that purpose, the promoter landing into certain debt issues will never happen.

Okay. Sir, just my last question on the Kerala land acquisition. So if you can commercially quantify some of [indiscernible] give a commercial sense, on what kind of savings or [indiscernible] but you receive costs in aggregate can be sourced by owning this land? And second, what is the market now? The second thing is when you intend to sell this land after the project [ base cost ], what kind of realization you have spent versus the investment you are making in this land?

Sir, actually, as you know, that Kerala, from the Ramanattukara to Valanchery to Kappirikkad, there are 2 projects. Both put together, the BTC is crossing more than INR 4,500 crores wherein the aggregates required for these projects is about INR 43 to INR 45 lakh metric ton. And the quantity is very good, sir. However, there is a market -- there is aggregate available in the market, but it's available at a higher cost. Today, for example, I would like to tell you that we made an agreement 3 months ago with the locals to buy such an aggregate. Subsequently, we made an agreement with them at INR 19 per EFC. Later, it has moved to INR 23 now they are asking for. So within a span of 3 months, the price is varying so much. So we do not guarantee going forward, what sort of prices we love to have. And second, the major problem is that earlier, we have done the project in [ Thiruvananthapuram ] bypass as you can remember that. There, we do not own a quarry, and we have started with INR 16 per CFC. And today, we are -- we have completed projects at INR 33 per CFC. So the aggregate cost was never constant, and we were -- every time we were paying a premium today to these guys. So this time, we have thought we will buy a quarry. Okay. Of course, the acquisition cost of quarry is both the quarries put together, it is almost crossing around 96, 97. So which is, again -- it will keep the project cost in control. Second thing, even after considering this buying costs, at least [ 53% ] depreciation you consider and make a calculation, the production cost is not crossing more than present, I mean to say, around INR 16, INR 15 per CFC, we will be able to produce and use on to the projects. So I say complete win-win situation for the company to buy these quarries. And going forward, later, the valuation left maybe today, the grain terminal has given a direction for the quarries beyond -- there is a radius for the blasting radius for the quarries. They have earlier recalled 100 meters. Now it is increased to 200 meters by green tubulars that they have challenged in the court. And now the court is taking some decisions, and there is no clarity from that. So many of the quarries are likely to shut down in the market also. There will be a lot of scarcity. Due to scarcity, the demand is heavy. As you know, that entire corridor from [ Calica ] to Thiruvananthapuram, it's now being developed, apart from that [ Maha-bypass ] and other few projects have also come up. So because of this, many projects are in one intense place, the quarry aggregate cost is completely going to go up, and we are expecting a huge demand there. That's where we are buying it. And definitely, after we complete the project, we may keep it if we have any future projects to be done. Otherwise, we sell it at a price. And that price, that is -- may not be less than whatever we are acquiring cost, it could be more or a little bit same.

[Operator Instructions] The next question is from the line of Ashish Shah from Centrum Broking.

Yes. And so thank you for all the assurance and clarification given earlier. I won't repeat those questions. I just have one question on our shareholding. So the promoters in the recent past have diluted some of the shareholding and we stand at about 51%. So do we have an assurance that we probably don't go below 51% in our current shareholding?

Yes, sir. We have restricted us to be at 51%. As you know that Mr. K. N. Reddy is my father. He wanted a certain amount for his family settlement and that he have already taken. And as a final call, he took back. So the company, as a company holding, should be at 51%, which -- and these are decided and now he's directed everybody not to sell at any cost..

On the irrigation side of the business, sir, if you can just talk a little bit about the progress of the projects. Where are we on the Palamuru project given that the entity has stopped the construction? If you discuss about the outstanding retrieval, et cetera, it will be helpful.

Yes. Venkat, please go ahead.

Sir, as far as irrigation process is concerned, sir, our entity recently, they have given that they stay for the Palamuru Irrigation Lift Project. So we are -- definitely, we have to follow that. And now we started mobilizing our resources from that project to other side actually. And other than the Palamuru lift irrigation, all other projects is in very good shape, like Mallanna Sagar [ Pump House ]. And as far as package 4 is concerned, that is our pump house project, that is also doing in well actually. So there is no issue on that. But definitely, as far as [indiscernible] Palamuru Lift Irrigation Project is there due to this NGT notice, definitely, now we are planning to stop the work actually.

Right. So this quarter, if you can help me, what was the total execution on the irrigation side? Because when I see your order backlog, actually, that seems to have kind of remained at a very similar level from Q1 to Q2. But obviously, we would have executed some reasonable revenue of irrigation as well.

So this quarter, in the irrigation side, actually, we did around 30% of work actually, and we did 46% of us. And back to that is 6%, and our other EPC roadworks is around 18%.

Sure. So has there been an increase in the value of any of the projects? This is why probably the order backlog seems to be very similar.

So there is definitely some change of scope has happened correctly in some projects. So with that, actually, there slightly increase in the value of some projects.

And if you can just lastly, the status of land for the -- one of the packages we got was INR 700 crores in value. How are we in terms of starting the -- how many places in terms of starting the execution of that project? And if I can also update on the package 4, how is the execution progressing on that?

Sir, I think -- go on, go on.

Yes. [indiscernible] such as Mangloor kindly go on, sir.

Yes, yes. This Mangloor project, sir, which is from -- starts from Periya Shanti to Bantwal that connect...

Sorry. I'm sorry, actually, I was talking about the [indiscernible] package 4, the pump house from it. Basically what is the progress there on the irrigation side? And also on the package 3, where we had some issue on the land and we were very clear on when are we going to start this.

As far as package 4 is concerned, execution is going well, actually. We completed around 20% of work there, which we already got it. And second is at around INR 250 crores. We already put, and we are expecting that money by next month end. As far as package 3 is concerned, that is with KNR [indiscernible]. That work is still land acquisition is the issue we see and we have not started the work as yet. So until we have clarity at the land, we have not even mobilized our resources to the project. So right now, we are working in only package 4 only.

Okay. So lastly, if you can give the outstanding receivables, operating receivables land only?

Actually, total receivables from irrigation is as of now, around INR 700 crores is standing. Out of INR 700 crores, it will be around INR 120 crores from Mallanna Sagar and INR 300 crores is from Vattem, that is part irrigation and around INR 240 crores from package 4 of Kaleshwaram and some small amount of around INR 50 crores for KP Sagar and Yedula. So put together around INR 700 crores receivables are pending from irrigation as of now.

[Operator Instructions] The next question is from the line of Shravan Shah from Dolat Capital Markets.

Yes. Thanks for the clarification previously and also congrats on the good performance on the particular EBITDA margin on that front. Now the question is, on the gross front, so if I remove the INR 50 crores for the land, so the cash flow for the first half stands at INR 120-odd crores. And if I look at the plant and equipment from March to now, so it is INR 65-odd crores. So the INR 55-odd crores has gone in which assets? So it is not part of plant and equipment? And continuing to that, now have we done anything in until September in terms of the Kerala acquisition? So that's why the amount in the cash flow is higher and also CapEx now for the full year is how much? So we already said INR 90 crores to INR 100 crores would be spending for the quarry incurred loss. So for the full year now, what the number stands for the CapEx?

As far as a draft block is concerned, definitely, increment in the plant and machinery is around INR 60 crores, sir, INR 360 crores. And because for other projects like for this Bangalore project, another starting project, we have taken land of around INR 14 crores of land actually. That is for quarry land actually. We got in these projects. And with this, actually, groundwork is around INR 100 crores is there. And around INR 20 crores, we have given advance to -- for acquiring of machinery. So that's why in cash flow, it is showing around INR 120 crores, but net purchase is around INR 100 crores. This is the first question. And what about second? Total capital for this year, actually, we expect that because now we are thinking that this INR 100 crores of the quarry land and for the Kerala we'll buy. But we just want to, again, reiterate that regarding in Kerala, there is a land filling active there. In that case, any company cannot acquire more than 15 acres of land in that state. So we have to acquire that land through a wholly-owned KNR subsidiary company. And in some cases, actually, we are also thinking to acquire the company in which this land is there. So we are just working out the mechanism. But overall, requirement will be around INR 100 crores, but that may through from directly purchase something from investment in our subsidiary company. So with this actually total requirement for this year, it may go up to INR 250 crores, actually excluding these 50 acres, what we already did, and again, that we got the money also.

Okay. So just to clarify, so it may happen that the Kerala INR 1,900 crores from the stand-alone in terms of the CapEx, the amount can be deferred? So apart from that, if I remove that INR 100 crores, the INR 150 crores for the CapEx for the full year, so that's how I look at the numbers.

Yes, correct. Correct, correct.

Okay. Okay. So secondly, sir, 2 things. First, in the initial, we paid, in terms of the bid, 10 bids to -- not clear in terms of the voice in terms of the value. So are we -- are all the 10 bids that we have bidded is in the arbiter or are planning to bid in the hand or irrigation? Secondly, in terms of the value also of that? And secondly, in terms of the equity for the HAM project, sir, was not able to get that clearly the number, sir, if you can repeat that?

Yes. What we have told is, there is a robust project pipeline and already at DPR or the Bharatmala project, which should accelerate the project of early activity going forward. The process of submitting 10 bids for road projects is currently underway. The average ticket size is from INR 1,000 crores to INR 1,200 crores, based on the [indiscernible] projects, then what we are expecting is we are targeting an order growth of around INR 2,000 crores to INR 2,500 crores before [ entering in ] 2022.

Okay. Got it. Got it. And the breakup of the equity investment that I think at INR 635-odd crores usage? So if you can repeat the entire number for '22, '23, '24.

Yes. Yes, sir. Actually, equity requirement, we already put actually as of date around INR 457 crores, but we have to further put around INR 635 crores. Out of this balance for remaining year, we are going to put around INR 270 crores for FY '22. And for FY '22, '23, we may put around INR 230 crores and rest of around INR 135 crores, we will put in '23, '24.

Okay. And just a further clarification that the 3 HAM that we sold to the queue, so that until now we invested around INR 354-odd crores. So that money would be out of balance by March end?

Out of this, actually [ 2 ] project definitely because 2 projects we got the PCOD in the month of May. That is Srirangam and Tirumala. And as for NHA, we can dilute our production cap actually 49%. And after that, after 6 months, we can now then do entirely. So [ one order ] to Shankarampet that we got in the month of October, so that may still lower that 31% in the next year, but other -- these 2 projects would be able to complete before March only.

Okay. Okay. Okay. And in terms of the guidance revenue, EBITDA margin for the full year, any upward revision?

So far, because as you know, there in Q3, extensive rains are there. And what is happening in Q3, most of the project is yet to start, like Kerala, Mangalore, [indiscernible]. Appointed date, in Kerala, we are expecting appointed date somewhere in the mid of December. So that's why we are thinking that Q3 may not be -- that it may be a little low because they are expensive in this part of the country. So that's why our margin, we are keeping -- our guidelines, we are keeping around INR 3,000 crores as of now. And definitely, EBITDA, we are targeting around 18% to 19% definitely.

Sir, last time we say, INR 3,400 crores. So now we are saying INR 3,000 crores?

So we do INR 3,000 crores only actually.

The next question is from the line of Vibhor Singhal Philip Capital.

Sir, just clarifications questions from my side. Sir, you've explained this entire details about the CapEx numbers that we are expecting the land and the -- excluding the land you are taking [ INR 390 crores ] of CapEx for the plant, machinery and equipment. So will that be sufficient to take care of the current order book, including L1 of around INR 11,000 crores that we have? Or do you believe for the irrigation projects or maybe other HAM projects, which you might need to make a similar kind of a CapEx next year also?

Sir, for CapEx definitely, because as you know, most of the product like Kerala and Mangalore disposal is going to be -- work will be done mostly in the next year only. This CapEx, we goal for this year, but definitely for next year for these 2 Kerala projects other than this land because other than land, we require actually lots of machinery. So further, definitely next year CapEx requirement will be there for 2 assets.

Right, right. Got it, sir. And sir, a related question for regarding the CapEx on the P&L loss. Basically, on our depreciation number, sir. I mean, I know it's more of a bookkeeping question, but our depreciation number has been coming down over the past year and this year as well. Despite we're doing more and more CapEx. So is there some change in the site policy that we had allocated because of this number of [indiscernible]. For our estimate, what should be the number that we should be looking at?

Sir, for depreciation number, definitely, because the last depreciation number in terms of how much your acquisition, it depends upon that. So as you know, last year, actually March 2021, we did only INR 100 crores of acquisition. That's why that year, depreciation was less. But this year, actually, now because we have already started acquiring the land. So this year, depreciation has been increased. Last year, it was, for the quarter, around 26 was there actually. But this year, it is around 30, 35 there. So in future also, we think that depreciation will be somewhere around 35 to 40 only.

So it has come down significantly from FY '20 numbers. In FY '20, we used to hear it at around INR 40 crores to INR 50 crores kind of a quarterly run rate?

You are comparable, because that year, if you see '18-'19, '19-'20, on that year, we did actually every year around INR 200 crores, it should be acquired the asset. That's why [indiscernible] more. But last year, actually '19/'20 even, so 2021, we acquired only INR 100 crores of assets. And this year also, we are acquiring this setup, but basically in the land because these are the land and land we cannot gain the depreciation. This year addition will be there. So excluding land, actually, we could able to cater depreciation on that. So this year, we think that it will be somewhere between 35 to 40 [ vendors ].

Got it. Sure. Sir, the next question and the last question is on the quarry land that we are acquiring. So now that we are looking to acquire this [ fourth ] quarry in Kerala, and we have the sizable part of the order is also in the state. And we are doing so as to prevent us from making a higher cost payment for the aggregate. So do you believe it could lead to incremental jump in EBITDA margins, let's say, in next year or the year after compared to current level?

So whatever we have projected, we will maintain. They have to come only in asset. In the next year, how it is being updated. But there should be -- overall, there should be some improvement, but we have a reason.

Expecting some claims in the past, we will see on the claims or anything gets realized then we'll know. And take that claims now -- we cannot say when it will happen.

Sure, okay. So just one last question, if I could squeeze in. I don't know if you already answered it. What is the expected appointed date that we are expecting for the half of it? Financial HAM projects time line?

Financial quarter is, we are expecting that any time for the 2 HAM projects. We already submitted the document, maybe today as to why it should come. By that time, we may have to wait.

Appointed date, sir, actually appointed date is concerned, first, I'll speak about the Mangalore project. I think the Mangalore project is around 90%, the land available. So again, required for 90% of category to be required, we have given [indiscernible] and the application has gone to NHAI's headquarters. I think on or before 20th, it should happen for the Periya Shanti-Bantwal part. And the Kerala project concerned -- we have started the dismantling of the structure. There are heavy structures that are outstanding in the project. It is almost -- it is passing through small towns and villages and [ Kottakal ] and [indiscernible], there are strictly populated places also we just passed through. So all that dismantling has now started. I think if we are able to dismantle everything in the coming month, 1.5 months, at least 90% of the category is available in each of the projects, and definitely will be taken, sir. And we are expecting somewhere in January, it should happen. As of now, the department says, we have 75% provisioning, that means the revenue department. And in the 1.5 months, they will achieve the 90% part which they are confidently saying. We'll have to confirm this by dismantling the structure and taking over the position on the land.

Got it. And this is only Kerala project?

Kerala project, sir. These 2 are the major ones and the Periya Shanti-Bantwal is also almost INR 1,100 crores plus at the land acquisition. [indiscernible] we would get one [indiscernible].

The next question is from the line of Faisal Hawa from H.G. Hawa and Co.

How soon do we feel that INR 700 crores of irrigation conduction will be recovered by us? And secondly, sir, are we looking at any kind of fallen dials for developing imports or metro or any kind of which could give us revenue of 3 to 4 year turns. And we do not feel that we will need a bigger order book now to sustain our revenues at a much higher level now that the entire company's revenue range have increased. So can we not look at INR 7,000 to INR 8,000 crores of orders in this year itself.

Yes, sir. We are just planning also. I think always we want to make an entry because as you know that Prime Minister's policy of investing on infrastructure is very huge this time and the huge big projects are going to come up. So definitely, we wanted to have our rolling it that INR 100 lakh crore policy. So we are definitely there for that. And for which -- whatever the tie-ups that are required, we are making and we would be in competition for this.

And the receivables on the irrigation front?

Yes, sir. Irrigation projects are coming up. Definitely, we welcome that, provided that we could have actual funds...

The [ INR 200 crores ] of irrigation funding, how soon we feel we can recover it?

Sir, out of INR 700 crores, around INR 250 crores is there from that package 4 actually. And that for that, we already raised the bill and we expect that this money will come definitely by end of next month, actually, this money will come. And as far as [ investors ] are concerned, there is definitely [ NPP ] has put those stable. But we are already -- because we have done the work actually, and this has been certified, so we're already putting pressure on the government to release this money too. Definitely, we expect that some portion of [ Mali ] will definitely will going to be released by next month actually. And Mallana Sagar, also, we can say by end of March, we should be able to realize actually the pending [ resume ] from that similar Mallana Sagar. And package 4 is no issue because it is already backed by bankers. So once we did the work and government will put their part of the equity, we can able to get the money. So as far as receivables is concerned from irrigation sale, we can say that there is a highly visuality there by end of March '22, we should be able to realize the entire spending receivables.

Sir, [indiscernible].

Our operations, our cash flow from our operations is still negative. So is it an optimal -- this us because we have not drawn loans in the subsidiary or is it actually we are manning because of the syndicate receivables.

That's definitely have -- actually, this cash flow from the operating activity is definitely -- for this quarter, actually, it is not INR 111 crores is there -- policy only this.

No. Cash flow from operations in the first half is showing negative.

No, you are talking about consolidate or stand-alone?

Consolidated.

Consol -- , because that is the increase of the financial assets because a lot of the receivables are there. We have to put in the -- under the financial asset for this field because one of the expenditure we had to incur actually towards the acquisition of that asset. So we have to show under financial assets. Due to that resonation, but if you see the stand-alone cash flow, it is positive on [indiscernible].

Is it because of this total HAM accounting?

Yes, this is the total HAM account. Yes, correct.

The next question is from the line of Bharani Vijayakumar from Spark Capital.

Sir, what is the portion of the order book coming from the Palamuru project where NPP stand or this is given now in the current order book? And how would will it be addressed? Will it be scrapped from the project -- sorry, from the order book?

Right now, it is around -- look, right now around -- we have completed around 70% of work actually on that project. So it is around 30% is pending. So it is around INR 250 crores is the pending order book as of now from that project.

And the project will not be canceled, because government has also taken up -- they have taken time until January 15 to submit the DPR. And so they are making all efforts to complete the DPR and then get the approval. So the project is almost 70% [indiscernible] most of the projects is done.

Understood, sir. From the receivable situation from irrigation of around INR 700 crores, you said the package for INR 240 crores will be received by end of, say, November, December. And from Mallana Sagar and the Palamuru project, which is INR 120 crores plus INR 300 crores, INR 420 crores, you said it will come by March 2022.

Yes, yes. Correct, sir.

So from the INR 700 crores, INR 420 crores plus another INR 240, that is what INR 460 crores -- INR 660 crores will be received by end of March 2022?

Yes, yes, correct.

Okay. Okay. And one thing that we are noticing specifically on the road bids, is that either it is getting delayed or players are not winning several projects, so very few players have won projects in the first half. So what is happening on the overall bidding scenario competition? And will NHAI and the entire sector see the targets being met in terms of bidding and getting new projects?

It is happening. Biddings are happening. [indiscernible] If you think about [indiscernible], there have been involved in there somewhat, and -- as you know, the DPRs, there are certain new expertises like Hyderabad-Bangalore and then Hyderabad-Mubai, these are the express [indiscernible] planned. And apart from these, Banglore, I need to say Karnataka, Tamil Nadu, as though as they're in the pipeline. And this time, we are also focusing, if the bigger scale projects that come up in last eastern part of India, we are now planning to bid on that. Apart from that, definitely, there is a good scope from new '22 expert rates, which have been planned by [indiscernible] and interlinking of sales to national highway. Those are also on pipeline. Definitely, I think -- but there is now aggression as the bids are not happening and they are just getting postponed every time. Recently, we were supposed to bid in some Kerala projects which has got postponed by 10 days. And there are some [ military ] projects also [indiscernible]. The underlying problem are any size from new features to be added to the projects, so they are deferring the bids. Somehow, I think again, March is nearing so they have new bid targets before March. Definitely the scope and there is some good targets to be achieved by NHAI. But definitely, the bids are going to happen before March for this digital side.

The next question is from the line of Parvez Akhtar Qazi from Edelweiss Securities.

Congrats on a good set of number. So a couple of questions from my side. First, what was the stand-alone debt at the end of Q2? And has it come down during the current quarter?

Yes, sir. End of Q2, actually, debt was INR 100 crores that was there. But again, our cash balance is there. So net debt is around INR 65 crores was there as of end of Q2. And this order of this [ INR 100 ] crores happened there. This has been repaid actually. As of now, actually it has been repaid actually.

As of now, we don't [ have ] too much of gross debt, right?

Yes, yes, yes. Some working capital utilization will be there. But as far as this debt, like any -- some loan like more term loan is there.

And sir, what would be the land availability for the 2 HAM projects?

Land availability of?

For the 2 HAM projects, the 1 that able got the LOA.

That is actually the land is available. They said that it is available for around -- [ the 3D ] about 80%, 85%. And now recently, we have, I think, in a few days back, I think last 5 days back, we have done it also with this project. I think they have 5 months' time to acquire, and they are very confident that they'll be [ beginning ] before time of 90%. land that is required for happening on an appointed basis. So from today, around 5 months aggregate.

Okay. So we expect maybe by probably the end of this fiscal?

Yes, 5 months. Take it kind of that. I think maybe in April, we will be able to start back with it. And time is also there, some agreement to a market rate on [ SPV ], we have around 5 months.

Sure. And last question. When we said we need about INR 635 crores of incremental equity, does that also include this [indiscernible] project?

It includes the -- it includes the [indiscernible]

The next question is from the line of Jiten Rushi from Axis Capital.

Congratulations on good set of numbers. So just quickly 2 questions. As you said on Bangalore, annual section of EPC, you will get to the point on 20th of this month, right, sir?

Yes, yes. Correct. Yes, actually, we have already given our consent for 90% category availability. And that memorandum, signed memorandum was signed and sent to headquarter at Delhi. I think more or less, get it announced from the 20th with respect to another [ filing ] to announce that. In fact, we were told around 15 likely to migrate those projects. But I think it is because the date is deferred. So before that, I think since we have given consent for 90% category availability, they will go for appointed business.

Sir, on the new segments, so are you targeting any projects on the airport runway projects or some other [ work ]?

Now we have not given any thoughts in the airports at all. Because 2 lakh kilometers to be in the highway sector by November program. Apart from that, there will be a lot more other projects also coming up in the urban development sector also as well as also there is equal real importance to them. So these things are now open, a new area like having more projects from regions. Railways also come up and valuating not engineering work. We are open to bid on that and could be to airport development also. But really, we are just waiting what sort of projects they are going to come up and how they're going to test the company in a better way because the competition we are hearing more in that airport today. It's definitely a competitive world. We'll [indiscernible] avoid oil start some gas in the partner to keep our self open to do so.

Focus will be on roads and education also.

Right. We will also keep -- we are open to even bid on airports if required, sir.

Airports or on metros -- or even metros?

even metros.

Okay. Sir, just 1 question. Ventas on the bank limit. So will be the utilization levels and how unweighted non-fund is?

Fund is it is almost nil actually because there is no debt in the [indiscernible]. We might be around INR 30 crores to INR 40 crores utilization there as of now. Around that, sir.

Yes. What is the total ability of fund this total?

Funding INR 145 crores, sir.

and non-fund is now?

Non-fund is total 1,950. Out of that, around 60% -- [indiscernible] around 50% is utilization. INR 1,000 crores will be utilization, yes.

The next question is from the line of Harsh Bhatia from Emkay Global.

My question pertains to just an extension of what you have already alluded to for NHAI. With the recent NHAI invite of INR 5,000 crores, as disclosed, and foreign entities almost picking up half the state, we have seen a fairly good response. So what sort of additional dialogue are you seeing developing in the space with respect to specifically KNR as well as for the overall growth sector? With such money flowing in, what sort of additional dialogue is getting developed. The new [indiscernible] we have to deploy?

Sir, repeat your question.

Sure. So with the initial INR 5,000 crores closing in, right, with the recent NHAI bid, what sort of additional dialogue are you seeing developing the road space? Like how does it pan out, specifically for KNR, as a road player as well as for the overall industry? Anything specific you would like to highlight? I mean, you have already highlighted so many measures that NHAI has taken. Anything specifically with regards to this point?

The reason that whatever it is proposed, we already highlighted the 2 projects we have identified. And we will also try to befits all the value. And we have said before this year, financial year-end, that we propose to at least the [indiscernible] to INR 2,500 crore. That's the question. Definitely with this recent infusion of invest money to NHAI, definitely now NHAI may go [indiscernible] developed. This year, we have seen that they are targeting to award, but they were awarding the too getting postponed. But now with this money is driven by NHAI, definitely, it will accelerate [indiscernible] awarding and anything and technically, we hope in the second quarter or this year, definitely. There will be the awarding activity will definitely will -- they will -- we will see the significant increase in rewarding to the financial.

That's helpful, sir. Sir, last question from my side. Is there any regulatory mechanism in place that may not allow us to sell this aggregate composite to our competitors just in case the market demands so...

Sir, pardon?

Is there any regulatory mechanism in place that does not allow us to sell the Kerala aggregate material to our competitors? Just in case the market demands so, maybe the prices becomes very good.

So you are talking about the Kerela, right?

Kerela-related quarry, the acquisition.

Actually, what we call now intently was that the quarry as positioned for quarry locations. And second, sir, 1 quarry is having around 8 acres of permission. And second 1 is having around [indiscernible] of permission. So here, the quantity required for is about INR 43 lakh million that is coming up, which may vary to a INR 35 lakh million also. So looking at this production to other cells is becoming a bit [indiscernible] we may be quite busy up to the project completion period. Later, we can definitely plan to sell some, and there's no doubt we get a very good price.

The next question is from the line of Shravan Shah from Dolat Capital Markets.

Yes. Yes. Sir, regarding 3 HAM value PCOD, the 2 one, so now how much -- so outstanding order book is INR 277-odd crores. So how much is the scoping can happen? So out of that, how much order book can be removed?

Because -- maybe around INR 100 crores, this scoping might be there because in Kerela, we're expecting from these and rates. So these 2 projects, we are expecting the scope as far as the Mangalore project is there. There won't be any descoping, but Tirumala could range around INR 100 crores, the scoping will be there.

Okay. Second, 9 crore or early completion bonus. So are we booking in this quarter or third quarter or fourth quarter?

This will be the [indiscernible] with first annuities, which is due in the patent it should book in this quarter.

Okay, in this quarter. Okay. So entire will be part of the stand-alone revenue? So to detection, our EBITDA margin will be higher.

I mean with this definitely because, as I said, on any cost or the cost into is there. So this should go to EBITDA down.

Yes. And the last time we spoke about INR 70-odd crores kind of arbitration from Orissa. So when it can come and how much -- so this INR 70 crores is an EBITDA or INR 70 crores is a revenue that will be there? And if that is the revenue, then how much would be the EBITDA from that?

The INR 70 crores, definitely, we are expecting that claim. But when it is as of now, already NHAI has gone to the both in revenues going on. But definitely, but of the INR 70 crores is there, again, there are some legal and arbitration expenses is there, but mostly around 80% will definitely go to EBITDA only, but not limited to that because it contain other income also. Interest income will be there. So if you say, in season will go almost 80%, you can say.

Okay, okay, okay. Got it. Got it. Second is, sir, data point on the retention money also both returns on wetland of retention money and the mobilization advance received and mobilization advance paid and the unbilled revenue.

Retention money is around INR 192 crores is letter, CapEx price. Again, that INR 111 crores is there towards liability sir. And mobilization received is INR 136 crores. What you ask other?

Mobilization advance paid to subcontractor?

Paid to contractors, it will be around INR 110 crores, sir.

INR 110 crores. And unbilled revenue?

Unbilled revenue will be around INR 392 crores.

INR 392 crores, okay. And the irrigation data, so have given the breakup. But the HAM and EPC data, so you can spell. So INR 600-odd crores, the half yearly data are showing 603 in current assets. So if you can help me in terms of the breakup of that.

Out of this, around INR 602 crores. HAM is irrigation is around INR 233 crores. And the rest is the EPC.

Okay, okay, okay. And just to clarify, this EPC [indiscernible] EPC, the appointed date, when the appointed date will come?

[Foreign Language] is there in case this is revenue which is a said project on, you signed the agreement, it will start. There is no appointed date as like that. So in the agreement that quality we stand agreement is already started.

Okay, okay. Because the order book was the same in Q1, Q2. So that's what I thought.

We have put not at certifiation because order books based on certifications we will renew some order book. So we have not raised any delay on that. But this quarter, definitely, we are going to raise it.

The next question is from the line of Niteen Dharmawat from Aurum Capital.

Yes. Sir, my question is related with this notification that government has given on 29th of October wherein it has mandated to release 75% of all the running bill in 10 working days to balance 25% within continues. So do you see the impact of that on the cash flow for company? So currently, it is restricted, I understand only on the central funds. So please can you please [Technical Difficulty]

I'm sorry to interrupt, we can't hear you properly. Sir, your voice is breaking.

Okay. am I audible now?

Speak louder.

Yes, yes. So I was talking about this notification of 29th October of the government, wherein some funds have to be released, 75% funds are to be released within 10 working days or within 28 working days. So do you see any impact of that on the cash flow for company?

Sir, basically, as far as our major product is there, that is from NHAI. So definitely, NHAI is very good paymaster. We are not seeing any really delay from the receivables from the NHAI. But our basically concern is there from irrigation projects or that already. We have explained you what is our strategy out of the debt. So as far as EPC work is concerned from NHAI there is no delay [indiscernible]. So we really do not think really there is any issue on that because, other than NHAI, we have HAM project and project based on availability of the funded parent company, and we will draw the money from really. We are not seeing it. We are noticing is going to impact our [ company ] very much.

The next question is from the line of Faisal Hawa from H.G. Hawa and Company.

So orders as far as content of road, there have always been a concern for myself because we get the order right at the end of the financial year and then go for appointed date and financial have some periods where we have a slower revenue between lack of orders, like next month or next quarter, the Kerala order cannot be executed and the relation order better problems. So why is the company not going a little more aggressive on landing some more orders so that at least our revenue growth is not affected? There should not be any month in which we are affected due to lack of orders.

Yes. I think we are targeting around INR 2,000 crores, INR 2,500 crores by this margin. Let's start month to month, sir, because we don't have to pick up an order in a very concentrating market. And it says there's a lot more job which is going to come up as for the PM itself or about the other sizes that are going to come up. So definitely, there are 2 lakhs being targeted in coming 5 years. So there's no taker also if such charter comes out. Definitely, there is a good market, which will be available in this. The target is to grab about, say, INR 2,500 crores to INR 3,000 crores as the Kerela is going to be completed and the teams are coming out. in March. And [indiscernible], it is underway that is also going to come out in the month of March, April. So to that team, you need to have others. So definitely, we are focusing on that.

And sir, secondly, this -- I mean, can we have a position instead of selling our projects to fewer, something we have, our own Indian, where we can only increase margins by another 1.5%, 2%, something like what we are in?

Yes. Those -- unless we have an option open for whenever things are just coming up at projects, we have done some FDA because we appointed date also. So these things, definitely, if they are not evaluating, definitely, we do not want to valuate any because already in place and the commitments are already given. So going forward, we can definitely pick up doing well.

And sir, now only 6 to 7 banks in India are in a position to lend over INR 1,000 crores at one go to any project. And at the same time, many road construction companies are not in a position to take more orders because of balance sheet concern. So don't you see a clear consolidation happening going forward for the next 1 or 2 years? Because at one point, the banks are not there to lend more than INR 1,000 crores or give project extension. And on the other hand, the road construction companies are also not in about balance sheet position.

Yes, sir. This is -- rather it be like good news like a news we can say -- but at this point of time, sir, definitely, the banks are really open to take for companies like us. We are conservatively looking at the orders that we are targeting, and we do not have a bid to have more big, other than what we had with. And second, the banks are of the opinion that a successful player is always given a parity and then they look at us very positively another, and we want to keep up this position in [indiscernible]. So definitely, the funding is going to happen to our projects that we had a strong belief good over time. So there should not be any problem of that such time. And as you said, yes, only a few banks are looking at and definitely the scope, which is going to come up to be deep. So the government of India are having some background impact to come out in a big scale and when the banks to get up to fund the project. It will become some sense also from the [indiscernible]. Now what is the scheme at nobody has an idea, but that will be something running behind.

But for the present all of 2 years, it looks like a clear consolidation within industry.

Sorry?

For 2 years, it looks like a very clear consolidation within the industry.

Well, maybe now so many people have the project there to come. It will be some time.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. S. Vaikuntanathan for closing comments.

Thank you all for joining us on this call. Please reach out our IR at Strategic Growth Advisers or directly, should you have any further queries. Stay safe. We can now close the call.

Thank you, sir.

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