KNR Constructions Limited (532942) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to KNR Constructions Limited Q3 FY '23 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, everyone. Thank you for joining us today on the call to discuss the financial results for Q3 and 9 months ended financial year of 2023. Along with me, I have Mr. K. Jalandhar Reddy, Executive Director; Mr. K. Venkatram Rao, General Manager of Finance and Accounts, and Strategic Growth Advisors, our Investor Relation Advisors. We have uploaded results and investor presentation on the stock exchanges as well as on our company website. I hope everyone got an opportunity to go through it. We would like to touch upon a few industry events and key company updates, post which we will have a question-and-answer session. Now I would like to share our thoughts on the recently announced union budget and other important industry developments. Starting with the budget highlights. The government continue to focus on infrastructure development. The government announced increase in capital expenditure on infrastructure investment by 33% to INR 10 lakh crores and almost equivalent to 3.3% of the GDP. The massive CapEx investment is expected to boost the GDP growth and create new job opportunities, especially in the hinterlands of the country as the focus continued on roads, irrigation and railways in the budget. As far as the allocation to highways is concerned, the government has allocated INR 2.7 lakh crores as against the revised allocation of INR 2.17 crores the previous year. Similarly, the allocation to NHAI is INR 1.62 lakh crores as against the base allocation of INR 1.42 lakh crores. Coming to the irrigation sector, Jal Shakti Ministry has been allocated INR 97,278 crores, which will further strengthen the activities in the irrigation sector prominently for Jal Jeevan Mission. We strongly believe that the government trust on the infrastructure development, along with the various initiatives announced by NHAI have created multiple tailwinds to the roads and highway business. KNR Construction remained geared up in terms of its capabilities and financial position to fully leverage these tailwinds to further create the value to the shareholders. As far as the overall tendering, awarding and construction highways is concerned, the overall activity has picked up in the pace -- picked up the pace in the last 3, 4 months, which was affected during half year ended financial year 2023, owing to the prolonged monsoons in 2022. Coming to the FASTag collections, the toll collection stood at INR 50,855 crore for financial year 2022, a growth of around 46% as compared to INR 34,778 crores in financial year 2021. The average daily toll collection through FASTag in December 2022, stood at INR 134.44 crores, and the single day highest collection touched INR 144.19 crores on 24th December 2022. The implementation of FASTag system has improved the collection and has brought more efficiency in overall toll collection operation. This has resulted in improved financial position and has encouraged the private players to participate in the highway projects. Now coming to the key updates for the company. In the quarter gone by, the company has completed transfer of equity shares in the following 3 subsidiaries to CUBE Highways and Infrastructure. Number one, KNR Tirumala Infra Private Limited, the company has invested INR 160.22 crores in the form of equity and sub debt for which the company has received INR 136.81 crores against the transfer of 49% of equity stake and the repayment of entire sub debt as on 31st December 2021. The company has now received INR 68.13 crores against the transfer of the remaining 51% of equity stake. In addition to the above, the company shall be eligible to receive an additional consideration up to INR 48.05 crores, subject to receipts of certain approvals from NHAI. Number 2, KNR Shankarampet Projects Private Limited. The company has invested INR 126.81 crores in the form of equity and sub debt, for which the company has received INR 108.51 crores against transfer of 49% equity stake and repayment of entire sub debt on December 31, 2021. And now the company has received INR 46.09 crores against the transfer of remaining [ 11% ] equity stake. In addition to the above, the company shall be eligible to receive an additional consultation up to an amount of INR 4.61 crores, subject to the receipt of certain approvals from NHAI. KNR Srirangam Infra Private Limited. The company has invested INR 78.36 crores in the form of equity and sub debt, for which the company has received INR 1.15 crores against transfer of 100% of equity stake and repayment of entire sub debt during the current transaction. In addition to the above, the company shall be eligible to receive an additional consideration up to an amount of INR 15.04 crores subject to receipt of certain approval from NHAI. With the sale of the above 3 companies, the company has accounted profit of INR 137.97 crores, which was shown as an exceptional item and an amount of INR 27.47 crores has been showed under the provision of tax with above profits. With respect to the such operation conducted by the income tax department under Section 132 of the Income Tax Act 1961 in March 2022. The assessing officer has initiated a proceeding for reassessment of income as is relevant for the each financial years from 2016, '17 to 2021 to '22. Further, based on the deliberations with the assessing officer and on a prudent measure, the company has made a provision of INR 24.75 crores towards provision for income tax and INR 9.45 crores interest on income tax for the above each years. The percentage of physical progress as of December 31, 2022 for HAM project is as follows: Magadi to Somwarpet at 68.9%; Oddanchatram to Madathukulam is 85.6%; Valanchery to Kappirikkad is 16.8% and Ramanattukara to Valanchery is 14.3%. The company has received the appointed date as on 25th January 2023 for Chittoor-Thatchur Highway. During the quarter, the execution has primarily been driven by HAM projects. Out of the INR 732 crores of revised equity requirement for all the 5 HAM projects, the company has already invested INR 293.13 crore as on December 31, 2022. The incremental equity requirement of INR 77.98 crores to be infused, INR 256.06 crores and INR 96.70 crores for the remaining part of the financial year FY '23, FY '24 and FY '25, respectively. You can refer the slide #24 of the investor presentation for detail on each HAM project. The toll collection for the Bihar project, that is Muzaffarpur to Barauni, in Q3 FY '23 and 9 months ended FY '23 has been INR 11.6 crores and INR 33.5 crores. Now coming to the order book position. As of December 31, 2022, the company has an outstanding order book position of INR 8,100 crores. EPC Road projects and HAM projects construed 77% of the total order book, while litigation project constitute remaining 23%. Client wise, 51% of the order book is from third-party clients and balance 49% is from captive HAM projects. The third-party order booked or non-captive order book, which accounts for 51% of the total order book position is skewed between state government contracts with 36% whereas 11% is from central government and balance 4% order book is from other private players. The current order book position remains healthy and provides a clear visibility of execution over a period of next 2.5 years. A robust project pipeline and ready DPR, detailed project report, under the Bharatmala project should accelerate the projects awarding activity going forward. The company is targeting a further order inflow of INR 4,000 crores to INR 5,000 crores for the financial year 2023. I will now request Mr. K. Venkatram Rao, our GM, to present the results for the quarter and the 9 months ended December 31, 2022. Over to Venkatram.

Thank you, sir. Please note that Q3 and 9 months FY '23 standalone as well as the consolidated numbers include -- let me take through the Q3 and 9-month FY '23 standalone financial performance first, followed by the consolidated highlights. I will start with quarterly highlights first. The revenue for the quarter grew by 8% year-on-year to INR 830.2 crores. EBITDA for Q3 FY '23 remained flat at INR 156 crores as compared to INR 158.9 crores in Q3 FY '22. EBITDA margin of Q3 FY '23 stood at 18.8%. Net profit for the quarter was INR 161.8 crores as compared to INR 100 crores in Q3 FY '23, a growth of 61%. Now coming to 9 months FY '23 highlights. The revenue for 9 months FY '23 grew by 14% year-on-year to INR 2,568.2 crores. EBITDA for 9 months FY '23 witnessed a growth of 9% to INR 509.8 crores as compared to INR 469.7 crores in 9 months FY '22. EBITDA margin in 9 months of FY '23 stood at 19.9%. Net profit for 9 months FY '23 was INR 370.2 crores as compared to INR 269 crores in 9 months FY '22. Now coming to consolidated financial performance, I will start with the quarterly highlights. The company recorded a 2% year-on-year growth in total revenue for INR 854.6 crores in Q3, of INR 22 crores to INR 872.9 crores in Q3 FY '23. EBITDA came in at INR 196.8 crores in Q3 FY '23 as compared to INR 139.6 crores in the same period last year. EBITDA margin in the current quarter stood at 22.5%. Profit after tax stood at INR 108.3 crores in Q3 FY '23. Moving on 9-month FY '23 highlights, the revenue for 9 months FY '23 grew by 13% year-on-year to INR 2,817 crores. EBITDA for 9 month FY '23 witnessed a growth of 29% to INR 671.4 crores as compared to INR 519.8 crore in 9 months FY '22. EBITDA margin in 9 months stood at 23.8%. Net profit for 9 months FY '23 was INR 297.7 crores as compared to INR 225.7 crores in 9 months FY '22. Now moving to the standalone balance sheet. The company continued to maintain a strong balance sheet. The working capital rate stood at 53 days compared to 54 days in September '22. The standalone debt as of 31st December '22 is INR 0 crores compared to around INR 200 crores of 30th September 2022. The consolidated debt as of December 31, 2022, is INR 456 crores as compared to INR 1,864 crores as of September 30, 2022. The net debt to equity as on consolidated basis as of December 31, 2022, stand at 0.17x as compared to 0.74x as of September 30, 2022. With this, we can open the floor for question-and-answer.

[Operator Instructions] First question is from the line of Mohit Kumar from DAM Capital.

2 questions on my side. First is on the irrigation project. If I remember the number correct, it was INR 9 billion at the end of September '22. And we understand the lenders who released money for irrigation and it has come down. Can you just let us know the receivables at the end of Q3? And when do you expect the entire thing to get liquidated?

Sir, the receivables as of today is around INR 650 crores, including receivables as of 31st December work done, but not certified. So out of INR 650 crores, INR 335 crores is the receivables as of December and around INR 315 crores is a work done, but yet to be satisfied. So definitely from what are these figures are there in September, it is INR 900 crores, now reduced to INR 650 crores actually by end of December.

Understood, sir. And are we having started the work for irrigation project? I think this quarter was muted. Can we expect it to go up?

Yes, yes. Actually, definitely, there was issue in the Vattem project. Now that clearance has come, and now we have started to work on this our Vattem project. As far as our other irrigation sites are there, that is packaged food. Now we are doing the work in a very fast pace. Only now almost all civil structures work we have almost completed. Now we have to build that pump house for that we have to board the electromagnetic equipment. For that we are already tying with the BHEL to get it and hope that in next year, actually in '24 actually FY '24, we should be able to complete that work also.

Are you happy with the money available with the government? Is the government regularly paying the money now? Are you seeing -- are you comfortable with that?

As far as package 4 is concerned, where [indiscernible] there is -- it is already funded by the bank. And almost in last quarter, we got INR 350 crores actually in that project itself only. So definitely, money is there actually as of now for package 4. So we are really not seeing any issue as far as package 4 is concerned. But definitely, this Vattem package and other package for live package 3, it is budgetary support. So that we have to really see because almost government has promised that they will pay actually every month INR 50 crores. So only the last month we have not got, but before that, we got all the money from the department.

Understood. Second question on the order inflow, sir. Of course, the order inflow for the 9 months was very, very muted. What is the pipeline looking for -- looking for us. Apart from NHAI, is there any order -- is there any other pipeline, which is available to us?

Jalandhar, sir, you want to...

Yes. Sir, actually, our rate flow is very poor. I agree because market is very aggressive. Every EPC tender is clocking below 30%, 32%, 35% as has been the level. When trying to understand how to do the project setback first, definitely, there is some sort of aggression is there. And maybe we have seen many projects who have quoted less and they failed also. After having this experience, definitely, we don't want to pitch into those levels and land into problems for the future. But however, sir, we have targeted almost this coming month, there are almost 22 tenders, which we are doing in March only. And this month, we are not less than from the 10 bps to 12 bps we are separating. So every effort is being done to take some orders. But we can simply give a sensible price, but we cannot give a price, which is a winning figure and later it land us in problem. So that's how the things are there. But I think, sir, there are players who are understanding, but by the time, there are new players who are also coming in and then they're taking a bad price kind of that. So there is an example who have quoted less, they have suffered, but people still are traveling in the same route. So I think if you target something in coming 2, 3 months, it will be a little bit tougher to get projects. Later stage, things may become a little normal. That's what we are estimating.

Anything apart from NHAI, sir, is available?

Pardon, sir?

Yes. Anything other than NHAI rose, is there anything else you are targeting in Q4, something irrigation, water?

We will focus on -- continue to focus on irrigation projects, but the pipeline is very limited here. Bidding scope is very limited. But anyhow, we will put on the efforts there. And partially, we are in line to discuss with the joint venture partner for our railway entry also. I think it is not successfully done. So I think sooner once we get on to that clarity, we'll let you know on that.

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

Sir, just continuing the previous question, this 22 tenders that we are looking to bid next month, March and 10 to 12 bids that we are looking to submit this month, what is the value and how much is the HAM projects index and the number that we are targeting INR 4,000 crore to INR 5,000 crore inflow. So that entirely is from the hand that we are looking at?

So the proposition is more sir. But even some more projects like -- but the ticket size has now become very small. As you were asking rightly, that the overall size and all, but the projects are varying from INR 500 crores to INR 700 crore, INR 900 crores, INR 800 crores, even INR 1,100 crores are there as a bigger ticket price in this slot. So that is a major problem, sir. And the proposition between HAM and EPC, HAM are more in numbers, sir.

Okay. No, sir, why I was asking -- I was trying to understand if as you are saying the ticket size is INR 500 crores, INR 700 crores. So if I just put 22 plus 10, 32, 34 tenders. So close to INR 17,000 crores, even if I average at INR 500 crores, so I'm just trying to understand the value. So in terms of the success rate for us to back the INR 4,000 crores, INR 5,000 crores. So in that sense, I was trying to understand.

Sir, actually, this year -- I mean, March, if I'm happily getting around INR 2,000 crores, so I'm very happy. Even if I don't get also -- if I don't get a bad price, that is good. That is a major thing. So whatever I get there a good price, I should target. I have no target that I should get before March only, but I will keep on putting on this bid, sir. Actually, the bids are available in 22 numbers, but whether the bidding is going to happen for all these tenders, which I'm really doubtful because they've been getting postponed. I think it is now pushed to March. But another push of postponed event is not happening, then it will definitely happen in the March.

Okay. And the other is in terms of the execution part. So for particularly the larger one I'm trying to just understand. So 2 Kerala HAM projects in 9 months, we have done close to INR 431 crores revenue and current outstanding order book is INR 2,822 odd crores. And we were looking at to complete by next March. So now 15 months to complete. So just trying to understand what kind of revenue we are looking in the fourth quarter? And are we able to complete by March 24, this INR 2,800 crores order for the 2 Kerala HAM project?

The Kerala HAM project now, as of now, there's a lot of time lost due to heavy rain. That is a major problem. We base rains from April to December. Even in December 10 days, we had rain sir. So after December, I think 1.5 months only, the progress has happened. And however, there have been certain problems that on -- 2 levels we should not work -- therein 2 levels we should not work and then they say night working they stopped for us. All these now we have gone to CM. CM has promised us to get the timing cleared for us. So we'll get more working period. So if that is started out sir, definitely, we will go breaking on target. That's the major thing we are chasing there, I think last Tuesday, I was there in [indiscernible], I had a clear cut discussion with Chairman sir. Chairman sir also has put it devoted to the CM and things are being consulted punctuated very higher levels.

Okay. Okay. Got it. And on the irrigation project, so whatever we are having a balance, so package 4, sir mentioned that Venkat sir that by March '24, we will be able to complete. So out of that remaining Vattem INR 290-odd crore and package 3. So how much revenue are we looking at in this fourth quarter and when we can see this to be completed?

Sir, actually, [indiscernible] whatever the discussions we have done, at least we'll try to achieve the last year figures because that got together hanging on this that because rainy was very heavy in this quarter, second and third quarter, completely, we have affected with this. So little bit bullishness is not there in this top line numbers. But however, the next year is concerned, I think may not be so much rainy -- definitely we'll do our best.

But broadly, sir, in terms of the Vattem INR 290 crores remaining, when do we see to get completed in fourth quarter, how much are we looking at and the package 3, which is INR 871 crores. So how much are we -- sorry, INR 550 crores, how much are we looking to book any revenue in fourth quarter and in FY '24, how much are we looking to book the revenue from this?

Sir, that main thing there, MD sir and me both discussed about this that before election, we would like to complete this. However, subject to realization of the payment also is a big content because now that Canada projects and all other projects are under running stage, wherein equities are likely to come out. So there, we do not want to take a chance for one project knocking effort to go on to the other projects. So we would go and limited investments into these projects and try to balance the situation, sir. So it depends on how state government hope us to give up the payment. That is the major constraint here, sir.

Okay. Last Venkat sir, 2 data points. What is the consol cash? And what was the irrigation revenue in third quarter and 9 month?

The irrigation revenue in Q3 was that is around 23% comes to INR 190 crores. And for 9 month, it is around 25% comes to INR 628 crores.

Okay. And consol cash balance?

Because standalone cash is INR 125 crores and consol cash, sir, on that data, I will send you separately.

The next question is from the line of Alok Deora from Motilal Oswal.

Sir, some of the questions have been answered. I just wanted to understand like the order inflow, again, on the order inflow. So it's been really muted and out of the INR 8,000 crores, significant decent chunk is of irrigation, which is moving slow. So what kind of growth now we are looking at for FY '24? And also, you mentioned that the intensity of building continues to be very aggressive. So how confident we are on getting this INR 4,000 crores, INR 5,000 crores of orders in the next almost only 1.5 or 2 months are left.

Jalandhar?

Yes. Actually probability of getting the first INR 1,000 crores is a little bit as of now, to seems to be a little bit challenging. I can really say that. And see, sir, the main problem is that the margins are extra, which those calls we have never taken in our company site. Rather, we are ready to a little bit scale down ourselves for some time. And certain risky times, it is not wise that you go -- try to go for a qualitative top line, but decrease the bottom line is not acceptable to us. So definitely, see, we are doing a business, we're making some good profits. It's not a -- and nowadays, all the highways are coming with lots of responsibility of maintenance also. So definitely, we have to see that long-term benefits and then go forward only. Otherwise, we are likely to have a lot of problems in future. So this is the time where we should take right calls and do not come into pressure for company. Anyhow the market is also -- is going to realize in a very short time about all the -- only newcomers who are coming, they are only quoting a little bit lesser and they are taking. Otherwise, there are prominent players who are out there, they have already come down to the normal levels of course, bidding. So only the newcomers and all their update also a little bit over. I think it may take another couple of 3, 4 months, I'm expecting the market to be a little bit volatile like this. Then after that, it could be normalized. That is what we are expecting, sir. However, we are also making our trials in irrigation plus railways, even try -- will try in some of the bids in metros. That's what we are planning.

So have you built for any of the other sectors? Or it's still at the planning phase?

As a early third, sir, we are starting some joint venture for our railways entry. And we are even trying to sort -- actually, the -- we have discussed quite a lot with 3 joint venture partners. As and when the things are materialized then the base material will come out and inform us.

Sure. Just the last thing, sir, so realistically speaking, you might end up winning INR 2,000-odd crores of projects this year as in the remaining part of this year. And then again, their first half will be muted because that's a very slow time for order winning order awarding. So your order book will be very critical stage, right? I mean considering the execution which we are doing by end of September '24, FY '24, I think we would be very at very critical stage.

Yes. I think it is like that. But definitely, it's not that market capital to be like this. Hopefully, things will become better and we'll be able to take the other. The new area increase also may give us the doubt on this.

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

My first question is on the innovation projects. So when we expect to complete the entire order book, I think ethane will be somewhere around the end of this year, what the you are looking to complete this quarter?

Sir, actually, the target we made is that to complete all these before election, because after elections, we do not know what sort of calls will be taken by people and what set of things we'll have to address. So definitely, it is better, you can mix everything before elections for which we are getting up and trying to finish the things. But again, the concern is about having those in time. So [indiscernible] That was the plan, sir. Maybe -- I may go a little bit...

I'm sorry to interrupt you, we are unable to hear you. Your voice is sounding from a distance, sir.

Hello?

Yes, yes, please go ahead.

Actually, that's what the scenarios are. If I get payments on time, definitely, I'm going to do it.

Okay, second question is on the NHAI pipeline. So you did mention about some 10, 12 bids, the summit in tender and coming months [indiscernible] So if you can highlight 32 or 30, 32 bids, these are largely big geographies of South India, and also if you can highlight what is our overall pipeline for NHAI till March, that be helpful to understand whether it is going to reduce from last year or it will be similar?

I couldn't get that question, sir, actually.

You have said that about 22 tenders are coming in this month, upcoming month and about [indiscernible] you were already submitting. So I wanted to understand which you're committing are largely in South India right because of geophysical focus in the 4 South states? My question is what is the total of bid pipeline in large, if you can help us understand what is the total project...

I think around INR 35,000 crores. It's pipeline.

But I'm focusing...

22 bids in the coming period.

And what is the value of those 22 bids out of the INR 35,000 crores of pipeline.

I've not calculated all that, but the bids are varying from INR 500 crores to level closer. Roughly around, I can say and I'm focusing about INR 17,000 crores, which to be done kind of that rough figure.

Okay. So out of 35,000 pan-India bid, we are targeting about half of that, so largely focused in the Southern market.

Generally, I'm continuing to refine North India and northeast part of India as -- the project bid sizes are very small and the computation is very heavy. So if I see the bigger ticket size in North and Northeastern part of India, I'm likely to focus on that.

Okay. And just one question on the income tax provision, sir. So we are generally seeing that the GST input credit cheering out of income tax rate and that applies to some of the vendors are not paying and then ultimately result into an income tax rate. So you have booked your provision for this. So any issue regarding any GST-linked dues which may come on in later date?

No, no. As far as the income tax is concerned, that assessing officer has initiated the proceeding. And when we have a discussion with that actually. So we assume -- as a prudent measure, we thought that this much provision is required to me, that liability may arise. So that's why as a prudent practice, we have made it. As far as GST is concerned, there is no such issue on that. As far as GST is there, everything is in calm, and we are paying the GST and what are the credits we are getting in the books, it is all -- we are -- it is -- everything is regulated. There is nothing issue as far as GST is concerned, sir.

And lastly, sir, any donations pay during this quarter?

No, no, no. We have not made any donation.

9 months?

Nothing, nothing. No, might be small donation will be there to our -- this -- some trust like that, it's not mentioned. Not a donation to any political party or like that. Nothing is there.

Okay, sir. And lastly, just guidance for FY '24. So how do you -- I mean you said that FY '23 largely in line with FY '22 revenues. So in FY '24, what kind of growth you are looking at on the current dollar basis?

FY '24, we are looking for around INR 4,000 crores of top line as of now. And FY '23, we expect that we could be able to close somewhere INR 3,000 crores, INR 3,500 crores actually. So FY '24, we are looking around INR 4,000 crores of top line.

INR 3,500 crores in '23 and INR 4,000 crores in FY '24, right?

Yes, yes, yes.

I'm just sorry just one last question. So can you expect now that the worst of the relation collection issue or the payment ratio is now behind us and do you not see any major upswing in the data in the coming quarters.

Yes, I think the payments are now streamlined and then we hope that the package for payment because all the banks have started releasing. And we also started establishing LCs in favor of BLTL, and work is now started moving fast. And other payment as per the budgeted payment, they have promised to release on a monthly basis, which we expect the sales will continue, and we are also requesting them to increase the contribution. And as far as rent is concerned, there is no problem. We are getting payment in time. And as it all, standalone debt equity -- debt ratio is 0 only. We don't have any debt on standalone basis. But we are -- as our ED was telling, we're watching the situation so that at least we should build a project in a profitable manner. Taking the project is not the main criteria. And we should take the projects in a profitable manner. And I think these things may also work out because the embassy also trying to change the stand and all, but it's taking time, it will come.

[Operator Instructions] The next question is from the line of Ravi Naredi from Naredi Investment. As there is no response from the participant, we'll move to the next question, which is from the line of Faisal Hawa from H.G. Hawa and Co.

Sir, is it not time to move on to something, which is much more complex as far as infrastructure is concerned. Maybe a lot of smaller players are able to catch our hand in NHAI where balance sheet was previously the only differential. So would it not be more feasible for us to go to -- go for something like a BOT projects where the competition is much more limited or probably something, which is more complex to do as far as engineering is concerned?

Yes, you are right. It's the right time that we should start looking into some of the areas like railways and irrigation is still I'm looking at. And other parts concerned, toll projects are definitely there is a lot of UN crisis and concession agreement is also not that favorable to the bidders. It is compulsion. I'll give a last choice to that. If I'm unable to get any of the orders from many of these, then definitely, I'll look at those like also. But right now, I think my gut feeling is that I think the coming 3 to 4 months' time or 4 to 5 months' time, we shall be having a comfortable order book online, I think on hand.

One thing is appreciated that we don't want to work at lower margins. That is something which is so appreciable about any management where they value their work and they value themselves. But here it's now looking very clear that people will just keep on creating committing, as you said, by quoting lesser. And we must be able to upgrade ourselves to really keep the company growth at a good level because from the last 2 to 3 years our top line has not really grown up efficiently. But to your credit, you have kept the balance sheet in absolute good order. And in fact, we are now cash positive rather than even marrying any debt on our end. So I mean, we are totally supportive of the management and -- but I think it's probably now time to up our game to something which is much more complex.

Yes. That's what actually management is also looking keenly in railways and what is happening in metros and all that basis we are looking at. See, the irrigation is concerned, it is having a little bit higher margins than highways. But once in quarter, railways, I think still that is a healthy margin in railways. So definitely, so we will start out the janitor issues and get into those sectors also. And it's a complete engineering work pro mechanical work, definitely, we will be able to cope up and successfully go with that. Yes. That means -- I mean to say that we are really giving a thought for entering into other sectors to make our self comfortable and to keep our growth to be on.

The next question is from the line of Shreyans Mehta from Equirus.

What is our strategy for monetization of the balance HAM projects? Will it be similar to what we have done? Or are we targeting any other strategy? That's one. Second one as far as railways is concerned, what kind of work are we looking at? And will we be open to taking projects from the railway PSUs or will be directly dealing with the Indian Railways?

With regard to the future, what all the HAM projects on hand, the management view -- the policy of the company is that, we don't want to accumulate projects or keeping them on hand. So we will take a right decision at that time, and a lot of inquiries are coming and we are also assessing those inquiries. And we will be working on some details and other things. As and when there is a progress, we'll definitely let you know.

Sure, sure. And on the railways?

If it's not the railways, AD was pointing out, I'm trying to find out some joint venture partners where we can directly bid for the projects. So we have to have an entry level so that we can bag more orders in the future. And a right partner is very essential at this stage. So that's being worked out. That also is a progressing stage. It will be -- we'll definitely inform the development.

Got it. Got it. And lastly, in terms of our CapEx, what's the guidance for FY '23 and '24 and what we have done until date?

Till date actually we did CapEx of around INR 110 crores. And FY '23, we expect it will close somewhere between INR 140 crores to INR 150 crores. And next year, definitely, CapEx requirement will -- because this will take care of our entire, whatever the existing projects are there. And next year, CapEx requirements depend upon when we'll receive this project actually. So if we receive some projects indefinitely Q3, then next year will be CapEx under in the same range of around INR 150 crores. Otherwise, it may depend upon when we receive that project.

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

What is this progress on NHAI's proposal to reduce their contribution...

I'm sorry to interrupt you, Mr. Kumar. We are unable to hear you. Can you please check?

Is it better now?

It is better, yes.

Yes, sir. I was trying to understand what is the status of the NHAI's proposal to reduce their contribution from 40% to 20% on the HAM project?

It's still the decisional stage only because a lot of -- entity also is getting a lot of pressure not to reduce, and they are also taking some time. Originally it was indicated that they will start the process. But going forward, we have to wait for that because of the coming election year and all, they will take up this aspect and all. So they are also waiting for that. So far, what are the draft concession agreements are there, it is not modified as of now. So what are the bids is there until March, actually. So we have seen that old classes is still coming actually. There is no change in the draft DC as of now.

Okay. Because this would have resulted in competition in reducing little bit, but since this is not...

We expect that this should come early, but so far, it is not coming up.

Okay. So in your discussion with NHAI, what are the thinking process or what are you thinking to address this aggressive booking? Because you think you remember back in 2018, similar things happened when just to complete awarding their targets, a lot of projects were awarded, inexperienced players, financial projects took time and then projects got terminated. I mean from what commentary, I can hear from Jalandhar sir selling looks like we are going down the same path. Like why would NHAI allow it to happen? What are they thinking in your view to address this?

So actually, really these concerns are not being sought by NHAI because they're happy and they're getting 30 low bid -- 30% low bids and they're really enjoying the situation of having so much for NHAI. But as...

As Reddy was pointing out, the -- yes, any practical steps have not been taken up by NHAI till now. And now I think going forward, the NHAI has got only 5, 6 months' time left because that they should complete their order book position. And afterwards they cannot come out with the order. So we have a...

You mean the entire 14,000 kilometers left in Bharatmala soon to be awarded in the next 5 to 6 months?

We have to -- we have [indiscernible] is that fully in task. But the statements coming from them is they're going to do, they're going to do. We have to wait for that.

So does that mean March 2023, that is next month is going to see a very large amount of ordering activity and order inflow for players, just like how we saw 1 year before election in 2018?

Yes, that is being changed like that only. So we are also waiting for that. And they are also, the number of projects also announced, but we have to wait for that until the bidding is open finally come off.

Right. Okay. My final question is on the lower margins in the company for in the first quarter. Any specific reason?

Actually, for this year, actually, we are already telling that due to this input price pressure actually. If you see last 3 quarters, actually, we could be able to do between 18% to 19% of our heavy data. Previously definitely, it was ranging in 20%. So now we expect that now infill price -- input price should be stabilized, then we can attain that our same heavy data previously what we were telling. There is some pressure in the input prices. That's why that margin has slightly reduced, but we hope that once this price has stabilized, we could be able to achieve that.

So maybe from fourth quarter or will it take more time?

We have to see actually because right now, again, that RBI can increase the interest rate, how it will impact in the inflation if inflation is still controlled. So definitely, we could be able to match from the quarter 4 onwards.