Larsen & Toubro Limited (LT.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Larsen & Toubro Limited Q2 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arnob Mondal. Thank you, and over to you, sir.

Thank you, Zaed. Good morning, ladies and gentlemen. A very warm welcome to our Q2 FY '21 earnings call. I hope all of you would have been able to go through the results. And last night, around 7:30 or so, our presentation was uploaded on the website. And hopefully, all of you have downloaded that presentation since we will be walking you through the presentation in some time. Today, we are very pleased to have with us Mr. R. Shankar Raman, Full Time Director and Group CFO. He will start the call with a few opening remarks because -- primarily because this time, there are quite a few large numbers that need to be explained. And after which, our IR team, Mr. B. Ramakrishnan, and Harish Barai will walk you through the presentation. And after that, we'll open it to question and answer. With that, I'd like to hand it over to Mr. Shankar Raman. Sir, over to you.

Thanks, Mondal. Good morning, everybody. Thank you for participating in today's call. Always good to connect with you. As has been the practice, these performance update calls are hosted by our IR head and the IR team. But since we are covering the results of a very significant quarter that has just gone by, I thought it fit to join you all today to share some perspectives. After my observations around some significant developments in the quarter, the usual format of performance presentation followed by Q&A will kick in. It is possible, depending on the duration of the call, that I might log out a bit towards the end of the call, maybe a little earlier than the scheduled closure of the call depending on developments that I'm expecting. But if that were to happen, please excuse me for that. Now jumping into the purpose of the call today, quarter 2 has been a very busy quarter and full of activities for us. We have to first and foremost ensure safety of our workforce, employing over 150,000 people across the group. We always had to deal with the infection touching someone or the other. And happy to tell you that despite close to 7,500 people across the group, contracting the infection, most of them, majority of them have rebounded quickly and well and have resumed work. It's very unfortunate that about 17 of our staff have succumbed to the illness. In almost all the cases, barring -- no, in most of the cases, buying 1 or 2, they had some co-morbidities, which actually got accelerated due to the virus. But while that is pretty sad to not have them with us, but the good news is all those who have rebounded are back to their full energy levels. We also had to make sure that during the quarter, the workforce returned to their respective places of work in some orderly fashion. Each city, as you know, had its own restrictions around attendance and stuff like that. Public transport was very varied across cities and towns. Taking all of that into account, we had to make sure that the return is orderly, and we are seen to be responsible employers. We also had to complete our labor mobilization at the sites. The challenges were very different as trying to get people back to offices to work. The challenge at the site is to make sure safe transport is a large number of people. The sites being most of them in little, relatively isolated locations. It was not much of a problem in terms of transmission. But the work practices in construction and project sites, as you know, is not really amenable to social distancing and stuff like that. There's lot of modifications that we had to do. We had to readjust our operational plans and procedures to respond to this unfortunate pandemic and faced unlocking that the respective state administrations announced. We also had to catch up on a lot of lost ground. Q2 was a pretty low quarter, to our living memory at least, in the company. And to make up for that required fair bit of energy, enthusiasm and fitment and will. And I think the company had done most of these things with a good measure of success. But as we started the quarter, there were a lot of trepidations because we didn't know how bad the quarter 2 was going to be and how quick the recovery is going to be, having lived through a horrendous quarter 1. But as we close the quarter, we are happy to share with you that we feel more enthused by the developments there are. There are some green shoots, if I can say that, visible in the environment. The parameters that we track to measure whether this bounce back in the economic system, our volume of traffic, this is both goods and passengers, the port traffic, the road traffic, the rail traffic, all of them have significantly picked up. There's been a fair bit of demand for energy. The power generation got a lift up in quarter 2, coal production went up. So these were indicative of higher levels of activity at factories and other commercial establishments, which is a good development. Imports and exports picked up. And gradually, I think April and May were pretty low. Though they may not yet represent the full potential of the country to import and export, month-on-month, there has been marked improvement. The PMI, the Purchase Managers Index, have also been indicating improved confidence and sentiments. And to drop that, the GST collections for the month of September was a full 4% higher than the GST collection on pre-COVID September of the previous year. And that's, again, a good sign about trade and commerce, possibly trying to get back. While the lockdown and the procedures around it is very understandable, and I think the government and industry administrations must be complimented for such stringent actions, it's equally important that we find the purpose of our lives back and try to, in a more responsible manner, perhaps get back to normalcy. And if Q2 is of any indication, we are looking into Q3 and Q4 with more optimism. Having said that, the specifics of Q2 being so important for L&T is because it had to deal with 2 significant events. One, of course, was we had to complete the EIT, the Electrical & Automation business divestiture, which has been in the works for quite a while now. And this thought to have been done possibly by end of FY '20, but for the disruption caused by the pandemic, but somehow we managed to get back on track, the commitment of both the parties to the transaction that we could almost remote basis on a virtual manner, complete all the pending documentation and close out discussions. And so that transaction has got completed. And secondly, we also had to reevaluate the carrying value of some of our investments based on certain developments that took place during the quarter. So I would like to provide some perspective to these 2 significant events. And the rest of the parameters as to how we fared versus our plans and how we see the road ahead, the IR team would cover in the presentation. But let me talk about the EIT divestiture. We've received the full consideration. As you know, the transaction was for INR 14,000 crores gross, free of debt and free of cash. And we've received the entire consideration barring some retentions that have been held back for some pending obligations and closing balance sheet adjustments, as you know, in such transactions. The pending obligations are largely to do with all the existing contracts, and there are thousands and thousands of contracts that we have with our customers getting the weight of each one of them painstakingly in favor of the buyer. We have certain thresholds for completing this by certain time lines. By the time on August 31, when the transaction long stop date concluded, there were some pending obligations. So close to INR 400 crores of retention amounts were held back for completing those obligations. I'm glad to tell you, as I speak now, the obligations have been completed. And we shall, hopefully, in quarter -- the current quarter, realize the balance retained amount as part of the sale consideration into the current quarter. We also had to make adjustments for the debt, as I told you, it was debt-free, cash-free transaction. So about INR 350 crores towards both debt obligation and working capital adjustments had to be retained, pending the close of audits by the auditors. And that is work in progress, and we hope to possibly complete that in maybe 30 days or so from today. So that left about INR 13,250 crores to be available to us. And we had incurred close to INR 250 crores of expenditure on completing this transaction, roughly translates to less than 2% of the transaction. But apart from the legal team, the TAM duties and all of the various and levies involved in transfer of establishments, we also paid a handsome bonus to our parting colleagues, as well, colleagues. After all, this business has been with us for 60 years. And many of the colleagues have actually been L&T lifers. So as a gesture and a thank you goodwill, we have paid a fairly generous parting bonus to all of them and all of that accounted to that INR 250 crores. So consequently, the INR 14,000 crores of consideration had translated into about INR 13,000 crores of cash -- net cash on hand. The value of the assets that we transferred is about close to INR 2,500 crores, and the taxation obligation is about INR 2,500 crores. So about INR 5,000 crores had to be reduced from the net consideration to arrive at a profit of INR 8,000 crores, which is what you will see as having reported. I am rounding off for ease of conversation. The precise arithmetic is visible in the earning charts. Now this is insofar as profits are concerned. When it comes to cash, as I told you, net of retention and expenditures, we had about INR 13,000 crores on hand. A portion of that retained money will most certainly come back on close-out audits, et cetera. But of the balance, INR 13,000 crores, INR 2,000 crores is the tax payout, in terms of book provision, that is INR 2,500 crores, but because of some carryforward tax advantages, the net cash outflow on account of tax cash-wise will be about INR 2,000 crores. That leaves about INR 11,000 crores of cash with the company. Now the associated conversation around such a large cash put with the company, how does the company plan to use the cash. And there have been a lot of commentary even in the media. About what use that the cash can be put to but being a company who is completely committed to all the obligations from all the stakeholders, we have drafted out a plan for this capital utilization, cash utilization. Close to INR 5,000 crores of debt, we would like to retire from the balance sheet. As you know, we had rather elevated debt levels in June quarter because the pandemic struck us in March end. One of the last things that we did was to beef up the liquidity structure in the month of April by borrowing additional amounts, just to be sure, because we had no idea as to how bad the pandemic was going to be and how strained the liquidity is going to be. Consequently, we sort of beefed up our cash reserves. But having seen through the pandemic and having sort of coming to a conclusion, that Q1 could be the lowest in the cycle of the pandemic and Q2 has been indicative of some recovery and Q3, Q4 could be hopefully stronger recovery than Q2, we do think that we should, in the remaining portion of the year retire the excess debt that we accumulated. So about INR 5,000 crores of the proceeds we have earmarked for debt reduction. We also need to make some investments in our business. And these are largely with services business. The businesses like financial services, et cetera, would require some capital allocation. We also need to grow our other services business, IT technology services, which have done very well during this difficult phase, encouraging us to keep nurturing them and making them stronger and bigger. So an allocation of INR 2,000 crores for various business investments, including financial services, is what we set aside. We also were required to safe harbor the Hyderabad metro project. As you know, just as the pandemic struck, we commissioned the project fully and quite unfortunately, despite all the lines being commissioned, the traffic had to come to a halt because of the severe lockdown. And the lockdown has got lifted in Hyderabad only on September 9. So we had some tail revenue coming in from the end of the quarter for the entire 6-month period. And even then, the resumption of work from office is not complete. And the IT town that Hyderabad is, there is going to be a gradual pickup in terms of IT office growing traffic. Also the fact that social distancing norms have to be adhered in trains, and there has been some staggered admission of people, et cetera, the traffic that we anticipated to ride on the train before the pandemic, it's not going to be the same immediately. It's going to be possibly, in my opinion, a 12-month buildup at least before the traffic comes back to some normal levels, feeling safe all the while. So this has forced us to restructure the capital. State Bank has been one of the largest lenders to the project and the lead lender -- lead banker to L&T as well. So L&T and State Bank have sat down together and been trying to work a refinancing package. It is not a restructuring package that Commerce Committee recommended to RBI. This is a refinancing package because we had to reevaluate the cash flows of the company based on the revised conditions. And consequently, it's quite clear that there has to be some amount of sustainability brought into the debt. And being an L&T company, given our track record of debt service being for the last 80 years perhaps, we cannot afford to have any blot on that reputation. So consequently, we are discussing with State Bank, including capital infusion by third party, including some discussions with the government for long-term financial assistance, et cetera. We need to rehash the capital structure and make sure that the revenues that we pick up gradually going forward will have sufficient wherewithal to meet all the financial obligations. So as a measure of prudence, and since Hyderabad Metro is very much a part of our portfolio as we speak, we have allocated about INR 2,000 crores for all such financial refinancing, restructuring options that will get finalized, hopefully, by the end of this quarter or at best early part of next quarter. Then we have left with after they get repayment plan after the investment in businesses plan and after the Hyderabad Metro restructuring plans, we are left with about INR 2,500 crores of cash, which is what we have distributed as a special dividend to investors at INR 18. The whole plan around the use of cash was just to make sure that we also used the proceeds to strengthen the balance sheet of the company and by the deleveraging and also strengthen the underlying business of the company. It is quite clear that the infrastructure assets that we have built so far, including Hyderabad Metro, which is the latest, are monetizable assets. So as part of the discussions with the bankers, we are also trying to work out a mechanism by which, in due course, after the traffic stabilizes, there will be options available for divesting our stake and derisking our balance sheet from these exposures. So talking about derisking on exposures, particularly on infrastructure assets, actually led us to a few more decisions in this quarter, and I would like to share that as well with you. One is the -- we have a coal-based super critical power plant in Punjab, where we have a PPA with the Punjab State Electricity Board. It's one of the most efficient plants being a plant and one of the later plants in Punjab. The plant gets priority in the consumption of power, both for the quality and consistency of availability from the Punjab State Electricity Board. So it's a very important asset for Punjab government and the electricity authorities. We have -- in the quest of moving towards asset-light business model, we had identified the infra assets as monetizable pieces except that they're all in different forms embedded in our financial statements, structurally. Some of them are in subsidiaries, some of them are in the associate company joined venture form. So one of the first things that in the course of the quarter we crystallized our plans for an orderly exit from Nabha. We do not yet have any specific offers on table neither have we kickstarted process as I speak today, but these are subsequent steps that the company might have to walk in the quest of monetizing that asset. But having said that, it became important for us to reevaluate the carrying value of the assets. We looked around at market multiples because once there is a plan for monetization, then it is important that the asset gets valued or carried in the books until monetization in an appropriate manner. Based on the multiples that are available for coal-based plants and looking at the nature of the asset, and it's a single asset company as well, doesn't have multiple power plants. We applied a prudent discount in consultation with our merger and acquisition and divestiture teams. And we had invested about INR 2,700 crores in Nabha Power Plant as our equity. And over the years, the Nabha Power Plant has been generating profit every year, year-on-year. And accumulated profits have been come back and reinvested in that business. So the carrying value had grown to about INR 3,800 crore. And based on the market valuation, we assess the realizable value to be around INR 2,200 crores, leading to an impairment of about INR 1,600 crores. The second asset that we closely looked at was another power plant, but this is an hydro power plant in the hills of Uttarakhand. It's a project called Singoli–Bhatwari. We took almost 10 years because there were enormous amount of challenges to complete the power project. It took all of L&T's commitment to project completion to stay on course and complete this project despite a 10-year delay. And now that the project in September, the turbines were commissioned and mechanical completion was certified. So the project has happened ready for generation. We are in advanced stage of discussions of with the Uttarakhand government. And based on the regulations and tariff fixation norms of the Uttarakhand regulatory -- electricity regulatory authorities, it appears as though that the levelized tariff would be around INR 3.5 per unit with the obvious initial tariff being at INR 5 and then leveling off over the duration of the long transition period that we have. So reflecting the possibility of the tariff setting through the PPA, we reevaluated the carrying value of this asset, which was actually close to INR 1,900 crores -- INR 1,890 crores, actually. And on the base of the PPA and the tariff potential, we've carried the recoverable value at about INR 837 crore impairing, in the process, about INR 1,000 crores from the carrying value. The third asset that we have been and dealing with and it is not an infra asset, but we have spoken about this at lent in the earlier commentaries and conversations. We have a nuclear power meant for nuclear power plants. It is a joint venture with Nuclear Power Corporation of India. We own 76% -- 74%, and NPCIL owns about 26%. We've been battling with gross capacity underutilization in this plant ever since commissioning. The frequency of the ordering and the speed at which nuclear power plants orders of Heavy Forging have been a learning -- steep learning curve for us. We cannot set up such an advanced and sophisticated workshop with periodical orders. It has to have regular flow of orders. So the nuclear power capacity addition today possibly has taken a bit of a backseat in contrast to the thrust that is being given to renewable energy. Regardless of the quality of the prioritization of the decision-making, the hard fact is that shop that we have is struggling for capacity utilization. But recognizing the fact that the capacity utilization is going to be a challenge, we've been in deep discussions with the government and through NPCIL about converting the loans into equities, just to rid the plan of the burden of having to service the borrowings. But despite almost 2 years of effort, we have come to the painful conclusion that there is no urgency on the part of the Nuclear Power Corporation to resolve this issue, given their own constraints, et cetera. So not wanting to comment on that current stand of theirs, it's important for us to recognize that this asset is not going to justify its carrying value of about INR 1,000 crores in the consolidated books. So the funded exposure that L&T had on this plant was about INR 1,000 crores. And that we impaired it as well because our conversations with Nuclear Power Corporation and Government of India came to a standstill. So these 3 actually together led us to an impairment during the quarter of about INR 3,700 crore. And the results that we have announced reflects this impairment. I think I will stop here because I'm sure you'll have a lot of things to absorb and through the presentation and the Q&A thereafter. But before that, one of the most compelling reasons why I thought I should speak to you today is my long-serving colleague and friend Mr. Arnob Mondal who has been spearheading this IR activity for over 10 years is retiring on second of November after 25 glorious years with L&T. Like all L&T guys, he is very, very passionate about his work. And I have no invitation in saying that you are able to lift the quality of IR practice that the company was adopting by sheer commitment, enthusiasm and passion for the work. So you've been a great support to him through this period. So I just wanted to, in your presence, acknowledge the tremendous contribution that Mondal has made and the value that he has created to this function. I also want to use the chance to welcome P. Ramakrishna, who along with Harish Barai will form the core of our IR team. P. Ramakrishnan has also been a very long-serving senior colleague of mine at L&T, worked in several functions. The last function that he was, he was the CFO of L&T Technology Services, a listed company. So maybe some of you have had an opportunity to interact with him in that avatar. But I think Mondal has taken the effort to introduce P. Ramakrishnan and Harish Barai to you. And I seek all your support to the new team, while wishing Mondal a very, very happy retired life. So thank you. I will hand it over to the IR team for the presentation moving forward.

Thank you for the lovely words and sentiments. And the clarity that you have brought to the very large items both the P&L and cash flow that have been embedded in this quarter's results. I think that answers a lot of queries. Many people have been asking me since yesterday after we declared our results on these matters. And obviously, I told them that I would not be able to share details because it would be selective dissemination of information. So I ask them to wait for the call, and you have very clearly clarified all those. So without any further ado, I'll now hand it over to Mr. P. Ramakrishnan who is taking over from me, and we call him -- affectionately call him PR by his initials. He will walk you through the presentation. And after that, the IR team will take the Q&A. So PR, over to you.

Thank you. Thank you, Arnob, and good morning to all of you. Some of you may have heard me during my previous stint as the CFO of L&T Services. My name is P. Ramakrishnan, shortly abbreviated as Arnob talks about, PR. I will take the presentation. Hopefully, all of you must have downloaded and probably went through it. So I will probably summarize the presentation in the next 20 minutes or so. Before I start off, the standard disclaimer. This presentation and what we have spoken in this particular call does have forward-looking statements and conversation that may concern our L&T's future business prospects and profitability. These are subject to a number of risks and uncertainties, and hence, the actual results going forward could materially differ from what we have disclosed in the analyst presentation of what we speak in the call today. With this, I come to the Slide #4, which summarizes the Q2 of FY '21. As the title says, we have had a sequentially strong quarter. But this is a backdrop of -- to see our group performance in this quarter to be seen in the context of domestic macroeconomic environment that is India, where we primarily operate in. As we see going by the month-on-month improvement in the high-frequency lead indicators, it appears that the Indian GDP contraction in Q2 FY '21 would be less severe than the 24% contraction that we saw in the previous quarter, Q1 FY '21. Now in this backdrop, we still managed to secure orders of roughly around INR 280 billion in the current quarter, whereas in the previous quarter, the order inflow was INR 236 billion. So despite the pandemic situation, we have had a reasonably healthy Q-on-Q pickup in order inflow almost to extent of 19%. Our order book at roughly around INR 3 lakh crore, which is precisely INR 2,989 billion is relatively stable. And is largely unchanged from that of the previous quarter of the previous year as well. Our group revenues for Q2 FY '21 reported at INR 310 billion vis-à-vis INR 213 billion of the previous quarter Q1 FY '21, demonstrated a growth of almost 46%. This is on the back of strong sequential improvement in revenue across most of our project businesses and also service businesses. Most of our sites were operational with the [ near ] labor strength of around 250,000 workforce. But our operational productivity or efficiency, as RSR also talked about, is yet to catch up to pre-pandemic levels because of work-related restrictions. We believe that as restrictions are leased progressively, we do expect a sequential improvement in site productivity. Our operational path that is before the exceptional item and the gain on the discontinued operations has been reported at INR 11 billion for Q2 FY '21, almost up multiple times from what we had in Q1 FY '21. Coming to cash flow. We have had a reasonably good cash flow momentum even stretching into Q2, more because of there has been ample systemic liquidity in the system. And the fact that both the central and state governments have front-loaded their borrowing programs for the year. Our client collections in H1 has been reasonably robust. To that extent, we had -- we did not have drawn down on our cash reserves to fund our operations for H1. And going by the government's borrowing calendar for H2 of the current financial year, and also the fact that the economy is showing pickup across all areas, our outlook with respect to customer collections remains positive for H2 as well. To summarize the performance of Q2 with respect to Q1 of the current financial year, I would say businesses are catching up on loss counts needed by the government's actions to restore normalcy. I come to Slide #5, which is the summary of the key financial indicators. So just to convey here, in this slide, the quarterly performance snapshot is presented on the left and half yearly on the right. I will focus on the Q2 FY '21 numbers as H1 numbers are [ derive-ish ]. Please understand that the sequential improvement in performance on quarter-on-quarter, as I mentioned, while I spoke on the previous slide, the Q2 FY '21 and the H1 FY '21, are not comparable with the corresponding quarter and the H1 of the previous year for obvious reasons. Our Q2 FY order inflows at INR 280 billion has registered a decline of 42% over Q2 of the previous year. As I said, the order book of INR 2,989 billion, there is a marginal decline of just around 1% over the September 30, 2019 number. Our Q2 FY '20 revenue and EBITDA at INR 310 billion and INR 33 billion have registered a decline of 12% and 17%, respectively, over that of the previous year. Our Q2 FY '21 PAT reported at INR 55 billion is inclusive of the gains on divestment of the electrical automation business and offset partly by exceptional items, which was highlighted by RSR during this call. To sum up the gains on the divestment of the electrical automation business, post-tax is in order of INR 8,100 crores. And just to unveil the exceptional items, net of tax during Q2 FY '21 represents impairment of funded exposure in the Heavy Forgings joint venture INR 10.7 billion and impairment of assets in the power development business, aggregating to INR 26.57 billion. Coming to working capital. Our -- as I said previously that our customer collections have been fairly robust. The gross collections across the group for Q2 aggregated to INR 29,000 crore, almost up by INR 4,000 crores as compared to Q1 of the previous quarter. And out of this, the project business or the core business also show growth in collections. We reported a collections of roughly INR 15,000 crores for the current quarter as compared to INR 12,000 crores of the previous quarter. The working capital position at roughly around 26.7% has remained almost the same as of June quarter, but has moved up when you compare with September '19 position of 23.2%. We believe that given the current year, this has been an exceptional year because of COVID, the intention of the company is to ensure that the absolute working capital, as we progress and close the year March '21, is at almost the same level as what it was in March '20 without really measuring the working capital to revenue as a percentage. Our return on net worth on a trailing 12-month basis is roughly around less marginally less than 17%, but not comparable strictly because it does contain the divestment gains and also exceptional items. I move to Slide #7, which summarizes our Q2 H1 FY '21 order inflow and order book. Again, here, order inflow numbers are mentioned on the left and the order book on the right. Our order inflows come Q2 FY '21 at INR 280 billion is down 42%. But it is good to note that the momentum has improved in infrastructure, covering both domestic and international despite the pandemic concerns. The power generation continues to see some award deferments, and the hydrocarbon CapEx is muted in the quarter due to soft oil prices. In Q2 FY '20, we had large order wins in both power and hydrocarbons, which largely explains the decline in Q2 FY '21 order inflows over the corresponding quarter of the previous year. As of September 20 and for the remaining months of FY '21, when we see from a bottom line prospect approach, the pipeline is quite -- seems to be quite robust of almost INR 6 trillion, and out of which INR 4.7 trillion is domestic and 1.3% international. Coming to the later part of the presentation, Arnob would take us through the -- summarizing the outlook based on this particular metric. Coming back, the government has ensured in the first part of the year that project execution continues and payment to contractors are not -- which are not withheld. It looks like in the next part of the financial year, the government will now turn focus on awards that is on new ordering, which hopefully should aid economic recovery and generate employment. As we speak, and the order prospect pipeline does see a lot of opportunities in areas like water, power transmission distribution, metro and RRPS systems, railways and as well as roads and expressways. Coming to the order book at INR 3 lakh crore, the portfolio diversity what we show and a dependence on government and PSU investments mitigates the cyclicality and especially considering the current outlier event of corona. Today, we have roughly 6 business verticals where each of their order book is between 9% to 15% -- ranging between 9% to 15% of the overall company order book. They are building some factories, water, power transmission and distribution, heavy civil infra, transportation infra and hydropowers. The diversity of order book helps and the future revenue growth is not dependent or not seem to be dependent on the fortunes of any specific sector. Out of the total order book of INR 2,989 billion as of September '20, 76% belongs to domestic and 24% in international. Coming to the domestic order split, which is around INR 2,273 billion, the split between central government at 14%, state government at 38%, public sector units at 30% and the rest private at 18%. So therefore, as I stated earlier, 82% of our domestic order book is from the public space. And we believe that in the current times, a larger proportion of public sector order book possibly mitigates credit risk. Coming to Slide 8. This summarizes the group performance from an overall cost perspective, starting with revenue. Here again, I will focus on the left side of the slide, which is the Q2 number. Our group revenues at INR 310 billion for Q2 FY '21 has registered a de-growth of 12% over Q2 FY '20. However, as I explained earlier, our Q-on-Q revenues have registered a smart recovery of almost around 50%. The services portfolio of our business has done reasonably well in Q1 FY '21. There is acceleration of momentum there as well in the current quarter Q2 FY '21. Coming to the summary of the cost. The MCO expenses, which is nothing but manufacturing, construction and other operating expenses, is largely attributed to the project parts of our business, is reflective of job progress, revenue mix, which is between core and service businesses, and cost control initiatives. The finance charge OpEx largely represents borrowing in L&T Financial services. The Q2 cost is largely flat. The overall headcount for Q2 for the group is around 161,000 as of September '20 as compared to Q2 of last year, that is September '19 at 165,000 overall drop in headcount of around 4,000 people. The lower SG&A charge in Q2 on overhead savings, primarily resulting from travel, rent and other miscellaneous expenses is partly offset by incremental credit provisions in financial Services business. You are aware, the financial service business has been making prudential macro provisions over and above the mandated provisions as is required. Consequently, our total OpEx for Q2 FY '21 reported at INR 277 billion degrows 12% over Q2 FY '20. I move to Slide #9. For reasons which I explained in the previous slide, over EBITDA for Q2 FY '21 at INR 33.3 billion, it has registered a decline of 17% over Q2 FY '20. The finance cost at INR 10.4 billion for Q2 FY '21 is commensurate with the level of borrowings at the parent L&T level and also has gone up primarily on account of the full commissioning of Hyderabad Metro. At the current levels of around INR 16,000 crores, the cost -- finance cost of Hyderabad Metro ranges between INR 350 crores to INR 375 crores per quarter. You would recollect as Mr. Shankar Raman also talked about the start in the financial year, the company had borrowed, the parent company had almost borrowed INR 12,000 crores as an emergency liquidity buffer to act as a sort of insurance against the slowdown. So against that, we have almost paid INR 4,000 crores during the current quarter. The depreciation charge at INR 7.1 billion for Q2 FY '21 includes the full impact of the Hyderabad Metro capitalization, which averages around, I would say, INR 75 crores per quarter. The other income reported at INR 5.6 billion for Q2 FY '21 is last year's reflection at the level of treasury investments and the yields that we have earned during the quarter. The share of JV associate companies largely comprises the results of our IDPL development projects group, power equipment and Forgings JV. The noncontrolling interest or minority interest reflects the profit share of minority shareholders across all the subsidiary companies. Coming to operational fact, our operational fact for Q2 FY '21 at INR 11.1 billion registers has registered a de-growth of around 52% over Q2 FY '20, largely on account of drop in revenue and under-recovery of overheads due to corona pandemic in our core businesses, underutilization of Metro services in the current quarter. The Metro was put up for commissioning again post-lockdown on 8th of September, so we also missed mostly the second quarter as well. And additional provisions, prudential provisions in the Financial Services business. As Mr. Shankar Raman talked about that [indiscernible] divestments, the profit from [indiscernible] Software discontinued operations at INR 81.46 billion includes the gain on divestment of roughly around INR 81 billion of the E&C business. Whatever numbers which we have reported in Q2 against this may undergo some changes because of the explanation what Mr. Shankar Raman spoke, post-transaction closing adjustments and additional recovery of consideration post-completion of our obligation. We may see some amount of closure to this transaction. As we go along, hopefully, by the end of FY '21, this should have been closed. I move to Slide #11. This slide summarizes the segment composition. And 1 particular slide, which is electrical automation, has been highlighted because that's coming quarter 4, discontinued business. One important point, which I would like to draw your attention to the segment composition is that the information technology segment, IT&TS mentioned here also includes Mindtree. [indiscernible] consolidated into the electric consult L&T system from Q2 of the previous year. Effective post April current year, we had a Smart World and Communications business. That has been shifted from the Infrastructure segment to others. Similarly, Military Communications business has been transferred from our Defense Engineering segment to, in fact, Smart World and Communications, which, in turn, has been mapped to others. So to that extent, the figures of the previous period has been regrouped in the segment results to conform to the new classifications in the current year. Having said this, this does not materially impact the performance of the segments to which these 2 segments were previously being reported to. I move to Slide #12. This summarizes our H1 FY '21 order inflow composition. Again, this is more a slide for reference purposes. We just want to draw an attention that 50% of order inflows has been contributed by infrastructure in H1 FY '21. Hydrocarbon and Defense contributed around 3% each and Heavy Engineering, around 1%. Obvious reasons, the share of services percentage as a total of order inflow is higher at 40% for H1. Moving on to the split between domestic and international, 63% of the order inflows for H1 were domestic and 37% international. And against this domestic order inflows, a substantial portion accrued from the Infrastructure business. Moving to international. A significant proportion of international order flows is from the IT&TS business. Having said that, the Infra, Hydrocarbons and Heavy Engineering has also contributed to international wins during H1. I move to Slide #13. This is a summary of the H1 FY '21 order book composition. As you can see, 75% of the total order book as of September 20 is from the Infrastructure segment and 13% from Hydrocarbons. Within the Infra, as I mentioned earlier, order book is well diversified across the 5 large verticals within that segment. Coming to the geographical split, we are predominantly an India-centric company. Because of that, 76% of our total order book is domestic-based. Against that domestic order book, the public space will be around 82% and private at 18%. Our international order book is 24% of our total order book. And as you may be aware, over the last couple of years, we have tried to move consciously from the Middle East where we had a predominant presence. As we speak today, 40% of the international order book is outside of Middle East. Moving to Slide 14. This is H1 FY '21 revenue composition. As you may see, the Services business at 39% has acted as a good hedge in our overall business portfolio, which has been [ relatively ] dominated by E&C. So in a period like this, the revenue across core businesses, in case there is a problem in which we have been witnessing, the Services portfolio has come to our rescue. Of the total revenues of INR 523 billion for H1 FY '21, the Services Infra contributed -- Services contributed to 39% and Infrastructure contributed 37%. Moving on to the geographical split, 59% is from India and the balance from outside India. This percentage of -- especially the revenue share of 59%-41%, maybe a little skewed because in the current year because of a larger proportion coming from the IT&TS business. With this, I have summarized the at the company level. Now I will -- the next few slides, I will take you through the segments of the company. Moving on to Slide #15, which is the Infrastructure segment. Infrastructure segment, as you may be aware, is the largest segment within [indiscernible] within the group. And obviously, the performance of this segment impacts the group's [ fortunes ] as well. Some quick comments on order inflows before we move to the other parameters. You would recall that in Q1 FY '21, the Infra segment recorded order wins of around INR 113 billion. And in Q2 FY '21, this segment recorded order inflows of INR 145 billion, representing a healthy sequential growth. Our bottom shop pipeline in this particular segment, which covers both domestic and international, is almost to the order of INR 4.2 trillion as we speak as of, say, September 2020. The Indian government is focusing on key areas like water, power transmission distribution, metro, railways, roads and expressways. And as we speak, ordering momentum is expected to pick up in H2. Hopefully, on the order inflow side, our Q3, Q4 order inflow should be better as the economic recovery and and in prudent tax collections should give a sufficient comfort to the government to put more orders on key awarding stage. The Q2 FY '21 revenues for the segment at INR 129.7 billion is up 102% on a quarter-on-quarter basis, primarily only because of supply chain normalization in Q2 and also almost full 100% availability across the 7 [indiscernible] sites. On a year-on-year basis, these numbers for Q2 FY '21 would be down 20% over Q2 FY '20. We do expect revenues to pick up in the coming quarters on the back of further labor supply normalization and also sustaining, I would say, the logistics and supply chain. I'm coming to Client Collections. Q1 and Q2 has been reasonably good for this segment, and I did touch upon this in my previous -- when I covered the previous slide. And hopefully, we should not be seen to execute the performance from our balance sheet in the coming quarters as well. The margins for Q2 FY '21 at 6.4% represents a marginal improvement of 10 basis points over Q1 FY '21. Kindly note that in Q1 FY '21, the margin buoyancy, despite the lockdown, was largely because of a couple of jobs, which should have ideally closed into the resale RSP or the margin threshold stage in the previous quarter, that is Q4 FY '20, actually moved to Q1 FY '21. And that's the reason the Q1 margin at 6.3% and now at 6.4%, which is a marginal improvement. On a year-on-year basis, our margins have dropped from 7.2% in Q2 FY '20 to what it was reported at 6.4% in Q2 FY '21. The margin challenges in H1 FY '21, obviously, were due to supply chain distribution and labor availability and productivity and lastly, job mix. With now supply chain coming to near normalcy and overall improvement in productivity, the revenues from this segment are expected to move up. The margins, therefore, would be primarily as a result of the way the job mix happens and not because of other factors as we saw in H1. Coming to Slide 16. This slide summarizes the performance of the Power segment. Although there were a couple of power prospects and flue gas desulfurization opportunities which were lined up, H1 witnessed award deferments due to the ongoing pandemic. Having said that, we would like to here -- mention here that the business is actually sitting on quite a healthy order book of almost INR 146 billion, which provides us revenue visibility for the near future. The revenue for Q2 FY '21 at INR 6.9 billion was up 42% on a year-on-year basis, largely driven by the execution from a large opening order book. A major part of the revenues of H2 FY '21 is yet to cross the margin recognition threshold, and this explains the margin variation of 4.1% in Q2 FY '20 to 3.1% what we have reported in the current quarter. As you may be aware, the Power business is optically -- margins are optically low because our Power Equipment businesses are actually joint ventures, and if they were to be consolidated as subsidiaries, then the margins of the Power segment would be up to almost 30% -- sorry, 10% plus. I move on to Slide #17, which is the slide covering the Heavy Engineering segment. The segment did see very, I would say, muted order wins in the current quarter, largely on account of order difference. The Q1 order inflows were good enough on the back of order wins in the international market. The orders what we backed in Q2 was roughly INR 323 crores as against INR 476 crores in Q1 of the current year. The segment recorded revenues of INR 6 billion, registering a Y-on-Y decline of 3%. While sequentially, it has increased by 59%, representing a substantial improvement for operations because of better capacity utilization post the lifting office -- lifting off lockdown. The EBITDA margins for the current quarter at 5.1% as compared to 24.9% in Q2 FY '20 is because of, in the current quarter, a onetime prudential provision has been made towards possible onetime -- towards the settlement with the client. We do expect, going forward, margins to be normalized in the subsequent quarters. I move to Slide 18, Defense Engineering segment. We had a significant order win in Q2 FY '21 from the Ministry of Defense which India, which replenished the order book. Having said that, the recent government announcement on time-bound defense procurement processes and faster decision-making hopefully awakens hope for the future. The announcements considering separate budget provisioning for defense capital procurement and a list of 101 items released by the government of India to be exclusively managed and manufactured in India over a period of time, is a distinct positive development of this segment. We do have some RFPs, which are lined up, and we are constructive on the future outlook. The revenues for Q2 FY '21 at INR 7.6 billion registered a decline of 20% over the last year, largely due to the tapering of a large order in the current year and new orders which we had yet to gather execution momentum. Margins for Q2 FY '21 at 24.4%, almost up from 18.1% in Q2 FY '20, largely reflective of the pace of jobs under execution aided with operational efficiencies. I move on to Slide 19, Hydrocarbon segment. As I explained in the previous -- while we covered the previous slides, due to the uncertain oil price scenario, we have -- we are relatively seeing very relatively secured tendering activity. And because of that, this segment recorded, I would say, very low order inflows during the current H1. The order book of the segment is extremely robust. It has almost 2 years of revenue execution. And hence, even if a couple of orders deferment, that should not impact the revenue trajectory of this segment in the near term. The segment dropped revenues of INR 40 billion during Q2 FY '21, registering a Y-on-Y decline of 6%. However, sequentially, the revenues have increased 32% with all our fabrication yards, up and running and most sites nearing normalcy. The International revenue constituted 53% of the total customer revenue and jobs were primarily executed in Africa, Saudi and Kuwait. The segment margin reported at 8.5% in Q2 FY '21 vis-à-vis 12.5% in Q2 FY '20. Previous year margins were aided by a onetime favorable variation claim from customers that got accounted for in that quarter. I move on to Slide 20. This summarizes the Development Projects segment. The segment comprises of 2 portfolios: one is the Power Development business; and the other is the Hyderabad Metro. Kindly note that other Development Projects business, which is IDPL, that comes under operations from joint ventures. Here again, growth and transmission lines concessions, which were housed in L&T IDPL are consolidated, as I said, in the equity method, so the numbers don't include in the Development Projects segment in this slide. The segment registered revenue of INR 7.4 billion, down 22% of the corresponding quarter in the previous year. The revenues in this segment are largely contributed currently by the Power Development business, primarily from Nabha. So the performance of Nabha Power for Q2 FY '21 was very robust, mainly because of a record deal of 92%. Hyderabad Metro, for obvious reasons, has not contributed to any sort of meaningful revenue and operations in the current quarter. The EBITDA margin for the segment at Q2 FY '21, 5.3% as compared to 10% of previous quarter of the previous -- of the -- sorry, of the quarter of the previous year, again, largely impacted our Metro operations. As I stated earlier, the Metro operations have started in a phased manner from September 7. As of September 30, we have a traffic of almost 50,000 passengers per day. And as we speak, it is touching 1 lakh in the current month. I move on to Slide 21 for IT and Technology Services segment. As you may be aware, this segment comprises our 3 listed entities: LTI, LTTS and Mindtree. And since the details of the performance of these companies are already there in the public domain post their board meetings and announcement of Q2 results, I will try to summarize the overall performance of the group as 1 segment. The revenues in Q2 FY '21 at INR 61.7 billion, it registered a growth of 5% of the corresponding quarter in the previous year. All the 3 listed subsidiaries have done fairly well on a quarter-to-quarter basis as well. An area of business verticals contribute to the growth between each of these companies. The details are summarized in this slide [indiscernible]. Happy to inform you that all the businesses have successfully adopted to a work-from-anywhere model, thereby giving us the assurance that there are no supply chain distributions from an execution perspective. The international sales, as most of them are primarily on -- export-oriented, constitute almost 93% of the total customer revenue for the quarter ended September 30, 2020. The EBITDA margins for the segment increased to 23.2% for Q2 FY '21 as compared to 19.5% for Q2 FY '20, largely on account of improved PAM power utilization, onshore/offshore revenue mix and operational efficiency. I move on to Slide 22. The Other segment, which is a residual segment, which largely comprises -- which comprises of the Smart World and Communication, the Realty business, the Construction and Mining Machinery business, the Rubber Processing Machinery business and Valves. The customer revenue of this segment during Q2 FY '21 at INR 13 billion, registered a decline of 33% over Q2 FY '20. This decline was mainly in account of the Realty business, where in the previous year, that is Q2 FY '20, included the monetization of a commercial asset in Navi Mumbai project and a higher proportion of handing over residential flats. The margins for this Other segment for the current quarter of Q2 FY '21 reported at 18%, has largely remained unchanged from what we reported in Q2 FY '20. Margins continue to be healthy on account of cost efficiencies in the residential project in our Realty business and cost-saving measures undertaken across other businesses. I conclude the segment results with L&T Finance Holding Group, Slide #23. This segment recorded an income of INR 33.4 billion in Q2 FY '21, a year-on-year decline of 3% due to lower disbursements vis-à-vis corresponding quarter of the previous year. The loan book was marginally lower at INR 988 billion as compared to INR 1,002 billion in September '19. The business's focus is on an improvement on return on equity, realized through a strategy on the retailization of the retailization of the loan book, prudent ALM, improving asset quality and increasing diversity of funding sources on an ongoing basis. The focus in Q2 of the current year partly centered on recommencement of rural disbursements, controlling credit costs, improving collection efficiency and as yet maintains adequate liquidating buffers. The group, over the last couple of years, has demonstrated tremendous resistance, despite the challenge surrounding the NBFC space. L&T Finance Holdings and all of its lending subsidiaries have a reaffirmed AAA rating by all the 4 credit rating agencies. Previous year Q2 FY '20 profits were impacted by a remeasurement of a deferred tax asset under the new tax regime, which was announced last financial year. With this, I have summarized the performance of the company for the quarter for H1 and also the segment performance. We now come to the last part of our presentation, which is the environmental outlook, and I'm requesting Arnob to take you through. Thanks.

Thank you, PR, for a very elaborate and illuminating discussion on the performance of the group for this quarter as well as this half year. Now coming to the last slide, it is more -- obviously, more macro. And I will obviously not read out every single word of it. I would just like to highlight a few things. Of course, PR has covered the results in details, so I will not get into all those. Mr. Shankar Raman also elaborated on the E&A divestments and impairments. I'm not getting into that either. Coming to the environment, I think it is clear that the government focus on Infra remains unchanged, and it's very strong. In fact, those of you who have gone through the detailed 300-page NIP plan, will clearly understand that it's a fairly-detailed -- it's a robust plan, with the funding also reasonably laid out. And while the private sector could probably fall short, it does appear that the public sector spend seem to be well on track, considering the fact that the center, state and ASU cash flow on CapEx on an annual basis is typically around INR 15 trillion to INR 17 trillion. So I think -- so on a 6-year time line, the plan does not look like wishful thinking. Of course, the focus on -- government focus on Infra has been validated to a large extent by the big high-speed rail order, which we received yesterday, and we have also announced it to the stock exchange as well, so that is a clear demonstration of the fact that the government is focused on pushing Infra. Just a couple of points. On the liquidity support, I think everybody realizes there was a big tax shortfall collection in the first quarter and early part of the second quarter, even though September tax collections have picked up quite a bit. This is largely being sought to be mitigated through an increased borrowing plan by both center and state for FY '21. Apart from what they originally budgeted, they are planning something around INR 9 trillion in additional borrowings, INR 5 billion at center and INR 4 billion, collectively at states to tide over the liquidity crisis that the government faces in the initial part of the area due to COVID. However, the gross debt to GDP could also climb to around 90% by the end of this year, which is okay compared to many other countries, but still something which needs to be also closely monitored. I think the pandemic is -- the global pandemic, everybody has talked about it and countries which have been affected and the unknown loan variable right now is particularly with respect to resurgence in different countries in Europe. In fact, Germany and France have already announced limited reposition of lockdown, so we'll have to see. In India, we have seen -- obviously, we have seen the Phase 3 opening that has happened, and will continue -- will hopefully continue. And we hopefully will not see a resurgence coming back. I think we have talked about the labor situation is back to normal. We are close to around 250,000 labor at project sites still around a week back. However, here again, I need to reemphasize that we have been facing productivity issues, primarily due to imposition of strict social distancing norms in our workforce. However, we are still trying to -- we are finding technology solutions and smart scheduling solutions to try to overcome that. Hopefully, a few months down the line, maybe 2, 3, 4 months down the line, we should be able to be better placed on that front. As far as L&T, I think in this slide, I've also shown an economic vote, and I will not go into details of that. I think we have multiple protective rings, even though I do feel that markets seem to have discounted some of these sulfur rings. And considering the way our stable Services business has been delivering quarter after quarter, I think there is a case to have a relook at conglomerate discounts in our models, but you are the best judge of that. As far as input costs are concerned, we have been seeing a decent period of relatively soft commodity prices, whether it be concession steel or cement or construction aggregates like bricks, [ stone-shaped ] sand, et cetera. However, currently, we are seeing some commodity inflation are coming through on multiple fronts. Hopefully, it will not spike. It will remain under control. As far as labor costs are concerned, a big question which we have been facing is that whether we are seeing strong labor inflation because of Hyderabad are coming back. Yes, we have had to incur quite a few one-off expenses in bringing them back on the transportation part to some extent. However, the recent inflation has been very, very moderate, and we have done a detailed analysis of around 70-odd sites at various states. And our assessment is that, from those sites, it's clear that if you take a base of January, in January 2020 and going up to September, because that covers the pre-COVID and the current situation, the labor cost inflation is really around 3% because we have already been paying minimum wages at every site, which is considerably higher than the minimum wages that are prevailing today. So it seems to be well under control. And of course, those onetime costs have all been washed through the P&L already, so there will obviously not be a recurring feature. I'd just like to touch upon some macroeconomic trends because many people keep on asking us, how do you see the macro turning out. And we do think that there's been an improvement from August, and particularly strong improvement in September. Some of the key indicators, I think manufacturing PMI going to 56.8% is a very, very welcome. And even the services PMI is slightly short of the mid-mark of 50%, so at 49.8%, still very small contraction, but obviously, travel and hospitality sectors also weigh in on that. So that is not entirely unexpected. But overall, the PMI -- composite PMI seems to be fairly strong now. Going by IIP, there's been a good trend of improvement. In fact, those of you will track IIP will recollect that in the month of April, it contracted by 57%. And it's -- in May, it improved to 33% in June to 15% and in August, it crossed something around 8.5%. So there's been a steady improvement in IIP there. Power generation, year-on-year, September, there was a 4% growth. And for the first 25 days in October, it's very heartening that we are seeing growth in excess of 10%. GST collections, all of you would have noticed that we crossed INR 95,000 crore in December, which is a very welcome sign. Some other indicators like tractor sales August and September saw very strong tractor sales. To some extent, it was also due to very strong monsoons that we saw with reasonably good special distribution across the country. Road traffic is coming back going by our IDPL rules, and they are back to, I would say, around flat year-on-year revenues in this quarter. It appears to have normalized to a large extent. Railway traffic has seen a growth of close to 4% in year-on-year in September. That's also very heartening. Exports has been strong, and we've seen growth year-on-year growth of over 5% in September. All of you would have also noticed that Forex reserves are in a very strong position. The last number that was given out was something like in excess of USD 510 million. The margin cost, NCI margin cost lending rate is also moderated somewhat. It's around 7.4% in September compared to 8.75% in May last year. Bank deposit growth has also shown a welcome improvement of around 10% in September year-on-year. One indicator of traffic movement is, of course, fast track collections, and that's also shown a decent growth. That's also seen decent numbers of nearly INR 2,000 crores in September versus average of around INR 1,500 crores in the December to February period. NPCI and UPI payments are back to slightly higher than pre-COVID levels. Net EBITDA is also fairly strong positive, close to $18 billion in September. Positive, even though the [ PLI ] thing is yet to [ rectify ]. We'll have to wait and see. Another thing is that going by the commentary, which I keep on reading and hearing, the late [pre analysis] here could also probably end. I'm -- this is not a guidance, could probably see strong [ SMCG ] and [ white good sale ] in November. We have also mentioned the import embargo on -- faced embargo in defense equipment, and we are very -- we do think that there's very positive news because, as a company, in terms of the total count out of those [ 101 ] items, we can actually address more than 50%, even though the -- even though the values could differ widely from item per item, but very welcome move. So these are some of the macroeconomic trends, which I thought I'd need to point out and because we are still in a slightly volatile situation, we are still not giving any guidance, but we are positive on the outlook. Now before I open the session to Q&A, I would also like to -- on a personal front, this is the last time that I'll be addressing you in the capacity of an L&T Spokesman. I'm immensely grateful to both the buy-side and sell-side for the here rate support and some interpersonal relationships that we have built over so many years. And people have never hesitated to reach out to me and at times that even at odd hours, which is testimony into the fact that they are very comfortable with our -- with the higher interchange that we have. My -- I would also like to extend my profound and heartfelt thanks to L&T management for the faith and confidence that they have [indiscernible] in me for all these years and for the constant support. In fact, it's very easy to go wrong and if top management wants to continually paint rosy pictures, but we'll never been under that pressure. And special thanks to my long-standing boss, Mr. Shankar Raman, who has supported me through thick and thin and for the valuable advice and insights that he has so freely given to me over the years. A large part of where I am today is because of that strong support and advice. The IR team, we've already briefly introduced both Mr. PR Ramakrishnan and Harish Barai. And I'll sleep easy at night, meaning that the higher function is in very sound and competent hands. And both of them are long-standing L&T employees. Both of them have -- meaning that Harish has been in L&T for over 22 years and PR over 28 years. So L&T is nothing new to them, so that is -- that's a great relief, actually, for me. With that, I would like to open the session to Q&A. And since PR and Harish are already in the group, so to say, I will [ present ] them to handle the Q&A. And if required, I will jump in or intervene if I need to add anything to what they have said. With that, over to you.

[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities.

Yes. I'll start with congratulations because they are now very successfully [ winning ] and a very, very warm welcome to Ramakrishnan, Sir. And Sir, a very good quarter in a very challenging environment. So my first question is, Sir, why are we still not giving any guidance given the fact that we expect the deliver availability has improved materially, and we expect some kind of normal run rate? Are we not confident of [indiscernible] H2? And also on the order [ prospect ] [indiscernible] reasonably INR 6 trillion kind of order perspective there, what is stopping us from giving any guidance? That's my first question.

Okay. So I will think that, Mohit, this is PR here. You must have heard Mr. Shankar Raman, and you heard me and you heard Mondal also closing with his guidance on outlook. See, it has always -- in the recent past, we have always, as a company, always given a sort of a guidance on how we see orders and how we see revenue and also margins. But at the start of this financial year, because of this COVID situation, the unpredictability in terms of when the ordering momentum will start, is not very -- is absolutely there, and it still lingers on. But there are -- as we have summed up across the 3 of us, what we have spoken over the last 1.5 hours, we do see a good amount of traction or opportunities which are being put. But as you are aware, these are all largely driven from the government side. And I'm talking first of India, and I'll come to the overseas part later. As far as India is concerned, the first part of the year was more to do with how to address the lot than the situation more from -- it was more driven from a social and a health perspective. And having done that, the company -- the country still continues to witness turbulence as far as corona is concerned. But at this time, the government also realized that it is important to keep the economic engine running. So they kept the economic engine running in the first part by ensuring liquidity and in the second part, as is evidenced by the prospects and the kind of tenders which are likely to be floated, so the theme shifts from more -- from a growth perspective in terms of kickstarting the economy on to the growth track. Now having said this, our internal discussions with our -- all our businesses just point out that there are lots of opportunities which are coming up and we are also trying to price it in a proper way and try to address those opportunities. But the timing of contract orders in the current situation becomes a little, I would say, difficult for us to estimate. And hence, this is one of the reasons that we have refrained from giving a specific guidance, but I believe if this whole situation stabilizes, hopefully by the end of March '21, I guess we will be in a better position to articulate as to how do we see '21, '22. So this year has been largely a year for us to ensure, as Mr. Shankar Raman talked about in the initial part of the call, that ultimately safe and health of our employees, of all our stakeholders is primarily important. And then addressing, given the constraints, how do we execute. And it's an important thing that since the large order book at least enables us to survive over the next, I would say, 1 or 2 years in terms of how we execute. And at the same time, it is important for us to also see the pipeline. So the pipeline looks robust, but in terms of timelines for us to give an idea about what kind of order inflow guidance, I think it's a little premature for us to say at this juncture.

Okay. Understood, sir. Secondly, on this Nabha Power [indiscernible] my question is the valuation which you arrived for Nabha Power of INR 22 billion, does this account for the disputes and custom duty getting resolved in our favor? Or is this -- or it doesn't consider this getting resolved? Secondly, on the similarly [indiscernible] is this completely funded by equity?

Okay. So I will take it. Mohit, there are 2 questions. One is Nabha. So the Nabha is -- our belief is that whatever matters we are pursuing with our client, PSPCL. There are clients where we have strong views on all these matters. And in fact, in most of the matters, the arbitration of the courts have come in our favor. We do have -- we do believe that these things are going to be positive for us. Hence, the way we have valued the company at what we expect to realize on account of a possible divestment does not factor into such matters going against us, number one. Number two, [indiscernible] is currently funded entirely by L&T in terms of a combination of equity preference and loan assistance. So we don't have any third-party debt into the company.

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

My 2 questions could be fast. If you can help share some insight in terms of the overall net performance of Hyderabad Metro in terms of how was it at the PAT level? And what would be the estimated time line in terms of towards the of the year expected number? Also, secondly, on Heavy Engineering, if you can elaborate what was the kind of warranty provision that we have taken on books for this quarter? And lastly, on the order inflow, although you've shared a broad prospect across a couple of segments, can you give some granular detail in terms of bottom-up across some of the new verticals in which you operate?

Renu, [indiscernible] here. Actually already into 3 questions, but anyway, Hyderabad Metro, we have in the current quarter, our net loss at PAT level is around INR 450 crores, approximately. Mainly constituting the depreciation, INR 75 crores interest, INR 25 crores and under recoveries at EBITDA level of around INR [ 35 ] crores, approximately INR 360 crore interest. PR, would you like to take the Heavy Engineering?

Yes. Okay. So as I mentioned, in the Heavy Engineering segment, the provisions towards a potential settlement going forward is in the order of INR 120 crores for the quarter. Renu, you also -- I think you also asked us for some idea...

Yes, the bottom-up prospect across some of the key verticals.

Okay. I'll very briefly touch upon that. And obviously, since it's very confidential information, we will not be able to give out full details. So in the -- if you take the core Infrastructure business, and here, I'm grouping power transmission distribution under Power and not under the core Infra. The core prospect base is around the INR 350,000 crores approximately, INR 3.5 trillion. Covering buildings and factories, heavy [indiscernible], transportation infra and water. Power which would constitute both coal and gas-fired EPC prospects as well as our transmission distribution, is around INR 120,000 crores. A major part, obviously, is Power [indiscernible] and [indiscernible] is obviously higher than the EPC prospects. [ PTC ] also includes [indiscernible]. MMH, metallurgical and metals and material handling is relatively small at around INR 15,000 crores. Hydrocarbon in both offshore and also including construction, hydrocarbon construction is around INR 1 lakh, INR 10,000 crores. And Heavy Engineering, Defense and Smart World and Communication, these 3 together are around another INR 15,000 crores. So that makes it around [ 6 set ], INR 10,000 crores as the EPC prospects that we are seeing as of the end of Q2.

Next question is from the line of Sumit Jain from ASK Investment Managers.

Yes. I have a question, ROE [indiscernible] of this [indiscernible] in. [ What is the ] ROE and for [indiscernible] net working capital, which is about [ 26% ]. What is the exact number in your numerator in denominator? Because I don't think the last 4 quarters as a total of the revenues is the denominator or you've taken FY '21 [ revenues ] as the denominator.

Yes, Harish here. So for ROE calculation, we take the trailing 4 months -- 4 quarters, sorry. So the last 2 quarters of this financial year, the first 2 points...

I'm sorry, you're very inaudible. It is probably on my end, am I connected?

Are you able to hear me?

Better now.

Yes So the ROE calculation that is there is based on the trailing 4 quarters, okay? And so it includes the 2 quarters of this financial year and the 2 quarters of last financial year, right? And since this includes exceptional gains, if we were to remove that, the ROE would be in the range of 10% to 11%.

Okay. And the question for working capital, again, here, the base [indiscernible] last 4 quarters?

Yes, absolutely correct. So it's the last 4 quarters only. and which is why the percentages look a little worse in the first 6 months of this financial year. Now if there was not a problem of the denominator, our sense is that our working capital -- net working capital to sales would have been better than 23.5% that we had reported in March. So essentially, what we are trying to do in this particular financial year is focus on the absolute levels of net working capital as PR mentioned. And hopefully, if we are able to maintain around these levels for the remaining part of this financial year, it would be a good achievement. And PR also mentioned that in the first 6 months of this financial year, the entire operations of the company have been financed by client collections. That is a happy situation to be in.

So for this, the stand-alone net working capital, the hydrocarbon is listed into a subsidiary, right?

Yes, the net working capital that we have reported includes all the businesses except financial services.

Next question is from the line of Ankur Sharma from HDFC Life Insurance.

Just 2 questions. One, on the hydrocarbon orders, when I look at the last almost 4 quarters now, actually, the hydrocarbon orders have been very, very soft. And so can you just talk about how do you see the situation currently, both domestic, overseas and also some of the larger prospects over there?

Yes. So you're quite right. I think we had very good hydrocarbon orders in the first 6 months of the previous financial year. And you're quite right that the last 4 quarters have been a little muted, primarily because it's a function of oil prices. And the petchem, et cetera, is also a derivative of oil. So that has been a little lackluster over the last couple of quarters for obvious reasons, both in India and in the GCC countries. But if I were to share some information from the bottoms-up prospect pipeline that we have because hydrocarbon sector has seen quite a muted ordering over the last couple of quarters, our bottoms-up prospect pipeline suggests that close to INR 1 trillion of domestic plus international orders might come quickly. Now very difficult to quantify which quarters, but it seems that a lot of bunching up is happening because of lack of ordering over the last couple of quarters. And let's see, we are hopeful if the tendering and ordering activity picks up quickly and which we believe will happen once normalcy comes back in the world and oil prices revive, we are very hopeful and constructive in the coming couple of quarters.

To add to what Harish just now told, in case of hydrocarbons, the opportunities going forward will be seen more on the mid and downstream, which is what we call the petrochemicals part because of, obviously, the muted oil prices and expected to continue. We don't see much of traction in the upstream side.

Sure. And just on hydrocarbons, again, your press release mentioned about some kind of provisions being taken there this quarter as well. If you could just elaborate more, I think it was on the domestic business, India business. So size of provisions, what does it relate to? Are you seeing some delays, et cetera? What exactly is there?

So see, essentially, I think the variation in margins that you see in Q2 of FY '20 versus Q2 of FY '21 is largely on account of certain claim settlements that we had in the previous financial year. There are no such major issues in the current financial year, and the margins are hovering between 8% to 9% in the current quarter of this financial year. And it is more normal. Of course, the COVID pandemic has created some challenges as far as under recoveries are concerned, but it's quite normal.

Okay. So there are no provisions this quarter. So the 8% to 9% is like a more normalized margin?

Yes, I mean, if you look at the history, and if you have seen the margins, the margins have remained in this band of 8% to 10%. Last year, Q2 was a little bit of an exception.

Okay. And just the last question would be, are there any order cancellations during this quarter, which you've taken out from the order book? Any significant number you want to share or is it that business...

There has been no significant order cancellations during the quarter. There could be minor ones, but nothing to -- as we say, order book, what we have is -- relatively at 3 lakh crore is reasonably robust enough for us to deliver. So there has been no significant cancellations.

Next question is from the line of Renjith Sivaram from ICICI Securities.

Yes. I just wanted to check on if you look at the overall order intake pipeline, what would be the opportunity from the state front? Because we had enumerated the segmental-wise in the states, which are all the states you are seeing activity and how much is [ coming ] from the state segment?

Large part of it is from states because water and power transmission distribution is obviously from state, and these are fairly strong. So while we will not be able to quantify, a large part of it is definitely from the states, mainly in water and power transmission distribution.

Whereas the metro and the RTS and the roads and expressways could be central-led.

Okay. And in terms of the overseas market, apart from Middle East, are you seeing activities improving from the Africa and the other Southeast Asia kind of market? Or is it still some time away?

So out of the INR 1.3 trillion worth of prospects that we see for the next 6 months of this financial year from the international markets, it is fairly well distributed across businesses, be it infra or hydrocarbon. Infra, largely, we see some opportunities in the water space and the power transmission and distribution space. And it is fairly well distributed across GCC Africa and Southeast Asia.

Okay. And sir, lastly, on the infra margin, it has been kind of subdued for quite a long time. So was there any provisions here? Or can you throw some color on the infra margin?

So the infra margins, I did talk about when I was covering the infrastructure segment, okay? In the current quarter, it was at 6.4% as compared to 6.3% in the previous quarter -- or the previous quarter of the current year. That is Q1, we said 6.3%. The important point here is as we have ramped up across the sites in Q2, the productivity challenges continue to linger on. So what we see at Q3, Q4 is that there will be -- there is absolute near normalization in terms of logistics of supply chain and also full 100% availability. And with the lockdown restrictions easing, we do expect the momentum of revenue growth to substantially go up or significantly go up in the next 2 quarters. But as you are aware, all of you must be aware that our margins on the entire E&C product business is largely driven on the project mix, the way it is progressing. So each quarter to that extent across all the segments, besides infrastructure, it would all depend on which project enters into some sort of a margin threshold. And like what we saw in defense, there was a particular order in terms of defense order, which entered into taper [ stuff ] because it entered into execution in later part last year and whereas in the current year, it tapered off. So margin movements across the sectors would be dependent on the progress of jobs and also on the mix, whether it's the cost job or an RSV job. There's only one thing I would like to say is that despite the situation in terms of getting to get as much orders as possible, we are being a little cautiously optimistic in terms of pricing, that we are factoring all the attendant risks and try to ensure that our bids which are going up for submissions do have what we call as acceptable margin pressures and factoring into all kind of risk parameters.

I just wanted to add to what PR mentioned. So yes, he mentioned about job mix and productivity headwinds. Now one thing I just wanted to say is, productivity headwinds are there. But to some extent, they also get mitigated due to lower raw material prices that Mr. Mondal mentioned and the operational efficiencies that we are trying to implement across the group level. But as we said, we will have to wait and see how it pans out during the next 2 quarters.

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

Sir, just on the high-speed rail, so have you concluded our negotiations on the project? And when do you expect to start the work?

Actually, I think this was announced yesterday, and we are pricing the stock. We have got the letter of intent, so that the project is obviously is in our favor. And we will have to enter into, I think, more detailed negotiations as to the commencement of work. But it's a 4-year project. That's the way I put it.

So just to add, the time lines between an LOI and the contract is a couple of months. So only after that, the design work will start. So maybe a couple of months away before we start working on it.

Okay. And my second question was on Hyderabad Metro. Now we have a running interest cost of about INR 50 crores -- sorry, INR 370 crores, 375-odd crores per quarter. And we have set aside about INR 2,000 crores, and we are also talking to governments and trying to get in an investor. So just to get a sense on why -- when do we expect the cash flows from the project to start servicing the liabilities, which may be finalized over the course of time after refinancing and getting some support from the government or getting an investor? So any sense on that should be helpful.

Okay. So as I did talk about, the interest cost per quarter would be in the range of INR 350 crores to INR 360 crores for this business. The point here is that this is a -- it's a complex project, okay, in terms of the way it is structured. The key positives in this project for us is that it is -- in all the cities of the world, you have the entire metro transport as linked, commissioned in one particular way, and that is entirely operational today. So that is a key positive. The second key positive is the concession period is confirmed for 35 and further extended by another 25 years. So you can technically say that it is a perpetual asset for us. Now -- and as we commissioned this project early February, we managed to get what we believe in our internal estimates almost 4 lakh passengers per day. In fact, that's around 2 lakh to 3 lakh passengers per day is the first milestone to cover entire operational cost, okay? And beyond that, we start servicing the finance cost itself. But because of COVID pandemic, this is absolutely a black swan event in the traditional sense, which has impacted this particular project. And so today, as a group, when we say as a group, we as the lead promoter, along with our lead banking finance institution led by SBI. Along with even the Telangana government, we are -- we are absolutely discussing to restructure the project in a possible way so as to minimize the effect it will have on all its stakeholders. Now such kind of decisions are not expected to happen so fast, but it is our intent that we should try to close it as early as possible. But it will be very difficult for us to comment at this juncture a time line. Having said this, this particular project in terms of the attendant, I would say, concern from L&T is no less than Mr. S. N. Subrahmanyan, the MD CEO and Mr. Shankar Raman taking their -- at their levels, their discussions are happening. So hopefully, I think we should try to close it out soon. But no time lines, please, at this juncture.

Next question is from the line of Abhishek Puri from Axis Capital.

Just wanted to check one, on the liquidity that we raised during the pandemic was upwards of about INR 8,000 crores. And looking at the cash flow from operations in the current first half of the year, not much cash has been consumed on. I believe it's almost INR 500-odd crores. And it is resting in a -- significant amount of money is resting in current investments, low yields today. So why do we use that for debt repayment instead of the E&A proceeds and use that INR 50 billion or INR 5,000 crores for the E&A proceeds for better purposes?

Yes. See, so Abhishek, so if you see our cash flow statement, so first, I'll throw some light on our stand-alone borrowings, which PR mentioned. We had raised about INR 12,000 crores in April, largely as an insurance buffer. Now by September and if you observe our Q2 cash flows as well, we have repaid around INR 4,000 out of that. Secondly, there has been some repayments in our subsidiaries as well. So if you see in Q2, we have repaid close to INR 9,000 crores of borrowings. And the allocation plan on -- after receiving the proceeds of [ EIC ] has been well-articulated by Mr. Shankar Raman. Now cash flows, as you have seen, both Q2 and H1, operational cash flows have been very robust. PR also mentioned that we expect Q3 and Q4 to be more normal in terms of client collections. And if that happens, I think we will have a little bit of more flexibility to have maybe retire a little bit of more debt that we have on our balance sheet. And the rest will remain as surplus. Now having said that, I think it's very important, yes, we have done well for the first 2 quarters of this financial year, but the virus, the coronavirus still continues across the world. And you can never be very sure how the next 6 months will be. So we are being guarded. Let me put it that way.

It's fair enough. When I'm looking at the INR 34,000 crore current investments, is that entirely into liquid funds? Or how -- or is it allocated into certain businesses, if you can just take up on that? And my second question is on -- at the beginning of the year, we talked about payment terms getting adverse, and the EPC contractors have to make -- fund some of these projects. That doesn't show in your numbers yet, both other current assets and receivables are down. So what has changed in the past 6 months on that?

Okay. So let me answer the second question first. So if you -- as we said, broadly, our net working capital, absolute net working capital levels have remained unchanged from March. Now the good thing is that we have been able to bring down our gross working capital levels close to INR 9,000 crores. It is a combination of reduction in customer outstanding and capital work in progress. So more of capital work in progress, moving into client billing and finally, culminating into collections. So that's the good part. But yes, if we have to continue our operations, we have to keep paying our vendors. So the entire liquidation that has happened on the gross working capital side has gone into paying our vendors, so that our execution continues. And as you know, I think first 2 quarters have been slightly subdued, but operations will pick up in Q3 and Q4. So that's where we are. What was your first question, sorry?

On the INR 34,000 crores current investments.

Is it current investments or something else.

Yes, yes. So the entire -- so if you look at our -- so if you look at our H1 cash flows broadly, the net cash from operations is INR 36 billion. And if you see March to September, our group borrowings are up by INR 5,000 crores. So that makes it INR 9,000 crores. And the EIC proceeds, everything has moved into surplus investments only.

Abhishek, the current investment is largely into what we do. Surplus investments, so all financial instruments across various [ asset class ]. There has been no structural change in that. There's no investments in any other entity or so. So all in the normal course of business, parking your temporary surplus.

So broadly, the entire INR 20,000 crores has moved into surplus investments only.

And I would like to wish Arnob all the very best. I've benefited immensely from our interactions with you. Thank you.

Thank you, Abhishek. Heartfelt thanks from my side.

The next question is from the line of Pulkit Patni from Goldman Sachs.

Sure. My first question is this disconnect between -- I mean we obviously talk about a big prospect base. But at the same time, RBI talks about weak state government balances. How do you reconcile these 2? Is there a concern that second half order inflows could be weaker, given what's happening at the state level finances? If you could take that as the first question.

Yes, sure. So Pulkit, I think the first 2 quarters of this financial year in terms of collections for us has been normal. The primary reason being that both the central and the state government, as you know, have front-loaded their borrowing programs for the year. Not only have they increased, but they have also front-loaded. So when we do our calculations, the H1 borrowings are already over for the central and the state. So the numbers suggest that close to 11 lakh crores of borrowings have happened between the central and the states for the first 6 months of this financial year. Now when we look at -- now the central government borrowing programs for Q3 and Q4 is out. The states, we only have the borrowing program for Q3. Q4, we are yet to find out. But basis, some rough-cut calculations, we believe that if central plus states raise about 11 lakh crores in H1, the H2 numbers seem to be around 9.5 lakh crores, which is not a far departure from H1, so to say, number one. Number two, why are we constructive? Because Mr. Mondal, Mr. Shankar Raman, they all covered the movement and the pickup in high frequency, economic indicators and GST collections, et cetera, are moving higher. So I think the government will be hopeful as far as its tax collections are concerned for the second half. So I think the remaining borrowing plus the tax collections should get us there. Now execution, I think the government was very keen that it continues and they have released payments. Ordering was a bit patchy, but not too bad as well for both for Q1 and Q2. Going by the recent media news reports, I think there seems to be an activity pickup in tendering and ordering from the government side. So I think we believe that Q3 and Q4, as far as ordering is concerned, should be much better than Q1 and Q2. That's the initial first sense we have, but still refraining from kind of putting our neck out and saying that we are in for very good times.

Sure. Makes complete sense. My second question is on these write-offs that we've taken. So obviously, in the last few years, we've been cleaning up our books. Now as I think through the future, I mean Hyderabad Metro is something where, obviously, we are in process of restructuring. The other one is our power equipment business. I mean while it's been doing well, but we all know the future of BTG equipment. So is there any other business where in the next few years, we could see the risk of some write-downs coming or impairments? Or we are, other than these 2, largely sort of done with the kind of readjustments we had to do? That would be my second question.

Okay. I mean first and foremost, it is very difficult to talk about into the future as to saying that whether do we expect any further kind of reduction, write-down or impairments in any form, I guess, right? So as we see today, and in fact, just to once again comment that there has been a background in the current quarter as to necessitating L&T for us to take a sort of an impairment charge on all these 3 specific assets, okay? The decision to try to see -- I mean, it's a defocused kind of business from a power development that portfolio is concerned. Mr. Shankar Raman also talked about that we are planning to divest from Nabha. Now it's an operational asset. And hopefully, I think we should find out, identify a buyer soon. And in case of Uttaranchal, the plant should be hopefully come for commercial completion. It has undergone mechanical completion in terms of the commissioning of the turbines and should go into commercial operations sometime this quarter. That is maybe December or so. And we are in the advanced stage of trying to structure out the long-term PPA. Now this was the event when we tried to talk about negotiation on a PPA perspective from a cost-plus approach, there is no way to justify the current carrying cost of that investment. And hence, that was a reason for prudentially taking a write-down. We also talked about Hyderabad Metro. As we say, Hyderabad Metro is -- I mean, for us to even take an evaluation of the project, it is important that we see the project post its commissioning in terms of -- because we have seen its commissioning, but again, because of this event, there is something -- it is very difficult for us to estimate. Now the same logic may come up for Uttaranchal. But Uttaranchal, it's a power project with too much capacity. You know the base, so the output of that particular project is known. Whereas in case of Hyderabad Metro, it is impossible for us to factor what kind of an output will work. So today, we are in the process of restructuring that. So it will not be possible for us to even refer to going forward, are there any sort of write-down impairments. So the decision to evaluate a matter from a write-down impairment or even reversal of a write-down is a dynamic process, which has to be seen every quarter depending on the developments and depending on each and every business and the sector to which it caters to.

So my question was actually more on the BTG business, but I can take it off-line in the interest of time.

No, no. BTG business also, today, at BTG, first and foremost, the BTG business is a sort of a joint venture investment for us, okay? We have invested as an investor. So it is not getting consolidated into our financials other than the share of profits. Now, yes, the amount of profits has come down because of lower order intake or order intake considering the, I would say, the lack of opportunities in the power sector, especially in super critical space. But both the companies, both the joint ventures have an order book for them to execute profitably. So until such time, we keep accruing profits. In fact, as we speak, the boiler turbine actually had a dividend decline to the parent in this current quarter. So obviously, there is a cash, there is a profit. It will be difficult for us to even say at what juncture we will try to do the impairment because the company isn't profitable.

Even though we tested for impairment regularly.

Yes. And just to add to what PR just mentioned, I think this year has been an exceptional year where for the first 6 months, we have not seen any power plant ordering happening. Yes, power plant, the thermal power plant ordering is down from what we have seen a couple of years back. But I think even going forward, a 4 to 6 gigawatt of ordering should happen over the next couple of years or so. So I don't think there is any kind of stress there. And as PR mentioned, they are still having something like 1.5 to 2 years of order book to work on.

Next question is from the line of Priyankar Biswas from Nomura Financial Services.

So my question is regarding the reinvestment of the Schneider deal proceeds. So one of the things, if I heard it right, so around INR 2,000 crores would be invested in Hyderabad Metro. And another INR 2,000 crores would possibly be investments into the financial services. Now first question is, is the investment in Hyderabad Metro adequate to keep the debt level -- to keep the servicing of debt levels adequate? So I mean like going forward, do we expect more infusions into Hyderabad Metro? That's first. And secondly, for the finance business, since based on media reports, it seems that the mutual funds business is getting sold at quite a fairly high value. So there is cash there also. So what is the need for credit investments in the finance business? So if you can clarify on that?

So Priyankar, this is PR. I will take that question. Two questions here. On Hyderabad Metro, just to -- I mean, just to state, the Metro project is complete from an investment perspective. There are no residual investments in terms of additional CapEx, which necessitate a combination of equity or debt, okay? The only other part in Hyderabad Metro project is the development of the associated real estate. To some extent, we have already done, and to some extent, we need to do or we can do. It's not we need. It's more to do, we can do, okay? We have -- I think our total package of 18 lakh square feet, which we can develop in the real estate. But that is based on demand and supply requirements in the future. So the Hyderabad Metro from a perspective of completion is already done. So in that context, we are already trying to see the restructuring of the balance sheet from a more -- from a liability perspective, liability side perspective, okay? One. Secondly, Mr. Shankar Raman also talked about that when we talk about INR 2,000 crores, which we are setting aside, it was actually services. So which means it includes Financial Services and also our other portfolio, okay, both put together. So he gave a number of overall INR 4,000 crores, out of which INR 2,000 crores is for Financial Services in a special -- specific reference to. But I wish to tell you that what we hear in the market are -- it's all media speculation. We don't have anything to comment upon whether it is news, actual news or not. So the decision to infuse funds will depend on the requirements of the business of L&T Financial Services businesses. And based on that, that all has been taken, okay?

Sir, I think what I meant by the Hyderabad Metro question was, see, your per quarter interest is something like INR 350-odd crores. So broadly -- so almost like INR 1,500 crores -- INR 1,400 crores, INR 1,500 crores is the cash interest cost for the full year. Now is the eventuality that traffic doesn't really pick up to, let's say, the 4 lakh passengers per day, so will there be further equity or maybe subordinate debt infusions that may still happen in the future? Or are you not expecting it post that INR 2,000 crores infusion that RS has spoken out?

No, no. That is actually no. I think what we have -- what Mr. Shankar Raman spoke to is based on our current level of discussions, we believe that our further fund infusion of INR 2,000 crore may have to be done into Hyderabad Metro. But in what form, that is all based on of our -- the result of the discussions and closure, which we will do with the lenders to the project led by SBI and also the assistance, which we are seeking from the Telangana government, okay? What we are selling now is that there be -- in our understanding, there would be a commitment of roughly INR 2,000 crore. But in what form that commitment will flow, it depends on the course of the discussions what we have with the other stakeholders.

Next question is from the line of Nishant Chandra from Temasek.

I wanted to just understand the cash flow movement. So the one presented in the analyst presentation is for the consol business. But if you were to look at the EPC business, can you talk to the impact of the cash flow statement, please?

Yes. See, Nishant, I would request you to go through the cash flow statement that we have presented in the analyst presentation because essentially, the one in the advertisement includes the disbursements that are attributable to Financial Services as well. So we reclassified it from the cash from operations and moved it into financing activities. So the one that we have presented in the analyst presentation will give you a better picture. And the net cash from operations that you see there is ex Financial Services. And if you want to refer to, you mentioned about core, right?

Yes.

So to go through the advertisement on the stand-alone side, to get a better sense on the core cash flows, which also is a - it will give you a good flavor.

Okay. Understand. Okay because there, it seems that even the EPC business has grown up cash, that's at least the interpretation I had. So...

Yes. That is correct. So -- which is why I'm saying, have a look at standalone. That will give you a good picture.

Understood. And just to be clear, the -- in the analyst presentation, the INR 127.8 billion of net sale of long-term investment is essentially pertaining to the E&A sales, right?

Absolutely.

Okay. Understand. And that is a gross number. Without taking the cash -- the tax -- cash tax into consideration, right?

Nishant, what is shown in the cash flow, you're referring to the advertisement, correct?

No, no. I'm looking at the analyst presentation, Page 29. So it has INR 127.8 billion as net sale of long-term investments. So I just wanted to check whether that is the gross inflows, excluding the tax attributable to the sale of E&A.

Yes. So Nishant, what happens is that Mr. Shankar Raman mentioned about tax of around INR 2,000 crores, but not all the tax gets paid upfront. So it happens in installments. So what you see there is roughly INR 13,300 minus INR 600-odd crores of...

INR 75 crores.

Yes, around that. Yes, of tax. So the remaining part of the tax will actually flow in a subsequent cash flow statements.

Okay. Okay, understand. Yes. No, I was not able to piece together the INR 2,000 crore odd of tax payment in this statement, which is why I asked that question. And thanks, Mr. Arnob, for all your help all the years.

Sure, Nishant.

Next question is from the line of Sujit Jain (sic) [ Sumit Jain ] from ASK Investment Managers.

Yes. So in relation to my earlier question, what is the net working capital for the EPC business? What you've given us is the net working capital position for the entire business across Financial Services.

Yes. So...

I'll just complete my question. So here, like you said to a previous question, if I look at the standalone balance sheet, and if I do the math, there's a INR 23,000 crore -- because that is the right representation. I may have to add hydrocarbons business there, but there is a INR 23,000 crore working capital. And if I divide that by the last 4 quarters revenues, then that figure crosses 30%. If I divide that by FY '20 revenues, then that figure is still 27%. So we need to have a spend as to what is the working capital position in the EPC business and infra business.

Yes. I'll give you a flavor on that. So if you look at standalone, which excludes hydrocarbon, obviously, first thing I wanted to just tell you that don't look at percentages because of the fall in sales, the percentages look quite bad. But if you see the absolute levels of working capital that were there in stand-alone as on March 20 and compare it with what exists as on September 20, there has been a marginal movement of close to INR 1,000 crores.

Let me chip in here. Let me chip in here. If you take core business, including hydrocarbon and ex services, the working capital level, considering the 4-month hearing thing is roughly around 28%. And so if you take services business, it's roughly around 21%. And that's how averages to around 26.5%, approximately.

Okay. That helps. And in the cash flow statement as you were just mentioning to a previous question, Page #29, the net cash flow from operation of INR 27.6 billion to [ INR 730 crores ] or INR 3,650 crores for H1 is the representation of the business, which is ex of Financial Services.

That is correct. That is correct.

Okay, sure. And one last question. And in correlation with the previous question, Hyderabad Metro, we have chosen to take write-downs in other businesses. Here, there is no clarity. I understand. But the way -- if you look at things, what was the rationale of giving a special dividend when that dividend, if I look at the current working capital of 25%, 26% needed, for an additional INR 10,000 crores of sales, you would require that kind of money, which is INR 2,500 crores, which you're giving as dividends.

The special dividend, as Mr. Shankar Raman talked about is -- refers to the event which is resulting from the [ E&C ] sale. It should not be confused or intermingled with L&T's policy on dividend over the years. This is because the exit from the E&C business is from an investment, which has been one of the oldest business of L&T and eventually resulted in a value creation, thereby giving an overall, I would say, cash flow consideration post tax around INR 11,000 and a PAT of almost INR 8,000, INR 8,500. It is against that, this particular dividend has been declared. So if I have to put it, if there were possibly no EIC divestments we could have done, we think we would not have declared a dividend in the first place. So we would -- we are linking the special dividend only to the extent it relates to the EIC divestment.

Would you not require this money for Hyderabad Metro or for your working capital requirement for incremental business? Does the business have room to actually give money back to shareholders where one can see easily that there is a requirement in the business itself?

At the start of the call itself, Mr. Shankar Raman did talk about that against the consideration, the post-tax consideration, which accrues to the L&T parent. What is the proposal we have, how are we used. So he did refer to the fact that out of this money, we are keeping a INR 5,000 crore of some sort of a liquidity buffer, which will be used for in case the COVID situation deteriorates or in case it stabilizes, we will use that money to either retire the short-term debt or possibly keep it is a liquidity buffer. And then he did articulate about setting some amount aside for Hyderabad Metro. So that is having factored, the group felt that it is appropriate that we have around INR 2,000 crores, INR 2,500 crores of cash, which we should use it to declare a special dividend. So to answer to your question, the probable outflows because of our commitments into the projects like Hyderabad Metro services, Financial Services and also a liquidity buffer, that has been addressed before declaring the dividend.

And wish Arnob good luck. And all this years getting insight, thank you very much.

Thank you so much, Sumit.

Next question is a follow-up from the line of Priyankar Biswas from Nomura Financial Services.

So just one more question here. So in state orders, so the state is I heard like 38% of the L&T current order book. So if you can highlight that within this, how much is actually funded orders? So essentially like multilateral or something like a power finance corporation or through some sort of a bank consortium loans. So mostly from a payment point of view.

Yes. Priyankar, so roughly about -- our order book from the domestic market is about broadly 2 lakh 30,000 crores, of which around 52% comes from central and state. So that would come to around something like 1 lakh 17,000 crores is central plus states, of which around 43% is funded by multilateral agencies.

And a major part of that is from state projects.

The next question is a follow-up from the line of Renu Baid from IIFL Securities.

Yes. So my just last follow-up was, you did mention in terms of slight increase in working capital requirements by end of the year and targeted overall debt reduction. Would we have any number in mind that over the next 12, 15 months, what could be the level of core debt levels that you would be targeting after part of this reduction in working capital relief from the next year?

See, now I think Mr. Shankar Raman articulated the capital allocation coming out of EIC. And as we see today, I think as on September, we have debt levels of close to INR 34,000 crores on the stand-alone balance sheet. Now everything will revolve around the operational cash flow generation that we will achieve over the next 2 quarters. Hopefully, if it continues to be robust as it has been in H1, maybe we will retire more and bring down our gross debt-to-equity levels as the stand-alone. But having said that, because of the EIC proceeds, let me tell you that even as on September, my gross debt-to-equity at stand-alone is 0.59, and net debt-to-equity is 0.11. So I think things have worked according to the plan that we have in our mind. And hopefully, if operational cash flows are good for the next 6 months, a lot of things will come in place.

Sure. So probably by next year, we should be looking at close to INR 25,000 crores or similar levels of overall borrowings for the business?

It all revolves around, Renu, the operational cash flow generation, right? So how do you want me to give you that estimate?

Good. [indiscernible] that working. And best wishes, and wishing good health to Mr. Arnob Mondal as well. Thanks for all your help and support.

Thank you, Renu. It's been a pleasure. Pleasure has been mine.

Next question is from the line of Ashish Aggarwal from Principal AMC.

Sir, most of my question have been answered, just one thing. We indicated that we were looking at INR 2,000 for our services business, including Financial Services. Just wanted to understand for ex Financial Services, why do we need that money? Because those businesses are throwing good amount of cash. So why do we need that money for the other services business?

So I guess like this that the other services business obviously are on the growth trajectory. And they have -- as you are rightly -- but you are right to say that they have reasonably large cash surpluses to justify that kind of acquisition by themselves. But it is like more like, I would say, put it across that in case if there is some good large business -- large opportunity, which probably necessitates some sort of a temporary kind of support. I think L&T as the parent may have to stand in good stead to lend that. But yes, to that extent, acquisition for those businesses will be largely driven from their own set of finances.

Next question is from the line of Uttham Kumar R. from Spark Capital.

This is actually Bharani from Spark Capital. So my question is on the order inflow. Now there is a 36% order inflow in the quarter coming from international, but that is including services, et cetera. Can you give the domestic, international order inflow split on only the core construction order inflow of about [ INR 17,000 crores ] for this quarter and for the first half?

Yes. So broadly, I will tell you the numbers for the first half. Out of around INR 51,000 crores of order inflows that we have reported at company level, core business would be around roughly around INR 30,000 crores, INR 31,000 crores. And international out of that would be roughly between INR 5,000 crores to INR 6,000 crores.

Okay. So INR 6,000 crores on INR 30 crores, 1/5. So the 20% is international or the inflow in the first half, that is on core construction?

Ballpark numbers, yes.

Okay. Okay. And this will be the same for the quarter also, like 20% in second quarter FY '21 also?

See. So the international orders have been slightly better in Q2 as compared to Q1. So out of the INR 5,000 crores of the international order inflows that I mentioned, close to INR 3,500 crores to INR 4,000 crores came in Q2 itself. Q1 was a little lackluster.

Okay. And this would be primarily in the power T&D and hydrocarbon?

Yes. So infrastructure, heavy engineering and hydrocarbon. These are the 3 core businesses which have international orders. And within infrastructure, obviously, power transmission and distribution and water are the areas where there is traction that is seen in the GCC countries.

And all the best, Arnob, sir, and I warmly welcome Ramakrishnan, sir.

Thank you, Bharani. It's been a pleasure interacting with you.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing remarks. Over to you.

Well, once again, thanks to everybody for a very interactive and the long call. In fact, this is the longest call that I have seen in the last over 11 years that I have been in this function. And I thought it was very, very elaborate and exhaustive. Not exhausting, exhaustive. But be that as it may, wish all of you a very good day, and stay safe. Stay well. Thank you.

Thank you.

Thank you.

Thank you very much, members of management. Ladies and gentlemen, on behalf of Larsen & Toubro Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.