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

Ladies and gentlemen, good day, and welcome to the Larsen & Toubro Limited Q3 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. P. Ramakrishnan. Thank you, and over to you, sir.

Thank you, Rutuja. And good evening, and welcome to this L&T Investor Earnings Call for Q3 FY '22. As you may be aware, the presentation has been loaded on the stock exchange and our website around 6:30 p.m. Hope you had a chance to take a quick look at the numbers. As usual, instead of going through the entire presentation, I will walk you through the key highlights for the quarter, followed by our comments on the environment and outlook in the next 30 minutes, post which we will take the Q&A. Before I commence a brief disclaimer, the presentation, which we have uploaded on the stock exchange and in our website today, including the statements that will be made during this call contains or may contain certain forward-looking statements concerning L&T's business prospects and profitability, which are subject to several risks and uncertainties, and actual results could materially differ from those in such forward-looking statements. To start with India at a macro level for Q3 FY '22 can be best described as a quarter where various economic parameters reintegrated back from the effects of the COVID second wave. Further, the festive season in Q3 also added to the demand buoyancy to some extent. With substantial pickup in vaccination, coupled with easing of regional curbs and improved mobility, the economic gain impetus, as evidenced by the various high-frequency economic indicators nearing pre-COVID levels. Green shoots were visible in multiple industry, services, investment and mobility indicators during Q3. The buoyancy in tax collections witnessed in Q3 also reinforces our growth thought process. On the flip side, supply-side inflation challenges continue to remain a source of worry. Our country is at a stage where a need to support recovery and balance the macroeconomic stability becomes a central challenge for policymakers going forward. Finally, although COVID wave three did strike India towards the end of the quarter, we do believe its impact on the economic progress is unlikely to be disruptive. Let me now cover the financial -- the various financial performance parameters for Q3 FY '22. Our group order inflows for Q3 FY '22 at INR 504 billion, registered a sequential growth of 20%, whereas on Y-on-Y basis, it registered a degrowth of around 31%. In our Projects & Manufacturing portfolio, our order inflows for Q3 FY '22 at INR 380 billion, registered a sequential growth of 26%, whereas on Y-on-Y basis, it fell by 39%. You would recall that in Q3 of the previous year, we had secured some very large domestic orders. In the current Q3 order inflows in our Projects & Manufacturing portfolio are basically from Infrastructure and Hydrocarbon, with contribution coming from Heavy Engineering and Defense segments as well. Whereas the domestic order announcements and tendering activity continue at a brisk pace in Q3, the awards of finalizations was a bit muted. Secondly, since we already have a large order book, we continue to be selective in the orders that we bid for. Moving on to the prospects pipeline, our Projects & Manufacturing business for Q4 '22, that aggregate total order prospects pipeline is at INR 3.92 trillion as against the prospects pipeline of INR 2.65 trillion that we witnessed for Q4 FY '21. This reflects an increase of almost 48%. This Q4 prospect pipeline is by far the highest we have seen in the last so many years. The Q4 FY '22 prospect pipeline of INR 3.92 trillion comprises of domestic prospects of INR 3.03 trillion and international prospects of INR 890 billion. As I said earlier, since the COVID third wave is unlikely to be economically disruptive, we do expect a busy Q4 in terms of awards finalization. Moving on to the order book. Our order book at INR 3.4 trillion as on 31st December is at a record high. As you are aware, a large and diversified order book provides multiyear revenue visibility. As our Projects & Manufacturing business portfolio is largely India-centric, 75% of this order book is, today is domestic and the balance 25% is overseas. Of the international order book of INR 820 billion, around 71% is from the Middle East countries and 17% is from Africa. As you can see from the slides, 89% of our total order book comprises of the Infrastructure and the Hydrocarbon segments. Within Infrastructure, our order book is well spread out across various businesses like heavy civil, water, power transmission and distribution, buildings and factories, transportation infrastructure and metallurgical and material handling. The further breakdown of the domestic order book of INR 2.58 trillion as on 31st December 2021, comprises of central government share at 10%, state government share at 29%, public sector corporations or state-owned enterprises at 44%, and the private sector comprises 16%. Finally, 33% of this total order book of INR 3.4 trillion is funded by bilateral and multilateral lending agencies. Coming to revenues. Our group revenues for Q3 FY '22 at INR 396 billion, registered a sequential and Y-on-Y growth of 14% and 11%, respectively. International revenues constituted 37% of the revenues for the quarter. The IT & TS portfolio continued to report industry-leading growth in Q3 as well. In the Projects & Manufacturing portfolio, our revenues for Q3 FY '22 at INR 272 billion, registered a sequential and Y-on-Y growth of 19.6% and 9.5%, respectively. Better execution in the Infrastructure, Hydrocarbon and Power segments was, to some extent, offset by lower revenues in Heavy Engineering, Defense Engineering and the Other segment. I will cover the details a little later when I cover each of these segments. Overall, as a philosophy, our execution in the Projects & Manufacturing portfolio was calibrated in line with the cash flows during the quarter. Going forward, as cash inflows improve in Q4, and there are no major risks arising from the COVID third wave and the consequent supply chain disruptions, we should witness improved execution levels just like any normalized Q4 for L&T. Our current labor availability is at around 261,000, which is at near normal levels. And more than 96% of our employees and around 75% of our workmen have completed both doses of the vaccination, and it is expected in the next 2 months, the rest of the -- the second dose of the vaccination for the workmen also will get completed. Moving on to EBITDA margin. Our group level EBITDA margin for Q3 FY '22 is at 11.5% vis-a-vis 12% in Q3 FY '21. You would recall that in Q2 FY '22, our group level EBITDA margin was at 11.5%. You may refer the detailed breakup of the EBITDA margin business segment-wise, which is given as part of annexures to the analyst presentation. You would have noticed that our EBITDA margin in the Projects & Manufacturing business is at 8.5% for Q3 FY '22 vis-a-vis 10.2% in Q3 FY '21. If you recall, in Q3 FY '21, we had a bulk sale in our reality business segment, which boosted our traditional core of Projects & Manufacturing business margin by around 150 basis points. Now excluding this reality, our Projects & Manufacturing business EBITDA margin would have been 8.7% in Q3 FY '21 vis-a-vis 8.5% in Q3 FY '22. On a 9-month basis, both our group as well as the Projects & Manufacturing business portfolio, the EBITDA margin for the current year is higher than the previous year. As explained in the past earnings call as well, we have multiple levers in our businesses to offset the cost headwinds being experienced in the current year in our fixed price contracts in the order book. For the benefit of everyone on this call, I will repeat what we have said earlier; multiple tailwinds emerging out of jobs reaching the valuation threshold, release of contingencies on jobs nearing completion, better overhead recoveries due to improved volume, customer claim settlements, value engineering and various other cost savings have provided the much-needed boost to margin in an increasingly inflationary environment. Moving on to PAT. Our operational PAT for Q3 FY '22 at INR 21 billion has registered a sequential growth of 19%, whereas on Y-on-Y basis, it has contracted 9%. The operational PAT variance can be explained by 2 reasons, one that I said earlier with reference to the profit on the bulk sale in our reality business last year. And secondly, in the Q3 of last year, we had a higher investment surplus in the books post the receipt of the divestment proceeds of the Electrical & Automation business. So a combination of higher investment surplus last year and favorable money market conditions yielded higher other income in the previous year. Adjusted for these 2 factors, our operational PAT for Q3 FY '22 would have registered growth over Q3 FY '21. The group performance P&L construct, along with the reasons for the major variances under the respective function heads has been provided in the analyst presentation. Coming to working capital, our NWC to sales ratio has improved from 26.2% as at December 2020 to 23.1% as at 31st December '21. One of the reasons for NWC to sales moving lower is due to the denominator moving higher. Secondly, as I said earlier, we have strived to maintain a healthy balance between execution on our revenue growth and working capital during this quarter. You would have noticed that our NWC to sales is slightly worse than the March '21 levels that we reported at 22.3%. Our group level collections, excluding the Financial Services segment for Q3 FY '22 is INR 321 billion vis-a-vis INR 329 billion in Q3 FY '21. In Q2 FY '22, also we collected a similar amount of INR 321 billion. As you know, Q4 is generally a seasonally strong quarter for us in terms of customer collections, so we should be able to bring down our NWC sales to in and around the 22.3% by March '22, which is at the same level that we reported as on March '21. Moving on to the balance sheet. If you glance through the balance sheet, given in the annexure to the analyst presentation, you would notice that our group level gross as well as net debt ratios have improved over the March '21 numbers. This is mainly due to the repayment of liabilities in our Financial Services business at around INR 52 billion, at the parent L&T level at INR 29 billion and Nabha Power INR 13 billion. Finally, our trailing 12-month ROE as on December '21 is at 11% vis-a-vis 16.5% in December '20. As you are aware, our return on equity for December '20 includes the benefit of onetime gain on the divestment of the E&A business, net of exceptional items. Also, you would recall that our ROE on our continuing operations was 10.1% as of March '21. We are improving progressively, and let me assure you that the return ratios will be pursued aggressively. Our robust business portfolio focus on cash generation distribution, an eye on capital employed, and finally, the divestment of the concession assets that we have will lead to better ROEs in the future. Very briefly, I will now comment on the performance of each of the business segments before we move to the final commentary on environmental and outlook. Coming to Infrastructure. Our order inflows in Q3 are well spread across the various subsegments. Having said that, let me mention here that Q3 did witness some delays in award finalization despite robust order announcements, tendering activity and improved government finances. We believe this is temporary and Q4 activity levels should be far better. Our order prospect pipeline in Q4 for Infra segment remains healthy at INR 3.15 trillion vis-a-vis INR 2.17 trillion at the same time last year, reflecting an increase of around 45%. Of the INR 3.15 trillion of prospects, domestic prospects are INR 2.75 trillion and the balance INR 400 billion comprise international. The targeted prospects are spread across various subsectors like water, power transmission, buildings and factories, heavy civil, transportation infrastructure and metallurgical and material handling. Order book in this segment is at INR 2.48 trillion, as on December '21. The average execution cycle of this order book is around 28 months. The Q3 revenues at INR 183.5 billion registered a growth of 16% over the comparable quarter of the previous year. We have followed a calibrated execution approach in this segment in line with the cash flows. To some extent, we did face supply chain delays in few of our large jobs during this quarter, which impacted revenues. Our EBITDA margin in this segment improved from 6.2% in Q3 FY '21 to 7.1% in Q3 FY '22 largely reflective of the job mix and improved over recovery despite commodity headwinds in the fixed price contracts in this portfolio. I'm sure you would have observed that in the current year, our 9-month margin in this segment is better than the previous year. Moving on to the next segment that is Power. The subdued ordering environment continues due to the larger emphasis on renewable capacity creation. However, the opening order book drives healthy execution for this quarter. The Q3 revenue in this segment at INR 10.7 billion, registers a growth of 19% over the corresponding quarter of the previous year. The EBITDA margin is at 4.2% in Q3 FY '22 vis-a-vis 2% in Q3 FY '21, largely explained by certain jobs reaching the valuation threshold during the quarter. Finally, as you know, profits of the boiler, turbine and other JV companies in this segment are consolidated at a PAT level under the equity method. Coming to Heavy Engineering segment. In Q3 FY '22, we had multiple order wins in the refinery oil and gas vertical. The revenues at INR 6.8 billion in Q3 FY '22 registers a degrowth of 7% over the corresponding quarter of the previous year mainly due to tapering off certain jobs in this segment in the current quarter. The EBITDA margin is at 15.6% in Q3 FY '22 vis-a-vis 20% in Q3 FY '21, largely explained by the change in sales mix and an adverse claim settlement with respect to an international project. I now come to the Defense Engineering segment. Let me mention here that on the back of the government's thrust towards indigenization, we continue to remain optimistic for securing decent order wins in this segment in the medium term. Having said that, receipt of multiple orders in Q3 FY '22 avoids the order book in this segment. The Q3 FY '22 at INR 7.9 billion down 23% vis-a-vis previous year, mainly reflective of slow progress due to customer delays and supply chain disruptions. The EBITDA margin at 23.7% in Q3 FY '22 vis-a-vis 16.9% in Q3 FY '21 is explained by a price variation claim and certain jobs crossing the revenue recognition threshold -- sorry, margin recognition threshold. As we always do every quarter, let me once again reiterate that the Defense Engineering business does not manufacture any explosives nor emission of any kind, including cluster munitions or anti-personnel land mines or nuclear weapons or components for such munitions. Further, this business does not customize any delivery systems for such munitions. We now move to Hydrocarbons. The receipt of high-value international orders voice the order book of this segment in Q3. The revenues for Q3 current year at INR 48.8 billion registers a growth of 11% over the comparable quarter of the previous year, largely reflective on the progress of the various onshore jobs. The order book of this particular segment is at INR 0.53 billion, out of which 60% of the orders is international and has an execution period of 28 months average. The EBITDA margin in Q3 FY '22 at 9.6% vis-a-vis 12.2% last year is largely explained by the change in job mix and stage of completion of the jobs in this portfolio. Moving on to the Development Projects segment. This segment includes the power development business, comprising of Nabha Power and Uttaranchal Hydel Power up to the date of its divestment that is August 30, 2021, and Hyderabad Metro. As you are aware, the roads and the transmission line concessions, which are part of L&T IDPL are consolidated at a PAT level under the equity method. The majority of revenues in this segment is contributed by Nabha Power. The higher PLF explains the revenue growth for Nabha Power and a subsiding COVID second wave led to improved metro ridership thereby resulting in improved revenues during the quarter. To give you some statistics, the Hyderabad Metro average ridership improved from 55,000 passengers a day in Q1 current year to 146,000 passengers per day in Q2 current year, and for Q3 current year, the average ridership stood at 218,000. The Q3 FY '22 margin in this segment at 3.2% is contributed by only the metro operations as Nabha margin is not being recognized from Q3 of the previous year onwards. The improvement in average ridership in Q3 also enabled Hyderabad Metro to report a positive EBITDA during the quarter. The metro at a PAT level, we consolidated a loss of INR 4.83 billion in Q3 FY '22, after taking depreciation and finance costs. The operating and monetization costs are around INR 0.75 billion each quarter whereas the interest cost for Q3 is at INR 4.83 billion. The charging of the unamortized expenses of around INR 0.57 billion in the current quarter Q3 FY '22 pertaining to the earlier term loan consequent to the refinance by market instruments impacted the interest cost for the quarter for Hyderabad Metro. At this juncture, let me give you a quick status update on the divestments of our concessions portfolio. As all of you are aware, our stake in hydel power plant was successfully divested in Q2 FY '22. For Nabha, we are looking at various divestment options, and it is work in progress. Coming to L&T IDPL, we are exploring the possibility of divesting our remaining 51% stake in favor of third-party investors. For Metro, we have a couple of updates to share this quarter. During Q3, the company completed the refinancing of the rupee term loan by issuance of NCDs and commercial papers. This will reduce interest rate by around 270 to 280 basis points, thereby resulting in the interest cost savings of almost INR 90 crore to INR 100 crore per quarter going forward. This refinancing will also reduce the cash flow support required from L&T to the Metro SPV on account of principal repayments, which had already begun in the earlier term loan. Secondly, the discussions with the Government of Telangana around certain concessions and financial assistance to the metro operations have progressed satisfactorily, and we expect some sort of a closure by the end of this financial year. Thirdly, the discussions are also ongoing with third-party investors, seeking equity fund infusions or long-term fund infusions into the Metro. However, it is a little premature to comment on the likely closure date. To conclude on L&T Metro, with the prospect of improved ridership, faced transit-oriented rights, monetization, the prospective government assistance and the recently concluded debt refinancing, the performance parameters should hopefully look up in FY '23 onwards. Coming to the IT & TS portfolio. Our revenues for Q3 FY '22 at INR 84 billion registered a growth of 29% over the corresponding quarter of the previous year. Business outlook for this segment continues to be robust. As I had mentioned in my previous call, IT spends earlier were largely focused on employment improvement efficiencies whereas IT spends today are more focused on redefining revenue models and revenue maximization. A lot of spend today is being directed towards cloud, data security and artificial intelligence. The margins for this segment is a function of wage cost utilization, onshore/offshore revenue mix and operational efficiency. I will not dwell too much on this segment as all the 3 companies in this segment are listed entities and the detailed fact sheets of their performance are already available in the public domain. Moving on to the Other segment. This segment comprises reality, industrial machinery, valves, Smart World & Communications and the recently launched Edutech business. During the quarter, the strong growth in the industrial visionary business was offset by lower revenues in reality and Smart World & Communications and valves. The margin variations in segment is mainly due to the bulk sale in reality in Q3 of the previous year that I had referred earlier during the call. We move on to Financial Services segment now. Here again, L&T Finance Holdings is listed, and the detailed results are available in the public domain. Let me mention here that the strategic deliverables for this business revolve around higher retailization, strong asset quality and overall improvement in return on assets. In Q3 FY '22, the retail book is at 50% vis-a-vis 40% in Q3 FY '21. Further, in the current quarter, the business entered into a definitive agreement to sell its asset management business, obviously subject to regulatory approvals. Finally, sufficient growth capital is available in the balance sheet for their growth. Before I move on to the final section on the environment and outlook, I will briefly like to reiterate that L&T has committed to become water and carbon neutral by 2035 and 2040, respectively. We have also commenced our engagement with the lead ESG rating agencies to explain our ESG journey and hopefully, a consistent periodic interactions with them should translate into improved ratings for the group. Coming to the final section on environmental and outlook. For the policymakers, the balance between the need to support recovery and achieving macroeconomic stability will be the central challenge in 2022. Going forward, we remain positive on India's constructive outlook. Even though the concerns revolving around the spread of new virus is surfacing, the healthy pace of vaccination and timely measures by the government to curb the spread should shield the path of economic recovery. The growth may be smart by intermittent supply side constraints and high commodity prices. The government's intent to push infrastructure spend to boost economic growth and make Atmanirbhar Bharat a reality is gathering full momentum. The company maintains a constructive view of higher CapEx spends in the near term. At a global level, divergent economic recovery and the consequent collaboration of global challenges, like climate will be keenly watched out. The fast pace of digitization leading to improved productivity will come its own share of challenges around cyber threats and so on. Similarly, there will be emerging implications around crypto and associated technologies. With the oil prices holding firm, investments from GCC countries is likely to get a boost. Finally, we will witness increasing interest in investments in the renewable segment aided by the respective governments, to government's commitment to net zero targets, and this will open up a new range of opportunities for the company. Let me now briefly comment on our guidance for the year. First, on order inflows. During 9-month FY '22, there has been a pickup in order announcements from the government and tendering activity continued at a brisk pace. On the back of normalized tax collections, we are optimistic that the government will use the unutilized portion of the budgeted CapEx spend in this current Q4 FY '22. Further to corroborate our bottoms-up prospects in Q4 add up to INR 3.92 trillion, which I said -- as I said earlier, is almost 48% higher than last year Q4. Since the momentum is picking up, if large parts of the tendering fructifies during Q4 basis past statistics, we may be on course to meet our guidance on order inflows for the year FY '22. Also, since we have a large order book, we continue being selective in the orders we bid. Although we remain reasonably confident in meeting the order inflow guidance for FY '22, there could be tail risks around some opportunities spilling over to subsequent quarters. Coming to revenues. Our group revenues for 9-month FY '22 at INR 1.03 trillion has registered a growth of 18%. The effects of the COVID third wave on the company's operations and the consequent challenge around labor and supply chain is expected to be limited in Q4. We remain on course to achieve the guidance on revenue for the year FY '22. On margins, our 9-month FY '22 margin in our traditional core business is around 8.8% vis-a-vis 8.7% in 9 months of FY '21. As you are aware, in the current year, our traditional core businesses have been impacted by elevated commodity costs on the fixed price contracts in our order book. At the beginning of this financial year, we did guide that we will maintain a margin of 10.3% in this portfolio. So far in the 9-month period, our progress on the margin front in our traditional core businesses has been satisfactory. As I mentioned earlier during this call, multiple tailwinds around drops reaching valuation threshold, the release of contingencies on jobs nearing completion, improved overhead recoveries due to higher volume, customer -- favorable customer claim settlements, value engineering and various other cost-saving initiatives have provided the necessary tailwinds to margin in a difficult inflationary environment. It is therefore very important that some of these factors that I just now stated support us in Q4 as well to achieve our yearly margin guidance. On working capital, as you know, Q4 has always been a seasonally strong quarter for L&T in terms of working capital management. Since our NWC to sales ratio is at 23.1% as of December '21, it will be quite possible that the same improvement trends will continue in current Q4 as well. And therefore, we are reasonably confident to meet the working capital guidance by March '22. Finally, in the backdrop of the current economic environment, the company continues its planned path of winning targeted orders focused on profitable execution of its large order book, leverage the strong momentum in its IT & TS portfolio, along with many other value engineering measures is committed to create sustainable long-term returns to its stakeholders. Thank you, ladies and gentlemen, for the patient hearing. We will now take Q&A.

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

Congratulations on a good order inflow for the last 9 months, given the challenging environment. My first question pertains to the prospects only. You did mention the GCC prospects are improving. Are we seeing material traction compared to, let's say, last 9 months? And are we very confident that the things -- the prospects will improve in FY '23 from GCC. That's the first question.

Okay. So as far as GCC is concerned, we essentially have the 2 major segments of our portfolio that is Infrastructure and Hydrocarbon Engineering, which are present in GCC. Out of the prospects that I talked about for L&T Hydrocarbon, the prospects as of 31st December for Q4, almost around INR 522 billion. 76% of this is actually relating to international prospects and a substantial part of this 76% is actually relating to Middle East. This, in my opinion, is far more than the same that we witnessed in the same period as of December 2020. Coming to Infrastructure, the total order prospects that we talked about at almost INR 3.15 trillion. The share of international prospects is around 13-odd percent, which I would say is largely remain the same, no major change as we compare with the December 2020 levels.

Would you expect this thing to improve further in FY '23?

Mohit, it's a little premature because as we -- consistently, we do that at the start of the year, we give the order prospects for the full year, and thereafter, at the end of each quarter, we bring it to the balance part of the year. So as we see now, the order prospects that I spoke about is for the Q4. When we close March '22, at that point of time when we come out with the results during May, at that point on time, we will revisit that.

Secondly, sir, we see L&T taking number stays in green economy. Of course, you may not diverse something as of now. But when do you expect to get more clarity and where are we in announcing the Lakshya 2026 strategic plan?

The strategic plan exercise is complete within the company, and we expect to come out in terms of format and communication very shortly.

And will we get more clarity in terms of the new investments in green economy in that strategic plan?

Yes. In fact, right, I think from the time after Q2 onwards, we have been communicating about L&T looking at alternative business segments like green hydrogen batteries, data centers and so on. So the exercise of the stat plan on the entire group is complete. In terms of how we will be looking at investments in these newer businesses, we will communicate in a short while from now.

The next question is from the line of Aditya Bhartia from Investec.

The performance on margins have been fairly implicit given the kind of raw material inflation that we've been seeing. Just want to understand with all the levers that were available had this kind of situation not been there, would we have seen a much better margin performance? And as things start to ease out, is it fair to assume that margins have -- margins may settle at a level higher than what we historically used to see?

So Aditya, I mean, first is, it is important for us to -- for all of you to see us in a perspective as a largely projects company. Having multiple, I would say, contracts across various segments, both domestic and international, contracts that are recognizing revenue still at cost contracts are in margin threshold, then a combination of fixed price contracts and variable price contracts. So at the start of the year, when we gave the guidance that with respect to the traditional core business portfolio, we said that we will try to maintain 10.3% for FY '22 was basis the assumption on the mix of jobs that will get into execution in the current year. And how much of, I would say, cost savings that we will do due to value engineering and cost overhead recovery because of higher volumes post COVID. So all of these have been combinations. So until -- and in fact, if you see for Q1, Q2, Q3, so 9 months, if you see, we have been able to manage. That is despite the fact that commodity prices had some impact on our execution with respect to -- especially with respect to fixed-price contracts. So we are hopeful. In terms of Q4, the way the job progresses will happen and the other levers in terms of better overhead recovery because of higher volumes, as you are aware, Q4 is always a very busy quarter for the Projects business of L&T, so obviously, we should have been -- we should be in a position to demonstrate more volumes and thereby overhead recoveries. But there can be always slippages here and there in terms of some jobs that were to cross the margin recognition threshold getting postponed or in some cases, a job which is scheduled to get into margin recognition threshold in Q1 of next year coming advanced to -- getting advanced to Q4 of the current year basis the supplies that to happen. So at this stage, as we see it, the way we have demonstrated in the previous 3 quarters, given the fact if those factors come out in our favor, the way I've talked about, hopefully, we should be in a position to maintain the same level. But to answer to your specific question in terms of what could be the likely impact that the commodity prices have impacted our 9 months, I would say, it would be in the range of 30 to 50 basis points, which has been compensated by the other factors that I just now referred.

So what I really wanted to understand is that has it been the case that it so happened that this year, certain contracts were supposed to -- certain large contracts were supposed to cross margin recognition threshold, certain contracts were getting completed and that has kind of aided margins? Or on a sustainable basis, we have seen margins improving maybe because of certain cost reductions that you've had in terms of operational efficiencies, greater use of technology, et cetera.

So as far as the operational efficiency and improved and use of more automated technologies has been concerned, I think L&T has started this from almost FY '19 onwards. But important thing is, Aditya, that FY '21 margins that we printed at 10.3% was basis the first 6 months? The projects part of the business could not witness any major growth because of the COVID. So we have factored the assumption that FY '22 is going to be a normalized year in terms of our ability to execution. And given the fact of the -- some of the jobs getting into margin recognition threshold has really helped us. Hopefully, and as you are aware that the entire order book that we have, almost at INR 340,000 crores across the segments at each point of time, there will be some jobs getting into margin recognition across the quarter. Some jobs getting closed out, like I talked about with respect to heavy engineering, some amount of tapering of job also has led to sort of a margin. On a quarter-on-quarter basis, I would believe that we should not be gauged. So structurally, I would like to say here that we seem to be on course to meet the guidance for Q4, given the fact that these factors come in our favor.

Sure sir. And sir, just wanted to understand what kind of competitive intensity are you seeing in different segments? And the weak subdued order and flows on the domestic side, has it been only a function of weaker order finalization? Or is it also about competition being very intense?

Okay. Aditya, I think -- in fact, post COVID, we have been extremely careful to select specific opportunities, not that we are looking at each and every order that we can possibly bid for or execute. We have been selective to ensure that what we bid has margins where they are not severely compromised. So from that perspective, we continue to be selective in target opportunities. And in those opportunities, we have inbuilt proper risk factors to take care of the increasing commodity prices and all, but at the same time, take cognizance of the competitive intensity and bid it in a selective manner. So this year, if you find -- I would say that in the Infrastructure segment, we have been successful in, I would say, in Transportation Infrastructure in -- sorry, Buildings & Factories, in Heavy Civil, in also Water & Effluent Treatment. However, in Transmission Infrastructure, as it has always been for the last 3 or 4 years, the competitive intensity has been quite high. And we have also desisted from bidding for smaller jobs because it is impossible for us to bid at those prices in which the tenders are getting awarded.

Sure, sir. And just a word on hydrocarbon competition?

In case of hydrocarbons competition, I guess, in fact, this year, we have secured almost INR 230-odd-thousand crores as international orders from -- in this particular segment. Obviously, I think in case of hydrocarbons, the competition varies across the -- both the domestic and Middle East. So in case of domestic competition, I would say, we'll restrict ourselves to maybe 4 or 5 entities. But in terms of international competition, the number of entities that compete almost doubles, I would say. But given the fact that we have had a good past track record in execution of the projects on time. So the clients also have been very proactive to give some pieces of these order opportunities as well to L&T. So -- which I said earlier that the Middle East has almost given us I would say, close to maybe INR 2.5 billion to INR 3 billion worth of orders -- billion of orders in the current 9 months.

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

Congratulations on a good set of numbers. So my first question is Hyderabad Metro. So if you can just highlight after all this refinancing and I mean support from -- state support. So how will the capital structure change? And what kind of loss funding we have incurred -- we've been incurring in FY '22? And how will you reduce in FY '23?

Okay. So Parikshit, actually, there was around INR 13,000-odd crores of bank debt loan that got refinanced through a combination of NCD issuances and commercial papers, which enabled us to get a saving of almost, I would say, 2.6%. Now on an average basis, the previous I mean, debt structure. The refinance incidentally happened on 31st of December '21. So the impact of this refinance will be seen from Q4 onwards. So the average of INR 350 crores per quarter or INR 1,400 crores per year was the interest cost on the INR 13,000 crore debt. Now that will get reduced to almost INR 1,000 crore of yearly interest charge, okay? So -- which we believe that itself a INR 400 crores saving on an yearly basis should obviously do good. Secondly, also, I would like to mention with a ridership that crossed almost 200,000 to touch average at 218,000 after long, I think actually it was the first time the Metro operations actually posted a positive EBITDA of almost INR 30 crores. So we do expect an improved ridership to actually facilitate more of this EBITDA accruals to ensure that the interest -- the buffer to take the interest cost also gets increasingly possible. But the most important thing at this juncture is to reduce the overall capital intensity of the deployment in the Hyderabad Metro. So which means a combination of the support -- the financial support that we are looking at from the government of Telangana. Once that happens, so that would be used to partly redeem the short-term debt profile that we have in L&T Metro and thereby reducing the further interest cost. And last but not the least, we are also looking at -- we are also discussing with investors to bring in fresh equity and use those equity proceeds to really further reduce the debt. But in terms of sequencing, our priority or the way it could happen is possibly by the end of this financial year, we should be in a position to have demonstrated the government's support to the Metro operations not only in terms of, I would say, soft financial assistance, but also our ability, the L&T Metro's ability to monetize the transit-oriented development rights in a far more effective manner. I guess we are seeking those relaxations and we -- and as I understand, the status of those discussions with the government has been quite positive and satisfactory. So that would be the first in priority. The second in priority is the work in progress in terms of, as I said, not bringing in equity investors, but in terms of the time lines, given the fact it is a concession asset requiring a whole lot of approvals. So I'm not able to really comment on time lines. But I believe by the end of March '22, we should have some positive news in terms of the Andhra -- Telangana government support for the L&T Metro project.

So I think we have been talking about that by March, this project will not be requiring any further support or loss funding from L&T side. So it looks like we will still have to continue at least until the first half of next financial year. Is the understanding, right? I mean, until the time we get investors and rightsize our debt to an extent where the interest cost reduces further from here on, you will still be incurring about INR 1,000 crores of loss funding for next year?

I think it would be best for me to say that the funding which we did in Q3 was around INR 200 crores, okay, which is essentially cash flow or loss funding. Hopefully, I think in Q4 also, it could spill out because January ridership has been a little below normal considering that there has been this Makar Sankranti holidays and some lockdown restrictions in Hyderabad. Hopefully, February, March, we should see come back to that same trajectory. So given the fact if the state government financial support comes in with the kind of magnitude that we have sought for. I'm sure next year, we could see a substantial reduction in sort of any sort of cash support to L&T Metro. But I would not like to put a number to that Parikshit because, as I said, it is the timing and the extent of the government support that we expect in this quarter, which will determine the next year kind of a, I would say, for cash.

Okay. My second question was on some of the info of debtors or receivables like AP. We have been talking about that collections from AP step project. And some of the teams which we have like expensed during the COVID times, we have incurred and expensed that maybe have to recover. So if you can just highlight on these 2 aspects of how we are in terms of collections and whether the key claims have been put to the client and has they started realizing these claims on the COVID?

So the exposure to the Andhra projects which was almost, I guess, around INR 1,250-odd crores as at March '21, now stands reduced around INR 1,150-odd crores. So there has been, I would say, positive developments across the various agencies, the government agencies, there's not one particular agency with which we have been executing jobs. So there has been multiple government agencies where the various types of jobs have been under execution. It is getting -- slowly getting resolved as a very favorable development is to say that in some -- with respect to some of the government customers, the advanced payment guarantee that we have provided that has been relinquished or waived off. To that extent, the intent is there. I would say that it has not deteriorated rather there has been an improvement in terms of collections. So what we are typically doing is the typical -- as per the standard, whatever is required as the ECL provisions, that is being done for. But structurally, I guess it will take a longer time to resolve and it is not only L&T, along with us, there are other companies also who have had a similar issue. And collectively, I think the government is aware of this, and they are making progress, although slow, but there has been progress. So we have had around INR 90 crores to INR 100 crores of collections in the 9 months.

And with regards to the COVID claims, which I think we have been exempting, but we thought there maybe at a better times it will improve equally from the customers. So is there a number you can quantify which is outstanding, which is to be collected from the customers and how much has been done?

So actually speaking, the expenses that we incurred in the first quarter of FY '21, which was all actually keeping the workforce in the site without any visible progress. Obviously, we had put a claim and in some of those claims have been realized. And as I speak, when I said for the 9 months, we have been able to maintain the margins. Some of these COVID claims have got realized and some are still pending.

Okay. So any number to that, sir? Or is it like not very meaningful?

I would not like to tell that number because it's a little sensitive, given the fact that it is with customers, and I would put it -- I mean I'll stay put there.

Okay, sure. Just one last thing on -- so what would be the composition of the fixed price contracts in the order book front?

As it stands now roughly around 2/3 would be variable price contracts and 1/3 would be fixed-price contracts.

So has this measure changed significantly because I think it used to be about -- close to about 50%, right?

Sorry, 50% used to be?

This fixed price earlier used to be much higher. I mean, so is there any change now?

No, no. I would say -- I'll put it like this, that for the jobs that we are execute -- we are quoting in the current year, many of the jobs we are positioning it as variable price itself, okay? So as it stands in the order book, I would say around 60% to 65% is variable and the balance fixed.

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

I have 3 to 4 questions. Firstly, when you spoke about your guidance and your comfort in building them. There seems to be a reasonable amount of comfort on revenues and margins, but your comments are more cautious on inflows, given dependence on order finalization from the government sector. So related to this, can you help us understand from the prospect list that you've highlighted for the fourth quarter, what would be the approximate mix between government and private sector? And any insights or input into the L1 projects on which we are awaiting clearance in the next couple of months or so.

So the order prospects that I talked about, I would say, almost of the domestic order prospects, 85% would be government and balance 15% would be private, okay? The private order prospects will be largely in Minerals & Metals also and buildings and factories, whereas the government would cover all the other segments. And as I mentioned earlier during the call that we have had, if you were to take as a statistic, Renu, that in the current 9-month FY '22, I'm taking 9 months and not being specific to Q3 because in the project awarding business a longer period tries to give a perspective. In the 9-month FY '22, the awards to tender ratio has been only around 48%, whereas in 9-month FY '21, the awards to tender ratio -- I'm referring to only the India-based tendering opportunities that are out in the public domain. That ratio was almost 61%. And secondly, as we speak until November, we believe that the total budgeted spend of both central and public sector utilities has been only around 50% of their targeted spend for FY '22. And with respect to the states, it is just around 40%, okay? So basis this and the fact is that we have a reasonably good order prospects at the start of this quarter at almost INR 4 lakh crores. And this is if you have to see how we have gone back in the last 3 years to see how much the order prospect started at January and how much has been the conversion. So if I go on that basis construct, and given the fact that there has been a lag between tendering and awarding, so we do believe that Q4 could be a good quarter. But at the same time, if I had to take current 9 months development in terms of the awards tender ratio, there could be possibilities that some large bids get slipover to next quarter.

This is where I had the second question that...

Let me complete, Renu. So the point here is every INR 1,200-odd crores of an order is almost 1% impact in terms of growth, okay? So if you have a situation that some of these targeted prospects get into tendering more, not that they have not been tendered, there could have been bids also been submitted, and we may be well placed in some of these bids. And if they materialize, then we will be closer to meeting the guidance. And in case, for whatever reason, they don't materialize, then it is possibly could be a spillover. And given the fact, I have only 3 months now to comment upon and with the past of some order slippages, especially on the awards to -- sorry, awards to tender issue that I just now spoke I guess that's the risk we run. But as for order prospects is concerned, it seems to be quite good. But in terms of actual tenders and awards, if those things happen, given the past behavior of what we have seen with respect to L&T, then we may be on course to -- be closer to the guidance that we have given. Otherwise, we could see some potential slippages.

Got it. Related to this, the question which I had was on the inflow prospect, can you highlight a few large projects, which would be more than $500 million, $600 million or probably $1 billion plus ticket size projects and whether these would be largely again in the Defense Engineering, Hydrocarbon segment? Or how would that pipeline look as on today? Because we recently heard about repeat order for K9 Vajra for 200 units, which could be close to about INR 12,000 crores.

See, as I see, we have reasonably good order prospects in Defense Engineering in hydrocarbons. And infrastructure always has been the lion's share of this, okay? So as far as timing of these opportunities are concerned, getting into awards and bid, would be little difficult for us to comment at this juncture, especially for this quarter. But we do believe that we should be in a position to get some good orders basis our, I would say, the way we have placed the tenders that we have submitted. So we do see there are multiple orders in the Infrastructure segment, which are in the range of INR 2,000 crores to INR 3,000-odd crores. I would easily say there are almost 7 to 8 such order prospects. And along with that in hydrocarbons and in Defense Engineering, again, in the range of INR 1,000 crores to INR 2,000 crores. In Defense Engineering, there are multiple prospects. But I think it could be better that we stay put here because beyond this, then it comes to -- the actual order prospect itself will come into the public domain, which should not be -- which should be avoided.

No problem. The second question is recently as in -- just yesterday we had announced regarding the setup of a Gigafactory, and the MoU for electrolyzer -- green electrolyzers. So wanted to understand, while we are committing for a small factory to start with in terms of 1,000 megawatt terms for electrolyzers, what is the thought process to use some of the existing manufacturing facilities that we have either with the MHI for the power equipment or in the L&T business space to use some of the existing capabilities for this Gigafactory. So would it be like completely new being fee CapEx or both down fee in terms of utilizing the existing installed base, specifically on the conventional power equipment portfolio?

So Renu, first and foremost, I would like to state here that the -- it is a memorandum of understanding in terms of how both the companies will work together to actually on this particular type of business. So in terms of the capacity, how the investments will happen, the location, whether it be greenfield in a separate investment or a brownfield as part of our existing facility, be it in Hazira or elsewhere. That is still all under discussions. But it was important, the fact that L&T going into green hydrogen, one of the important things is to have the right technology partner, the right partner to bring in this technology and work jointly. Little premature in terms of -- to conclude as to how the structure of the joint venture will be or where the investment will happen, these are all going to be fine-tuned as we get into definitive agreements.

So any possibility of using the existing power equipment facilities which are co-owned along with MHI, by using MHI technologies on the green power or they will continue to be conventional coal-based solution probably?

So okay, Renu, the MOA is with another party and our MHI JV for the turbine and the boiler factory is separate, okay? Now in terms of whether we use that facility for making green hydrogen and all depends on a lot of other developments. So which are all work in progress. Most likely, I would say that the facility for green hydrogen in all probability will be happening in Hazira itself. But whether it is the extension of the MHI facilities or a part of a new facility within our existing campus, these are all discussions that will happen. And maybe time will tell as to what will be the final methodology.

Sure. And lastly, while we spoke in detail about the margins and cost perspective, can you just help with respect to one data point on a regular basis through regional provisions and otherwise, we tend to make these regular provisions for cost overruns on projects. And particularly in the current environment where there has been steep inflationary headwinds, only for bookkeeping purposes, can you share what would have been the total provisions in the 9 months for cost overruns on this fixed price contracts?

So Renu, I guess, as far as fixed price contracts, since it is contract accounting, what actually happens is the actual costs that have been incurred for the period divided by the actual cost incurred for the period plus the balance costs that are going to be expected to be incurred to complete the job. That determines the percentage completion. When multiplied by the contract value, we give you the cumulative revenue as against the previous period, how much we have recognized under the contract gives you the revenue for the period which you are reporting, okay? So while we do this, obviously, as a consistent measure, for example, when we start the margin recognition, the moment the contract achieves a particular threshold level, we have a contingency that is kept because the job is not yet complete. And as the job progresses, so only the contingency will get released. Now this contingency, which is provided for takes into account all things. It can be engineering surprises. It can be maybe a cost overrun as well due to commodity prices or Q2 additional cost inputs because of a rework and all. So all of that gets built in. So specifically to say fixed price contract impact of commodity prices on the expected cost to complete is a parameter which is just cannot be taken out and isolated.

Got it. And lastly, one more thing. Given that now we're sitting at almost INR 2,500 crores of gross debt for the core portfolio, what would be as in for the targeted year-end level, should we look at incremental 10% to 20% reduction in the borrowing levels from the current levels, given improvement in cash flow is expected? And what would be the net debt at the core portfolio level?

When you talk about the net debt at the core portfolio is almost negligeable now. And I don't think in the next Q4 or the next 6 months also, there are any -- sort of a major debt raising plans for the parent L&T, okay? And to the best of my understanding, even for the group as well. I'm excluding L&T Financial Services primarily because it's a financial services entity. Although L&T Finance also has been overall reducing their overall book itself in terms of both the -- the focus is more on retail and thereby, they are reducing the book now, they're actually -- their strategy is to -- first to come down and then grow. So that is how they are looking at. So unlikely that the debt levels will see any uptick both at the stand-alone and the consolidated level, if at all, it should be coming down in the course of time.

The next question is from the line of Puneet Gulati from HSBC.

My first question is on the capital employed. How much capital employed do you currently have on Hyderabad Metro and in Nabha Power projects?

Our exposure to -- I would have to put it in -- okay. The total funding to L&T -- of L&T to L&T Metro as of December '21 is around INR 7,200 crores, out of which almost INR 2,400 crores as equity and the balance is by way of cash support and various other instruments. Our total carrying value on Nabha Power -- this when I spoke on the L&T Metro exposure of INR 7,200 crores is the L&T standalone exposure to Hyderabad Metro. But when it comes to the consolidated financials, this will get subtracted with the cumulative losses that we have considered. So that way, as of December that INR 7,200 crores of stand-alone translates to almost INR 3,750 crores in the consolidated level, okay?

Okay sir. For Hyderabad Metro, for example, the way to think would be INR 2,400 crores equity and INR 13,000 crores is the debt. Is that how one should think about?

No, no, no. At Hyderabad Metro level, it is -- if you see their balance sheet, you will have INR 2,400 crore of equity and then INR 13,000 crore of bank debt or third-party debt. And the balance, INR 7,200 crore minus INR 2,400 crore. What is the L&T assistance will be shown as a liability there. Okay?

Okay, okay, okay.

Okay. Yes.

Yes, yes.

Okay. So -- but coming back, so the carrying cost of Hyderabad Metro in the L&T consolidated books, obviously, after taking -- since we are absorbing the losses until now, that losses will be cumulatively, it's outstanding at INR 3,750 crores is the carrying cost. That is INR 7,200 crores minus the losses aggregated reported at INR 3,750 crores. Coming to Nabha Power, it is around INR 2,400 crores.

And then what's the progress on Nabha Power in terms of divestments?

See, obviously, there are -- early discussions are happening with prospective parties. But at the same time, we are also very clear that we don't want to be seen as sort of a distressed kind of a seller. So given the fact if there is a value convergence, hopefully, there has to be some closure of this transaction. But it is an item in priority.

Yes. But it's a tough one, right? Given the fact that nobody really wants to invest in a thermal unit and the fact that Punjab has a lot of issues. Do you see any material progress happening in FY '23?

So Puneet, it is like this. I would like to -- of course, there is this -- the coal-based power plant generation is considered to be a less favored investment destination now from perspective of the fact of ESG and all. But I would like to state and reiterate here is that it is the best managed, best performing coal-based power plant one of the best -- actually, the best in Punjab, I would say, because it is the ranking first in the Merit Order Despatch. But more important is the most efficient coal plant. So from an investor who would like to see sort of an assured returns, given the fact that there is still some 16 or 17 years for PPA left out. So we give some sort of annuity returns. But yes, had this probably the ESG part would not have surfaced like the way it is now. Maybe we could have seen the divestment happening earlier. But that doesn't mean that there are no investors looking at to -- looking at these assets because if you are to be in coal, I would say Nabha Power is the least polluting of that.

And second part of the question is, you've talked about hydrogen electrolyzer, but we haven't heard you talk much on the solar manufacturing opportunity despite the fact that you've bridged under the PLI as well. Any more color on how you're thinking of in terms of manufacturing? Is it a serious thought or is it more an opportunistic endeavor?

So we are looking at this part of the renewables also. But in terms of, I would say, overall priority on the green portfolio, I would say, would be more on the green hydrogen on the battery side. We are looking at solar as well. But as you are aware, the solar investment also calls for a large scale and a large investment outlet. So let us see how the whole thing pans out. And then in the next 3 to 4 months, I think we will come to -- you will come to know about how much are refocusing on investments in each of these new businesses.

So this is not likely to go with the plan announced in 2026 plan?

It will, but the extent of investment, kindly give me some more time. As I said earlier during the call, the start plan is complete. But in terms of communications, we will do that shortly.

Understood. And lastly, on the EduTech side, anything you can comment what is the scale of that business in terms of revenues?

So the EduTech -- so EduTech is like, I would say, a knowledge skill portal, a knowledge skill business, where L&T's thought process is to accumulate the engineering skills or the knowledge skills that it has over the traditional conventional engineering portfolio and also assimilating the new age skills that we have from the LTI, the likes of LTTS and the Mindtree. So package them as what we call as elective courses and try to position it to the various universities -- they are largely private colleges, I would say. So that they are in a position to get for their students, content, which is covering both theory and full applications because it is being designed by people who have been in that particular field. So we do believe that this part of skilled enabled elective courses for engineering students will make them better employable. And obviously, it will be a sort of a win-win for L&T as a group and also for our competition as well.

In terms of any revenue that you have? Or is it something completely?

It just started, Puneet. So it is like we have positioned it as a startup. It got commissioned in the month of October. So we have around 50-odd courses that we need to roll out, which will all get happened by the next 2 to 3 months. So in terms of the scale numbers and all, maybe from Q2 onwards, we will be in a position -- Q2 of next year, we will definitely be able to communicate.

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

A few questions on my side. So you said that the external debt in Hyderabad Metro is almost like INR 130 billion, right? I mean to some participants. So does that mean that we have refinanced the entire external debt, right? So as you said...

Yes. Yes. Complete.

So still is the INR 4.83 billion interest cost that you highlighted, so is there a component that you would charge on the, let's say, the related party loan that has been provided within this, like within this INR 4.83 billion.

No, no, no. Okay. So INR 13,000 crores was external bank debt is replaced with INR 13,000 crore of marketplace debt, be it the NCD or whatever commercial paper. And I also hope that L&T's stand-alone exposure, that L&T's contribution to Hyderabad Metro has been INR 2,400 crores of equity and the total cumulative exposure of INR 7,200 crores minus this INR 2,400 crores that is what we have given us financial assistance. And obviously, as an arm's length transaction, this is being positioned as a sort of an intercorporate deposit charging normal rates. So when I report the interest cost for Hyderabad Metro, it includes the sort of interest also, which they have to pay for the L&T assistance, barring outside of the equity. Now in terms of -- when I mentioned that when we get the assistance from the Andhra government, which we are looking for, so the part of this assistance will be used to bring down in terms of a combination of the external debt cost, okay? And then as we speak with the external investors for further equity. So that part is work in progress in terms of how much of money will come, when, in what form.

Okay. So essentially, the cash flow impact is much lower, so that I wanted to understand. So it's not an entire INR 4.8 billion. So even if I adjust for the INR 0.57 billion, that was amortized. So that would be the correct assessment, right?

Can you repeat that question? No, I've not understood this.

So in the quarter, you had a INR 4.83 billion finance cost. So I am saying, if I have to look at from a cash flow perspective, so the entire INR 4.83 billion won't be really expensed because there is some related party finance cost in it, right?

Okay. Okay. So you're referring to the metro interest cost of INR 438 crore for Q3, right?

Yes, yes. So I'm trying to say that at a consol level, the cash flow impact would be lower. I mean, because there is a component that...

Correct, correct. But only thing in this quarter, that amount now includes an additional around INR 60 crores cost that Hyderabad Metro expensed out because this is related to the cost that the Metro had paid at the time of original structure of the loans, the term loans which they have taken from banks, so which was getting amortized. Now that, that loan itself doesn't exist so that outstanding portion of the unamortized portion has been expensed out.

Okay. Now I got it. Second question is see, I think in the third quarter, there were some impacts, I guess, like in Delhi for most of the quarter, I think there was a construction then. Then in most of the states of the South is of too much of rainfall, I mean floods in Chennai like this. So were it not the case, could your domestic infrastructure execution have been much higher? And what would you assess to be the impact of this?

So Priyankar, Q3, -- in Q2, we had an impact in the month of August and September on execution because there were unseasonal rains in Western India, okay? In Q3, considering the projects that we have, luckily, there was no such impact because of external factors. But as I said during the call, there could be -- had there been some supplies, which were on time for a particular project in Western India, maybe our revenues for infrastructure would have been better, but that is a spillover to Q4. Otherwise, we have not seen in Q3, any sort of, I would say, weather conditions or lack of manpower impacting project process.

And just adding on to this, so I remember that earlier when Arnob was there and initially you also as well, it was highlighted that L&T was quite advanced in terms of -- at that time, the project was going on for digitalization of the entire construction equipment assets that you had. So where are we with regards to that? And when should we see the savings or the productivity gains for that in our numbers? So broad sense if you can give.

Okay. So Priyankar, we have almost, I would say, 11,000-odd construction equipments that are across the 1,000-odd sites in the country. All these equipments are obviously linked now, they all become so to say, smart equipments by which a person remotely can evaluate, monitor the efficiency of the working of those equipments, so that we are in a position to have better productivity. For example, if a particular equipment is seen to be not moving in the site at all for a long time, it gets addressed at the business, I would say, business head level, not business head level, at the central command level to find out why this particular equipment is idling, given the fact that there has been no set manifest in terms of the engine getting operated or is it moving. So which means if an equipment is idling and we know for sure that it is not going to be used, at least that is getting escalated and the equipment gets shifted. Similarly, even workflow efficiency is also getting monitored through use of various equipments that we are now fitting, which not only efficiency but also safety. So all of this has an impact on the overall, I would say, cost and efficiency and productivity. And to tell you, I think this is also one of the reasons that we are able to price these productivity and become more competitive for the jobs that we have been securing all these years. So in terms of -- as far as automation or making the smart equipments is concerned, all the construction assets in our infrastructure business have all been automated completely and monitored remotely.

So maybe that is how you could probably offset a lot of this besides the other factors you mentioned, maybe this...

Yes, yes. 100%. Yes, yes. Correct, correct.

Sir, absolutely the last question from my side here. So just touching up again, on the new power -- sorry, the new segments that we've talked about. So we have heard about tech tie ups that you have announced, let's say, with ReNew Power also and then more recently, HydPro (sic) [ HydrogenPro ], so is there any tech tie up also in the plans for the battery because you have secured this PLI. So not really heard anything on that yet. So what is the status of that?

So talks are on with prospective parties. So we should -- we should hear -- you should hear soon once that happens.

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

So thank you all for participating on this call at this late hour. It was my pleasure to interact with all of you, and I hope we have answered all your questions. With this, the call is concluded. Take care and good luck.

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