NCC Limited (500294) Earnings Call Transcript & Summary

Ladies and gentlemen. Good day and welcome to NCC Limited Q4 FY '21 Earnings Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Thank you. On behalf of DAM Capital, I welcome you all to the Q4 FY '21 Earnings Conference Call of NCC Limited. Today, we have with us from the management side, Mr. R.S. Raju, Associate Director, Mr. Y.D. Murthy, Executive Vice President, Finance; Mr. K. Krishna Rao, Executive Vice President, Finance and Accounts; and Mr. K. Durga Prasad, Joint General Manager, Finance. Without much ado, I will hand over the floor to the management for their opening remarks, which will be followed by Q&A. Over to you, sir.

Okay. Thank you, Mohit. I am Y.D. Murthy, Executive Vice President. I will initially make some opening remarks. And after that, I will hand over to Mr. R.S. Raju for his comments for the fourth quarter numbers. At the macro level, if you have seen, FY '21 was a very tough year for all corporates and also for all economies. Many economies have shrunk in FY '21, including Indian economy. Indian economy is expected to shrink by about 7.5% to 8%. The fourth quarter GDP numbers are yet to come in. So we don't know the exact number. But definitely, this is a negative growth for the economy as far as FY '21 is concerned. Now NCC, we are a part of the economy. And also, we have registered a negative growth as compared to last year, that is FY '20. Like our negative growth is about 8% to 9%, so we are in line with the GDP growth of the economy, and so that is understandable. As compared to FY '20, we have reported a top line of only INR 7,300 crores. That is point number one. As far as the macro environment is concerned, again, we are having a difficulty in terms of the COVID 2 already spreading its wings all across and again, a lot of difficulties are there, a lot of lockdowns are there. State governments are imposing a lot of restrictions, et cetera, that is bound to impact the performance of construction companies and also even other companies as far as the first quarter of FY '22 is concerned. We are also not very clear how it is going to pan out though we are having a strong order book of INR 38,000 crores. So one point that I want to bring here is the issue was discussed with our top management. And because of these uncertain times, we are not able to provide any guidance in terms of FY '22 turnovers and order book, et cetera. What we felt is let the first quarter be over. And once the things start stabilizing, perhaps when we declare the first quarter results, we can provide a guidance for the rest of the current financial year. This is one aspect that I wanted to bring to you upfront. We are sorry, we are not able to provide any guidance for FY '22, but having an order book of INR 38,000 crores, I am personally confident that FY '22 should be better than FY '21. And also there is one difference between FY '21 and '22 mainly because in the first quarter of FY '21, in the month of April 2020, when the lockdown was imposed by the central government across the country, even the highways were blocked and so there was -- the supply chain was restricted, it was broken. So raw material supply at the project sites was a problem. And also because of the lockdown, the clients have asked us, they asked the construction companies -- we have to stop the work at the product site. And the client is asking, as a contractor, even if I have the raw material, even if I have the manpower, I will not be able to go ahead with the execution of the project. That was FY -- I mean, April 2020. Whereas in the current situation, that problem is not there, nobody is asking us to stop the work. Though there are restricted availability of manpower at sites, but the work is going on. Because the highways are open, raw material supply is taking place, and also, the supply chain is more or less stable. Even workers availability is also more or less all right, but for some stray cases where some COVID-19 impact is there at some project sites. So we are confident as far as the FY '22 is concerned, should be far better than last year. And also, I would like to bring to your notice certain measures that the government has taken as a measure of release to construction companies. For example, last year, our reserve bank has mandated all the banks in the country to provide COVID-19 loans up to 10% of the fund-based limits of the companies, and that too at MCLR rates, that means without any markup. So we got a very concessional rate of interest, and our company was able to take nearly INR 150 crores of loans from the Reserve Bank -- sorry, from our consortium banks as mandated by the Reserve Bank at a concessional rate. And that helped us to maintain our liquidity. But as far as this year is concerned, the Reserve Bank has taken up the issue, but they have given some relief only to the MSME sectors that is corporate -- small-scale industries having loans of below INR 25 crores per borrower, some relief they have announced. But as far as corporates are concerned, they have not given any relief in the current year. The other important aspect is the Finance Ministry has directed all government agencies to see that the performance guarantee can be prorated to the progress of the work at the project site. If the project has completed 50% execution, the performance guarantee can be -- the value of the performance guarantee outstanding can come down by 50%. That was a major relief to a number of construction companies, including our company. And particularly, we were able to reduce the requirement of performance guarantee by about INR 690 crores during the last 1 year, till March 2021. One more positive measure done by the Finance Ministry is the performance guarantee value. Usually, the clients specify performance guarantee at 10% and some clients who specify 5%. But Finance Ministry has directed all government agencies to bring down the value of performance guarantee to 3%. That is also a big relief. Likewise, they have distanced with bid bonds. There is no need to provide a bid bond until December 2021. Based on the certification, based on the financial health of the contractor, who is bidding the project, he is permitted to bid for the project. That is also a big relief in terms of availability of bank guarantees. One more measure they have done it, mainly because now if you see, banks are also under a lot of stress, they are not able to provide the necessary fund-based and nonfund-based limits to construction companies, and the government is planning a huge infrastructure spending and a lot of tenders are being floated, the biggest component that is in shortfall at this point in time for all construction companies, including our company, is available to of bank guarantees. So to mitigate this problem, they have requested IRDA, that is Insurance Regulatory Authority, to look into this aspect and see whether insurance companies can provide surety bonds and guarantees, that is an international practice, they want to bring it to the Indian context also, which means the construction companies have either window of opportunity to procure bid bonds and guarantees. So IRDA has formed a committee, expert committee, to look into the matter and the expert committee has already given their recommendation, recommending that insurance companies can also participate in providing bonds, surety bonds to contractors. So that also, as and when it is implemented, is bound to bring some relief to companies like us. So these are the macro environment that I am talking about. Definitely, the order books are going to improve nicely in FY '22. The government is bent upon kickstarting the economy. And the best way to kickstart the economy is to take up as much as construction and infra projects. You must be aware, they have talked about the NIP, National Infrastructure Pipeline, about INR 110,000 crores to be implemented over a period of 5 years. And so a lot of projects are likely to be awarded to frontline companies like us. And we are also looking at positively on 2, 3 aspects. One is the affordable housing projects, which is implemented across all the states. We have done some affordable housing projects in the state of Andhra Pradesh earlier. In other states also we'll participate as and when tenders are called for. Likewise, the other projects in the Jal Jeevan Mission, that is again a central government project, where 50% of the project cost is provided by the central government by way of subsidy, and the balance 50% will be taken up by the state government. In this Jal Jeevan Mission, all the state governments are looking at providing a potable drinking water to all the villages and all the towns and also the last mile connectivity, that is to every household in every village. That is a big project. Earlier, this was done in the state of Telangana by way of Mission Bhagiratha. We have got some orders, clearly INR 4,000 crores of orders, and we were able to implement them successfully. And recently, we bagged orders for about INR 6,200 crores in the state of Uttar Pradesh under this mission Jal Jeevan. So these are the 2 verticals where we have got very good expertise in implementation. And going forward, as and when orders are -- tenders are called for, we will definitely be able to participate and see that we get our share of orders. Likewise, road sector is also doing well. We have got the expressways. We are doing the Nagpur-Mumbai Expressway, it's a big order of INR 2,850 crore, where the client has achieved a financial closure and payment cycle is quite robust, and execution is also going nicely despite COVID-19. And there is a bonus plus. We are targeting that bonus plus also. So likewise, going forward, enough orders and enough business is going to be available for companies like us. And we are fully geared to get into a higher orbit of growth as we go forward. So these are my opening remarks. I request my colleague, Mr. R.S. Raju to talk about the company's performance in the fourth quarter and also the year as a whole. And later on we can take up the question-and-answer session. Thank you. Mr. Raju, you can...

Thank you. Mr. Y.D. Murthy. Good evening to all of you, I am R.S. Raju, Associate Director, Finance and Accounts. Just I will simply touch some of the operational level areas, the numbers for the current quarter as well as for the year. So let's first start from the order book. So already my colleague explained about various orders secured by the company at different places, out of which what are the important orders, how they are going on. As far as numbers are concerned, we know that we have an opening order book of INR 26,570 crores at the beginning of the year. And in the current year, the company secured INR 18,943 crores. So we can say that this '19/'20 though it is a pandemic-affected year, still, it is a good year for the company for the good amount of orders secured by the company. As a result, the company now has INR 37,911 crores as of this March 31, '21, which gives us a good stand or a good foothold for the year '21/'22. Already he has explained that for the year '21/'22, because of the strong order book, we are confident to have some good growth over the previous year numbers. So as far as the turnover is concerned, in the fourth quarter, the company reported on a standalone basis about INR 2,639 crores against INR 2,206 crores, resulting in a 20% growth. Similarly, if you compare with the immediate previous quarter, it is INR 2,638 crores against INR 1,943 crores where we have 36% growth compared with immediate previous quarter. It shows that there is a growth in the turnover from quarter 2 to quarter 3, quarter 3 to quarter 4. So similarly, since the company secured good orders, the growth the company is expecting in the quarters of the current year of '21/'22. So if you come to the 12-month period of the current year, the turnover reported is INR 7,371 crores against INR 8,370 crores, a decline of 12%. I mean year-on-year, there is a decline, but quarter-on-quarter, there is an increase in the turnover. So when you come to the consolidated financials, a similar number reported, about 2871 -- INR 2,817 crores against INR 2,334 crore, a 21% growth in the fourth quarter. For the 12-month period, it is reported INR 7,949 crores, against INR 8,901 crores, a decline of 11%. So if you compare immediate period's quarter, similar growth of 32% is there. And the company has reported an other income of INR 115 crores as against INR 151 crore of the previous year. If we come to the margins, since it's a COVID-19 year, so all of you know that there is a tremendous pressure on the work front because of resources constraint and particularly the workmen constraint. As a result, the projects that -- first of all, the top line is affected and the productivity is affected. As a result, the gross profit margins also got affected here. So the gross profit margin reported for the fourth quarter is 16.17% versus 20.16%. And gross profit for the 12-month period reported is 19.06% versus 20.98%, almost all a 2% dip in the gross profit margin. The reasons for the dip in the gross profit margin for the year as a whole and for the quarter generally are due to the COVID approximately 0.75% GPM level affected. And due to steep increase in the inputs, like steel, aluminum, petroleum, other products, particularly in the fourth quarter -- third quarter about 0.5% affected there on the gross profit margin. And due to some AP projects that you know because we have certain projects and the capital city projects are not in good movement, as a result and as a reassessment re-estimation of the value of the work we've done, the unbilled revenue, all these things, they have again reasoned with us basing on their dialogue and deliberations going on with the department. And as a result, certain impact is also there on the margins. So as a result, all these 3, 4, these things and overall, margin in almost all the divisions got affected except roads and some mining division. EBITDA margin also got affected, but not that much. The EBITDA margin for the fourth quarter is 11.07% versus 12.86%. And EBITDA margin for the 12-month period is 11.78% versus 12.53%, a decline by 0.77% (sic) [ 0.75% ]. The reasons whatever I explained for gross margin are the same reasons, some about a bit here, but there is an improvement in other expenses because of some control measures taken by the management. And this we are indeed for business purposes particularly for this COVID-19 pandemic. The net profit margins for the Q4 reported is 4.4% versus 5% of the last year. Similarly, if you see the quarter-on-quarter, there is an increase in the net profit margin from 3.6% to 4.4%. For the 12-month period, the net profit reported is 3.54% against 4.56% percent, almost 1% decline in the net profit level. So we all this decline, all the reasons because of clearly the COVID-19 impact, which resulted impact on the top line, which further impacted onto the margins. The EPS for the fourth quarter is INR 1.89 and for the 12-month period is INR 4.28. As far as other expenses are concerned like salary costs, interest costs and administrative costs, depreciation costs, there is a significant reduction happened and the control measures were taken by the management, which yielded the result. As a result, the company was able to manage the margins to that extent in the pandemic period. The interest costs reported for the fourth quarter is INR 117.7 crores as against INR 119.51 crores for the corresponding quarter. And the salary costs, there is a significant reduction in the salary costs for the year as a whole, if we take. The salary costs came down to INR 349 crores from INR 435 crores, about INR 85 crores decline happened on a year basis. Similarly administrative costs have come down from INR 258 crores to INR 179 crores, and interest costs have come down from INR 518 crores to INR 458 crores, that also significantly declined by about INR 60 crores, and depreciation also a little decline has happened. So all these things resulted into a PBT of INR 338 crores, in terms of percentage 4.59%. And after making provision, the net profit reported for the year as a whole is INR 261 crores. So in the current year, now the company opted to change into the new income tax rate. The new income tax rate is 25.17% effective rate for the company. Earlier, it is almost all 35%. Now the company considering the various deductions and MAT credit and deferred tax asset, all these things, now opted seeing the benefits of changing into the new rate accordingly in the fourth quarter we had changes into the new rate. There's no much significant impact on the profit and loss account. For the fourth quarter, there is a benefit of INR 6 crores. For the year as a whole, there is a negative impact of some INR 5 cores. So very marginal impacts are there by changing into the new income tax rate. So for the year as a whole, the interest rate because of the COVID-19 and also because of the rigorous steps taken by our finance development for the reduction from the various banks, so there is a significant reduction happened in the rate of interest. And also, there is a reduction, it happened in the amount of debt in the company, which resulted ultimately a reduction in the average cost of capital from 9.84% to 9.22%, almost all 0.6% decline we've seen in this year. As far as group companies are concerned, in the Q4, all the companies put together reported a turnover of INR 78 crores and a profit of INR 6 crores. For the 12-month period, all the companies reported INR 243 crores, a profit of INR 15.50 crores. Generally, the group companies, some companies reported in significant profits, but some companies used to report the losses. As a result, all the group companies together up to last year, we have seen the losses, negative figures. But gradually last year also some improvement has happened in reduction of the losses. But current year, almost all come to the plus side, so profit side it has come. Going forward, the group companies also report the profit and as a result, in a consolidated level, whatever profit reported by the standalone companies will not be impacted by the losses of the group companies report, further value addition we expect to have from the group companies. If you come to the debt position, for the current year, there is a reduction in the debt at stand alone about INR 120 crores. As a result, the net debt stands in the books of accounts as of 31st March '21 is INR 1,789 crores. For the consolidated level also, there is a significant reduction happening in the debt year-on-year. Now the consolidated debt stands at INR 2,181 crores. There is no -- in some companies, some debt has come down. And in one company, debt has increased, that is NCC Urban Company. So overall, INR 120 crores decline has happened at the consolidated, all companies together. About various numbers reflect in the balance sheet, particularly the working capital and the receivables -- trade receivables. As far as collections are concerned, though it is a pandemic and the collections are happened more than what we expected, the collections are not that much badly affected because of COVID-19. Yes, some impact is there, but not that much significant impact. And the collections are good and more than what we expected. As a result, the debt is not increased, the debt has come down. And the liquidity of the company is good. And now the operations are not affected because of any liquidity problem in any of the -- throughout the year. Mobilization advance in the company. There is some increase that's happening in the mobilization advance from that of this previous year. Because the company secured good amount of orders, in the current year also, the company expects a significant amounts towards mobilization advance. As a result, the company is not expecting any liquidity problems. And debt also, we are not expecting to increase. Though volume increases in the current year, the debt, we are not expecting to increase. As a result, some margin levels also improvement will happen for the company. So these are some of the highlights of the company. And if any -- balance information, if any, through questions, we will provide to you.

Yes. Now we can take up the question-and-answer session. We request the participants to ask their questions. And I request the -- no participant should ask more than 2 questions. And the maximum number of persons that we'll take up will be above 20 because of lack of time. Please go ahead and ask your questions. Our colleagues, Mr. Krishna Rao and Mr. Durga Prasad, will take up the questions.

[Operator Instructions] Our first question is from the line of Varun Gupta from Augmenta Research.

Congratulations on the good set of numbers. I have 2 questions. In terms of execution in the months of April and May, are you able to keep up to your expectations? And if it's possible, could you quantify it? And the second question is I wanted to know on the current order book, like what percentage of the current order book has fixed contracts, and what percentage includes the price escalation clause in case of movement in commodity prices?

I will answer. First one is about April and May, April-May, at this movement to quantification, we can't say. But in terms of percentage, yes, there is 10% or below, that one impact over our plan -- our plant turnover is there. So April, some good amount of work done; but May, some impact is there. Some projects are going at 100%, some projects at 90%, some projects are 80%, like that are there. So that is the way. But the kind of work affect is not as affected in the previous year. So that is that one. As far as escalation is concerned, we have roughly about 65% to 70% of projects covered by the escalation. Anything balance is there to your questions?

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

Sir, I understand that we refrain from giving any guidance. But just trying to understand in terms of the April-May, overall, what kind of workforce is -- on an average is available and in terms of how much impact it is there on the revenue? And if -- and at the same time, the increase in the steel and the cement prices, do we see a decline in the EBITDA margin in the first quarter? And if it is so broadly because last time we were talking about INR 10,000-plus crores kind of revenue should be there. So some idea in terms of the guidance, both on the top line and margin would help, sir?

Guidance now, we are working out at this moment, considering the present level, it is very difficult to assess and tell the number. As a result, the management reserved this process. And after carrying out the detailed estimations, we come out with them and the guidance for the year as a whole once the COVID-19 situation comes to some level. So as far as operations are concerned, you can guess that we have the got the order book, that's number one. Number two is, you've seen that how the company grown quarter-on-quarter in the period -- the last 3 quarters. The last quarter of the year reported INR 2,600 crores, a 30% growth over in the previous quarter. So that is the kind of things going on at the projects. So as a result, certainly, though not INR 2,600 crores, at least INR 2,000 crores, INR 2,100 crores, like that, that much level of things will be there, like that we are expecting. But we can't precisely tell what the number. So that is the level one can assess also.

Okay. So in terms of the margin sir, previously, we were talking about 12% EBITDA margin should be there. So let's say, this what...

But for the -- okay for the normal -- if you take the normal condition, as the EBITDA margin around 11.5% would be there in the normal conditions. But what is the kind of impact the COVID-19 had? We have to see further. If it won't impact significant, then the level of margins would be there.

Okay. Sir, lastly, in terms of the -- broadly, in terms of some numbers, how much is mobilization advance retention money and the group exposure company's number, and then also the CapEx number, if -- bare minimum CapEx that we are planning to do in this FY '22 as we are not giving a guidance?

CapEx around INR 200 crores we are planning CapEx for The kind of orders what we have. And then mobilization advance, we have about INR 1,400 crores roughly is there as on date. And we expect further increase on the mobilization advance. And what's the other...

Okay. Sir, retention money and exposure to group companies.

Yes. As far as the retention money...

The retention money impact has come down. The retention money has come down from the previous year level to this year, about INR 2,100 crores now. Earlier, INR 2,300 crores is there. INR 200 crores has come down in the retention money because of the collections from the old projects where we completed, number one. And other one is what you were asking?

Exposure to group companies in loans and investments.

Yes, yes, the loans and investments if you see the...

That is about INR 1,000 crores is there.

If you see the loans to the group companies, there is a significant decline happen in the loans to the group companies. About INR 280 crores or so decline has happened. And as per -- out of which NCC Urban is the major one. And other companies are, some small companies are there, INR 20 crores; and one another company is there INR 5 crores like that. But there is overall INR 280 crores decline happened in the loans. As far as the investments are concerned, we have converted one loan of INR 120 crores of NCC Urban into the investment. To that extent, INR 120 crores, increase happened in the investment and the same decline happened in the loans. And apart from that one, in the investments, there is a decline of about INR 10 crores which has happened. So net-net, INR 110 crores increase, which happened in the investments, and a decline of INR 280 crores happened in the loans. So overall, if you combine both the investments and the loans, there is a decline of INR 170 crores in the group exposure.

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

Sir, congratulations on a decent performance. So my first question is on the real estate monetization. So last quarter, we had final stages of closing some large transactions on the real estate side. So can you highlight what is the status now there? That's my first question.

Sorry to interrupt Mr. Kandpal. Sir, there's a disturbance coming from your line. Request you to mute your line while the management answers your question.

What was the question, can you please repeat it?

So sir, last quarter, we were planning to divest some large land parcels and realize some INR 300 crores, INR 400 crores from that. So any update on the transactions now since the COVID has hit us. So if you can update us on the status of those land deals?

That is also under real estate, so that is NCC Vizag Urban. The NCC Vizag Urban, that is the prospective buyer already approached and terms and discussions are over. Draft agreement were also prepared. And some of the permissions, which are required to take from the government, some permissions are all taken. And final approval is pending with the government. The moment the final approval comes, the rest of the process, entering into the agreement, signing the agreement, payment of the advance, all these things takes place. And because of COVID-19, both at government level and other level also this transaction also got impacted. And we expect this transaction takes place in the coming months.

Sir, in first -- second quarter, most likely in the second quarter or before September, this should happen?

Yes, yes, yes. We'll have -- signing of the agreement will happen. Some part of the amount will come, if at least come to the normal, the situation.

Okay. Okay. Sir, my second question was on, if you can help us reconcile the AP receivables. So from the start of the year, so what was total outstanding net exposure, and how -- and what is outstanding as of now? So if you can break it up into -- yes, AP net exposure. And if you can break it up into standard exposure and the one where the projects are stuck up and canceled. So if you can bifurcate it also into 2 parts.

Okay. As you asked, we bifurcate into 2 parts; one is running projects; another one is halt projects in the capital city. In the capital city, we have 5 to 6 projects are there. So in the capital city, the amount held up, the total is about INR 181 crores and the retention money is INR 73 crores, about INR 223 -- INR 255 crores is held up in the capital city projects. And in the running projects, we have about INR 210 crores.

Okay. So that's the total INR 210 crores.

INR 210 crores is the retention money. And the total net receivables are 2 -- INR 391 crores plus INR 210 crores, about total -- all put together INR 391 crores is total and INR 181 crores is capital city, total INR 573 crores excluding the retention money. And as per the working capital...

500...

INR 572.98 crores receivables and unbilled revenue. That is excluding retention money again. So the working capital -- as far as working capital is concerned INR 714 crores. Earlier 800 -- at the beginning of the year, it is INR 847 crores, has come down to now INR 714 crores. In the current year, about INR 133 crores collections were happened.

Okay. So as of now, the total exposure is INR 714 crores you're saying, net exposure?

Sorry to interrupt Mr. Kandpal. Sir, I would request you to rejoin the queue.

INR 714 crores, net exposure. Out of INR 714 crore, INR 593 crore relates to the running projects. So only about INR 223 crores only these capital city projects. Running projects, we have to leave out. Anyhow running projects work is going on, the payments will come. Month-on-month, the payments we are getting. This INR 223 crores, where the project is halted, and this requires the government's decision, the new government's decision about descoping projects or continuing some of the projects like that. That discussions are going on. And the department is asking us to carry, but we asked them at least release some payment. If you release some payment, then only we start like this, where the discussions are going on, on these capital city projects.

The next question is from the line of Ashish Shah from Centrum Broking.

Sir, the first question is on the key projects that will drive the execution in FY '22. So in FY '21, we know that Mumbai-Nagpur was amongst the biggest projects driving the execution. So the top 3, 4 projects that you think will drive '22 execution? And what is the status there, sir, especially in NCC Karwar and the water projects in UP?

Yes, yes. So the top 3, 4 projects, if you take, one is the road project still is there in the top, significant turnover to complete in the Maharashtra, the Nagpur to Mumbai road. The second one is Karwar, that is a big project. And one more big project also received in same premises. So from that project, in the last year, most of the ground works are done and the workforce has come and has reached above the ground level. The work is now going well. From that also we expect good turnover. And similarly, 3 to 4, these AIIMS projects are there, AIIMS Guwahati, AIIMS Bilaspur. And particularly the big project we received AIIMS from Jammu and Kashmir area, that is also another project. So another big project, INR 833 crores, coal mining project, what we received in Nagpur. That is going also without any much impact of the COVID-19. As of this moment, I can say that there is not any significant, except 5% to 6%. So like that, some 3, 4 projects, but the projects are going on. If any effect is there, any some insignificant effect is there at this moment, not a major impact.

So sir, outside of AP, are there any slow-moving projects in our order book right now?

Outside AP, slow moving, no. At this moment, but big projects, no big projects in a halt level. Only one project is there. We have removed that one, that Mumbai, MSRDC work. From Mumbai, one project we received INR 800 crores value, that is not there in the order book now. And Nauroji Nagar project, earlier it has started, now it is going in good progress. Nauroji Nagar, the World Trade Center.

Sure. Just last one. What -- you said about 60%, 70% of the -- 65%, 70% of the projects are covered by escalation. What is the remaining, around 30%, which segment of the order book would that be, where we don't have escalations?

Generally, this -- where the lifespan of the project is less than 1.5 years, the escalation would not be there. So wherever small projects, INR 150 crores, INR 200 crores, INR 300 crores, a lifespan of less than 2 years, there, the escalation won't be there.

Okay. So this is irrespective of the segment?

Yes, yes, irrespective to the segment.

The next question is from the line of Meet Vora from DAM Capital.

So sir, my question was towards the EBITDA margin. So for this quarter, we have seen the EBITDA margin has come down Y-o-Y as well as Q-o-Q. And on the expenses side, the reason being, as I understand, is first, due to subcontracting expenses, and secondly, due to the construction expenses. So how do we look at it going forward as in, in terms of the subcontracting expenses? Why the increase? And do you believe that construction expenses would have been increased due to inflationary pressure? So how are we looking at it going forward?

Now the decline in the EBITDA margin basically one is due to COVID-19 impact. You know that how the first quarter, second quarter were impacted heavily because of COVID-19. So that impact has fallen into the -- down the level, the margins. So here, the expenses are concerned, the salaries, administrative expenses comes under control. And once the volume picked up, the EBITDA margin rise from the present fourth quarter level possibilities are there to go up. So we have the good order book, and we have good resources. We have the good team. As a result, so the EBITDA margins is not a big, this one, at this moment basing the way the company is structured, doing the works at different places, particularly the big projects. So going forward, if the COVID-19 comes, then there won't be further reduction in the EBITDA margins. There will be possibilities for a pause there.

Sir, I just wanted to clarify one thing regarding subcontracting expense, which is there. So it has actually increased 54% Y-o-Y.

Yes. The subcontract expenses, it is a mix of the projects. Where you've seen the subcontract expense increase means the material costs come down. So other machinery costs will come down. It is a mix of the total direct cost. So it's a mix. We can't compare quarter-on-quarter, month-on-month, even project by project. What kind of mix is happening? When subcontract projects are more in a particular quarter or so, the subcontract expenses are more, like that would be there. So we can't precisely tell how the next quarter, the next quarter subcontracts will be. But as a whole, the gross profit margin, which represents your direct cost; again, direct costs represent your material costs, subcontract costs, labor costs, transport costs, machinery costs. So these elements depends upon what segment. If you take the water segment division, that nature of expenses are different; if you take the building division, nature of expenses are different; if you take the mining project, the nature of expenses are different. So like that expenses are different. But all put together, you have to compare.

Okay. And just 1 more question that I had. What happened about the Mumbai Metro order where we were L1. So have we recognized it?

Mumbai Metro?

Yes.

Hello? Please repeat to me, the order -- your question?

What happened to the Mumbai Metro order where we were L1, have we recognized it?

Still, they have not given that. Mr. Krishna Rao, Y.D. Murthy? Murthy? Hello?

Can you give some clarity? Which order are you talking about in Mumbai? Sir, can you identify that project? What else has to comment on...

Okay. My question was regarding overall -- the overall projects are there in Mumbai Metro, which were L1?

Several products are there in Metro in Mumbai. Okay. But still, let me see.

We'll come back to you on this, but shall we go to the next question, please?

There is no pending. There is no pending. There is no L1 also that is pending. There is Mumbai Municipal -- hello?

The next question is from the line of...

Hello? One -- what exactly you are asking? This is a Navi Mumbai Municipal Corporation, Vashi flyover. This is flyover work. This is -- we became L1, waiting for the letter of acceptance, letter of intent, LOI. We can now proceed.

The participant left the queue, sir. So we will move on to the next question. The next question is from the line of Vibhor Singhal from PhillipCapital.

Sir, also, just 2 questions from my side. Sir, what is the gross standalone debt number at the end of this year? And what are we expecting it to be by the end of FY '22?

Krishna Rao [Foreign Language]. Hello? Please repeat to me your question? One is debt of...

Sir, what is the gross standalone debt number? And what do we expect it to be by the end of this year? And do we expect it to increase or decrease or remain stable, is the question.

We expect to come down, the debt of INR 1,789 crore at this moment we have, that we expect to come down by another under INR 100 crores, INR 200 crores. But it depends upon several things. So -- but basing on our internal assessment, there will be a decline in the debt.

And sir, that would be driven by, mainly, if we are able to monetize that NCC Urban Vizag and maybe some more payments from AP, right?

Yes, yes, depending upon the kind of monetization group companies amounts inflow happen. Like Vizag Urban is there, if it happens, that it helps us to reduce the -- my debt. The group exposure also will come down. Similarly NCC Urban also is planning to give INR 100 crores. If their plans, if their -- whatever their plans succeed, then these things will happen. So -- but in general, basing on the plan, there will be a decline in the debt from the current level to the end of the current year.

Sure. That's really helpful. Sir, my second question is on the UP projects of the Jal Jeevan Mission that we have talked. Any from the -- if you can just give some color, sir, what -- have we started work on them? And how is the work progressing because of COVID situation, what is the duration of the projects, et cetera?

UP projects, you are asking.

Yes, sir. Jal Jeevan Mission, yes, UP Jal Jeevan Mission projects.

Okay. UP projects at this moment, this survey is going on and some of the projects survey is completed. And for the major of the project, the draft feasibility report are under preparation. Once the feasibility report, estimations and other things are over, then only they give the approval to start the work. So those paperwork is going on at this moment.

So sir, when can we expect to start execution on these projects.

About in another 2, 3 months, the starting -- to start the groundwork will be happened. It is gradually. It is a number of projects, number of DPRs will be there, gradually it goes. So the physical work, we expect to start in another 2, 3 months' time. And again, we have to see how the COVID-19 is impacting, at what level, how the things. Some precisely, we can't say at this moment.

The next question is from the line of Ankita Shah from Elara Capital.

Sir, could you throw some light on the increase in...

Sorry to interrupt you Ms. Ankita. Ma'am, there's a disturbance coming from your line.

Can you hear me now? Hello?

There is some soft of airy disturbance coming from your line. I would request you to move to a better reception area.

Hello? Is this better?

Yes, ma'am. Much better. You may go ahead.

Sure. Sir, could you throw some light on the increased working capital cycle for us, particularly the receivables as well as the inventory? I understand AP exposure is there in the receivables, but is it excluding the held up money in the capital city project, given the existing ongoing project receivables have kind of gone up significantly. So your outlook there? I mean, the reason why it's gone up and where do you see it going forward?

Now basing on the discussions taking place, and the government considering the budget position because COVID-19 also, though they promised earlier to pay some of the amounts, because of COVID-19, the funds there gone to some other priorities. But now in the immediate future, we expect about INR 120 crores payment from the government relating to the AP projects. As far as capital city projects are concerned, now there is a momentum from the government and department to complete some of the projects where 85% were completed earlier and to take up some of the road projects, which are important, minimum important. So those projects they want to carry by descoping the existing projects, for which about, I believe that INR 3,000 crores the government sanctioned to the department, and they are now tying up INR 3,000 crores. And the government also facilitated by giving the land to the APCRDA department to use as a security for the borrowings or some part use for sale and use that amount to complete these projects, like that directions are happened. Now they have to mobilize the fund and pay the amount, they asked us to carry, but we asked payment at least release some payment, we will start the work, like that the discussions are going on. So we saw that some positive sign to -- for the movement of the works, about the capital city projects where some INR 250 crores is held up. But rest of the projects where INR 500 crores is held up, they are ongoing projects. And there also, since some projects, some slow momentum is there. But now in the coming year, there is more than what they given in the last year will happen. And basing on the budget now allocated, INR 100 crores to INR 120 crores, their plan, it is in process, we expect any time, within a month, that payment. So thereby some good outlook would be there for the -- in the year '21/'22 on the AP projects.

Sure. Also, if you can tell what kind of reduction in loans and advances and reduction in investments are we looking for in FY '22? And lastly, if you can give the breakup of order book in terms of segment and geography-wise?

Okay. Mr. Krishna Rao will give the division-wise order book. Tell them division-wise order book numbers, opening numbers, closing numbers. And as far as exposure is concerned to the group company's, plans are there. And roughly, all companies together about INR 200 crores to INR 300 crores inflow would be happen from the group companies in the year '21/'22. Krishna Rao, you are there, Krishna Rao?

I think he is not there. Durga Prasad, are you there?

Sir, he is connected, Mr. Krishna Rao.

Durga Prasad is there. Can you tell the numbers or shall I tell them?

Yes, very much I am available.

Okay. You tell them the division-wise order numbers, division-wise opening and closing, if necessary. If they ask also tell what the kind of orders received.

Sure. Building division opening order book is INR 13,241 crores, which is 50%, and closing order stands at INR 21,157 crores, that is 56%. Roads is INR 2,644 crores, that is 10%; closing stands at INR 1,954 crores, that is 5%. Water division opening order book INR 4,660 crores, 18%; closing order book stands at INR 7,078 crores, that is 19%. Electrical division, it stands at 6% opening as well closing, but opening order book was INR 1,711 crores; closing was INR 2,438 crores. Irrigation is opening INR 2,054 crores, stands at 8%; closing order book to INR 2,442 crores, that is 6%. Mining stands at 7% opening as well closing; opening was INR 1,912 crores; closing was INR 2,592 crore. Others stands at 1%, that is around INR 250 crores. That is the end of INR 37,911 crores closing order book. Hello?

Also, if you could provide geography-wise, that was also one more thing that I had asked? Sir, geography-wise?

Hello? Geographical? Okay, state wise, you want to know the state-wise?

Yes, yes, yes.

Just I will repeat some of them, how the order book is. State-wise, I will tell you the state-wise order book as on date. Okay? Hello?

Okay, okay, okay.

I will tell you in terms of percentage so that it becomes -- it makes easy. Uttar Pradesh we have 25%; Andhra Pradesh 11%; Karnataka 10%; Maharashtra 10%; Telangana 7%; Jharkhand 6%; Bihar 6%; Jammu and Kashmir 3.85%; New Delhi 3.81%, Tamil Nadu 3.54%; Odisha 3.4%; Assam 1.83%. Like that about 1% to 1.5% rest of the states like Madhya Pradesh, Himachal Pradesh, Rajasthan, Haryana, Sri Lanka, West Bengal, Punjab, Gujarat. So almost all 25 -- okay, okay.

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

A couple of questions from my side. First is, if you could give us the execution figure in Q4, including if we had done any execution in the international side?

Hello, hello, not clear.

Sir, I was asking, if you could give us the total execution figure in Q4 FY '21, including any work that we would have done in the international side?

International. No, in the standalone results, international numbers are not there. Hello?

Sure, sir. Did we do any work in the international subsidiary this quarter?

No, we are not doing international. International works were completed, and we've taken a decision to close the Dubai and Oman business. As a result, almost all 100% are over. Only rest, if any, 5% to 10%, 13% like that will be there. So from the current year onwards, there won't be any turnover of business from the international companies. Only, we have small 2 orders in the Sri Lanka, that is very small orders, about INR 200 crore, INR 300 crores.

Got it, sir. And sir, secondly, if you could update us on the status of the Sembcorp and the TAQA hearing?

Sembcorp and TAQA cases, the hearings are not yet over at Sembcorp because of COVID-19. And the other end insisting for the personal hearings rather than the virtual hearings. As a result, they are planning for personal hearings. And in the meantime, the second wave has come. The second wave, COVID second wave, further impacted about the meeting personally for completing the hearings. So now they are again postponing the hearings. And according to the present situation, about November '21 or so, the final of the hearings or final award expected time, internally they assessed to get at the time.

Okay, sir. And regarding TAQA?

TAQA also in the same line, the TAQA case also. And literally management would like to have some amicable settlement with TAQA. But once this COVID-19 gives some relief and once again people try to have something amicable, this one, to avoid all these things.

The next question is from the line of Amber Singhania from Asian Market Securities.

Sir, can you hear me now?

Yes, we are hearing you. Please go ahead.

Sir, just wanted to know what is our total pending order book in Andhra Pradesh? And if you can give us some details of that? How much is the ongoing order? And how much is the order stuck in the capital city, which I require -- which is currently not moving as such?

I will say. Now in the order book, AP, the award orders what we received earlier, now it's there about INR 2,903 crores in which the capital projects, whatever are there we removed from the order book. At this moment, 0 or there. If at all they ask, again, that whatever value they give, that again will come back to the order book. And about new orders, which we have quoted last year, some 2,3 orders we received, that is about INR 1,200 crores we received. So after adding this INR 1,200 crores new order, that is running projects, so the total order book now of AP is INR 4,171 crores, but all are categorized under funding projects, not on the capital city, not on the APTIDCO.

Okay. So there is no stuck project in the order book today?

In the order book, we have removed.

Okay. Okay, sir. And sir, what is the time line or what is the status of this resolution with the authorities there? Where do we stand in terms of, first, receiving our pending due? And second, these projects may see a light of restarting, what is the status on that one?

The running projects are going on basing on their budget availability. They're asking us to the extent funds are available to progress. And about capital city projects, the movement now has come. I just already explained about 5, 10 minutes back about what if -- how the things are happening and what is the outlook of the capital city project. I already explained for the earlier questions, which they made, whether you are available at the time or not, this answer is over.

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

The question has been answered, sir.

The next question is from the line of Binod Modi from Reliance Securities.

Sir, just 2 small questions. You said INR 1,400 crores mobilization advances. Can you guide me what is the quantum of interest-bearing amount out of this, out of INR 1,400 crores?

84% represents the interest bearing. 16% is the interest-free advances.

Fine. Got it. And last, sir, about the sequential basis, if I look at, so there has been a jump of almost INR 11 crores to INR 12 crores in interest costs. So just wanted to understand, is there any sort of one-off finance charges that we have incurred in this quarter, quarter 4?

Finance charges? Finance -- the rate of interest -- what is your exact question?

No. I was asking, if I look at on absolute basis, there has been a jump of almost INR 11 crores on sequential basis in interest cost. So just wanted to check, is there any sort of one-off in terms of incremental finance charges?

That means that the VP charges...

[Foreign Language] Hello?

Okay.

I will give you the bifurcation of the finance costs for the fourth quarter. Interest on term loans is about INR 8.6 crores. Interest on cash credit and WCDL is INR 38.28 crores. Interest on mobilization advances is INR 30.08 crore. Interest on other loans is about INR 5.29 crores. That is as far as the interest cost is concerned, that is total INR 82.25 crores. It includes interest on mobilization advances also, which is INR 30.8 crores. Now BG commission is INR 28.92 crores. LC commission is INR 4.65 crores. And other bank charges, like processing charges, upfront fees, et cetera is INR 1.89 crores. So the total finance costs for the fourth quarter is INR 117.71 crores. But if you look at the -- and the finance cost is less by about INR 2 crores as compared to the fourth quarter of the previous year. If you look at the annual number, there is a substantial decrease in the finance cost. Last year, that is FY '20, the total finance cost is INR 517.87 crores; whereas in current year, that is FY '21, it is INR 457.78 crores. We were able to achieve substantial improvement in pricing, mainly based on our rating, mainly based on our conduct of accounts. The consorted banks have brought down the interest rates in line with the policy rate reduction given by the Reserve Bank of India. That has helped us to save in finance costs substantially in the current year.

The next question is from the line of Saket Kapoor from Kapoor & Company.

Sir, as per the question of earlier speaker, sir, in absolute terms, there has been good savings in the finance cost. So sir, going forward, on the total -- on the entire turnover, sir, what percentage are we emphasizing that finance cost will be attributable for the next financial year, sir? Any ballpark we have worked out...

Yes, yes. Ballpark -- we have 4.5% of the turnover of the company.

Okay. And what was this figure for this year, sir?

It is similar. More or less, similar.

This year, this is -- okay.

A further reduction may be possible based on 3, 4 factors; one is if any policy rate reduction is there, that could be passed on to us by our consortium banks; another thing is we are also looking at a possible rating upgrade. If that happens, again, the finance costs can come down. We already represented with a number of banks in the consortium of a reduction in the BG commission and LC commission. Some degree of the reduction we have already achieved. Some more banks are also likely to fall in line and reduce the BG commission. So we are confident the finance costs should be in the range of 4.5% to 5% of the turnover in FY '22.

Sir, and what is the blended cost of fund for this year?

The blended cost of funds, I'm talking about the interest cost. Again, that depends on utilization and also we have got this facility of sweeping with the 3 banks, that is SBI, Canara Bank and ICICI Bank where the current account balances are swept into the main CC account on a daily basis, and that will reduce the outstanding debt at the end of the day. Approximately about INR 100 crores is coming into these CC accounts of all the 3 banks put together on a daily basis. So we are able to substantially reduce the interest burden there. And also because we have a comfortable liquidity position, in some banks where the interest rate is high, we are not utilizing those limits. So the blended cost of borrowing, as far as the interest cost is concerned, we are talking of the cash credit and the working capital loans they have given, WCL loans, they call it, it should be around 8.8% to 9%.

Right. And lastly, sir, on this geographical mix of the order booking, it is largely skewed towards the Uttar Pradesh sir. So, sir since Uttar Pradesh would be in the assembly elections next year, so we -- are we inversing envisaging an increase in the execution cycle, sir, for -- going forward? What is the executable period of the orders that we are executing in the state of Uttar Pradesh? And how is the payment terms and cycle?

Yes. The order book in UP has gone up to 25% of the total order book, mainly because of a big order of INR 6,200 crores we have received in the month of December pertaining to Jal Jeevan projects of the particular state. That's why it has gone up to 25%. I don't think it is skewed. In fact, earlier, we had a large stake -- order stake in Andhra Pradesh. Before that we had a large exposure in Telangana. So it keeps on varying some state to state depending upon the opportunities. Now Maharashtra also got large projects, mainly because of the Nagpur-Mumbai Expressway that we are doing and also some Metro projects we are doing in Pune and some projects in Nagpur and some projects in Mumbai. Also, we are a company with all India exposure. We operate in almost 27, 28 states of the country. Wherever opportunities are there, we have got a decentralized section of bidding for projects, we are able to bag those projects. So I don't think it is skewed. In fact, company has got a robust risk mitigation policy, and we are seeing that exposure per state will not increase a certain level.

And the payment cycle and, sir, the execution period for the INR 6,000 crores big order, Jal Jeevan order, which we have got? What is the executable period? By when are we going to execute, if you could just -- hello? Sir, hello?

Sir, just give me a minute, let me check.

Yes, ma'am.

The line for Mr. Murthy is disconnected. Kindly stay on line until I reconnect him. Ladies and gentlemen, we have the management line reconnected to the call. Thank you and over to you, sir.

Thank you. Sorry, I got disconnected. I don't know where I got disconnected. Can you tell me what question was this?

Yes, sir, I was looking for the executable period? By when will be able to execute this Jal Jeevan order of INR 6,000 crores? Has the execution started? And is COVID effecting -- is COVID being any hindrance to the execution, sir?

No, that is yet to be assessed. In fact, the project execution has not started. We have to provide initial service district-wise. And then submit our project report to the state government agency. After they approve it, we'll start the work, and that will be done over a period of 18 months. And then after approval, the project will be completed over a period of 30 months. We are aware UP Government is going for election next year. And in fact, earlier also similar projects were executed in Telangana. We don't think there's going to be any difficulty in terms of providing funds for execution of these projects.

Right, sir. And for the net margin, sir, you will be giving the margin ballpark in the first -- post the first quarter numbers only? Sir, as in the earlier commentary, you have not been able to allude to the turnover and the margin guidance. So post the Q1, sir -- Q1, can we see any bit of lag effect in execution because of the COVID factor? Or is it different than -- since it is different than what it was in the first wave? So any...

See, COVID impact was there in the first quarter of last year also. And COVID impact is there in the first quarter of this year also. Only difference being, in the month of April last year, they have completely locked down everything, including the highways. And also there is a direction by the clients to the construction companies to stop work at project sites because all commercial activity was brought to a standstill in the month of April last year. But similar thing is not there this year. Work is continuing, nobody told us to stop the work. The supply chain is also intact because highways are not closed, and the workers are also available at the project site. Barring a few cases of COVID-19 impact at the project site, I don't think that disruption in current year will be as severe as last year. So we are confident in FY '22, first quarter, again, 1 more month is yet to be completed in the first quarter, we are very confident that the turnover over in first quarter FY '22 will be better than the first quarter numbers of FY '21.

Okay. But the pace will be slower. What we exited the March quarter, that pace would be...

Yes, yes, yes. That is agreed, yes, obviously, obviously.

Absolutely, it will be there. Murthy [Foreign Language].

Yes, yes. Now we'll come to the end of the conference. Already it's 1 hour and 15 minutes we have been talking. We will take the last 2 questions and then close it.

The next question is from the line of Anand Shankar, an individual investor.

Sir, good evening. I just have 1 question. For the previous year, we had an order inflow of around INR 19,000 crores. So I just want to know if there is any guidance from the order inflow for this...

Sorry to interrupt, Mr. Shankar. Sir, your voice is breaking, sir. We are unable to hear you.

Your voice is breaking, and we are...

Okay. Can you hear me now?

Yes.

Yes, yes. You know better. Please go ahead.

For the last financial year, we had an order inflow of about INR 19,000 crores roughly. So I just want to check if you can give us a guidance on the order inflow for the current financial year as well.

Yes, this was discussed by the top management. And we have thought because of the very fluid situation, because of this pandemic, COVID 2 currently raging across the country, we have decided not to give any guidance as far as top line is concerned as far as order booking is concerned, but we will review it by the end of the first quarter and accordingly come back to you with our guidance. This will be the last question.

Sir, this was the last question. So I would now like to hand the conference over to the management for closing comments.

Mohit Kumar, are you there? You want to -- now we come to the end of the conference, and I thank all the participants for their enthusiastic participation. And also thank DAM capital and Mohit Kumar and his team for hosting this conference. And if any of the participants who were not able to ask their questions, they can send us e-mail or they can call us, either me or my colleague, Mr. Durga Prasad, and we will be glad to answer your questions. So with this thing, I thank everyone, including my colleagues who participated in this conference call. And I hand over the mic to the management to -- of DAM capital.

Sir, Mr. Mohit Kumar, he has disconnected the call, sir.

Okay. Okay. Then let us close it. Thank you all. Thank you very much.

Thank you. Thank you all.

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