NCC Limited (500294) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to NCC Limited Q2 FY '24 Results Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashish Shah. Thank you, and over to you, Mr. Ashish Shah.

Yes. Thank you, Malcolm. On behalf of JM Financial, I welcome everybody to the second quarter financial year '24 earnings conference call of NCC Limited. We have from the management today Shri R. S. Raju, Director Projects; Shri Sanjay Pusarla, Executive Vice President, Financial Accounts; and Shri Neerad Sharma, Head Strategy and Investor Relations. So I hand over the call to the management now for the opening remarks, after which we can have the Q&A. Thank you.

Thank you, Mr. Ashish Shah. Good morning, ladies and gentlemen. A warm welcome to all of you into the Q2 FY '24 Investors Conference Call of NCC Limited. First of all, we are thankful to JM Financial Services for organizing this con call. The presentation containing the performance of 6 months and Q2 FY '24 was uploaded on the stock exchange and in our website at around 11 p.m. yesterday. Now I will take you through the key highlights of the second quarter and 6 months. Thereafter, we will take you through the question-and-answer session. Disclaimer. Before my briefing on the Q2, the usual disclaimer of the presentation that we have uploaded in the Stock Exchange and our website yesterday, including the discussions that we will have in this call contains or may contain certain forward-looking statements relating to NCCL business prospects and profitability, which are subject to several risks and uncertainties and actual results may materially differ from those in such forward-looking statements. Now about to Indian economy or infra construction that I don't want to touch on that one because to give more time for the question and answers. If you have any questions on that one, we'll answer it at the appropriate time. Now before going to the operating performance, I would like to brief on the key matters taken place in the second -- which were participated in this second quarter finances. The first one is Sembcorp Arbitration Award. In this quarter, this Arbitration Award is received in September '23. All of you know that, this Arbitration Award process took more than 5 years' time. And the award was not in line as expected by NCCL. NCCL noticed that some of the clients are not properly addressed by the arbitration tribunal aspects, the matter referred to outside legal firm to identify the grounds, if any, available to ascertain further legal proceedings. However, a matter of prudent accounting principles, NCCL has given effect for the difference amount of INR 351 crores in books of accounts. After adjusting the existing presence of INR 57 crores, there is an impact on P&L by INR 351 crores. But cash flow concerns, there would not be any cash outflow. There would be a cash inflow of INR 198 crores. With that, this award is given as INR 198 crores payable to NCCL by Sembcorp. So as a result, there would be a -- cash inflow would be there in the coming months. But at the same time, in the same quarter, we have received a positive settlement agreement with NHAI for one of the road project for INR 152 crores, which given effect in the results of the Q2. And this transaction has a positive impact in the P&L account. But both the claims together impacted revenue by INR 199 crores and PAT by INR 149 crores. Because of this impact at the PAT level of INR 149 crores, a significant amount. All the margins, gross profit margin, EBITDA margin and net profit margin, all the margins related from the -- of a normal course. And going to the other big aspects taken place in the second quarter. NCCL secured four major orders. One tunneling project and the 3 electrical smart meter projects totaling to INR 11,293 crores, which would further fuel the growth of the company going forward. And SPVs, out of these four projects, we're required to create special purpose vehicles for three projects, for two smart meter projects and one for tunneling projects. So we have incorporated SPVs as per the terms of the contract and the further proceedings, including finance closer are in good progress. NCC Vizag Urban. We now received INR 20 crores out of INR 50 crores, September '23 installment from GRPL towards sale consideration of NCC Vizag Urban. That balance INR 30 crores, they promised to pay before 15th November '23. The balance to installment December '23 and March '24, they assured to pay within due date. As far as guidance is concerned, we have given 20% growth guidance for top line for the year '23, '24. In the first half year, we have exceeded the guidance to whatever the target basing on the guidance of 20% we internally stipulated for 6 months, exceeded this by 5% and the management is confident to achieve the guidance given for the fiscal year '23, '24. So then we go to the order book. As far as order book is concerned, the company secured a good amount of orders in INR 12,289 crores in Q2, a growth of 362% over corresponding quarter in previous year. The major orders received in this quarter are given in the presentation uploaded in the website. Among them, four are big orders, one is Thane metro project, that is tunneling project, two from Maharashtra State Electricity Distribution Company Limited and one from Bihar Distribution Company Limited, and another one is -- okay, another tunneling project, as I said. Now the order book as of 30th September '23 stands at INR 61,796 crores, highest ever order book. This INR 61,700 crores is after eliminating the O&M part of those four orders about INR 2,600 crores or so. These three orders contain -- these three orders electro smart meter projects given for the duration of 10 years. And out of top 10 years, first 2 to 3 years, primarily execution, erection of the smart meters and completion of the project order scope would happen. But then in 7 years, the contractor requires to kind of operate, maintain and hand over the asset to the client. So what we've done here is in the order book, the first 3 years, whatever revenue comes that, to that extent, we include in the order book and the balance 7 years mainly of operational maintenance that we kept aside. Only we take that part when the fourth year comes into the start of that O&M period. Our order book is well diversified and spread across various states. Right now, we have 28% of orders from UP, where both UP and central government given priorities for the Jal Jeevan projects and with adequate fund allocation. So far, the payments are good as a result the progress of those projects going well. Now come to the NCCL Q2 operating performance. First of all, I will brief the numbers relating to the stand-alone Q2. In this quarter, the company performed well in majority of the performance parameters. On stand-alone basis, the company reported a revenue of INR 4,283 crores against INR 2,950 crores year-on-year, a growth of 45% on year-on-year basis. The revenue primarily driven by buildings and electrical divisions, which in turn good progress achieved in the UP Jal Jeevan Mission projects. The gross profit reported as INR 503 crores against INR 483 crores, a growth of 4%. The company has posted an EBITDA of INR 279 crores against INR 289 crores. In terms of percentage, the EBITDA reported as 6.5% against 9.61% of the corresponding quarter of previous year. The PAT reported as INR 69 crores against INR 122 crores. So here, you might have observed about the decline in the profit margins, which primarily, as I said, we have given an impact of two, one positive claim and one negative claim, together impacted the margins by INR 149 crores. Now I would like to just inform how the margins, when we exclude these two nonroutine items. So in this quarter, nonroutine items were accounted by the Sembcorp arbitration award, an adverse impact of INR 51 crores, and a favorable claim from road project INR 150 crores. The net impact of these two items, [ INR 109 crores ] impact at revenue level and the gross profit margin level, EBITDA level and at net profit level it is affected INR 149 crores. Once we exclude this negative impact of INR 149 crores, the net profit works out to INR 218 crores for the second quarter as against INR 122 crores reported in the corresponding quarter previous year, showing a growth of 79% over corresponding quarter. So this type of adjustments and impacts are also there on the Q2 of consolidated results, and also this impact is on the 6 months results of both stand-alone and consolidation. So in this quarter, the other income reported as INR 27.7 crores as against INR 31 crores from the corresponding quarter of the previous year. This is about second quarter. Now I move to the 6 months stand-alone operating results. On stand-alone basis, the company reported a revenue of INR 8,121 crores against INR 5,908 crores, a growth of 36% year-on-year. The revenue increased primarily due to more revenue from buildings division, which is turn due to good progress in UP Jal Jeevan Mission projects. The gross profit reported as INR 1,091 crores against INR 948 crores, a growth of 15%. The gross profit margin in 6 months is 13.44% against to 15.90%. The company has posted an EBITDA of INR 659 crores against INR 570 crores, registering a growth of 16%. The EBITDA margins reported at 8.12% against 9.56% of the corresponding period of previous year. PAT reported as INR 231 crores against to INR 242 crores. Now I move to the consolidated financials, Q2. This quarter reported turnover of INR 4,720 crores as against INR 3,320 crores, achieved a growth of 40% over corresponding quarter of previous year. The gross profit reported as INR 539 crores against INR 518 crores, a growth of 4.10%. The GPM reported 11.4% against 15.20%. The EBITDA reported INR 304 crores against INR 310 crores, a growth of -- a negative growth of 2%. The PAT reported as INR 86 crores against INR 138 crores, a decline by about 37% over the corresponding quarter of previous year. The 6 months consolidated results this quarter reported a turnover of INR 9,100 crores against INR 6,695 crores, achieved a growth of 36% over corresponding period of previous year. The gross profit reported as INR 1,165 crores as against INR 1,019 crores, a growth of 14%. The EBITDA reported INR 713 crores against INR 618 crores, a growth of 15%. The PAT reported INR 271 crores against INR 275 crores, a decline of 1.5% on a year-on-year basis. I will brief about the group companies, individual companies performance. All of you know that we have only at this minute three companies which are reporting the revenues. One is Pachhwara Coal Mining Private Limited, which is doing the mining project, another was NCC Urban doing the real estate business and the third one is [indiscernible] road annuity project. In the group companies, PCM has reported turnover of INR 338 crores as against INR 280 crores in the corresponding quarter of previous year. NCC Urban has reported a turnover of INR 95 crores as against INR 82 crores in corresponding quarter previous year. The total group companies together reported a turnover in this quarter as INR 435 crores against INR 368 crores, a growth of 18% on a year-on-year basis. This increase is mainly driven by mining product being executed by the PCMPL. The group companies performance in 6 months. The first 6 months period, the group companies reported INR 804 crores as against INR 645 crores on a year-on-year basis. NCC Urban has reported a turnover of INR 169 crores as against INR 170 crores. The total group companies reported turnover in the 6 months as INR 975 crores as against INR 730 crores, a growth of 33.56% on a year-on-year basis. As far as cash flows are concerned. The cash flows was generated in the operating activities is INR 159.54 crores against INR 53.20 crores. This is one of the best quarter, reported a significant amount of cash inflows from the operating activities, despite the expansion taking place at the projects and despite a 40% increase in the volume of operations at project level. The net cash flows used in the investing activity is INR 79 crores against INR 53 crores. Similarly, the net cash flows used in financial activity is INR 135 crores against a trial of INR 50 crores in the corresponding quarter of the previous year. So balance sheet. Now moving on to balance sheet, first one is the CapEx increase in this quarter by INR 43 crores. The company has not spent any big amount on CapEx in the second quarter. In first 6 months period of the CapEx is INR 90 crores. Inventories increased by INR 19 crores from the previous quarter, which in line with the increased volume of construction activities. In the first 6 months period, inventories increased by INR 268 crores. As a percentage, there's no big increase in the inventories comparing to the kind of progress what the projects are doing. Trade receivables. The trade receivables increased only by INR 61 crores as against 43% growth in turnover, so which reflects an improved collections from the clients. In the 6-month period, the trade receivables increased only by INR 179 crores as against 36% growth in turnover. The trade receivable days significantly come down to 70 days, almost it is lowest in the last 7, 8 years. Unbilled revenue. The unbilled revenue stands at INR 3,646 crores as against INR 3,679 crores. There is a slight decline despite increase in construction activities. There is a decline unbilled revenue from the previous quarter. Overall, there is a decline in unbilled revenue from a peak level of 24% to 22%. Now coming to the working capital. There is a phenomenal improvement happened in working capital in the current 6 months period of the year. The working capital has increased by about 11% as against 39% growth in the turnover. You know that there is a big order book and the company needs to wrap up the progress. But despite all these things, the working capital increase happened only 11%. The working capital as a percent of the turnover recorded as 26% as against a peak of 55% in finance year '21. Earlier it has almost touched 50% of the turnover of the working capital level. Now, it has come down to 26%. In working capital, similarly, working capital days, a lot of improvement has happened and reported a decline from 194 days in financial year '21 to 89 days this FY half year '24 -- first half year. This is the ever lowest in the last 5 years period. Coming to the liability side, the debt has increased from INR 1,306 crores from first quarter ending to INR 1,470 crores by September '23, an increase of INR 164 crores. Generally, in the construction industry, the collections are lower in the first 6 months as a result the debt increases in the 6 months of every year, but the quantum of increase in Q3 is much lower than the normal increase happened in the last couple of years. The mobilization advance is decreased in the second quarter from INR 3,320 crores to INR 3,224 crores, a decline of INR 90 crores. Coming to investment, there is no change in the investments in the half year or in the second quarter. Now I request the JM Financial Services to contribute further from the con call. Here, we have my colleagues, Mr. Sanjay Pusarla and Mr. Neerad Sharma and Mr. Srinivas Rao. And we will answer the questions.

Yes. Thank you. Malcolm, we can open for Q&A.

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

First, congratulations on great set of numbers, particularly on the execution and the order inflow front, sir. So I understand we are not giving any guidance or upgrading the guidance on the execution. But roughly trying to -- on the directional front, trying to understand that normally, the second half is relatively much better on the execution front versus the first half. So last year also was the case. So broadly looking at the current run rate 36% kind of a top line growth that we have seen in this first half, is it fair to assume that we should be having at least 30% plus kind of a growth this year? And the way the order inflow is that definitely, you can update how much more, are we expecting the order inflow. So considering that even the next year also, one can see a 20% plus kind of a revenue growth. So that directionally is, I am correct?

Yes. Can I answer your question?

Yes, sir.

So as far as guidance is concerned, what we've given the 20% growth on the top line and the first 6 months, our achievement is almost close to that one whatever guidance we have given. And going forward, in the next 6 months, as you observed earlier, the percentage of execution, generally good in the second half than the first half. But here because of certain nature of projects, the execution increase happened in the second quarter of [indiscernible]. So earlier, that type of increase out there in the second quarter. But in this year, in the second quarter, more turnover because of the various projects, big size of projects are in the -- reaching the good position to execute. And in the second half, as you said that there is a good amount of order book and rather value is increasing. But whatever orders we received in the first half year or in the fourth quarter of this previous year, there the big size orders are there like this Malad project, now tunneling project, and these smart meter deposits. But these projects require certain pre-execution proceedings including the finance closure. So generally, it takes some time to really turn out the report. And in financial '24, '25, good visibility is there to report a good turnover from these projects. And in the second half, generally, basing on the first half year performance, we believe that and definitely some execution would be good. And thereby, I mentioned in my remarks that management is confident to achieve the 20% guidance. So thereafter, there may be some increase will be there, but we are not going to increase or change any guidance at this moment.

Okay. Got it. And then in terms of the margin level, so if we adjust the claim, so full 1H is 10.3% kind of EBITDA margin. So that is -- that number is sustainable. And previously, we were talking to -- in terms of the further debt reduction also. So from here on, so Sembcorp, obviously, if we fight and we will get the cash flow maybe at later stage, but broadly considering whatever we have, so how much more we can see the debt reduction and accordingly, the finance cost reduction?

Yes. Now margins are concerned, the company philosophy is since there's a competition in the market, now we -- at the gross profit margin level, there's a compromise is there while bidding the projects. But at the bottom level, from EBITDA level onwards, improvement is looking by the management were reporting by increasing the top line. That is the philosophy. In such a way, we are moving. So now, in the second half, whatever normal margins, now the first half, second quarter got impacted because of this onetime in the transactions. But second and third quarter remains as we reported the first quarter. So in normal course, excluding those transactions for the year as a whole, we expect an EBITDA, and we've given guidance as 10%, but it may go 10.1% to 10.2%. So there would be the growth over the previous year in the EBITDA percentage. And similarly, in the net profit, also increase would be there. We reported last year 4.2% and current year, there is a chance of reporting 4.5% plus at net profit level.

Sir, I was asking in terms of the order inflows. So further, how much have we are looking at to get the more orders? So how much we are planning to bid by March end to get? And at this time -- yes, sir.

As now, we already secured INR 20,000 crores orders as against INR 26,000 crores mandate guidance we have given. So now we are confident that we definitely achieve the INR 26,000 crores after book basing on the present flow of orders. And there is some chance to exceed that one. So it may go another INR 2,000 crores, INR 3,000 crores, INR 4,000 crores plus of the existing -- what guidance we have given.

Got it. Got it. And lastly, on the data point, sir, so you have mentioned mobilization advance. If you can repeat the retention money and unbilled revenue number. And investment is -- I hope the subsidiary and JV loans and investment, is the amount the same INR 1,230 crores, which was there in the previous quarter?

You're not giving chance for the others. Total questions appear that you are asking. Shall I -- JM Financial, Mr. Ashish Shah, just you tell me whether to proceed further to answer all the...

Mr. Shravan Shah, I -- sorry to interrupt you, sir, we have other participants waiting for questions. I would request you if you have a follow-up question to rejoin the queue.

Yes, this was the data point, so it can help everybody, too.

Sure. If you have a follow-up question, Mr. Shravan Shah, you can go ahead and follow up with the queue back again.

Okay. We will answer in the last, Mr. Shravan Shah.

The next question is from the line of Mohit Kumar from ICICI Securities.

My question is on the -- sir, in the Slide #22, you were saying that the need to enter into new verticals to grow at 20%. Does it mean that you're expecting a slower growth in the existing verticals in the near term? And hence, there is a need to enter into new segments? And if you can help us with the new segment, which you're trying to enter into?

Mr. Mohit Kumar, this is Neerad. I hope I am audible, right?

Yes, sir. You're audible.

Mr. Mohit, the fact of the matter is it is not that we do not see a lot of visibility in the existing vertical. The infrastructure market in India is evolving at a very fast pace. For example, if you talk about the tunnel projects, it was not an active market about a decade back. So smart meter. I'm just giving you an example to answer your question in totality. We are always looking at what are the new avenues for growth, what are the new projects which are coming up for bidding. And accordingly, we try to have the competence, the qualification and then decide to bid for the projects. So the pipeline of the project continues to be very healthy in the existing vertical as well as the new ones. But we are not going whole-hog, we are a bit selective in these new vertical. As we have already shared with you, we have just started with a big tunnel project in the city of Mumbai. We have taken three smart meter projects. So this is what we intend to do. So as and when the new opportunities come in the newer verticals, we will try to see what kind of projects are those, what is the competence required to do that, what kind of investments, if any, is required, what kind of competence is required in terms of people skill, then we decide to bid for those projects.

So my second question is smart meter opportunity, right, sir. We haven't done, I think, electric or smart metering ever in the history. So do you think that -- how will you go up on bringing those competitions -- competencies and building those capabilities so that we execute at reasonable profit margin, especially the orders?

See, Mr. Mohit, I agree with you that this is a new market, but this is an emerging area really. And we have done a lot of distribution projects. This is a kind of project that we are doing in the Jal Jeevan Mission. What the Jal Jeevan Mission sincerely is all about? It is about giving the retail tap connection to the households. In these smart meters, we are trying to do the same thing. What is required to be done here is to provide the smart meter connections to all the households. So -- and we have done a lot of distribution projects, and we know the clients. In fact, we have been active in this vertical. We have been working with the state electricity board for about 2 decades now. And all these projects are promoted by them. So we understand the space, and we believe we have what it takes to succeed in this space.

[Operator Instructions] The next question is from the line of Nikhil Abhyankar from ICICI Securities.

Sir, my question is regarding, we will be entering into the election season in the next 6 months. So do you see that any order finalization will be hit, say, after Jan, Feb? So whatever the orders come in, should happen till December, Jan?

Shall I? Yes, yes, you have asked a very good question. We are entering into these very exciting festival of elections, the state elections, followed by central elections. But we already had the buffers in place. As my colleague, Mr. Raju has already shared with you, we are already sitting at the highest order book in our history, that is about INR 61,797 crores. So close to INR 62,000 crore. So even if -- though, I do not agree with this view that after the elections are announced, there won't be any project. But even if theoretically, let us say that the proposition that you are trying to make is correct, in that eventuality also, we have sufficient orders on our books to continue to execute till the new pipeline of projects are announced and awarded.

Right, sir. Understood. And sir, also, what is the status for TAQA arbitration? And what is the total claims for that arbitration?

The TAQA, certain developments are there. Now already we explained about the legal status earlier. In this quarter, there are some amicable settlement to proceedings are going on. So there are good chances to get resolved from mutual discussions and other things. That process, almost 70% to 75% is over. And we expect some amicable settlement between the two parties. So as a result, the pending legal proceedings and other things gets closed. So there won't be any -- we are not expecting any big amount over -- or provision we made in the books of accounts to happen.

Okay. So how much are the provisions, if I may know?

Nikhil, I'm sorry to interrupt you. There are other participants in the queue, please limit your questions. If you have a follow-up question, we would request you to rejoin the queue, please. [Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.

Am I audible?

Yes. Yes, please.

Sir, just a clarification first up. I mean, you mentioned PAT margin of 5% plus in this year, right, that's what you mentioned to one of the participants earlier?

No. 4.4% plus.

Come again.

4.8%.

4.8%. Okay. 4.8% plus.

4.5%, we mentioned in my initial answer...

But what your question...

4.5% plus.

4.5% plus. Okay. Fair enough. And I think our adjusted EBITDA margin in this quarter was around 10.8%, right? So ideally -- I mean, second half is generally much better than your first half, I think. So ideally, this EBITDA margin of 10.1% to 10.2% isn't that on the conservative side, I mean?

For the year as a whole, you're asking?

Yes. Yes. That's what you mentioned, right, 10.1% to 10.2% EBITDA margin.

It depends upon the mix of several divisions we have, several net supports are there. It depends upon the mix. Generally, the band of 0 to 0.5%, in between, it will vary. So we are confident to at least report 10.2% level for the year as a whole.

Okay. Okay. Okay. I understood. And my second question is on your debt outlook. I think we have seen increase in debt. And I think we had earlier guided that FY '24 and debt on a Y-o-Y basis from FY '23 base, it would be lower by about INR 100 crores to INR 200 crores. So where do we stand in that front? And then how do we see the interest cost because our interest cost is -- has always been on the increasing trend. So some understanding on interest and debt would be helpful. Yes.

Now, as far as interest cost is concerned, there are two parts. So one is the interest on mobilization advance and other one is interest on our loans. As far as the loans are concerned, there is no any good increase in terms of interest because mobilization advance is increasing and mobilization advance also, the mix of the advances. One is interest-bearing advances, other one is noninterest-bearing advances. And that mix moves that is where more interest-bearing advances are there, then as well as the interest cost goes. But always, we should see with reference to the top line. If you see with reference to top line, there is a decline in the interest cost from the previous year. And any year, there is a decline -- decline is happening in terms of percentage. When the company grows about 30%, 40%, naturally the debt also supposed to grow, but somehow the debt is under control. So in this year, since more orders have come and big orders have come, where the electro meter -- smart meter projects is a different type of semi-annuity or hybrid nature of annuity projects, that one. It requires the initial investment by the company. Only the payment will come over a period of 10 years from those projects, as a result, some part of investment or infusion of the capital into the three projects required. As a result, going forward, there would be some increase in the debt level increases, but it is in correspondence to the growth in the top line. In terms of turnover, the interest cost, there is a -- we expect a decline, but not in the absolute terms. So as far as the third quarter or so -- in the third quarter, we are not expecting any big increase in debt, but fourth quarter and thereafter in FY '25, the debt increase may be there.

So what is the debt level we are targeting?

Mr. Deepak, I'm sorry to interrupt...

So it's a follow-up only. I mean it's just a clarification. So what's the debt level we are targeting FY '24 end?

'24, the debt level around INR 1,500 crores or INR 1,600 crores, another INR 200 crores, INR 300 crores from this period.

INR 1,500 crores to INR 1,600 crores FY '24?

Yes, yes.

The next question is from the line of Deepika Bhandari from PhillipCapital.

Just two questions from my end that in the first half, we have taken a significant amount of orders. So do we see our CapEx to increase next year than the usual range?

Yes, CapEx basing on the present nature of projects, we are not forcing any significant increase in the CapEx. The next year, we are required to buy the tunneling machines and how we -- in SPVs, the tunneling project required to buy that, again, in the special purpose vehicle. So how that company structure, whether the company borrows on it's own and buys equipment. So when the equipment on consolidation, that part again comes into the balance sheet like that. Some naturally, it is a capital-intensive projects, thereby some CapEx would be there. For smart meter projects, we are not expecting any CapEx -- significant CapEx for those projects. So there may not be big increase, unless we get any road projects or mining projects. When we get mining project, a significant increase would be there in the CapEx. It depends upon the nature of projects. So as on date, whatever projects are there are secured, and we are not doing any significant increase in the CapEx. It would be in the normal level of INR 300 crores or so.

Okay, sir. And my next question is, sir -- I mean, because we have won recently so many orders, which might be on the mobilization state. So as on 31st -- as on this 31st September, what percentage of order book was not contributing into our revenue? If you can just give us a rough percentage.

If you consider the INR 20,000 crores, what we secured in the current year, out of which 70% to 80% of others won't participate in the current year order book -- current year turnover, 15% to 20% orders participate in the second half.

Sir, that means INR 15,000 crores to INR 16,000 crores of the total order book is not contributing in -- was not contributing as on September into our revenue?

Correct.

But there will be some contribution in the second half.

The next question is from the line of Prem Khurana from Anand Rathi Shares.

Congratulations, very strong execution during the quarter. So sir, my question was to understand our thought process, the way we are thinking about the business now. So as I see, when I look at some of these orders that we've been able to manage in the recent past, let's say, tunneling project, which is very large for us and even the advanced metering systems, seems as if you are willing to commit our balance sheet now, right? Because the tunneling project, I mean, you would need to kind of go and I understand it could be at SPV level as well. But either you're willing to take more debt? Or you would be required to infuse some money you're going to buy a TBM? And even with the advanced metering system, there will be some equity infusion from your side. So does it mean that we're open to kind of come in our balance sheet to kind of get some more orders wherein you feel, I mean, this money would be able to generate you [indiscernible]? To what extent would you be willing to kind of take more such projects wherein you will be required to kind of commit your balance sheet?

As far as these projects execution are concerned, there are two parts: one is tunneling project you're asking, the other one is the smart meters project. As far as smart meter projects are concerned, already my colleague, Neerad Sharma explained, though they are big in size, we have the earlier experience in the same segment that is electrical distribution works. This is nothing but again, that type of nature, but the payment terms, the type of annuity and it is a big size order. Number of electric meters, smart meters to erect in various places like water -- Jal Jeevan water project, how we are doing retail connection to each in-house. Like each in-house, we have to erect the new meters. And the additional thing is the software system -- supporting software system to link each and every one to the central process, so that is there. So as far as this process is concerned, management at this moment is not facing. And the team is now they build up to take up to execute these projects. And though it is a big project, some problems would be there. It's new, but it is a manageable level at this moment, management is there. As far as tunneling project is concerned, definitely it is a new vertical. And earlier, we don't have experience in tunneling but we have experience in the road. Only one tunneling -- operation of the tunneling is the one new item. So we -- thereby, we secured this project with a joint venture of J. Kumar. They have the experience of execution of this type of projects earlier. So we jointly will execute this project. So thereby, we don't foresee any big problems. Some certain challenges would be there, but it is manageable with the help of the other partners. Any other?

No. So basically, I mean -- sorry, I think I couldn't convey what I want to understand. So I want to understand in these sort of projects, right, you would need to include some equity in the SPVs. So internally, I mean, is there any change in the thought process wherein you are willing to invest money in some of these asset ownership businesses or let's say, in advanced meeting, you would have to put in money. Tomorrow, you could go decide when to go and bid for road hybrid wherein you would be required to put in money. To what extent would you be willing to commit your balance sheet towards such projects wherein you would be required to stay back with these projects for some time?

Okay. Now these SPVs, we created separate SPVs. These are based on SPV level making a finance model, whereby to mobilize the funds partly through the debt and partly by equity. So when our share of equity is required about for all the projects put together at this moment, we expect about INR 400 crores to INR 500 crores, equity infusion would be there. That is over a period of 2 years or so. In a year, about INR 200 crores, INR 250 crores equity NCC needs to invest to that extent our balance sheet gets adjusted -- or gets affected.

And just one bookkeeping, could you please give me the breakup of order backlog in terms of how much is -- out of the INR 61,800-odd crores, how much is for the stand-alone entity and how much would be with the subsidiaries, I mean, like of MDO and advanced metering system, which would not reflect in the stand-alone operations and possibly if you could share that breakup, please?

Now from the SPVs, these two SPVs, we secured the electric smart meters. Out of 3, one is directly received by the NCC, no SPV is required and NCC execute their project, that is INR 2,400 crores or so. And other two projects, which appear in the -- first of all, which appear in the SPV books of accounts. Now we are structuring that, that SPV again award the EPC content to the NCC. So whatever EPC contract to be done in the first 2, 3 years to complete the project to that extent they give to the NCC. That value is about INR 3,660 crores that appears in the NCCL books of accounts and some part appear in the SPV that SPVs part is about INR 927 crores. Again, total is our subsidiary companies, the order book as on this date, basing on the structure, stands at INR 7,732 crores and NCC stands at INR 54,000 crores. Together, INR 61,786 crores. And further, another point to be noted is the O&M part of these three electro smart meters project, totaling to INR 2,690 crores is kept aside out of the order book. This we consider into the order book only when the O&M bid starts, that is roughly in the fourth year of the project starting. Clarified?

The next question is from the line of Parvez Qazi from Nuvama Group.

Congrats for great order intake. Sir, two questions from my side. One, if you could provide us what is the total exposure to subsidiaries, JVs, et cetera, that we have? And second, what is the status of payment on the Andhra project percentage, the state is also going to go to election soon?

You're asking about Andhra projects. As far as Andhra projects exposure is concerned, there are two parts, one is the capital city projects and other one is other than the capital city projects. So in the capital city projects, the exposure in terms of fund based and non-fund based. As far as bank guarantees are concerned, there is a significant decline happened from the level of INR 300 crores, INR 300 crores to INR 200 crores, now it comes to nearly INR 100 crores, INR 120 crores. And as far as capital city exposure, at the beginning of the year, we have INR 157 crores. Now it has come down to INR 147 crores. For the running projects, there may not be any big change in the running projects. Whatever we have there every month we put the bills and every month bills we are getting. Whatever outstanding is there as of 31st March '23, the same level is there now. And as far as further exposure is concerned, we are not taking any new orders from AP state. And also the execution of the projects, what are the projects are there, where our fund allocation is there, only we are doing such projects to bring down or to control the exposure till the fund position of the government improves. Any further clarification you need?

No sir, just the exposure to subsidiary. That's it.

Subsidiaries. Okay. For subsidiaries, there is no change in the first 6-month period. In the first 6 months period, the investments weighing INR 875 crores at the beginning of the year, the same level also there, same is also there as of September '23.

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

Can you provide stand-alone and subsidiary order book for Q2 FY '23 outstanding one?

Now the order book as of 30th September '23, for stand-alone stands at INR 54,000 crores and subsidiary company INR 7,700 crores, totaling to INR 61,796 crores.

I was asking for Q2 FY '23. That is 30th September 2022.

In comparison?

Yes.

You were asking about previous year, right, '22?

Yes, yes, same quarter previous year.

Yes. Give us a moment, please.

Now, we have about INR 7,700 crores in subsidiary companies at this movement corresponding to the same September '22, that would be around INR 3,500 crores or so.

Also, second question would be, could you throw some light on the pipeline that we are seeing right now, if you could quantify it sector-wise or the overall pipeline or something like that if possible?

We continue to see a very healthy pipeline of projects coming up for bidding, for example, in our biggest division, buildings and housing. The transportation, we get to see a lot of elevated corridors, a lot of bridges kind of structure. The same way the Jal Jeevan Mission, the water supply rural as well as bulk water supply projects continues to be very interesting space, and we continue to see a lot of opportunities, a lot of bids coming up. Same is true for the electrical division. When we speak about these smart meter projects or the distribution side, we continue to see a lot of healthy projects. But it is not really helpful to put a number. Why? Because these projects may not get decided in the next 6 months or 12 months, and infrastructure projects takes a lot of time to develop, to get permissions, to get the funding, get all the permissions in one place and then they are bid out. So even if let us say that, that number is x, that number x may not get decided in the next 6 months or 12 months. So that is the reason. We do not really wish to share that number because that is not something that gives you a meaningful information to estimate our performance in for the next few years.

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

You can hear me?

Yes, Yes.

Sir, firstly, sir, due to paucity of time, we are having only two questions. So Neeradji, what is the best way to get in touch with you post the call, you also elaborate on that? And secondly, sir, on the MDO business, I think so mine development, SPV we have done earlier, that was about to yield results now. So what is the update on the same?

Surely. Firstly, I will answer your first question first. You please note down my number and e-mail. If you are ready, then we will talk about the MDO projects. So that you can reach out.

Yes, sir, please.

Otherwise, in the presentation and on the website, the e-mail ID, the numbers are already given. So you please note down my number, 9000326123 to connect with you. Now your next question was about this MDO project, this mine development project, right?

Yes. Yes, sir.

So this is about MDO project. So now the MDO project, basically, it is given for 30 years time span and we started the project. At the beginning, the client is able to provide the land and other facilities to some extent. As a result, the mine plan approval is taken for a period of 5 years and in place of 30 years. So the 5 years period is almost over. And for the balance 25 years, whatever format is required, that is procuring forest land, procuring Stage 2 clearance and R&R, this revised mining plan for 25 years, revised mining lease for balance, this coal extraction, all these things for the last 1.5 years are there. Now, they were completed and the WPD of the client, it is the obligation of the WPD sale to procure all these things. Now, the client completed those formalities and handed over the forest land, and we started working in that front, tree cutting and then starting mine other side and the shifting of villages and settlement of their R&R issues, all are in progress. And as a result, the mine is -- the extraction of our burden and coal is continuing. So last year, we achieved the final milestone of achievement of capacity of 15 million tonnes per year that we have achieved. So as on this date, whatever obligations are there or milestones are there for the MDO, it is in place within the time or in place. Similarly, the WPDs are also -- they are also putting a lot of efforts, whatever come, what are facility is required, that they're also cooperating and they're providing. As a result, we are able to report good amount of turnover on quarter-on-quarter. So for the current year, we given target of about INR 1,500 crores or so, and that we are confident to achieve INR 1,500 crores turnover. And for the first half year, the company reported turnover of INR 804 crores. So about transportation, 100 is the transportation from mine pit mouth, mine to railway siding, that is 55 kilometers distance. And as far as original document, the WPDCL agreed to provide the railway siding up to the pit mouth in a period of 5 years. But there's no good progress as far as railway siding is concerned. Still the transportation is going by the trucks of this distance of [ 15 kilometers ]. Now we and the WPDCL, as an alternative plan till the railway siding comes into the place, worked out various options and identified another two routes to reach the railway siding, another two railway siding stations are identified. And the second one, already, we started transporting this one. More than 50% now we are transporting through the second road. And also we identified another road now. And that strengthening of third route is going on. And once this comes into operation, to some extent to the density in the transportation of the growth comes down, but this is one problem at this moment, transportation of the coal. But of course, this is an obligation of the WPDCL to provide the facility. But as far as MDO is concerned, it is performing what it refers to do. So at this moment, we can see that project is going well.

And sir, very small point, I joined late. So depending upon the scalability of execution, the last H2 -- last year, H2 and this year H2, what kind of growth are we looking in terms of the execution getting scaled up?

Last year, H2, there are some -- we accounted certain pending bills in the fourth quarter whatever they kept spending there, plus a real estate dispute is there with the WPDCL. Earlier, they had not digitally escalation, there is a dispute between the two parties and the dispute is resolved and finally agreed by the client. And they certified the bills in the fourth quarter. So as a result at INR 1,500 crores to INR 1,600 crores. And in the second half also INR 800 crores plus about INR 850 crores or INR 900 crores in the turnover may stand.

No, sir, I was looking at company as a whole. Last year, we clocked -- yes, sorry, it was my second question only. If you -- if I would just complete it. I was looking as a company as a whole, sir. We did top line on consolidated closer to INR 6,700 crores for H1. And ended the year around INR 15,500 crores. How should this edge to look in terms of comparison with last year? That was my question and all the best to the team and should and [Foreign Language].

As comparing to the last half year, compared last year consol about INR 7,000 roughly, INR 6,700 crores top line we reported. And on the 20% growth would be there. INR 8,200 crores, INR 8,300 crores.

Okay. So H2 will be lower than H1, sir, in that case?

No.

H1, we have done INR 9,100 crores?

Yes.

So if we are looking for INR 8,200 crores for H2, that means sequentially, it will be lower?

So it is not slow. So it's -- we expect...

It will be more or less in the same range, maybe it's INR 9,150 crores in the first half, and it may lead to INR 9,300 crores or INR 9,400 crores.

Now last time, say, INR 7,000 crores or so we've given in the top line for second half on this 20% comes to about INR 8,500 crores or so and so another INR 600 crores is different there. So we at the same level -- the same level would be there, INR 9,000 crores, INR 9,100 crores.

I would try to answer your question a little differently. We have already given a guidance for 20% growth, and we continue to stick to that target. So we will hopefully surpass that number.

As there are no further questions from the participants, I now hand the conference over to Mr. Ashish Shah from JM Financial for the closing comments. Please go ahead, sir.

On behalf of JM Financial, I'd like to thank everybody for participating in this call. Also, we thank you to the management for allowing us to host the call. Sir, any closing remarks from your side that you would like to make?

Now, I thank you very much the JM Financial Services for organizing the call. And I thank you all the participants. And I also thank for the questions what you asked by you. And we hope that we clarified all the questions and whatever questions we have not answered and if any further clarification required, you may please contact our strategic plan head, Mr. Neerad Sharma. His phone numbers are available in the investors presentation. Thank you all.

Thank you very much. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you very much. Thanks, Ashishji.

Thanks, Mr. Ashish.