Power Mech Projects Limited (POWERMECH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Power Mech Projects Limited Q3 FY 2021 Earnings Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Chirag Muchhala from Nirmal Bang Equities. Thank you and over to you, sir.

Thank you, Stanford. Nirmal Bang Equities welcomes you all to the Q3 FY '21 results conference call of Power Mech Projects Limited. The management is represented by Mr. S.K. Ramaiah, Director, Business Development; and Mr. Jay Satish, Chief Financial Officer. I now hand over the call to the management for their opening remarks, post which we can take questions from participants. Over to you, Sir.

Yes. Thanks, Chirag. Dear friends, Good evening, this is Satish. It's our pleasure hosting call for quarter 3 and 9 months FY 2021. It's happy to say that the bad is over for Power Mech and the operation has completely come to normal. As we could see, the execution and the turnover momentum has turned from INR 85 crores to INR 200 crores plus, per month. The performance for quarter 3 and 9 months turned to be positive from negative. The impact of COVID continued to be on our operation for almost 8 months. Quarter 3 was a blended quarter for us as October and, to some extent, November month was impacted due to COVID, especially sites like Maitree Bangladesh, where we're executing a contract of INR 830 crore. Similarly, Barh in India and Nabinagar in India, put together, the contract value is close to INR 400 crores, which required large number of manpower with low productivity that impacted, to some extent, month of October and November. However, December month was a great month for Power Mech as all sites were operating normal with full swing. The reported total income for quarter 3 FY 2021 is INR 517.92 crores, and EBITDA is INR 31.45 crores, and PAT is INR 3.13 crores. Whereas if we see during quarter 3 of last financial year, the reported total income was INR 547.44 crores, and EBITDA was INR 74.21 crores, and PAT was INR 36.41 crores. And the revenue mix for quarter 3 is as follows: erection business has contributed INR 133 crores of revenue; civil has contributed almost INR 184 crores of revenue; O&M, INR 171 crores of revenue; and electrical business has contributed INR 19 crores, and higher -- and other income is -- put together is close to INR 11 crores. Whereas during Q3 of last year, the contribution from erection business was INR 201 crores, civil was INR 147 crores. O&M business was INR 162 crores, and electrical was INR 34 crores. And in terms of variance, if you see, like, the mechanical erection business is down by almost INR 68 crores, as compared to quarter 3 to quarter 3, that has come down by 34%. And civil, it has gone up by INR 36 crores, which is almost 25%. O&M, more or less flat, slightly gone up by INR 8.8 crores, which is 5%, whereas electrical is down by almost INR 15 crores, which is 43%. Similarly, the reported total income for 9 months FY 2021 is almost INR 1,142.32 crores, and EBITDA was -- EBITDA is INR 21.05 crores negative, and PAT is INR 81.26 crore cumulative negative. Whereas last year for 9 months, the total income was INR 1,575.98 crores, EBITDA was INR 211.52 crores and PAT was INR 99.91 crores. And in terms of contribution, the mechanical business, we did close to INR 280.53 crores, whereas last year, it was INR 559 crores. So there is a dip of almost like INR 279 crore. Similarly, civil, we did close to INR 358 crores of turnover, whereas last year, it was INR 429 crores. This has come down by INR 70 crores. O&M is close to INR 438 crores, whereas last year, it was INR 474 crore. So there is a marginal dip of INR 36 crores. Whereas mechanic -- erection -- sorry, electrical business, it is close to INR 50 crores, whereas last year, it was INR 33 crores. So there is a dip of almost like INR 54 crores. Comparatively, operation has completely turned to be positive towards normal direction during quarter 3 as compared to quarter 1 and quarter 2. Quarter 1 and 2 was a washout year -- a washout quarter for us, whereas quarter 3 is a blended quarter where we could see some sort of impact for 1 or 2 months, but whereas December was a complete normal quarter. So this is a positive sign for us. The execution cycle has improved substantially, major projects like Maitree, both civil and structural work at Bangladesh, Barh, Nabinagar and Neyveli, the domestic sites where we execute the mechanical work. There, the manpower requirement was high. And to some extent, we had a little setback even at Ramayampet canal work at Telangana. So we can very much say that, and we are very much confident, of seeing quarter 4 as a completely normal quarter with turnover momentum appropriate INR 200 crores plus, per month, and this is expected to be continued because December, we have crossed almost INR 200 crores of turnover, and that momentum is expected to be continued going forward. Operational costs to be completely proportionate to the normal execution level and margins can be maintained. Depreciation cost will continue to be in the range of INR 9 crores per month going forward for next few months. And finally, the finance cost, there will be some reduction during quarter 4 as compared to last 3 quarters with the reduction of overall debt level. And the share of profit from JV expected to be marginal. So this will help us to reach to the normal level completely for the complete quarter of Q4 because the momentum of reaching to normal, we could see from December quarter onwards. So the turnover of INR 200 crores per month versus loss in terms of extraordinary cost and maintaining the margin. And in terms of our receivables, the receivables are around INR 467 crores as against INR 542 crores as on March 31, 2020. The inventory level have continued to be around INR 122 crores, and the retention money is close to INR 290 crores as against INR 309 crores as on March 31, 2020. And if we see like the peak borrowing of the company went up to INR 590 crores, as we discussed during the last quarter, due to delayed receipts from customers. And the peak net borrowing went up INR 460 crores. But -- however, now the debt level has come down from INR 590 crores to INR 530 crores, and the net debt level has come down from INR 460 crores to INR 370 crores. This is a positive sign, and this will help us bringing down the finance cost during quarter 4 of this year. And if we see like the average collection has substantially improved, which used to be INR 125 crores to INR 130 crores per month, now we could see the collection picking up from INR 175 crores to INR 200 crores per month on an average. This has helped us to maintain our operating cash flow positive for 9 months by almost INR 52 crores, which is really exciting. If we see last year, for 9 months, the operating cash was negative by INR 68 crores. And for 12 months, it was negative by almost like INR 48 crores. But whereas -- during this year, for the 9 months, in spite of a lot of challenges, tough time constraints, we could still able to improve our cash flow. So this helped us to maintain the operating cash flow positive by almost INR 52 crores. And we're expecting the operating cash to be positive by at least INR 65 crores plus, by year-end. And one of the most exciting [indiscernible] is like the order book is quite healthy. During this year, up to date, we have added close to INR 3,900 crores of orders, and we're expecting to add a few more orders before this year-end. And we're expecting some healthy orders from the O&M side. And if all go, we may add INR 800 crores to INR 900 crores from the O&M business itself. Considering our order booking, we are confident that year-end, we'll have a backlog or a book of close to INR 7,600 crores to INR 7,700, crores, which is quite healthy. If we see the history of Power Mech, the conversion ratio used to be almost 40% to 42% of our backlog order book. Now with the addition of O&M orders of INR 800 crores, our backlog of O&M business is going to be quite healthy. So we're hoping of some positive growth in the O&M business, too. If we take the conversion ratio of 38% to 40%, which is quite conservative, we're very comfortable that we'll have a strong execution cycle for the next few years, especially FY '21 and '22. If we see the turnover execution cycle, the run rate is close to INR 200 crores plus, per month. December, we had almost like INR 210 million, INR 220 crores. And we're confident that January, February, March, the execution cycle will be minimum INR 200 plus crores, per month, so which will leave us a quite strong revenue cycle for us. And this momentum will continue going forward. Now I request Mr. Kodandaramaiah to add a few more developments?

Thanks, Satish. Thanks, Chirag and the team. As an update on the other aspects of the business and the marketing and the order booking side, as we have seen, the last year backlog was standing at INR 4,575 crores, and now with the order booking of last year of INR 1,953 crores. Now as in February middle, perhaps now we have reached a figure of order booking of INR 3,904 crores, and the backlog has gone up to INR 7,353 crores, a rise of 60% compared to the beginning of the year -- of this year, 2020/'21. And the major growth areas have been back, in the ETC business, mechanical side, there has been a 13% growth in the backlog of INR 2,330 crores against INR 2,054 crores. And the civil side, there has been a quantum jump to 3x. The backlog now stands at about INR 3,785 crores against the backlog of INR 1,227 crores. O&M is more or less static till the -- this one. Of course, the new things, we will explain it about what are revenues which have happened. And then electrical, there has been a dip in the backlog. Now the broad spectrum of the business breakup has been the power sector continues to dominate in the combination of works regarding the mechanical works, O&M business, civil, structural and various other aspects. That constitutes 65.4% of the order backlog constituting INR 4,750 crore. And in the case of nonpower, it is INR 2,603 crores, which is 34.6% of the apportioning to the nonpower business. Now the domestic -- the business has increased. There has been a dip in the international order booking in the current year, maybe possibly due to the COVID conditions outside prevailing in many places. And the domestic order backlog is INR 6,267 crores, constituting 85% of the backlog. And then the international business is around INR 1,086 crores, consisting 15% of the backlog. These are the broad spectrum of the ordering position and the backlogs available that gives a good vision for us to carry on from here. Now coming to some of the key aspects of the conversion and the way work has been going on in many of the key projects, what I would like to update is that in the case of Bangladesh, there is a major job, which we are doing -- executing it, and that is around INR 860 crore. And there was -- there has been a setback there substantially in the first 2 quarters, and there was some pickup in the third quarter. And this INR 860 crores, we have about over 35%. And now it is picking up, and the billing is going up to INR 20 crores per month. That's the positive side. Then in the Yadadri project also, about INR 800 crores, there has been an upswing also in the billing, which is going up from INR 11 crores to INR 15 crores -- INR 12 crores to INR 15 crores. And about 15% of the work has been completed. And the other major customer, JSW, between 2 projects worth of INR 400 crores, we have completed almost 50% of the work completion. Then the cross-country pipeline packages, what we are doing with Adani, and then another 2 IOCL projects worth about INR 325 crores, now we have completed 65%. Then Dangote is a major export job, $76 million, and that is going on pretty well. Perhaps we should see an early end of completion and the benefits of that. We have completed almost 70% of this job. Ramayampet canal has now picked up momentum. Out of INR 373 crores, 40% work has been completed. Then Sadulpur electrification, railway electrification, INR 350 crores. About 45% of the work has been completed. So this is how the major projects are there. There are so many other projects, which was explained. One positive thing is that perhaps we will see at the end of the day, in another 6 months, for the Barh project, even though we have got issues on the -- with Doosan and also Nabinagar. Both the cases we are pursuing contractually the matter. We'll see with the COVID making getting eased out, perhaps we should have some resolution in this year -- coming year. Now on the O&M side, certain positive things are there. We have diversified into material handling packages of nonpower sector, Tata Steel -- Bhushan Steel projects in Angul that is about INR 80 crores. That is a major breakthrough. And we've also taken the job earlier at Barh of another INR 100 crores. So that has added to the total order booking on the O&M side. Now the focus is on the nonpower side, and the present backlog, about INR 1,000 crores, INR 996 crore to be exact, the aim is to jack it up to [ INR 12,500 crores ], and the focus will be some of the projects which are getting renewed at Jharsuguda and also with Vedanta Group, there is a good traction on that. And if it fructifies, perhaps it will be positive in creating a backlog of more than INR 1,500 crores by end of the year. That should be a quantum jump for the operations of the O&M business as it is a continuous revenue earner. And also the road projects are taking shape. That is around -- roughly around INR 800 crores, both in Mizoram and Karnataka states. That is the arrangement we have with our partner. Then the new initiative had been the drinking water project, which is -- we have taken up in UP that is around INR 449 crores, it is Meerut and Etawah division, within [indiscernible] division. Then the scope of the work is roughly around 450 villages to be provided a drinking water system. The concept of this drinking water is part of the initiative that has come from the -- from the Ministry of Drinking Water and Urban Renewal Systems. Their major scope is around the pricing systems, around 20%; then the bore wells and pump houses, around 43%; then rest of the [ tube wells ] to 18%. Then there is a scope for O&M operations for about 10 years, which stands at 5% of the contract value, which will happen after completion of the job, which is around 21 months. And there is a portion for a 10% interest in advance and 95% pro rata payment. So this is a major initiative, which we have obviously taken. And that should give more -- because there is going to be a huge investment in terms of the drinking water as part of the PM's initiatives. Now coming to the other aspects of the business interests, what I would like to highlight is that we are following the traction related to the investments being planned in the next 5 years, which has already started, under the NIP, National Infrastructure Pipeline, which is a huge investment of INR 111 lakh crores, with major investment in energy sector, roads, railways, then urban schemes and also irrigation schemes. For this is where some of the things are new to our business, which has come in the roads and the drinking water system is part of this investment and is going on. And railways, we are already there. And railways, the investment is expected at about INR 13.37 crores within this period, and we have seen that nearly INR 1.5 lakh crores of investment is taking place in railways, in so many segments of railway development. Then O&M is continuing to be a focus area. Now the area what we are looking at is the 39 plants we are operating, 65,000 megawatts of plants under operation, mostly under the IPP sector. And recently, we have made a major initiative in taking the orders from the NTPC, that is about 5 plants, about 7,600 megawatts. And the next focus will be captive sector, which has got an installed base of about 65,000 megawatts. That should be major, too. And the nonpower sector related to steel and material handling, iron ore handling, coal handling. And we have already made an entry, as I said, in the case of Tata Steel, Bhushan Steel project and also Nagarnar with NMDC, that is a major initiative. And now the other thing what we are trying to look at is that we have made an initial tie up with Thyssenkrupp, who are the world leaders in material handling packages, and we are now working on a couple of projects, jointly bidding it on a consortium or a joint venture basis because Power Mech has got the credentials to completely execute the job as a single point responsibility in undertaking engineering, civil, structural, mechanical, electrical jobs. And Thyssenkrupp is happy to provide the engineering support and be the technology partner and equipment supplier. This combination has been worked out. And perhaps, if this is successful, the first project we are going to fructify is related to the Adani Enterprises Limited job coming up in Kurmitar, Odisha. That project is estimated to be around INR 450 crores, which should be shared between us and Thyssenkrupp. And like this, there are a lot of other projects coming up in the iron ore handling, material handling, coal handling and other fields. And all these places, wherever, based on the opportunity, we are trying to bid on the same thing. Now, certain other developments, what has to be updated is that the O&M side, one factor which is going to change the O&M philosophy is that because of the reduction in the plant load factor from 70% to 52% in the present situation, the opportunity in O&M has gone up because maintenance practice has undergone change and more shutdowns are coming in the plant because of the operational metrics has undergone completely changed because of the increase in the scope -- or increase in the generation from the renewable sources. And that is more to go up as the years pass by. But it is expected, the plant load factor of the entire grid in the next 8 to 10 years will come down to less than 50% and perhaps major changes will undergo will be -- will undergo in the case of operating the coal-fired plants, and the maintenance costs are possibly expected to go up. And then as a matter of policy, for the time being, we have taken a little bit of a backseat on the FGD business because FGD was not stand-alone working as a very remunerative package because of the low prices going in the market. And there were a lot of contractual issues involved in structuring it and also bidding it. For the time, we have taken a backseat, and more than that, the value of the work was not substantial for our present operation. So that is where the thing we have said on the present view. But Bangladesh, we are there fully established. INR 830 crores. We are doing Maitree project 2 [ 660 ] megawatts. And Bangladesh has got huge plans for expansion from the present capacity of 20,000 megawatts to 31,000 megawatts mostly in the case of gas and the coal-fired plants because they want to ramp up their generation capacity for their growth. And that is where the opportunity is expected, and we should take it forward. As far as the international business is concerned, yes, for the time being, the opportunities are not popping up much in the Middle East and other places. We are happy to complete the ongoing jobs in Nigeria and other projects, about 10 projects at all we are handling it. And regarding the rest of the projects, perhaps things have to improve a bit. Now as far as the deployment of the manpower resources and the workforce is concerned, it has come back to normal. It was very low at INR 4,000 to INR 5,000 2 quarters back. Now it has reached the pre-COVID level of over 13,000 manpower at site. That is where the confidence should come and what Satish was telling that we should be able to get a turnover of around INR 200 crores positively every month. And with the expected backup of around INR 7,000 crores to INR 7,500 crores, perhaps next year, we should look for a continuous generation of revenue and positive growth in the business. Thank you very much.

Sir, shall we open up for Q&A?

Yes, please.

[Operator Instructions] The first question is from the line of Pratiksha Daftari from Aequitas Investments.

So I just wanted to understand that with the commodity prices rising and what we understand that probably cement prices are also rising, how do we see the impact of these rising prices on our profit margin? And how much of this is factored in the recent orders that we've received and current order book?

Yes. Thanks, Pratiksha. Yes, it's Satish here. Yes, if you see -- this will be a concern for mostly these projects where we have a little bit of supply component, okay? So most of the civil pie. So more than 75% to 80% projects will have this escalation price variation clause. With the variation of the material, so we have right to claim with the customers. So maybe 20%, 25% of where the prices are firm. So it's inbuilt because -- so there was a time when the prices were low, we have enjoyed a better pricing. So this is inbuilt, this should not be a worry for that, and this should not impact our margin.

Okay. And could you just repeat the receivable number that you mentioned? And is that the receivables as we speak? And how does it compare to last year same quarter?

Yes. It was -- so it's INR 467 crores, madam. Last year, it was almost like INR 542 crores.

Okay. And so what kind of collections are we experiencing, monthly run rate for collections in Q3? And how does that compare to Q4 right now?

It has picked up now. It used to be INR 125 crores, INR 130 crores, INR 140 crores. Now it's ranging between INR 175 crores to INR 190 crores, INR 200 crores. So December, we have seen close to INR 180 crores, INR 190 crores, so we expect it to be in that range, maybe slightly more than that.

Okay. And how does this compare to the first half of the year?

First half, I think, it was almost like 50% of this collection because hardly -- quarter 1 was like hardly like INR 100 crores, INR 110 crores. That was the run rate per month. Now it has almost doubled actually.

Okay. All right. And do we have any targeted -- targets for reduction of short-term borrowings and bringing down the working capital cycle? How do we expect that to pan out for the next 2, 3 quarters?

Yes. Now the collection cycle is improving. Apart from that, BHEL, on an average INR 7 crores to INR 8 crores is releasing the final bill. So that is a plus point for us. So this will help us to improve the operating cash flow. Because if you see like first -- now the cumulative 9 months itself, we had operating cash flow positive, so that helped us to slightly reduce the debt. The peak debt, which used to be almost like INR 590 crores, now that has come down to INR 530 crores. So quarter 4, we think there will be a slight reduction. So on average maybe every month, we're planning a reduction of INR 8 crores to INR 10 crores.

In short-term borrowings?

Yes, yes.

Okay. All right. And what is the cost of debt -- average cost of debt right now?

It's around close to 10%, madam.

The next question is from the line of Rishikesh Oza from RoboCapital.

Sir, just one question from my side. So roughly 40% execution on an order book of INR 7,000 crores and an 11% EBITDA margin for FY 2022. So do you think this is a fair assumption?

Yes, it's possible, sir. If you see the backlog order book to our conversion, it used to be almost 40% plus, okay? So we are assuming, if it's conservative, 38% to 40% also is going to be, that is the range what we need to execute. And our normal margins used to be -- the blended used to be 12.5% to 13%, that is the number what we used to. But of course, first half, we... [Technical Difficulty]

Excuse me. This is the operator. Participants, the line for, Mr. Satish has dropped, Please take a moment while we reconnect Mr. Satish. We have Mr. Satish on the call. Sir, you may go ahead.

Yes. Sorry, it was disconnected. So our normal margins used be in the range of 12.5% to 13%, okay? Now because of COVID and all, there was some impact in the operational cost, so that squeezed our margin. So going forward -- because December, we saw good execution and contribution in terms of the margin because of the absorption of the cost. And this trend, we are seeing quarter 4 is going to be complete normal for us, and that is going to continue.

[Operator Instructions]. The next question is from the line of [ Darshil Jhaweri ], an individual investor.

I just wanted to check on the debt, you mentioned INR 8 crores to INR 10 crores reduction. So was the debt outlook for FY '22 in the interest cost? And on the margin front, you mentioned like fourth quarter will be completely normal quarter. So 12% margin is what we are looking at going forward into fourth quarter and FY '22?

Sir, in terms of debt, yes, there will be a reduction of both the short-term, and by short term, I mean the working capital as well as the term loan because we have close to INR 530 crores of debt at growth level and the net level is INR 370 crores. So we were successful bringing it down the last 4 to 5 months. Now this trend will continue. We are expecting, at least if all goes well, at least INR 60 crores -- around INR 60 crores to INR 70 crores of reduction next few months. So that is the target now. And sorry, sir, can you repeat your second question?

In terms of margins, like fourth quarter and FY '22, 12%, 12.5% margin is what we are looking at for next quarter?

Sir, you see, December, we had a very comfortable number, it was -- which was very close to our normal margin. Now though the execution cycle is completely normal, okay, of course, there is a little bit of safety cost and all is there, but which we have factored. So we are expecting this to be completely normal margins for quarter 4, sir. And that trend will continue.

Yes. I understood. By normal margin, we are indicating 11.5%, 12% kind of -- that's the normal margin, right? 12% kind?

Yes, yes. But slightly more than that. 12% to 15%, yes.

The next question is from the line of Dhruvam from HDFC.

Sir, a few questions. Sir, on the O&M, you mentioned that...

I'm sorry to interrupt, sir. May we request you to use your handset, please? Your voice is not coming in clear.

Sir, a few questions. Earlier, you mentioned that the scope of O&M is changing because of the change in PLF of plants. So sir, is it possible to share, say, for example, earlier, you were doing about, say, INR 100 crores of say -- this is a random benchmark. Say, you were doing INR 100 crores of execution for a project, how much can that change by because of the change in scope of work?

You meant to say -- Ramaiah here. You meant to say on the O&M side, what I brought on?

Yes, you said the scope of work is changing. It's increasing because of the lower PLF and increase in overall activity.

No, there are 2 things which will be there in this very important. One is that the long-term contracts, which are operating 39 plants, that anyway, we make our efforts to expand into both in the power sector and the nonpower sector. That is a business which we have recently quietly established it, and that is where the major works are coming. Now what I meant to say when the PLF undergoes changes because of the share of the renewable power is increasing in the grid. And it is at 24% as on today, could go up to 50% by the end of this decade. Then what happens is that our power plants will come under terrible strain in operations. They have to operate on a day/night basis. Normally, thermal plants are operated on base load stations. So once this change of operation metrics comes into the picture, there will be a lot of wear and tear in the equipment. And after all, the grid cannot work without the -- with only the renewable power. And obviously, a part of the annual maintenance, there will be more of backdoor maintenance, more of preventive maintenance and all. That is almost -- today, it is about -- our -- about 20% to 25% of our business comes from that, apart from the AMC long-term contracts. So that's what I meant to say. Look, that portion of the business also can go. That is where -- because of the -- not as an opportunity, as a matter of operating back, which has to be implemented. And the government has already told the main -- well this one NTPC to create some standard operating procedures for our operating the thermal plant at a lower plant load factor. And that regime will be followed by all the other grids -- other utilities also down the line. So that is the expectation.

Got it, sir. That's helpful. Sir, second question was now -- sir, one thing was I read through the press release of new order wins, the recent press release, so it says that it is part of a JV. So the order book that we have given is our scope of work, or that is part of the whole 100% thing?

Yes. But this order, we took it because -- for the sake of the credential purpose. So ultimately, we'll be completely executing the order. And the complete financial obligation as well as the execution obligation we have taken, including providing the performance BD and all. So it's been given for the 100% of the land.

Okay. So anyway, the whole execution will largely be us. So that will all be reflected.

It largely will be us, yes.

Got it. So sir, now we have a very decent order book, about INR 7,000-plus-odd crores. And even if I assume a 30% or 40% execution, that is about 2.5 years of order book. And you're looking for even a higher order book after the O&M win, I believe. So a very decent order book. Sir, for the last few years, if I understand, you were building your nonpower side of order book as the power sector is declining a bit, but that had some impact on your working capital. If I see, the working capital was increasing, although the margins were steady. But sir, now with such a size of order book and -- that you have with the 2 to 3 years of visibility, should we, sir, assume the incremental wins will be relatively probably better margins and also relatively at a better working capital, given that you're sitting at a very comfortable position now?

Sir, actually, this strategy, even last 4 months, we have been working. So we are not quoting any projects where we see at least 14%, 15% at EBITDA level. Now -- honestly, now we have given a clear-cut direction too even our business development not to quote for some of the projects. So maybe next few days, the orders, whatever we'll win, maybe from more like from a O&M side because we had a target of INR 4,500 crores. We may slightly exceed because of the O&M 2 projects we are expecting. It's a larger contract of INR 400 crores each. If we win both, probably it will add slightly larger number. Otherwise, we may -- we are confident that at least 1 project will win where there is a renewal contract. And the second, if it did slip, we will add in April. So the idea is now only quote -- look for projects which I just said, like with largely higher margins, with better working capital, because it is slightly full now.

Satish, Ramaiah here. What I would like to add, what you say is correct. Now the order book is comfortable. I think we are not hungry for orders in the sense, but we want good orders. I think the -- down the line, what happens is that when the base of the order booking is good, the tendency is to bag good contracts under safe contracts and better contracts. I think that is the -- let's say, this is going to all the BD groups. And that is one of the ways perhaps we can sustain this margins.

Got it, sir. And sir, this win that you have got in UP for the, I believe, the Jal Shakti-related win. So is this -- can this be a huge opportunity? And I believe currently, we have gone through a JV. But in future, can it be done independent and probably a better margin profile also?

Yes. We have joined hands with another company for, as Satish told, for qualification, but entire work, we'll be executing to get the full -- and the JV is structured in a way it is recognized by the UP government also. Therefore once, maybe 2, 3 projects, we have to do that. And like what we have done with the T&D and the electrical group also, same thing we have to repeat here. We have to complete 1 or 2 jobs, and then we'll be automatically qualified. And this is a huge opportunity. And every district, every town, perhaps ever village, will be -- the investment is going to be there as part of the NIP plan.

Got it. So in your commentary, you were mentioning that of the scope of work, about 20% was piping, bore well was 40%. I missed the remaining part.

No, it is 20% -- I will recap it again. 25% liners, the line systems; then the 21 -- 43% is bore wells and pump houses and tanks because you need a bore well, you need a pump house and you need a water tank for storage distribution and all those things, and extracting water. Then the other miscellaneous things, 18% civil work, then about 5% goes to the final last meter connectivity to the households. That is how the price makeup is structured. And there is going to be a separate O&M contract, which is -- which will be a continuation of this. Once we complete the job after the contract period and this guarantee period, which is totally equal to 5% of the contract value with some escalation for a period of 10 years. So for every contract, we make it in the case of drinking water business, there is going to be a 10-year O&M business also.

Which is approximately 5% of the order value?

Yes, yes.

Got it. And sir, typically, you used to take contracts where there is no raw material risk. So should we assume these kind of projects are also similar? There is no raw material...