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

Nirmal Bang Equities welcome you all to the Q3 FY '22 results conference call of Power Mech Projects Limited. The management is presented by Mr. S.K. Ramaiah, Director, Business Development; and Mr. J. 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.

Thanks, Mayank. This is Satish here. Good afternoon, all, and thank you, everyone, for joining for the -- having the conference call for the quarter and 9 months ended 31st December 2021. Before I begin, I would like to wish you a happy new year, and hope that even your family members are keeping safe. Along with me, I have Mr. S.K. Ramaiah, Director, Business Development; and SGA, our Investor Relations adviser. This quarter ended on a positive note with a good amount of product addition and execution going smooth for quarter 2 FY '22. We saw the COVID situation improving drastically with the ramp-up in vaccination numbers across the country and even at our sites. Quarter 3 was relatively smoother before the impact of Omicron came into play at the start of the new year. We continue to proactively follow all the necessary guidance to safeguard our employees at all our sites as well as ensuring that [ construction ] and maintenance are running smoothly. We have seen a number of COVID cases going up across all our sites. However, it was not severe, and execution was not impacted at all. The [ depression ] on infrastructure development throughout the country and even in the recently announced budget, the number of opportunity especially for [indiscernible] and recognized player like Power Mech are significant given the multidomain approach directed by the company over the past few years. Each of these segments offer tremendous growth opportunities in alignment with our long-term objectives and targets. And to update you with this quarter's developments before we open up the floor for your question and answer. The reported total income for quarter 3 FY '22 is around INR 650 crores and EBITDA is INR 72 crores and the PAT is around INR 33 crores, whereas last year quarter 3 of last financial year, the total income of INR 518 crores and the reported EBITDA was INR 31 crores. And PAT was around INR 3 crores. The revenue mix for quarter 3 for the series is as follows. Erection business has contributed around INR 157 crores; Civil around INR 268 crores; operation and maintenance, INR 226 crores. Electrical business added close to INR 25 crores and other income is around INR 4 crores. In the same quarter in the previous year, the mechanical business contributed INR 133 crores, civil around INR 184 crores; operation and maintenance, INR 171 crores; electrical INR 19 crores. Similarly, on year-to-date, this is the reported total income for 9 months. FY '22 is around INR 1,822 crores. EBITDA is around INR 206 crores, and the reported PAT is around INR 91 crores. So it will be similar period for the last financial year, the total income was INR 1,142 crores, marking a 60% rise. The reported EBITDA was negative by INR 21 crores, and PAT was negative by INR 81 crores post adjustment of minority interest. The revenue mix for 9 months is as follows. Erection business has contributed around INR 370 crores to [indiscernible] close to [ INR 425 crores]; operation and maintenance, INR 587 crores; and electrical business down to INR 6 crores. And other income is close to INR 15 crores. In the same period in the previous year, the mechanical business contributed INR 180 crores Civil is around INR 358 crores. O&M business, around INR 438 crores. Electrical around INR 50 crores, and other income was around INR 14 crores. The performance has been in line with our internal expectations, with the top line going up by almost 25% year-on-year and 19% even on a quarter-on-quarter basis. In addition, the quarterly performance is meeting estimates. We would like to highlight the annual guidance given earlier still continues to be on track and will be met on all parameters. This is further expected to solidify on the foundation of a strong order growth, recent order wins and a healthy pipeline of accepting orders identified by our internal business development team. Depreciation cost for the 9 months continued to remain flat due to reduction in the CapEx during the period. And during quarter 3, the finance cost is around INR 19.8 crores, with the increase in usage of long-term visibility. And for 9 months, the cost is around INR 55.8 crores, whereas during the previous year, for 9 months, the cost was around INR 57.9 crores. There has been a reduction for the 9 months comparatively. The cost for quarter 4 is expected to come down, both in terms of absolute numbers and as a percentage to the top line, in the next few quarters as a portion to the final cost. We are further expecting that it should come down as a percentage to the top line. Going to the balance sheet.and working capital cycle. The receivable cycle continues to be in the same range, and the monthly collections significantly improved from INR 200 crores -- close to INR 230 crores to INR 240 crores on average per month. Moreover, the cash flow from operations during the tough times, which is, I would say, expected to be passed through, which is around INR 34 crores, and we are expecting this trend to continue further. The CapEx for the 9 months is close to INR 15 crores, whereas last [ year ] was INR 22 crores. So for the year, we are expecting close to INR 25 crores, which is more or less in line with last year. So we are not expecting any increase in the CapEx addition. And the gross debt is around INR 540 crores, but it was [indiscernible] was INR 509 crores, and the net debt has come down to INR 390 crores, more or less flat. There is not much increase in spite of increasing the order book and increasing the execution level. The order backlog for the company at December 31 stands at INR 7,497 crores in the India order. And if we add India project, this stands at INR 16,291 crores. And we are confident of meeting our order inflow target of INR 4,000 crores, including the projects, which are already on L1 stage, so they are -- more or less, the target of INR 4,000 crores, we are very much confident of meeting this. Next to -- we're expecting that L1 to be kind of [indiscernible] with INR 1,400 crores. So even at a modest execution rate, now that the monsoon season is over, we are geared up to capitalize on the growth momentum in the infrastructure space and more than deliver on our set of targets. This counts to a strong base for our confidence going forward with a good liquidity position in the order book and the [indiscernible] had been placed to manage the projects through the uncertain environment. Now I request Mr. Kodandaramaiah to add a few more developments. Thank you.

Yes. Thanks, everybody. Thanks, Bhandari. Thanks, Satish and Rohit. As Satish updated on the -- many of the financials, coming to the various aspects of the marketing, business development and the -- our position with that. Last year, we know at the end of the 2021, the backlog was INR 7,333 crores. And the current 3 quarters, we added INR 1,971 crores, mostly in the O&M and the [ field ] segment. And after taking the conversion, what has happened in the 3 quarters, the [indiscernible] of the [ order base ] was INR 491 crores, mostly driven by field works and some of the key wins in orders we have received. In the last quarter 2021, the order booking was [ INR 687 ] crores, and the current year quarter 3, it is INR 1,628 crores. And there are a lot of offerings coming in the fourth quarter. . Coming to the various aspects of the segment-wise, ETC, there's not much of growth in that. Of course, the backlog has come down from INR 2,369 crores to INR 2,080 crores, minus 12%. The field backlog has gone up from INR 3,584 crores to INR 3,966 crores, plus 10.6%. O&M, there has been an appreciable jump from INR 1,168 crores backlog to INR 1,316 crores as in quarter 3. And then electrical, not much a headwind. That is how we are looking at the business for the time being. But overall, that is without the MDO. Once the MDO for the [indiscernible] it has a total expected lifetime of INR 9,294 crores. The backlog stands at INR 16,791 crores, and with order booking stands at INR 11,265 crores at the end of the quarter. Of course, that will come mostly on a recurring business model from 2024 onwards in the first year of the operation, and it will all go to sixth year, with the expected revenue peaking around INR 400 crores, which will add to the O&M segment of the business. There are some key orders in the pipeline. The railway work in Vadodara, then [indiscernible] we had to firm up INR 178 crores and then some O&M jobs with NTPC, and then a major drinking water project in UP, nearly about 450 villages, around INR 1,400 crores. And there are a couple of other O&M jobs are also expected. Therefore, we are quite bullish by end of the year. Last year, we had a very good backlog, very good order booking. And this year also, we will -- we are confident. Last year, the order booking was about INR 4,638 crores, and with the expected -- the present order backlog and the -- excluding the MDO and the new orders, what is expected, we are still hopeful of getting it to plus INR 4,000 crores. Therefore, that should give a lot of leeway in terms of the backlog at the end of the year, nearly INR 8,800 crores to INR 9,000 crores, and that should take the revenue generation to a much higher scale in the coming years. Now coming to the business progress is that I think the present focus of the business is minding the domestic segment because of the huge investment taking place as part of the national infrastructure pipeline. Satish has said it has been [ reached ] this year. And the opportunities are coming in a big way in infrastructure, and there are some of the investments also coming in the private sector. And the international business, not much of headway because of the outside environment. And the backlog of the domestic stands around INR 6,825 crores, closely to 90% of the backlog and balance 10% international. And this is excluding the MDO. Therefore, the power to nonpower ratio is INR 4,810 crores in the power sector mainly driven by the jobs we have taken in the O&M and some of the civil jobs we have taken up in the -- allows us to have [indiscernible] and non-coverage INR 2,687 crores, that is 64.2% and 35.8%. Therefore, with the -- and also the new job, what has been added in the pipeline so far in the quarter, mostly well driven by the O&M side. That is similarly to [ 600 megawatt ] INR 343 crores, [indiscernible] 260 megawatts, INR 391 crores, IL&FS Cuddalore, INR 51 crores. And then earlier, we had taken [indiscernible] also. That was in the last year. For these major projects are [indiscernible] in the O&M conversion. Apart from Adani road project, Kodad to Khammam INR 645 crores, [indiscernible] 600 megawatts civil works. Those are not excluded by other agencies on a risk purchase basis that has been given by GHMC INR 45 crores. NMDC 2 packages INR 146 crores in civil and defense work. Under [ Kalagura ], ETC job will be material handling about INR 80 crores, then [indiscernible] was INR 112 crores, North Chennai, an FGD will work on some of the railway works and some of the [ machinery ] jobs in the border of Doosan insulation work. Therefore, all these things add up substantially for the year, and the major aspect of the business is driven by the infrastructure to the [ Ministry ] coming up, obviously. And that is how the business also has been diversified. The major focus is at the water and the drinking water [indiscernible] also. Presently, we are executing 2 major jobs in Bulandshahr 195 villages and [indiscernible] new 449 villages of INR 1,288 crores. Last year, on the back end of the -- whatever we have completed, the current year INR 160 crores, and there are STB projects under completion in various stages and light work jobs. Therefore, the entire water segment of the drinking water is [indiscernible] and the [indiscernible] hydro job comes to INR 1,470 crores. and that is well driven by the new investments coming in the drinking water systems. Now coming to the MDO work for Basantpur. This is a capacity of 5 million tonnes to be reached in the fifth year from the date of award, that is in the June, July. And then it is on a consortium basis on 74, 26 -- sorry. Then a joint venture special purpose vehicle is there called [ KBB ] Private Limited. And the initial development work is in the progress. By 2024, the first initial operations should be commenced. And then the full capacity of 5 million tonnes should reach in the fifth year from 2021 onwards. And it is a open cash planning, and that should come as a good recurring business model for the O&M segment of the business. Now coming to the major projects, what we are handling. Now Barh, we have to complete it, about 80% we have completed. In Bhusawal, about 47% were completed, about INR 285 crores. Then cross country [indiscernible] jobs we are taking, that we have completed nearly around 80%. And the major job, what we are doing on Maitree for BHEL and NTPC, INR 855 crores, that poises pretty good. We have reached 55% level of completion. Then Yadadri also is taking in full swing, INR 806 crores, about 26% progress. There also, progress is good. Then JSW balanced jobs, whatever is there, 65% we have completed. Balance, mostly we have to complete in Bellary segment of the business. And the [ dam water ] progress has been pretty good, $76 million, 90%. I think in a couple of months, the job should come to an end. In Ramayampet Canal, 60% of INR 373 crores is irrigation project, other for electrical about 56% of INR 350 crores. Then Buxar boiler from L&T, INR 176 crores. There has been distribution [indiscernible] because the civil inputs are not available. Only 10% has been completed. And the other electrical jobs, what we have taken [indiscernible] INR 140 crores, we have completed. The drinking water is ongoing, INR 188 crores. About 5% of the work has been completed. Then the ETC, what we have taken from other [indiscernible] about 14% what has been completed as on -- at quarter end. Then the national highway projects of the [indiscernible] and Mizoram, both together, about 18% works been completed. Now Khammam, Kodad has INR 645 crores that work has to be taken up now. Now railway jobs, the RVNL Boulevard, about [indiscernible] has now most completed. Other, about INR 330 crores of job is under various stages of completion packages before we see the status on various jobs. Now the focus of the business will be aligned with the Gati Shakti program of investments and also private investment. We are also tracking the investment coming up in the private sector, particularly Adani group. As I told you, INR 280 crores of jobs, we are taken on the new segment of the ETC, and we are working a couple of projects we can, including possibility in FGD tie-ups with them also that we have to see how to take share. And we are discussing with other players also in the private sector for FGD -- some of the FGD opportunity. And then the focus is also in the O&M endorsement in the PSU, where PSUs are putting a lot of efforts in diversifying into O&M resources and outsourcing. Therefore, NTPC, already, we have made a headway there, and what we have taken recently in Raichur. And there -- these are the new initiatives that have come in the public sector. Apart from the private sector, what we are doing, where we are consolidated the business a lot. And the major sectors of the business will continue to be the steel plant also expected, we will take the experience what we have taken up on JSW [indiscernible]. ArcelorMittal is coming with the investment of INR 1.5 lakh crores for a greenfield project in Odisha and also brownfield project in Essar. Then there are a lot of mining opportunities we are pursuing with Adani and other opportunities. There is a huge opportunity in material handling, about more than INR 10,000 crores. And then ongoing STD opportunities are also there. Then conventional power plant, yes, a few opportunities are there left over just what we can say in [indiscernible] and some of the jobs, which have to be tendered out. But the major project is expected from Neyveli, and that operation at [indiscernible], that is 3 800-megawatt that should happen next year. Therefore, some opportunities should come up in that. For -- in the export, there is not much of headway as on today, but O&M story is pretty good. What I can only say is that with the 3 major jobs, what we are doing is -- and the more -- some more -- a lot of repair and maintenance jobs in the pipeline, small jobs, but adding to some significant amount. Perhaps the total order book should end up -- at the end of the year, nearly INR 1,000 crores. That should give you a better visibility for the next year in terms of turnover and also better margins also. So this is what I would like to say with my remarks, a continuation to Satish. Thanks, everybody.

[Operator Instructions] The first question is from the line of [ Puneet ] from HSBC.

Hello. Can you hear me?

Yes, sir.

Yes. So my first question is with respect to the RTC bid that you put for INR 3.30 under SECI. Can you talk a bit about what your strategy is on that? Will you procure power, funding, et cetera?

Pardon. Can you repeat that question?

Yes. Sorry. My question is with respect to the RTC bid that you put under the SECI tender for INR 3.30 per unit. Can you talk a bit about the strategy there and the funding?and where will you procure power, et cetera, from?

No, that is not fortified actually, so we wish to bid, be selective. And as of now, there is no thought to pursue for that.

Yes. But you did put a bid, right? I mean, just trying to understand. You might put something in that in the future as well. What is the strategy behind it? And where will you likely source it in terms of funding and power?

Funding, of course, multiple opportunities are there because green energy, the funding lines have multiple opportunities, okay? So we had a thought of exploring the one opportunity, okay? We -- back the back are, now. But now, that is not getting certified. So as of now, there are no tenders, which are impacting, which we are pursuing. So we wish to be on slow on this front now.

Okay. So when this bid opens up, you won't bid again. Is that...

Yes. As of now, there is a stop because the orders are -- now it's lined out, okay? Because [indiscernible] quarter's book, which is already lined up is not clear. Now apart from that, we have identified another INR 20,000 crores of opportunity. So the opportunities pipe where we are seeing some good exciting products, probably, we may go explore in that front.

Yes. But this was anyway a completely different line of business, right? I mean, some project development to power developer or ownership...

Yes, from a construction to more like a developer.

Yes, yes, yes. So how are you thinking about it? So unless, you are saying that you won't bid for it again.

As of now, immediately, we have no plans to bid for it.

Okay. So the SECI tender, which is supposed to come out, you won't bid for that at all.

Yes.

Understood. But what kind of IRR would you have looked at when you previously bid for it? And where would you have to source that power from?

The IRR is like around -- it's around 16% to 18% plus that was the part, actually.

Okay, And sourcing of power, would it have been a mix of thermal plus renewable?

It would be more like renewable only.

Okay. And the RTC part would have been possible just with renewables.

Yes. That was the thought process.

The next question is from the line of Rishikesh Oza from Robo Capital.

Sir, given the order book guidance that you have given for this year-end, would it be fair to say that we can do around INR 3,300 crores, plus revenues for next year? .

Yes. I think with the present RFO expected also, I told you, plus INR 4,000 crores by end of the year, assuming these 3, 4 projects. Now the invoice have come to be approved and was [indiscernible]. The thing is the backlog of that will go up to nearly INR 8,800 crores. For this year, as Satish has projected, maybe we will be reaching plus INR 2,000 crores last year, the backlog was INR 7,333 crores. Therefore, the beginning of the end of the -- the beginning of the coming year, it would be INR 8,800, INR 9,000 crores. But it is safe to assume that we'll exceed at least plus INR 3,000 crores of conversion next year.

Okay. And what EBIT -- sorry, please go ahead.

Yes, yes. Okay. So assuming 38% to 40% conversion, okay, because historically, it's almost like 40%. If you take 30% to 40%, that's the range, we are confident of converting to the opening order book.

Okay, That is what I'm saying, like we can -- like about INR 3,300 crores, plus revenues will not be a problem. Correct?

Yes.

Okay, okay. My second question is, sir, regarding EBITDA margin. So what EBITDA margins are you looking for next year?

See, it's now -- it's going around 11% plus, and we are expecting this number to go up maybe another 3 quarters it would take to improve, okay, seeing the order book on hand and down, okay? Because some of these projects, where we are doing some of the credit sales, that also now that mix is coming down. Probably, second half of next year onwards, the numbers are improving. Till that, it will be in the range of 11% to 12%.

Okay, okay. And sir, this quarter, our employee cost was also high. So any comments here? Is this a onetime or like a recurring cost?

Yes. The increase in manpower cost is for two reasons. One is the order book in terms of like the O&M has gone up, okay? The revenue of top line also has gone up. So we have recruited some more people, number one. Number 2 is like some of the big [indiscernible] which we like nowhere in the subcontractor's payers, we have taken 2 Power Mech stimulus. So there is a fix from subcontracts to Power Mech.

Okay, okay. And last question, sir. We have almost INR 2,000 crores of ETC order growth, and like our conversion is like almost around INR 127 crores or something. And it has not crossed our pre-COVID levels also as of now. While O&M and Civil are doing well, they are growing. So any comments here why are we converting very less over here? And when can we see any recovery from here?

I think only the cycle time fixed by the owners, by the ETC contractors also. They're all 36 to 40 plus a month, particularly these higher capacity units existing 800-megawatt unit have a longer cycle than up to 14 months. And just for the conversion, it gets a little bit elongated. But we have to understand, there was a COVID disturbance, whatever is there for the last 2 years. And with the present backlog of 2018, next year, perhaps, no, we should break that cycle. We should -- I see around INR 600 crores to INR 700 crores in the next year.

[Operator Instructions] The next question is from the line of Pratiksha from Aequitas Investment.

Yes. So I have maybe 2 questions. One is that centered a little bit currently Civil heavy. What is the margin you applied in Civil? And do we see a little deterioration because civil works are nearly in their completion and the margins will drop further going on?

See, in Civil, the focus will continue to be in, of course, the traditional power plant on a collective basis. Next is the water and railways. We see there are other components. Now our order book is full. And the new orders, we are not taking anything less than 12.5% to 13.5%. The existing, we are working in the range of 11.5% to 12%. So going forward, we will not quote anything less than 13%. That's the plan.

Less than 10.5%.

No. Today, it's working around 10.5% to 11.5%. And going forward, the new quotes, whatever we are doing, it's all in the range of 12.5% to 13.5% plus.

Sorry. 13.5% to...

12.5% to 13.5%.

Okay. And then you will bid.

Yes.

And what will be the area of these new bids? Like which segments that we're going to -- we are looking more traction?

One is railway, both at the signaling and track laying, culverts and bridges. This is today close to 5% to 6% that we intend to go up to 12% [indiscernible]. And of course, water and STP, that is being good. Now we have a good amount of fight in the water business. That may continue to be around 10% plus going forward. These are the 2 areas, which will contribute to significant [indiscernible] in the business.

Okay. So just letting you know that water, we are seeing a 10% growth. And the railway segment, we are seeing that from 6% of the total revenue, the share will increase to 12%. Am I right?

So the railway is expected to be 10% to 12% of our total business. And water will also going to be 10% of our total business.

Okay. And what will be the receivables and the payable days and specifically the -- receivable days?

It's bordering around on -- on an average 75 days, okay, receivables. And the payables are more or less aligned to the receivables for all the projects for this [indiscernible]. And it's running in the range of 70 to 80 days. This, of course, is working around 90 to 95 days because that trend may continue for a few more quarters because of BHEL, the cash flow cycle and all. But in case of Maitree, international project, that is working around 65 to 70 days. That's at 70 days. But whereas in India, it is working around 90 to 95 days.

Okay. And how much percentage of our order book or the execution is less for BHEL order?

It is around 16% to 18% as of now. Probably, next year, the pie will come down to maybe 13% to 14%, with the increase of the other architecture.

Okay. And the more INR 4,000 crores order inflows you are seeing or targeting, what would be the major portion of that?

No. INR 1,900, almost close to INR 2,000 crores, we have already added. Now that is close to INR 2,000 crores. Of that, INR 1,700 crores already in L1 stage. So INR 1,400 crores to INR 1,500 crores is in water segment. [Technical Difficulty]

[Operator Instructions] Ladies and gentlemen, thank you for your patience. Please stay connected. We are trying to reconnect the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.

Hello?

Yes, yes. I think there was some problem.

The breakup of the incremental INR 2,000 crore order, you actually then got cut off. So can you just repeat?

Sorry. Can you just repeat, sorry?

Yes. The incremental INR 2,000 crore order inflow, you were...

Yes, yes. It's around INR 1,500 crores is in the water project, which is almost -- it's in L1 stage. Apart from that, another INR 240 crores -- INR 230 crores, it's -- one is in railway segment, that's close to INR 113 crores. And INR 120 crores is BHEL that's for a filing work -- Civil work that is with FGD project.

And this, what...

INR 1,700 crores -- yes, yes, Pratiksha.

This is entirely in the Civil business.

This will fall entirely in the Civil business, close to INR 1,700 crores. Apart from that, some more projects in discussion, which we are expecting to follow. So the target of INR 4,000 crores for this year, we are confident of achieving.

[Operator Instructions] The next question is from the line of Darashil Zaveri, individual investor.

Congratulations on a good set of numbers. I wanted to ask when you think we can reach the INR 4,000 crore company. And what do you think our total margin will be for next year, blended margin, a rough ballpark?

See, next year, we'll be crossing the INR 3,000 mark. That is very much obvious, and it's possible because of the strong order book. And in terms of margin front, now we are -- it's ranging in the range of 11.5%, and that trend is expected to go up further post quarter 2 of next year. So that is possible, so that could be a good jump because some of the projects where we are losing royalty and all that we did not spend because we have built enough experience. And there could be some [ selling ] in terms of COVID-related expenses because, still, though the sites are running smoothly, still, some costs relating to the COVID protocol, we are spending, and some amount of cost towards material increase and all, which we have observed during this quarter. And next year quarter also, we are trying to -- there are some costs, okay? But going forward, all the new bids get quoting considers the new price. So maybe FY '24, there's a possibility of reaching your number.

[Operator Instructions]

Sir, I just wanted to understand the opportunity that we are exploring in the FGD business. And how is the market panning out? And what are that you are pursuing with FGD, particularly?

Mr. Kodandaramaiah is there online or is he disconnected? Can you check, please?

He's there, sir.

Regarding this FGD, we have already taken the initiative. I have taken a job in Kahalgaon. Then North Chennai, over INR 120 crores is expected. Now result, any time it is due. And we are also discussing with some of the private investment -- private players. They want to retrofit this one, FGD systems, with some understanding and collaborations. We also have started some dialogue with the Adani also. Therefore, the outcome of these things will come through the next couple of months. But whatever opportunities are there, to the extent possible, we are pursuing it based on the -- how much margins can drive in these things because we are also having so many other opportunities in infrastructure side. Therefore, we have to be selective on this also.

So how is the margin profile looking there in the FGD order?

Now I think we -- as Satish has rightly said, we'll try to go at least 13% to 14% EBITDA margins there, minimum.

Below that, we are not quoting now because the order book is quite full, okay? The valuation front also, we have taken what we wanted. So going forward, we are not quoting anything less than 13%, 13.5%.

[Operator Instructions] The next question is from the line of [ Rajnish Mehan ] from [indiscernible] Capital Services.

Congratulations for a good set of numbers. So I wanted to know what is the debt position currently.

Yes, yes. So today, the net debt is INR 390 crores, okay? It's more or less the same, what it was there in FY -- 31st March 2021. In spite of increasing the order book and the execution level, we try to maintain at the same level. And gross level is around INR 500 crores, plus.

INR 500 crores. And do you see any reductions next year?

We are working towards that. There will be some reduction. And you'll also see that in terms of finance cost as a percentage, you'll see some good amount of reduction in terms of absolute number and also percentage.

[Operator Instructions] The next question is from the line of Abhishek Poddar from HDFC Mutual Fund.

Sir, congrats on good set of numbers. Could you please discuss the working capital movement during the quarter?

So from the receivable front, it is -- excluding the [indiscernible], it has continued around 75 days. And -- whereas BHEL domestic, it's close to 90, 95 days. That is the usual setting, whereas Maitree, Bangladesh, it's around -- less than 75 days. And the inventory front, more or less, it's continued to be around 20, 22 days because, still, it's in the range of INR 150 crores to INR 160 crores range of the inventory. And from a payable side, it's around 70 to 80 days, and that is expected to slightly come down. So for the year, quarter 4, there may be slight reduction in terms of the receivable days by at least 5 to 6 days. So that current base should come down. If you see like 31st March 2021, okay, it was around close to 195 on current days, okay? That will come down to 170 now. That may come down to 165 days, overall, taking the retention money and other line items.

Okay. 165 days by March '22.

Yes, March '22. And first off, you'll see next year, it may further come down because, final -- most of the projects we are closing, so a good amount of finance bills are coming from the returns and money and all, number one. Number two, as mentioned, the BHEL pie also is coming down. So with that, it may help further to bring down the number. So the thought purpose is to -- at least to bring down the net current base to at least to 120 or 135 days each year.

Okay. And last part you are saying, sir, it will be coming through BHEL.

BHEL pie is coming down so -- because now, in domestic, the BHEL pie is around the collection days. It's ranging 90, 95 days, okay? With the BHEL pie coming down and the finance bills, especially from the return to [indiscernible], okay, this will happen. You'll see that with the change of the business mix, maybe next year, this number should come down to at least by -- to 135 days. That is the plan we have. We are working towards that.

Okay. Understood. And sir, regarding the margin, so how much is the element of higher commodity costs and lower margins? What is the impact of that?

See, around -- if you take like -- keep aside O&M and the service component and the projects which are having the material component, okay, some parts are covered with the PVC. But around 20%, 25% is still like a fixed cost component. So overall, quarter 2, quarter 3 and quarter 1, it will have an impact of close to 0.4% to 0.5%. And part of it also, we're expecting the same range. Going forward, you'll see that, maximum, the projects having that impact, that will come down. And the projects, which we have taken recently and all, it's all built the new prices. So it will not have much impact. As of now, it's in the range of 0.4% to 0.5%.

Okay. And the old contracts will get over by 1 or 2 quarters.

Yes. Subsequently, it will come down. The 25% will may come down to 5% or 6%. So you'll see that next 2 quarters onwards, that impact will significantly be down.

Okay. And just one more question, sir. Regarding the FGD opportunity, what is the total opportunity size that we are bidding, sir, and some expectation that how big this could be for the next 1, 2 years?

Already substantial orders have been taken away by ETC players and all. What we can be looking at this working for ETC players, wherever we are working in nearby sites and other stages where we can deploy our resources. And then, if you look at the private players, they have not made a major investments, and that they have to be forced to do it because the dates have been extended from 2020 to 2024. It may further go up. For totality, if we try, we'll try in the private sector with the understanding with Adani and some of the private players.

And sir, how large the orders we are looking at? Do you want to...

No. There are 2 ways of doing it. One is that we work as an ETC contractor or a civil contractor to them. That can be in the range of INR 100 crores to INR 150 crores for each of these projects. But if you work on a tie-up basis, the technology tie-up and then understanding through an ETC basis, then that can be something like INR 40 lakhs to INR 50 lakhs per megawatt.

Okay. So both the options are open, and you'll...

Yes, yes. Both the options are there.

[Operator Instructions] The next question is from the line of Anupam Gupta from IIFL Capital Limited.

Sir, can you give us some clarity on the CapEx requirements for the next 2 years and also the equity commitments that you have for the next 2 years?

Okay. So the CapEx, this year, we have planned for INR 25 crores. So already, we have spent INR 15 crores. So another INR 9 crores to INR 10 crores, we will spend in quarter 4. So it will be -- the CapEx will be close to INR 25 -- max of INR 25 crores. And next year, it will be in the range of -- it may go up to INR 35 crores to INR 40 crores, yes.

And equity commitment.

And equity, of course, this year, not much. But next year, maybe INR 25 to INR 30 crores. We may need to plan for the MDO project.

Okay. But MDO project also, you will consolidate, right? So it should appear as equity. Or how will it come in on the book?

It's -- 74% is held by us, so it will form part of our subsidiary company. So it's reflected in our consolidated balance sheet.

Okay, okay. Understood. And in terms of the new orders in the new segments, which you are taking, so Civil obviously has gone up significantly. Do you see a risk of working capital pressure there incrementally or you don't see that happening?

See, the new projects, it's very clear. The strategy is like we will -- we wish to take projects only where we have comfort in terms of the collection and all, okay? So the BHEL pie, though we know the customer quite well and we understand the project and all, but in terms of payment cycle, it's a bit staged. So the thought process is to bring down that pie, okay? So we will not take any projects, which are milestone link or a pressure from the customer or there is no back-to-back funding at all. So the new -- the first priority is the receivable cycle that needs to be 30 or max 60 days, not beyond that. And next, of course, is the margin front. These are the 2 criteria when we choose any project. So we are going on that thought process. So in the recent past, we are losing almost like 2% to 4% in terms of buying the credentials and paying the royalty and all. Now it's -- we have built our expertise in-house now that will be straight towards savings. So I think those 13%, 13.5%, it's quite possible in the margin trend, a big component of the 60 days payment cycle.

Okay, okay. And just one last question. What will be your tax rate for; 22, '23, '24?

Sorry. Sir, can you repeat?

What would be your tax rate? Should it be 25%?

Yes, it will be 25%. There is no change in the recent budget also. I think there will not be change in the next year. So that is the range we have to factor because some of the international projects, it's less than 25%. So on a consolidated basis, it should work 23.5% to 24%.

Okay. But next year in international share comes down, your tax rate will then come down.

Yes. It's possible, sir, because last 1.5 years, we have not added much from the international space. So the pie, which to be -- it may come down next year. So on a consol level, the difference will be hardly 1% or 1.5%.

[Operator Instructions] As there are no further questions, I will now hand the conference over to Mr. Mayank Bhandari for closing comments.

We thank the management for taking time out and sharing their valuable insights in this call. We want thank all the participants for their presence. Sir, do you have any closing remarks?

Yes. Thank you, everyone, for joining the call. And the presentation, it's already uploaded at the website. And anyone who wish to have a more clarification, they can always reach to me directly for a one-to-one discussion for any other clarification. And we'll come forward with more updates on Q4. Thank you very much.