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

Ladies and gentlemen, good day, and welcome to the Power Mech Projects Limited Q1 FY '24 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. Prasheel Gandhi from Nirmal Bang Equities. Thank you, and over to you, sir.

Thanks, Liza and good afternoon to all participants. Nirmal Bang Equities welcomes you all to 1Q FY '24 Earnings Conference Call for Power Mech Projects. From the management team today, S. K. Ramaiah, Director, Business Development; and Mr. Jami Satish, CFO. I now hand over the call to management for opening remarks, post which we can take questions for -- from participants. Thank you, and over to you, sir.

Yes. Thanks, Prasheel. Good afternoon, all. This is Satish. I have with me Mr. S. K. Ramaiah, Director, Business Development. Once again, welcome you all to the earnings call of quarter 1 FY '24. We had one more great quarters as we are seeing positive developments across verticals, including execution, business development, new talent induction, risk management, continuous leadership training, working capital cycle improvement and cash flow. The overall performance of Power Mech is well within this set plan. Both in short term as well as long term. Performance for the company continued to be robust. Coming to the numbers, the reported total income for quarter 1 FY '24 is INR 871 crores. And the EBITDA for this quarter is close to INR 105 crores. And PAT is close to INR 51 crores. Whereas during quarter 1 of last financial year, the reported total income was INR 749 crores, and the reported EBITDA was INR 86 crores and PAT was INR 39 crores. Quarter-to-quarter, there's a growth of almost 16%. And with the growth of the top line, the EBITDA has gone up almost 22% and whereas PAT has gone up to 29%, which is significant. The revenue mix for quarter 1 is as follows. Erection business has contributed INR 139 crores. including Railways, Metro, water distribution STP, it's around INR 493 crores. Operation and maintenance, both domestic and international put together is INR 224 crores, and electrical business has contributed INR 809 crores. Whereas last year, Q1 FY '23, electrical business has contributed to close to INR 152 crores, civil, INR 376 crores. Operation and maintenance it was around INR 196 crores and electrical business, it was INR 22 crores. During quarter 1 of this year, domestic business has contributed almost like 90%, and rest has come from the international market, which is close 10% and power sector, power and non-power, the distribution is 51% and 49%. Quarter 1 of last year, the contribution from international used to be 17% whereas distribution 10%, and domestic was around 83%. And similarly, the mixed power and non-power last year, it was 60-40, and this year is almost like 51-49. We have seen growth both in O&M and Civil business on a year-on-year quarterly basis. Erection business continued to be flat, expected to grow post quarter 2. Electrical business has saw negative growth because of conscious reduction in the order bookings plan. We are not expecting much to concentrate on electrical business because of its large working capital intensivity. Going forward, water distribution related work, railway, metro, power projects-related work, material handling, and contract mining will play a major role in our business model. Of course, operation and maintenance, both power and non-power domestic as well as international will continue to be the backbone of the company. Improvement is also seen in overall margin profile and same is further expected to improve gradually. Coming to the depreciation cost as a percentage, it is more or less flat. Remained lower side due to planned CapEx spending, not much CapEx is happening. We have kept close to INR 40 crores to INR 50 crores, that is the level and the finance cost as a percentage remained controlled and continue to be controlled on account of the improved working capital and cash flow. With improvement in margins, we have also seen improvement in ROC and ROE. And one -- on commencement of the revenue from MDO business, significant improvement further expected both in ROC and ROE. Coming to the other developments. During last quarter, we got close to INR 42 crores, which was held for a long time with the Andhra Pradesh Medical Tech park INR 42 crores we realized and close to INR 20 crores of retention money, which is the final amount. All said, now we are expecting this to be realized next 30 days. And the average monthly collection continued to be INR 350 crores plus, and we are seeing gradual increase in the collections with the growth of the business, and this is expected to grow significantly. Coming to the net current debt, excluding cash and cash equivalents, it continues to be in the range of 128 to 135 days which used to be significant to get back lot of efforts gone to bring down this number. And our immediate target is to see this number to 150 to 110 days. And coming to the gross debt and net debt remained at control level. As on quarter 1, the gross debt is close to INR 490 crores, which is flat in spite of increase in the order book and business. This number remains controlled because of improvement in the working capital cash flow and the net debt is close to INR 284 crores. And debt equity is also more or less remained at control, 31st March, we had close to 0.37. And where it was 31st March, it was 0.5. So it has come down significantly. So more or less, it's trailing 0.3 to 0.4. Coming to the order book target. We had an opening order book of almost INR 23,000 crores plus. And we have set a target of close to INR 10,000 crores for this year including the lower order book of INR 200 crores of last year. So we are more or less confident of achieving this number so this target remains the same. As of today, we have got 11 status of projects around close to INR 2,000 crores. And [indiscernible] we have already got INR 720 crores. So the target of INR 10,000 crores it's quite achievable. We've identified projects of around INR 40,000 crores plus. So INR 10,000 crores for this year's target, we're quite confident, excluding the [indiscernible] part. Major target segments includes international operations because post-COVID -- during COVID, we could not take much of the orders because of travel restrictions. But now the team is quite active. A lot of inquiries are coming. So we have kept close to INR 400 crores plus of international order book and could be another INR 150 crores to INR 180 crores of operation and maintenance orders from international. Apart from that, Domestic sector, we are targeting close to INR 1,500 crores of [indiscernible] orders. And we are seeing a lot of momentum happening in the power or especially the world plant is getting revived. So we have kept a target of almost like INR 2,000 crores plus. On top of the water distribution, it's almost like INR 2,000 crores, INR 2,500 crores, material handling lot of inquiries are happening. So there, we have kept a target of INR 500 crores to INR 800 crores. And specialty construction could be in the range of INR 450 crores to INR 900 crores. So the order book is widely spread. So the opportunities are plenty. Now each is view in-house, it's quite competitive to bid for different size projects. Now SBU has built their [indiscernible] credentials. Now it is enabling the Power Mech to bid for larger projects at competitive price and without JVs. So that is also helping in a big way to improve the margin profile. As you all know, like recently, we have got a large MDO contract from SAIL. This is a measured breakthrough for Power Mech. We have been working for 2, 3 years to see that Power Mech will build INR 3,000 to INR 4,000 crores of stable income for a long-term business mix is sustainable and which will help in a big way to improve the margin profile because normally, we used to work at 13%, 14% margin 3, 4 years back because of so many reasons losing for the JV credentials and all and booking costs for the PQ and also, we ended up working with 11%, 11.5%, 12%. But now there is a high probability that the margin profile will improve with the new project. So this MDO, we have got from Steel Authority of India, SAIL. The contract size is close to INR 30,438 crores, which has to be executed over period 28 years that includes 2 years of development period. The broad scope includes development of all the infrastructure, including washery coal handling plant all related infrastructure, which is necessary to excavate the coking coal. So we have to excavate close to 4 million tons of coking coal, but total result is expected to be almost like 90 million tonnes. And the overburden, we have to remove almost like 535 cubic meter million. So this is a large contract and this still change the profile of Power Mech and this will help, along with the existing MDO of KBP project plus the operation and maintenance, which we are generating close to INR 1,000 crores of top line. So this will help us to push INR 3,500 crores plus from 26 onwards in a big way. So the consistent stable income, INR 3,500 crores is now issued for Power Mech from 26 onwards. Plus now we have built credentials in railway, metro, water, of course, we have our own [indiscernible] power. So combined together, we can see a large quantum jump going forward. So this MDO project, we went with a JV partner called PC Patel. The structure is 74% Power Mech will hold and 26% of the JV partner and the structure we have gone because of PQs but the 100% will be educated by us. So next 2 years, we have to set up the washery and co-lending plant and related infrastructure. So this needs close to INR 800 crores of investment and on peak, we are expecting a top line of almost like INR 200 crores plus. And the margins from this project is expected to be the largest contributors as compared to our all existing businesses. So this will help in a large way for our branded margins. The investment of INR 800 crores. This will be a combination of lease some of prospective debt and internal accruals plus the equity part. We are working on multiple structures to optimize the cost and the capital structure. And one month good development is the KBP MDO. We have got this forest clearance and recently, the EC committee has approved the environment [ experience ]. So this is expected to receive by end of this month. So most likely October onwards, both the projects, the ground work can be started. So for this year, FY '24, quarter 4, we may expect some INR 100 crores plus of cost of line. The new project of Tasra, which we have got from sale, this is a project where all the approvals are in place. So it wouldn't like -- it won't take the process and what we have taken for the old mine. So this is a ready-to-start project, approvals are in place. So we are expecting the contract to be executed next 30 days. Post that, we can comment the work at the ground will mobilize the project, and we are expecting to book some revenue during this year. So the combined 2 projects, maybe INR 100 crores plus. Maybe next year, we can target close to INR 350 crores to INR 450 crores. And gradually, it can go up to INR 2,000 crores plus escalation. That is the target. And in terms of our execution cycle, it's quarter 1, quarter 2 historically it works 35% to 40% of the total year. So this year is going to be 35%, the revenue coming from quarter 1 and quarter 2, 60%, 65% will come in the second half. That is how the industry works. So we kept a target of 37% to 40% conversion to our opening order book, and we are positive and confident of achieving that number. And FY '25, '26, we are seeing a good quantum jump because of the projects in pipeline order book is very strong. Apart from this, this MDO, both are going to stabilize during this year itself. So this will help in a big way. So both the projects put together plus the existing order book and the projects that we have kept in target. So probably 35% plus CAGR we are expecting next 2 years. So by FY '26, is going to be major quantum both in terms of our top line and in terms of margin profile also we are doing, we are expecting that we should come back at least plus to our normal margins what we used to report 4 years back. Now I request Mr. S. K. Ramaiah to just give more developments before we get into Q&A. Thank you.

Thanks Satish. Various points you brought about on the business. And thanks for the participants. As Satish has said, the entire business outlook looks positive and bullish. And we have seen the order backlog of INR 7,333 crores by end of the year. And with additional INR 720 crores, we are maintaining more or less the same backlog of orders, with mechanical contributed INR [indiscernible], O & M nearly about INR 500 crores, electrical INR 270 crores. The power to non-power is 65% to 35%. The power sale backlog is INR 8,081 crores. The non-power [indiscernible] and the domestic segment is highly bullish. And this is obviously the input, what we are getting in terms of the national infrastructure pipeline investments, which is going on for the last 3 years which is a total investment of INR [indiscernible] crores, and that has been reflected in the near doubling of the orders from 2021 to '22, '23 from INR 4,238 crores to INR 8,479 crores or with that the establishment [indiscernible] of INR 8,500 crores of order booking last year, as Satish said about the projections for the current year of INR 10,000 crores is reasonably possible. That is mostly driven by the opportunities what it can have and a lot of the investments are coming in the private sector also. The major aspects of the business is that around INR 2,000 crores of jobs are in the [indiscernible] position. In terms of O&M, water systems [indiscernible] and installation jobs and also nonpower jobs. And moreover the opportunities, what is being tracked. Industrial projects in various segments comes to around INR 25,000 crores, with inflation of about INR 5,000 crores non-power about INR 500 crores, railways nearly INR 3,000 crores, electrical INR 1,500 crores. O&M INR 2,500 crores, drinking water about INR 2,000 crores and other water systems another INR 2,000 crores, [indiscernible] nearly INR 3,500 crores and road projects about INR 4,500 crores. Therefore, there is a visibility of the investments, both in the public sector, the government sector and the private sector. In all areas of the investment is going up, and railways experience, drinking water experience and even road construction experience is pretty good for the organization because we are doing quite well in terms of conversion and [indiscernible] the project. The major projects on hand, Yadadri, what we are doing into 5 x 800-megawatt in Telangana about INR 813 crores, 76% has been completed. Maitree 2x660 megawatts in Bangladesh [indiscernible] were completed 77%. [indiscernible] 2x660 megawatts in Tamil Nadu 78% of INR [indiscernible] crores and the [indiscernible] the progress is very good. 64% were completed. Then the other road projects, we have done about 56%. Then Bhusawal project for the BHEL we are done about 89% of INR 256 crores. Drinking water progress is picking a lot of traction. And almost 30% of the work has been completed. Then the new job what we have taken [indiscernible] is the maintenance shop work in Bangalore is about INR 427 crores work has started in full swing now, and revenue should come up more in the current year. Then Monnet Ispat', which is a renewable project of 2x525-megawatt INR [indiscernible] crores we've already taken up. And railway electrification job, almost 92% is completed. The opportunity wise, if you look at it in the installation business in the power sector itself, there is going to be a revival of the investments in the coal-fired plants [indiscernible] variety of factors. One is to bring the stability in the grid. Other is to balance the baseload operations. And there is a plan to -- already many of the projects have been approved. NTPC bringing a project in [indiscernible] bringing up a project in Raghunathpur. Haryana power generation company at Yamunanagar, 800-megawatt, [indiscernible] is almost on the pipeline, about three 800-megawatt, NLC Neyveli expansion 2X660 megawatt. Then Rajasthan Vidyut Nigam Limited, [indiscernible], they're bringing up 2 major projects into a 2x660 and 2x800-megawatt then [indiscernible] Board also is bringing 2x800 megawatts. Apart from that, there is a revival of thermal plants about 12 sets of various capacities, which were went on liquidation process in Monnet [indiscernible]. This is about 12 sets of 5270 megawatts. And in this already, we have made an entry in Monnet Ispat and [indiscernible] we are discussing and already we are doing the offer for about INR 500 crores and we are helpless there. Apart from the Coal India Limited is planning, they are trying to become energy intensive company also from coal, not only coal production, they want to enter into energy generation. And that they are planning to invest 2,400 megawatts in [indiscernible] and Madhya Pradesh. Then the [indiscernible] opportunity as Satish was saying, that is within bullish now. We have identified about 9,450 megawatts spread across various upcoming projects in Khurja 2x660-megawatt, Ghatampur 3x660 megawatt, [indiscernible] 800-megawatt, Vedanta captive power plant in [indiscernible] 182 megawatts, Raichur KPCL, 2x800 megawatt. Then Jindal power plant in Angul 2x6n0-megawatt and [indiscernible] project 2x660 megawatt. In the domestic operation itself, we are around INR 2,000 crores. Internationally, recently, we have seen that the captive power plant we have done for the Dangote oil refinery in Nigeria, we've already taken a job of INR [indiscernible] crores AMC contract. And there's opportunities in Middle East, particularly in the Gulf area, where we are well established. Last year, we booked orders of nearly INR 150 crores in various maintenance jobs, [indiscernible] services jobs, et cetera. And there is a scope to find out opportunities of more than INR 500 crores. And therefore, in terms of the overall growth, perhaps INR 10,000 crores is achievable and the continued investment in the government investment in drinking water of the [indiscernible] INR 70,000 crores out of INR 12.5 crores villages drinking water is made available still 7.5 crores of households have to be provided. And there are many other water-related projects in urban development and all. Those things will come in. And railways offers an excellent opportunity and the Metro rail also excellent opportunities to present installed base of 750 kilometers -- route kilometer is more than double up with an annual investment of INR 20,000 crores. And with our entry and railway maintenance shops, particularly metro maintenance shops in Bangalore. Every city, there are about 27 cities are, planned for the present 8 cities are there. It will double up with that it will go to Tire 2 or 3 cities. Every city wherever the metro rail comes, there will be 1 or 2 maintenance shops between INR 300 crores to INR 500 crores. And more than the railways is coming at various schemes to improve the logistics and also maintenance shops and more than that, the road sector, they are going to not only the road development will continue to grow, but they are going to put up a lot of logistics to reduce the logistics cost. And they are investing heavily into [indiscernible] nearly about INR 50,000 crores to INR 80,000 crores. And power sector I told you about that non-power, particularly the investments will come up in the steel sector. The present installed base of 158 million tonnes will develop over 5, 7 years. And all the major players, both in the public sector, Steel Authority of India Limited, JSW, JSPL, Arcelor Mittal, all of them are going to increase their capacities and [indiscernible] lined up the investments [indiscernible]. And it is expected also in the refinery segment also, this investment should come up by increasing the refining capacity, and then the gas and oil sector also. Therefore, this outlook should sustain for the next couple of years. And then the basic feature of the revenue generation will shift from the mine development operations as Satish has told and coupled with the increased sustained business in the O&M, both in the domestic sector, international sector and non-power sector also. That is how the stability will come in revenue growth. And then apart from the new opportunities, what we'll get in all sectors of the business, which we are pursuing as on today. Thank you. Yes, yes. Prasheel, you can go -- move forward to Q&A.

[Operator Instructions] The first question is from the line of Pritesh Chheda from Lucky Investments.

Sir, what kind of execution do you see for FY '24 on the revenue side?

See FY '24, we have kept a target of 37% -- 37% to 40% conversion to our opening order book. So we are on as per the plan. First half, we are expecting close to 35% to 40% -- 35% to 38% conversion, thereafter 60% in the second half. That is a plan we have kept.

Okay. And what is the backlog number that you're referring to for that 37%?

The opening order book is almost close to INR 13,600. That is the base for the conversion. And we have kept a target of INR 10,000 crores for this year. So already L1 is INR 2,000 plus INR 120 crores we've already taken. So this -- some conversion will happen, okay? That's going to be an offset. But [ as a sum thing ] 37% to 40%, that is a conversion we're expecting for the year. For the opening order book.

And you received INR 2,000 crore orders, right, so far, in the INR 10,000 crore target that we have, right?

INR 740 crores, we have already got LY and it started -- the work started. The rest INR 2,000 crores in L1 started, probably next 30 or 35 days or Max 45 days, the contract seller process shall complete.

Okay. Then on the power erection side, what kind of projects are you seeing in the system?

Yes. As I told you, the only the [ revival ] of the thermal plant services were stuck up on liquidation. That is coming. We monitor has started. Now it is expected that turn of our 600-megawatt already, we are in the special customer around INR 400 crores of offers also we have given, and we are well placed there. On number contract is expected to 60 megawatts. That's a major job. Then apart from this, it is expected to present revival of the coal-based plants I told you 22,320 megawatt. That has fully come up in a sense, some projects should happen. Like NLC Talabira 300 to 800-megawatt in very Then NTPC is already implementing to system [indiscernible] I mean, it is expected, it should be awarded shortly. Maybe there are certain things they are discussing with the LSD. And there are other projects also. Therefore, these are the things we are looking at it. And in non-power also, there is going to be opportunities in the iron world, then coal handling plants and also, yes, drinking water and then water systems, et cetera. Therefore, wherever the installation-related jobs are there, both in our core and power, things would happen.

And sir, my last question is this MDO revenue, will FY '26 will start seeing the revenue booking on the 2 projects, which is KDH and the sale or FY '27, the real the operator-related revenue. So that will be in '26 or '27 in.

We're expecting some revenue to come by quarter 4 of this year itself.

That's mine development revenue, right?

It's both the MDOs because the second revenue which we got recently we have all the approvals in place. We need to have the contract in that will take 30, 35 days. Thereafter, we need to move at the project.

Sorry, I wrote that, you said INR 100 crores in INR '24 crores and INR 300 crores in FY '25, right? These would be site development revenues, right, which you're

No. For things will happen parallel. Site development will be like and the excavation of coal per tonne, what the customer has to pay, that will be building will start so it's actual revenue.

So -- and you said that INR 2,000 crores in FY '26, right?

Yes. So put together, we are targeting close to INR 200 crores plus, okay? And plus our MDO is the existing one put together that name plus MDO 1 and MDO 2 we are targeting that, that should drop at least INR 2,500 crores to INR 3,000 crores plus escalation is already complete.

So what is this O&M.

The existing operational maintenance, which we are doing close to INR 1,000 crores now, okay? That is actually long-term contracts, which is sustainable. So that plus the MDR, which are almost like 25 plus 28 years. The 3 put together, I'm targeting close to INR 3,000 crores plus.

Okay. But the MDO number is INR 2,000, right? Your O&M number is already there as a part of your INR 4,000 crore revenue, right?

Yes, the INR 2,000 crores this two MDO by '27, I think it should be close to INR 2,000 crores.

And in '26?

'26 could be around INR 1,250 crores to INR 1,300 crores.

And in terms of the output that, that might have to produce, there will be a peak in FY '27.

'27, yes, it will peak at FY '27.

And what margin should one assume on this INR 1,200 crores or.

See the MDO, there is a lot of scope to improve the margins, and this is going to be the highest segment in our business, normally, like O&M, which normal work 6 to 7% plus at EBITDA level and we're expecting this business to contribute more than the [indiscernible] Business.

You have a fixed price, which has been -- you have quoted a fixed price, right?

That's per tonne plus escalation, which works close to 4.5% to 5%.

Okay. I'll come back if I have more questions.

We'll move on to the next question. That is from the line of [ Mayur Boodara ] an Individual Investor.

Congratulations for the good set of numbers. Actually, my question was around we now have 2 big MDO orders in our hands. So are we open to take any more MD orders if it come belongs our way?

No, sir. Now the stomach is full now, okay? So we have to stream in these 2 projects, and we have got our own other operations. So at least not for next 5 years.

Okay. And sir, my second question was regarding -- so you said that we require close to INR 800 crore investment for this MDO 2, MDO, second order of MDO. So how much we are going to fund it through debt?

We are working multiple combinations. One is the project-specific depth. Second is some equipment we can go for an outsourcing model. It's like a lease model and some in the form of equity. So it is going to be a combination of various structures. At least 70%, 75%, it has to come from the debt side. That's what we are planning. So probably next 1 week, to 10 days will have more plant in terms of the capital structure.

Okay. And sir, on the order side, so we are targeting INR 10,000 crores of new orders in that we have close to several to INR 2,700 crores, we already received the L1 or level like that. So from FY '25 and FY '26 onwards for the more bigger orders like INR 15,000 crore order inflows, how we are preparing our team execution team?

Yes. So sir, '25, '26, we have kept around INR 11,000 crores to INR 12,000 crores. That's the target because we don't want to increase because the bandwidth now set is close to INR 900 crore to INR 1,500 crores, okay. the execution level. So gradually is improving. Now we have got almost like 13,000 employees working with us apart from that, we have got 12,000 employees. So in terms of infrastructure is well set, and we have kept a CapEx plan of close to INR 50 crores to INR 60 crores, which is a recurring every year we spend so that we have enough equipment in-house. And more importantly is the talent, one is like inducting the talent from the big companies, okay, that we are seeing a lot of people getting attracted to join Power Mech makes a lot of -- like even the MDO, we have created a separate vertical and almost like more than 200 people who have been recruited and the top level more than 20 people coming from Coal India, CCL, Syngene. And that will function as a separate view. And apart from that, the continuous training programs, okay, to groom the middle level and [indiscernible] from the senior leadership, it's a continuous process. Now the process in terms of the in-house infrastructure is well set now to execute the projects. So to target for INR 10,000 crores to INR 11,000 crores of order book and the execution is well at the 2 MDO the team is set now. We have quite strong plan for next 3 years. For FY '27, '28, we need to consolidate way to move. That is the plan for now.

Okay. And sir, my next question -- last question is regarding -- so we are targeting from FY '26 to FY '27, close to INR 3,000 crores plus revenue, which will be recurring so on that, we are targeting so in operation and maintenance, we have close to 17% EBITDA margin. And you are mentioning that MDO EBITDA margins will be better than that. So close to INR 3,500 crores of our revenue will be 17% plus EBITDA margin. So overall, doesn't our EBITDA margin will move upward of 15% close to 14% to 15%.

See, FY '26 onwards, so there's a high poverty that the margin couple, yes, it should improve Okay. We used to work 13%, 14% 4 years back. So at least that number plus we should move forward. There's high potential because there is a lot of scope to improve the margins in these two MDO so there's high probability we should improve the taxies back margins.

Okay. Okay, sir. And congratulations for the future.

The next question is from the line of Riya from Equitas Investments.

My first question is in regard O&M order book. So since a couple of quarters, you've seen the tapering down so now when June quarter, I can say is only INR 458 crores, while earlier it used to be around INR 1,100 crores, INR 1,200 crores or -- so what would be the reason for the same?

Yes. See, Madam, this -- the order book, what you're seeing is the residual normal what happens is a contract is for 5 years, okay? And we [ belated ] something which is subject to renewal. So we take only the residual order book you see the gross order book is INR 2,500 crores plus. Yes. So this year itself, we are expecting close to INR 1,200 crores to INR 1,500 crores of orders that includes also the projects which are going to be renewed. So on [ depots ] on a gross level, but we take net because that's the building whatever we do, we did it from the actual contract value. So therefore, the residue looks to be smaller.

But I think the earlier numbers are also the residual number, like if I see March 22 numbers, the entire on the quarter were around INR 1,200 crores.

Because if the contract renewal to the additions if there's a mismatch, okay, the residual number will come down, but you'll see that again, it will pick up the gross order book is INR 2,500 crores. So today, it's INR 950 crores to INR 1,000 crores. This is expected to grow at a 18%.

Rami, here, what I would like to say is that, as rightly said, these are all long-term contracts say 3 to 5 years, 2 years to 5 years and all. The advantage in this once we are established there, there is an average chance of 90-plus percent of renewability of the same thing in the -- in many of the contracts. And every year, 25% to 30% of a contract as way that is a recurring order. Apart from that, the new opportunities, what we are making it in the existing profile of the projects where we can all center because of our background and experience that will add up to the overall improvement in the O&M and no international market is taking shape. For example, we have taken a long-term on contract in Nigeria, where we have done the institution work of a 400-megawatt captive onto than INR 100 crores and in Middle East, last year, we have booked maintained jobs and special service jobs about INR 150 crores. So that gives this one that we'll be able to improve the international O&M business also. And then domestic, now there is going to be a lot of emphasis by the prior published also to enter into the long-term bond outsourcing as a model because the private sector is driving the benefits that our presence of 68,000 megawatts, is helping us establish with the public health like bring to 60-megawatt Ghatampur than many other projects, as I told about the O&M, these opportunities are opening in the government sector also. And the private has also renewals will come. That is one of the reasons the present backward will certainly grow. One information is that -- in the last one month we have received under INR 200 crores of point orders in the domestic market from organic group and also from the relining form, that is content, et cetera. And the opportunities what we are tracking in the -- this 1 as we told you to improve the [indiscernible]

And actually, I think you mentioned in your opening remarks, but could you tell me the debt number not order.

Yes, yes. See, the debt is close to INR 490 crores, that is a gross, okay, net is INR 284 crores. Which is more or less what it was 31 months.

The next question is from the line of Deepak Poddar from Sapphire.

Yes, [ Namaskar. ] Many congratulations, sir, for a great set of numbers, actually. I mean I've been looking at the company over the last 1, 2 years, the way that you have scaled up is commendable. So sir, my first question is on your O&M. I mean, O&M, what sort of margins we are currently doing in O&M?

Sir, in domestic, it's working in the range of 16.5% to 17.5% some 18%. Internet is slightly larger, but the volume is too small. Okay, another the first project where we would able to crack 3-digit size contract. Now [indiscernible] we have got. So that is the number. The blended works around 6.5% to 7.5%.

One more aspect in O&M perhaps I should share that. The drinking water projects, what we're improving INR 3,000 crores. Now once the commissioning starts in the village is covering by end of the year. There is going to be a revenue scheme, which will come on the O&M side of the drinking water based on the capital cost up to 3%. That means if the present projects are fully implemented next 1.5 years. Perhaps we can get the additional revenue of INR 100 crores in the end itself from the drinking water systems for the next 10 years with escalation.

Yes. That will be one of our initiatives.

Yes, that is an initiative on the no [indiscernible]

But I also wanted to understand, is there any scope to increase the margin in ideally O&M does involve a very higher margin, right? But do you think that the 16%, 17% margin can be increased basically by.

Sir, honestly, in domestic, we have to see that it's -- that number is maintained, okay, because we have to factor the employee cost, which is almost like 60% plus of the cost employee escalation in terms of the employee cost and all inflation but there is a possibility in international markets because we have to see how much we can scale up, at least next 2, 2.5 years, we are targeting INR 250 crores to INR 300 crores of [indiscernible] So with the support of International, yes, there is a possibility. But as for the domestic is concerned, to say that number is maintained.

Okay. Okay. Understood. Understood. And I understand. And when you mentioned this FY '24, we are looking to convert 37% to 40% of opening order book. So INR 5,000 crores to INR 5,500 crores of execution level we are looking at this FY '24

So 40% of opening and plus there could be some conversion from the new orders. So more or less, we are targeting that number because first half -- maybe the first 6 months, 35% to 40% conversion there up the residual 60% conversion should happen. That's so -- so we are targeting that number.

INR 5,500 crore around plus minus somewhere.

In the range of 30 down to 40 because it's quite difficult to specify a number.

So 37% to 40% of your INR 1,300 crore something?

Yes. We are planning that

But excluding MD order, right, I mean INR 23,000 crores minus INR 9,300 crores

Input a small portion of maybe INR 100 crores INR 200 crores. That's all because we don't see much additions happening this year. It's more of like a project mobilization and the execution will start this year. So the big conversion will come from the next year onwards.

Correct. Correct. And post this FY '24, you did mention, right, that FY '25, '26, you're looking at 35% CAGR, 35%-plus CAGR in revenue, right, FY '25 and '26.

yes

Okay. Okay. Okay. That's quite good. And I also wanted to understand on your MDO, you mentioned O&M plus MDO 2. This put together INR 3,000 crores revenue potential from FY '26 onwards. Which will be our sustainable recurring source for next maybe what 25-plus years, right? So do we see any risk in this INR 3,000 crores revenue that we are looking at?

The first 2 years, because the [indiscernible] it's like it's tested model, okay, this INR 1,000 to [ 1,100 crores ], which is now itself we are converting. So assuming that international may not grow significantly, 15% to 18% growth also, we can reach by FY '26 to close to INR 1,400 crore, INR 1,500 crores. But this MDO 2, because what is important is we need to develop these 2 projects for 1 or 2 years, okay, it takes time only in the initial development period once it's done, thereafter is like a recurring model. So we are working towards that. So what is important is like to set up the initial infrastructure and KPP, we need to set up the coal lending plant, where we got that expertise set of GST, that is not a challenge. And second is Tatura, we have to set up washery and CSP. But having said that, parallelly, the work can start. Nothing stops on a -- so how to optimize the cost and improve the margins, yes, of course, based upon the local and all we need to see once the ground realty comes, okay? Apart from that, we don't see any challenges because we have done a thorough analysis and we have worked in past in those localities. So we understand that locally quite well. And our expertise in terms of CSP construction and material handling, more importantly, and equipment management and the large market network where we have -- we have built that expert last 10 to 12 years. So this will help in a big way/ So I don't see any subparts to happen.

Yes. What I would like to add, Rami here is that, see, both the mess are linked with the very important report subscription working code. One is we are putting a coal watch in the case of Patara, another is whatever coal we are producing in the KBB project will go for exporting this 1 called delicate brand starts with central coal. Therefore, that is our basic advantage, and the India is heavily dependent on the import of the coating coal from Australia, Indonesia, et cetera. And that is one of the main aims of providing these contracts in a big way and sale is directly doing it and all India is also doing it. Therefore, there is no -- there should be any risk in these 2 projects in the long term. And Satish has said, one difference between our MDU operation and others is that we have got no savability and operational maintenance that not many people have that. Therefore, that becomes a value addition and apart from that, we can do the project institution much better than others because we have got a strong in-house expertise in construction also. And that should add up all the better margins all out.

More importantly, now see, the imported coking coal, it's raining 10,000 to 13,000 events plus. Okay. And the rate what we have structured it the KBP is almost like 900 plus and this is 3, -- so there will be a tremendous plus for the customer to implement this project because their buying cost is quite expensive coking coal is a very -- I mean, very important resource for any steel company, right? An advantage and both the customers are quite healthy. And so seeing all these things -- there is a lot of comfort on these 2 projects.

Correct. Correct. Agree, agree, sir. I mean even the margins that you mentioned of 13% to 14%, right, potential by FY '26, I do see that there is upside risk -- because I think on -- about 35% to 40% of your revenue will be driven by the MDOs and O&M, which will have 17% margins.

And even drinking water will add a revenue recurring on the end.

Fair enough, sir. I think that's it from my side. All the very best to you. Thank you so much.

The next question is from the line of Anupam Gupta from IIFL Securities.

Just one question. So your existing order book, almost 50% comes from the FGD projects from Adani. So if you can give clarity on what's the status on those projects in terms of execution in terms of payments?

Around 800 out ores we have done the ordering, the engineering issues and local configuration because they're all retrofit projects. Naturally, some configuration engineering and other aspects have to be lined up. Based on that, the progress will further take up.

So maybe -- see, as of now, like the engine part, okay, maybe first half, we don't see much conversion to happen. Probably the second half in terms of ground conversion, okay, that we could see in the second half only.

Okay. So when you say 36% to 40% execution effectively includes that they should pick up in terms of execution right in the second half?

Yes, yes.

Fine. Okay. Okay. But you don't see any issues in terms of payments or further getting canceled or any of those things.

No, no, it is a much -- actually, the mandate is very clear. It's the international commitment to reduce our sulfur emissions and then bring down the self-production with the efficiency of 95% collection. And therefore, 211 lakh megawatts of gold based parts out of [indiscernible] than 1 lakh has been ordered, and there is no going back, and it is a national commitment.

More importantly, it's a large-scale project. So we have -- we meant see best open our risk analysis, we wanted this project to be cash-neutral project. So at any point in time, we'll see that there's an advanced plot, which is interest free. So there is [indiscernible] So as part of the risk policy, we'll see that it's the complete risk is in banks and the cash is neutral. There is a model with adopting.

As there are no further questions, I now hand the conference over to the management for the closing comments.

Yes, Rami, again. I think what Satish has told on the various numbers, the business what we have brought off and the interest shown by the participants. One is that we continue to be bullish on the market investments both in the public and also private sector in infrastructure, power sector, then overall development schemes are like drinking water and the boards and the steel plant, then mining iron ore mining, apart from the coal mining, then the international markets should improve, particularly in the Middle East after the COVID and that is where now our O&M presence is well established in the international market in West Africa and also in Middle East. And we've been looking for the new investment going to come up now in the ultra and then Bangladesh also is going to add up capacity. So we are doing a major project and Bangladesh plan is to gear up their capacity from the present 24,000 megawatts to nearly 40,000 megawatts because they are powered with all these aspects. Perhaps we should look for a positive growth and then more important is that the cycle time of implementation and learning in all the diverse areas, what we ordered in our non-power apart from the traditional that has stabilized now and the manpower is well worked with the implementation cycle time engineering management, engineering coordination, procurement under project execution, that should drive slightly better margins compared to the previous years, and that is why we have quite positive.

Ladies and gentlemen, on behalf of Nirwal Bang Equities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.