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

Ladies and gentlemen, good day, and welcome to Power Mech Projects Limited Q2 FY '24 Earnings Conference Call hosted by Nirmal Bang Institutional Equities Private Limited. [Operator Instructions] Please note that this conference is being now recorded. I now hand the conference over to Mr. Prasheel Gandhi from Nirmal Bang Equities for the opening remarks.

Thank you, Rohit, and good afternoon to all participants. Nirmal Bang Institutional Equities welcomes you all to 2Q FY '24 Earnings Conference Call for Power Mech Projects Limited. From the management team today, we have S. K. Ramaiah sir, Director, Business Development; and Jami Satish sir, CFO. I now hand over the call to management for opening remarks, post which we can take Q&A from the participants. Thank you, and over to you, sir.

Yes. Thank you, Prasheel. Hi, all. This is Satish. Good afternoon, and best wishes to all. Hope you all had good Diwali. I have with me Mr. S. K. Ramaiah, Director, Business Development; and Ch. Kotaiah, GM Finance. Power Mech had one more great quarter with good set of numbers and execution. There is no change in overall plan set for Power Mech. Execution and ongoing business plan is in line with our projections and internal set targets. We are happy to see more and more opportunities coming in our core sector, power projects, a combination of new and old plants getting revived. Moreover, we are also too excited to see plenty of opportunities coming in the operation and maintenance, both in the domestic as well as international market. This year, we will see a large order book addition coming from O&M space from various projects in pipeline, which are in advanced stage and orders from O&M during the year going to be all-time high in the journey of 24 years. For Power Mech, we are seeing quarterly execution bandwidth going up quarter-on-quarter. Going forward, we'll see the numbers going up significantly. In any financial year of Power Mech, execution during quarter 3 and quarter 4 contribute substantially higher as compared to quarter 2 -- quarter 1 and quarter 2. Therefore, we'll see quarterly execution cycle improving significantly for the rest of the quarters of financial year FY '24. Coming to quarter 2 and H1 numbers. The reported total income for quarter 2 FY '24 is INR 937 crores. And the EBITDA is INR 118 crores and PAT is INR 51 crores. During quarter 2 of last financial year, the reported total income was INR 774 crores and EBITDA was INR 89.5 crores and PAT was INR 44 crores. So on a quarter-to-quarter basis, Power Mech has demonstrated almost like 21% growth on the top line. And with the growth of top line, EBITDA has gone up almost by 32% and PAT has gone by 17%. The revenue mix for quarter 2 FY '24 is as follows. Mechanical business has contributed INR 148 crores; Civil business, including railway, water distribution, INR 496 crores; O&M INR 272 crores; and Electrical business close to INR 17 crores; and others close to INR 5 crores. Whereas during the last year FY '23 quarter 2, the contribution for Erection business was INR 161 crores, Civil INR 367 crores and O&M it was INR 226 crores and Electrical INR 17 crores and others was INR 3 crores. O&M and Civil has shown a growth of almost like 20% and 30%, respectively. Erection more or less remained flat. But however, this number again will go up significantly going forward. Electrical consciously we are not bidding for new projects, therefore, it's more or less flat. And coming to the H1 of FY '24, the total income was close to INR 1,808 crores. And EBITDA is INR 223 crores and PAT is almost INR 102 crores. Whereas last year, H1, the total income was INR 1,523 crores, EBITDA was INR 175 crores and PAT was INR 83 crores. There is a growth of almost like 19% for the -- for H1 as compared to last year. And with the growth of the top line, EBITDA has significantly gone up by almost 27% and PAT has gone up almost 23%. Similarly, O&M and Civil business has gone up by 17% and 33%, respectively. Mechanical, there's a dip of 8%, but however, it will continue to grow quarter 3, quarter 4 and Electrical business is coming down because not much order booking is happening on the Electrical business. This year, we'll see a significant contribution coming from the water business because the order book is quite healthy. O&M continues to be the backbone of the company, contributing almost like 27% to 28%. And during the end, it will continue more or less the same percentage. FY '24, because of the healthy order book, water business will continue to contribute close to 20%, 25% of the total business. And O&M will continue to be 25% plus. And Mechanical will continue -- both domestic and international will continue both almost like 18% plus. And railways again picking up with adding of the metro. This year, it is expected to be almost like 4%. And we'll see that FY '25, FY '26, there will be significant change in the business mix because water -- because of its -- because of healthy order book, the contribution is going to be almost like 18%, 20% next 1.5 years. And Erection business is expected to go up almost to 25% to 26%, and the railway is expected to go up to 7%. And MDO, this year will start with a small number, and this is expected to go up significantly next 2 years. FY '25 is expected to be almost like 8% and FY '26 going to be almost like 16%. So there will be a significant change in the business mix because of the increase in the O&M pie and MDO business. Improvement is also seen in overall margin profile and same is further expected to improve gradually and on reaching MDO to peak during FY '26, the margin profile will improve to a greater extent. Depreciation cost as a percentage remained lower side due on account of controlled CapEx spending. And the finance cost, keeping aside interest on tax impact as a percentage to revenue, remained lower side and continue to controlled on account of improved working capital and cash flow. As you all know, with respect to search operations conducted by the Income Tax Department under Section 132 of the Income Tax Act 1961 during July 2022. Based on the deliberation with the assessing officer and as a prudent measure and to avoid any further protracted litigation, the company has made a provision of INR 16 crores for the assessment year '18 and '19, the company has made all required information available to the department so far. With better deployment of capital improvement in margins, we have also seen improvement in ROC, and this is expected to again go up significantly. As stated in our earlier calls too, the overall execution bandwidth is seen increasing quarter-on-quarter on account of various initiatives and strong increase in in-house resources. The company is well set to execute projects now in the range of INR 1,200 crores to INR 1,800 crores per quarter. And other developments include: the operating cash flow for this period is almost positive by INR 70 crores, and the system generated free cash flow of almost INR 50 crores plus during the period, which is quite healthy. We are working on the same to improve further. Also the average monthly collection of the company continued to be healthy. More importantly, the net current base, excluding cash and cash equivalent, has substantially improved on account of improved working capital cycle, change in business mix and change in customer concentration. Net current days has come down to in the range of 130 to 135 days. And on stabilization of the MDO business from FY '25 and '26 onwards, we can expect significant improvement in net working capital days, and this can help the system generate larger operating and free cash flow. We can see quantum jump in free cash flow. More importantly, the gross debt and net debt remained controlled despite growth in the business and order book. As on 30th September 2023, the gross debt is close to INR 450 crores and the net debt stands at INR 226 crores. But if we see, as of today, we can proudly say that Power Mech is a net debt-free company. And debt equity ratio as on 30th September stands at 0.3, which has significantly has come down because of the improvement in the cash flow. But if you see net debt today is nil because the net debt is almost 0. Coming to this 2 MDO projects, lot of developments and ground activities are happening in both the projects. The first project, Kotre Basantpur, a Stage I forest clearance we got in November -- from the government we got in November. Environment clearance also we have got it. Now the project is ready to start now because EC and FC were the major milestones which we achieved now. And we have applied for the consent to establish. This is expected to be next 1 month. Therefore, we can start the ground activity from this year itself. And coming to the second project, establishment of mining activities already completed by October. And more important is the heavy equipment, which are very important to start the excavation started -- we have started the procurement and transporting the equipment, and these equipments are expected to reach the site within the next 1 week to 10 days. And the core drilling activities already started during 3rd of November. And the EP consultant, M/s Vardan EnviroNet, the finalist for the washery. Apart from that, the electrical connection, okay, for 1.46 MV allotment along with the demand note received for JVVNL during October. R&R Colony fencing work already started. Apart from that, the mining area fencing work already started. So we are expecting next 1 week the bhumi puja. Therefore, we can start the excavation work where the -- during end of this month itself. Therefore, we would see the revenue picking up from this financial year itself. Coming to the order book. Order backlog as on 30th September is around INR 53,100 crores with both the MDO, and excluding the MDOs, the backlog is almost INR 13,400 crores. Similarly, the order book backlog as of today is around INR 53,500 crores with both the MDOs, and excluding the MDO, it stands at INR 13,750 crores. For the entire year, FY '23-'24, the company expects a target of INR 10,000 crores, and we keep the target as it is. We are confident of reaching this number, including the orders which we have received up to date INR 1,800 crores plus the projects which are in pipeline and in L1 status, close to INR 1,800 crores. We have identified opportunity size of around INR 46,000 crores plus. We are also expecting good amount of order booking and education cycle at international market, too. During FY '24, large order increase expected from the power sector, both in the O&M, Mechanical and Civil construction. As we stated earlier, the focus will continue to be going forward consolidation and leveraging the growth and the focus will continue on industrial plan, operation and maintenance, railway and metro, water, to some extent road and MDO projects. The execution cycle during FY '24, '25 and '26 is going to be robust and healthy on account of improved order book backlog and targeted projects in pipeline, and more importantly, increased bandwidth in the execution cycle per month and per quarter. As projected, margin profile seem improving and expected to improve further gradually year-on-year. Our plan to build business model to have a recurring long-term service model income to the tune of INR 3,000 crores to INR 3,500 crores plus in combination of O&M plus MDO for sustainable long-term growth from FY '26, if possible. This model will help us in a bigger way to improve margin profile, working capital cycle and in a large extent improve the free cash flow. Power Mech is well set to demonstrate execution and conversion in the range of 34% to 35% of its opening order book in a year. In addition to that, revenue from MDO business also ramping up coking coal production plant. Going forward, O&M and MDO business will drive substantial growth in a significant way. And we have some more development from the business side. I'll request Mr. Ramaiah to add please.

Yes. Thanks, everybody. Good afternoon to everybody. Thanks Satish for the opening remarks on the various numbers of Q2. Yes, as Satish has said, the outlook continues to be bright because the trigger for that is the massive investments the government sector is spending in all the areas, energy sector, infrastructure, and then the drinking water schemes, water systems and railways and the metros. I think that is what is going to -- when the company is going to align with this business. And of course, O&M, there is a lot of revival is seen. And as per the numbers are there, what Satish has spelt out, the segment-wise the numbers are the ETC and Mechanical portion, the present backlog is about INR 7,052 crores compared to INR 6,878 crores at the beginning of the year. And the Civil component of the work is INR 6,074 crores against INR 6,736 crores. The O&M is INR 353 crores versus INR 600 crores, of course, we have to add certain numbers which will come up now. Then the Electrical, it is INR 255 crores against INR 118 crores. And then MDO is a major component of our business with about INR 39,732 crores of backlog with both the MDOs. That should take us to a very healthy backlog, in the near term, 2 to 3 years, for the long term say 25 years. Looking at the MDO side, INR 53,111 crore as on September end, as of today it is INR 53,500 crores. Now the -- when we look at the opportunities, what we can see is that there seems to be a substantial revival of the power sector market. This is mainly driven by the apprehension of the load mismatch, which will happen in the couple of years between the coal side power generation and the non-coal side, that is the renewable power, if the present renewable capacity is about 125,000 megawatts. I mean, the total installed base of 4,11,000 megawatts and all. There is going to be further augmentation of the renewable power as the years go by, and that's why government has taken some remedial actions in terms of fast tracking the investment in new projects. And the present indications are that, apart from the NTPC, which is planned and they've already ordered Lara for BHEL and other projects are going to be in pipeline like Sipat, Daripalli, Singrauli, Meja, Ramagundam, Patratu also. Then the GENCO, the generation companies, they are having a plan of about 10,500 megawatts. That is going to substantially come up. Recently, the government has approved the Yamuna Nagar project also. And looking at these projects, the expected capacity addition, which will come up in the next couple of years, should be about 23,300 megawatts. The new -- these are all the new projects, what I'm trying to say. And then there is a revival of the projects for both -- the first projects of 5,270 megawatts has already been taken action at many of the projects. And we have already taken some initiatives in taking the orders there in -- with Vedanta and also with [indiscernible]. Now, the government has asked, recently a Policy Minister has been directed by the Power Ministry, saying that another 5,500 megawatts of stuck projects, that also has to be revived. And it has ordered the state government undertaking is also to participate in these bids, so that it is revived. Therefore, the revival of nearly 10,000-plus megawatts, that's a new addition of 23,000 megawatts. That should give a very good outlook for the power sector growth. And in terms -- our business is quite aligned with that in terms of the main installation work, erection testing, commissioning, the O&M jobs and all. Therefore, that is one aspect on the new units and also the revival of the old units I said about 10,000-plus megawatts. Well, the O&M opportunities has triggered substantially. Recently, we have seen that 2 major jobs we have taken, Hindustan Zinc Limited, therefore compensate O&M about [ INR 279 crores ] and O&M contracts. It's a very important break-through, the 2 mining and metal sector, non-power sector we've taken. And then Raichur 2x600 megawatts INR 163 crores. And then Adani at Mundra, we have taken about INR 100 crores of jobs for various O&M packages. Now the opportunities which we are tracking in terms of new projects which are coming up with Khurja 2x660 megawatts, Ghatampur 3x360 megawatts, North Chennai possibly 1x800 megawatts and then Buxar, of course, as the commissioning comes to that, then there is a major project in Balco with Vedanta group, that also we are having a look at it. Therefore, all these opportunities, the ballpark figure of opportunities in terms of the BTG, installation plus civil and CHP, which is our core strength flow, because coal handling and also material handling is one of our core strength, we establish it. It comes to about INR 12,000 crores of opportunities with these new projects coming up. And then the revival of the old projects also, it can add up another INR 4,000 crores to INR 5,000 crores. Now it can be anyway reach between INR 17,000 crores to INR 20,000 crores of opportunities both with the addition of the new capacities and also the revival of the old projects where half completed jobs are to be taken up. And there, the execution -- fast-track execution is there and Power Mech is a preferred bidder for that. And as you have seen in the case of Vedanta group for the [indiscernible] job. And recently, we have one more major order with BHEL for the Talcher INR 354 crores, the main part equipment associated work and civil work also. Therefore, with that type of initiative, this will continue to play in the coming months and coming quarters also. Now coming to the other water-related projects, we have substantially identified a huge opportunity, particularly in the Madhya Pradesh, then in Karnataka, Tamil Nadu, then Madhya Pradesh, also I said. Therefore, with all these projects, the total opportunity is about INR 18,000 crores. And Madhya Pradesh itself is planning about INR 9,000 crores in various schemes of drinking water, AMRUT scheme, urban water requirement kits for various towns and cities, sewage treatment plants, et cetera. And with our fast track execution expertise, what we are developing in UP for the drinking water scheme, perhaps we are well qualified for many of these jobs. And then wherever it is required, we can have a tie up with the other parties also like micro irrigation, lift irrigation and those type of schemes also are coming in a big way, and that should help us. The various segments of these water systems or the sewage treatment plants, urban renewal schemes and the AMRUT scheme, then water supply schemes, lift irrigation schemes, canal works, and then, of course, the most important is Jal Jeevan Mission, which is a flagship initiative of the Government of India. It is heartening to know that almost 70% of the rural villages are well connected now. And we are doing pretty well in the -- what we are doing at drinking water schemes in UP for our 4 major areas, nearly about [ INR 2,800 crores -- INR 2,750 crores to INR 2,800 crores ]. And almost about 40%, 45% of the work we have completed. Of course, that gives us a lot of reference base and expertise because the type of organization is what we established there is a distributed organization system. That means down the line, at grass-root level distribution organization system, village level, the area level and then the block level, the district level and the zone level. Therefore, it is well-structured organization, nearly about 4,000 people are working. And already about 100 villages, we have completed the 100% water supply scheme and then water is flowing to those villages, and the people are seeing the benefits. And what is more important is the organization what we established about 4,000 people in the engineers, supervisors, field and all the working staff, subcontracting staff, that should give us a strong base in undertaking many of the important water project, drinking water projects, et cetera, also. Then one more important thing which has come recently is that, as we summed up these contract agreements with the Jal Jeevan Mission scheme with the UP government, finally the numbers are out in terms of the operation and maintenance scope of the work. Earlier, it was only a general future involved in the LOI, but now they're firmed up the figures in terms of operation maintenance because as we complete the execution of these projects village-wise, it is estimated 3% of the capital cost will come for the O&M over the 10 years with escalation provision. And the present estimation is that the numbers have been given by the UP government for about INR 681 crore. And this we have not considering our order book so far. And that we have just figured out now. And of course, another 3 to 6 months, we started opening of that O&M front also work in more and more villages come on the front line. Now this is on the drinking water and water systems. And then, of course, in the railways, we have seen the experience what we are gaining in Bangalore, Challaghatta, INR 427 crores. And then we are doing about 14 railway projects worth of INR 1,500 crores, apart from the -- including the BMRCL job. And that is given and recently, we have taken some jobs on the railways. And then Raebareli, we have taken an infrastructure facility for the Vande Bharat infrastructure facility. And then we are working with -- Mumbai, also, we have taken foot over bridge some jobs also. Therefore, these opportunities will keep coming and the railways and then metro together offer huge opportunities in terms of railway infrastructure in maintenance depos, workshop, repair shops. And then this all, revamping of the station and all those things. And that's also a good feature is that now the organization is in place to execute these jobs. I think that is one of the future of Power Mech. We are continuing to build the organization capacity in wherever we are diverseful and we want to sustain those type of organizations for long-term growth and all. And of course, whenever there are viable projects are there in the railway -- in the road sector also, we will do it. For example, the Telangana job what we have taken from Adani, the EPC we almost completed 70%. That is a very fast progress what we can say we have achieved. And then other 2 projects also, we have done near about 60% of the job in Mizoram and then Karnataka also. For these -- this background of these road projects, the railway projects should give us good background. And then the new initiative is going to come up in West Africa and Nigeria, Ghana, Tanzania and other places, support from the Middle East. There are some new projects are expected to come with 4,000 to 5,000 megawatts in the Middle East, Saudi Arabia then UAE and all. And already, we have got the organization there about -- as on today, 1,600 people are working in the Middle East and then West Africa and all. For that organization setup also, it continued to help us to see that the new jobs we can take it and implement it also. Therefore, as Satish has rightly said, there is a substantial opportunity in the market as part of the National Infrastructure pipeline, which is in the fourth year of its implementation -- part of fourth year of the implementation of the INR 111 lakh crores. And many of the organizations who can catch up with that, they are benefited including us. And we have been greatly benefited by this investment from the government side. And then private sector investments also will come up in the steel sector, mining sector and then coal side. And then Coal India is coming with first mile connectivity around 50 projects with an investment of INR 20,000 crores. Therefore, there are plenty of opportunities. We have to select the right technology, right partnership wherever is required for the association where we don't have that in some of the new areas. And then the implementation of mechanism has to be stablished with the learning what we have achieved it. And one of the features I can mention is that while our margins can improve, further it's the learning curve we were undergoing with and without much addition in the capacities for the manpower and also the equipment base, what we are having, if you see the turnover is continuously growing up year after year, and that is a good future of our operations. And with that better margins can be driven down the line. And then with more opportunities coming, perhaps we'll also get better margins in the market. So this is what I have to say. Now we can go further for the questions and answers.

Yes, yes. Prasheel, thanks for giving the opportunity. We can move forward to the Q&A.

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

My first question is related to the tax provision that you mentioned. If you could just repeat the number, what is the provision that is taken because of the search?

Yes. We have provided for almost INR 16 crores, madam. This is including some of the interest component on this tax. So put together, it's INR 16 crores we have provided for.

Okay. And this is full provision. And you wouldn't anticipate any further provision repository going ahead?

Yes. See, what they have done is they have completed for some of the assessment years. So we don't expect some bigger amount to come, okay? Maybe next 2 quarters, we'll see that this 100% this issue gets resolved. Therefore, the provision may remain more or less slightly lesser than what we have provided for. However, having said that, we have got almost like a refund of INR 40 crores, INR 45 crores plus. So in terms of cash flow, there is no impact. But however, it will have some impact in terms of the provision part.

Understood. And in terms of O&M, so we've almost spent INR 500 crores of revenue in the first half. Just wanted to know what is the target that we have for this year? What kind of growth are we anticipating as compared to FY '23 for O&M?

O&M this year probably will be touching close to INR 1,150 crores to INR 1,180 crores, that is the target. Probably this still continue to remain almost like 25% to 25.5% of our total business this year.

Okay. Understood. And what would be the monthly collection run rate right now?

This is speaking of, Pratiksha, it's almost like it's ranging now INR 350 crores to INR 400 crores. And -- see, normally like quarter 1 and quarter 2, historically, it's like 35% -- 35%, 35%-plus of our total business. But however, quarter 3, quarter 4, there will be a significant quantum jump. So we're expecting this number to pick up from probably quarter 3 December onwards. And I'm saying that this number should cross INR 400 crores, INR 450 crores gradually.

Okay. Okay. Understood. And so we had about INR 3,000 crores plus orders from water segment. So just wanted to know what is the execution guidance in terms of FY '24 for water project?

For water project?

Yes.

Yes. See, water, this will play a significant pie this year because the order book is significant. Maybe if all goes well, FY '24, we are expecting close to INR 900 crores. That is a number at lower side, and it may go up to INR 1,000 crores, INR 1,050 crores at the highest side.

Okay. All right. Okay. And our interest cost for this quarter has gone up significantly, is this because of bank guarantees or something because the debt numbers haven't grown in Q2?

Honestly speaking, the finance costs remained controlled. As stated, like there is some impact of interest cost on account of IT. So the provision of INR 16 crores also includes some portion of the interest. So because of that, there is an increase of almost INR 3.5 crores to INR 4 crores. Otherwise, if you exclude that, the finance cost remains flat. Yes, so this is a -- it's not a recurring item, it's like almost like a onetime. So water maybe will close this year, so that there is no ambiguities carried on this fund, okay? So you'll see that this number coming down because if you see the net debt as of today, it's almost like debt free. I don't see this number to shoot up.

[Operator Instructions] The next question is from the line of Arun Subrahmanyam from Ampersand.

Sir, my question is that what kind of order inflow that you are targeting non-MDO in this current financial year?

Sir, we have kept a target of almost like INR 10,000 crores. So we are not changing that target. So we did close to INR 1,800 crores of addition up to date. On top of that, the projects which are L1, it's almost like INR 1,800 crores plus. And we are expecting good amount of additions coming from the power plant, both in the O&M, civil also the mechanical side. This put together, we're expecting close to INR 4,500 crores. Therefore, we'll have a combination of orders coming from power plant, okay, both the old and new plants. And O&M this year, we may cross INR 2,500 crores to INR 3,000 crores of addition. And on top of that, we are also targeting close to INR 1,500 crores of projects relating to water. Apart from that, if all goes well, railway and metro, we may add close to INR 800 crores to INR 850 crores. And other civil and international put together, we're planning INR 10,000 crores.

Understood. Sir, what could have been the reason for the first half order inflow being a little slow? And what will really change going forward?

The first half, like -- see, we were working more towards this domestic side, mostly on the power sector and some of the railway, apart from the road projects, okay. Of course, O&M, it's been almost like finalization stage, okay. But however the -- in terms of awarding it took slightly longer time. Apart from that, some of the state selection code and all, some spillover maybe they're probably during December and all. So more importantly, what is important that the negotiation part, it's almost done now. We could see that conversion happening next 30, 35 days. So maybe December and January that where we'll see huge number coming in. And apart from that, road projects, we have seen that the tender is getting postponed a couple of times. Of course, this is close to INR 800 crores to INR 950 crores, that's what we were expecting. And in Chennai, there was a bit of slow in terms of discussions and negotiations. Now that part we've already completed. Apart from this, the Vedanta, it took slightly longer time. But of course, the order conversion started happening. Apart from that, we are also talking some of the O&M projects with Vedanta and BHEL also. Probably we'll see that -- normal historically, if you feel like the conversion first half historically less, but second half, it's more, even in terms of execution order inflow also.

Yes, I think what Satish is saying is correct. See, what is happening also, of course, the elections this -- the state elections [ are in progress. ] Most probably centers are out, that is where our confidence comes from the point that there are identified projects are there, the drinking water, power side, railways and then roads also. And then international also is there. Therefore, the opportunity size is substantial as the inquiries are coming. There is no dearth of the inquiry. The person who selects the right combination of these products -- projects and its execution and our fitting there, and then seeing that we sell it to the current projects and proper execution, and that is one of the themes. Perhaps the first half is always because the rainy season and then many of the clearance has some issues, they may take more time to firm up all those things. And in case of drinking water and water system, what has happened, this is the last phase of the ordering perhaps we have to do last but one maybe also. Therefore, they are now trying to complete that exercise. That is where there are about INR 18,000 crores to INR 20,000 crores of opportunities. And the new power projects because Lara has been awarded, there was a delay in awarding it also. Now it will come up. Talcher is already they have taken action and all. Now the revival of the projects, what has happened in Athena, we have seen the benefits of that and more of opportunities will be there in that also. And the second phase of the revival of the old projects another 5,500 megawatts also it happens, also more opportunities will come. Maybe a little bit of adjustment is there in time lag and all. But overall, opportunity-wise, there is no dearth of it in the domestic market. At least, we are very bullish on that in all these segments and all. And the railways, in fact, if you look at the track record of 14 projects what we are doing and the metro projects what we have taken, there also a lot of huge opportunities are there. And we are into that many of those things. And the usual second time once it happens, actually we will be able to close it by third and fourth quarter, somewhere around it.

Sir, then just a follow-up, out of your total order backlog, after any kind of slow-moving projects like which are slower than your anticipation and if at all, things are going to be improving your...

Sir, can you repeat, sorry?

Yes, sorry, there was a lot of disturbance.

Yes, some disturbance.

Sir, I just want to know that of the order backlog that you have, will you like to call out any slow-moving projects, which are like getting a little delayed compared to what you had thought of including the one which you have received, the big one that you have received from -- received last year, is there any slow-moving project? And is that going to be improving sometime soon?

No, no, there are no projects which are old or suspend. It's all are ongoing projects. The plan is intact. Of course, there was some scheduled changes in terms of the ordering and all, but there is no change in the plan -- overall plan.

[Operator Instructions] The next question is from the line of Prasheel Gandhi from Nirmal Bang Institutional Equities.

A couple of questions from my end. First, could you update us on the status of our FGD order and the potential revenue booking that will take place over the next few quarters?

Yes, the initial things or issues regarding the layouts and engineering certain types are required in that most probably, now the engineering orders are placed and then there is going to be tracking on that. Udupi projects, for example, 2x525 megawatt, we are taking action on that. And that is -- that should be around -- roughly around INR 800 crores that would -- took shape now on a priority basis. And then others projects also should follow. So FGD, if you look per se what is happening is that the major [indiscernible] implementation is, to some extent, is fitting the system into the limited space and the technology selection and the fitting of that. And as on today, if you see 12,000 megawatts -- sorry, about 10,000 megawatts are in the capacity addition on the activity side, out of 1,69,000 megawatts identified. But ordering has build on about 1,05,000. Therefore, in most of the things, there is a general amount of a little bit lag is there initially because of the finalization of engineering, layout issues and all. And of course, the other side also, there can be some issues related to fixing the tariff also, those inferred with the DISCOMs and electricity boards also. And that is where the government is also a little bit giving the -- give way for them to implement it, but they are very firm on that. Now for all the projects, the latest update is that government has extended the deadline up to 2027. That is the overall entire country's requirement. But where the ordering has been done, the usual contracts and schedules will be there, barring the issues related to engineering fit-ups and then the layout issues finalized, all the access availability and those type of...

Yes. So probably in terms of revenue, Prasheel, like FY '24, maybe quarter 2, quarter 3, quarter 4. Quarter 3, we may expect INR 50 crores to INR 100 crores. Maybe quarter 4, it may go up to INR 250 crores to INR 300 crores. And FY '25, maybe in the range of INR 1,000 crores to INR 1,200 crores or it may go up slightly by another INR 200 crores, INR 250 crores. This is the plan what we have got now. We'll have more update probably for this quarter 3, we'll take end of the quarter 3 or maybe beginning of quarter 4. We'll see the scheduling part and if something can be improved in FY '25.

Sure, sir. Sir, secondly, are your margins, you are saying your margins jumped significantly about 19 bps on a Y-o-Y basis. So can we expect this -- first, what will be the reason? And second, how do we expect -- would you expect further margin improvement? So what do you see to get a sustainable margins, can we assume 13% or a 14% kind of margins?

See, we had -- the first plan is to see that the whole project mix comes down. Therefore, our cost towards the royalty, which is impacting straight into our EBITDA margin, that should come down and that is happening. So there is a natural mix change because of rebuilding the PQs in-house directly. So to some extent and to a larger extent, that is helping us to push the margins. So the first plan is to get back to our normal historical margins, which we used to report at 13%, 13.5%. And that is quite possible FY '25, '26. And with MDO getting stabilized by FY '26, we could see that the number may go up to 13.5% plus by '26 onwards. So the first plan is to bring back our normal margins to 13%, 13.5% by FY '26. So we'll see that every quarter, there will be some gradual improvement in the margin profile. And on top of that, we have given a clear cut instruction to our business development, mostly for any projects below threshold margin limits. Therefore, we are not rushing for project for low margin just to build the order book. So that is also helping a great extent to add the quality orders and see that margin profile is maintained.

Sir, just a follow-up, so what is the current mix of your old projects? So how much of the order book will still have that old projects with higher royalty payments? And when do we expect this to complete?

This will settle down by FY '25. So we could say another 25% to 35% in that range.

The next question is from the line of Amit Vora.

Congrats on a very good set of numbers. Excuse me, if I'm asking this again. The only thing is that you had mentioned that for completing the MDO projects, there might be a requirement for you to raise some debt as well other than the equity that you have raised. So is there a plan to further raise any debt or no?

Yes. Sir, the first project, Kotre Basantpur, KBP, which is a smaller size, okay, we have already tied up Power Finance Corporate, PFC, INR 260 crores, which is a project specific and the servicing will be done from that SPV. So that tie-up is already done. And for the second project, we need to set up the infrastructure. On top of that, we need to also build a washery plus coal-handling plant, which is larger in size. So that is expected to be almost like INR 790 crores plus. So we have raised the equity, so we have sufficient equity. Having said that, we have lined up some debt part from our existing banks should we use or not, we'll take a call because the internal system itself throwing some surplus cash flow. Therefore, we wanted to use or not probably we'll take a gradual call. Of course, the PFC part we'll use. But the second part, Tasra washery, we'll take a call gradually, sir. We'll take, if at all, need this, but not at least for next 16 months, there will not be any increase of debt in the Tasra project.

Okay. That's great to know. Just one question. Now we are almost 1.5 months in Q3. So what is your estimation on the Adani project? Is there any -- you did mention, but I'm just saying that because we are already there almost 1.5 months in Q3, what is the status there? Is there any possibility that what kind of revenue booking can happen there?

See, Adani, as I stated, like quarter 3, maybe in the range of INR 50 crores to INR 150 crores that is the maximum we can do quarter 3. We are working on that. We have spent some money. And the -- out of the total packages, Udupi is quite active. So slowly by FY '24, the max what I'm expecting is INR 250 crores to INR 300 crores, INR 350 crores. That's to the package of Udupi, we may go, probably...

The second half total, you're expecting between INR 300 crores to INR 400 crores. Is that correct estimation?

No sir, for the entire year of FY '24, I'm expecting in the range of INR 250 crores to INR 350 crores. Quarter 3, maybe in the range of INR 50 crores to INR 150 crores.

Okay. And last thing on exports. So order book that you have targeted and you have mentioned for INR 10,000 crores, this includes both domestic and exports or it is only the domestic orders?

Sir, it's put together. Export, we have not taken a larger target this year. The maximum what we have intending is maybe INR 250 crores to INR 300 crores. Of that INR 180 crores to INR 200 crores is O&M itself.

It's negligible, so that's not...

FY '25, probably, we may need to keep a larger target. But for this year, we have kept a softer target.

The next question is from the line of Bharani Vijayakumar from Spark Capital.

So when you were talking about the opportunity from the power sector from the new projects, you mentioned projects worth 5,270 megawatts from revival of projects is also there. So just my question is whether are these projects which have already been announced, but were sell due to various reasons now coming up again?

No, they are firmed up. These are all well-regulated. That's called under inflator schemes it has come, and then tendered and awarded, for example, JSW have taken the job in Orissa, then Meenakshi at Andhra Pradesh, Vedanta have taken it. And then now that the final rebidding has taken place for the Amarkantak 2x660 that with Reliance, earlier PFC was real one and now Reliance has given a better offer -- sorry, Adani has given some better offer. Now that way, most of the first phase of the project or what I said about 5,000-plus megawatt more or less everything is firmed up. Now what I'm trying to say that itself will have maybe half done job, it will have an investment of at least substantial investment, you can say usually about INR 15,000 crores to INR 20,000 crores overall investment. And then in that, we will have a share of INR 4,000 crores to INR 5,000 crores, our opportunity size. Now coming to the second stance of the NCLT projects, government has now elaborated that and saying that state GENCOs and other companies also stated that it can also participate in that, that they have published a list of those projects also. That is also coming to substantial about [ 5,000 to 3,000 ] megawatts. Once it happens, that will add up to be more opportunities. Then that is what as far as the -- I think government is very firm on this revival only because of the scare which has created but as a renewal element of the percentage of the power growth up, there can be a huge disturbance at grid. They want to avoid that, that situation can any time in the next 2 to 3 years. They want to fill up those gaps fast so that the base load operations are well established, coal-based plants are available for day light operation, then the renewable takes over the bulk of the generation and all. So I think we are very clear on that. And that's why we are also feel that the organization, the setups and the people what we are having and we are achieving them, and we are focusing on these new projects also in a big way.

Okay. Okay. Understood. My second question is, so of course, you mentioned about the NTPC's new projects. And this revival and the NCLT projects another INR 10,000 crores. But there is no mention of any projects from state GENCOs, like why is that the case? Are you seeing any state GENCOs projects also in the pipeline?

Yes. I think what has government has said that why state government, for example, private sector is coming up. For example, Adani has taken over. Vedanta has taken over. Reliance also is bidding for [indiscernible]. Then JSW has taken that Orissa project of the [ IPP ]. And then JSL has taken over [indiscernible]. Now what the government is they want to announce the basket of this one for the bidders. And that's way -- I think this has come just 1 month before. I have seen in the website of power industry and with a clear guideline and they want to push these balanced projects also. They've got a list of projects, if required I can share that separately.

Okay. Maybe I will get in touch with you to get that. Actually, my question was regarding state GENCOs, like, say, TANGEDCO or AP GENCO, these state GENCOs are not coming up...

Yes, yes, exactly. What you are telling is exactly we are on top. Yes, they have been supported by the government to participate. That is -- they issued a circular. They issued a specific circular for that. If required, I will send you that.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments. I would now like to hand the conference over to Mr. Prasheel Gandhi for closing comments. On behalf of Nirmal Bang Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.