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

Ladies and gentlemen, good day, and welcome to the Power Mech Projects Limited Q3 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Teresa John from Nirmal Bang Institutional Equities. Thank you, and over to you, ma'am.

On behalf of Nirmal Bang Institutional Equities, I would like to welcome you all to the 3Q FY '25 earnings call of Power Mech Projects Limited. The management today is represented by Mr. N. Nani Aravind, CFO of the company; and Mr. S.K. Ramaiah, Director of Business Development. We will -- I will now hand over to the management for their opening remarks, after which we will open up the floor for Q&A. Thank you, and over to you, sir.

Thank you, Teresa John. Good afternoon, everyone. I'm Nani Aravind, CFO of the company. I have with me Mr. S.K. Ramaiah, Director of Business Development. I welcome you all to all -- quarter 3 FY '25 earnings call. The performance for quarter 3 and 9 months for this financial year continued as per our set targets for the entire year. The reported total income for quarter 3 financial year '24-'25 is INR 1,347 crores against INR 1,115 crores in quarter 3 FY '24, an increase of 21% year-on-year. EBITDA is INR 160 crores as against INR 141 crores, a growth of 13% and PAT is INR 87 crores, which has grown 39% compared to INR 62 crores in quarter 3 FY '24. EBITDA margin has decreased from 12.66% in quarter 3 FY '24 to 11.87% in Q3 FY '25 due to increased overhead costs. PAT margin has gone up from 5.60% to 6.50% due to lower tax and increase of other income. Revenue mix for quarter 3 FY '25 is as follows. Mechanical business has contributed INR 277 crores against INR 230 crores in quarter 2 FY '24, showing an increase of 20% year-on-year. Civil business, including railways, water distribution contributed INR 522 crores against INR 596 crores in Q3 FY '24, a decrease of 12%. O&M revenue are INR 481 crores against INR 260 crores in corresponding period last year, registering a growth of 85%. Electrical business, INR 25 crores against INR 21 crores, increase of 19%. Mining business, INR 34 crores against 0 in Q3 FY '24 during last year. Other income is INR 9 crores against INR 7 crores in Q3 FY '24. So during quarter 3 of FY '25, the distribution between domestic business and international business is 95% and 5%, respectively. Contribution from the power sector remained at 65%. Non-power sector contributed 35%. Similarly, the total reported income for 9 months of FY '25 stands at INR 3,409 crores against INR 2,922 crores in 9 months of FY '24, an increase of 17% year-on-year. EBITDA is INR 417 crores against INR 360 crores, a growth of 15%. PAT is INR 218 crores against INR 164 crores in 9 months of FY '24, a growth of 33% year-on-year. So on 9 months to 9-month basis, EBITDA margin has decreased from 12.45% in FY '24 to 12.22% in 9 months of FY '25 due to increase of overhead costs. PAT margin has gone up from 5.70% to 6.40% due to lower finance cost, lower tax expenses and the increase of other income. Revenue mix for 9 months. Mechanical business has contributed INR 608 crores against INR 517 crores in 9 months FY '24, showing an increase of 18% year-on-year growth. Civil business, including railways, water distribution contributed INR 1,459 crores against INR 1,586 crores in -- during last year, a decrease of 8% year-on-year. O&M revenues are INR 1,213 crores against INR 755 crores in corresponding period last year, registering a growth of 61%. Electrical business, INR 42 crores versus -- against INR 47 crores, a decrease of 10% year-on-year. Mining business, INR 60 crores against 0 during last year. Other income, INR 28 crores against INR 17 crores of other income during last financial year. So during 9 months of FY '25, the distribution between domestic business and international business is 94% and 6%, respectively. Contribution from the power sector remained at 62%. Non-power sector contributed 38%. With reference to the other financial parameters are concerned, net current days, excluding cash and cash equivalents, have increased from 147 days in Q2 to 155 days in Q3 due to delays in certification of the water works and delays in realization of receivables resulted in increase in the current assets of the company. And on stabilization of MDO business from FY '25 and '26 onwards, we can expect a significant improvement in net working capital days. The gross debt and net debt remained controlled despite delays in certification of water bills and delays in realization of receivables. As on 31st December, 2024, the gross debt is around INR 614 crores and the net debt stands at INR 141 crores. The debt equity ratio as on 31st December stands at 0.29x -- 0.39x. Order book status. So far in this financial year, the company has secured orders worth of INR 4,242 crores till December. The order backlog as on 31st December is around INR 57,915 crores. If we exclude 2 MDO, the unexecuted order book stands at INR 18,284 crores. We are actively pursuing upcoming tenders, targeting INR 3,000 crores in new orders by March 2025. Additionally, we have been declared as a L1 bidder for the 49 kilometers Deoghar bypass Highway project in Jharkhand valued around INR 973 crores under HAM, and we are awaiting for the issuance of LoI from NHAI. So with reference to MDO business is concerned, we are making significant progress in our 2 MDO projects. At Kotre Basantpur, KBP mining, we have achieved a key milestone with the state forest department's release of 564 hectares of notified forest land in the month of July following the securing of tree felling permission in October, tree felling beginning December '24. We anticipate OB removal to commence in next month, March '25, with coal supply scheduled to start from April '25. The other MDO, Kalyaneswari Tasra project, is gaining traction. We have completed equipment mobilization for initial mining and received environmental clearance for 3.5 million tonnes per annum washery on October '24. OB removal and coal production has been ongoing since January '24 with approximately 5.38 lakh tonnes of coal excavated and dispatched to sale as of January '25. Although sale offtake is currently lower than the plan due to limited washery capacity outside, we are working to address this constraint and scale up production. Now I request Mr. Ramaiah garu to update on the development of business side.

Yes. Thanks, Aravind, for your update on the overall numbers [indiscernible] and for more information [indiscernible]. As I said, the -- as Aravind has given his update, as far as the business side is there, the backlog of orders, INR 17,362 crores at the beginning of the year, has gone up to INR 18,284 crores, upside of 5.3%, with overall addition of INR 4,242 crores has added up to the 3 quarters. And in this case, a few important things is mechanical and ETC business has gone up by 7% from INR 6,422 crores to INR 6,857 crores. Civil backlog as from INR 7,814 crores, INR 7,310 crores, a reduction of 6%. O&M, there is a huge uptick in that in terms of order booking. That is a positive indication from backlog of INR 2,197 crores to INR 3,228 crores, about 47% more. Electrical, a modest decrease from INR 930 crores to INR 887 crores, minus 4.6%. The overall order backlog has gone up by 5.3% from INR 17,362 crores to INR 18,284 crores. And domestic business continues to drive the business substantially, more than 95%, 96%. And international operations recently some -- mainly on the O&M and the maintenance jobs we are now trying to catch up. There is a balance portion. Then power sector continues to drive the substantial business because of the huge surge in the opportunities which have been available both in the installation business, civil business, as well as the O&M business. And then MDO has given update about the overall position in terms of the present execution and the actions taken. Now what we can say is that, as the opportunity side, there is a positive thing in terms of the investments, particularly in the power sector. What I can give -- that is an important thing which is driving the business. What I can give an update on this is that BHEL has been ordered with substantial orders in both the EPC and the main plant works along with the civil works. That comes to almost 24,000 megawatts in the last 2 years. In the EPC business, they have taken about INR 81,680 crores and the main plant installation -- main plant works in the supply and installation and then the civil works also has -- civil works, that is the main plant boiler and turbine, INR 55,302 crores. And L&T is also entering now. They are taking further interest into this one. They have taken 2 major jobs of 4,000 megawatts, and that is around INR 27,523 crores. And therefore, in that way, the overall ordering which has been done in the last 2 years is about 28,900 megawatts. In that, the major players are, Adani Group has taken 6 projects, about INR 10,920 crores, we have done the ordering. Haryana Generation Company Limited 800 megawatts. DVC, INR 1,600 crores. And then recently, the latest news is that they have taken a decision on the Raghunathpur for the boiler island of the work that has come about INR 6,500 crores or something like that. And then Mahagenco, this is also latest development, Koradi. They have taken forward the additions, they're spending on the Koradi investments 2 X 800 megawatts. Now that has come to 1,600 megawatts and then they have ordered on BHEL for about INR 8,000 crores in main plant works. And then NTPC has substantially ordered on BHEL about 11,580 megawatts, totally comes to 28,900 megawatts. In that, the EPC portion, as I explained to you, BHEL EPC portion comes to INR 81,680 crores. Now the balance ordering has to be done in many places. Koradi, they have to order about 1,600 megawatts. Adani because they are doing the packaging themselves in about 10,920 megawatts, they are doing in-house. Of course, there also the opportunity can be there in many of the civil works, mechanical works, coal handling, miscellaneous works, et cetera. And NTPC, the recent bulk tender which has ordered 2 to L&T and one to BHEL in Telangana, that is about 6,400 megawatts. That opportunity can be substantial. Now, Raghunathpur latest update, about INR 6,000-odd crores which has been awarded on the -- this is the latest, yesterday's news to BHEL on the boiler island. That means they have split the entire EPC into 2 EPCs, one is the boiler island, another is the turbine island. And the boiler island, they have taken this job. And then the MPGCL and -- there are new projects which will be expected [indiscernible] also. Therefore, from the combined opportunities in the power sector, I would like to delve in the first instance. The main business interest for us is the installation business, civil and structural business for the main plant and wherever balance of plant is there. We have measured out the total opportunity size about INR 27,250 crores. New projects which have been allotted about 13,560 megawatt. And then there is a recent development where in KSK Mahanadi, the NCLT project which was been gone for liquidation, has been awarded to JSW. That is, there are -- existing 3 units are running 3 x 600 and the one more unit, they are going to complete it, that is 600 megawatt. And 2 more units, they are going to change the concentration from 600 megawatt to 660 megawatt. These are the major things. And the other areas, yes, in the infrastructure side, government continues to be bullish in investments in railways, drinking water schemes, roads and then metro projects, et cetera. Therefore, what we are focusing is that the experience what we have gained in the drinking water, we want to expand the business because this drinking water scheme has been extended up to 2028 and the total investment may exceed about nearly -- from INR 360,000 crores it can go up to nearly INR 500,000 crores. And it is expected certainly in the southern states; Karnataka, Andhra Pradesh, Tamil Nadu, Kerala and Maharashtra, a lot of investments are expected. And now with the experience what we have gained in the U.P., where we have done substantial work for about INR 2,723 crores, about 1,969 villages, the work is in progress. Substantial work has been completed. That is the focus on that. And O&M what I can say is that we are very bullish on the O&M because one is that a lot of new projects are getting commissioned. In fact, last year, the commissioning was expected about 6,000 odd megawatts, and that will go up to 8,000 to 10,000 megawatts in this year. And then if they maintain this pace -- because the government's plan is to ramp up the capacity of the power plant installation from the existing 218 gigawatts to 218,000 megawatts to nearly 300,000 megawatts, that means 80,000 megawatts. And lot of ordering is there and many players are coming with investments. JSPL is planning 2 projects, one in Orissa and then another in West Bengal in Salboni already there. Yesterday the news is that they have been awarded, that is JSW Energy. Then JSPL, the sister group is also planning 2 major plants in Orissa and also in Chhattisgarh. And then there are other players also expected after all -- the utilities also -- sorry -- many utilities are expected to make investments, including Coal India and many other public sector government undertakings in Uttaranchal is also planning 1,320 megawatt for whatever requirements are there. Then Coal India, I said, they are planning investments in Orissa and Rajasthan on a joint venture basis. Therefore, we are very bullish on the power sector investment in the next 2 to 3 years, which are expected to go for another 4 to 5 years. It will throw up 2 major opportunities. One is the complete installation business, which will be available, which will be our major player. Another is the follow-up O&M jobs, which will come up as part of the new commissioning, which will take place every year about 8,000 megawatts. And that is a substantial business opportunity. And that we have seen in the major orders we have taken recently in many of the O&M jobs. For example, the major O&M jobs, what we have taken last year is the drinking water about INR 681 crores as part of the commissioning operations which is going to take place. And then Meenakshi Rehab and O&M jobs INR 685 crores, and then 950 crores for Talwandi 3 x 660 megawatts, Thoothukudi INR 392 crores for 2 x 600 megawatt, Singareni 2 x 600 megawatts INR 343 crores. And there was a major job we have taken in Nigeria where we have done the commissioning of the captive power plant, INR 139 crores. There are other jobs in -- for the JP Group in Bara. Then Udupi Adani jobs we have taken about INR 100 crores and JSPL Angul also we have taken INR 466 crores. In all, this is how it adds up. Now certain things which we have to factor in that. Mainly the election process has happened continuously state after state. It has some sort of a postponement of the ordering and also decision to call the tenders and all. There is another positive development with companies trying to foray into it. That is in trying to see how much we can make the -- make use of our -- best of our experience in terms of the complete installation, O&M and then civil, structural and then material handling jobs and then main plant works, et cetera, potentially trying to balance of plant packages because the NTPC has got plans to do the balance of plant packages, and we are working with BHEL. Then other customer also making -- also Singareni there is opportunities coming up. Koradi, I said about 2 x 800 megawatts, that also is coming up. And then there can be other opportunities. Therefore, balance of opportunities can throw up at least around INR 12,000 to INR 15,000 crores, more than INR 15,000 crores of opportunities, then we have to see how to take that call. And then the other things what we are doing in the international market -- the focus is more on the domestic market. And the areas of railways, yes, railways, particularly the metro jobs, metro jobs in reference to the maintenance states, over INR 10,000 crores of opportunities are there. And we are already working in many such maintenance shops and railway workshops also. This is what I would like to say. Thank you very much.

Sir, shall we begin with the question and answer session?

Yes, ma'am.

[Operator Instructions] We take the first question from the line of Dhruv Bhatia from AUM Funds.

My question is, sir, obviously, the opportunity is very, very large what you're pursuing, your order book already reflects that. But in terms of execution, what are the challenges for you to grow much faster than the 20% sales growth that you have done, because you have a massive order book? So if you can give us some guidance in terms of execution also what we can expect next year and maybe in FY '27? Just focusing on FY '26 and '27, what is the internal target? What are the differences to grow much faster in terms of people, CapEx, materials or working capital, if there are any constraints? And linked to that question is what are the margins that you expect with higher and higher scale, where should the margins stabilize both across the non-MDO business and in the MDO business as well?

So thank you, sir. With reference to the scale of operation is concerned, we -- last year, we have touched almost INR 1,500 crores per quarter execution capacity. So we may scale up this because of the number of new line of business we started and O&M also, there is opportunity, we received more orders during the year. So we may touch -- we can execute up to INR 1,800 crores to -- even we can touch up to INR 2,000 crores of revenue. So the next year target for '26 and '27 guidance is that we have -- earlier we have committed that INR 7,500 crores we targeted for the '26 and '27 is around INR 9,500 crores. It is including the MDO operation together. But there is a delay in terms of the starting up the projects in MDO. Most likely maybe 10% or 15% here and there, probably we will touch between INR 7,000 crores to INR 7,500 crores between we may touch in '26 and maybe around INR 9,000 crores we can touch in '27. So in terms of the profitability is concerned, the MDO business will give a more EBITDA margins once we reach the peak rated capacity, which we are expecting from FY '28 onwards. Till that time during the development phase, we may not expect that much of EBITDA increase in the overall margins. But regular business, we are choosy about picking the right orders and high profitable orders we are planning to execute. And O&M orders also we are going to increase. So the O&M -- the EBITDA margin maybe a year-on-year basis may be around 0.5% to next 2 to 3 years, maybe in the range of 1% to 1.5% range, we can expect to grow sir.

Yes. I will add a few things to what Aravind has said. The other thing what we have built upon rightly is on the capacities and the methodologies, what we can do to ramp up the revenue and also the growth. That is obviously comes from the capacities organization has built up over the years. In fact, one of the basic things is that the organization capacity, what we have seen is -- which was around 30,000, 32,000, including all the manpower direct and indirect manpower and also engineering, supervisors and the contracting labor. So it has gone up to 37,000. That itself shows that for the O&M in the last 6 months, we have ramped up the organizational strength of both execution, operation maintenance, skilled people, engineers from total figure of 12,000 to 13,000 to 17,500. Therefore, that is because of the large pool of the piece rate workers and the skilled people we are having in our roles from our piece rate workers, our contractors and other agencies and all. Second thing is that the organization has fairly gathered a lot of expertise in terms of site execution that they want to convert into high-end value jobs. That is mainly in conversion in the civil works, for example, end-to-end solution, civil, structural, mechanical and then O&M. Therefore, we are perhaps next to L&T or some of the bigger companies, which are not into this traditional -- this type of business. We are the -- perhaps the only player who can provide end-to-end solution from -- in the entire construction as a construction partner. That capacities we established in terms of physical capacities. Our mechanical was about 400,000 to 450,000 tonnes at onetime, we have demonstrated. And then in the concreting side, 250,000 to 300,000 kilometers, that is substantial. And when we have reached that type of capacities when the new orders are expected and each plant 2 x 800 megawatts, 60-megawatt plant has got a capacity of 150,000, 140,000 tonnes. And then doing a couple of jobs parallelly is not a challenge for us, which we have demonstrated earlier. And therefore, in that -- not only that, in the infrastructure side also, a lot of expertise has been developed in the recent years.

Sir, my question on the margins. So we expect for the next 2 years at least margins to be constant in the 12% range?

Sir, we...

Yes.

See, there is one basic thing -- change which has happened in the market. Why we are a little bit bullish on the market is that the O&M pie of the execution has gone up substantially in terms of the backlog by 50% -- 47% to 50%. As we all know, O&M is a -- provides better EBITDA margins and all. Now on the bullish trend in the main plant -- power plant ordering, it is now demonstrated that a lot of order flowing is there and then competition is a little bit subdued now because of the historical reason. And we are well able to handle that. And the realization of the average value has gone up by 20% to 30% in the last couple of years, both in the mechanical work and the civil work and the O&M side. That is the main reason why perhaps Aravind is working on these figures. In the coming years, we should be able to show better margins.

So what would be the margins you think going forward just as an indication for the core business or the non-MDO business? And then what would be in MDO business over the next [Technical Difficulty] margins?

MDO -- so our mining operations are progressing well, and we expect this segment to contribute around INR 2,000 crores to our top line by 2028. As we reach full operational capacity, the growth will further solidify our market position and support our overall revenue targets also. And we are actually targeting to annual growth of around 25% to 30% over the next 4 to 5 years of top line. This -- And the EBITDA margin right now, we are at 12.2% average we are giving. So O&M division with margins exceeding 15% is a key contributor for the major increase in the O&M -- the EBITDA margins. So looking forward, we are projecting an increase of EBITDA margin with 1% to 1.5% over the next 3 to 4 years as the mining revenues also will continue to grow along with -- and contribute to major top line. So both mixed together maybe 1.5% at the peak rated capacity we are expecting in next 2 to 3 years, sir.

That's 1.5% per annum or more 3 years it will be 1.5% higher?

No, both together over a period of 2 to 3 years, when we reach the peak rated capacity. It will not happen immediately. It will -- year-on-year, it will go. And we reach the peak rated capacity, we expect another 1.5% jump in the EBITDA margin.

Yes. One more thing I would like to add up is that since we are having a single established -- we are doing multi-area jobs in construction, particularly the civil works, the structural works and mechanical works, our overheads can come down reasonably, that can contribute to some better margins. And then O&M backlog and capacities is going up, and that will definitely add up also for the margins down the line. And the other trend is that the customer is now preferring outsourcing the O&M on a comprehensive basis. That brings a lot of value addition, not only in the private sector. Private sector has started now. Public sector also has started. Many of the public sector companies also like KPCL, GMDC and then other many companies are going to catch up because they don't want to increase their establishment, and this is a better option to work on that. And some of the private customers are further expanding the O&M profile into such a way that we take the entire responsibility because of the capacities and the performance what we demonstrated so far.

We take the next question from the line of Pritesh from Lucky Securities.

Sir, any reason why -- when you see your 9 months' number and when you also see this quarter's number, the O&M in your revenue mix have risen quite substantially. And the growth is also -- a bigger growth is coming from the O&M revenue itself. So why isn't that your operating margins are moving up? Have you taken some orders in civil which are a lower margin order? Any -- what is the key reason, if you could tell us?

Sir, we are executing...

See, if you are saying that your margins are going to go up because of O&M, they should be visible now also, right?

Correct. I'll come to that, sir. See, the current -- last year, because of the general elections and there were delays in terms of the realization of receivables. And moreover, there are new O&M orders we received during last year. We have taken up a lot of manpower into the roles of the company. And so the conversion will happen slowly. Initially, we'll have more overheads in terms of the starting of the new projects. That is one reason. And U.P. Water division, we are executing this project under Jal Jeevan Mission. Because of the general election, there was no fund allocation at that point of time. So there is delays in realization of these bills. And subsequently, Jal Jeevan Mission timelines has expired in the month of November. Again, there is no fund allocation for this project. So again, there is -- the department has not certified the lot of bills pending from the certification. So this resulted more overheads, and we are incurring working capital limits to utilize for running the projects further. So that caused the more expenditure overheads increase in the current year, sir. Next year, once these O&M operations are stabilized, automatically the initial cost, whatever we incurred is normalized and we may improve the -- maybe Q4 onwards, there may be increase in the EBITDA margins compared to the Q3.

So you are saying -- if I understand your answer correctly, you're saying costs associated with new projects have come in the P&L, but the corresponding revenue related to those new projects are yet to come in your P&L. Is that the interpretation?

No, no, no. The corresponding revenue we received. But initially, we have to -- start-up costs will be there to start. Major overheads we have to incur to start up these works. We have to set up the site establishment and everything. So that incurs more cost in terms of the overheads is concerned. The revenues we realized, but this cost will be normalized in the subsequent quarters. In the initial period of starting up the operations, we will have incurred more cost in mobilizing the resources.

What is your usual margin that you bid at for in the O&M contracts?

It ranges from case to case, sir. So it depends on the scope of work and all. So it ranges from 15% to 20%, 21% is also there. Some cases we are having 21%, 22%. And on average, we are getting 16% to 17% average.

Actually, there are 2 categories in this. One is a long-term O&M contracts. There is a steady margin. Then short-term shutdown jobs, repair jobs, maintenance jobs, that will -- can get a better margin also because customer is in a hurry to get the job done because of the shutdowns and all. There some opportunity cost is there. That is how the overall O&M pie, both the AMC and the short-term jobs can provide better margins. As I told in the main plant, the installation business and civil work, because of the competition being reduced a little bit and also the higher demand, the margin profile has gone up and that realization will come in coming years.

And sir, last. On the order -- or let's say, the order visibility available in the power sector. So you guys gave a lot big analysis. But if I have to shorten it and understand, how much of the orders for BTG which have been given out to BHEL by various utility companies, out of that order, how much order is yet to be ordered out for the main plant erection and the balance of plant? If you could...

See, I'm taking out the -- I gave the overall figures of what the BHEL order has taken in the last 1.5, 2 years.

That is about 29,000 megawatts, right, what you said?

29,000 megawatts, roughly it comes to nearly almost INR 140,000 crores, okay? Then L&T has taken recently INR 27,523 crores. So therefore, all these things will come. Of course, a few orders have been -- getting converted and all, but bulk of the orders have to be converted. And this year and next year, major ordering will happen. That's what I gave a figure of the total opportunity size in the ETC, civil packages for the balance ordering to be done by -- out of these things, about INR 27,000 crores to INR 30,000 crores is left. This is on the orders already placed by BHEL on BHEL and L&T. Then there will be another 13,560 megawatts of new ordering has to be done by the utilities, by various utilities if they have to place the order because the urgency of doing it is very important to ramp up the capacity to -- by 80,000 megawatts by 2030-'32 from the present 220,000 megawatts to 300,000 megawatts. That is -- Also there will be better margins which will come because of the increased demand. As you know, the demand goes up, the margins also slightly can go up also.

So basically, simple to understand, out of whatever is ordered with BHEL plus NTPC put together, the main plant erection worth INR 27,000 crores, balance of plant worth INR 15,000 crores are yet to be ordered out to various contractors like you. And over and above that, there will be new tenders for BTG or new tenders for power plants...

13,550 megawatts...

13,500 megawatts, which is yet to ordered out completely, correct?

Yes, yes.

Okay. Now what -- you have a 50% market share in -- so we -- is there a change there in the BTG erection? And to the first participant's question, you never answered, why is it that you have orders today in the non-MDO area, in the non-MDO? But when it comes to revenue execution, why is it slow?

No, revenue execution -- So that was mainly because of drinking water, there were certain fund allocation issues. That is where we had some shortfalls there. And then there were certain delays in the local that happens in some of the projects and all because of the engineering issues and clearances and all. That is also a factor. And when we are doing a lot of projects in the open area, there can be local issues on the land acquisition, clearances approaches and this type of -- these are all to be there. And that is how there is some sort of this one. But even then, as Aravind said, with INR 3,380 crores and then our figure was to exceed INR 5,000 crores revenue in this year, that we are confident of achieving it.

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

You outlined the opportunity size pretty well, but we have seen BHEL getting orders quite some time back. So when do you actually see BHEL tendering out and you've been able to book this EPC or BOP orders incrementally? Do you expect anything to come in fourth quarter? Or when should we start seeing the tendering happening from BHEL side given that they themselves have a large order book?

For example, a couple of tenders we are already bidding process is on, unless it is extended, let us say, it will take 1 to 2 months. But in the BOP, Koradi tender is due and that is the -- that we are working with BHEL. And there is going to be Singareni tender also, 1 x 800 megawatts. That is also due. But first of all, BHEL has to get the order and that is in the final process. They have given the offer and all and perhaps that needs approval from the state government at the cabinet level. Then there can be other projects also which are expected there. That's why I gave a figure of INR 15,000 crores in the BOP. And then as far as the installation, civil and other opportunities what the BHEL has got and even the L&T has got about INR 27,000 crores, what I said is that, this should happen maximum in another 6 months to 9 months. Because including Adani direct orders, BHEL main plant orders and then balance of plant orders, whatever they are there, then L&T also. Then all these things in various areas, main plant, balance of plant, coal handling, the civil works, structural works, piping works, et cetera. That is where -- but in the worst situation, it is extended to 9 to 10 months, because if they don't award all these things by end of the another 8 to 10 months, perhaps projects get delayed. That's what I can say.

So let's say, next year, when you say that you will deliver close to about INR 7,000 crores of revenues, what is the minimum ordering which you are looking at for this year at least?

Looking at the trends, of course, this election process is a continuous phenomenon. Many of the projects are located in these segments and all. And then perhaps about INR 10,000 crores should be reasonable.

INR 10,000 crores total ordering in this year?

No. Next year, next year.

Next year. Okay. Okay. Understand. And in this INR 18,000 crore order book, we should assume that -- the same thing which you had mentioned in the last call that the Adani orders which have not started are not going to be executed, right, around INR 4,000 crores, that's the right assumption?

Which one, FGD?

No, Mirjapur and...

Yes. Mirjapur is -- we are discussing it. Those, Mirjapur...

Mahan.

Then Koderma.

Koderma -- Mahan.

Then Mahan Stage 2 -- Stage 3. Stage 2 we are already executing, Stage 3, then Mirjapur new units and then Amarkantak we have taken it. And they are also planning Kawai and all. Of course, Kawai out the 4 units, 2 units were shifted to the projects in Madhya Pradesh. These are all to be expected.

So you are saying that INR 4,000 crores can still be executed or they will not be executed?

Sorry, Anupam, can you repeat your question?

I'm saying the FGD orders which were there from Adani of INR 4,000 crores on which work had not started, will that happen or will not happen? What is the clarity on that?

As on today, except for that INR 900 crores, which in Mundra, they have taken out for the time being. We are executing [indiscernible] project. Then other projects as on today, yes, it is -- it stands because one more development I can say is that Supreme Court recently has taken a very hard call in terms of that they don't want to compromise on the pollution. And some postponement can be there in the implementation of FGD orders because there are other related issues in terms of the tariff adjustment and tariff compensation by the electricity boards and then DISCOMs. And that is one of the reasons which is a little bit delaying all this implementation. Otherwise, in our opinion, I don't think they will compromise much on the FGD. It may take some more time.

Understand. And the next question is on the MDO. So let's say, the revenues are obviously pretty volatile given that sales, the washery capacity gets -- washery capacity clarity is not there. But broadly, if you look at, let's say, FY '26, what sort of revenues would you expect for the mining MDO from SAIL and CCL project separately?

Maybe around in the range of INR 300 crores to INR 400 crores range because per month, we are executing around 100,000 tonnes in Tasra, we may execute from April. So that tantamounts to around INR 200 crores to INR 220 crores roughly we can execute for the next year. And CCL also, we may execute around INR 50 crores to INR 80 crores of revenue, 0.4 MTP is the initial capacity we have to execute. So together, maybe INR 300 crores to INR 400 crores between we can execute the MDO business.

Okay. And your washery for which groundbreaking had happened, what is the execution time line for that?

By '26, we have to -- by September '26, we have to complete the washery. We have already acquired all the required permissions and everything. So major equipment designs are also completed and we have ordered -- we have identified and finalized the vendors and we have ordered some equipment also. So remaining are also under negotiation and discussion. Most likely ordering will happen in the next 2 to 3 months.

Okay. So September is the time line?

Yes, yes.

We take the next question from the line of Deepak Poddar from Sapphire Capital.

Sir, just first, I mean, I just wanted to understand on the debt side, how are we looking to -- I mean, in terms of debt, how do we look the outlook?

Sir, as of today, we are having fund exposure of around INR 700 crores. INR 714 crores is our utilization. And going forward, we are executing this CapEx requirement, I mean the washery requirement in the Power Mech book. So there may be a requirement of around INR 700 crores to INR 750 crores capacity addition in the next 2 years. So roughly by '28 we'll have -- roughly around INR 1,200 crores addition will happen in terms of CapEx is concerned. Term loans will be added to that. And working capital side, maybe another INR 100 crores, INR 150 crores will be added to that. Because we are taking up the BOP, EPC projects. So roughly maybe INR 1,800 crores to INR 2,000 crores roughly will touch by '28.

So INR 2,000 crores debt by FY '28, that's what we are looking at?

Yes, sir.

And which is currently...

No, no, it's not debt, sorry. It is a CapEx total. Debt will be around INR 500 crores only we are adding to the CapEx, INR 500 crores plus another -- so around INR 800 crores will be added to that. INR 800 crores plus another INR 700 crores -- INR 1,500 crores to INR 1,600 crores will be roughly the debt number by '28.

So INR 1,500 crores to INR 1,600 crores debt by FY '28, right? And which is currently INR 600 crores, right, gross debt?

Yes, INR 714 crores.

INR 740 crores debt right now, and it will be about INR 1,500 crores to INR 1,600 crores by FY '28. And this addition, I mean, each year, it will be like INR 200 crores, INR 300 crores? I mean the addition will be on a phased manner? Or will there be...

The CapEx requirement is roughly around INR 700 crores, INR 750 crores, in that INR 240 crores we have equity, the QIP funds we raised. So INR 450 crores to INR 500 crores will be added in next 2 years, plus the regular CapEx on the new orders we received, so around INR 100 crores every year regular CapEx will be added to that.

Okay. So INR 750 crores is the CapEx for next 2 years. So out of that INR 400 crores to INR 500 crores debt will be added in next 2 years, right?

Yes.

That's the right understanding?

Yes, yes.

Okay. Okay. Okay. Okay. I got it. And in terms of execution, I mean, this year, FY '26, we are looking at INR 7,000 crores to INR 7,500 crores kind of a revenue, right, FY '26?

Yes.

Out of which, how much is coming from MDO in this year itself, FY '26?

FY '26, we are projecting maybe INR 300 crores to INR 400 crores between -- depends on the momentum of the orders intake from the sales. So we are projecting INR 300 crores to INR 400 crores in between.

INR 300 crores to INR 400 crores. And you mentioned by FY '28, optimally MDO can do INR 2,000 crores of revenue. And so at optimal levels, what sort of EBITDA margin one should look at in MDO? Is it close to 20%?

Both together an average of 20% to 22%, we can take up, sir. We have higher margins in Tasra and lower margin in KBP, weighted average of around 20%, 22%, we can take.

And this year -- earlier, we were targeting, I think, close to INR 5,500 crores of execution. Now given the 9-month execution that we have done, what would be our revised target for this year, FY '25?

We may touch it this year around INR 5,000 crores to INR 5,200 crores between, sir, roughly. And we are -- as of 9 months, we have executed around INR 3,400 crores.

Correct.

We are short by INR 1,800 crores. And the water utility certifications are pending. Roughly around INR 200 crores works are there in the WIP. That certification happened. And another INR 1,600 crores to INR 1,700 crores we can execute in the Q4...

Fourth quarter.

Fourth quarter, actually for the both government and private sector, clients are likely to expedite the certifications and payments. So we can able to touch at least 25% growth for the current year. So INR 5,200 crores, we are targeting to reach.

How much? Last point I missed.

INR 5,200 crores roughly.

INR 5,200 crores. So fourth quarter, we are looking at INR 1,700 crores plus kind of execution, right?

Yes. Because already some certification is pending from water division. So that is already there, INR 150 crores. It was supposed to happen in Q3, but there is a delay in terms of certification because of the timelines expiry of Jal Jeevan Mission. So now the recent budget also has extended the timelines. If they can do the certification, they'll release the funds in April.

Okay. Okay. Okay. Understood. And in terms of order book accretion, we are looking at around INR 10,000 crores of order inflow in next year, FY '26, right?

Right.

The next question is from the line of Manthan from Nexus Equities.

So I think earlier we were targeting order inflows of around INR 10,000 crores to INR 12,000 crores for this fiscal year. So now till December, I think we have just received INR 4,200 crores of order. And what you said that we might receive another INR 3,000 crores of order in the remaining 3 months. So...

INR 973 crores, we were in L1 in road projects. So we are waiting for the LoI. So that will also be added to that.

Okay. So overall, how much order inflows that we expect?

Between INR 7,000 crores to INR 8,000 crores, sir.

So because -- earlier we were targeting something INR 10,000 crores to INR 12,000 crores. So are there delays in orders bidding or some orders will be spilled over the next fiscal year?

Actually, what happened was that the election process, another some of the tenders got postponed like the major BOP tenders, Singareni got postponed by 5 to 6 months. Then Koradi, it was the earlier project we started back 6 months back or 8 months back. Now only they have started some tendering work and the main plant has been awarded. And then there were some ordering itself on BHEL and L&T, there were some delays by the utilities. This is a major reason for that.

But sir, then so next year, we are targeting order inflows of INR 10,000 crores roughly. Now if I consider that INR 4,000 crores which were actually going to receive in FY '25 will be received in FY '26. So next year also incremental order will be just INR 6,000 crores. So the pace of order inflows is decreasing despite you being -- despite BHEL having such a strong order book, you said that L&T is also having strong order book, even Adani also, then why we can't target much aggressive order inflows? Because our order inflows has been stagnant since last 9 to 10 months.

No, I agree with you. But basically, what we have to understand there can be a time lag between taking decisions and then some of the places there is engineering issues are there. More than that, there were layout issues and then basic approvals will be there. These are the things which generally delays it. Therefore, we have been doing well in certain big ticket items like previous years. And of course, this year onwards, the big ticket tickets, what we are hoping for the BOP, there is a postponement and all. That is where our optimism was making INR 10,000 crores to INR 12,000 crores earlier.

So this year, as you said to the previous participant that we are quite confident of achieving INR 5,000 crores to INR 5,200 crores of top line. Is that -- so we stick to that?

Because we have demonstrated last quarter also the capacity to execute, fourth quarter, as I said, the billing and the certification process will be better in the customer also because he wants to dispose off his funds and then bill it also, payment also.

The U.P. government is certifying the bills only when there is a fund available in the system. So they are holding the certification. So we are recognizing it as WIP. They allot the funds, they are certifying and based on the certification, we are taking. So that way we are confident of getting the certification by March and we can able to reach our target.

So you are -- what you are saying is that INR 200 crores is just -- INR 200 crores of revenue booking is just delayed because of certification. As soon as you receive the certificate, that INR 200 crores of order revenues will straight away come. Is that correct?

Yes.

And sir, since that we might need to borrow in the next 1 or 2 years. So as of now, we are working on a PAT margin of roughly 6%. So we expect that our PAT margin will be 6%, net-net, 5.5% to 6% or will that come down?

See, basically, the finance costs, we are under control, and that's why we are able to manage the 6.5% to 6.8% level of PAT margins. Now if the EBITDA margin is improved, then automatically this margin also will go up. So the main constraint is happening at this EBITDA margin level only. So as and when we get the order -- I mean, the true profitable orders added to the portfolio, EBITDA will automatically go up and our PAT margin also will go up, sir. Year-on-year, we are well within the planned number. And compared to the previous numbers also, we have less finance cost. But going forward, if we go for the -- because we are majorly -- new O&M orders we are executing, there is no working capital requirement for that. So only EPC projects, if I bid, then I have to go for the more working capital and my finance cost will be more. And if I add more CapEx to my balance sheet, then again I have to add more interest costs. So far, we are managing well within that. So again, the future depends on our growth pattern and the BOP works, probably we may have to incur more finance costs. And -- so the PAT levels will undergo a change.

And the MDO revenues were INR 34 crores in this quarter, so which was like a significant jump from previous quarter. So we -- can we expect such a Q-o-Q jump on the MDO revenues? Or is that some -- like again, in MDO revenues also H2 is heavier than H1? So how does it work for MDO order?

Tasra project actually, this ready -- readily available. So we started mining because earlier some other MDO promoter has done this expression. And so we were readily available and we are doing the billing directly. So now we have to -- there is no appointed date we have not received so far, but SAIL is giving as and when the available quantity, it depends on the availability of the washery capacity outside. So from April onwards, we may get appointed date and then it's a binding agreement between the SAIL and us for lifting the material as per the contractual terms. So based on that, we are hoping that every month we can raise a bill to SAIL as per the agreement conditions.

And of this ex of MDO order book of INR 17,000 crores, INR 18,000 crores, how much is slow moving? Or these all are like executable in the next 2 to 3 years, the current INR 18,000 crores of order book ex of MDO?

Except the FGD of INR 4,600 crores roughly will be the FGD orders nonmoving. Rest of the order is running only INR 14,000 crores roughly right now...

So this INR 18,000 crores includes FGD slow moving order of INR 4,200 crores of Adani, correct?

Yes.

That is INR 14,000 crores what you plan to execute in the next 1, 2 years or 3 years, means this current order book?

Average, you can get 2, 2.5 years.

40%.

40% is the conversion ratio.

We take the next question from the line of Anush Mokashi from Yadnya Academy.

So my question is about this recent development about nuclear energy mission. So just wanted to understand what benefits do Power Mech see from this? And basically do Power Mech have the capability to develop these small modular reactors? And if not, like would you consider entering into this segment?

Yes. That is a government initiative. Already Jindal has started a joint venture, I think they are going to start. And then NTPC, this one, Nuclear Power Corporation, they have started a joint venture. Idea is to put 200 to 250-megawatt sets. Of course, they are all -- that has to be developed and all. Of course, we have recently taken a job of INR 550 crores in Kahalgaon for the main plant works and all. We are looking at it, but it is going to be a challenge because the technology is there, then the sourcing is there and then a lot of aspects are there. But one good thing is that these plants will run a lot of time, 30, 40 years, and it makes sense. And that we are just thinking. We have not taken any call so far.

And just next question was, like you said, the INR 200 crores of revenue booking has been delayed to Q4. So is the cost also delayed -- I mean, the cost booking is also delayed to Q4? Or is it upfrontly booked in Q3 only?

No, because when we recognize the WIP, it automatically comes into the revenue part, sir. So some back-to-back contractors are there in this project. So wherever the back-to-back contractors are there, the cost has not been booked and the revenue has also not considered. So whereas direct execution is concerned, we have already recognized the WIP. For the balance portion, wherever back-to-back contractors are there, it's -- for that we have not recognized both cost and revenue because we have not received the bills from the clients or even subcontractors' side.

The next question is from the line of Kamlesh Jain from Lotus Asset Managers.

Sir, just wanted your thought on the fact that recently Ambuja has come out with the tenders to operate their cement plants.

I'm sorry to interrupt Mr. Jain. We are not able to hear you clearly, sir. Can you please increase the volume?

So sir, just wanted to have your thoughts on the development that Ambuja has come out with the tenders for some of their cement plants to operate on MDO basis or on a contract basis or outsourcing. So as we are looking to diversify into other sectors, so are we -- would we be pursuing that particular opportunity going forward?

So is this a capital consumption power plants which you are referring by the Ambuja?

I'm talking about the entire cement plant, sir.

Okay. So now we are pursuing with Dalmia Cement, Bihar and Andhra and Tamil Nadu also. They are actually planning to start the captive power plant -- solar power plant and wind power plants. So there, they want to join as the 26% partner and we will install the required megawatts of solar power plant and wind power plants, and we have to supply for 25 years of PPA, they will enter with the Dalmia. So the negotiations are going on. We have given our quotes for them. So we are waiting for their confirmation on that, sir. So there is a new solar business, which we are actually looking at to start with. Future for entering into the green hydrogen business, we want to have -- this kind of experience requirement is there for the solar power. So in that plan, we are in touch with them, sir.

I was referring to operating the entire cement plant. So like Adani has come out with the tenders like to operate their entire cement plant -- some of their cement plants on a pilot basis. So I hope...

This is to the oil refineries and the power plant windup. But if that kind of work is that probably we can also explore that opportunity, and we'll also look into that.

Oil refineries is an option. BPCL has committed INR 60,000 crore investment in Bina. Then HPCL is expanding it. We have got some experience. We have done some of the jobs in Reliance and other places also. Therefore, it is an option because the same expertise we have to deploy it and do the work. Only thing more stringent, quality and safety issues will be there.

But do we have the potential or do we look -- are we looking to operate the entire cement plant like grinding clinker making capacity? All those...

We can operate a power plant, which is highly sophisticated and that too with a control room operation. Like we have started working in some of the O&M plants in the NMDC and then JSPL for the steel plant and all. It is an option which we can explore it if we can get a reasonable, this one, returns on that. And there is going to be a captive power plant in any cement plant and then the kiln operation and the other ancillaries and all. Those things, the skills which are required and all, only the operating character, the production characteristics and then the various parameters in the cement plant, that we have to get used to it. And that can be -- it is a question of taking a correct call and then going about it. And as on today, we are reasonably well satisfied with the O&M initiatives, whatever we have taken and there continue to be more opportunities which will come up because of the annual capacity of 8,000 to 10,000 megawatts in the next 4 to 5 years.

And lastly, sir, I don't -- I'm not aware whether you have articulated about that. But on the Tasra mines, like we have seen a very suboptimal operations from SAIL. So how confident are we to execute those orders in the coming times?

Sir, as of now, we have not received appointed date in Tasra project. So it's not a binding obligation at this moment from the SAIL also to lift the material. From April onwards, we are getting the appointed date. So then the contract clauses will kick in. So it is a binding on them to lift the material irrespective of the capacity is there or not outside. So we are -- so the contract is protecting our rights. So there is no problem in terms of achieving our targets for the next year.

Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.

Yes. Thanks for your participation and even the inquisite, this one, requirements we have brought out, it is a very interesting discussions we had. I think power sector is highly bullish. And infrastructure, we are well established now, the drinking water, railways, roads and other related projects and then metro, maintenance shops, et cetera. And naturally, business should look up, which BHEL is looking at [ bulk] of the orders and L&T is also coming up. And there are many new areas which will come up certainly. And this should -- we continue to be aggressive in our approach in both marketing and execution, exceeding INR 5,000 crores in this year certainly. And then in coming year about INR 10,000 crores, as we said, that is looking at some of the BOP opportunities, which are major items. And then the non-power sector jobs which we established in railways, roads and then material handling, coal handling and then mine site development, goods, et cetera. Therefore, let us look into that way. And then as far as the capacity of the company is concerned to augment the execution capacity, that is always there and that we can do it. Thank you.

Thank you, members of the management. On behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you very much.