RITES Limited (RITES) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the RITES Limited Q1 FY '21 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Viral Shah from Prabhudas Lilladher Private Limited. Thank you, and over to you, sir.

Thank you, everyone. Good afternoon, everyone. I welcome all the participants to the 1Q FY '21 Results Conference Call of RITES Limited. We have with us Shri Rajeev Mehrotra, Chairman and Managing Director of the company; Shri V.G. Suresh Kumar, Director Projects; Shri B.P. Nayak, Director Finance; and Shri Parmod Narang, CFO of the company. We will commence the call with the opening remarks from Shri Rajeev Mehrotra to give an overview of the company's performance. This would be followed by a Q&A. Now I would request Mr. Mehrotra to begin with the opening remarks. Over to you, sir, and thank you.

Thank you, Mr. Viral Shah. Good afternoon to all of you. I am Rajeev Mehrotra, Chairman and Managing Director of RITES Limited. I'm very happy to welcome you all to the investor conference call on RITES Limited financial results for Q1 FY '21. Hope all of you are keeping well during this time of pandemic. I'm joined by our Director Projects, Mr. V.G. Suresh; and Director Finance, Mr. B.P. Nayak; along with the CFO, Mr. Parmod Narang. RITES is a Miniratna Category - I Schedule A public sector enterprise, leading player in transport, consultancy and engineering sector in India, having diversified services and geographical reach. Now I will briefly take you through the highlights of the company's results of Q1 FY '21, and then we can open the forum for questions and answers. I hope you all have been able to access the financial results, the presentation and press release uploaded on our website as well as the stock exchanges for this quarter. I'll cover consolidated results first. Despite pandemic conditions, I see that the business of the company for the quarter remained satisfactory. We have been able to generate revenue as well as maintain margins during these though times. I will now summarize the results on a consolidated basis. As you know, almost 97% of the income in the consolidation comes from the stand-alone results. So whatever I'm talking is relevant for stand-alone also. RITES consolidated revenue has decreased to INR 379 crore as against INR 573 crore in Q1 FY '20. Similarly, operating revenue, excluding other income, stands at INR 335 crore in Q1 FY '21 as against INR 538 crore in Q1 FY '20. Decrease in revenue is mainly due to 2 reasons. First, we had very less exports in Q1 FY '21, and the impact is of INR 128 crore. And these were actually not lined up during this quarter. And the second is disruption of supply chain and travel restrictions imposed due to pandemic, so certain field work could not be completed. If you see, approximately 22% fall in total income is due to exports only, which were not scheduled for this quarter. EBITDA and PAT stand at INR 104 crores and INR 65 crores against INR 167 crores and INR 102 crores, respectively. That is EBITDA and PAT impact of INR 167 crores last year and INR 102 crores PAT year-on-year -- quarter FY '20 after making adjustment for onetime expenditure on CSR of INR 10.15 crore INR and donations of INR 7 crore to PM CARES Fund. These are in the nature of annual charge, but coming as quarterly charge. EBITDA and PAT stand at INR 121 crore and INR 80 crore respectively, with improved margin of 31.9% and 21.1% against 29.1% and 17.9% on year-on-year basis. We have been able to sustain margins as a result of remote working during lockdown. And we were very quick to resume the operations when the things were permitted. And implementation of cost control measures well in time, we could see the shape of the things to come. Stand-alone results. RITES total stand-alone revenue has decreased by 33.9% to INR 366 crore against INR 553 crore. Similarly, operating revenue, excluding other income, stands at INR 323 crore in Q1 FY '21 against INR 519 crore in Q1 FY '20. EBITDA and PAT stand at INR 94 crore and INR 60 crore against INR 151 crore and INR 93 crore, respectively, in Q1 FY '20. After making adjustment for onetime expenditure on CSR of INR 9.92 crore and donation of INR 7 crore, EBITDA and PAT stands at INR 111 crores and INR 75 crores, respectively, with improved margins of 30.4% at EBITDA level and 20.6% at PAT level against 27.3% and 16.8% in Q1 FY '20, respectively. I'll now cover performance of stand-alone segments. Consultancy continued to provide highest revenue to the company and achieved revenue of INR 185 crore, which is down by INR 20.7 crore over Q1 FY '20. But the margins in consultancy, whatever was executed, we could maintain the margins at 44.3%. Rather, the margin has improved as a result of effective utilization of manpower resources and some cost control measures. Leasing revenue stands at INR 24 crore in Q1 FY '21 as against INR 29 crores in Q1 FY '20. The decline was due to suspension of work at certain sites, ports, et cetera, during the lockdown, and the locals could not be used. Despite cost rationalization, the margins were impacted due to depreciation expenditure, which is fixed over the quarter. Exports revenue during Q1 FY '21 stands at INR 0.5 crores against INR 129 crore in Q1 FY '20, as no exports were lined up for Q1 FY '21. The company has entered into cape gauge markets by securing contracts from Mozambique for export of locomotives and coaches for which supplies are likely to start in H2 of FY '21. H2 FY '21 is also going to see exports of coaches and DEMUs, these are multiple -- electrical multiple units, to Sri Lanka. So both these orders are now under execution. Turnkey revenue during Q1 FY '21 stands at INR 114 crores against INR 128 crore in Q1 FY '20, but we were able to sustain a margin of 4.5%, which is higher than the previous year-on-year margin. Performance of our subsidiary, REMCL, also got impacted due to less traction power purchase by Railways during this quarter. And we have a fee on each unit of power purchased. So that was significantly impacted. REMCL revenue stands at INR 15 crore against INR 20 crore in the previous financial year. Similarly, profit before tax has also decreased to INR 7 crore as against INR 12 crore in Q1 FY '20. This quarter has seen a good windy session. And as a result, the revenue from power generation remained at INR 5 crore, which is with a growth of 51.7% over Q1 FY '20. So these are the summations on the performance. Now I come to order book. Company's consolidated order book now stands at INR 6,157 crore as of June 30, 2020, with new or extension of orders secured for INR 270 crores during the quarter. During this quarter, in addition to securing more than 60 new contracts, including some enhanced scope of ongoing works, RITES Limited signed an MoU with Coal India for providing railway infrastructure technical services for another period of 5 years. During the period, we have also been shortlisted for allotment of work by Indian Railways for railway electrification, ROB, bridges, signaling and telecommunication on competition basis amongst PSUs, for which we will be submitting financial bids by mid of August 2020. I believe comparison of the performance of this quarter, which is an unprecedented quarter, should not be used as a prelude to draw conclusions about the company's performance in the coming quarters or year-on-year comparison with the previous quarters, because this had various disruptions. And despite this, my team continued to deliver whatever was best possible in the given circumstances. Now we can open the forum for questions and answers. And thank you very much for your attention, please.

[Operator Instructions] First question is from the line of Rohit Natarajan from Antique Stockbroking.

Sir, in the investor presentation, you illustrate that there could be a moderate revenue growth in FY '21. The first quarter completed and second quarter halfway through, are we in a position to quantify what that moderate revenue growth or what the outlook will be in FY '21?

Well, this will definitely depend upon the general recovery which H2 can see. We were hopeful that by Q2, things will look much better. But you see the cases coming in Delhi, Mumbai and other places. I think if the working environment improves in Q2, it could be possible to record a single-digit growth. We are not looking at the high growth numbers we recorded in the last 2 years. Moving our orders, but then the delivery itself is a challenge, despite orders being there. So if things look normal, at least a single-digit moderate growth is still possible.

But that will be higher single-digit, I assume?

Let me hope. We'll try to be as close to 10 as possible. But then the underlying -- the challenges are that still there's no movement. The trains are stopped till September 30. The airlines have restricted movement. And our field work is very affected. So hopefully, this should improve by beginning of H2. And then there is -- we will run faster than required. We have done this in the past. We are up since end of, say, April or May beginning in terms of following the projects and starting execution wherever legally it was permitted to do. So hopefully, that will continue in H2 if the things improve in general.

Sir, I appreciate that part. Moving on to the exports, which you have said that it is scheduled in the second half. Can we book INR 550-odd kind of crore in revenue terms for exports in the second half? Is that kind of scheduling is what you have in mind?

Yes. INR 550 crore looks very close to almost realistic number. But we'll try to push it higher. Maybe we could do even INR 600 crores.

Okay. Just last question from my side, sir. You also hinted that you are submitting some financial bids for the turnkey segment. And also you had hinted in the past that there were some talks in terms of consultancy orders, probably something to do with metro as well. So is there any -- could you quantify those financial bids, I mean, in terms of what is the volume that you're targeting in turnkey? And what is the status of consulting order? That's it from my side.

Okay. So first answer is that certain businesses like electrification, rail over bridges, road over bridges, some signaling work for this eligibility, the list is already issued by the Ministry of Railways and the offers are to be submitted on 17th August. And I think we would hope to be somewhere -- I mean, we are targeting -- I do not know to what extent, it could be possible to target INR 500 crores to INR 1,000 crores of projects during this process.

Sure. And consultancy part?

No this would be -- these orders are only for turnkey. This tender is only turnkey. I'm coming to the other -- and this hopefully by the end of August or maybe early September, we should see. We also try to see can we generate some revenue, because a lot of these projects would require detailed engineering and tendering approval of design and then revenues would start flowing in. We'll target to see something coming out of this by March. Maybe before that, it may be difficult. But otherwise, this all would be actually yielding numbers in the next financial year. Now coming to certain other metro work, which we had given bid for. No major work has been finalized. So we will wait for the finalization process to get over. Because another tender for DFC, which is also not yet finalized or DPR for 3 DFCs. Of course, smaller work of metro, about INR 14 crores, we have already cropped in, consulting part. But the major general consulting works are yet to come out. If you notice, the consulting order book has already gone up. So we have added about INR 250 crore in last quarter. Mainly this is adding to the consulting order book. So you see the consulting order book, we ended at INR 2,528 crores, which is a good number to handle during the year.

The next question is from the line of Chintan Sheth from Sameeksha Capital.

Congrats on the decent numbers in the current environment. Sir, it is heartening to see our employee cost controlled in this quarter. We have been able to reduce sequential employee cost in this quarter. How much can you see that sustaining over the coming quarters? Or it will increase as we ramp up our work?

Well this was a tough call, but then the flexibility we have built up in our system is based on regular employees, some people who are on contract, project-specific contract. Some people are on deputation. Some people are on hired post-retirement for certain specialized activities. So looking at -- this could spill over to maybe 3, 4, 5 months, and we decided to reduce numbers. We have reduced about 217 total during this quarter. And this has given us savings of about 9%, over 9%, 9.5%. And I think this should not slow the year. If at all we make any additions, maybe this could be in Q4 when the job is picking up, I don't see any significant addition to this.

Yes. Sir, if I look at our margins, even if there is less export contribution and there was incremental higher contribution from turnkey, which is a low-margin business for us. This is excluding that CSR provisions, but still being able to delivery very healthy sets of margins. Apart from the newer employee and travel cost, how much do you think that this cost will likely be sustained over the coming quarters? That is what I'm trying to understand.

Well we are trying to target about 8% to 10% control in the manpower cost. The range is around INR 475 crores to INR 500 crores. It is an yearly target, which is the highest cost for -- it's around -- 45% will be -- is the employee cost. And there is a possibility, should the projects go faster, we can go for further hiring on contract basis for projects, should this be required in Q3 and Q4. Let me clarify that no project will suffer because the person is not there. We don't allow that to happen. But at the same time, we need to control and time.

Got it. And sir, the tunneling projects we were expecting, we got a couple of them in this quarter, consultancy work. You hinted last quarter that around INR 250 crores of opportunity is there in the tunneling part. Is the tender process over and we ended up with only 1 or 2 of the packages, which you mentioned in our presentation? Or we expect more orders likely to come?

There are some more tenders in the pipeline, but not yet decided. One major tender for highway, that is in Ladakh area we had already shared some time in May. After that, no major tunnel work award has been finalized.

Okay. So what kind of -- I think it's difficult to provide that, but if you can -- how much we've bidded -- financial bids we have submitted during this quarter, that would be helpful to understand the activity level on the ground.

Well Chintan, I think it's not correct actually to start sharing the bid number, because across the departments and locations of -- 12 locations of freight. But I think -- let us follow the practice of sharing major success. We normally notify to stock exchanges all work awards above INR 50 crores. It does not mean that we are not working on less than INR 50 crores. We accumulate -- like this time, we have accumulated about INR 250 crores during quarter. But actually, 1 or 2 others were not required to be notified. But tendering, it's very difficult to give you a number, because that is centralized at different locations. But not much has happened in this quarter actually. We have submitted the evaluation and all that is going on.

Sure. Sir, can you repeat the turnkey project ordering target you just mentioned a while back in the previous query?

Okay. I'm just discussing a part of this turnkey profile, which is electrification, signaling and road over bridges, ROB as we call them. On this, we are committing price offers, that is our fee offer, on 17th. And in case we can get anything between INR 500 crores to INR 1,000, we have capacity to take up those projects afresh.

Okay. So INR 500 crores to INR 1,000 crores orders we are targeting to get that is turnkey set of projects?

Yes, yes. But that's only electrification. The bigger one, which is doubling third line or new workshop, that is yet to happen.

The next question is from the line of [ Swechha Jain from ANS Wealth ].

Sir, a couple of questions. One was, actually, I think I missed the last part when you were talking about the order book. And I think, sir, you mentioned that we've got -- we signed an MoU with Coal India for 5 years. Will you be able to share or quantify the value of this MoU, sir, signed for what quantum?

Okay. The projects, it is very difficult to say that these many projects are going to come this year or next year. This is a broad framework within which either Coal India or any of its subsidiaries, if they have a project, they can just approach us and then we do not negotiate the commercials at every stage. Now within that, we notified earlier that this has been there since last 7, 8 years, I think. We have been earning about INR 100 crores per year out of such arrangements with them. But it's safe to believe this will be INR 100 crores or a little more. We have slightly increased work span this time for us, some more areas covered for technical services. But it's very difficult to quantify, because we do not know the extent of projects which will emerge. But as now, the clarity is we should be able to maintain our INR 100 crores to INR 125 crores. But 2 years down the line, difficulty to say.

Okay. And sir, have we signed the MoU with Railways for FY '21?

This we are discussing actually, and maybe by end of this month, we should be able say something that's conclusive. But the broad indication I've given you that this year, this could be a moderate growth. And within those parameters, we will finalize the MoU targets. We'll try to maintain the margins, even if it means cutting corners, we will do that. We are already doing it. People are doing sacrifices. We are reducing the numbers. So the twin objective, a moderate growth, but we'll try to maintain the profits by cost management. So both these things are in place already.

So sir, can we assume the margins that we have -- that's going to remain at this level, Q1 level?

I think that I have hinted very clearly that we'll try to maintain the margin even if it means some cost cutting internally, we will do that.

Okay. And sir, just last question. The last con call, you had given a guidance of INR 400 crores of CapEx. So can we assume that this is the CapEx number of guidance?

I think this is slightly more than this. But I don't see any change or whatever given in last con call. So safe to believe. It's not INR 400 crores. INR 400 crores is only for working capital. I can revisit and maybe you can then compare. We have fixed our numbers. INR 400 crores out of this INR 1,224 crore cash we have, we are keeping for working capital. Now [indiscernible]. Against this, we have CapEx for locomotive purchases for loco leasing, INR 80 crores. We are going to make some buildings and including workshops for loco maintenance, INR 150 crores. We began to put equity in REMCL for that solar work, IRSDC and SAIL Kulti, INR 200 crores put together. Of course, dividend payment would not be coming as working capital. But then some service equipment, computer softwares to be purchased, INR 40 crore. So this takes to around INR 200 crores -- INR 350 crores -- INR 450 crores -- yes, slightly more than INR 450 crores.

The next question is from the line of Ankit Merchant from Reliance Securities.

So the question is related to our turnkey bidding, which is undergoing. So this turnkey bidding is as per the new process. And should we see any margin decline in these particular orders, which we are going to undertake? Also, the second question is related to the exports. So what we have currently is near about INR 1,400 crores of order book, and out of which, almost INR 600 crores we are planning to complete in this particular year. So do we see any more pipeline coming up in our exports segment?

Okay. The answer to first point is that we try to maintain whatever math we were earning in the turnkey contracts. This is only a procedure, which has been changed to make certain compliances and not to cut the corners on PSUs. The export order of around INR 1,400 crores is definitely to be completed this year plus next year. All these would be [indiscernible] out. We are discussing with other clients, but this is a long lead item. It takes almost 9 months to -- 18 months to complete 1 major export order negotiation. There are discussions going on with one client at least. There's a major requirement of coaches.

Sure. And last question is related to consulting, and within that, the quality assurance part, which we do for Railways. So although close to INR 1.6 lakh crore is what Railway CapEx has been planned, so do you think that the quality assurance part revenue should be going up in this particular year, considering that government is spending so much CapEx or Ministry of Railways?

I don't see major -- there will be definitely some impact, especially in the new projects which they are going to put on hold, the projects which have not yet started. There may be some slight delay in starting. But I don't see it significantly affecting the quality assurance income, because this is one side of the view you are taking. Let me give you another view. A very regular inspection is done by us in all the rails purchased by Railways. We do a 24-hour setup there to do inspection. There the peak has been revised 0.45 to 0.55 from April 1. So this is certainly also going to give us around INR 4 crores to INR 5 crores per month extra with the same workforce. This would compensate for any shortfall that comes from the reduced orders as such. So therefore, I'm saying that we'll be able to maintain the margins.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Firstly, it's good to hear that the tendering is happening in the Railway projects. But there were some news articles where it was mentioned that the government issue of finance or Railway are reconsidering the already approved projects or there may be some issue with the finances. So are you seeing on ground really the delay from the payments from Railways or Ministry of Finance or it's just news articles?

I think that order has been misunderstood widely. Maybe there would be a clarification. We have already given our feedback. If the project has not been started at all, then the government has a right to review on how much delay, 6 months or 1 year. But what they are now rolling out are the projects, which are in essential categories like electrification, the signaling and telecom, the safety works like the road over bridges. For this, there is allocation and therefore only these projects are coming. Once they start coming out, I don't see any delay in payments. And whatever is already with us, I'm not experiencing any delay in payments. So 1 or 2 weeks or 1 month here and there, that can keep happening because of certain clarifications or certain approvals. But yes, there is a -- I think on nonessential type of projects, we can wait a little more. And I think that much right every owner has to decide what to start and when. But per se, there's no change in the policy on major expansion or the safety related or the cost management related, like the electrification or the signaling or the safety of tracks through road over bridges, ROBs, these are going to take some time.

Okay. That's good. Secondly, sir, you mentioned that on 17th of August, whichever bid we are submitting, that is only for electrification, rail over bridges and signaling. So the bigger ones, doubling, tripling, when those tenders are going to happen?

They are working on it. I cannot give any timeline, but that is also set to happen. Give me some time and next month, this should happen.

Okay, okay. Sir, in IRSDC, you mentioned that we are going to invest around INR 200 crores in IRSDC, REMCL. Can you quantify how much we are investing in IRSDC for 24% stake? And what would be the business model of IRSDC? I mean, will the IRSDC invest a large chunk of money or the developers will invest?

Okay. We have indicated INR 200 crores as equity investment lined up, of which INR 48 crores is likely to be expensed this year on investment in IRSDC. INR 48 crore only in IRSDC, which is 24% of our stake in their paid up capital. Now their business model is a mix of stations they will do on developer model basis. 2 stations they might do on their own, which is Bijwasan and Anand Vihar in Delhi. These are very prominent locations and very urgently needed and very, I think, commercially viable. So this they are going ahead. Anand Vihar and Bijwasan , which is close to airport. Besides this, most of the investments would be on developer model basis. Now this feed capital, if I can call it, because INR 200 crores is not much of a capital for such a big brand, there we'll have to see how developer model works. But looking at the overall scenario right now, they might see the planning, depending on what the market feedback. But of course, the 2, 3, 4 stations, they are going ahead. And you already know about Gandhinagar and Bhopal.

So whatever projects IRSDC will do on their own, what would be the revenue? I mean, how the revenue will come? And what would be the -- I mean, the entire redevelopment CapEx will be done by IRSDC. And what would be the revenue then?

I do not have really project-specific IRRs with me now. But the 2 stations would be done by them on their balance sheet, and the rest would be on developer model basis. So they must have assessed the requirement -- sorry, the possible buildup area and the uses and [ misuse ]. Now they are allowed to do a commercial as well as residential development in these areas. So put together, the IRR are definitely around 16% to 17%.

Okay. And just one last question. Sir, can you help us with the REMCL project of 3 gigawatts? How -- so earlier, you were saying that it was only 1 gigawatt we will do on our own. So any update on that all 3 gigawatt, how much we are going to put and where we are [indiscernible]?

Well let me just clarify, there are 3 parts of the project. We can call it part 1. Part 1 is 1,000 megawatts, which we've increased to 1,600, because that is sufficient to generate 1,600. This is on developer model basis, for which the pre-bid meeting has been held and there are some queries raised by bidders, which are being clarified. As of now, the terminal date is 28th as a submission date, but I think will extend by about 10 days or so, so that we will have at least clear 15, 20 days. But that's one side. Now this is clearly a developer model where the investors are going to put their money. The second question, which you asked us, this Part 2 is related to the question you're asking. REMCL will do not 1,000, but only 400 megawatts. Only 400 megawatts on its books and taking a ballpark figure of INR 4.5 crores investment, cost around INR 1,800 crores investment would be there. So for this, we may need to put about INR 180 crores, INR 190 crores of equity over 2 years, this year and next year.

Okay. And the entire INR 180 crore by RITES or...

No, Railways will be putting [indiscernible].

Okay. So we'll put INR 180 crores and Railways will INR 180 crores.

Yes, 51:49 is the ratio we have. And third one is developer fee, because a lot of people might be having this query. So let me clarify again. Again, portion 3 is, again, on developer model, which is on the land, which is parallel to the track. So they are trying to now decide whether at each TSS, we call it Traction Sub Station, we go to what extent to pick up the load in one traction sub station. So that technical modality is being closed very soon. So that would also see about 1,000 megawatts and more is possible there. But no investment from REMCL, no equity from us. On all this, we'll get a fee of about INR 0.05 per unit management fee.

The next question is from the line of Hardik Jain from ISJ Securities.

Sir, just one clarification. IRSDC model, so you're saying that on the developer model, whatever [indiscernible] so IRSDC will get that commission of the amount on the whatever the big amount of the project is there?

Yes. Normally, they will get a portion of the return from there. And this will be partly used for station development and maintenance. That's financing type of model. The station maintenance would also be -- when I say maintenance means the facility part of it, the platform, the toilets, the [indiscernible] and all those things.

So when you say that these stations will be done by IRSDC, Bijwasan and Anand Vihar, so how much money IRSDC will have to put in this development? And will IRSDC have to take any in debt for developing this?

They are in talks with IRFC that were being developed. So I'd not be able to share more details at this time. But yes, this will be in a combination of equity plus debt and possibly maybe [indiscernible].

And so in these kind of projects where we are developing IRSDC, I think the primary revenue model would be the lease income that those stations will generate or -- and -- or other kind of revenues, like advertising revenues or something, all that will go to IRSDC?

Yes.

Okay. And last question. Sir, since you're saying that the field work is still not going on smoothly. But when you compare July or even half of August has gone -- when you compare this last 1.5 months to June, have things improved or still as bad as June?

I don't think people are taking this kind of [indiscernible] must appreciate. Yes, things are improved and -- but still we have difficulties in travel, people have difficulties in getting together. They have to be maintaining the social distancing and then move or meet, but it's much better than June definitely.

The next question is from the line of Harshit Kapadia from Elara Capital.

Congratulations on a decent set of numbers in this challenging time. My question is that when you look at the consultancy margins, you have seen an improvement by 400 bps, from 42% to 46%. Now since there was a lockdown in at least 1.5 months of the quarter, we were to assume that the quality assurance business, which is largely inspections [indiscernible] impacted the most. And that is the high-margin business for you. But despite that, the consultancy margin has increased. So what explains that, sir?

Harshit, there is 1 steel rolling mill in Bhilai, all the rails were produced there. And this plant continued throughout, not even a day it stopped. And that gave us a lot of revenue. And not only that, they increased our fee on that business. And incremental -- this incremental [indiscernible] is only around INR 4.6 crores to INR 5 crores. So these 3 quarters, we made this extra. Plus this business continues despite everything has been closed. And then when things were started in May, we tried to resume wherever possible during May onwards, including certain overseas inspections we could do sometime in June and July. Wherever we could not travel, we appointed our counterparts on emergency basis. There some agencies we can contract instead of traveling. So all that helped us to clear the backlog. But now people are traveling. They do not have the public transport, but then of course, now the taxis are plying. When taxis are not there in May, we made sure that we provided them official vehicles to do this. So we could focus on this business, which is a high margin, which affects the supply line for Railways also, and we could get revenue from this. The biggest contributor was actually QA.

Right. But why would they increase the margin? What would be the reason for them to increase this margin?

Periodically, we keep discussing with clients. I'm told, every 3 years, there is a clock to reset margins there.

Every 3 years. Okay.

[indiscernible].

And on the question somebody asked on the Coal India subsidiary where you have signed MoU, can we expect the margin similar to how much you look on the nomination in the projects? So would it be 45% is a safe assumption to make? Or where the margins will be a bit lower?

Well this is overall. And from there, you may take 35%, somewhere even 48%. But the indication is that, yes, broadly, we'll try to maintain those margins, because they are not material [indiscernible] then we'll try to maintain this.

Okay. And sir, you had also mentioned that you're expecting a slight growth for the entire FY '21. So I just wanted to understand, would it be largely driven by [indiscernible] construction and export business? Or will you expect consultancy to also [indiscernible] significantly?

We are trying to do consultancy also, because there are foreign projects, which are now going for -- working again. We have activities started in Mauritius. We have got one project highway project in Bangladesh. We have positioned people there. Similarly, we are expecting some more work in 1 or 2 countries, where things will start maybe by September. So there will be revenue from foreign projects. There will be revenue from domestic as well as the quality assurance. So I think consultancy might be flat or moderate growth there. So my indication was, on overall basis -- we refrained from giving any assessment last time. People did not like it then, but that was the situation. We were not sure what would happen in Q2 until there's a lot of clarity what we are going through in Q2. And therefore, we thought that it's still possible to maintain a moderate growth overall basis. But I think the biggest driver of the strength would be exports. Whatever currently we are getting now actually give a meaningful revenue in '21, '22. But there's a lead time of 6 months to design, tender and then start of work.

The next question is from the line of [ Manish Garewal ], individual investor.

Yes. Am I audible to you?

Yes, please.

Many congratulations and complements for managing in tough times in such an admirable manner. Now, my questions were relating to -- there were some press reports about Ghana emerging as an interesting geography for RITES. So any development happening there?

Well actually, this is a country which is looking for expansion of railway network. We already have one Indian company working there, and we are helping them in the technical part of it. We signed one MoU directly with the government of Ghana, it was sometime in end of, I think, January when they were here for one exhibition. Major rail exhibition was here in Delhi. We signed one MoU, which was reported in the annual report also. We thought of launching one set of people -- experts for Ghana. And then the travel restrictions had started sometime in early March itself. So yes, answer to your point is yes, they are opportunities and we are looking at this country. And in fact, we have a 1:1 MoU with them. But [indiscernible].

Like Mozambique has emerged as a very good actually destination. [indiscernible] So can Ghana also -- give us some idea about the growth visibility in terms of revenues for RITES. Are you seeing it in the same manner?

It's too early to say, because they have to create first infrastructure. That itself will take 3 to 5 years.

Okay. Okay. So it's long-term kind of thing. Okay.

Yes, they have just given there one major line now with an Indian company doing the execution. But they have lot of plans to connect within the country and also with one of the neighboring country. So we actually will be taking up a study, then only it will be better to comment. But any meaningful role of exports and all that is at least 2 to 3 years away.

My next question was relating further equity dilution by the shareholder, a key shareholder and [indiscernible] policies. Any light you could throw on that?

Well right now, the government holding is around 72%. I do not have any knowledge of any decision to further dilute in immediate weeks or months. But it's a public knowledge that the government is looking at the overall PSU strategy for PSUs, whether strategic or nonstrategic. We are yet to know the outcome of this. So let us wait. And where the structure falls in, then maybe a major [indiscernible] indicator. But right now, I have no knowledge of any further -- and we are actually not competent to comment on this [indiscernible] further dilutions.

Right. And on the dividend?

Dividend, yes, if we keep making profits, we will be trying to see that we become a dividend paying company. But I cannot comment if it's same or more or less, because it's again based on several factors, which the Board will consider. No significant change in the outlook on this.

The next question is from the line of [ Lokesh Nagpal ], a shareholder.

My question is related to the order win likely in the second quarter, which is ending September. The reason I ask this, Rajeev, is the fact that you're showing INR 130 crores order from consultancy in the last quarter. So those are the bigger orders, and I'm assuming, given a full size order considered there, the other orders will be very, very small or negligible. So on the consultancy order book, it is like INR 2,100 crores. The order wins are about INR 150 crores in the last quarter. And how is the order book win situation coming in this quarter?

Well let me correct here, what we have presented is consultancy order book as of June 30. It is INR 2,528 crore. The order book has seen inflows of INR 250 crore, mostly consulting. That is the position, not INR 2,100 crores. It's actually INR 2,521 crores -- INR 2,528 crores, which is higher than the year-on-year business comparisons.

The increase to that consultancy order book of INR 2,500 was roughly INR 250 crores in the last quarter. Can I please understand -- it seems to be kind of fairly low, I could be wrong, given the difficult environment. But can you give us any sense of how many -- what this order book will grow to in this quarter?

No, it's very difficult to predict with this precedent. But I can only tell you that it's hardly any major award that happened during this pandemic. So whatever activity we will see would now onwards to maybe rest of the year. So [indiscernible] around maybe at least INR 1,000 crores to INR 1,500 crores order book should be possible. You've got a bunch of order stock flowing out. But this is an assessment, which is based on just information which we have. I cannot commit that this will happen. It's likely. Normally, whatever we are executing, we are able to recoup as a new order. Based on that premise, I'm giving you this idea that it could be possible to still look at around INR 1,000 crores.

Sir, I'm trying to get words out of your mouth now. I heard the answer to the dividend question. But I'm just trying to connect the dots. Given the moderate revenue growth [indiscernible], even if it's a single-digit growth, are you at least likely to retain your dividend and the dividend payout policies for the Navratna and Miniratna? So are you likely to at least retain the dividend payout of last year. Please if you can give some insights to shareholders, it would be nice. And hence, the [indiscernible] that there is likely to be a growth. Of course, the question -- you will propose the dividend. If you don't propose, the Board will not approve, right? Are you planning to propose to the Board based on the performance that is likely to come?

Well the company has been increasing profits, and then you're seeing this increase in sales also. Nobody can commit a payout, and no Chairman is in a position to commit a dividend payout. Let us be optimistic. I have given you 2 major indicators that there will be growth, we'll try to maintain the margins intact. So there's no reason to worry about dividend. Dividend will be an outcome only.

Sir, my last question is, is there any stake reduction from the government likely? I think if I recall, if my memory serves me right, June 18 was the last time the government reduced its stake [indiscernible]. Is there anything on the cards right now that is to the best of your knowledge, sir?

No, last year, we had 2 rounds of a follow-on offering. The -- I think November and March.

That's correct, sir. [indiscernible] Is there anything on the cards right now, sir?

No, no, no, not to my knowledge. And let us wait for the overall government policy on the PSU. I think that will be a bigger guidance for future rather than 5% here and there disinvestment, which I'm not aware of right now. I don't see anything on those lines.

The next question is a follow-up question from the line of [ Swechha Jain from ANS Wealth ].

Sir, I have 2 follow-up questions. One was, I think earlier somebody asked with respect to how are the things on the ground. So just wanted to understand, do you think the worst is over, like Q1 FY '21 was the worst quarter for the company in terms of the pandemic? And do you think things will only get better every quarter from here on?

Look, if you are comparing Q2 and Q1, Q2 is definitely better than Q1. And that would be visible we the results are there. Because the ground provision has changed, but not completely, say, normal. So there are disruptions like in Chennai, I think last month, there was again a 15 days' lockdown, [indiscernible]. Even now 2 days lockdown in certain cities. And the number of cases emerging, 50,000 -- 52,000 new cases per day still in the country. But business, we have tried to get to almost, I would say, 75% to 80% of normalcy. And there was a time in April when nothing was moving. So we are way better than April. We're in August now, but it's not normal. So therefore, I was saying that if we can actually see a better recovery in H2, then there's enough to do with the company. People are willing to move faster than required and the orders are there. But then you should be able to deliver. There has to be a supply line. There has to be a supply line for exports, which have to be intact. Hopefully, I think [indiscernible].

Okay. Okay. Sir, just a connected question. Sir, with respect to revenue, we've guided that we'll see a moderate growth. But we also believe that exports would be the biggest drivers in this year. And what I understand is, correct me if I'm wrong, that see, the margins in exports are comparatively lesser as compared to consultancy. And with respect to margin guidance, we are thinking that we are going to maintain the margin. So I'm just not able to get this. I mean, can we assume that we may have a moderate growth, but we may compromise a little bit on the margins?

Well I think the correct understanding would be like this that this year, we are starting with the low turnkey order book, because last year, turnkey orders did not materialize in time. So what we have seen last 2 years, highly driven by turnkey growth, this year could be a flat growth in turnkey, but more on the exports. And exports are way more profitable than turnkey. But then we have other businesses, we have consultancy, we have leasing, we have energy management, which are intact. So there is no reason to worry to -- my only worry is if we do not normalize, that is my biggest worry. If things do not normalize by December, then I mean the entire country or the entire industry would have challenges, not RITES alone.

The next question is from the line of Parimal Mithani from Credential Investments.

I have a question regarding your fleet base, sir. So in the last con call, you mentioned you have the opportunity in 22 countries. Can you quantify in terms of the opportunity size and when do you [indiscernible] globally in this market? Second question is in terms of the IRSDC. If I'm not correct, Anand Vihar and Bijwasan, total project cost is close to combined both is close to INR 1,200 crores.

Yes, maybe it was lower.

And sir, I think [indiscernible] retail and all that. Can you -- any indication in terms of the revenue potential there? That's it. And sir, third question is, in terms of -- recently, the Railways appointed you as consultant for the private trains. So can you tell me the scope of that work with them, how -- what part you'll be handling in, in the entire process?

Okay. Let me start with the first answer. [indiscernible] is actually 1,067. We have in India, 1,000, which we call the meter gauge. So this is slightly bigger than that, but way less than the broad gauge. So this is a gauge, which is not anywhere used in Asia also. Now Africa, Mozambique and other countries, Malawi, Zimbabwe, Botswana, they all would be using such gauges. But until now, we were not making any product for them. So we could not export. Now we have developed a platform for locomotive. We have developed something on self-propelled trains, we call them, DMUs, diesel multiple units. We are also giving coaches. So once these products go there, people see and they see videos, YouTube videos, like what we exported to Sri Lanka, the YouTube video of that has been seen by many countries, and there are inquiries which keep going. So unless you actually provision a product in the market, it is very difficult to say how much more will come. Once you do a good job in a country of cape gauge, which is first time we are entering, there is a lot of hope. Within Mozambique itself, I mean, this is a fast-growing country, where mobility is needed. So I'm sure if we do timely and good job, because of all these challenges, we should be there for a good time to come and then other countries. So that's my answer on the cape gauge. On IRSDC, actually, I do not have such precise details about the revenue details in the Bijwasan. Maybe in next con call, I'll try to get some more details on these projects as well. But yes, you're right, the cost could be around INR 800 crores to INR 1,000 crores, depending upon the phasing they will do for the project. But these are very, very well positioned or located stations with good commercial demand around.

And sir, equity contribution, is it on a milestone or it's like [indiscernible] how do you -- the INR 200 crore that you committed to them, it's on spend sheet or is it...

[indiscernible] We are yet to close in on this, but maximum 2 or maybe 1.

If you can give details in next con call, [indiscernible].

I'll try to get more details about these 2 stations, and possibly, what are the revenues streams from the development model stations. Let me not answer based on my ready knowledge, but then some people documented input from them. [ PPO ], we are a transaction adviser. On the [ PPO ] on the business, our role is to make the document, help them in standardization of routes. Now we are going through the process where there are queries from people. They make comment on the document. We take care of whatever can be accommodated and then come out with the final document, then this will be invited. Our role would end with evaluation and then we give a recommendation that -- for which segment which bidder is collected. I think that is the overall view right now.

And sir, what's the value of this consultancy [indiscernible]?

Can I request you that -- we have a lot of competition. Individual transaction, if you can excuse me. This will be a fee which is then also has to be spent -- somewhere we hire legal consultants and there we take 1 or 2 experts maybe. So my request is let us not go into any individual transaction. But broadly anything quoted would have around same margins, 35% to 45% margin.

Sir, is it safe to assume that it hands for any bidding that comes or any this private [indiscernible], you will be one of the consultants from the government side for other projects of similar size?

No. We are transaction advisers for several complex, say, positions [indiscernible] diesel and loco factories were set up, we were the advisers. And this has been done -- we are there -- so there is a separate transition advisory group in RITES, which [indiscernible]. Yes, if there is a contract normally, we are there.

As there are no further questions, I would now like to hand the conference over to Mr. Viral Shah for closing comments.

Yes. Thank you. Thank you, everyone for participating in the call. I especially thank the management for giving us an opportunity to host the call. Rajeev sir, I will hand over the call to you for any closing comments.

Well, thank you, Mr. Shah for helping us in this conference. Let me reiterate that this was a difficult quarter. Our employees took all the risk and the determination to deliver whatever could be done this quarter, we have done it. Let us not compare this quarter too much with any of the quarters, because this is an abnormal situation, which if we try to compare too much, we'll actually get misleading leads. Let us believe that we formally have orders. We are a market leader in what we are doing. And we are committed to deliver better than what we have done last year. A moderate growth, but that would be very important, if under these circumstances, we can still deliver a moderate growth. Thank you very much for being with us. See you again. Thank you.

Thank you. On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.