RITES Limited (RITES) Earnings Call Transcript & Summary

[Audio Gap] Everybody, just to add. I think [ Sanford ] missed, I have with me my CFO and Director of Finance, Mr. Nayak, and my entire team. Just to add to that, that I have recently joined to charge as CEO and Chairman and Managing Director of RITES on 7th October. I am privileged and humbled to head this organization with a rich past of 47 years. I'm from the Indian Railway Service of Mechanical Engineers, about 20-plus years there and then last 10 years in Container Corporation, and now I am heading RITES. To take this forward, the results as you see have been uploaded on the website and the figures seem to be encouraging. We have built up on the platform of Q1. Let me begin with the safe harbor statement. The presentation, which has been uploaded, and all discussions that we have today may have some forward-looking statements. These statements have obviously carry some risk and uncertainty because of which the actual results could be different, but we need not undertake to update -- we do undertake to update these statements periodically. I'm going to talk about the highlights of the results, which you have seen on the print and social media. So as you see the brief -- some brief figures I'll make as an opening statement and then we'll open up the forum for questions. The quarter revenue has gone up by about 58% and the operating revenue has gone up by 74%. Core EBITDA has shown a growth of about 69%. It's primarily on account of export and leasing growth. The PAT is up by 24%. These are comparative figures between Q2 of FY '22 vis-a-vis Q2 of FY '21 and the core EBITDA and PAT margins were sustained at a healthy 27% and 21%. Our important subsidiary, REMCL has also shown a healthy growth of 31% in revenue and almost double the profit. We have as you must have seen, we've declared an second interim dividend of INR 4 per share and we have a consolidated order book as of 30th September of INR 6,400 crores. So with this brief opening comments I leave the forum open for questions.

[Operator Instructions] The first question is from the line of Chintan Sheth from Sameeksha Capital.

Thank you for the opportunity and congrats for the great set of numbers. And Mr. Mithal, welcome to the board. So first question is on the recent ministry's -- Railway Board's new order of opening up the rail contract for the private firms as well. So any implication, if you can highlight what kind of risk and opportunity it will impact RITES in the future, especially for the consultancy business because large part of the business was coming from Railways on a nomination basis. If it goes to private firms, then how should we look at RITES' ability to win contracts in future? Second is on the export side, you have executed a...

Chintan, sorry, sorry, I'll interrupt you. So as I mentioned, as Sanford mentioned in the beginning, I'll take one question at a time and then you can come back in the queue. There can be a supplementary question on the same subject, but then I request you to come back for the second question on export later. Your specific question on the recent circular of Railway Board. 2 key points, one is its impact on our existing order book or future order book. So while there is certain orders, which were in pipeline, Railway orders, which were in pipeline and yet to fructify, they would definitely be -- we would aim to take them to a logical conclusion, but in fact, I see the circular as an opportunity rather than a challenge because for consultancy business, as you must be -- if you're following RITES, you must have seen that RITES and consultancy is doing works across the spectrum of clients, whether it is state governments, other PSUs, private players, domestic as well as internationally. So I would take this as an opportunity to, in fact, leverage this opportunity to become more competitive and take on more work, both domestic as well as internationally. As far as turnkey works are concerned, which we were getting on competitive bidding among the Railway PSUs from Railways, well we were in any case bidding and for the last 2 years, bidding and getting them on a competitive basis. So we will continue to do that. So as a bottom line, as I would say, I take this very much as an opportunity, which can be leveraged to make our top line and bottom line grow further.

Okay, any insight on who will be our competitor in consultancy if private market is opened up for rail tenders, if you can highlight. And what will its impact -- what is our cost competitiveness to safeguard our margins in the future?

So as you see, we have 3 broad areas of working, both -- or in terms of peer routes, that we call it, one is consultancy and one is inspection and turnkey and besides Expotech for abroad. So I would consider all the key players in private in each of these sectors as my peer group and the best-in-class as my healthy competitors. So whether it is the best-in-class consultancy firms or consultancy agencies or the engineering consultancy firms or engineering consultancy PSUs or inspection firms, whether globally or domestic, I would consider them all my healthy competitors and this much I want to assure you that we would be -- we are already working on it. We have been working on it, but more so in the last 15, 20 days after issue of these guidelines to be able to identify the opportunities which come up and how best we can make our bids competitive with all these peer groups.

The next question is from the line of Shreyans Mehta from Equirus Securities.

Sir, my question pertains to exports. So basically, good to see that exports are back on track. So of the balance INR 900-odd crores, how do you see that panning out over next 3 to 4 quarters? And a subsequent question is, when do you see new orders coming back as far as the export segment is concerned?

So yes, you've touched a very important subject and an important element of our top and bottom line. Yes, exports have started picking up. We have done about INR 330 odd crores till now and the production is on track, I have reviewed it across our sourcing manufacturers. And I would foresee that out of the total odd INR 1,000 crores, we would definitely, in this FY, aim to reach about INR 700 crores, INR 750 crores plus and then with the balance if this trend continues in terms -- and I'm sure it will continue with our manufacturers and sourcing suppliers on board, that we should be able to take this somewhere till the middle of next year. But the second part of your question that, yes, we are working very hard to get some new orders right away in the next 2 to 3 months so that the pipeline doesn't dry up and we maintain this for the coming FY also. And for that, we have seen opportunities across countries whether it is in our neighboring countries or whether it is in Africa or other Southeast Asian countries, where they are asking for the rolling stock to be customized for their gauge whether it is the KF gauge or the standard gauge and whether it is locomotives or coaches or DMUs. So we are working on that and I'm sure that we will be able to keep the pipeline uninterrupted.

Great. Great. So sir, just a small clarification. When you say INR 750 odd crores, that's of the balance INR 1,000 odd crores, which is left, right?

So I would say a cumulative of about reaching about INR 750 odd crores in this is FY, and then the balance would spill over to somewhere in the middle of next FY. That is as I said presuming that we don't have a setback in the next 1 month or so, I'm hopeful that the way things -- I hope that restrictions come up. The trend seems to be good overall -- the ecosystem. So with that, I think we should be able to definitely aim for INR 750 crores cumulative plus in this year.

The next question is from the line of Venkatesh Subramanian from LogicTree. As there's no response, we take the next question from the line of Rohan Advant from Multi-Act.

Yes, this is Rohan Samant. So connected to the earlier question. So the quality assurance business that we have, will that also be opened up for competitive bidding going forward?

Yes, Rohan, the quality assurance business was already opened up in terms of the -- in various areas in terms of state governments and other sectors, but yes, certain -- a large part of it, we were getting from Railways also. How it pans out, time will tell, but I think the -- as I mentioned in my opening reply, that in any case, for quality assurance, also, we have been giving a very good competitive offers. So I don't think there should be a problem even if as time pans, how it pans out, that even for railway QA inspection issues, it is opened up for competitive bidding and with our and bench strength that we have across sectors for inspection, whether it is products, services or civil engineering structures or whether it is rolling stock, I'm sure that our expertise also has an hedge. So I don't see a problem even if it gradually opens up more and more to competitive bidding.

Okay. So I'm not very clear. So when you say we will kind of have to look at it. Is it open or is it not open? Like the rolling stock quality assurance that we are doing for railways, will that be opened up for private sector competition?

Why I'm saying is we have to look at it is because it is for the client, it is for the Indian Railways to see how it pans out the execution of these guidelines, whether initially, it is only for turnkey or it extends further to the QA inspection because till now, these guidelines, as you must have read, was with reference to the guideline of the 2019 guidelines, which was, in any case, referring to competitor bidding between the PSUs, which was for primarily turnkey projects. So whether that intent of this new guideline gets extended to inspection of rolling stock of railways also, that as I said, time will tell.

Sure, okay and just if you could give the quality assurance number for Q2? That was my last question.

Yes, the total consultancy, including the QA, the Q2, we had a revenue of -- domestic was INR 223 crores, abroad was for INR 27 crores. So INR 250 crores was the total revenue in this segment. The profit was INR 109 crores. So it had a margin of about INR 43 crores -- 43%, sorry.

Okay, just if you could quantify the quality assurance number, if possible?

You can send a mail, we'll have a look at that because normally, we count consultancy, which includes various kinds of consultancy, including QA. So if you want those further details, you can send a mail to my investors cell, we can send it.

The next question is from the line of Keshav Garg from CCIPL.

Sir, 2 quarters back, we were told in the conference call that this year, FY '22, exports will be INR 1,300 crores. Last quarter, we were told that it will be INR 900 crores to INR 1,000 crores. Now you are saying it will be INR 750 crores. I think that as we go forward, it doesn't reduce to below INR 500 crores, sir. Thank you. And sir, also wanted to just understand that now the recent order pace that in all orders where the letter of award has not been signed, will be canceled. So what is the quantum of that business...

I'm sorry, I'm again interrupting you. As we mentioned, we'll take one question. So I'm taking your question at the export, you can come back on the second question in a queue. As far as your first question on export is concerned, well, the outlook of INR 1,300 crores or INR 1,100 crores, which you were mentioning given in the past 2 conference calls and your estimation that hope that it doesn't fall before 500, I can only comment on what the situation is as of today. It is as of today, if the cumulative is INR 330 odd crores. So I can only assure you that don't worry, it will not fall below INR 500 crores. We have had a review in the last 15, 20 days with all the sourcing manufacturers from where we source the locomotives, coaches, and the DMUs for export and the setback, which was there in the Q1 because of which lockdowns and restrictions, both in terms of manufacturing as well as exporting at the ports, those have now opened up, and Q2, as you see, that's why vis-a-vis Q1, the export has grown large INR 1 crore only in Q1 and INR 340 odd crores revenue in Q2. So that is why the setback was there vis-a-vis the earlier predictions but I can only assure you that we are on track to getting at least INR 750 crores plus revenue from export in this FY.

Sir, so coming to this letter of award cancellation. So...

Kindly come back on this question in the queue, please.

The next question is from the line of Ankur Sanwal, an individual investor.

Sir, welcome to RITES. Sir, I would like to know with such a big amount of cash we are having what we are planning to do with that. And just a piece of information regarding 15th of July accident in Adani Board about a loco. Was that loco a power company?

We'll answer the first question. The first question is regarding cash. So cash is, yes, we have a good healthy cash balance, but now as you see, having declared the interim dividend, which is also quite a healthy interim dividend, which you must have seen. So yes, we are doing a cash management. The dividend is in line with the cash balance that we have and we keep a track on the cash balance and see down the line in Q3, Q4, what is the dividend to be declared.

The next question is from the line of Shreyans from Equirus Securities.

Sir, going forward, so how do you foresee FY '22 panning out given that we'll be clocking around INR 750 odd crores from exports and net balance would be roughly around the same amount which we might go for FY '22? And assuming the other segments do a normalized business, we are looking at a somewhat flattish in terms of top line. However, in terms of margins, we might see some squeeze. Is that the right way to look at it?

Yes, I'm glad you've got it right. So what is the trend of Q2 is showing and just the next 1 month will further reconfirm the trend. As I said, sometime back that, hopefully, we don't get any other setback or in terms of wave or a restriction and if things touchwood, would remain the same, then with this trend, Q3 should further consolidate on Q2 and what we are aiming is that try and reach the top line and bottom line figures of '19/'20 levels. That is the target which we are aiming for. And yes, with more contribution of exports, yes, the margins would definitely see maybe a little upward trend. We're aiming for that. But yes, you put it right, the aim is to at least reach the '19/'20 levels both in top line and bottom line.

Sir, my question was more pertaining towards the FY '23 basically. So how do you foresee FY '23 panning out?

I think FY '23 will be a little too premature to predict right now. Let's aim for FY '21/'22, see how Q3, Q4 pans out and also the 2, 3 things which we mentioned in the past few questions, both in terms of us getting more export orders, us leveraging on these competitive bidding both for turnkey projects as well as consultancy and how it opens up in terms of an QA and inspection competitive bidding. So we are working on all these fronts. We are looking for partnerships with peer groups to complement and supplement our strengths and resources to be more and more competitive. We are looking at the cutting on costs, making the turnover and bottom line top line per employee reach '19/'20 levels, even maybe better than that and you must have seen the thrust for FY '23 going forward in the next 6 months would be to make RITES future ready. That's the end goal. If we are able to consolidate and leverage on our strengths, we would definitely see a healthy outlook for FY '23. The bottom line of all our efforts in the next 4, 5 months would be to make RITES future ready with the basic principle of not just more of the same, but much more of the new. This is going to be the guiding principle of my vision for RITES to take it further forward and to answer your specific question of making a growth in FY '23.

Okay. So sir, the reason why I'm asking is that primarily...

I think you can come back for a supplemental question.

Sir, it's just a follow-up on the same.

I think you can come back because there are other participants waiting. You can come back and ask.

Our next question is from the line of Manish from Fiducia Capital.

Mr. Mithal, welcome aboard. My question is regarding the domestic consultancy business, where the company was talking about INR 329 crores, INR 330 crores, then INR 300 odd crores and now the numbers are like INR 237 crores, INR 225 crores types. And consulting business is such that meaning COVID obviously will have a bearing, but then what we are hearing is like work on home and all these things. So how soon can we hit back the old numbers given the fact that you already have a pretty healthy order book.

Yes, Manish. Thank you. You've got it right in your figures, but just a slight correction, even the best figures in FY '19/'20, if you see the domestic consultancy, which included QA, was INR 999 crore, say about INR 1,000 crores so which makes an average of roughly about INR 250-odd crores. I'm not saying that, that is the best we can achieve. I'm sure we can do better. Considering INR 250 crores. Q2, we have done INR 223 crores. Q1 was a slight setback with only INR 184 crores. So cumulative for this H1, we've reached already INR 407 crores, which is on track for considering that now things are opening up, I see a healthy order book in consultancy, domestic as well as international. So I think we are on track. I'm quite sure that we will be able to reach a figure of INR 1,000-odd crores in domestic consultancy in this FY. And yes, for sure, there is scope to bring it further up. No 2 questions about that.

Looking forward to that.

The next question is from the line of Arafat Saiyed from Reliance Securities.

Congrats on a good set of numbers. So my first question is on opportunity in Railway. If you look at the Railway CapEx is significantly happened in the past few years and this will continue. So I just want to know what the take on Railway CapEx going in, especially metro also and where you fit in that bill?

A very important point. In fact, there are the National Infrastructure plan, the National Rail Plan and the National Monetization plan, all 3 for which the Railways has a major chunk share in the projected plans. In all 3, we have a very major stake going forward. In fact, the National Rail Plan, the report was made by RITES and now to take it further for its implementation, we are working on that. You've seen the latest National Monetization plan, which has been announced by the government. So we are looking at a lot of opportunities to be a partner with the Railways and other stakeholders in monetization of assets, we are exploring opportunities. So interesting times ahead and with things stabilizing outside, ecosystem stabilizing, all these opportunities, both in terms of the CapEx spend by the Railways as well as the monetization plan by the Railways, we see ourselves very, very actively placed to leverage and capitalize on these opportunities.

Thanks. That's it for my question. I'll get back in the queue again.

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

Can you hear me?

Yes, Parimal, go ahead.

Sir, I just wanted to [indiscernible] competition bidding. You have a subsidiary called REMCL Limited. Does it have any bearing on that subsidiary in terms of going ahead or is it too premature to [indiscernible].

I think it's a little premature because REMCL has a different function. REMCL is procuring power for Railway's traction and Railways use. It was formed with that purpose. And also, it's got now a very major role of working on the renewable energy front with this becoming a very important area for the government. And REMCL is fully geared up to work on -- it is working on various renewable initiatives in partnership with the railway, and it's a joint venture between RITES and the Indian Railways. So it's a joint effort between RITES and Indian Railways. I don't think prima facie that, that seems to be. It's a different area of activity.

Okay and sir, can you just give a follow-up on this question itself. In terms of circular, it seems the competitive bidding has gone among the PSUs. Is there any guideline in terms of how the bidding will happen and what are the parameters if you aware of it, sir?

Not to my knowledge till now.

Okay, sir, it will be better if you can share who's the company [Technical Difficulty]. So it's much better understanding the business [Technical Difficulty].

Sorry, I didn't get you.

Sir, it will be much better once you get the guidance clear from there because as far as what we understand is that L1 bidding is almost gone and it will be on a performance as well as key other metrics also.

Any further clarification which comes subsequent to this circular, we'll definitely share it with our investors. As of now, any further clarifications or any further detailed modalities of how it pans out, we'll definitely share it with our investors.

The next question is from the line of Venkatesh from LogicTree Capital.

My question is on the current order book and the future. So if you get back to the FY '20 levels this year and our current order book is INR 6,400 crores. What is the execution time frame for this by which these orders will get completed. And if we have to maintain the current run rate, are we confident of, say, adding another INR 2,500 crores or 3,000 crores orders for '23 or '24.

So presuming and hoping and that we are aiming for to come back to the FY '20 levels with an order book of about INR 6,400 crores makes it about to roughly about 2.5 years in the pipeline but yes, we have to aim for, as I mentioned, about 2 questions back that FY '23 has to be consolidating and building up on this FY '20 levels of top line and bottom line. So obviously, this INR 6,400 crores which is -- as with the current levels of '20 -- FY '20 is 2.5 years, but I would like to suppress it to much lesser time frame and that would also be possible only by getting some more orders. And that, in terms of 2, 3 areas where we definitely need to get more orders and we're working on it. One is exports, which we are aiming to get some more orders in the next few months so that the pipeline doesn't dry up as well as getting more orders, both in the consultancy ring as well as turnkey, but a balance between the 2 to get a balance between the top line and bottom line. So yes, the current order book to put in a nutshell aims for about roughly 2 years, 2.5 years, but then aiming for a bigger growth in '23 and aiming, therefore, to get some more orders in the next 6 to 8 months.

Fine sir. Just a follow-up on the order book. So you talked about the National Rail Pipeline prepared by RITES and there's a INR 11 lakh crore CapEx plan. So RITES also has the, as I understand the ability to go beyond Railways, service even airports and other infrastructure projects. So the size of the opportunity is huge. What would be the kind of vision that you may have for the next 3 to 5 years for this company in terms of top line? Can that be -- because in the previous interactions with the RITES management, it's fair to expect growth in upwards of 20%, 24% over a period of time, but since you have joined, is there a vision that you think you can give us a 3 or 5-year time.

Very interestingly in a month that I have joined, I have realized that -- and you said that RITES is basically doing Railways and it has a ability to do airports and ports. In fact, that is a slight -- I would slightly beg to correct that and this is what I have realized more so in the last one month. In its last 47 years of existence, there is no activity or maybe no city or states in India or a number of countries, about 55 odd countries internationally, where RITES has not operated upon. So whether you talk of ports, highways, airports, waterways, buildings, bridges, metros, we recently did the Mauritius metro, smart cities. So we are -- the bench strength here is tremendous and the Railways business, yes, it is a very important part, but that's only part of the activity and we have been doing and I want to leverage it further. So with that bench strength available and the diverse skills available, I would be looking forward for one key point, which I mentioned some time back and that is to make RITES future-ready and not do just more of the same, but much more of the new. And by that, what I mean is that looking at and capitalizing and leveraging on all possible domestic and international opportunities, complementing the strength which I have in-house with partnerships with the best-in-class across sectors whether it is consultancies, EPCs, engineering consultancies or inspection firms. So with that, I see dramatic growth happening in the next 3 to 5 years. I wouldn't want to restrict myself right now to giving some numbers. I can only say that the scope is enormous and gradually, over a period of time, I would like to zero it down to more numbers year-wise as the growth for next 3 to 5 years, but I see a dramatic growth for RITES in the next coming 3 to 5 years.

Great, sir. We love your confidence and optimism. And perhaps a humble suggestion is instead of RITES, we should rename the company as ITES so that we don't restrict ourselves to Railway.

No, no. In fact, that's a very good suggestion. In fact, sometime back, earlier if -- people who've been following RITES for many years, they would know that this used to be called Rail India Technical and Economic Services when this company was formed in 1974, but I think many years back, it has got rechristened as RITES. So RITES is the brand name now and Railways is a very important part, as I said, but we don't call ourselves Rail India Technical and Economic Services. We call ourselves RITES.

The next question is from the line of Vipin Goel from Mirabilis Investment.

I think the [indiscernible] discussed on this. So the consultancy order book that we are getting. So last quarter, you had mentioned some 6, 7 metro projects that were out for bid, and we had bid for all of those. So any update on that? That is one. And then, sir, a follow-up on that, again, like apart from the Railway portion, how has been the ordering been under roadways, airports, and port side?

So in terms of metros and roadways, both -- metros, we have been working on 2, 3 places. I think we are doing in Ahmedabad, Nagpur, we're all doing that and metros our opportunities are coming up also further in other states in India. And also internationally, Mauritius we did, we are looking -- hoping to get some more work there. So metro is an area which orders are fructifying. We are also participating in bidding for upcoming metros in many states and as far as the turnkey's orders coming from Railways, yes, they are coming. They have been already fructifying and getting translated into work across the Zonal Railways. So both in terms of the turnkey and highways and metros, orders have matured and we also have some orders which will further get finalized in the Q3. So the order book is likely to expand also at the end of the Q3, Q4.

So sir, but despite all of this, we are investing the -- projecting a range for consultancy is still in the INR 1,000 crore range. So how do we see this going ahead? Is there any number that you would like to give around it?

As I mentioned some time back, consultancy, INR 1,000 crores are the best domestic consultancy '19, '20. So as I said, we would be able to reach that figure in '21, '22. And taking forward, definitely, '23, we would like to grow on that.

Okay. All right. Just the last one on the turnkey margin...

Please come back in the queue.

The next question is from the line of Uttam Kumar Srimal from Axis Securities.

Sir, my question pertains to turnkey. During the half one, we have done a revenue of INR 205 crores and currently, we have order book of around INR 2,700 crores, INR 6,400 crores. So what kind of revenues we are looking at half year FY '22 and FY '23 and the margin for the business?

So turnkey, as you see, the Q2 has been both Q1, Q2 combined, as you correctly said, about INR 205 crores has been slightly suppressed vis-a-vis the '20/'21 figures as well as the '19/'20 figures and that's primarily because most of the turnkey works, the Phase 1 of that, the revenue realization had happened in 2021 and now the new orders that we have got, they are all after the opening up after June after the second wave, the work has started all across and the revenue realization in turnkey will start coming in by end of Q3 and stabilizing by Q4. So I see the turnkey revenue to start stabilizing by Q4 and we have a healthy order book of about INR 2,700 crores odd in turnkey, which should now only grow every quarter-wise, because as these works progress and revenues start getting realized, the revenue realization in turnkey will improve on a quarter-to-quarter basis. As far as margins are concerned, margins have again in turnkey been slightly low because since the revenue realization has been low and the cost keeps getting incurred, certain fixed costs is getting incurred in turnkey. So it obviously impacts the margins. It has come down to about 1.8-odd percent but normally, the aim for margins in the range of 2% to 3% in turnkey. And going forward, as the revenue realization improves, definitely these margins will look up. So both in terms of top line and bottom line in turnkey, I see a quarter-to-quarter improvement going forward.

Okay. So sir, we do see turnkey revenue getting to INR 600 crores, INR 700 crores this year, what we had done in FY '20 and FY '21?

We are aiming for that. Yes, we're already about INR 205 crores. As I said, it will pick up by latter part of Q3 and stabilize in Q4. So while we would be aiming for that, but yes, it will be a tough call, reaching INR 600 crores, but let's see how Q3 pans out. As I said, if next 1 month, we don't have a set back, then we should be able to try and get more turnkey revenue.

Okay. And sir, for the CapEx for this year and the next year. That's my last question.

No, thank you -- for the next question.

The next question is from the line of Vishal Periwal from IDBI Capital.

Yes. Sir, a couple of like weeks back, there was media reports that Braithwaite is to be taken over by RITES. So if you can give a little color in terms of what are the synergy benefit I mean that will be there for RITES in terms of what exactly Braithwaite is doing? And second, where exactly we are in the whole process? Any due diligence started or any color that you can provide, that would be helpful.

So Vishal, I would not like to comment on media reports. So only when we get some official communication regarding this issue, we'll share it with you. Okay. I hope you've got that.

Sir, we've lost the line for Vishal. We will take the next question from the line of Parimal Mithani from Credential Investments.

Yes, Please go ahead.

Sir, what I recall from your previous con call, now you mentioned that turnkey was taken because you [indiscernible] of doing turnkey projects. With this competitive bidding going on, how do you see that business in terms of the rail side of the [ government ].

So as I mentioned, I take this circular and these guidelines issued as an opportunity because even after the 2019 circular, the turnkey projects of Railways, we were getting on a bidding basis. It was not on a nomination basis. We were getting it on a bidding basis among the Railway PSUs. So now only thing is that if it opens up further and with our costing, we just need to be more alert on this and I'm sure we'll be able to get more turnkey projects because besides Railways, we've also been getting turnkey projects from state governments and other PSUs. So I'm sure that we will continue to do that. So turnkey, I don't see as I said, as a setback, I see it as an opportunity. Because of us being competitive, I think this as an opportunity to take the turnkey segment further.

The next question is from the line of Lokesh Manik from Vallum Advisors.

Sir, pardon me, I've joined late if this question is already answered. My question is mainly regarding the consultancy order book. So what I have been observing that since the past 13 quarters, we been averaging a new order addition of about INR 250 crores, plus/minus INR 50 crores. So what is holding back the growth in this area of the business?

No. So I won't say anything holding back per se, the consultancy was primarily in Q1. There was lesser orders received, so there was a general slowdown, but Q2 orders have been coming up in consultancy, whether it is a QA element of consultancy or whether it's the other consultancy and I foresee that the orders and the opportunities, which I have reviewed in the last 1 month after joining regarding the opportunities available in consultancy, both in domestic and internationally, I foresee more orders coming up for sure. So this is -- yes, there has been the trend which you're seeing, but I think looking to make this grow further, especially after about the Q3, Q4 as things open up and even internationally, we are now seeing a lot of opportunities opening up as travel has opened up. So we are getting feelers and leads for international consultants in a number of countries, which I think our teams have now started traveling also and interacting in the last 15, 20 days. So we foresee that to open up and stabilize by Q4 internationally also.

Right. So, I do appreciate the impact placed on the business due to COVID since the last year but the trend was coming down pre-COVID. So that was my one concern. Secondly, sir, for these incremental opportunities that you are seeing, are you foreseeing any pressure, any competitive pressure for these projects in consultancy that you plan to acquire?

Not at all. In fact, as I mentioned, that I would look at tapping all opportunities with the bench strength that I have across sectors, as I mentioned some time back, any sector which you can think of, whether it is environment or ESG or renewable energy or smart cities, we have tremendous bench strength here. And whichever element of this resource, which we do not have, I'll be complementing that with partnerships across the sectors with the best in the group and best-in-class in that group. And we would fit in partnership for a number of upcoming consultancy opportunities.

Okay so we should not expect any pressure on the margins?

This is the operator.

Sure, no problem. I'll come back.

The next question is from the line of Jainam Shah from Equirus Securities.

Am I audible?

Yes, please, go ahead.

Yes. So sir, basically, my question pertains to the CapEx. So we have planned around some [ loco order ] CapEx, some office building CapEx and some for the REMCL and for IRSDC. So what exactly are our CapEx amount we are expecting for FY '22 and for balance 2 years, FY '23, and FY '24.

So our CapEx target for this year is INR 100 crores. We've done about INR 69 crores still in the last 6 months and I think we are on track. We are quite sure that we'll be able to reach that. We have plans in pipeline to reach INR 100 crores. We've been doing CapEx if you see last year also was INR 80 crores, and the '19/'20 was also about INR 66 crores. So CapEx has been in the range of about INR 80 crores to INR 100 crores and for '23, while we are still at the drawing board to draw out plans for that, but we would remain in that. I think it's a little early, but we would work out more details and maybe by end of Q3 we would be able to draft out the predictions more finitely for CapEx for '23.

Sir, as you said earlier, there has been some CapEx of office building...

Participants, we've lost the line for the current participant. We take the next question from the line of Venkatesh from LogicTree Capital.

A question on your people's -- team strength and people skills. Broadly, in the world that we are living in, in terms of infrastructure, there a lot of technology at play. There are probably apps to deal with how infrastructure projects are getting executed, et cetera. Where is RITES on this technology value chain. Do we have the kind of strengths that are important to execute, plan, design, projects of critical importance? And do you spend money on R&D, software, et cetera?

Subject which you touched Venkatesh is very close to my heart and in fact, as I mentioned, my vision is future ready. So what I see is that RITES has a good IT base, it has a lot of applications in-house. It has also been working in partnership and doing it work for other PSUs, but I have a very soft corner, big soft corner for IT, IT area, IT related works and using it for applications, not only for in-house efficiency, but also taking on IT works in a big way, in partnership with other IT, the best-in-class in the group of IT companies. So I see the opportunities I want to capitalize and leverage on opportunities in the IT sector, both for improved in-house efficiency, whether it is in terms of project monitoring, whether it is in terms of employee productivity and also partnering with the best-in-class to take on IT consultancy projects, IT turnkey projects. So this is one area which is definitely going to see work in the coming months and the coming years by RITES.

Amazing, sir. I think IT consulting for infrastructure is what -- you put it in the right words. Great. And you would be open to recruiting or adding team members from the market because IT guys obviously are expensive in India and RITES will go for talent from the market if required?

I am open for any resource, which translates into a bottom line. That resource, whether it comes from employing full time, employing on a project base, employing on a contract or partnering with someone on a specific case or a specific project or a specific area of activity, each of these options will be explored and depending on what it gives me in the bottom line would be executed on a case-to-case basis.

Great, sir. We'll follow-up with you otherwise on IT consulting. It's also very dear to my heart.

The next question is from the line of Rohan Samant from Multi-Act.

I think we can take the last 2 questions after this.

So with respect to the IRSDC JV, there was this news regarding there is a possibility of government shutting that JV down. So we have around INR 48 crore investment in that JV. So what happens to that investment?

So in fact, it's not just a possibility. The instructions have already come in writing for closure of IRSDC. And we have 24% share in that. The modalities have already been started with 3 promoters of IRSDC, that is RLDA, IRCON, and RITES. We've had meetings and our Board of the -- of IRSDC. So going forward, the process is already rolling. And in the coming months, it will -- based on the evaluation and the -- as the 3 promoters decide in the subsequent board meeting, how to -- and what will be the impact and the valuation of the assets and liabilities, the picture will become clearer in the coming months and we'll definitely share it with our investors.

The next question is from the line of Keshav Garg from CCIPL.

Sir, in FY '19, we did INR 1,070 crores of our consultancy income domestic and this year, we are expecting it to be INR 1,000 crores. And sir, our export order book is flat since 5 years. And sir, our cash balance is constantly declining and our other income is also collapsing. So taking -- and so all this was when there was no private competition. We could not even keep abreast with inflation. Now with private sector competition coming in, sir, things look really dark. So what do you have to say about that?

Well, that's your perception, I can only say that as if you've been hearing my specific comments on each of these areas, I would only request that's a sweeping comment and I would not like to subscribe to that. The figures and the performance of quarter-by-quarter, except for the last year, which there's been an overall setback, have been encouraging, and I can only assure you that we are looking to leverage on each of the 4 sectors. And the only coming quarters will maybe assure you the results of the coming quarters that I don't think things are dark to use your words as you frame that out to be. Maybe the last question after this.

Ladies and gentlemen, we'll take the last question from the line of Chintan Sheth from Sameeksha Capital.

One question on the INR 4,000 crores new line projects, which we secured in Q2 is not part of our order book as mentioned in the presentation. Is this kind of go back to bidding or something because of the new orders come or it's part of our order book and gets reflected in Q3 once finalization happens?

So Chintan, this INR 4,000 crores is work-in-progress in the sense that the INR 6,400 crore order book, which we have mentioned, this does not include the INR 4,000 crores, which came in recently in the last few months. And the modalities of finalizing all the modalities of this, especially more so with this circular also coming. So we are working on it. And we -- as soon as the -- it concretizes, which should normally, I don't foresee any problem, we'll add this to the order book, but in terms of all the papers and agreements and the work getting signed and things like that, only then we would add it to the order.

Ladies and gentlemen, as there are no further questions. I would now like to hand the conference over to the management for closing comments.

Thank you all for very interesting questions and touching all the areas of activity, which we do and which we plan to do. And as I mentioned that the Q2 has been encouraging. The last 1 month of Q3 also has been showing a positive trend. And with this trend, I'm sure that we will continue to grow and capitalize on this growth trend, which we are seeing. And to again reiterate my vision for RITES in the coming years, I see that I capitalize and use my in-house bench strength, partner with the best-in-class to complement my bench strength wherever I feel that there is a gap and to make RITES future-ready with the cutting-edge that is required in today's time. And the bottom line, which will guide every decision, every activity, every decision, every strategic move of ours would be the bottom line that would be not just more of the same, but much more of the new.

Ladies and gentlemen, we thank you all for being a part of the conference call. If you need any further information or a clarification, please mail at [email protected] that's A-N-I-M-E-S-H.L-O-D-I-Y-A at RITES.com. Ladies and gentlemen, this concludes your conference call for today. Thank you for using Chorus Call conferencing services. You may now disconnect your lines. Thank you and have a pleasant day.