Techno Electric & Engineering Company Limited (TECHNOE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Techno Electric & Engineering Company Limited Q4 FY '21 Earnings Conference Call hosted by Asian Markets Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amber Singhania from Asian Markets Securities. Thank you, and over to you, sir.

Thank you, Ayesha. Good afternoon, everyone. On behalf of Asian Markets Securities, I would like to welcome everyone for 4Q FY '21 Earnings Conference Call of Techno Electric & Engineering Company Limited. We have with us today Mr. P. P. Gupta, Chairman and Managing Director; Mr. Ankit Saraiya, Director of the company, along with their management team representing the company. We shall start with the opening remarks from the management, and then we will move to the Q&A session. Over to you, sir.

Yes. Thank you, Amber. A very good afternoon to all of you, and I'm grateful for -- to be part of our investors conference call. I welcome, once again, everybody to discuss our financial results for the quarter ended March 31, 2021. First of all, I will like to wish everyone to be safe and healthy as the times are extremely challenging, and I trust most of you must have been vaccinated by now. Anything said on this call, which reflects our outlook for the future or that could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the industry or our company faces. Full year results are not comparable on year-on-year basis due to the impact of COVID-19 in the quarter -- in the last year, first quarter of April-June 2020, when we almost lost 3 months. And we continue to be impacted with local lockdown and quarantine rules by different states. As such, the present results may please be considered as if the year was of 9 months only. Let me quickly highlight our performance for the last quarter, previous quarter year '21. The total revenue stands at INR 214.79 crores, up by 88%. Revenue from EPC stands at INR 212 crores up by 78%. EBITDA for the company stands at INR 18.95 crores. The operating profit for the EPC segment for the quarter is at INR 32 crores compared to INR 15 crores last year. Other income is at INR 8.6 crores. The profit before tax for this quarter is INR 14.94 crores, and profit after tax is INR 8.81 crores. The EPS for this quarter stands at INR 1.18 crores. The full year detail, the revenue is at INR 889.22 crores. The revenue from EPC business is at INR 789 crores. We have been able to cover most of the ground despite lower revenue in the first quarter due to the COVID-19 impact, as such, this may be taken as a 9 months revenue. Revenue from Wind segment is at INR 100 crores approximately compared to INR 90 crores last year. The company -- this includes the differential tariff charges of INR 0.975 per unit or units built during the year '19, '20 and '20, '21 totaling to INR 35.85 crores vide APTEL impugned order dated 28/01/2021. Setting aside the TNERC tariff order of March '18 where the tariff was reduced to INR 2.14 as against INR 3.12 earlier -- INR 3.10 earlier. And confirming that the tariff of the prior period, that is INR 3.10, will continue to be enforced till further orders. Additionally, we have also provided, impaired or written off INR 11 crores of revenue booked in the year '17, '18 on account of REC pricing as per regular orders, which reduced the floor price to INR 1,000 from INR 1,500 for the unsold inventory there. EBITDA for the company stands at INR 216 crores. The operating profit for the EPC segment was maintained compared to last year, which stands at INR 144 crores approximately compared to INR 140 crores last year. Operating profit margin is at -- for EPC segment is at 18% compared to 17.9% last year, year-on-year. EBITDA for the Wind segment is at INR 72 crores. The other income is at INR 83 crores compared to INR 44 crores last year. It includes profit from the sale of our transmission asset in Haryana that is named as Jhajjar KT Transmission asset and we made a profit of INR 38 crores as capital gain. And additionally, we received a dividend from the company of INR 15.80 crores. As such, the gain out of the same is around INR 43.80 crores, which is part of INR 83 crores, INR 83.5 crores. Profit before tax was -- for the year is at INR 215 crores approximately compared to INR 213 crores and profit after tax is at INR 204 crores compared to INR 177 crores last year on stand-alone basis. The EPS is at INR 18.22 crores and the value of current investments, including cash and cash equivalents is -- stands at INR 800 crores in the company. The order intake last year has been only around INR 43 crores, but we are L1 in various orders what more than INR 600 crores, which could not be decided. Additionally, we have also participated in tenders for more than INR 3,000 crores, the results of which are still awaited. This -- so if we take L1 in the order book, it will be around INR 1,000 crores on an average. Our unexecuted order book as of date is INR 1,920 crores approximately. But the outlook is very great, I will say. We expect lager business out of the FGD segment, AMI segment and also our new segment where we are in by that is data centers. In FGD segment, we'll continue to be in focus for next 3 to 4 years. As for notification of Government of India, all coal-fired power stations need to limit their sulfur emission as notified by the [indiscernible] department and further classified by Central Electricity Authority by December 2023. This is a -- there is a considerable providence with CPSU is ordering the projects for implementation of these solutions, but the same will now be happening with SCBs and private sectors more strongly. We expect business of around INR 12 billion in this year only at this level of business will continue for next 3 to 4 years as 50 gigawatt is yet to be ordered out of the remaining units with CPSUs, SCBs and private sector at least, if not 100 gigawatts. So maybe there will be further line extension by government going forward. Coming to Transmission segment. We expect it will be a status quo and will be largely linked into the evacuation of the renewable power as we had stated last year. There is an ongoing TBCB bidding of 66 megawatts of evacuation of renewable power to meet the target of 175 gigawatts and we trust this will be over by September '21. But earlier, it was supposed to be completed by December 2020. But due to COVID, this has been extended and some of them have been refloated also. Against the bid submission, we plan to bid for at least 7 projects totaling to INR 3,500 crores and expect to win 1 at least, if not 2. The union budget additionally also provides for INR 3.5 lakh crores and restated by FM yesterday in the stimulus package for power distribution sectors to be released over 5 years and what will be released based on financial performance and viability demonstration by the distribution company. So this area continues to be of huge concern to the government and lot more need to be done. We are also finding good interest as well as traction from the various InvIT funds and large investors, large PE funds to participate in above bids by making the company significant partners, trusting that there is no development risk by partnering Techno. This will enhance our access to capital that will help us in bidding for more than 1 project albeit a little more aggressively. Metering segment on the distribution side, we see a lot of activity happening going forward and particularly in the case of prepaid automatic meters or smart meters. And also the power distribution networks will also be strengthened and made a lot more smarter and intelligent as a backup [indiscernible]. The objective is mainly [ among the commodities ] to improve efficiency and contain losses. So the health of the DISCOMs could be improved. Additionally consumed government is also desire to provide the consumer a choice of power suppliers, which still remain a dream after 20 years, nearly 17 years of electricity has been placed. And even open access also is not in place as desired. We had mentioned earlier that we are interested for a project in the state of J&K for parallels 9 lakh meters, and we hope this will be procured this year. And as you all know, we are already actually looking at project for 2 lakh meters, which has acquired [indiscernible] status right now. Apart from this, there are readings in media that government is also utilizing this opportunity for reforming the sector, which are overdue and will be carried out in the name of Atmanirbhar Bharat. And although these reforms are also loans [indiscernible] of the stakeholders in the sector and as well as the need of the consumers for [ when we get launched ]. There is -- this is holding up the amendment into electricity aid, amendment to the tariff [indiscernible] and the elimination of cross subsidy, payment of subsidy directly to the power consumers and a lot of planning is made by CEA to give eligibility over the next 3 years, 3 to 5 years. We are very hopeful that power sector is at a critical juncture and something good should happen going forward. Wind segment, we are again facing headwinds because of the DISCOMs being poorer by every project day and not having enough money to pay. It has impacted not only the tariff but also [indiscernible]. We hope to realize our pending payments of last 2 years shortly out of the INR 1.2 lakh crores package announced by the Finance Minister through REC, PFC to the DISCOMs to pay to the generators of their views of the December 2020. We have already received around INR 58 crores in last quarter, out of our total dues of INR 132 crores by the tranche 1. The tranche 2 has certain conditions precedent which are to be complied by the DISCOMs to facilitate the release of the same and is expected that in this coming quarter, we'll be able to get that money. Additionally, we have been speaking about the REC price issue since last few quarters. There is no trading of REC happening after the stay order of APTEL in July 2020, APTEL has allocated fast track hearing in the first week of July, and we hope to receive the order by July end. As commented in the last quarter, we will be recovering our performance of last year and shall be executing at least 50% of unexecuted order bookings during the year and also part of that new orders to be booked during the coming year. The next 3 years are going to be full of growth as we can foresee, whatever growth we have lost in the last 3 years, will be made up in the coming 3 years. We -- in the coming years, we also see a strong power sector reforms with focus on efficiency as a stable and reliable power supply, cost of power and improvement of overall financial health of the sector. The focus will continue on renewable power with the [indiscernible] transmission infrastructure as grid corridor. The transmission infrastructure is required for 500-megawatt over next 10 years. Our thrust on overseas market is also bearing fruits. We are hopeful of bringing further orders probably markets of Africa and [ Namibia ]. And our FM have also yesterday confirmed the package of financial assistance of INR 33,000 crores for exports. That said, COVID-19 has impacted our life is multiple ways, but 1 positive outcome of this is the growth in the digital space. This is a huge development with the growth in the digital activities all around us. Obviously, there will be more digital data to be handled and also backed by now IT policy of the government of data privatization or in-house. It is expected that the third-party data centers, industry or data center infrastructure will grow significantly from the current level of 500 megawatts to at least plus/minus 2-gigawatt in next few years. And this will definitely be seeing a further growth like renewable power. Till date, most of the data centers are located in Mumbai where undersea cable was available. But now for the last 1 year, Chennai has become the hub also after the installation of undersea cable. Airtel, Adani and NTT are already in the process of setting up of data centers at Chennai. We have also -- Techno is also in advance stage of setting up of data center of 30-megawatt of IT load for [ hyper scale power density ] for which the land has already been acquired in Shirsoli in industrial estate next to CCF -- TCS campus and the project is under construction. Additionally, we will captively consume the operational wind power capacity by 111.90 megawatts to classify the data sector as carbon neutral that aligns with the policy of major hyper scale customers like Microsoft, Google, et cetera, because of their ESG commitments. So we see a double whammy rewards out of this business, which will grow strongly in the coming next 3 to 4 years. I will ask my son to cover both on this point. Ankit, can you take over now?

Yes, sure. So I think our plan is to actually grow this segment from just 1 data center of 30-megawatt to at least 250 to 300 megawatt of total capacity of data centers over the next 3 years. We are beginning with Tamil Nadu and maybe in the -- the next project, we may go to Calcutta, as Calcutta is also seeing development of an undersea cable landing station at Bigha at West Bengal by Reliance Jio, that also should get commissioned by 2022, hopefully by March, and we should be able to see Calcutta becoming an attractive destination because as of now, there is not much data center activity over there, though there is demand of data by the consumer. And West Bengal is the gateway to Northeast, serving Bihar, Odisha additionally and can become an expert of data center to markets like Bangladesh, Bhutan, Nepal. Calcutta might become a very, very interesting proposition considering that there will be limited development of data centers considering the market as such overall. But as we speak, we are seeing a lot of interest from Airtel, STT as few other data center operators now scouting Calcutta parallelly along with Techno. We are in advanced stage of land allotment from the state government. Hopefully, we should be able to get a land allotment in Calcutta in the next 6 months' time and initiate that project as well. Additionally, we have shortlisted land in Hyderabad right opposite where Amazon is developing the captive data center. The -- that should become our third project going forward. And then maybe we will start targeting Navi Mumbai and Noida as our fourth and fifth installation. So the overall idea is to develop about 250 to 300 megawatt of data centers over the next 3 years' time. And as mentioned, we should -- we are leveraging both our verticals, which is EPC and renewable energy. So it adds to the capabilities of the company, and it is a natural extension to what we have been doing till date. The total investment, hopefully, we'll be able to make up about a couple of billion dollars in this industry going forward. And we are looking for a strong strategic partner to handhold us during this journey, who should be able to take anywhere between 51% to 74% in this venture while Techno holding 26% to 49%. And we'll be derisking our data center operation and customer acquisition capability by holding a strong strategic partner along with us, while Techno will take on the development risk, and ultimately offload the data center to the strategic partner and come out of the asset as we have practiced previously in BOT projects. So that being the business plan, hopefully, we'll be able to see good deployment of capital over the next 2, 3 years, along with a strong strategic partner behind us. And we are in advanced talks with a couple of players based out of Singapore and U.S. who are evaluating Techno Electric as a potential strategic partner for developing data centers. And we should have a good strategic partner on board before the end of this calendar year. Back to you.

Yes. See, we are setting up this group in Delhi, where Ankit has moved now. He has already set up a team and electromechanical work as involved in data center is the forte of Techno Electric, which we are doing for last 30 years in power houses, areas like cooling, standby power solutions, power intake solutions and power storage solutions. They have been firefighting solutions, and we will be taking a strategic partner of our building work. So all these sounds good going forward. With this, I will now open to the house further any required -- any information or detailing. Over to you, Amber.

[Operator Instructions] The first question is from the line of Ankur Sharma from HDFC Standard Life Insurance.

I had a couple of questions. One, sir, if you could just remind us, what was the FY '21 order inflow and order book? I think you said INR 450 crores for the full year in terms of ordering?

Order booked is INR 450 crores and INR 600 crores we are L1, which we expect in this quarter. Any day that should be converted into order.

Okay. And the order backlog, sir, the order book?

Will be INR 2,000 crores I would say, with INR 450 crores and by INR 600 crores coming in, it will be INR 2,500 crores.

Okay, fair. Sir, secondly, as we go into FY '22, would you like to guide us in terms of sales margins and orders as well and within orders, how you typically give it by segment, how much you are looking at FGD, transmission, data center, et cetera, that would be very helpful.

Sir basically, traditionally, we have been a T&D company by and large, although we started mostly as a auxiliary system suppliers to power stations 40 years back with the first power house being set up by NTPC, that was our first journey. So it used to be mechanical in nature at that time, which grew to electrical and then to transmission with power grids coming in, and we have done number of switch yards, which we still do for NTPC at Meja, at Tanda, at Vindhyachal at many places we have been doing and systems of water intake or firefighting solutions we have done in Bongaigaon, Barh, Vallur. We have been part of all powerhouses of the NTPC in some capacity or the other, other than gas-based by and large [indiscernible]. Similarly, in power grid, we have a huge presence as you know I need not repeat if they have 260 stations country wise, at least in 125 or 130 Techno has been there as greenfield or brownfield extensions substantially, we are in all these segments. But coming to this year's buildup have changed or not over the years, every business -- every 5-year I see changing tremendously as a [ capability ]. Earlier, we used to do more of the 220 kv stations in 2005 and the Board of DDGY (sic) [ DDU-GKY ] rural electric [indiscernible] which by 2010 became 400 kV transmission systems then GIS came then 765 kv came, and then smart metering became part of us and now we are part of FGD. So in the current year, you can take FGD will definitely be contributing all of the top line around no less than 40%. Another 40% will come out of the transmission side at distribution, which is our traditional. So we don't see much growth in this area. FGD will grow from 15% to 40%. And another 20% will be out of data center, which we have been building in Chennai in-house. And the top line targeted for this year will be almost around INR 1,250 crores if we don't see much disturbance out of the COVID once again. But in next 9 months, we should be able to otherwise achieve this kind of billing and mix of it...

Okay. So you said, sales of INR 1,250 crores, sir, how much margins and orders also in value terms?

Order we definitely are expecting no less than INR 2,000 crores or INR 2,500 crores this year if government offices continue to work at the site. And margins will continue to be at the present level 15% plus that is achievable by efficient execution or timely execution [indiscernible].

[indiscernible].

The next question is from the line of Bhavin Vithlani from SBI Mutual Funds.

If you could help us understand what has been the investment portfolio breaking down into what has been mutual funds? And how much is the AIF and various corporate bonds? And also, if you could also explain about the INR 100 crores loans that were given and how should one think about it?

You see, there is no change over last year. We have run our license post ILFS debacle in the country. So whatever exposure we had in bonds and as we have liquidity from INR 400 crores, now it is only INR 150 crores at the moment, brought down. And balance is all parked in mutual funds only, which are largely debt and short-term schemes of the debt mutual funds, which is almost around INR 450 crores. Then we have investments of another INR 100 crores in our joint venture or associate companies, additionally, I would say. So -- and this INR 100 crore loan given to [ McLoy OC ] has been reclassified and reinstated backed by escrow account. Of the promoters -- earlier promoters have given this money in the company as a security deposit, which now is transferred to escrow account. You can download our cash flow and balance sheet from the website. You will be having more clarity on it because the other corporate debtor wanted to take advantage of by citing in [ NCRT ] proceeding as if more loan in books mean no loan, nothing is due to us. So that is the kind of story it was, whereas the loan was very much part of the current assets at that time also. But nevertheless, to give a specific recognition, we again reinstated the loan by reclassifying the current assets and that by escrow account to remain only able to the investors and the investing community and also to honor our commitment to them, that company will suffer no loss on account of nonrecoverability.

So just why aren't we paying back the INR 600 crores of surplus cash to the shareholders and there is always that risk of this allocation of capital? I mean, I mean, it seems like our focus is more towards earning a more annuity-like cash flow stream rather than growing the business if that could be the case. Why shouldn't we be paying it back to the shareholders and maybe that could be taken up with the promoter at the personal end? And because this has been impacting the return ratios to a greater extent.

Sir, I think Techno has been very liberal in buyback or dividend payout. We have announced the final dividend of INR 4, which together means INR 10 or 500% of the face value of the share. And in amount terms also it is INR 110 crores, which is almost more than 50% of the bottom line as per our dividend payout policy, and we will continue to be there for long term. Additionally, as highlighted by Ankit, we have used program of investment in data centers in next 3, 4 years. And liquidity, you see is always makes you king in the market, by honor your commitments to the suppliers, stakeholders, business risk. So it is always a good idea to have -- to be cash strong, debt-free. And investors should always look for growth in stock value growth in the company as well as the dividend additional like we are paying 500%. But if your recommendation is onetime special dividend, I note your point, we'll come back to you down during the year.

[Operator Instructions] The next question is from the line of Renjith Sivaram from ICICI Securities.

Sir, if you can throw some clarity on the revenue target for FY '22? And if you can just throw some more what's our order intake target also for FY '22?

Sir, wish and target are becoming every day a concern to us. If you ask me, our top line will be INR 1,250 crores, as I already stated in the first question from HDFC. And the target of order intake is INR 2,000 crores this year or maybe more if everything goes normal, I can say. And the bottom line will at least grow by no less than 25%, if not more.

Okay. And sir, how much of cash we are planning to invest in data center for this year, next year is there a time line earmarked, if you can help us with that?

To start with, it will be around INR 100 crores. But depending on how soon the partner is in place and what kind of risk reward he offers us in that relationship. You can say it can range from INR 100 crores to INR 500 crores spread over 3 to 5 years.

Okay. And probably post extension of that, we will try to sell it out, and then we'll adjust that as we have done with the transmission related that's all [indiscernible]?

Absolutely. You see Techno is EPC, we like to remain EPC. We like to build a data center not only for us but for third parties also because that is ultimate aim to acquire capability, proficiency and to make it a part of our ongoing EPC business. That is the larger focus out of it, and the team is being set up in Delhi to achieve this. So -- and starting with our own data center is only to assure the market that they are in safe hands post by all means successful commissioning of a given data center.

Okay. Sir, lastly what's the total size of this data center industry in the Indian market? What's the total size of this industry so we will get some idea?

As Ankit said, it will be 30-megawatt of IT load or 50-gigawatt of billed collected load to start with.

The next question is from the line of Deepesh Agarwal from UTI Asset Management.

My first question is this Chennai data center, which you're building right now, would that be able to absorb your entire power from your Wind farm selling the power to this data center?

Actually, you are right, sir. It is sized accordingly because the general PLF, what we get in a wind power is no more than 20%, 22%. So as such, this 112-megawatt, we stepped up out to technically no more than 30 megawatts of the normal power capacity of any thermal generating station, thermal or hydro generating station in a normal partner considering 80% PLF. So exactly the whole power will be consumed. We produce about 200 million units, which we intend consuming fully in this data center and maybe importing another no more than 25 million to 30 million to reach additional tranche.

Right. Right. And at what stage we would be selling the power to this data center? Because I understand we are not getting the entire tariff from the Chennai DISCOM -- from Tamil Nadu DISCOM. So would there be a change in our realization in the Wind business?

Absolutely, it will help sir, because if we take this power from the grid it costs around INR 8 per unit. But I think to have a win-win relationship, we can consider a realization of almost around INR 5 to INR 5.5 as against INR 3 we get now.

Understood. Understood. And for the other data centers, would you be building up a renewable project or you will be tying up power from the market?

No, we will be tying the market power, which over the period we may substitute by our own captive power because renewables have become a real life-changing story in this country. It is cheaper than thermal, you can do it in 12 months. It is becoming easier to store now going forward and it is becoming a lot more stable and reliable as against grid power earlier. So technological innovations are happening with every passing day sir, and I'm very confident that even society will experience this change in years to come. So obviously, it will be part of our focus to absorb technological changes, upgradations and costs accordingly. The renewable power today is available at INR 3 a unit, which [indiscernible] is trying to produce and sell through different entities. So it's a very exciting period for the renewable period, carbon neutral over the period, we may be carbon positive, which we had not marketed so far so strongly. But trust me 1 thing Techno has been carbon positive for last 10 years. We are so strong in outlook on this side.

Okay. Okay. And last question, if I can squeeze. When you say that you are looking for a strategic partner in data center, would you be looking for a partner, even at the construction phase, reason being it may impact your valuation. Or would you wait for project getting commissioned and such a market-related valuation which is typically high when you see the global valuation of data centers?

Sir, we will need a partner at the construction stage honestly, because this high-end customers all have very specialized requirement when it comes to hyperscale, super-node data centers, they all have their customized typical requirement, which are only known to these data center operators. Otherwise, we are mostly in India used to co-location data centers not enterprise solution data centers, which are low end applications. So we have an ambition to be part of the high end and getting a partner at the construction stage will help.

The next question is from the line of Sandeep Tulsiyan from JM Financial.

Yes. Sir, first question is putting some of these large orders, which we have in the book. A lot of them were booked, say, towards the end of 2019, and we have seen a sharp increase in commodity prices in the last 6 months when these orders are in the bulk execution phase, the DVC order, the Jammu/Kashmir order and Dharampur order. So if you could just help us how the price escalation clause will work on some of these contracts? Although we are making very good margins now, will there be any impact on the margins overall?

Sir, cost and margin is a 2 sides of the same coin and it is an ongoing challenge all the time in any industry, in any market. But engineering capability is 1 thing, which always helps you in improving your efficiency, better use of these commodities and materials, redesigning, redefining their engagement in the project solutions. So basically, you see don't look on this business like P&C. It is an EPC. So there is capability in E more than P&C, sir and P&C happens by virtue of being cash liquid in market. So we get -- firstly, we engineer very optical solutions within the challenges all the time. Sometimes solutions are more skewed in favor of finance, sometimes they more skewed in favor country cement. Sometimes, they are more skewed in favor of copper, depending on how commodity prices behave. So accordingly, you have to do engineering. So that is the forte of Techno that we rejuggle and juggle our solutions in a manner that we still can deliver the same very solution on a committed price with though original margin. Yes, it is a challenge, but it is a part of life. So this is -- this do not worry us, sir. We have seen these cycles many times in the past also. And there is no 1 single commodity, which dominates our solutions. They are well distributed across the [indiscernible] in the solution. So no signal element is more than 5%, 10% in the solution. So we are, by and large, able to take it in our stride. And luckily it generally has a policy of procurement, power grid do not include transformer reactors, which are high value, high cost nor a producer of 1 distribution provider. So that is -- the rest of the solution is perfectly optimized within the cost structure. So we don't see any impact on margin. And we will -- like earlier, we used to do 765 kv solution in 3 years, sir. Last year, we delivered this solution in 12 months at Bhadla to power grid which is a history in itself with the country that can a 765 kv station be built in 12 months, despite COVID. So all productivity levels are high. You take care of your neighbors. We have vaccinated all our employees, labors, camps, villagers all around us. So you have to carry out this whole process as a mission as a passion. So you are -- everybody takes care of your health also in turn.

Understood. And probably our guidance also of 15% margin versus we delivered 18% last year kind of takes care of whatever escalations happen.

Yes, I have always maintained 15%, sir, plus/minus. Yes, we'll definitely target more but our guidance, I will always say 15%.

Sir, second question is on these new orders between INR 2,000 crores to INR 2,500 crores that you have shared. How much of data center part does it include? If you can break up between, say, how much is going to come from the TBCB part? Are there any FGD orders you built in? How much of smart meters, and anything between from those export orders of Afghanistan and Africa, if you can give us a breakup on a broader basis, it will help.

Sir, broadly, you can take it like INR 1,000 crores out of FGD, another INR 500 crores out of transmission, INR 200 crore to INR 250 crore export businesses and 1 TBCB package of about INR 400 crores, INR 350 crores, INR 400 crores and some distribution packages of another INR 250 crores. So all packed together INR 2,500 crores. But there may be some variation here and there sir, but by and large this is our mindset.

Understood. And sir, just 1 clarification.

[indiscernible] data center sector will be another INR 500 crores as I said.

Data center will be another INR 500 crores. Got it. Okay. Sir, just 1 clarification. You mentioned in your opening remarks this INR 100 crore ICD, which was given to [ McLoy ]. I think last year, it was not appearing in our assets, but now it is reinstated. So you mentioned some reason I kind of missed it in the opening remarks, if you can just clarify that again.

Kindly refer to clarification on accounts part in our website, it will amply clarify you. Otherwise, you are welcome to send me a mail, I will further engage one-to-one with you.

[Operator Instructions] The next question is from the line of Renu Baid from IIFL.

Yes. So our equities are -- always are valuable to listen to your views and insights on the sector and trends, which are picking up. And also to highlight that you've always been among the first in the industry to identify the emerging trends in this case, data centers coming in. So sir on the -- first question is on the data center segment itself. You mentioned that apart from using the cash as well as the E&P capabilities you want to build up a steady-state capabilities in data center APC segment, L&T segment. So if you can elaborate in terms of what are the kind of initiatives you've planned to build up the team to execute with the EPC of these projects? And apart from the in-house data center that we are planning to execute, what are we doing in terms of getting the PQs from other consultants to qualify for large data centers which are coming up on EPC basis?

Let me ask ma'am Ankit to answer this query, who is heading the center, who is handling this division for us. Ankit, will you please take over this question?

Yes, sure. Basically, we're building a team in Delhi. And you've already started the process of building the team and we're trying to take people who have been established in this industry for at least the last 5, 6 years, 1 needs to keep in mind that data center as an industry is not something which is matured. It is still very new. The scale of data centers that we are talking about today have not been practiced in the industry ever and it's a trend of only last 1 or 2 years. The resources which are available in the industry with the existing players are also very, very limited. And the benefit that Techno holds over here is this industry is more or less the -- if you look at the people who are governing the industry or were actually running the shows have all come from power sector because power is what has to be handled majorly in these projects and they are also sized in megawatt. We said that while we are engaging with people who are -- and we are onboarding people who have experience of building even if it is a small data center from companies like L&T or other data center operators, which are existing Techno -- having the right Techno already has those skill sets because we have about 300-odd engineers from power sector. And basically, even if you look at people who engage with other data center operators or EPC companies who are delivering data centers also have professionals coming from power sector only. So it really doesn't require a very large team to be set up a very new team to be set up, but a few senior level position people who can guide the existing team to the right direction for building those data centers. So that work is already ongoing, and we have decided to base this team out of Delhi because it's easier to find people from ITI background and power sector in Delhi rather than Calcutta. So that call we have taken to set up this team in Delhi. And that's what we are working towards. We've already hired at least 4 professionals. We have our Head of Design engineering in place. We have a senior person in business development from L&T already in place with us. And we have people in Chennai for specific works. And the team is ongoingly being shaped as the requirement is coming forward. And hopefully, we'll build a team of 15 individual space in Delhi Gurgaon. That will basically channelize the team back in Calcutta.

Sir in addition the capital requirements by when are you targeting to start participating in external projects for third-party operators or owners, sir?

We've already started doing that. We started engaging with data center operators. And so we are in talks with 1 of the data center operators based out of Singapore for doing a small EPC job for their upcoming data center in Bombay. Then going forward, we're already in talks with a couple of other data center operators who are looking for us to participate in smaller packages of their upcoming data center as well as in providing them with renewable energy in those specific states wherever the data centers are coming. So these kind of conversations have already started. We need to be a little more aggressive as far as backing EPC orders and data center is concerned, but it is going to be a little time taking because we don't have specific experience and qualifications with us. So marketing ourselves in this sector is going to be a little more time taking and may take about another 6 months to establish ourselves as an EPC contractor in the industry. but that journey has already started, and those conversations have already begun. So 1 of the conversations is already in an advanced stage.

Sure. My second question is to Gupta sir asking and understanding on for a lot of projects, be it on LGD side for certain components or for the smart meters, you have always had some tie-ups and efficient sourcing arrangement with counterparts from Asia. Now that the government has been a bit more sticky in terms of not allowing companies a sourcing for power projects coming in from the Chinese counterparts, how are we looking at the sourcing arrangement for the equipment side? And would it now move more of domestic sourcing? Or are we looking at alternatives sourcing arrangements from other global vendors?

No, ma'am we will continue to discover the sources, competent sources. And as available, like FGD, we have a Korean partner now. We have 1 Korean company has approached us for meter business also. Because India is a hub now, where a lot of growth has to happen in these segments, which rest of the world has already progressed with and have the desired capability with them. And obviously, there are local sources also. But as the businesses are becoming more complex and risk is growing, so many CapEx also are becoming hybrid of CapEx and OpEx. So this business of product and project will start segregating going forward. So this will be another edge to Techno in terms of leading the pack. Having delivered 400 projects in last 40 years in all terrains and challenges countrywide right from Kashmir to Kanyakumari and Northeast to Mumbai. So I think Techno has a know-how and ability to synergize solution in a given pocket that is very important in India. Nothing works as a standard way of life, standard solution, which is relevant in 1 pocket is not relevant in another pocket ma'am like even the -- our language, culture, habits way of looking on issues change with every state, every pocket. Similarly in projects, you have to be very localized. It's a very fertilized business, pockets consuming business. And that has been forte of Techno to preserve costs, preserve margin as well as deliver project in time because we absorb all those things faster than many others because that is the character of the company, and that should be true character of any good project company to my mind.

Got it. And sir, 1 last question, if I can ask. Do you have any plans to foray or look at opportunities in the clean energy segment, be it energy storage or otherwise on the hybrid and other side?

Obviously, ma'am. We will keep, keep exploring. Definitely, we are not look -- let me tell you, we are a solution company ma'am. We are definitely not a life cycle investment company in asset. That is not our business. We create life cycle assets for somebody to own. But acquiring technologies, improving on technologies, integrating those technologies as a part of our solutions is always strengthening us to of remain time relevance and also offer a complete competitive solution to an asset owner as required. So these are definitely of our interest, huge interest. And if required, we will ourselves like to invest in first 1 or 2 solutions to gain experience, gain comfort out of the use of it and then market that comfort to the investor. So that I must take the risk, if I want a high reward out of my business ma'am, then I have to take high risk also, that capability my company must have.

[Operator Instructions] The next question is from the line of [ Rohit Balakrishnan from iThought PMS ].

Sir, on this intercorporate deposit of INR 100 crores, I just wanted to understand, sir, if my -- please, correct me if I'm wrong sir, in the previous calls also, I think in the last year's balance sheet, we had reversed this INR 100 crores by the promoter. I mean, the company getting back this money and the promoter paying this INR 100 crores, taking it on their own books and subsequently -- and this matter was closed in a sense. And now I have gone through the note, what I understand is that you have now taken an escrow and whatever the deficit will be taken from that escrow, which is guaranteed by the promoter in a sense. So -- but just wanted to understand, sir, even to get here I mean I understood that you had already closed this matter by the promoter taking it on their own books and not on the company's books. So this was a bit surprising, sir. Can you please help me clarify this point?

Sir, please write to me on one-to-one because that corporate that are uses my submissions in these kind of conferences in legal proceedings. So whatever note says and your takeaway is, you give me one-to-one call, I will explain for sure.

Okay, sir, I will do that.

But I will request you that note is very sufficient and explicitly detailing and is sufficient for investor guidance. That company carries no risk on its own. And if there is any shortfall in recovering will be made good by the promoters. That commitment we continue to our investors and to be honorable in the eyes of our investors.

No, sir, I understand. Okay, fine. I get what you're saying. I will write you one-on-one to get more clarity. Sir, the larger point, I think somebody said -- earlier also raised this point. So we are -- in our business, in the EPC segment and also in the transmission segment, I think we are second-to-none as can be seen by the strength of the balance sheet and also the kind of margins and the kind of risk we take, we are very risk averse and that is something a very, very good thing, especially in our business. Sir, if you look at the excess cash -- and I also agree to your point that you've given cash out and you've been generous by doing a buyback of INR 100 crores and paying dividend of INR 110-odd crores this time, INR 130-odd crores this time. But sir, like some of the things that we have been doing in the last 2, 3 years -- and I'm sorry for being a bit blunt about this, but last couple of years, first was the issue of INFS and now this again [ McLoy ] thing why you both -- in both the cases, we have not had any write-offs as such. I mean in the [ McLoy ] case you are guarantying and also in [ INFS ]. But sir, it just puts a spot on our otherwise very clean back record and governance that we've had both on the business side and also on the capital allocation side. So I mean this is just -- I'm sorry, but just a small feedback being an investor in the company for a fairly long time, but just I also have gone through a lot of your publicly available conference calls and investor-related materials. And I have really enjoyed reading whatever you talk about the industry, but I mean, both the value creation point and also from a risk mitigation point, I would say that -- I mean, if we can repay that extra cash or if you don't see any business deployment opportunity, I think that the market will reward us handsomely rather than these adventures if I may add that word.

Sir, you have 2 observations. I will be very honest to both of them. More than a year back, I had sought a pardon from the investor community that our lessons are learned and there will be no mistakes in the future, and we mean it in latter and [indiscernible]. Nobody in India have thought experience like ILFS as it happened. And the way -- but I'm more complaint, the way it got there thereafter let me out it forth. Otherwise, there was lot of value in the company for recovery nevertheless. But coming to our part, that gradually, we are substantially reduced our exposure to [indiscernible], it is no more than INR 150 crores now. Whatever money we have recovered is all parked in mutual funds. They are all short term or liquid funds at best. And you can see from the present balance sheet that no more bond book has grow and your money is all safe and secured. And we have also talked about how we planned utilizing this money going forward with building other businesses, because the money needs changes with the -- change in the industry cycle. Going forward, I see 2 changes. One, of course, is a diversification in data centers, what we have talked. And number two, this CapEx business has happening in India in EPC segment will get partially converted into OpEx business as an opportunity, for which you will again need your own capital. So I think we are handsomely regarding the shareholders by a dividend policy of 50% distribution of the bottom line every year as well as preserving cash to be any challenge or change in way of doing the business we are in.

Sure, sir. Sir, 2 questions on the business itself. So we had outlined -- I mean, a very helpful outlining of the data center business. So this ramp-up of 8 to 10x that you are envisioning from 30 megawatts to 250 to 300 megawatts. This we are envisioning in the 3 cities that we are sort of thinking or this is more beyond 3 cities, so Chennai, Calcutta and Hyderabad would take us to 300 -- 250 to 300 megawatts? Or will we need Bombay and Delhi as well to be added for us to reach that level? And sir, 1 more question this 30 megawatts in Chennai which is coming upfront, this you expect to be up and running by FY '24? Or will it take more than that? And what kind of top line will that give us from an EPC standpoint?

Ankit, would you like to answer this question, please?

Could you please repeat?

Yes. So I was asking, sir...

So he is asking first when is your Chennai project getting completed and commissioned? And number two, what top line it will generate? And thirdly, whether you are 250, 300-megawatt will be limited to 3 stations as named by you or will include in Navi Mumbai and Noida also? These are the 3 questions by him. Please answer 1 by one.

Right. See, most likely, we should be able to commission the project in Chennai by December '22. And you see the revenue over here will might be broken into phases because even the data center might get developed overseas. By December 22, let's say, we should be able to develop 10 megawatts of data center, and commission it completely and handover the first phase, that is the 10-megawatt to any potential customer. And as the customer acquisition progresses, we should be able to keep developing additional megawatts up to, let's say, 50 megawatts, and that would be the end of the project. But then we'll keep developing our phases and revenue will keep flowing accordingly. So hopefully, we'll be able to complete the whole project over the next 2, 3 years' time and hand over the complete 50-megawatt to a single customer. So therefore, the revenue might get staggered as per the phases that we keep developing it. But once it is completely developed, I think we should have a revenue of approximately INR 225 crores or INR 230 crores approximately from each of these data centers. And the total capacity of 250 megawatts will be obviously developed over at least 4 or 5 cities in India, depending on each data center size. But let's assuming that each data center will be anywhere between 30 to 50 megawatts, it would be developed over 4 to 5 cities. And the 3 which I mentioned specifically were Chennai, Calcutta, Hyderabad, which are the first few projects that we want to target to begin with and then maybe explore Noida and Navi Mumbai. But it also strongly depends on a strategic partner, what this business plans are going to be because most of the strategic partners that we are discussing with want to be in Mumbai to begin with and Chennai are those 2 targets. So we have to align our business plans with their business plans and see how we progress. But in our opinion, if we have to do it, we would like to begin with Chennai and go to Calcutta, come to Hyderabad and then the other 2 cities.

The next question is from the line of Sagar Sanghvi from ADD Capital.

Sir, 1 question on the balance sheet side. The previous participant had also asked the same question. So of the total INR 800 crores of cash that we are carrying on the balance sheet, how much would go for data center over next 1 or 2 years? And how much is the regular cash requirement for the regular operations of EPC business? And since you'll be generating about INR 200 crores to INR 250 crores a year of free cash every year. So how do we plan to utilize the same?

Sir, the cash utilized in the data center over the next 2 to 3 years can be up to INR 500 crores, as I explained and depending on the partner's own commitment ranging from 51% to 74% and how it gets deployed. So it can range from INR 100 crores to INR 500 crores in a year, number one. But number two, we also see this CapEx business become the OpEx going forward, like in smart meters or even maybe transmission assets, like TBCB and others or more business is happening in the states also going forward, in sub transmission also as TBCB as suggested by the Government of India, MOP as well as CEA. So this business is at a very influx stage now, which has to -- which has happened traditionally over last 20 years, is no more going to be there for the next 2 years as we see the change. So we want to stay prepared to meet any contingency in terms of requirement of funds or cash availability with us, and also continue to reward investors significantly and sufficiently. So 500% dividend is no small reward, sir, to my mind, and we'll continue to maintain it, if not improve on it. But we will continue to evaluate, as you have suggested our requirement of funds, and keep updating you in the investor call.

Sir, you mentioned the CapEx will turn into OpEx. So that means the working capital should go up for us?

Yes, you can say kind of -- it means you get paid only when project is completed and handed over. So working capital will be long term. No project happens in our industry, which has the cycle of less than 2 years. So it means you have to fund for 2 to 2.5 years. And say, 50% of top line becomes more of an OpEx then your requirement would immediately go to INR 500 crore, INR 600 crore or more to maintain the top line. So I would say that these are speculative in nature at the moment. Let's not get worried about it. The more important part is that you are a company is strong enough to address all these challenges as they emerge in the market. And maintain its good -- its strong presence by reward to you.

Sir, last thing, how much would be the retention money that would be driven by it?

About -- it is INR 200 crores sir. The total -- as of now, see the total is about INR 200 crores, you can take 10% of the top line of 2 years. That will give you a drop down.

That was the last question. I would now like to hand the conference over to Mr. Amber Singhania.

Thank you, Ayesha. On behalf of Asian Markets Securities, we thank everyone for participating in this call. Special thanks to the management for giving us the opportunity to host this call. Sir, would you like to add any closing remarks?

Yes, absolutely, Amber. I will, first of all, like to thank you all the participants to join the call despite COVID and all challenges of COVID with them, around them. Still in case any 1 of them have any queries related to our performance, please drop a mail to us and we'll be happy to reply. And similarly, I will repeat my invitation to them because we are located in Calcutta. So anybody dropping in this side is well up to drop in our office and see how we exactly carry out our operations. So you will be our honored guest. I would like to now with this close the conference and thank everybody for joining in. Thank you so much, Amber for organizing it.

Our pleasure sir. Thank you. With this, we can close this call, Ayesha.

Thank you. On behalf of Asian Markets Securities that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines.