Texmaco Rail & Engineering Limited (TEXRAIL) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Texmaco Rail Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agrawal, Head, Institutional Equities at SKP Securities Ltd. Thank you, and over to you, sir.

Good morning, ladies and gentlemen. On behalf of all of us at SKP, it is my pleasure and privilege to welcome you to this financial results conference call of Texmaco Rails & Engineering Limited. We have with us Mr. Indrajit Mookerjee, Managing Director; along with his colleagues, Mr. A.K. Vijay, Executive Director, Finance; Mr. Hemant Bhuwania, VP, Corporate Finance; and Mr. Ravi Varma, GM Corporate Affairs and Company Secretary. We will have the opening remarks from Mr. Vijay, followed by a question-and-answer session. Over to you, Mr. Vijay, for your opening remarks. Thank you.

Thanks, Navin. And good morning to all the investors, all the investing fraternity who has shown interest in the company. We have been interacting with you regularly. Of course, maybe during the last year when the pandemic was there, our interaction had been slightly low. But then since we never expected that the pandemic will come back in such a manner, whereby, again, we will be totally working from home and it will come down to lockdown to the states. But then, of course, this is a way of life we understood and accordingly now we are gearing up ourselves, irrespective of the situation, which is there in this. We are able to float and make some headway, and that's what basically we are trying to do in this company also. So with this opening remark, I'd like basically first to present you what the results have been. And thereafter, I'll give you a brief commentary on how the company has basically done in the past year, and then I'll open the session for the question and answer, which we'll be very happy to reply to all of your queries. So as a result you've already seen in your hands, we have gradually, after the pandemic and epidemic that is this quarter COVID-19 caused and thereafter, another disaster which came in the form of Amphan in this region of the country. And as a result of that thing, the -- especially the Calcutta region suffered very badly. We have been able to perform reasonably well from second half of quarter 2. First half was total washout. Second half, first 2 months, we could do just nothing. On the third month onwards, we started gearing up ourselves. And if you see the performance in the quarter 2, 3 and 4, we have gradually climbed up. So that's out. That is the target we'll sort of maintaining this year also from quarter 4 to quarter 1, and then accordingly, maintain the year. But quarter 1, again, is a disaster for the reason that we are under complete lockdown. The plants are not allowed to be operated. The -- another -- the major issue, which arose and which any engineering company has to face and they have to really come out with some very innovative solutions on that is we have not been provided with any oxygen. And to an engineering company to run without an oxygen, especially both by foundry as well as by fabrication shops, it's a nightmare. We are trying to work on those situations also that how can we do without that also because this problem is going to last for a few months at least from now. So we have to learn to live without oxygen also. And whatever we can do, we try doing that thing by adopting some innovative means and methods. But once the lockdown is open, I will go full blast on this, so make sure that whatever we have lost in the quarter 1, we are able to make up in quarter 2, 3 and 4. Hopefully, no such disaster we'll be looking forward to in the company. Maybe that COVID -- the third phase also may be there. But then we -- by that time, we'll be gearing up ourselves to face those challenges and come out in a manner whereby we can still give to our investors a reasonably satisfactory result. That's basically the situation is. In quarter 4, my total income has been INR 619 crores. For the year, it is INR 1,720 crores. And we have made an EBITDA of -- quarter 4, we have done INR 32 crores. But because we have incurred a huge loss in the quarter 1, which was almost close to INR 40 crores, the year-ending profits before tax is restricted to INR 11 crores 60 lacs. So that's what the basically result of the company was. Now I'll come basically on the division wise, and I would like to brief you basically how the company has basically performed in this various division. The first, which I mentioned to you, there was the lockdown, which was induced by the central government and which lasted for 1.5 months and thereafter, after the lockdown, the restriction, which was imposed, whereby the factory was not allowed to operate, and we were only allowed in our factories to deploy 100 people. We employ nearly in the factory, 3,000 people. We were permitted to operate the factories with only 100 people for a couple of months. As a result, gradually and gradually we started building up this thing. We, as I mentioned, quarter 1 and part of quarter 2 was total washout. Thereafter, we started picking up. And at a given time, the performance what we could achieve was I consider to be satisfactory. And hopefully, immediately after this lockdown, we'll gear up again and make sure that our performance for the current year also is maintained on the same pattern. The performance of Rolling Stock division, which is the main division of the company, is showing signs of recovery. Initially, it was sluggish, but then we showed signs of recovery. And we are basically thankful to the customers for showing their support during a difficult year by rescheduling their deliveries, which was a real challenge because we -- the commitment of delivery, which was there in the month of April, May, June, July, August couldn't be maintained for the reason that there was no production. Now nonetheless, once this was -- the pandemic situation improved and it opened up, we started delivering them and all these things. And as a result, under new schemes, private sector orders and things started coming to us also. Of course, there was not much -- no fresh tender was released by the Railway Board, which was overdue. But nevertheless, we relied on the private sector. And under new railway schemes, whereby, they are encouraging, a lot of product players would come in and get into various schemes. We are able to maintain our reasonable order book. We closed the year with the order book of almost about 2,000 wagons. And we are also booking fresh orders. So hopefully, this year also, there should not be a major challenge to our Rolling Stock division per se in respect of wagons. In respect of loco shells, there was a challenge. This division, we started a couple of years ago. We have been doing reasonably well. But last year, because of, again, this corona period and the non-finalization of tenders and other orders, we couldn't get new orders. So we have kept it low key, lower. But by the start of the year, the inquiries started floating. And then by this -- when I'm talking to you, we have already booked order for more than 70 to be delivered this year. And hopefully, this year, we should be able to do much better compared to whatever we've done past, which was, normally, we were doing about 60, 65 loco shells. The Steel Foundry division, in spite of that initial suffering and all those things, powered up and basically maintained its performance. Of course, it is a challenge in respect of the prices of scrap skyrocketing, commensurate to the prices of steel, which are going up so high. And this has actually caused profit to dip. But then, of course, we are getting near we had export and other fields. Also getting into the defense field for hand molding casting through a new acquired unit of [indiscernible]. And these things are basically limiting us to make sure that the Steel Foundry division we can run comfortably and profitably. The other area where we really suffered was basically our division in respect of HME and Bridges. This division basically is more reliant upon the site working. And the site working operations basically has suffered only because simple reason that people at sites were not available. All -- we all have heard about the immigrant problem and then how the immigrants went back from their respective place of work to their native places. A big exodus took place at that point in time. And to bring them back to site and start working, all these things became of a serious challenge. So this challenge we really faced in our HME and Bridges division. Also we faced the same challenge in our Rail EPC division. Now Rail EPC division also basically relied mainly on site working, and we have multiple sites where people are working and there are almost about 4,000 people who work on the sites. And these people, once they go back, it is very difficult to bring them back to the site and all these things. So really we have seen a challenge in all these things. So to cover up that, we tried at best at whatever supplies we can make -- make the supply. We also changed the pattern of our order bookings. So we went in this whereby we are booking -- we have started booking orders for our core competency area of signaling. We booked orders in small, small tenders where the volumes were INR 50 crores, INR 60 crores, like INR 70 crores. And those orders could be completed within 1 year where major course was supply and lesser part was of erection at site. So that's how we could manage some activity, and we could show the performance which we have shown to you that this division has done at almost INR 600 crores. So with this position, basically, the company has tried to make up this position. They did its best to make sure that even in the current situation we are able to do something. So that's how we are doing a Rail EPC division. Now in Rail EPC division there's another company called Bright Power. Bright Power basically, we [ restrain ] ourselves, and now we are focusing more on this because all these challenges has actually made my liquidity to really suffer. And because of liquidity challenges and all these things, we were not going in for larger orders this last year, and we are mainly focusing on smaller orders. So Bright Power division also now getting into a newer field of basically refurbishment, maintenance. And such areas, the time slot is less and the margins are [indiscernible] better and the execution time is also short. This is requiring less amount of working capital. So that is why basically the company has come to a situation where we have changed our strategy about this thing. So focusing more in Rail EPC on signaling. We are focusing more on the basically other [ Fare Collection ] division, their supplies are greater than the site working. And to some extent, our core competency there in ballastless tracks, which we are maintaining. As far as the track link is concerned, there, basically, it is very labor intensive. We have gone slow on that, and we have not booked any fresh orders as far as those -- that division is concerned. So this is a rearrangement we have done about in the company. Hopefully, this time [ will be over ] well for the organization, and we'll be able to balance ourselves. And with these submissions, I would like you to ask any questions which you would like to have in respect of operation of the company.

[Operator Instructions] The first question is from the line of Bhagyesh Kagalkar from HDFC Mutual Funds.

Yes. Can you quantify the current order book division-wise? And in the wagons also the breakup of private and public sector. What are the challenges in Wagon division now at world and regions, et cetera? And the outlook for margins because steel prices have risen so what are the key parameters for you?

Yes. I'll give you the answer to the second part first. My colleague, Hemant will give you the details in respect of the order bookings for various divisions as well as for the private and railway orders. Challenges, you rightly mentioned about there are serious challenges because of the steel price and all this thing. The price has skyrocketed, in fact, rather, the steel prices are up in 1 year's time by almost about 50% to 60% which is unprecedented, never heard about. Fortunately for us, in respect to railway contracts, we have the variation clause so we are able to pass on that cost increase back to the railways. So we are protected to that extent. In case of private parties, normally, the order -- the order deliveries are shorter. They want deliveries between 3 to 6 months at the maximum. And as a result, normally, they don't agree to giving you the price variation clauses. So most of the private contracts are without PVC clauses. These are the challenges faced by us. But as you all know, we have competitively better margins in respect of private orders than the railway orders. So we are able to somehow sell through in both of those also. And the new order booking, which we are doing, of course, that is being booked at the current market trend and current market prices of the steel. So that, we will be able to sustain and there won't be a serious challenge on the bottom line as far as the order book is concerned. Hemant, now you can tell the details of the order book.

Yes. So the total order book as of March stood at INR 3,400 crores. So the breakup would be, Wagon division has an order of around INR 625 crores. While EPC division has an order book of INR 2,000 crore. While Hydro Mechanical and Bridges division has an order book of INR 375 crore. While Steel Foundry has an order book of INR 200 crores. While locomotive -- locomotive shells and other components has an order of INR 100 crores. Other subsidiaries and joint venture has an order of around INR 100 crores. In Wagon division also, as we really said that we have an order of close to 2,000 wagons. From Indian Railways, we have an order of around INR 275 crores and from private, around INR 350 crores.

So private book still is bigger now?

Yes, private is bigger.

Okay. And that's what the priority is in that wagon segment, which you're ordering. And the private order book -- private wagon order book is more better now from the logistics companies, et cetera, car carriers and all those things?

Yes, yes, it is basically -- I'll explain to you, the private order books are -- we were not booking because the price variations are getting so high and all these things. Of late we started booking. And the order basically is now coming from all segments. Logistic, of course, is a major segment, which is giving the major order. But this apart, even the city or companies are coming with the orders. So companies, basically, they are not buying the container wagons. They are also coming up for the orders. Industry is also coming in a big way. Be it sale, be it UltraTech, be it your NTPC. They all are coming out with the orders and all these thing. So private sector, the customer base has become very wide. It is not restricted to few particular segment of customers who are only buying. So that's a good sign in the wagon industry. Second part, which is important in this, which you would like to know about, that railway wants to travel the freight movement by 2030. That is what the railway's plan is. Today, it is almost 1.1 billion to 1.2 billion freight, which is being carried -- tonne carried -- freight, which is being carried. The railways plan is to increase to 3 billion tonnes in another 9 years' time. So by 2030, that is a target of the railways. And to multiply this thing, of course, you don't require 3x the population of wagon, but double the wagon population is required. Today, the population is 2.68 lacs of the railways. So naturally, railway will be looking for something a population of almost 6 lacs wagons. So it's a big, big market size, and railways don't have that much funds and all these things. They'll rely more and more on the private sector. And private sector, finding it very lucrative, are certainly getting into this thing. Like today, the iron ore prices are seeing a move in the market. As a result, all the iron producers are looking for wagons to be available to them yesterday. So that's how basically the market goes about. But good thing about the demand in the wagon sector is now widespread. And it is in the variety of rail industries, not nearly restricted to some open type and closed type or otherwise restricted to container wagons or BTP wagons. Now every variety. Steel plants are required in the pull wagon, autocar required in the auto carrier wages. Then your -- of course, the fly ash wagon -- fly ash required in the fly ash wagon. So it is now more expensive wagons coming more and more in demand. Of course, they were there earlier, but not in that volume, which volume is now we're looking to. So it looks like that this segment should do well in the coming years.

Vijay, this is Indrajit Mookerjee. I just wanted to supplement your very well-articulated answer by one more point is that there are lots of work going on in the company for improvement of internal efficiency, which really works out to reduction of wastage, quicker productivity, get it right first time, TQM, et cetera, et cetera. So I thought that I'd just mention that.

The next question is from the line of Kirthi Jain from Sundaram Mutual Fund.

Sir, when you say that the demand is improving. In the previous cycle, we saw that company can clock at, say, 18% to 20% of margins. So when do you expect such golden days back for the company, sir? That's my question.

I would love to have that situation. And we all are waiting that kind of situation to emerge, whereby we can make and give that kind of returns to you. Of course, it will take some time because you see this particular segment have been battered in the last couple of years. No orders from railways. Order coming at highly competitive prices and all those things. So segment-wise, badly battered. And now, situation is gradually improving. Of course, when the demand is good, the market is looking up, then you will find the industry cannot suddenly increase capacity to supply a substantial quantity. But the prices also start improving and that -- we're going to see that in the coming future. Maybe that -- we may have to wait for 1 more year to come to that situation.

Sir, there were earlier predatory pricing, like, we used to hear at Jupiter, Amtech, all those names separating predatory prices, below cost handle. Has the situation gone up completely now? Is the pricing now relatively better? How will you describe the pricing for now?

I won't say completely, but just like Amtech. Amtech has gone out of the business because they have lost heavily on this. Jupiter, of course, they initially were doing quite predatory price and all. But today, they have changed their strategy because they are -- they've become also established supplier. So they don't need to do that predatory price to get the business. Thing also getting their business. And the kitty is large. Everybody gets the business. Why should one go for predatory price? It's predatory prices come only in a situation where the kitty becomes very small. And everybody wants a sort of that kitty their major share. So this situation is likely to be changed. And with more and more opening up to the private sector by the railways, situation will be different than what it used to be earlier when companies are merely depending upon the railway orders.

Okay. Sir, what would be the industry utilization maybe something like in the Q4 period, sir, roughly?

I couldn't get your question very clearly.

Sir, what would be the industry utilization -- capacity utilization in Q4 FY '21 for the wagon manufacturers?

See, ultimately, we have been -- if you see the history, wagon division, the maximum have produced 18,000 wagons in a year. That's what basically we're going about. Except for one exception year when the production was almost about 19,000 something. But never they have made more than 18,000 numbers. Now gradually, earlier, in the last couple of years, the capacity utilization was close to only 10,000. It has now gone up to 12,000, 13,000. And hopefully, in the coming years, it will again start looking at 18,000. Once that kind of segment emerges, the prices also start showing signs of going northwards.

I asked your Q4 because -- sir, because in the first 9 months, the business would have got disrupted due to COVID. Let's say, I wanted to check with regard to Q4, are we able to come to around that 4,000 to 5,000 range at the quarter on annualized run rate? Are we able to come to that normal level?

So, let me be clear, not in this year. But yes, coming years, we are targeting that.

So by FY '23, we should see, sir?

Hopefully -- the way the business is going and the segment is looking up, hopefully, we should be targeting that kind of situation.

Okay. Sir, last question from my side. With regard to our EPC and direct construction businesses, sir, what are the kind of credit controls and other controls, which you are bringing and implementing in the systems to improve the profitability and smoother execution?

Very interesting question. Rather, I was wanting to look forward to reply this question for anybody coming to. See, earlier, when we went into this business, we went into main 3 segments, signaling which was full strength of the company. Ballastless track and track link. Track link is a business where volumes are very large. And of course, we wanted to make a top line, which is basically commensurate to the size of the company. But execution of those depends on a lot of factors. And it is highly dependent upon what the government policy from time to time remains. We burnt our fingers by coming across the policy of the government, whereby the government has put the mining of the land into restricted area, restricted zones. And moreover this business is totally controlled by the local mafias. So these challenges, we -- it came on the surface. We faced it, we realized, and we found that mainly this is not our line of business, we being a core competency company, so we'll remain in the core competency areas. So this year, you'll see we have not booked any order in Rail EPC business in respect of track link. We are focusing signaling, and we have booked almost INR 300 crore order for signaling in this year. And signaling orders are fast in execution. Money is not blocked. The liquidity is good. What we have to do is evenly maintain. Unlike areas where like we are doing a couple of your track link contracts, both in the segments of export as well as the domestic market. The challenges which we are facing in this respect is Bangladesh, we are doing a major contract. Now Bangladesh's border is closed. We are not permitted to enter Bangladesh, and it's not happened once. Last year, it happened 4 times. Resultant thing is our resources there are idling. They are not able to execute the job properly. The money remains blocked because until unless you'll reach the milestone, the payments are not being released to you or even the payments are released partly 70%, 30% money remains with them. So this kind we see that the blockade is very high. And other division in the company starts suffering for that. So that is why the strategy while we are now focusing more on orders, which can be executed faster and where the site gestation period is comparably smaller. So that's how we are focusing signaling, AFC and ballastless track.

Sir, just clarification, sir, anything quantitative thing can you give on the Bhagyesh's last question, sir, like what he asked on the numbers on what we want to achieve in FY '22?

You know, I generally don't predict on all this thing, but it will certainly be better than what we did the previous year. That means year '19, '20.

Also in terms of margin, sir, margins also will be better?

Margins, certainly, it will improve compared to what we have been doing. It will improve because the demand segment has [Audio Gap] positive.

The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund.

Sir, just one additional question. I think my colleague asked quite a few points, and thank you for all those current status. Just one additional question. Sir, as we look into F '22, fiscal year '22. From a wagon production perspective and for the railways, do we see this 10,000, 11,000 number of vehicle production a year going meaningfully up to 15,000, 16,000 this year, sir? Or we think it be at the same 10,000, 11,000 wagon per year. What are your thoughts, sir?

If you want my gut feeling or my limited knowledge in this field, which basically I could gather from this thing. My instinct says it will be closer to that.

Okay. This is because of this 2-month lockdown, et cetera? Or is this the general ordering momentum? Is that...

You got it wrong. My response, basically. It will be closer to about 14,000, 15,000. So it will -- you still the increase in spite of the lockdowns and all, we see the demand is such, it will see an increase.

The next question is from the line of Kaustav Bubna from Rare Enterprises.

Sorry, I missed the initial part of the call, so I apologize in advance if I'm repeating something. So I basically wanted to understand very bluntly, I wanted to ask a lot of money is being infused into the company at these price levels. So I wanted to understand how much of this infusion is going towards debt repayment and working capital management versus how much of it is more towards the promoters' bullishness on the business going forward? Could you explain what you guys are so bullish about going ahead in, like, the different verticals and please explain that properly?

Sure. So Texmaco is a flagship company on the globe. And one of the premier engineering company, which has withstood all the onslaughts which has happened to engineers in India, especially in the Eastern Europe. And one of the very few engineering companies which survived all the turmoils during 60s, 70s, 80s and much stronger over the years. Promoter had tremendous confidence in the company and in the basic [ USP ] of the organization. So promoters have analyzed and found it convincing that, yes, company needs liquidity for the reason that because we went into a business of Rail EPC, the deployment of working capital was substantially larger than what we would have anticipated. Due to the reason of COVID and other factors emerging in all this thing. And last year, incurring certain loss and all this thing. Banks are also not coming so heavily to increase their limits. They were restricted lower limits to the whatever levels were there. And we have to bring in some money to make sure that the working of the company is not getting impacted. So promoters decided to put in almost about INR 170 crore to INR 200 crore in the company. And that is how if you see last year, the window available to promoters to go ahead by infusing capital by way of preferential allotment to the promoters. We utilized that window. So initial window was for -- by the time the permission and all came, we put in INR 79 crores. But due to technical reasons that balance money could not be brought into that particular time limits, so we have to go again for that thing. We went again. But some of the fellow shareholders, they thought the promoters are enriching themselves with additional equity of the company by -- and not giving opportunity and option to the other investing public to participate in this thing. And in general, we've got a feel that they are looking more for a right issue than promoter getting preferential allotment only. So promoters, the feedback, promoters duly analyzed and they have very generously agreed to the suggestion. And in the last Board meeting, they approved to go ahead with the right issue up to an extent of INR 175 crores that, of course, the quantum will be decided by the Capital Committee, which has been formed for the purpose. And once they meet, they decide in all this thing, we'll be coming with the right issue very soon in the market. So that's how promoters talk. Why the confidence of promoters are there, because the segment is looking, as I explained in my initial speech, you might have missed at that point, we have mentioned that how the railways are targeting to increase the volume of the trade. I did mention that one thing also the railway target today is from 29% market share of trade to increase to 50% market share, and they also want to move the traffic from 1.1 billion, 1.2 billion today to 3 billion by 2030. So this -- all segment looks for that the railway requires these products, the railway have to move the cargo through some means. And they require...

This would benefit your Rolling Stock division then?

That's right. And in the EPC in the last question, my -- your fellows from Sundaram when they asked me, I clearly answered to them also this is what we are planning for EPC. We are going at more in the niche segment, which is basically signaling, AFC and ballastless track and not focusing ourselves on track link, which is high volume, but it is unpredictable. And enrollment of back-end to become very large. So we have accordingly decided that, yes, our focus will be in the different zones.

Okay. That's nice. But wanted to also -- so if you include conversion of loan to equity, preferential and rights issue, which is the series of events which have taken place, right, one after another, what is the total dilution which is taking place? Or would it be expected [ to place? ]

I really don't know what the size of the -- you're right, it will be. But as I told you, INR 79 crore already induced in the capital, INR 175 crore is the Board-approved maximum limit for rights issue. It depends on Capital Committee at what size they will elect to come with. But apparently, it looks like in even INR 200 crore the company will be getting out of this.

Okay. Okay. And sir 2 more questions. One, on your receivables. So could you just explain what the INR 600 crores receivable? Could you break up who are these receivables from, the INR 600-odd crores? And what the status is confidence of receiving the money and what the reality of the situation is?

See, most of these debtors are basically from government parties. So the confidence level of the company that way is quite good. Some of them are also from the large private sectors, especially the big conglomerates. And therefore, one other reason of the payments because mostly payment is stock in our EPC business. Otherwise, in other businesses, all the payment cycle is generally good and in wagon industry, even cycle is basically maintained reasonably by all the players, whether be it the railways, be it the private sectors. So that some payments are there. That dispute -- that challenges that we face. In respect of finalization, as I mentioned, the initial 30% of payment comes from the milestone achievement. And the gap between them. That is where we get -- our money gets stuck. We are working in that direction. So 2 specific areas we attack. Number one, by not going into the track link work, we are reducing the volume of our unbilled revenue. And by making sure that we are taking the smaller-value contracts, completing in time and getting out of this, we are also reducing our debt liability. So basically if you see today, my debt and all these things drive by, it has not gone up, in spite of all this difficult period of COVID, people not paying and all. My debtors' limits are almost at similar levels.

A lot of people...

[indiscernible] down.

Sorry, what?

My debtors' level is almost the same level. Their inventory level has gone down.

Sir, you know a lot of people who track your -- a lot of analysts who track your company and the sector of the opinion that this [ DFCC ] increasing freight traffic, et cetera, through rail story has been going on for years, but it hasn't really benefited the company in any way. So what do you have to say to that or about that?

Again, please let me explain to you basically again, the business is such, especially the track link thing, where basically only the larger players, small -- the sustaining, who are doing the civil work together along with this thing. We are not in the civil work, and we are facing challenges in respect of whether -- either one of other reason, if any particular constituent is not able to complete or fulfill his obligation. We are getting stuck and our money gets stuck. And we are not sure today, comfortable situation whereby, we can deploy unlimited work we are applying to the project and wait for this thing and go against claims and all this thing. So that's not a pause to the company. Accordingly, we have decided, in such kind of projects, we will take lesser interest, and we will be more focused on the areas where competencies are good, and we can get out very faster. So this is a trend change, which we have taken the same principle decision from this year.

Yes. No, I was trying to understand more on the Rolling Stock division. On the Rolling Stock division, which you were saying would benefit from increased freight traffic, right, you were saying? Could you explain a little bit as to when that will actually start showing in your numbers and how so?

I answered that question. When the query came from HDFC, I answered that in detail.

The next question is from the line of Nishith Shah from Aequitas Investment.

Most of my questions are answered. Sir, I just wanted to understand post Q4, are there any significant order rents in any of our divisions?

Significant order intake?

Yes.

Yes. Hemant, can you answer?

Yes. post Q4?

I'll answer it. Don't worry, Hemant. Post Q4, we have been able to book orders in wagon segment almost about we have booked orders for 400 wagons in wagon segment. And in respect of Rail EPC, we have booked orders for about INR 180 crores in signaling division. And my electrification, we have booked orders for almost about INR 50 crores, but that is basically in the new segment of refurbishment and maintenance, which is normally high return and that is where the focus of the company is today. So that is where we have booked those orders. In foundry and [ all ] things, we are booking regular orders for export and all these things as usual. There's nothing which is basically significantly any big jump or go down. The positive thing existing in foundry, we are now approved for supplying to defense, and we are supplying to [ level ] the large castings, casting going up to 22, 23 tonnes individual castings. We're supplying to [ level ]. And it should be balancing that is comparatively better [ amortization ], which we'll get on that. So that's how basically the orders will churn, and we are comfortable with this thing. The inquiries are many. We are working on that selectively also and also basically going in the area because our competency is mainly in the specialized variance. And that is the area where we are really focusing upon certain new developments as well, and we will also cover this point in our concluding remark.

The division, what would be our capacity utilization?

If it reaches capital, we have capacity to build 7,000 wagons also. But then it depends upon what kind of types of wagons we get and what types of wagons in a particular run we get. So these are very flexible one. But today, roughly, we have -- if you see on an average, with the mix of all the wagons and all these things, we are running hardly at 60%.

Okay. And sir, I want a clarification. So you said INR 625 crores is the order book for wagon segment and Indian Railway is INR 275 crores out of this, right?

Yes.

Okay. And sir, lastly, can you give me dispatch number for wagons for the quarter?

Yes. For quarter 4, the total number of wagons, Hemant, will you please speak out?

Yes. Yes, sure, sir. So for quarter 4, the total wagon size was around 550 wagons of which railways were 300 and the balance were for private.

The next question from the line of Dinesh from [ Suisse ].

Sir, falling -- period is not rolling down but lying down. And you have said that we have got the resilience to sustain and server and grow in the last 7 decades. Now my question is, I mean, going ahead, what are the likely bombs that you're going to face? And what is your strategy to growth? And can you give me a spot of failure that we did? And what is being done internally to avoid that now?

We'll cover this in our closing statement in general. We cannot be really specific, you know, pretty well these questions, but we will certainly cover in our concluding remarks, what is the vision for the company.

And sir, about the rights -- I mean, what is the rights -- are you going to share the rights that you're going to with this?

Rights, actually, let Capital Committee decide on this thing. But the size of the right capital will not be more than INR 175 crores. That is where we've been working on this thing. And Ravi, would you like to add something on this?

Sir, and I would like to know, what is the internal activity or cost reduction that you are now ?

Yes. That is basically, as the MD explained in his short [ demand ] in one of the questions -- answer to the one question, that we are working both on improvement in our utilization of the material. So better planning for utilization so that the wastages are reduced dramatically. Second thing, our component manufacturing and other areas where we are -- can be improvised, whereby the cost can be reduced instead of depending on the outside sources, if from the space of the scraps, which are emerging out, we can prepare those components and all this thing, and in-house, we can do that thing. And also that improving the technology, whereby rework on these wagons are totally stopped or rather fabrication, what we do is totally stopped. And certainly, that all depends upon the quality improvement, which is a 4 area of focus of the new team.

And the recovery of the stock-up debts, I mean, how is the progress going on there?

Yes. That also explains the last question. The recovered debt, basically, if you see that my debt level in spite of difficult times, we have maintained that chain. The debt has remained at the same levels. And gradually, we are trying to reduce it also, working more constantly on this thing. Last year, we've been able to reduce our inventories to a large extent. This year, our target is to reduce our debt to a large extent, and that will happen because the moment we start achieving the milestone, the debt and unbilled, both will start coming down dramatically. That is what the focus area for the management is, and that is what management has taken task on its hands.

Ladies and gentlemen, we will be taking the last 3 questions. The next question is from the line of [ Siddharth Buda ] from Principle India.

Sir, regarding this debt reduction, sir, can you please help what will be our target for FY '22 and '23, ex of right?

See, ultimately, our target is this that the debt and unbilled revenue, which should come down to the level of maximum 3 months. That is our target. Three months of our turnover should remain between these 2 other items. That is -- basically, we are working constantly on that. And hopefully, we'll be able to achieve with the change in the business track, which we have now basically decided.

Okay, sir. Okay. And sir, regarding this Railway EPC, sir, you have mentioned that there has been some change in the product and all. Sir, 2 questions on that front. Number one, do we have any EPC orders, so that is going to, again, hamper FY '22 or '23? And second with the change in the product mix and all, so what can be the reasonable margin and your working capital in that particular sector?

Can you come again? The first question, I didn't get clearly.

Sir, any old orders that is there in the EPC business which will attract the higher working capital than the low margins?

There is. I must admit. Number one, this question I have divided 2 parts. One, the legacy contracts. Of course, we have left that behind, and that's basically only the residual ones, which is basically the final 5% and 2% and 3% like that, things are there, which we are closing down. And this year, our target is to at least close 18 contracts. Second point, which is there, do we have such contracts, which I was talking about, especially in the track link? We have. One of the major such contracts is EDFC, the second one is basically Bangladesh. These are 2 major contracts where we are doing the tracking work and all these things. So there are -- challenges are still there. But hopefully, once the situation normalizes and the larger value of contract is Bangladesh, where we have substantially large value of contracts. So that is what basically we'll be gearing up and posting our team there, so that -- but in case pandemic remains such, then that can certainly be a challenge in the coming year as well.

Sir, I'm just talking about the -- as and when the thing has become more normal, sir. By then sir, .

[indiscernible] Domestically, we are not -- we are closing down all the contracts. That one contract with EDFC also -- we will close in this year. This are part to smaller -- so remaining things are there. We are targeting to close during this year. The only thing which remains large value is Bangladesh. And where -- if the pandemic situation is not there, certainly, we'll be able to move faster because Bangladesh working compared to the Indian condition, all the things like land mining and all this restriction are not there at this point of time. So hopefully, that will not be a big challenge. And if the sites are available to us, we should be able to go. But that is going to be complete in next 2 years' time, this year and next year. So by '23, we should be able to complete that contract as well.

And sir, that particular contract, Bangladesh, as you correctly mentioned, is your large order, but that will pull down our working capital and the margins. So whatever good work we are doing actually in the remaining part of an EPC that will be ...

Not only Bangladesh. Bangladesh, I think we will be able to regain a lot because, basically, they have delayed the contract because they changed the design. As a result, our disposal have idled there and the cost we already booked. So those things, I think we'll be able to get the adequate compensation of them. But it is basically in general in all this track link contract, these typical problems are being faced. If anybody, any cause during the contracts and the overall system of things are not able to do their job, we get stuck. If the bridge is not made, we get stuck. If the land is not filled, we get stuck. If the land is not, basically, stabilized, we are stuck. For one other reason, we're getting stuck. So that's the way we maybe [indiscernible]. As far as signaling and electrification is concerned, these problems are not there because we are going on a developed sites, which are already -- the tracks are already laid, the art work is done, bridge is done, then only we come into picture. So that kind of situation basically helps us, and that is the focus of company now we have realized, and we are accordingly changing the business track on that.

Correct, sir. So you have mentioned in your previous answer. So my question -- last question is on the EPC business. With our new focus focusing on the electrification and signaling, sir, what can be the margin that we can expect from that particular vertical? And what will be the working capital if we stick to the signaling and electrification cost?

I wouldn't -- you know that I don't speak about margins in this because this is a forward-looking statement. I restrain myself from saying anything. But the segment, there are 4 competencies there, which are 3 which I analyzed to you, of which 2 are our core competency, and third, we are developing the core competency. Internally, it's a niche business area. We certainly have better margins. In your [ Northeast ] track, we are the leader in the segment. As a result, we are able to get reasonably good site business and large business and all this thing. The margin is normally, other than the -- some variation here and there, it is reasonable over there that we don't have much challenge in the margin there. And [ ASC ] is the new field which we are getting into. We have done a couple of jobs. And now we are also getting to export this segment into being where major part is supplied, lesser part is the basically site working on. So I think this -- I hope that with these 2 segments working together, certainly, the margins of the railway division will look up. And then electrification, as I mentioned, our focus today is now getting into the more to refurbishment and maintenance, which anyway, compared to the new supplier, a higher margin business. So that's how we feel that, yes, we'll be able to attend to the margins also. The challenge which we face in margin also we'll be able to adapt.

Correct. Sir, my last question, sir, the industry leaders, those who are doing the signaling EPC and electrification work, they are doing an EBITDA margin of 10% in working capital, net working capital days of 90 days. So are we near to those metrics?

Not near to that. Our margins are certainly better in electrification. We have been working at EBITDA margin at 14% to 17% depending upon how -- what kind of business we have done during the year. And even a way in the -- your segment, we have been working at EBITDA margin of 13% to 17%. Of course, over the period, our margins have gone down. And because of what -- the actual involvement to a large extent, a major portion of that is eaten up by the interest segment. That is our focus in these things. How could we reduce that work [ and do better ]? And as I mentioned, my data is unbilled. We will try to bring our targets to bring them down to 3-month level, which will certainly make the -- location might work up to much faster. And the certain thing is this thing might cost on interest, certainly will go down. And that's where my net margin will improve on that.

Okay. So you clearly mentioned that we are targeting like 3 months of working capital for the entire company. So that will also be a...

I didn't say [indiscernible]. Basically, we are talking about [indiscernible] and these things. And Rail EPC, basically, there's no inventory. So Rail EPC, correct. But in case of brick and mortar, this is not correct.

Okay. Okay. Sir, that was helpful. And I hope you can conduct the call on this on a regular basis so that we can have a connection and the continuity.

Yes, my MD also wants that. So I'll do that.

Next question is from the line of [ Arvan Joshi ] from [ Italia ] Advisors.

You answered my question, which I'm going to ask in some parts. I just wanted to have a more broader and long-term understanding of your thought process. What has been the learning from the tumultuous year we have just spent encountering the COVID issue, the pandemic issues? Other companies have reinvented themselves from this pandemic. Any learning that you can share with us and also highlight how we can transform ourselves on that? Any new strategic positioning that are going to emerge because of these experiences? I just wanted to understand that and how will we enhance our competitive positioning based on our past learning?

Very good question, [ Arvan ]. When especially to our kind of company, this is a very, very pertinent question. We, as -- initially, I mentioned that we are an 82-year old company. And with being 82-year old company, we are basically considered to be a traditional company, laggard in certain aspects and not induced to the modern technique and all these things. But with our younger team, which is there in place today and the -- first time we learned that today, we can, in fact, rather I'll go into background. We were having offices and corporate office separate and plant office separate. Working from -- corporate office working from city and plant office working from plant. And then we decided that, okay, this is not very fruitful and effective. If the plant offices and the corporate office are combined together in the plant itself, the efficiency will improve and the decision-making process will certainly go much faster. That's how we did sometime in 80s. Now today, I'm realizing that everything is locked down. There has been a situation whereby people are not able to attend to office. The transport facilities and all these things are curbed by the government. Regular restrictions are being brought in. And still, we are able to work very effectively. And today, work from home is normally becoming a culture, our kind of company as well. So which is very, very interesting. And within the first learning we had, it is not necessarily that the offices should be very close to the places where we work. We can work from anywhere. It is more important thing, the strategy and planning, which should be done, and that can be very well done from the way we are now doing for last 1 year, more than 1 year, rather. Now it is 13, 14 months. So that is what we basically learned. Secondly, we learned about this thing that we -- our production processes were such where we're targeting that we cannot get into production lines until unless, we have made sure that all this lines from [ Jagan ] are properly manned. All my materials are properly available at site and all these things. And then the production line starts like the assembly lines. Today, we have changed. If one [ wagon ] is not working, we skip that [ wagon ], get into next [ wagon ], work this thing. We're working with a smaller group of people to make sure that at least some operations goes on in spite of restrictions and all the kind of bottlenecks, which are being placed by us due to this restriction, COVID and various government restriction whereby my competent suppliers and all facing challenges. Some did bid item for which the earlier approach is to stand still announcing we are doing in-house, making sure that if something has not come, adopt innovative way, do it in-house and make sure the production line keeps going on all these things. So these are the new learnings which we have learned, and this certainly is going to make our company much more strong and strengthened in the coming period. And this certainly will add a lot of value to the organization basically.

Ladies and gentlemen, this will be the last question, which is from the line of [ Pipa Karachi ], an individual investor.

I have a quick question on the rights issue. This is the second time we have announced a rights issue. I'm just trying to understand why is it that you haven't yet set out the terms with the rights issues?

My colleague will answer to you in detail over this. Ravi, I think this is a question you should detail.

Yes. Thank you, sir. Well, I would like to address a query on the rights issue. See, the right issue comes, the Board has approved -- a limit has been already approved. The Board has approved up to an extent of INR 175 crores. Now they have left the option to the Capital Issue Committee to decide the term condition improving pricing based on the situation, which the committee will take a call. And accordingly, the information will be made available through the public and restock exchange as well.

Sir, I understand that. My question is, you guys announced the rights issue in the -- this is the second time the same announcement has been made. You have announced the rights issue in the past, it's been awarded for the reasons best known to your [ superior ]. Subsequently, you've announced another rights issue. And then we are hearing a rather bureaucratic answer that there will be a Capital Committee. Why don't the Capital Committee meet and then decide the term? What are you all so uneasy about? [indiscernible] Unable to sell INR 200 crores worth of paper? What is the [indiscernible] about?

Yes. No, no...

I'll answer the question. Ravi, I'll answer this question. See, the answer to your first question is very clear. The last time we are very openly and clearly disseminated the information that the Board couldn't -- the company couldn't go ahead with the right issue for the reason that the approval from the NSE was -- sorry, BSE took us much longer. And finally, we could get the approval only on 26th of September. Whereas the issue -- the opening of issue was not possible to do in the 29th of September to last day. So the result of this thing is this thing that [indiscernible] to a [ drop ], and we went further then. Since that money company required liquidity much faster, the promoters came forward and said that we are willing to put in the money by way of a professional allotment. And that's how we went for professional allotment. Once that approval came, promoter put in INR 79 crore, the balance thing was the technical reason couldn't come at that point in time. We went again so that the last year itself, the allotted money could come. Some of the shareholders were not very comfortable with that. The opinions of general shareholders were insisting that instead of [indiscernible], it should be a right issue. And as a result, they didn't pass the resolution at that point in time. And getting the feedback, we put in the last meeting about this thing. The company will certainly meet, but you know pretty well, times are difficult and all these things. People are not in the site. There's a company lockdown situation. Immediately, post lockdown, we'll open up. Our Capital Committee will meet and will come forward because we want it to come very fast.

Sir, I completely appreciate what you're saying. And kindly bear with me -- my question. You just -- you or your colleague just spoke a couple of minutes ago about how you are well adjusted to working from home right now. And lockdown certainly can't be a reason why senior management can't decide the terms of the rights issue. That is not something that needs to be made at a particular environment here. My -- the short point is that having had a [ Board ] issue, one would expect that the management would be prepared, and be ready with term rather than announce that you are raising INR 175 crores and where Capital Committee -- the committee is going to meet to decide the term right issue. I mean just think about [indiscernible]...

I need to intervene in, obviously. I think...

Yes. Sir, let me just say one last piece, sir. Just...

I think because your -- no, no, correct. Correct. You see, no Board decides on the term.

[indiscernible] 80-year old multi-decade old company that is struggling to raise INR 175 crores or maybe are not struggling. Certainly, it appears like that. You know when -- if over a period of -- this is over a year, you have not announced an issue for one of the other reasons, not been able to put in it. Sir, the capital market is functioning seamlessly through the lockdown. People are raising capital, IPOs are happening, all kinds of stuff are happening. You guys are taking more than a year to raise a sum of INR 200 crores.

No. No. No, I don't take your argument, and it is not a well-conceived argument you are making. Please try and appreciate -- I understand what I explained to you. It's just this -- 1 minute. This has been approved by the Board on the meeting of 14th of May. Unfortunately, immediately thereafter complete lockdown was there. It is a disruption. Please appreciate and all these things. We certainly are going to organize the Capital Committee meeting to make sure that terms are finalized and issued to this thing. But disruption, we have to now, basically, cost finalize our -- your merchant banker than the legal entity and all these things. We already finalized the legal entity. Merchant banker, we're in the process of finalization. That also will be finalized within -- maybe by early next week. Immediately thereafter, they will set the terms and all these things, which we'll put to Capital Committee and Capital Committee will make sure that this is -- it is not actually the same terms and condition which we, last time, was put will be acceptable to shareholders. Shareholders will certainly like that this time and the next time, again, we are coming with those issue, that terms should also be slightly different than what this thing is, then what will be the pricing? These all things, we'll work out. And if we're decided, we are not taking much of time. But of course, there can be a couple of weeks' time, which will be required to do these activities, which we certainly are working on this thing. And I don't think your basic approach to this thing, that the company is struggling to raise is correct. It's that shareholders were not willing to allow a company to raise through the promoter's potential holding. That's certainly a prerogative of shareholders. But then the other thing that the company is not in a position to raise the money, the process was different.

Sir, I'm not saying that you're not in the position to raise money. All I'm pointing out to you is that it is been -- it's been, I don't know, 15 months. I don't know how long the specific period. In fact, the [indiscernible] long, and the company has been unable to conclude a capital raising, an activity that any other company, any other reasonable companies that -- that part of the financial activity has not been impacted by the pandemic. All I'm trying to say is that shareholders, minority shareholders have been -- you know the outcome that we've been living with for multiple years. There has been -- I mean, extremely poor financial performance, therefore, extremely poor return metrics for minority shareholders. And in -- whatever your argument may be, sir, the full facts are that it has been more than a year and the financial -- the capital raising has not been concluded. And my short point was, given the problem of the previous episode, I would have thought that you would have been prepared and come with the capital raising plan with all aspects covered, not a capital raising plan which is announced and then your [ results ] [indiscernible] the term. Sir, [indiscernible] my idea are both pulling in the same direction. I have to say this [indiscernible] that you have. We need to see the company do better. But I'm struggling to understand how you don't see the message that you're giving the capital market by taking 1 year to raise INR 200 crores. I understand [indiscernible] at large [indiscernible] a multi-decade company cannot sort out capital requirements in -- over a long period of time. And I urge you to take it constructively and try and change -- the messaging that you've given to the market, it's not going to do that the stock price is languishing. It is these actually that are causing this kind of price behavior. So kindly...

One minute, 1 minute. I think you are -- what your subject, you are going about, you are not trying to appreciate and missing. You are harping on that 1 year, 15 months and all those things. The company has come out very clearly, every time, why it has not happened. And those are basically technical reasons, which where we have -- company management has no control. Please appreciate all this thing. This time, what you mentioned, correct, the Board never decides upon the terms and all these things. The Board, basically, first principle has to approve, whether they are willing to permit to us to go ahead with the capital issue. They have permitted us on 14th. Immediately, thereafter, I told you that lockdown, so there's a little offset to the working [indiscernible]. We are already, in the meantime, finalized the legal advisers for this issue. We are also working on the merchant banker and immediately we'll finalize the merchant bank in the coming week itself. And thereafter, terms will be put to Capital Committee, and that is a pool done and come to the market. So please appreciate. I do understand that. But -- your pains, I understand. If the market is languishing, the share price is not even a good return to shareholders. Certainly, there's a pain.

Sir, sorry, that is not that -- that change is there. I'm not denying that. But that change is not something that you are responsible for as an executive team. I'm saying something else, sir. I'm just trying to -- I hope you will get a constructive message from what I'm saying. There is a signal because, sir, when you -- there's a signaling that of efficiency or lack thereof, when you conceive a plan and execute it in a timely manner. And when that does not happen for a long period of time, the market perceives it in a certain way. You must take that signal from the market is my point. See the pain maybe caused -- is not only caused by the absence of the rights issue. The pain is caused by multiple [indiscernible] reasons. Other competitors are also feeling the pain, I understand that. But I am just [indiscernible]...

I appreciate your point. Your point is also well taken. I'd like to because -- I owe you an explanation and I'll give you that detail explanation. Certainly, it's very important for me. I take your point as we will discuss internally with the management team, how fast we can do this thing and come back with our terms, conditions for the right issue.

And [indiscernible] recording, verified that the date of approval of the Board was conceived.

15. So I'm sorry, I mentioned wrongly, it was 15. The last year around 15. Am I correct, Ravi, that the last year [indiscernible] lockout is May declared?

[indiscernible] the Board meeting alone is also not maybe we can [indiscernible]. So we're now -- I think we can move on if there is no question.

No. I think all the questions are over. And Indrajit, maybe at the end, you would like to say something?

Okay. Yes, I'm available here. It was very nice to go through all the questions. And more and more, the questions are coming, I was thinking that there are -- most of the questions have, including the last one, of course, the gentleman was very educated, maybe for fair reason. But all these questions only help us to improve and look into various other areas to improve because that's why we are. We are here to add value to the corporation so that we can all -- the shareholders can share, can enjoy the benefit of the same. So some very interesting questions came and one of it is, I just can't help but address it too is, what you are doing in the lockdown? And I think the lockdown, my way of looking at it, that is allowing the management to innovate more and more. And I think what has really happened that we have -- we fought -- we have fought through the various ways to improve, what more we could do. Like, for example, there is -- I think Vijay has already mentioned, it's a company which is like a human body. The engineering companies depends on metal cutting and metal fabrication and no oxygen. So how do you operate without oxygen? It's a great example of innovation. So it also gives us sign to innovate. It gives us a sign to look at our future. It also is strengthening our internal actions because right now, we are on lots of internal actions and how to improve our efficiency, how to reduce the cost, how do we have this kind of product in the market, how you develop product, which is going to be coming in very soon. So how you are actually ahead of the cart, and that's where the design teams are working. So these are all the various activities which are going on. Maybe we have faltered, like the gentleman just now said," You have faltered. You have not taken your time for deciding how the capital issue should be." Yes, that's an important point. We haven't done it, but thank you for pointing it out. But at the end of the day, I see a very, very strong future in the areas where we are working. And we also -- our mind is very clear where we should focus instead of being a wall-to-wall carpet. And Vijay has very, very, very clearly articulated that where we should be, where we should not be, how we should work internally, both in the production of Rolling Stocks, in the foundry as well as in the EPC contract, where we are completely changing the way we want to work, including the Bright Power. So I think in a nutshell, the questions are so good that it gave us more chance to think and introspect and improve ourselves. I think that's all I have to say.

Thank you, sir. Anything more [ Naresh ] or Navin, anything more? Or should we...

No. Thank you very much, Mr. Mookerjee and Mr. Vijay. Rajitya, please take over.

Thank you very much. On behalf of SKP Securities Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.

Thank you.

Thank you.

Thank you, everybody. Have a nice day.

Thank you.