Titagarh Rail Systems Limited (TITAGARH) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Titagarh Wagons Limited Q4 FY '22 Conference Call, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Aashna of ICICI Securities. Thank you, and over to you, ma'am.

Thank you, Peter, and good day, everyone. On behalf of ICICI Securities, I would now like to welcome you all for the Q4 FY '22 Earnings Conference Call of Titagarh Wagons. The management today is being represented by Mr. Umesh Chowdhary, Vice Chairman and Managing Director; and Mr. Saurav Singhania, Group Financial Controller. We will start the call with the opening remarks on the results and the outlook by the management. Post that, we can have the Q&A session. I would now like to hand over the call to Mr. Chowdhary for his opening remarks. Thank you, sir. Over to you.

Thank you very much. Very good afternoon, everybody, and thank you very much for joining the earnings call of Titagarh Wagons Limited for FY '22. As the presentation has already been uploaded and would be available to you, you have seen the performance of the company. The -- I believe that whatever was kind of discussed, projected or aimed for in terms of items discussed during the earlier conference calls, the company has been able to more or less be on track on all of the aspects. The major developments or the major highlights for the year has been that stand-alone revenue of the company has been the highest ever in the history of the company. The Indian operations have done reasonably well. Of course, the big development that has happened is post the results of March, which is the company has bagged the highest ever wagon order placed in the history of Indian Railways for a basic value of about INR 7,800 crores and a total value of INR 9,000 plus crores, which takes the order backlog to INR 10,000 crores for the Indian operation in itself and gives a good visibility for the future. The other highlight has been that the first metro coach produced in India for Pune Metro was dispatched from its factory in Uttarpara and the production has now begun for the metro coaches. As far as the European operation is concerned, the year has been challenging, but a few of the implementation of strategy that has been put into place. One is that the thrust was on execution of the legacy contracts. And while the target was to complete legacy contracts by March 2022, there has been a little bit of a spillover. And by June 2022, that is Q1 of FY '23, all the legacy contracts would be over. The working results of Italy has also been -- have been marked because of a couple of one-off exceptional items. One is relating to certain relocation costs, and in terms of closure of 1 site. So the company had multiple sites, which was continuously uneconomical, and they have merged the operations side from Tito to Caserta and a one-off cost has been incurred of about EUR 1 million or so for that. The other is a provision has been created for the claims or the extra costs of the end-of-line contracts, which have been completed or are being completed. So out of the losses, a total of about EUR 4 million related to this one-off items, including the extraordinary item. So in a nutshell, otherwise, the company in Italy is also picking up. The new orders has started execution. The first train of Catania was put into passenger service, and the company signed the contract for the Rome or the large [ 2 regions ] of about EUR 280 million. With this, pipeline of the order in Italy is also healthy. And once the legacy contract is removed and the extra cost in terms of multiplicity of sites, et cetera, is done away with, we believe that this year, we should be able to definitely reach EBITDA breakeven. So in an -- this is an overview as an opening remark from my side. I'm happy to take questions. Thank you.

[Operator Instructions] Our first question is from the line of [ Abhijit D. ] from Equentis [ Portfolio Advisers ].

A few things, sir. I mean, first of all, congratulations getting the order from the Indian Railways and it's been a long time coming. And finally, I think the railways are biting the bullet and they are now more perhaps more serious awarding wagon contracts. So I just wanted to know in terms of -- this is a very large order. Texmaco similarly has also got a large order a few days back. So I just wanted to know, I mean, in terms of the margins on these orders, because there are no free issue items. So what in your estimate would be the average blended margins over the 3-year contract, I guess, which you have got?

So as I've always mentioned that the average blended margin in our business at EBITDA level is 8% to 10%. And even in this order -- with this order, I would say, I would maintain the same guidance that in our business, an EBITDA margin of between 8% and 10% is something that we will be able to achieve and sustain. Some quarters can be lower, some quarters can be higher in terms of the mix of execution or temporary factors. But on a sustained basis, that is the margin that we will be able to achieve.

No, I was specifically asking about this order, sir. I mean, it's a very large order in the sense, because you'll also have some advantage of scale here for this particular order. So don't you think it can be better than your average 8% to 10% margin?

No. I would still say it would be around the same. Because in the wagon business, while the scale is important, in order to get the scale, one has to be competitive. So these are matters which are factored into while making the bid and while doing the pricing strategy and all of that. On one side, one has to keep into mind that there is -- this is not a monopoly business. There are competitors, and we have been able to get the largest share. And this, in fact, establishes that last several years in a row, we've been having a market share of about 30%, which is a very good market share in a competitive industry like this, while maintaining our EBITDA margin. So I would not revise either upper or downward the EBITDA margin guidance.

Our next question is from the line of [ Rajesh Bandari ], an investor.

Congratulations for the big order.

Thank you.

Sir, you have mentioned, you have asked the railways for some change of wagon type. What exactly is that?

So our -- we've got 2 types of wagons and the 2 types of wagons that we have got, we are executing both of them.

Okay. But you said you are -- you have asked for the change of type.

We have asked them for balancing the 2. We have got 1 wagon type of a certain quantity and the other wagon type of a certain quantity. So at that -- the reason that -- sorry...

Rota and Roto.

No, no, this is [ Boston ] and DPL. And -- but we have accepted the mix that the railway wanted to allot to us. So that's already done. We've already signed the contract, and we've already started production and dispatches.

And there'll be no price implication for that?

No, there will not be.

Okay. And sir, you have received order for 24,117 wagons per 7,800 basic. So it is working out to INR 32.34 lakhs per wagon. So for this INR 32.34 lakhs per wagon, the EBITDA margin, you said approximately 8% to 10%. What will be the net margin, sir?

So we give the guidance in terms of the EBITDA margins, and that's what I've been able to share with you. In terms of debt, we don't have any long-term debt. So the working capital debt is something that, of course, is on an ongoing basis. So normally, if you look at our trend, we've been doing EBITDA margins of about 8% to 10%. Some years, there have been a couple of percentages plus or minus. Or I would say, some quarters rather, some years may. But on a blended basis, we would still maintain 8% to 10% of EBITDA margin.

Okay. That is EBITDA. Yes, because normally, your quarterly turnover in stand-alone has been INR 400 crores approximately, so which worked out to approximately INR 1,500 crores last year, you did. But with this big order, you will be executing something about INR 2,400 crores per year for the wagon itself, this new order. So that should -- by increasing the turnover, the other costs should come down, sir?

That's what I explained to the gentleman before you, sir, that while pricing the wagons, we take the advantage of the volumes and the advantage of scale and everything. Because at the end of the day, in a tender business, you also have to be the competitive bidder in order to get the volume. So while doing the pricing strategy and doing the sales strategy, this aspect is already taken into consideration to stay at the 8% to 10% EBITDA margin.

And do we have any PVC clause, sir?

Yes. The contracts come with the price variation clause, upward and downward.

If the steel prices go down, it may go down also. If it goes up, it may go up also?

That's right.

Okay. And sir, [Foreign Language]. So how to improve upon that, sir?

That's what I just explained that in terms of the -- so there -- we need to see the Italian subsidiary in 2 aspects. So first aspect is the strategic aspect of the company. The company has been strategically a game changer for the group because it has enabled us to enter into the metro to the high-technology propulsion and all of the other above businesses. In terms of the losses, which the company has been incurring, these are losses because of the acquisition of some of the legacy contracts or the initial contracts, which were loss making. But there is no cash impact on the stand-alone because the stand-alone is operating on an independent basis. So while on the consolidated P&L, the losses are impacting, but there is no cash impact on the stand-alone in terms of the losses -- initial losses that subsidiaries in Italy. There are no guarantees or nothing of that sort.

Okay. So can we expect an increase of something about 40% to 50% in the profits in the next 3 years?

I would not like to comment on that. I've given you the basis and then the result is something that we will not be able to give any forward-looking numbers.

Our next question is from the line of Subhankar Ojha from SKS Capital.

Congratulations for a good set of numbers. I have a couple of questions. In terms of this metro coaches. So what is -- what are our pipeline apart from what we are doing right now, this Uttarpara and Pune? What are the bidding pipeline that we have?

So we have a very healthy tender pipeline. We have bids for many contracts, and they are in the pipeline. The demand for the metro coaches is very healthy in the countries. The Prime Minister, Honorable Prime Minister, while inaugurating the Pune Metro had also announced that all the Tier 1 and Tier 2 cities are being planned to be connected in by metro. So I would say that the tender pipeline, while the orders that we have on hand is only the Pune right now. The tender pipeline is strong and healthy.

And so this Pune, is that a profitable order? I mean, are we going to make 8% to 10% -- I mean, the standard margin that we make, is that project also going to do a similar sort of margin?

So we do not comment on contract by contract profitability because of obvious competitive reasons. But as I have always maintained that the tendering strategy, pricing strategy, everything is done, keeping into mind that the company should be profitable to the level of 8% to 10% EBITDA.

Coming to your overseas operations. So basically, we did acquire these companies back in 2015, 2016. And so how much have we totally invested so far for this -- in this company? And what are the basically kind of a return, kind of ROCE we generated? And what are the potential earnings for this company for the next 2, 3 years?

So the investments that have been made are disclosed as a part of the balance sheet. There is no other investment or guarantee, which is prevalent, which is not disclosed in the balance sheet. As far as the earning is concerned, the order book of the company is about EUR 500 million as of now. And we expect that in 2022, '23, we should be EBITDA positive. In 2023, '24, we should be able to turn net positive.

And sir, can you share a similar time line of execution of this 500 million of orders that you have? I mean, like the way you share for the Indian operations?

In our transit business, in a passenger coach business, it is quite different. These are framework contracts. So the execution time lines are more spread out. Not like wagon contract where we got the contract and we start the execution immediately. So I may not be able to give you an exact schedule, but on a thumb rule basis, the contract for passenger trains are normally executed over 3- to 5-year period, any contract.

Three to 5 years. And sir, just to cross this number. So your Italian operations had a roughly, say, INR 500 million -- INR 500 crores of revenue, with INR 40 crores of EBITDA loss and kind of, I think, INR 80 crores of net loss. Is that roughly the ballpark number?

Saurav, would you like to give the exact numbers?

That will be helpful.

Yes, sir. Yes. For the foreign operations, are you talking about the annual number or just...

Annual, yes. '19, yes. FY '22 yes, that's correct.

So in terms of the total revenue for operations was almost like EUR 72 million from the foreign operations and for the year and -- EUR 76 million, sorry. And the EBITDA was, if I remove the impact of the exceptional item, it was EUR 1.8 million negative. And also if I remove the onetime loss of EUR 3.9 million, it will be positive at EUR 1.2 million. And the loss at PBT level was almost at EUR 9 million, which is almost like your 10 -- INR 72 crores is correct. Yes.

So the reported EBITDA loss would be EUR 1.8 million plus. I think you had some EUR 4 million of execution delays provision that you've created, right? So that's about EUR 5.86 million, right?

The reported EBITDA in the financial statement before -- as I said before, exception is EUR 1.8 million negative, which includes the impact of EUR 3.9 million of onetime provisions that we have done. And if I include the exceptional item, then the reported EBITDA loss would be almost EUR 3.2 million negative, which is almost like INR 25 crores, INR 26 crores on [ that sense ].

It is -- in the presentation, I think all of this has been clearly covered. And if there are specific numbers, then we can always be available offline.

No, I just don't know. So basically, we are going to make that reversal of that margin at the EBITDA level. And that's what I was trying to get. What would be the added number to your next year EBITDA from the overseas operations.

Our next question is from the line of Vasudev from Edelweiss.

Yes. Congratulations on winning the largest ever order from the Indian Railways. So sir, on the same order, can you elaborate on the delivery terms?

Sure. It is to be delivered over 39 months.

Over 39 months. So how much then will it be like in FY '23 and how much in FY '24 and beyond if you can let it up?

It's relative to the contract. But more or less, it will be, I would say, a little less than equal in the first year and then the rest will be over the next 2 years. So more or less, it's -- I would say, 25% to 30% in the first year and the balance in the next 2 years.

Okay. Okay. And the billing will be done based on the number of wagons dispatched or after, like, some money given in advance? Or how is the billing cycle about for this contract?

It is the standard billing cycle at the railway that has been followed ever. There is no advance in their contract.

Okay. Okay. Sure, sir. And on the Pune contract, so we are on track or there could be any delays expected?

No. We are -- barring the COVID delays, et cetera, we are, by and large, on track.

Okay. So by when will we be executing the full Pune contract, the Pune Metro one?

FY '23, the contracts will be fully executed.

Okay. So in this year only. Sure, sir. Then on the demand outlook, how is the demand looking from the private sector? And also, how is the demand outlook from the DFC wagon ordering perspective?

The wagon orders that have been placed by the railway includes for the DFC. And as far as private wagon outlook is concerned, it continues to be strong. Of course, after the recent move of the railway of the government to put some export duty on steel and steel-related commodities, there has been a little slowdown on the offtake of private wagons. But I believe that it's -- we believe that's centrally. And the private wagon demand continues to be healthy.

Okay. And would it be possible to give the split of the order book in private and public sector?

Beyond what has been shared in the presentation, we will not be able to give further...

Sure, sir. No problem. And just a few data related points. So if you can tell me how many wagons have we dispatched in FY '22?

Once again, the numbers that have been given in the presentation are the ones that we can disclose in public domain. So that is already there as a part of the presentation that has been uploaded in the -- on the website of the company.

Okay. Okay. Sure. No problem. So you -- so on the bid pipeline, so you said that the bid pipeline is healthy. So again, would it be possible to quantify like how much of orders have you already bidded for? What is our target for FY '23? And are we advance currently in any order?

We shall be making those announcements only when we win a contract. As a matter of policy and in order to avoid speculation, we do not speak about any contract unless it is awarded.

Okay. Okay, sir. And sir, last question...

Sorry to interrupt, this is the operator. For more questions, please join the queue.

Just one last question, please. Just one last question. Sir, what is the CapEx that we have done in FY '22?

We've done a CapEx of about close to INR 100 crores, which has been primarily funded out of internal accruals.

Our next question is from the line of [ Hari Kumar ], an investor.

Congratulations to the management for a good set of Indian numbers. Sir, my first question is regarding the international operations. Am I audible, sir?

Yes, sir. Yes.

Why is the parent company not supporting the Italian subsidiary and bringing in minority investors, sir, because it's in a loss and it's been default of loss? Why is it not supporting the Italian subsidiary? And my second question regarding the international operation please, what are the orders in pipeline for the Italian operations?

So the 2 points that we have mentioned, first part is that regarding support of the Italian subsidiary, the Indian parent is fully supporting the Italian subsidiary. But as far as financial support is concerned, Indian subsidiary has to also take care of -- there has been almost a 4x -- or if you look at it in the last 3 years, -- so 3 years ago, the average order book size of the company used to be in the vicinity of INR 600 crores to INR 700 crores. Today, it is INR 10,600 crores. So obviously, the capital allocation of the parent company has to be made accordingly. So as to ensure that the parent company is also executing the orders that it has within itself. The second is, as far as the minority shareholder -- shareholding is concerned. The minority shareholding is more strategic and would be very useful for the future of the Italian company. Both the companies, the Indian and the Italian companies work independently while utilizing the synergies of each other. But both of them have a complete autonomous and independent working. The other is you said about the pipeline of business in Italy. So the pipeline of business in Italy is very strong. There is something called the Program of National Reconstruction and Rehabilitation, which has been launched by the government of Italy and the European Union, which entails spending EUR 180 billion in infrastructure, out of which almost 40-odd billion will come to our sector. And since Titagarh Firema is a company based out of the South, recently also, the announcements that were made by the senior government officials clearly said that companies based out of the south of Italy will be the bigger beneficiary of the PNRR, the Program of National Reconstruction and Resilience. So we believe that there will be a very, I would say, very optimistic market scenario. The very fact that Titagarh Firema was able to deliver -- develop and deliver 2 brand-new trains in less than 24 months in spite of the COVID period, clearly demonstrates its technical prowess. So with that, we think that the company is in a good position to be a part of the PNRR and the railway upgradation process of the Italian Railway.

And regarding this Indian operations sir, are we eligible to bid for this Navy corvettes Defense Department has opened up recently. Navy corvette, INR 36,000 crore orders.

So I'm not sure about this, whether specifically on this or not, but we have done recently the fast petrol vessel for the coast guard, which is in the category of a warship. We did this via the GRSE. This was launched by the Director General of Coast Guard last month. And with the acquisition of the new shipyard, which we have done on the south side of Agra Bridge, we believe that the ship building capabilities of the company would increase in order to do more of sophisticated vessels for the Indian Navy. With regard to the corvette, I would not be able to give you an answer, but I can -- if we can get your details and if we are able to share this, we'll definitely share this with you.

About the wheelsets problem, sir, is the company facing any problem?

Wheelsets have been continued to be a problem, but the railways have taken necessary actions, because the railway world has to effectively deliver the wheelsets to us, so we have to buy the wheelsets from them. So that the railway have placed some orders for importing wheelsets, et cetera. So we believe that the railways have been very proactive in the planning exercise. The very fact that they placed an order for 3 years at 1 go for freight wagon is a testimony to the forward-looking planning that the railway has started doing.

Our next question is from the line of [ Panjal Agarwal ] from Green Portfolio.

I understand that company is trying to reduce debt. But in the consolidated cash flow statement, there are short-term borrowings for INR 95crores and repayment of long-term borrowings for INR 103 crores. The company seems to have repaid its long-term loans with short-term borrowings. I mean, sir, what are we doing here? What is the strategy?

Absolutely not. The company is never repaying long-term borrowing with short-term loans. Both are dealt with in completely separate and isolated buckets. The long-term borrowing has reduced over the years. And that has been reduced only out of the working cash flow. The short-term borrowing is basically cash credit limit and this can be -- or can be a very kind of a moment of time event because invoicing, typically in the month of March, can happen at the later part. There are certain customers that do not pay up in March because they would like to move their tables in April. So the company is very, very cautious about ensuring that there should not be any long-term usage of short-term funds. And you can be sure that, that is not the case.

All right. Also, sir, I can see that other expenses have gone up by 55% on a year-to-year basis. So can you tell you the nature of these expenses and the reason for the spike?

So other expenses, I would include certain settlements for claims that have happened. Unfortunately, the Director of Finance of the company could not join in because his flight called delayed. He could not land in time. I don't know, Saurav, if you are able to give more breakup or otherwise, we can provide the breakup.

In the consolidated, the other expenses are, because of the justification that we've given in the opening speech of Mr. Chowdhary, that it includes EUR 12 million of almost like INR 35 crores of onetime provision that we've done for the end-of-life legacy contract for the extra cost of -- from the customers. So that is the major impact from the consolidated perspective from the Italian operation. For the Indian operations, I mean, there are certain, I think, advances -- I need to check for the stand-alone basis. Maybe we can come back. For the consolidation, the meter increases the EUR 4 million of the produced that we've got.

All right, sir. Apart from this, I wanted to ask that inventory has also increased by 25%. So what is the nature of the inventory and the reasons for being stored up? And similarly, trade receivals have doubled in stand-alone statements from INR 14 crores to INR 28 crores. So the quality of the trade receivables and have you already received that amount in the month of April and May?

Ma'am, these were very routine treatments, INR 14 crores or INR 28 crores is not a big amount considering the size of the company. And if you look at the turnover of the stand-alone, it is, in terms of number of days, not at all, very high amounts that we are talking about. I'm not very sure on which numbers that you are talking. But there is -- the provisioning norms and the way of recognizing these amounts is very strict, and we meticulously follow them. So if there was anything which was doubtful that would not be appearing in the prospect.

All right. Sir, just one more question. Sir, have we started with the regular production of propulsion systems. And have you received any orders yet?

We have received the orders and we have started with trial production.

Our next question is from the line of Sreeram Ramdas from Green Portfolio PMS.

Sir, about these other expenses that the previous candidate has asked, I will send him an e-mail, and I will request for the details because I need further explanation on this if you do not mind. Secondly, sir, have we started -- we have started -- we've continued the project, right, in Italy, the metro?

Yes. Yes, we've already delivered for train.

Okay. And the legacy contracts should be finished by June -- by June end, hopefully.

I already mentioned that in the opening comment.

Okay. Okay, sir. And sir, last question, look, our Italian order book has been increasing, but our revenues, when I look at consolidated passenger stock versus the stand-alone passenger stock, I'm getting a revenue of only INR 60 crores for this quarter in -- for the Italian subsidiary. So the revenues are performing by 60% year-on-year basis. So sir, what is the reason for Italian subsidiary to report lower revenues?

The contract that we signed have been signed recently and typically, in a passenger train business, first designing and the production of the first train take between 18 to 24 months. That is one. The second is that the focus of the company in the last quarter and in the June quarter is to complete the legacy contract, where the revenues are much lesser, because these are primarily revamping contracts, not newly new trains. So therefore, that takes an impact. But unless we are able to complete those contracts, we will not be able to streamline the situation of the company.

Okay. And sir, lastly, we recently won an award for 24,000 wagons, now do we have the current capacity to execute all these orders within the next 3 to 4 years? Or do we need to spend anything on CapEx at the moment?

The buyback has the capacity, some balancing capacity that will equally create and appreciate.

Okay. All right. And how much CapEx are we expecting? EBITDA, a major figure that you're expecting for CapEx?

We're not talking about very large amounts at this point of time. So whatever CapEx will be there will be for the wagon business will be just the routine maintenance and just that.

Our next question is from the line of Vaibhav Badjatya from Honesty and Integrity Investment.

And you can -- sorry, I was late to join the call, so you can escape it if this question has been asked by somebody else. I just wanted to understand on the new large railway order that we've received, how is the raw material risk pass-through works? I mean, if the steel price rise, what would be the risk? And with what leg? And if you can just explain those contracts, that would be helpful.

Ladies and gentlemen, we have line disconnected for the management. Please stay connected while we join them again. Ladies and gentlemen, we have the line for Mr. Umesh Chowdhary connected.

Yes. My apologies, the line suddenly dropped. I don't know why. So I was mentioning that there is a price variation clause in the contract, which takes care of both upward and downward movement of steel prices.

But is it, like, with some time lag that is there and for some 3 to 6 months, we retain the benefits and the risk? Or is it like immediate pass-through? How does it progress? What are the strengths and...

Normally, the time lag is always there by a quarter or so, because the wholesale price index takes time to move. But again, that's why I always mention that there is possibility of a quarter-to-quarter kind of a movement on EBITDA margin, but on a blended basis, that kind of matches that.

Got it. Got it. And just broadly on the new orders, when we have put in the -- put into it. what kind of margins are we expecting on this -- in this order, if you can share that? What is the EBITDA margin that can be expected?

So again, before this was discussed that as a company, we work with a pricing strategy, which gives us about 8% to 10% of EBITDA, and we would continue to work with the same strategy.

Our next question is from the line of [ Ketan ] Mehta from Nizar Securities.

I've got 2 questions. First, we are undergoing some rescheduling of payment with our creditors in our Italian subsidiary. So if you can throw some light on that and the status of this rescheduling?

This is basically the unsecured creditor in the Italian system, the Sanjay Creditors, if there is a renegotiation of the payment terms of the Sanjay Creditors, it is classified under this end. This is not a reschedulement of the secured debt that is.

Okay. And by what time do we expect this negotiation to be -- I mean, if you can just give a broad time line as to when this matter will get sold.

These are ongoing. These are not long term. So maybe by the next quarter itself, it will be done.

Okay. Okay. And sir, second is, our promoters had infused around EUR 20 million in Italian subsidiary in exchange of OFCD. So how much dilution can this cause? How much dilution of the holding company can be caused by this OFCD?

No, there is no OFCD infusion. There will be an equity infusion, which will include the equity infusion from the government of Italy.

Okay. Okay. So there would be some dilution caused by this, right?

That's right. The dilution will be caused by that, but that is something which, once the final equity structure is defined, how much money will the Italian government put in and third parties put in, it will be defined.

Our next question is from the line of [ Hari Kumar ], an investor.

Can we expect any more orders from this 90,000 wagon orders opened by the railways department, sir?

We've already got 32% of the orders laid by the railways. So I think we should be happy with that.

Okay, sir. Any strategy for the export of wagons of the current order that have been soft, sir?

Sir, we are definitely working on export markets. This is something which is our focus, and we will continue to focus on building -- so if you look at the company's overall strategy, I had mentioned in the call earlier that my focus is to build up an order book. In fact, our target was to build up an order book of INR 5,000 crores. We have been able to build that reasonably well before time and that grew twice of the target. Now the next target will be to do geographical diversification. And for that purpose, we have also opened a small office in the North American market. So we will continue to do geographical diversification of our markets.

And lastly, sir, about this industry for our -- how ahead are we in implementing this strategy for the industry port?

We are continuously upgrading ourselves and we keep on putting whatever IT enablement that we can. Our coach plan that has been made is utilizing industry for 4.0 standard practices.

Our next question is from the line of [ Rajesh Bhandari ], an investor.

With this new order worth INR 7,800 crores, our turnover for these 3 years would also be more than doubling up?

Sir, again, we will not be able to give you forward-looking numbers statements or projections, but we've shared the numbers and the time line for execution.

Yes, it is the time line you have given. So yearly, it works out to something about INR 2,400 crores, which is in addition to, say, INR 1,500 crores, which we did the -- just gone by year.

It will not be an addition because these are orders that are placed by the railway. Instead of getting a smaller order, we've got a larger order this time.

[Operator Instructions] Our next question is from the line of Premal Shah from Pratik Heat Products.

I just have a couple of questions. The value of the legacy contracts, which are pending, what is the value of those contracts?

The total contract value, the legacy contract that was residual on the first of April was something around EUR 20 million, EUR 30 million, which we will target to complete in the current quarter, that is the June quarter.

So after that, there would not be any legacy contract bleeding...

Thereafter, there will be no legacy contracts.

And the new contracts which you have already bagged, there are these -- what kind of margins are those going to be working on?

Sorry?

What kind of margins would the new contracts in Italian operations will be after the legacy contract?

The Italian railway business operates on a smaller EBITDA margin. Normally, the EBITDA target margin in Europe is at about 6%, 7%. So the new contracts have been booked by us in the -- under the normal circumstances. So we would expect to be around that percentage of EBITDA margin.

And the factory shifting that you've done, one of the facilities that you've closed down and moved to the other facility. What kind of an impact would that have overall on the operations?

That will bring in about -- bring about a lot of efficiency in the operations and reduce costs by almost -- I would say the cost that we have incurred, the payback would be less than 1 year.

Our next question is from the line of Ashwani Sharma from ICICI Securities.

I've got a couple of questions. First is sir, on the metro, while macro looks very good in terms of opportunity. But if you could give us some ballpark numbers as well opportunities concerned over the next 2 to 3 years, that will be helpful. That's my first question.

Sure. So as far as metros are concerned, these are all tender-based businesses. So to give an order visibility will be difficult, but I can only give you tender visibility. The tender visibility is very high. A lot of metros have already come up and they are continuing to come up. Our company has already, as we speak, bid in a couple of tenders which are ongoing. And we continue to bid in the tenders that are going to come up in the future itself.

So which are the states which are highly active in these tenders?

All states, I mean, if you look at daily Metro is actually in Chennai, Ahmedabad, Bangalore. So there are different states that will be coming up. So -- Gorakhpur has been sanctioned. So there will be a number of them that would continue to come up.

Okay. So my second question is on the -- your traction motor business. If you can update us what is happening over there?

So I already mentioned this that the trial production in our plant has already started and we would be into regular production in the next 3 to 6 months now.

So we have got any order in?

Yes. Yes. We already have orders and for that, the plant approval and the trial production has already started.

Okay. And my last question is on the large wagon order that we have received. What kind of advance we will get from the railway for this?

There is no advance for the railway contract. The working capital...

Our next question is from the line of Premal Shah from Pratik Heat Products.

I'd just like to know, this Pune Metro contract, at what kind of margins is that going to be running at?

We -- I just mentioned it to one of the participants. We do not disclose contract by contract margin for competitive reasons. But what I can share with you is that whenever we are calculating our overall contract or product mix and execution mix, we ensure that we still, with our targeted margins, that we have projected to the investors.

Yes. The only reason I was asking is because in the presentation, I could see that the passenger rolling stock, in spite of having a good top line, the margins are negative. So I was just wondering what would be happening going down the line in the next 3, 4 quarters.

There are fixed costs, which are obviously there, which will be continuing. And as I said that on an overall contract basis, it's not -- it's not an onerous contract. Otherwise, we would have declared that it is an onerous contract. But then pricing is also strategic. So this is a business that we will have to kind of follow our strategy in order to achieve the larger picture that -- the larger objective that we have set out to achieve.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you very much for all the very insightful questions. I hope I've been able to answer whatever I could, keeping into view the competitive and regulatory framework. I think that on a nutshell, as closing remarks, what I would like to share is that it seems that the company is all set to enter into a different trajectory. Incidentally, this will be the 25th year of the company's incorporation. The company was incorporated in 1997. So it is a very important landmark year for the company and for it to be having number of landmark achievements on this year is also very fortuitous. The first metro coach was rolled out this year. The first large contract has been received this year. And also the first warship was launched. So all the 3 businesses have something to contribute to the 25th year of the company's incorporation. Going forward, we believe that all the 3 verticals of the business, which have shaped up well, which have their independent management teams are picking up, and they would continue to deliver as drivers for the growth of the overall company. So I would like to convey my sincere gratitude to everybody, to the employees, to the bankers and more so -- most of all, to the investors who have been with the company, who have supported the company and we really are sure and we hope that we've been -- we will be able to take this company to a much different and a much greater height in the year to come. Thank you very much.

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