VA Tech Wabag Limited (WABAG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of VA Tech WABAG Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Mittal, Managing Director and CEO -- Group CEO. Thank you and over to you, sir.

Thank you. Dear friends, let me first welcome you all to the earnings call post announcement of Q2 FY '22 results of VA Tech WABAG Limited. Joining me today for this earnings call is our Chief Financial Officer; Mr. Skandaprasad Seetharaman. Our best wishes to you all on this auspicious occasion of Deepavali. Moving on to the performance for the quarter. Economic activities continued to progress well as construction work and supply chain are at near normal levels. During quarter, we further expedited the pace of execution across sites by deploying sufficient resources and requisite working capital. This was essential to ensure the project progress is well ramped up as we move into the second half of the fiscal. Coming to some key project updates. In our Zarat seawater reverse osmosis plant of 50 MLD capacity expandable to 100 MLD being executed for SONEDE in Tunisia, the project is progressing very well with engineering and ordering compete. Civil and marine works are at peak and in advanced stage of completion. Equipment deliveries are underway. On our One City, One Operator project, which is the O&M contract in the city (sic) [ cities ] of Agra and Ghaziabad, has been ensuring treatment of 670 million liters per day of sewage, adhering to the national treatment standard and serving a population of over 3 million people. One of the major objectives for us in this project is to eliminate manual intervention in the underground sewage network by deploying mechanized technologies. Since our takeover of the project, we have renovated 4 STPs and associated network with a treatment capacity of 230 MLD. As part of this contract, we operate a customer call center for resolving public grievances in a timely manner. Moving on to our hybrid energy model project in Kolkata. Detailed engineering is complete and ordering is also nearing completion. Civil activities are currently underway and the equipment deliveries will commence soon. In our latest, the Amur Gas Chemical Complex project in Russia, we have established our branch office in Moscow to facilitate the project execution. We have signed a contract with the customer. Basic engineering activities are complete and detailed engineering is currently underway. Our local engineering and procurement teams are in place at Russia to work closely with customers and also local vendors. Moving on to the ordering activities. We are witnessing good traction in Middle East, Africa and Indian markets as tendering activities are gaining momentum in these geographies. We are witnessing increased interest from multinationals and other financial institutions to invest in the water sector as the post-COVID recovery phase begins. Governments across the globe have been unveiling long-term plans as well as regulatory changes towards water and hygiene. As you know, ESG and sustainability have become the norm now in every industry, and one of the most important components of this is water security. All these factors give us confidence that WABAG's commitment to technology and sustainability, we are well poised to continue growing profitably and enhance our global leadership position. I now request Skanda to take you through the financial highlights for the quarter. Over to you, Skanda.

Thank you, Mr. Mittal. Good evening, friends. Thus, you've had an opportunity to look at the results update presentation as circulated and uploaded on our website. Let me take you through the key financial highlights for the half year ended 30th September 2021. Our revenue from operations on consolidated basis stood at INR 1,342 crores, up by 29% year-over-year. On a stand-alone basis, the revenue from operations was INR 973 crores, up by 54% year-over-year. The consolidated EBITDA for the period stood at INR 97 crores, which was up by 34% year-over-year. And the stand-alone EBITDA for the period stood at INR 71 crores, up by 30% year-over-year. We continued to grow profitability in this quarter as well with the profit after tax attributable to owners for the period at INR 42 crores on consolidated basis, up by about 90% year-over-year. On a stand-alone basis, the profit after tax stood at INR 30 crores, up by about 146% year-over-year. On the core metrics, our core EBITDA stood at 8.5% and the core PAT at 4.1%. The core return on capital employed, ROCE, was 21.1% and the core net working capital days stood at about 79 days. During the period, we have deployed resources into the projects across the group to ensure execution is expedited, which is reflecting in the top line growth and improved margin profile year-over-year this quarter. Despite higher sales, the trade receivable levels have remained the same -- have remained similar at March '21, signifying better billing and collection turnover. The cash flow used in operations of about INR 250 crores was primarily deployed towards expediting the pace of project execution. We express our heartfelt thanks to our bankers, vendors, investors and all other stakeholders for the continued support extended to us. With this, we now open the floor for question and answers.

[Operator Instructions] The first question is from the line of [ Ashit Kothi ], an individual investor.

Congratulations on your very good numbers. We would -- I would just want to ask one question. That is, when do we see the constant stability? I mean, say, there used to be lots of volatility in terms of performance. So have we passed through that volatile times and now we are on to an overall growth trajectory for next couple of years at least? And second question was why we have been making on Namami Gange project as well as some other real cleaning projects also? Recent episodes in Yamuna river pollution. So are we working on those areas also?

Right. Thanks for your questions. The first question is on the growth, whether we have reached a stability. You would have noticed the company that we have been a continuously growing company, and we have been steadily growing anything between 10% to 15% average even if you take over the last 1 decade. And we will continue this growth journey with no intention to consolidate because we see there's a huge market both in India and international. With WABAG's positioning in the technology and the references we have, we see no reason why we should not continue to grow for years to come. Being a project business is always -- can be -- from the mix of the projects, there can be some ups and downs, but the general pattern of the company since its inception has been growth. So yes, confidently, we can say why only 2 years? More than 2 years, we will be on the growth path. The. Second part, you talked about Yamuna. Why only Yamuna? There are so many rivers in the country. Today, they're all coming under the Namami Gange initiative, which was initially started for river Gange, our holy river Ganges. But now this scheme has been extended to all the rivers across the country for cleaning up the rivers and ensuring the effluent and the sewage is not flowing into it without treatment. So we see this as a huge opportunity in coming years and decades, which will bring so much business on the treatment side. So this is -- definitely, we see a good opportunity, and it's right in our domain area to provide the solutions for this pollution control.

But with all the money which has been spent -- which is being spent on cleaning the rivers, are you offering solutions where it should start at the inception? There is -- at a plant level, at the projects level whereby it does not reach the river at all? And if the companies are not in a position or not willing to, then some kind of a model where state and the companies together contribute and the balance is through sharing of profit or whatever? Because over a period of time, the water cost is increasing in major metropolitan cities as well as in industrial areas. So for the companies to reduce their cost of water consumption, they need to use your technology and recycle and reuse. So where do we stand on that?

Too many questions in one question. I'll try to answer...

Sorry, sir.

No problem. We'll attempt. If I miss anything, you can re-ask. Number one, this treatment has to be at the source, at the origin of this waste water. Whether it's sewage or whether it's industrial wastewater, the treatment has had to happen where the waste gets generated, not once it flows into the river. That's not possible. So that's what we do, and that's what we have been doing. Right where there's a source of the wastewater, we go there and treat the sewage. And if some small nalas are opening into the river, cap that nalas, pump the sewage also in the treatment plant so that all the sewage gets treated and no stream or sewage or wastewater goes into the river untreated. That's number one. Number two, we're talking about partnering with the government. That's exactly the model what we have today, which is called HAM, Hybrid Annuity Model, where the government and the private companies are collaborating together, investing together and ensuring that we find a solution for this treatment. Last one, you're talking about the cost of water. I think you know that the cost of water in India is lowest compared to any other country. Even smaller countries like Bangladesh and Sri Lanka and others charge more cost of water compared to India. So our cost of water is very low, and that is also one thing which our advice to government is always to increase the cost of water so there's more money available not only to build projects but also to operate and maintain the assets which they have created. And they don't have to work on the subsidies which they get from the government. They should be self-dependent. The last one you talked, and it's very, very important, is to recycle and reuse. That's the concept. The government as well as companies like us have been advocating for last 1 or 1.5 decades, and I think most of these new projects are seeing that the water gets recycled. That is also economically the best solution because there's a revenue which is coming out of it. And because you have a treated water which is reusable quality, you will never compromise on the treatment standard. You will ensure that the water gets treated to a standard which the process industry can use it. We are leaders in recycle whether you talk about industrial. We have done plants for power, steel, oil and gas and even for the municipal industry, where the sewage gets recycled and are supplied to the commercial and the industrial units for their requirements. So we have, in fact, built one of the largest plants in Chennai, which is a good reference to see that the sewage is used and then, after treatment, supplied to all the industries, including some of the large multinationals on the Poonamallee High Road of Chennai. So this is definitely our way forward, and what you said is -- I fully agree.

[Operator Instructions] The next question is from the line of Priyankar Biswas from Nomura.

Priyankar from Nomura here. So my first question is we have seen a very strong rebound in domestic sales, at least in the consol numbers, like over 60%. Whereas, in the overseas sales, this seems to be lacking. I mean like it is down by 3%. So any issues or something that fit into the overseas drop size and maybe due to supply chain or anything?

I don't think so. See, as a company, we don't distinguish between which product we give, whether it's water, wastewater, desal, neither we distinguish by the geographies. Where we have a right project to use our technology with good cash flows and also with the excellent technologies we can use, we prefer those projects. And it can be in India, it can be globally. So I think today, we don't look at the numbers what is coming from India and what is coming internationally. It can be just the mix of the projects which you can see that this will -- definitely, we will see more international with this Russia project and the Petronas project which is going up. You will definitely see this happening. Now if you see the numbers and, I think, the segment revenue, just coming to the numbers, if you see on a half yearly basis, yes, there is an excellent rebound from -- in India from INR 309 crores to INR 521 crores. But also rest of the world, it's not bad. It's from 79 -- or INR 792 crores to INR 912 crores. So that has also substantially grown, even the rest of the world. So if now Russia project starts picking up, you will see in the coming quarters more will be in rest of world. And maybe India will also grow, but the rest of the world will also grow much more faster. And you can see a big difference between what was in the first half and what will be in the second half.

Then the follow-up here is, what -- while the trade receivables are flat, this is what I observed, there is still some working capital-related outflows. So any reason why the terms of the trade payables or the terms of credit are worsening? Or is there something happening there?

Priyankar, if you'll see what has happened in the balance sheet, as you rightly said, the trade receivables have remained flat. But what is also important is the turnover has grown. You'll see from a half year-to-half year basis last year to current year we had INR 600 crores of turnover more, but the trade receivables are broadly flat, which means we are collecting faster. And on the trade payables, as I mentioned in the speech, we have -- and also what we mentioned in our Q1 investor call on the price increases and the extended state where we had a margin dip, in the current period, the margins -- margin profiles have improved both at standalone and consol. And this is a result of expediting progress in the projects. And obviously, we will have to fund where there is construction work or where there is a cash and carry on material prices in order to have our margins intact. So there, you will -- then there is an investment of resources that we'll have to put into the projects. But on a half year-to-half year basis, for the incremental working capital versus the incremental sales, it's not in the same ratio. We have come down on the working capital days as such. So the entire money has gone into the projects to expedite, to pick up the pace so that our H2 is also -- and we have stepped into H2. It is important that the pace has picked up.

So if I understand it rightly, so these working capital investments should help us further accelerate from the current levels in H2, right? I mean to have an even more enhanced execution? So is that the right understanding?

That is correct, Priyankar.

And sir, the last question from my side is see, last con call, I remember hearing about potentially the Chennai desalination -- or about the Chennai desalination tender. So what is the status there? And if you can give some even qualitative color like how we are placed vis-a-vis the project. And when can we expect the bidding to happen?

Bids are under preparation. Presently, the submission date is in January, where the technical and the commercial bid has to be submitted in January even if we get 1 or 2 extensions, but it will definitely happen in February. And generally, being a JICA/Japanese-funded tender, it will take about couple of months for evaluation and then award. So we expect the award to be in the first quarter next year.

Okay. And the competitive intensity, if you can give some idea like...

We're already prequalified. We have said in the previous con calls also that there was a global competition being an international-led tender, ICB. And so there was a prequalification called for, and only 4 companies have prequalified. And I'm glad to inform that our company also is one of the 4 which is prequalified to submit the tender.

The next question is from the line of Kaushik Poddar from KB Capital Markets.

Yes. Since COVID has more or less stabilized right now, can you give us a sense of the turnover for this financial year as well as the margin for this financial year -- or for the next half, second half?

See, you have always -- I think you've been an investor with the company. You always see that the second half is always stronger than the first half. Now in the first half itself, we have done pretty well, and you have seen what my colleague, Skanda, has told you, the growth we have done over the last quarter. So I'm sure you can quickly churn your numbers and you will be able to come to. But because of this uncertainty of COVID and other things which are happening globally, we have reframed the last year and this year to give any estimates of where we will be at the end of the year. But I don't think it will be difficult for you to estimate where we would be with the kind of track record we have had in the last few years.

Okay. And secondly, this -- the price of commodity steel and everything have gone up. Do you think that the commodity price hike coming in the way of reaching your 10%, 11% margin which you have talked about?

See, definitely, you have seen in the first quarter it did have an impact, 2 impacts. One you rightly said is the commodity price. And second, because of COVID, we have an extension of time, something in the base of about 6 months to 8 months. That will also cost money because we have extended stay cost. But that is what Skanda was explaining, that this quarter we have taken a conscious decision that we will not delay our projects with COVID or no COVID. Plus, during this, lots of small suppliers and contractors are really short of cash. So we also support them to ensure that they mobilize their resources and work at a speed what we desire of them. And also, to fix the price, we immediately take the delivery rather than keeping it for 3 to 6 months where further increase in commodity prices can affect us. So this is a trade we have to do, that -- whether you invest a little extra working capital and get your projects on time as well as you don't allow your margins to slip, whereas we always have said that 10%, 11% on core EBITDA is possible, and I would assume -- even now, we would assume it's possible.

That's great. And can you give a sense of any big order you're getting in the next -- I mean, opening up in this coming second half -- in the second half?

Yes, as I said in my speech earlier, that we have a very good order pipeline. We are very bullish on what we will book orders in the second quarter. And...

Second half.

Second half, sorry. You're right.

Right.

Second half of the year. So I think as far as order opportunities are concerned globally, there are enough to get what we want. We also don't want to go beyond a certain level where we have 3, 4x of our annual sales should be our order backlog, and we try to keep it in that. So we -- whatever we execute, we try to get 20%, 30% more than that as our order intake.

20%, 30% more than your turnover, whatever you do, right?

Yes, yes. Yes. That's the minimum number we have to get so that we grow year-on-year in terms of order book.

The next question is from the line of [ Omkar ], an individual investor.

Congratulations for good quarter 2 numbers. Sir, any update on APGENCO and TSGENCO collection as of now? Because it is pending from long -- because, of course, we are not working, NCLT were not working. Now quotas started working. Any update on that?

I think the only update I can give, that at least now hearing has started, and some of them are still virtual and some of them are even physical hearing both at NCLT and at Supreme Court. We have had already 2 hearings completed. So we expect very soon, maybe in next quarter, we will be able to tell you the outcomes of these cases.

Okay. So things are going up, right?

Yes.

Great. Great. And as the earlier person has already asked question regarding the JICA project, so as of now you're saying even if that project -- whatever outcome will come, that will come next year first quarter, am I right?

That's right. Very correct.

The next question is from the line of Arvind Joshi from Bateleur Advisors.

Yes, most of my questions are done.

The next question is from the line of Dhananjay Mishra from Sunidhi Securities.

Sir, the -- my question is regarding this Libya framework contract. It has been in this framework since long. So any specific reason it is not moving?

I think it's a question of the priority of the government because we have -- already we have said that in the framework definition itself that the contract comes under framework when we have a signed contract. Here, the contract is signed and we have even paid the stamp duty to get the contract registered. But we don't start the contract until we get a letter of credit. So obviously, when the finances are limited, the country is taking a decision which project is urgently required. And today, their emergency requirement is drinking water and the power. So this sewage treatment plant, probably it will take a few more quarters before they can allocate fund and open the LC. But you see the second framework contract, which is the Bomba MED, which is a desalination plant. You will see this coming much faster because this is drinking water. We recently signed this contract, and we expect maybe in next quarter or so we should be able to get a letter of credit and start execution. So the preference is always to the drinking water and power, and we will accordingly see the sewage treatment plant will probably take a few quarters more to get into effectiveness. The second one, the drinking water, will come much faster.

Okay. And secondly, sir, in EPC segment, we have seen 35% growth in H1. Our O&M segment, it has remained flat, and we were -- had a target to reach from 15% revenue in O&M in -- to 25% in next, well, 3, 4, 5 years. So what is the -- I mean, is there any specific reason here also?

Yes, I think it's a very simple. Basically, the O&M projects come into force after EPC completes their project and hands towards the plant to the client and the client hands it over back to us for operation and maintenance for a long period, which is 5, 10 years. Now because of 2 rounds of COVID, 2 phases of COVID, we've seen a delay of anything between 8 to 12 months. So naturally, some of these revenues got postponed. What we should have completed 8 to 12 months earlier probably will now get completed 8 to 12 months later. So probably in the coming quarters, you will see the revenue of O&M also picking up as we complete EPC projects and hand it over to the O&M team.

Okay, sir. And the last question on balance sheet. We have -- in current assets, our trade receivable has been -- has remained almost same in the last 6 months. But in -- on noncurrent asset, our -- this trade receivable has gone up by INR 120 crore. From INR 547 crore, it has gone to INR 658 crores. So what is it all about?

So when we execute projects, especially municipal projects, there are terms of retention which are there. So on every invoice, the customer holds retention, which will be paid as a milestone payment at the end of the project or after the end of warranty period. So what is classified as noncurrent is what is not expected to be received within the next 1 year. So where we have large projects which started in the last couple of years and will take more than 1 year to complete now, those receivables are classified as noncurrent. So an increase in noncurrent also signifies that we are expediting the projects and invoicing is going.

The next question is from the line of Charanjit Singh from DSP Mutual Fund.

So just I want to understand on the industrial side. And we see now there's a -- more push from the corporates to the ESG norms and they talk about the water treatment. And we are having a very strong capability with effluent discharge and water treatment of the industrial space. So in terms of opportunities which are evolving there, if you can touch upon? And any major government regulation changes which can lead to much more -- better growth in the industrial side? That's my first question.

I think it's true both for industries as well as the municipal authorities. So everybody wants to be self-dependent, as in ever. So I think when it comes to water also, they don't want to depend on the external source. They want to just be self-dependent. So in that case, I think most of the industries are going for recycle and reuse. It is the new norm for all the industrial plants we are seeing. There are 2 reasons. One, the environmental discharge norms are becoming strict. And also, the regulator and implementing authorities are also becoming very strict. If you don't meet the norms, so then they can even shut down your unit. So as a result, industries are going for more and more treatment plants with recycle capabilities. And that's where we see a good business for us. Same thing is happening for the municipal authorities, where they also don't want to just discharge their wastewater into the water bodies. We also want to make money out of it. At one stage, the treatment of wastewater was seen as liability. Today, the wastewater treatment has become a business. Wastewater is an asset because they make money out of it. They treat this water and sell it to the industry at a very, very good price. As a result, it has become a new business model to treat wastewater and make -- the clean water, the treated water, is sold to the industries and other commercial establishments. So yes, going forward, we see this trend picking up. And everybody is looking for water security. Nobody wants to depend on external source to get their water. And if they don't get water, then they will have to shut down their factories and their units, which I think industries are moving away, and they say, we will recycle our own wastewater.

So Rajiv, if you can just touch upon -- so how large is this industrial water treatment market and at what rate it is growing. And how is the competitive dynamic here?

I think it's -- it requires technology and also experience. As of now, it's not very competitive. There are large players who have experience, can handle it. But I'm -- like any other business, over a period of time, everybody will gain experience and get -- but at least for next 5, 10 years, we would see this as a very niche market for us. This is growing definitely at not less than 15% year-on-year, and this will further continue to grow. Even government is educating that industry should use recycled water. But there is a guideline for the power plants which are in the vicinity of a sewage treatment plant. They have been encouraged to use this recycled water rather than taking fresh water.

Okay. And sir, lastly, on the working capital side. Now going forward in the second half, how do you see the payment cycle from different customers be it state or central-funded projects? If you can touch upon -- one is great in the near term. And overall, going forward, working capital levels, at what level we would like to maintain that. That's my last question.

Payment cycle-wise, you know and we have said it in many of our con call speeches and also in Q&A that we mostly go for projects which are multilaterally funded or sovereign funding is coming in or, in some of the international projects, where letters of credits are available. Yes, as far as cash flows are concerned, we can see there is some credit period. Sometimes it's 90 days, sometimes it is 150 days. Other than that, we don't see that any problem would come in terms of collection. As long as we do our job, we should be able to collect money on time. And also, I think as the industry is moving, I think customers are also wanting that they'll pay so that they can also get their projects completed on time. If they don't pay on time, the projects will get delayed and there will be escalation in cost, which is not to anybody's benefit. So customers are equally interested to see that this is coming down. Now in terms of receivable days, if you see from last 1.5 years, from March '20 to September '21, we used to be on 230 days. Today, we are down to 160 days. So continuously, we have brought down our billed receivable days by almost 70 days in last 18 months. So going forward, our endeavor is to continuously further bring it down to a level where a normal industry of our type should be. And this, we are very hopeful that in next few quarters, you can see the results, what we deliver.

The next question is from the line of Mohit Kumar from DAM Capital.

Congratulations on a good set of numbers. Sir, my first question is on the opportunity side. Do you see this ordering opportunity as we enter FY '23 becoming better compared to FY '22? And how do you see H2 FY '22 for domestic and the international orders?

I think the answer to your question, one is yes, definitely yes that we are seeing these opportunities to be better than what we saw about a year back. Definitely, we see some investment coming in. Plus, there is a huge focus both in India and at international level on the water sector. So as we said earlier, we see that this opportunity is growing, and it is already at the pre-COVID level. So from an investment point of view, we don't see any problem, any concern on investment on water projects. Second one, I think you said the domestic and international?

Yes, sir. So if you can give a qualitative color in -- especially in Middle East. So are you seeing larger orders -- larger-size orders? Are you -- do you expect those orders to be closed -- to get closed in the next 6 to 12 months? Are you seeing a higher traction especially on the [ municipal ]?

Definitely. We have at least about 1/2 dozen orders where we feel very good about it. At least, we would think that in next 2 quarters, we'll be able to close at least half of them. Three them will be closed in next 2 quarters, and we are very hopeful of that. Same as with India. We have a lot of good bids in evaluation phase. They will also get closed in next couple of quarters. Regarding -- I think you talked about one more thing.

So sir, if I can, I want to -- FY '22 about Middle East because we don't see why -- are you seeing like higher activity?

[indiscernible] -- go ahead, please.

Yes. My question was that are you seeing much, much higher activity compared to H1? H1 was pretty bad, right? We haven't got any order inflow. There has been hardly any large orders getting finalized. So do we expect the H2 to be far better? That was the question.

No, no. I just want to remind you that it's not a correct statement that we don't have orders in the first half. In fact, one of our largest order, the SIBUR order from Russia, which is close to INR 12,000 -- INR 1,200 crores, we got it in the first quarter. And also, the [indiscernible] order we got in the second quarter.

Yes. True, true. My question was prospecting more to domestic than -- domestic.

Domestic, yes, I think that you're right, our intake is low. But I'm sure you will see in the second half, even the domestic things will pick up. And overall, as I mentioned to somebody earlier, we would meet our targets of order intake in this FY '22.

And lastly, on this Bombay MCGM order, which was being allotted to 4 to 5 players. Once it gets finalized, does it translate into some opportunity for us? Because I think this is a INR 10,000 crore order for all the 5 packages. How does this -- how can this potentially translate into a number for us?

I don't know if you have been in the previous con calls of the company. We have been talking about this for last 3 to 4 years.

Right.

We have consciously not participated this time because we have been doing this for last 10 years. And I don't know even now whether this will be finalized or if we'll see a new offer of this order. So this is going on...

So my question was that whether those parties who will win the contract, will we get -- those contracts eventually come to people like us? Is that assumption right -- wrong or right?

Wrong. We would normally not work as subcontractors to them. If we think it's interesting and we believe that this will go through, then we will work as a main contractor, a lead contractor ourselves.

My question was because some of the contractors have no experience of doing this kind of large contract. And so...

And we've seen -- no, in his country, that itself is a flop. So please stay away from such things.

The next question is from the line of [ S.A. Naran ] From [ Capricorn Research ].

Yes. We had overdue sticky dues from the state government of -- under the [indiscernible] Telangana. What is the current status? Have we collected them or have we provided against the outstandings?

See, as we explained to one of the earlier participants, this is under litigation and one is at the NCLT, another is at the Supreme Court. Because of last 2 years, we all know the ports were not functioning, and the urgent and important things, they were taking it on a virtual hearing. Now things have improved in the last couple of months, and we ourselves have had a couple of hearings for our case. So we expect in next quarter or 2 we will get a decision, and we are hoping for a favorable decision. And we'll keep you informed as we progress.

Wonderful. My next question is, compared to Q-on-Q, the finance costs have gone up from INR 19.8 crores to INR 22.1 crores. This is about 4% of our revenue. Should we consider this as the norm? What will be the normalized finance cost per quarter or for the year on absolute terms as well as on percentage basis?

I think if you look at half yearly numbers, that can be a norm because if you see, the net interest cost has come down. Whether we say half yearly basis or a Q2 basis from the previous year to this year, our interest cost has definitely come down. Now the bank charges have slightly gone up from INR 23 crores on a half yearly basis to INR 25 crores -- or INR 23.7 crores to INR 24.9 crores. But this is purely based on the business we have like new Russian order we get or Malaysia order. And these are all international orders which we all have to give a bank guarantee for performance as well as for [indiscernible].

And a couple of more questions. Our PAT margin is likely to improve. What would -- and if it is likely to improve, what will be the trigger?

We have said always that we will try to keep the EBITDA in a double-digit margin, especially the core EBITDA. We told the earlier participant also. I think below EBITDA, we don't have much other than this interest cost and the bank charges. So it should be slightly better on a year-on-year basis. So the first year -- the first half is always a subdued half compared to the second half, which is much stronger. So we would...

For the year...

Sorry?

For the full year itself, it would be improved?

Yes, yes. Definitely, we expect for full year it should improve.

Great. And my last question, what is the tax rate? Is it likely to be reduced? You seem to be having some 29% or 30%. Is it likely to be more?

We are a company with a lot of subsidiaries across the globe. So in India, our tax rates will be at 25%. But when we consolidate all the units across the globe, this is an effective rate for us as a group.

So this will stay put?

Yes, I think it depends how much business, how much revenues, how much profit comes from each entity and what is the tax -- country's tax rate.

The next question is from the line of [ Ravi Nada ], an individual investor.

Sir, what is the free cash flow we had generated in this quarter?

I think we have used cash, as Skanda was explaining, to expedite our projects. Skanda's looking at it, and he'll give you more correct numbers. But we have used cash in this quarter. And Skanda, could you...

Yes. Our free cash flow use is about INR 280 crores for the half year.

For the half year.

The next question is from the line of [ Ashit Kothi ], an individual investor.

Sir, with regards to the competition and our ranking in the world market needs [ sufficient wins ] on water treatment. Like there's bars for now and a couple of others. So where do we stand vis-a-vis that? And if I go look at the markets, I would -- how do I put it region-wise? Asia Pacific, Europe, Central Asia, that is including china, Southeast Asia? So if overall order positioning, if I divide it region-wise and the margins region-wise?

It's a good thing we don't track the companies that way, but I can give you overall feel of it. See, if you see, we are a global company. Our main business comes from India and the neighboring countries of India, which is South Asia and Southeast Asia. We are not in China. We are very active in Middle East, North Africa and some countries in Sub-Sahara. We are very, very active in Europe being origin from legacy. It's a European company. So we have units in Switzerland, Germany, Austria, Czech, Romania and Turkey. They are also very active. And at the moment, we are not in America. Whether it's South or North America, we are not there. And at the moment, we also don't intend to be in that market.

Okay. And a reason for not looking at China at all? I mean, is it one of the most polluting countries? I mean, is it ahead of India, but is it? India and China are 2 major polluting countries as far as water pollution is concerned and also air pollution. But I think we are not in air pollution.

No, we are not. We are only in liquid. We are not -- so I think very simple. I don't think we have been to China and stayed there for almost 25 years until it was soft loans which were going to China. Being a European company, there were a lot of technologies and a lot of loans. We were able to do business there. But once I think that China developed and they didn't need any soft loans, this was more than about 15 years back, we saw that we can't compete with the local players there. Because it's their market, they understand it, they have better connections, and we are not. So we stayed there for 5, 7 years to see, and we came to a conclusion that this is not a market for us. And same way, we don't see a single Chinese company in India who is active in this sector. So I think it goes for them also. Probably they cannot compete with us in our country, and we can't compete with them in their country.

Okay. And on the world ranking, sir?

See, I think you should be proud that our company is #4 in terms of world ranking. And this is well documented and there in public domain.

Right, sir. And we plan -- how do we plan to reduce bank charges? Not the interest cost part of it, but the bank charges, I suppose that was more towards bank guarantees and things like that?

Like our Finance Minister has announced to all the -- at least units in India to not take 10% performance guarantees and take 3%. So issues like this, if your government supports companies, especially in the water sector, which is also seen as a clean sector, sustainability sector, ESG sector, we definitely can reduce it. And today, the bank's guarantees have come down, but the rates have not come down. So next thing, I think the government can also put the maximum cap where the banks can charge for such guarantees.

Okay. But only on the company profile then they are not going to reduce it per se?

They do that, but that's a small thing which they give depending on our rating, depending on our past performance. They definitely give you. But that's very small. Especially when we do business outside India, we have to pay double charges. One, we have to pay to an Indian bank to give a counter-guarantee to a bank based in that country because the client will only accept a guarantee from a local bank. So this also becomes a double charge for the bank guarantee for us if we do international business.

And how are our relations with multilateral agencies like -- be it World Bank or IMF or any other agencies which do fund this kind of clean water or water treatment projects to save environment?

I think today, our reputation and the brand is very strong. We enjoy a very good relationship, and they also have a lot of confidence in our capability and reputation. So today, we are working with all multinational agencies, whether it's KfW, Germany, whether it is World Bank in Washington, D.C., whether it's JICA from Tokyo, whether it's ADB from Asia. So if you talk about all multinational agencies, we have been working with them, and majority of our projects are multinational projects. We will also be happy to note that even our first HAM project was also funded by a commercial arm of World Bank, which is IFC, the first time something like this was funded by IFC. So the debt funding came from IFC Washington, D.C. for our Kolkata KMDA project.

Congratulations for that. And my only request would be what I had earlier asked you when you had said that you have not been looking at all in that particular [ area ]. But region-wide presence and orders and also with -- against each region's multilateral agency. So it would give us an idea if anyone wants to track -- what are the other projects which are being promoted by those agencies and whether our company is going to be part -- taking part in those bidding process and things like that, which would give us maybe a little bit idea -- more idea early on.

Sure. We have noted your requirement. We'll see what we can provide you extra.

Right, sir. And once again, congratulations for good numbers, extraordinarily good numbers.

As there are no further questions, I would now like to hand the conference over to Mr. Rajiv Mittal for closing comments. Over to you, sir.

Thank you, everyone, for your participation in our Q2 FY '22 earnings call. We have uploaded the analyst presentation in our website. In case you have still further queries, you may get in touch with the Stellar IR Advisors, our investor relation adviser based in Mumbai, or feel free to get in touch with us directly. Thank you, everyone.

Thank you. Ladies and gentlemen, on behalf of VA Tech WABAG Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.