Vascon Engineers Limited (VASCONEQ) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY 2023 Earnings Conference Call of Vascon Engineers Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Santo Sundararajan, Group CEO, Vascon Engineers Limited. Thank you, and over to you, sir.

Thank you. Good morning, everyone. I welcome you all to the earnings conference call of Vascon Engineers for the second quarter and half year ended September 30, 2022. Today, joining me on the call is Mr. Somnath Biswas, our CFO; and our Investor Relations team, Stellar Investor Relations. I believe you have gone through the Q2 and H1 FY '23 financial results, presentation uploaded on the stock exchange and on the company's website. The key development in Q2 and H1 FY '23 are: we have been highlighting over the past few quarters that we are focused to improve our debt position, and in continuation to that, we are happy to report that over the past 18 months, we have reduced our gross debt by INR 59 crores to INR 155 crores as on September 30, 2022, as against INR 214 crores as on March 31, 2021. This, along with improved cash flow generation has led to a net debt of only INR 41 crores as on September 30, 2022, as against INR 134 crores as on March 31, 2021. More importantly, a significant part of the debt reduction has been on the high cost debt, which helps in bringing down our finance costs. During the aforementioned period, the total debt-to-equity ratio has improved to 0.19 from 0.30 earlier. Further, our credit rating profile has also improved. Like we mentioned in the last con call, [indiscernible] trading has upgraded its rating for our long-term bank facility to acute BBB stable and for the short-term facility to acute A3+ stable. Also in September, [indiscernible] has also assigned long-term credit rating of BBB stable and a short-term credit rating of A3+. With improving business performance and cash flow generation, we are hopeful of further upgrading our credit ratings going forward. We continue to focus on liquidity management by monetizing the noncore assets. The second key highlight continues to be the improving run rate of EPC execution. During the quarter, EPC revenue increased by 53% year-on-year and 14% quarter-on-quarter to INR 156 crores. While on a year-on-year basis, it may look highly growth-centric with the base effect of a partial lockdown last year in the first quarter. When compared on a quarter-on-quarter basis, growth in EPC execution run rate is quite encouraging. And that typically in the construction industry, Q2 of any fiscal is lower than Q1 because [Technical Difficulty]

Sir, can you hear me, sorry, we lost your audio in between. Can I ask you please repeat? Like 2 seconds ago we lost your audio sir.

Okay. Thirdly, our EPC order book has been robust. As on September 30, 2022, the total order book stands at about INR 1,800 crores, of which, external EPC orders are about INR 1,500 crores, and the balance is from internal orders. Further, almost 74% of the order book is towards government projects, which provide visibility of cost execution and uninterested cash flows, helping us improve our execution run rate. With that, we believe we are well placed to improve performance in the next couple of years as our order book forms about 3.9x the FY '22 EPC revenue, providing strong EPC revenue growth for the next 2, 3 years. The company is witnessing increased demand in real estate EPC segment as we are trying [ after ] realtors based in Pune, Mumbai and [indiscernible]. Lastly, on the real estate and GMP businesses, we are happy to report that there is meaningful progress in both the segments as well. Real Estate segment, after various headwinds in the recent past is gaining momentum steadily. There is a gradual recovery in demand as the economy moves towards normalcy. Our new sales booking in H1 FY '23 stood at 135,000 square feet for a total sales value of INR 83 crores. During H1 FY '23, our real estate revenue stood at INR 48 crores and an EBITDA of INR 22 crores. The gross margin came in at 61%, while EBITDA margin at 45% in H1 FY '23. Due to the nature of accounting treatment given to revenue and expenses for real estate business based on Ind AS, the recording of revenue happens on project completion basis, making it lumpy in nature, whereas administration and other expenses are recorded as incurred quarter-on-quarter basis. Due to this timing difference of revenue and expense recognition, in certain quarters where revenue is not booked, the real estate business will show a loss as opposed to those quarters the revenue is booked. During the first half, we have launched new residential project Tulip Phase 3 in [ Coimbatore ]. Out of 49 units, which is in Vascon share, 44 units were sold within 1 month of launch as well as a project Eco Tower in Pune in which Vascon has a 70% share, 25% is sold out as on 30th September 2022. On the other project Vascon Spring, we have fully sold the building consisting of an area of 33,387 square feet out of which, 70% is Vascon shares. Also, we have recently received the first redevelopment project based in Santa Cruz in Mumbai, which will yield a total value of INR 225 crores. GMP business continues to deliver sustainable performance in the past quarter as well. Revenue of INR 113 crores for H1 FY '23 and a healthy gross margin of 28% is what GMP has delivered in the first 6 months. EBITDA stood at INR 7 crores with a margin of 6% in H1 FY '23. Coming to the industry sector. Driving construction industry is indicative of a strong expanding economy because it creates homes, places of employment and other official infrastructure like [indiscernible]. This year, India has anticipated to have the fastest growing major economy worldwide. Construction will be one of the main focus behind long-term growth as millions of Indians consider moving to urban areas in search of high-quality employment. Three key factors we [ cast ] the demand will likely continue, contributing to a good holiday season for real estate. Firstly, prices have been gradually rising due to rising interest costs. This contributes to higher demand because buyers prefer to buy in the rising prior half year. In a 140 basis point increase in home loan rates to 7.9% haven't dampened demand because rates are still low from the pre-pandemic levels. This is due to the fact that despite the global crisis, which has resulted in an increase in increased interest rate, the Indian economy continues to grow at a rate of 7%. Lastly, as people work from home more frequently, there is greater demand for larger homes with amenities. Given this backdrop, the festive season is selected to see strong demand for residential property since the monsoon and the short period, the preceding quarter Q2 is due at [indiscernible] time, and sales are often considered in the October-December quarter. On the overall financial performance, let me start with the standalone numbers. During Q2 FY '23, the company reported a total income of INR 183 crores as INR [ 92 ] crores in Q2 FY '22 [indiscernible] year-on-year. In Q2 FY '23, EBITDA stood at INR 26 crores and remained INR 1 crore in the corresponding period last year. EBITDA margin was at 14%. [indiscernible] net profit of INR 22 crores (sic) [INR 23 crores] in Q2 FY '23 as against INR 3 crores in Q2 FY '22 with a growth up to 35% year-on-year. On a consolidated basis, Q2 FY '23, the company reported a total income of INR 235 crores as against INR 161 crores in Q2 FY '22, which is a growth of 46% year-on-year. EBITDA stood at INR 29 crores, with EBITDA margin of 12% as against INR 13 crores in Q2 FY '22. And the net profit of INR 23 crores as against INR 3 crores in FY '22, which is a growth of 571% year-on-year. On the strategy, we completed us towards building a strong order book, enabling the execution to continue at current levels. The EPC business will be primed to focus on the company going forward. With this, we can now open the call to question and answer. Thank you.

[Operator Instructions] We take the first question from the line of [indiscernible] from MAS Capital.

So my question is with respect to the gold mine that we have in the Thane land. And I understand out of the 150 acers land that Vascon has, I think, around 70 acres is owned by Vascon. Recently, Amazon had a deal with a real estate developer in October, which is being counted as the biggest real estate deal of 2022 valuing that planned at INR 1,800 crores for 60 acres. So what is Vascon's plan to unlock value for our shareholders?

Yes, you are right, a couple of fantastic deals that happened in and around our land parcel. This is excellent news in the demand in that area is being established and the price is also being established at much higher than what we have ever calculated or signed to Vascon. Of course, we hold it on our balance sheet at book value, which is [indiscernible]. So there is a huge gold mine there, as you rightly said. Our issue is that what the land that we possess is not entirely [indiscernible]. And we will be waiting for some more time. And then we are talking to a few partners who are willing to partner us in acquiring land in and around our parcel so that we can have kind of a swap deal and create a continuous parcel for both of us. So technically work has started, but it is a long drawn process. We do not want to be taking values or application for shareholders in the short term over the next 2, 3 years on this parcel. But this will yield great numbers, great profits, great revenue assisting in the medium term. But we do not want to give any guidelines in the next 8 quarters or so.

Okay. Okay. Fair enough. My second question, I think first of all, congratulations on bagging the first 3 development project in Mumbai, I think at INR 225 crore revenue opportunity sounds great. So in the larger scheme of things, do you see Vascon doing a lot of redevelopment in Mumbai, given the large Mumbai redevelopment opportunity that exists?

Yes. So we do feel that smaller project from Vascon standpoint to be able to do extremely big projects in Mumbai is not in our bandwidth. We would want to focus on small projects like this, which we have acquired now. This is an excellent starting point for us. It's in a very time location, probably one of the most prime locations from they can have on right in Bandra. And so this would be our pilot project. We would want to get this kicked off. And yet, [indiscernible] , we're having a separate team that is entirely looking at redevelopment options wherever we deal the value is right and the [indiscernible] are ready [indiscernible] partner. We are keen on making a few entries within Mumbai in this aspect.

We take the next question from the line of [ Mr. Bajan Ghana ] from Summit Securities.

Congratulations for a great set of numbers, sir. My first question pertains to the real estate business. If we see the pipeline projects, which we have categorized in 2 parts, one is the near term, another one is the only pipeline closer to almost INR 1,500 crores plus INR 900 crores. So almost INR 2,400 crores kind of sales value potential. If you can guide us the launch timeline and the completion timeline? At what timeframe we expect this INR 2,400 crores to be convert into sales and then eventually deposition to be given? So if you could guide us will be really helpful. Some ballpark timelines on these projects.

So all of these projects, which is in Mumbai, Kharadi and Pune, the other one, 4 acre housing in Pune, the [indiscernible] and the Santa Cruz redevelopment that we have signed in Mumbai. All of these are tied up and at various stages of obtaining approval. So you can expect that these 5 projects should definitely be launched in the next months and putting an upper-side number 12 to 15 months at max. And if you take -- if you expect in 2, 3 years max for execution. So in the next 4 years, the INR 1,500 crores plus the INR 900 of existing, all of this would definitely be getting executed, sold and revenue realized booked. But as we said, the real estate revenues come in a quarter where we obtain [ OC ]. So how we will be able to sort of [indiscernible] by getting an OC every quarter will get to be seen because we do not have so many projects that we can keep getting [ in these quarters ]. But having said that, this quarter or the next quarter, somewhere the revenues will have to come, these profits will have to come. So yes, over a 4-year period, I think we target [ the depreciating ] both the buckets should get executed.

Yes. Sir, what I'm trying to sense is that we understand this accounting annually, which is existing. But fairly to understand from an average yearly perspective, INR 500 crores to INR 600 crores kind the top line that can be expected? I'm not purely asking from a P&L perspective. I'm just saying from a cash flow perspective.

Yes, cash flow perspective, you're obviously right from next year we will see extremely healthy cash flows compared to what we have seen in the past in real estate. Cash flows come in advance and the recognition comes later. However, we probably [indiscernible] being launched in the next 7, 8 quarters, I do not know how many will actually reach the stage of [indiscernible] . So suddenly, you would see an lopsided recognition of all the revenue for 3 years and 4 years from seen come down. And the sets that we are booking on will get recognized in the next year. But the one real estate much more in volume than what production. So we've a lot of work to the real estate division to bring back positivity and kind of new projects. So all the remains in that every quarter, almost we are signing up a new project and yes. So we will be launching a new project every quarter going forward for sure. And even 2 years, given 24 months from 20 months from today after that [indiscernible] will also see a position in [indiscernible].

Yes. Sir, your voice is a little bit breaking. So we are not able to understand it fully. I don't know whether it is with me or with everybody. So just to get slightly more sense. Can you also start disclosing this because most of the real estate companies also gives the expected construction cost and the total operating cash flow, which can be expected from these projects. So that gives us some sort of valuation metrics. So what can be the expected construction cost, which can be assumed for these projects on a ballpark basis?

So generally, on an average, I think INR 3,000 a square feet to INR 3,300, INR 3,500 kind of wherever it is, in general, could be taken as the construction cost. But rather than you calculate things because there are shares to be land on that other. I understand what you're saying. And I think we will calculate this as a ballpark projection and share it.

That would be great, sir. That would be give us some sort of cash flow that we are going to [indiscernible] for the next 4, 5 years from this order.

Yes. So we also have operating. So over a 4-year period, what would be our operating cost of running the real estate division? What would be the cost of construction for all these projects that we have? And then what is the top line? So effectively, what would be the...

The operating cash flow that [indiscernible]. So rather than going to P&L, it is better that we focus on cash flow that [indiscernible] for us. Yes. And sir, my second question pertains to the EPC side where you have now almost INR 1,500 crores order book and the execution cycle has picked up very well at least in this first half. So what can we sense in terms of this financial year and maybe going into next financial year, purely from EPC side and getting into newer orders and all. So if you could guide us on that parameter, it will be really helpful?

Yes. So EPC, fortunately, we had an excellent order book even now in hand. This year, we haven't bagged much. We do intend -- hopefully, we will bag a few more orders before the end of the year and keep this order book at same level or upward of what it is now. But having said that, even if the order bagging is a little bit delayed, the current run rate is expected to only increase with all these projects having taken shape and giving us full execution front on ground in all these projects. And so as you saw, our execution run rate has only increased quarter-on-quarter. We have done about 156 this quarter. So next 2 quarters would definitely be better than second quarter. Third quarter and fourth quarter generally are a better quarter for construction. We've already seen that in the month of October, we've done quite well, more than what we've done monthly in the previous quarter. So I would expect us to do a good percentage more than the first half in the second half of this year. So our guideline has always been about INR 600 crores EPC. I think safely, we should do that much or more in EPC this year. And next year, we would like to have at least a 20%, 30% growth on this INR 600 crore target of this year. So that would hopefully go up to INR 750 crores, which we will definitely achieve considering the run rate at which we are working currently.

Got it. And sir, can we work with 10% sort of margin on this EPC on a contributive side?

So what is happening in EPC is at the end of the day, we're still looking at a single-digit PAT, if it comes down to a PAT level. We do have EBITDA or gross profit in double digit in the teens...

No, I'm talking about operating margins only, not EBITDA margin.

The EBITDA margin is over 10% anyway. So that is not a problem. But we will, hopefully, next year, when we reach INR 750 crore and upwards of INR 750 crores execution, that's when we will hope to at least reach 9%, 10% PAT because that is where we would want to be. 5%, 5% PAT is quite low, we will hopefully be closer to 10% PAT. That is our target for next year.

[Operator Instructions] We'll take the next question from the line of [indiscernible] from [ Kotak Securities Limited ].

Sir, I just wanted to get a small clarification. You said you want to keep the order book at the current level by end of FY '23. Does it mean if you continue to remain at around 3.9x of revenue or it was absolute figure?

So I was actually talking of absolutely, you're right. I was actually talking about absolute figures. They are doing INR 600 crores, and we won 4x that, so we should be at INR 2,400 crores. That's a very ideal point to be in, but we still -- we've lost 6 months in focusing on our BG and getting those limits. So we've got our ratings plus. We are now at an advantage of mines to get our limit retention to the existing collateral we have. And then we'll be in a position to bid for much more projects. Today, we are a bit constrained in choosing which project we want to bid for. But having said that, we've taken an internal target that at least in the next 6 months, if I'm going to extinguish another INR 300 crores, as me at least back INR 300 crores and remain at INR 1,500 crores, INR 1,900 crores level to start the next financial year. And then quickly within the first half of next financial year, we'll ramp that up towards upwards of INR 2,000 crore, INR 2,400 crore for sure. Yes, we should be at around INR 2,400 crores so that the healthy growth story can continue for the next 3, 4 years. Yes. Can you hear me?

Yes sir, we can hear you. But [indiscernible] line or disconnected. So we are promoting the next question from the line of Mr. [indiscernible].

My first question is monetization of [indiscernible]...

I'm not able to hear you. Your line is cracking.

Sir, your line is breaking up, sir. If you are on speaker phone, I would request you to please use your handset.

Now sir, my first question is multisite Thane land. Any update on that? And any update on [indiscernible] projects and the Goa projects also.

The third one was Goa project -- projection. So the first one, [ Sami ], I think I just answered. We do not want to be giving any updates or highlights or expectations on that parcel for the next 8 quarters but we'll definitely be moving in an excellent direction as far as we are concerned, as we all know, some deals are being signed and closed in and around our land parcel exactly the same region in Pune, which is taking the valuation of the land much higher than what we have ever thought. So it's a gold mine, which is waiting to be tapped. But I think we will still have to wait for a few more quarters to get a partner who will help us in test. So no guidelines for the short term. For the second one you mentioned was the [ Provide] project. Yes, Provide project we are working on launching a project over there. We've got an investor tied up in principle who will be partnering us so that we get the initial cash flows required to get the approvals and launch the project. So we hope to launch that project within the next 12 months, get the approvals and launch it. So we are working on that, that will get launched soon. And the third one in Goa, the project that we back so the Goa Airport is going on fine. They are constructing it [indiscernible] COVID. The other one that we had back, which was a convention center that is on hold as far as we are concerned. So we are not taking it in our order book as of now.

Next question regarding the margin [indiscernible] in this current quarter, around 5% margins. So we expect around 8 to 9 kind of in that [indiscernible] ?

Sorry, your voice is cracking?

Sir, right now, our current margin is around 5% for this quarter. So previously, if you look at a few quarters, we are around 8% to 9% margin. So when we can expect that recovery going forward?

Yes. I think over the next 2 quarters, the margin percentage would increase for sure.

Can I expect higher single digit or double digit?

Yes, high single digits, double digit will still take, hopefully, next year.

We take the next question from the line of [indiscernible] [ Kotak Securities ].

So I was asking earlier a question is that we have execution project of 3.7 million square feet in EPC, whereas our ability is around 8 million. I just wanted to understand how do you then look at tapping this ability of 8 million or any path or guidelines you have in mind?

So see, we always maintained that our ability to do INR 800 crores, INR 1,000 crores, INR 1,000 crores of -- as in we can always grow beyond that. It's not the feeding on our ability. But the current bandwidth that we have in terms of assets and senior staffing would enable us to execute about INR 1,000 crores. We're doing about INR 600 crore this year, next year, hopefully, we'll do INR 750 crores, INR 800 crores. The year after that, we will exhaust our bandwidth in terms of assets, CapEx and senior staffing. So 3 years from now, definitely, we will have to look at investments to grow beyond INR 1,000 crore EPC mark.

Okay. Sir, there is a slide in the presentation about noncore assets identified for sale, a 9-acre land parcel in Aurangabad and [indiscernible] particularly solution, [indiscernible]. Can you just give us some timeline or guideline how this will play out in the future?

So the 9-acre land parcel in Aurangabad is currently [indiscernible] banks there being a lead banker to get our [ CP ] and BG limit. So in the meantime, we are looking to sell off that parcel because it is a noncore asset as far as we are concerned. If we do -- we are in talks with a party who is interested in purchasing. If the deal does go through, then you might realize about INR 30-odd crores cash flow, but that would gain it would not be free cash flow for us to reduce debt or use in business growth because it will have to be with SBI to retain the limits that we have as a collateral. The other one, GMP Technical Solution, we will not be -- we're still not looking actively to divest it yet. I think we will still give it a year or maybe 1.5 years, 2 years to stabilize quarter-on-quarter, like Vascon EPC is now stabilizing in terms of execution run rates as well as bottom line. GMP is also at that turning point. It is doing well, the next 2 quarters, we expect to do much better than what it has done in the first 2 quarters. So we would wait for it to have a reasonable healthy EBITDA and PAT that is being seen at the end of each quarter. And then based on that, then we look at the valuation, maybe a year or 2 down the road to [indiscernible] .

And my last question, sir, is this entire Thane land parcel which we own in the book. What was their book value or the amount which is sitting in the balance sheet as of now on book value?

Book value, it's about INR 50 crores.

INR 50 crores.

[Operator Instructions] We take the next question from the line of [ Mr. Vijay Ada, Canara HSP ].

[indiscernible]

Sorry, your line is cracking up?

My question pertains to 2 things. One, I just wanted to know about the construction cost for the real estate with the current cost on the steel and all that going down. So has that decreased a bit for us? And secondly, you already stated on the bank part, how things are getting on the bank's ratings. Last time when we spoke, you talked about the rerating and all that, so our limit will get announced so that we will be able to bid for a higher number of -- higher order book, so is that process going on? When can that get concluded?

Yes, I'll answer the banking part first. The process is very much on. This quarter, we got about a couple of months ago, we've got a waiting revision from [indiscernible], which is now a very positive news for us as far as the banking is concerned. The banks are now doing our credibility in a much more positive light. So we are in negotiation with the existing consortium of banks as well as with a new bank to see whoever offers us the best limits within collaterals that we have. And so that is -- the discussions are going on, our finance team is continuously working on it. And hopefully, in the next call that I have by then we should hopefully have revised our limits with the consortium. So that is making positive progress. And yes, once the limits are revised, we will have much more bank guarantees in hand, and we can aggressively look for order booking. Sorry, what was the first question?

First was regarding the cost of construction in residential, now has that gone down with the price decrease in the steel and all that?

Yes, definitely. Suddenly, the steel and most raw material prices have gone to an extreme peak. I think they have stabilized a bit, but they are still much higher than pre-COVID levels. So it's not that it has come back down to what we were 2 years ago. So the price is also stabilizing at those levels. So yes, in real estate, considering that they are yet to launch, we are talking about. This is [indiscernible] stabilization of raw material price happens. And then we are able to get sale price after calculating all our costs. [indiscernible].

We are losing your audio, sir.

Can you hear me now?

Yes sir.

Yes. So I said, yes, the costs have come down, and we will work out the cost of construction and the cost of operating real estate division, and therefore, the cash flows over the next few quarters based on the projects we are launching and the projects we have already launched, and we will share this.

Okay. Sir, last question on this development project that we won in Santa Cruz. So that value is worth INR 225 crores. So how much time execution will happen for this project? And secondly, what kind of margin can we expect? Because the INR 225 crore order that is there, we have taken INR 180 crore order book in EPC. So INR 45 crores is a gap. So do we need to pay for rent and other costs also? So what's kind of the margin we can expect in this?

That INR 225 crores [indiscernible] real estate. So factoring all these things, the rent and everything has been calculated on this part. So really easy part. So this will be considered as the [indiscernible].

Okay. So what can be typical timeframe for the completion in margin on this entire like project if we can...

[indiscernible] 2, 2.5 years [indiscernible]

2, 2.5 years. Yes. Okay.

Three to 4 years.

We take the next question from the line of [ Mr. Manis Sha ], individual investor.

[indiscernible] intact growth is [indiscernible]?

Yes.

[Operator Instructions] We take the next question from the line of [ Akhsata Anjan ] individual investor. As there is no response from the line of Ms. Akhsata, we take the next follow up question from the line of [ Mr. Rashmi Oda, Kotak Securities ].

Yes, sorry. Sorry. You have given the guidance on the increase for this year around INR 600 crores next year, INR 750 crores. Any guidance you would like to give on the real estate side are looking a bit holistically on the overall potential revenue of the company for the next 2 years? And secondly, as I understand, maybe this year, next year, growth will be led by EPC and then as you are the launches certified, then that will fire up maybe after FY '24 and that leaves real estate back ended and drive the growth in '24, '25, something like that?

Yes, you're right. So I think it's fairly easy to give guidelines because it is recognized quarter-on-quarter in a [ senior ] fashion. So as long as we continue to grow our order book step by step and continue to execution, you can with offset such linear targets of growth. Real estate, we have gone in now back in full trend, we lined up. We have 5 projects to be launched in the next 12, 15 months, and then we have a couple of projects which we have launched, which are to be executed and finished. All this put together should get us more than INR 2,000 crores of revenue to Vascon over the next 4 years. But now the recognition of this revenue will only come mostly in the third year and fourth year because the projects are getting launched now. And while cash flows will start accruing from the next few months itself, the revenue will get recognized as you rightly said, in '24 and '25 or rather '25 and '26 impact. And only then we will see at the balance sheet or the P&L level that real estate is pushing growth as much or more than EPCs. Till then in the books, it will look like EPCs still be a significant contributor to our growth story. But the fact is that we are focusing very much on real estate as well. And we will continue to update you with the new projects we are launching. We will also share -- as was pointed out, we will also share the cash flow projections over the next 3, 4 years coming from real estate, and that will give you all an idea of where real estate is heading. The recognition will happen as per the guidelines down the line.

[Operator Instructions] The next question is from the line of [ Mr. Surya Nayak ], Individual Investor.

So regarding the [indiscernible] project, around INR 15 crores has been [indiscernible] from the FSI sales we have got this quarter. So what is the case, I mean, if I see your project pipeline status, so our share from the [indiscernible] is around INR 230 crores. So what is the future? When are you going to actualize these profits? Because of the cash flow statement, so it has not been increased. So what is the status of regarding the Ajanta case?

So in Ajanta, you see the top line does not come [indiscernible]. It'd be very difficult to monitor that we [indiscernible] share of profits eventually from that entity that comes as applying and bottom line to our balance sheet. So that is why you're seeing what you're seeing. The INR 230 crores is project in the future. It has not yet been launched. So that will happen over the next few years, that execution of INR 230 crores. And that plan is also with us in a very long time at low value. So INR 230 crores will have upwards of 35% of gross profit when we execute that one.

So can we expect a similar kind of profit to come in the subsequent quarters?

No, you will not see [ a repeat ]. So this quarter, we [indiscernible] for certain sale and completion that could be recognized in the books from Ajanta. Next quarter, we will [ recognize ] something similar. And then when this project is launched this INR 230 crores. So we are already working on a project, which will get its OC in next quarter. So yes, in next quarter also, we will get some profits from Ajanta. Then there is [indiscernible]. Yes. And the next 2, 3 quarters, we'll get some profit from Ajanta. After that, there will be a lull because this INR 230 crores will get launched and will get executed over the next 3 years. And so only 3 years later will be the OP and recognition of those profits. But we'll see cash flows. Throughout the period, we will see positive cash flows coming in.

Okay. And regarding the other form of monetization of your projects, I mean one is your [indiscernible]. Sorry, the Aurangabad land parcel. When the -- and along with the GMP Technical Solutions, when are you going to actualize those sales? Is there any parties going -- talks going without any parties or still it is in the [indiscernible] stage?

So Aurangabad, we are in talks with parties who is interested and hopefully, we can close it in the second half of this year. I had explained that, however, that cash flow would not accrue to us as we can to be used in either business growth or debt reduction because the brand is pledged as collateral with our banking [indiscernible] limit. So whatever we realized we have to be used as replacement for the collateral with the bank in the short term. So as far as GMP is concerned, we are not talking to anyone as it stands. We will be hopefully waiting for a year or 2 more. GMP is also doing well, it's stabilizing and expanding its [indiscernible] in market as well. So we expect that GMP over the next 2 quarters will do much better than it did in the first 2 quarters of this year. The projection has been very healthy. And hopefully, then if that trend continues. Next year will be much better for GMP. And once we are able to establish media quarter-on-quarter growth in top line and bottom line for GMP, then we will look at [indiscernible]. Then it will be the right time to be able to value the company. Today, I don't think we will get the true value of the company because they are not talking.

So you are waiting for good times to plan out in GMP to exit? Or because if you aren't looking so much optimistic about the future, then we should not be looking at exiting from the GMP?

No, no, no. We will exit. I'll tell you what, I mean, as a long term as a we have been taking over the last 3, 4 years and we'll be sticking to it, and we intend to continue to stick to it that we will be focusing on execution of EPC as much and as fast as we can. The second focus will be on lining of real estate, which is again verified EPC without huge investments in land parcel. So rising of joint venture development and focusing on those executions. So as a company, our expertise, our knowledge, our bandwidth is in executing these 2 aspects, and we will focus only on those as we go ahead. We do not intend to hold on as investment, shareholders' money that's invested by shareholders wherever they feel is right. GMP, we will exit. But I think today is absolutely not the right -- we will get an extremely wrong valuation for the company because we have balance sheet over the last 8, 9 quarters is not going to support a good multiple or whatever that we look at in terms of valuing the company. So we'll let it stabilize for more 5, 6 quarters more, get a linear bottom line, and then we'll value it and use those proceeds to focus back on our core strength, which is again, real estate.

Okay. And when the shareholders can look forward to good dividend distribution in terms of good results that is coming out?

Yes, we haven't -- I mean, we haven't discussed this at the management of the Board level. [indiscernible] Hopefully, we have more [indiscernible] at the end of first quarter, we will take this with our Board and management and [indiscernible] cash flows should we declare or the [indiscernible] and we wait for a year or so more, then we may take the call. No commitment, no discussion on this at the Board, so I do not want to give any guidelines on this. But we will come back after we discuss internally on this.

Yes. Seeing is believing so that is what would be...

Thank you, sir. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Dr. Sundararajan for closing comments. Thank you, and over to you, sir.

Thank you, everyone, for [indiscernible] and I will see you all again next quarter and hopefully with a better set of results than this quarter. Thank you.

Thank you. On behalf of Vascon Engineers Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.