Vascon Engineers Limited (VASCONEQ) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vascon Engineers Limited Q3 and 9-Month FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Santosh Sundararajan, Group CEO, Vascon Engineers Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. I welcome you all to the earnings conference call of Vascon Engineers for the third quarter and 9-month ended December 31, 2023. Today, joining me on the call is Mr. Somnath Biswas, our CFO; and our Investor Relations team, Stellar Investor Relations. I believe you would have gone through the Q3 and 9-month financial results and the results presentation uploaded on the stock exchanges and on the company's website. During the 9-month of FY '24, company saw uptick in the overall business. All the business segments witnessed a gradual revenue growth as compared to the same period last year. During the quarter, we have won a few EPC orders as well and some redevelopment projects as well and have experienced an uptick in the company's growth momentum for FY 2024. In terms of profitability, standalone EBITDA margins have been maintained at 10% in Q3 FY '24. Our outlook for the EPC segment remained strong, backed by a strong order book of INR 3,613 crores, which is the highest in the company's history, with an order book, which is about 5.4x of FY '23 revenue. We have a strong balance sheet. We have high efficiency of all business segments and our overall improved financial position has helped us increase our BG limits. We believe we are well positioned to continue this growth trajectory in the coming quarters. Let me take a few minutes to restate our recent developments, which have built a strong foundation for the company to grow on. EPC execution and order book. During the quarter, EPC revenue increased 12% year-on-year, INR 185 crores in Q3 FY '24. We have received few new orders whose execution will kick start and we expect it will happen in the next 3, 4 months. The execution run rate will then gain higher momentum going ahead. Our total order book as on date stands at INR 3,613 crores, which forms 5.4x multiple of our FY '23 revenue, providing strong visibility for EPC revenue growth for the next 2, 3 years. Of the total orders, external EPC orders are worth INR 3,064 crores and the balance of INR 549 crores are internal orders. 78% of the order book is towards government projects, which provide visibility of faster execution and uninterrupted cash flows. We have new orders worth INR 1,808 crores in the 9 months of FY '24, which is the highest ever order intake by the company. These comprise of INR 222 crore work from Bridge and Roof Company, India, which is a Government of India enterprise for construction of a medical college at Kanker in Chhattisgarh, another job of INR 299 crores from the Jharkhand State Building Construction Corporation for construction of a medical college and upgradation of district hospital at Koderma, another INR 514 crores from Bihar Medical Services and Infrastructure Corporation for the construction of Lohia Medical College & Hospital at Supaul. From Pimpri-Chinchwad Municipal Corporation for the construction of general hospital in Moshi, totaling to INR 357 crores. And finally a LOI, we've received from Capgemini for the construction of an IT Park in Chennai for a total of INR 416 crores. Real estate continues towards growth momentum coming to our real estate business bookkeeping procedures are as per the [ Ind AS ] requirements, and may result in timing differences with reporting of expenses and revenues. The significant portion of our real estate project portfolio is now completed, we anticipate a favorable impact on the result of our real estate business segment in the next year. New sales booking in 9-month FY '24 stood at 104,000 square feet of area with total sales value of INR 97 crores. During 9 months FY '24, our real estate revenue stood at INR 47 crores and an EBITDA of INR 18 crores. Gross margin came in at 64%, while EBITDA margin was 35% in 9 months FY '24. We are very much optimistic about sustaining the positive movement in the real estate sector, given the promising pipeline of projects ahead. Additionally, we are expecting -- we are establishing partnerships with realters located in Pune, Mumbai and Coimbatore, so that we have a pipeline of new launches in the year ahead. In the real estate segment, we successfully introduced 1 project in FY 2024 and we are presently gearing up to launch 2 new projects in the next couple of months. Despite a decrease in real estate revenue this year, we anticipate offsetting the decline through increased EPC sales during this year, ensuring that our overall top line remains consistent with the previous year. Lastly, coming to the GMP businesses. It has started looking healthier and showing optimistic performance now, and it has continued to deliver sustainable performance in the past quarter as well. Revenue of INR 187 crores in 9 months FY '24 and healthy gross margins of 32% with EBITDA of INR 14 crores and 8% PBT in 9 months FY '24 -- sorry, 8% EBITDA. The company has been repaying a significant amount of high cost debt over the last 30 months, and this has helped the company bring down its finance cost substantially during the year. We are happy to report that over the past 30 months, we have reduced our total debt by INR 47 crores to INR 168 crores in December 31, 2023, as against INR 214 crores as on March 31, 2021. Over the last 9 months, the gross debt have increased in current fiscal year majorly can be attributed to the company's involvement in new joint venture for real estate along with utilization of funds for bid bond money and earnest money deposits for recently secured EPC orders. Consequently, the net debt has risen to INR 72 crores in the last 9-month period. As I mentioned earlier about the rating upgrade in the previous call, I would like to reiterate that our company's CRISIL has upgraded our credit rating to CRISIL BBB+ for long-term and A2 for short-term facilities. This upgrade has led to an increased BG limit and has also played a crucial role in negotiating favorable interest rates in the company's favor. Before going through our financials, a brief overall industry update. The Indian economy has expanded 7.2% in FY '23, which is highest amongst the major economies of the world and continuing this it is anticipated the Indian economy is expected to grow by 6.3% in FY '24 as compared to 3% in the world. The real estate sector actually contributed to India's GDP has increased activity throughout the current year. It is anticipated to sustain its growth momentum in 2024. The residential market is expected to continue its upward trend in the coming years, fueled by the prevailing inclination towards home ownership. Anticipated burgeoning business hubs for large multinational corporations, Tier 2 cities are poised to draw attention due to cost advantages and a readily available local talent pool. This surge in corporate interest is expected to drive demand not only for office spaces, but also for residential assets in these cities. The Smart City mission is set to catalyze multi-faceted development, road network and real estate, thereby enhancing the overall livability of these cities and attracting residents from neighboring areas. The comprehensive development of roads and industrial corridors across the country is poised to elevate the connectivity and economic spending of Tier 2 cities, rendering them increasingly attractive for logistics companies to establish their facilities. Moreover, the rapid expansion of e-commerce market is likely to contribute to heightened demand for warehouses in these cities. Overall, we remain positive on the industrial growth prospects. Coming to the financial performance of the company in Q3 FY '24. The overall financial performance, let me start with the stand-alone. During Q3 FY '24, the company reported a total income of INR 206 crores as against INR 200 crores in the corresponding quarter last year. We saw a growth of 3% year-on-year. In Q3 FY '24, EBITDA stood at INR 22 crores as against INR 17 crores with a growth of 28% compared to the corresponding period last year. The EBITDA margin was at 10%, and we reported a net profit of INR 16 crores in Q3 FY '24 as against INR 13 crores in Q3 FY '23. At a consolidated level, Q3 FY '24, the company reported total income of INR 282 crores as against INR 256 crores in Q3 FY '23, a growth of 10% year-on-year. The EBITDA stood at INR 28 crores with EBITDA margin up 10% against INR 23 crores in Q3 FY '23. And the net -- as against INR 16 crores in Q3 FY '23. To conclude, we would like to reiterate that the company continues to be focused towards building a strong business with focus on execution of our projects, efficiently deploying our capital, increasing our order book while maintaining financial prudence, which will all enhance our profitability. With this, we can now open the floor for questions and answers. Thank you.

[Operator Instructions] First question is from the line of [ Prateek Bhandari ] from Aart Ventures.

So I have a couple of questions to ask to. As you stated that your order book is approximately INR 3,613 crores, which is 5x the revenue of financial year '23, right?

Right.

So can you just let me know as to what was the order inflow in the quarter 3 and 9 months FY '24?

So as I said, we've -- in the 9 months FY '24, we have got INR 1,800 crores of order.

Okay.

And in Q3, I think -- Q3 is about this only one job, INR 400 crores. Yes.

INR 400 crores in Q3 and INR 1,800 crores in 9 months FY '24, right?

Actually, 9 months is INR 1,808 crores. Yes.

INR 1,808 crores.

Yes.

All right. And what kind of order inflow you are expecting for the upcoming quarter?

We are bidding for a couple of projects, but we do not know with the government [Foreign Language] that is set to happen early March probably. So we do not know how many of these decisions will be taken in the next 2, 3 months. We expect these months to be a bit slow till the election. And so we do not want to put a number, we've already overachieved our order booking target for the year. And then we have another -- before March 2025, we have a target of booking another INR 1,750 crores to INR 2,000 crores of orders. So how much of it will happen in the next 2, 3 months is a bit difficult to say, but yes, this is our order target up to March 31.

Okay. And another question to ask too, as you stated that the order book is INR 3,613 crores. So can you give me the tentative ratio of the order mix there?

So in terms of government to private, we are about 70% -- 75%, 77% government, balance would be private. In terms of types of buildings, I think about 50% of this order backlog is hospitals and...

So I heard that you have stated 77% is coming from the government side.

Right.

So in terms of EPC, what would be the ratio, EPC and your other business?

No, this is all EPC order book we are talking about.

Okay. So this INR 3,613 crores is entirely EPC.

Out of INR 3,613 crores, INR 549 crores is an order backlog for the EPC from the real estate division. The percent of the real estate has -- is going to launch or just launched and the construction value of those, the EPC value of that.

[Operator Instructions] Next question is from the line of Rajendra Kulkarni, an individual investor. Mr. Rajendra, your line is unmuted. Please proceed with your question.

Am I audible?

Yes, you are audible. Please go ahead.

Yes. I wanted to ask about the bank guarantee, what is the current status? Has it gone up or not? I couldn't hear the...

Yes. So we have got over the last 6 months we've got past about INR 40 crore increase in our bank guarantee limits, tie-up to tie-up. And also, as of this quarter, we've got a fresh assessment from SBI, which has increased our bank guarantees by INR 200 crores, the asset limit. And so now we are in the process of -- about INR 100 crores has been tied up by SBI itself. We are in the process of tying up the balance INR 100 crores with other banks.

Okay. And you have opened office in Mumbai, right, a few days back.

Correct.

I just wanted to understand whether you are going for the redevelopment projects only in Mumbai or are you planning new joint ventures also in Mumbai?

As of now we're planning only for the redevelopment, not joint venture.

We have our old plant also in -- I mean, a share of projects in Powai where partly we own the land. So that also we will be launching. So as of now, these are the 3 projects, 2 redevelopments and 1 in Powai. The focus of the company is to launch. Parallelly, our business development team is looking for, again, niche, small redevelopment projects in Mumbai. So in the short-term, that would be the strategy.

And one more thing. About the real estate division, you are surprisingly very quiet on the real estate projects, I mean new launches. Is there any conscious decision by the management that right now you're putting a full stop on real estate? Or are you launching some new projects? I want to know that.

Yes, yes, very much. In fact, we are not putting full stop. We are pushing real estate to year 4 and 5 because we believe -- we have 2 engines, EPC and real estate. We want to be pushing both. The last 3, 4 years have seen that we have managed to push EPC almost to its potential. From here on, things have been sorted out, ratings have improved, BG limits are coming in. So we are taking a steady growth challenge of at least 20%, 25% year-on-year for the EPC division. And now real estate, we want real estate to also reach its capacity. Over the next 3 years, we have tremendous emphasis. And in terms of launches, as I said, we have 3 launches coming up in this year. We have [Audio Gap] which we will be launching shortly. One is we Powai project which is residential in Mumbai. One is, again, a residential project in Kharadi in Pune. One is the commercial project, we are at the final stage of closing out in Baner in Pune and then the 2 redevelopment projects that we have signed up in Santacruz. So we have 5 launches scheduled to happen in the next 12 to 15 months. Our team is aggressively working on these. Some of them are at an advanced stage and might get launched in the next 2 to 3 months. Some of them will take 10, 12 months to get all the approvals in place and launch. So these projects are all tied up, and you will be hearing about our launches quarter-on-quarter on these projects.

So if you look at the number also, this year, we launched 0.5 million square feet already. So there over a period of this 12 months or something, another 2 million square feet is supposed to be launched. So we are aggressive, but we have just consolidated our portfolio very clearly.

I just wanted to add one more question. You have this recently backed projects, which have a gestation period of near about 30 months. So can you say that '25-'26 or '26-'27 will be your growth year in terms of revenues and profitability?

So let me -- I think in the interest of everyone on the call, see, we have INR 3,600 crores. So out of INR 3,600 crores order backlog, about INR 500 crores is our own real estate. Let's take that aside for a moment, then we're looking at about INR 3,100 crores to INR 3,200 crores of third-party EPC. Now the standard, as you said, it's a 30 months, some of them are 24 months, some are 30. Generally, 1/3, 30% of our order backlog in April is what we have always ended up executing in the next 12 months, okay? So going by that, we will be starting April with 3,000 -- upwards of INR 3,000 crores. And so we will target to execute INR 1,000 crores in the next financial year of third-party EPC. And then the year after that, we would endeavor to take that 20%, 25% upwards and go to INR 1,200 crores to INR 1,250 crores. That is our target. The INR 1,000 crores looks entirely visible because we already have the order backlog in hand. There is no ifs and buts in terms of BG limits or order booking or any such thing. The INR 1,250 crores target to achieve it the year after, that is '25, '26 before March '25, we would have to book about INR 1,800 crores to INR 2,000 crores of fresh orders going forward, which is what we have taken as a target. The BG limits are almost in place for this. And now we will be bidding. As I said, the upcoming elections might put a hold on getting good government orders for the next 3, 4 months. But we are positive that once elections are through, we will be able to easily achieve our order booking target. I would also like to let everyone know that as far as EPC is concerned, now our bid size that we get accepted for has gotten increased. We've got, including GST, INR 600 crore order from Bihar. Going forward, we might be able to qualify for orders up to the size of INR 700 crores, INR 750 crores also. And at this level, the competition also reduces. And it is better to take a slightly bigger job at a single location and work on it. So maybe 4 orders would suffice to help us book INR 2,000 crores for the next year. And now coming to real estate. In real estate, we have about unrecognized revenue from projects that we are already working on to the tune of about INR 250 crores to INR 270 crores which have not hit our balance sheet, plus the new 5 launches, which I spoke to you about just now, will bring a revenue of about INR 1,400 crores to Vascon's books. So INR 1,400 crore plus INR 250 crores, INR 1,650 crores are already tied up and projects we are working on at various stages. INR 1,650 crores of Vascon's share of top line will have to come to our books. Now if real estate unlike EPC will not be quarter-on-quarter, it will depend on completion. But it is fair to say in the next 4 years, all these projects would have to get completed. So we're looking at INR 1,600 crores coming in 4 years. So an average of INR 400 crores without talking of any other new tie-ups [indiscernible]. So this is an overall summary of what is in hand at this point of time.

Last question, sir. When are you expecting to conclude your QIP, in this quarter only?

We are hopeful, I mean we've got the necessary approvals from Board and the shareholders. And now we have actually started meeting -- conducting a few roadshows and meeting a few potential QIBs. And the interest looks positive. So once the results -- I mean I'm sure they will also be waiting for the results of this quarter to be out. And now that we have finished our quarterly Board meeting, I think we will really ignite this topic, go back and again meet the potential QIBs. And yes, hopefully, we don't want to delay it much. Hopefully, this quarter.

Next question is from the line of Himanshu Upadhyay from BugleRock PMS.

Congrats on the good results and improving results. My first question was, we got a large order from private sector and where we were -- we have been thinking of growing. How is the pipeline on private sector side? And do we think that this revenue mix, which can be now sustainably around 70% for government and 30% private over next few quarters? Or do you think the pipeline is still not very strong and hence, it will get back to government being predominant 90%?

See, it's a very interesting question. We keep debating about it internally. We would like it to be -- we do not want to be overly exposed to one sector. We were extremely highly exposed only to private sector 10 years ago and then we went through a tough phase because of that. So as a strategy, we want to be exposed to both private and government, and we want to be at the 70-30 or 65-35 mix at this point of time. So one aspect of private is also that as our real estate launches are happening and the real estate division is set to grow, a proportion of that will come as our order division as well that adds to that and then there is definitely pipeline. The CapEx cycle, I think, is turning around. So we are seeing that industries soon will be looking for more and more expansion. We are looking that whatever COVID did to the supply demand ratio of commercial spaces, I think that has sort of panned out and now commercial spaces are again in demand in spite of the work-from-home scenarios and everything. And so we see that there will be commercial buildings coming up, which we are happy to try and grab compared to residential buildings. And so yes, at the same time, we would, at any point of time, whatever projects are available to us in that quarter, whichever we feel will be best projects, we would back it. So the endeavor is trying to maintain a 30-70 mix. Temporarily, it might keep going up and down. But overall, we would like to be at least 30% private.

And a second question is on this QIB, see, we have certain assets for sale, okay. And the GMP and again, Thane land whatever happens at some point of time. And at least GMP is now profitable and everything is there. Why this QIB and why, in this growth base, our balance sheet is good, okay, my assets for sale are there, which are also maturing, we want to dilute the equity, okay? And historically, we have always stated that we don't want to put a lot of money into the real estate business. We want it to be fast capital churning. Some of your thoughts will be helpful. And how should I understand your capital allocation strategy going forward?

Sure. So you are right, we want to be an asset-light real estate player. We do not want to buy land and we have refrained from buying land even now. Any proceeds that we might get from QIP or from our accrued earnings from these projects as we extinguish them or if we do asset sales, like you mentioned, like GMP, whatever we get in terms of cash flows, we would -- we do not intend to be buying land. Having said that, the real estate game has changed over the last few years, wherein most of the government, Mumbai, Pune Coimbatore across India actually, but because we are in Mumbai, Pune, Coimbatore, the FSI rules have increased quite a bit and various guidelines. What happens is that the FSI does not come free, it comes by having to buy premium FSI from the government or having to buy TDR from the private market and getting it loaded. And so when we get land from a redevelopment society or from a joint venture partner, they bring only the bare land, which comes with an inherent FSI of maybe 1, 1.25. Beyond that, for the project to be viable, profitable, we would have to exploit the maximum FSI potential, if not the entire thing, at least close to the potential. And so there is an investment element in terms of having to buy the approvals. Now there are 2 strategies. We were working on a strategy of -- and at that stage, you are right, our balance sheet is good. But we also, as a company, do not want to be taking NBFC across debt at a nascent point of a real estate project. And at that stage, we do not get construction finance...

Sorry to interrupt, sir, your voice is breaking.

I said at the point of launch of these projects, we have 2 options to fund the additional premium cost of FSI. So is either you go for an NBFC debt or to go for private equity at the project level, which we were working on. We did not want to take the NBFC debt route because the uncertainties with launches and the servicing starts on time, and so we do not want that short-term, long-term cycle, which we have faced in the past. So we were ready to go the private equity route to fund the initial cost on these projects. In the meantime, I think we have already lined up 3, 4 such projects, and then we felt that instead of offering heavy IRR to a private equity partner who expects 23%, 24% IRR from projects which we have lined up ourselves, it is probably better to raise. As you said, we are a listed company, there is an advantage that we can raise funds in the market, raise equity. And when we know the returns that we are staring ahead in the next 2, 3 years on the money we are raising is extremely high. So we then said, why should we be offering these returns to others, why not just bring it within the company.

A very interesting point, a very important point, but why not then rights issue because as an existing investors, would not it be beneficial for the existing investors to participate in rights issue and be a part of the story? So why do we do...

We talk about it internally and discussed at the Board level. We also felt as a company we are just about hitting, we were below the INR 1,000 crore market cap value for a long time. We were extremely underperforming in terms of our valuation that we deserved in the market for a long time and [ dollar ] agents, they have backed the company throughout this period. We felt that strategically, we have done a rights issue in the past. I mean, very theoretically speaking, it's always good to do a rights issue. But we felt that at this point of time, we -- there was a need to sort of create interest among a little bit bigger QIBs who would then become part of our shareholders. And I think this will be overall beneficial to all of us as shareholders going forward if we have some of the bigger players coming in and expressing interest in the company, understanding about the company. This would give us a chance to access those kind of investors and present the company to them. And if they start tracking us and seeing the potential in the company, I think it will help all of us as shareholders, that was the thought process. Valuation also is very less at this point of time.

And best of luck for the future.

[Operator Instructions] Next question is from the line of [ Dipesh Sancheti ] from Manya Finance.

Am I audible?

Yes, you are audible.

Okay. It's great that you are thinking of using our own funds to get better returns. What ROE are we expecting to do in the projects which we are running to do, I mean, our own projects, the development projects?

So this -- our calculations show that this -- let's say, we raised INR 100 crores and deploy it in our own real estate projects, which we have lined up, the 5 projects that I said we are launching. If we deploy the INR 100 crores into this project, our calculations show that over the next 3 years itself, we would increase our profits by INR 100 crores. So INR 100 crore is to INR 100 crore in a period of 3 years.

So that is -- so that will give you an ROE of, what, 35%, 36%?

About 25% to 30%.

Okay. And how much sales are we looking in that? I mean if you're looking at INR 100 crores profits, how much sales are we looking at?

Our share of the top line, as I said, about INR 1,600 crores and INR 100 crores is an increase in the profit, not the profit.

Increase in the profit. This year to deploy...

By raising this equity internally rather than by sharing portions of our profit to private equity players in the market, if we raised this equity, then our profit into INR 1,600 crores would increase by INR 100 crores.

So then why are we raising INR 100 crores? Why not INR 200 crores?

So good question, see, for these projects that we have in hand, we need about, like we said, about INR 200 crores, INR 150 crore, 200 crore, net. We have internal accruals to fund the balance. So we needed about INR 100 crores, all of them put together. And at this point of time, so we thought we'll just do it theoretically and we do not want -- so looking ahead, there are various sources of funds to fund on more projects going ahead. You would always need that in real estate. Although, as I keep saying, we have set like, but real estate is never going to give you a EPC kind of a situation where you do not put your money into the game. You would have to buy TDRs, FSIs, marketing expenses and launch approval costs and launch the project. So as we look for new projects, we would need more investments 6 months down the road, a year down the road. But we have, as you said, as we discussed, we have planned to probably high walk GMP. If that happens, we will get one tranche of equity or cash flows available from that. Also, our EPC and real estate numbers for the next year look good. So we will be making much better profits next year than this year. So those cash flows will also accrue and will be available. So we will see as it goes. And if at all we need to raise more, I mean, we would be happy to come back to shareholders or whatever in the future, when our valuation is higher and then the dilutions are lower.

See, if you look at another aspect also, if we go for INR 200 crore kind of raise and all these things, this will end up diluting the existing base in the range of 13% to 14% kind of dilution is likely to happen, #1. And #2 is that for raising a QIB also you have a very definitive aspect of that for which projects we are going to raise fund. So as of now, the definitive aspect of the requirement is to the tune INR 100 crore, rest is a little bit indefinite. So that will be little -- so this thought process could be in [indiscernible] the system and get another INR 100 crores or something more.

Great. I mean...

We need to restrict our dilution...

Right, right. That makes sense. If for a higher valuation if we are looking at. And as time goes, we will call in for more money, that's good. Now I just want to understand where this INR 1,650 crores comes in the presentation because in the presentation, I was seeing that there is an order book pile-up of INR 3,000 crores, which is external order book and INR 549 crores is the internal order book. I didn't get the figure of INR 1,650 crores, which you have mentioned.

Your voice is cracking intermittently, we are losing you.

Am I audible now?

Yes.

I was not getting the INR 1,650 crores figure in your investor presentation. I got INR 549 crores as your internal order book.

So you see out of -- so real estate projects, I'll tell you the total value of those projects will be upwards of INR 3,000 crores. INR 1,600 crores is Vascon share. As the other partners have a share, so Vascon share of the project -- 5 projects that I announced, which we will be launching in the next -- 5 projects which are currently in the various stages of execution, all put together, we have an order -- we have INR 1,600 crores of Vascon share of revenue yet to be recognized. Now out of this INR 1,600 crores, only INR 500-odd crore would be construction or INR 600 crores will be construction or maybe INR 700 crores, INR 800 crores. I mean the only way we get an approval, do we consider the order backlog in terms of EPC order backlog, but for clarity purpose, let me put it this way, we have INR 3,100 crores of third-party EPC, which is clean and clear, plus INR 1,600 crores of real estate revenue, so this is our order backlog, INR 4,700 crores on a stand-alone basis.

So I will just summarize another one also. You look at that number, the real estate top line, INR 1,650 crores. So if you look at that our current portfolio -- which is ongoing portfolio in that portfolio revenue to be recognized under the tune of INR 150 crores and value of unsold stock, we will be it is something another INR 150 crores. So INR 300 crores is revenue is likely to be -- supposed to be recognized from the existing portfolios. And whatever the 5 projects is under launch, that is supposed to be almost INR 1,400 crores. So that is the way INR 1,650 crores number is coming up.

Okay. And how do we assess the profits come off the JVs coming in the future? Because last quarter, we had a huge profit coming in. This quarter, we had a bit of loss coming in. How do we assess in future that how the JV profits and sales are coming?

See, the loss and profit if you look at it comes under just on the revenue recognition. I mean, as with every quarter, as we always keeps on telling, the real estate doesn't recognize every quarter its revenue. It happens only based on the completion and all these things. But your -- the other overhead admin costs and all these things, it keeps and all that. [Technical Difficulty] so that's a little bit fluctuating, but overall basis, it will be steady.

Okay. And interestingly, you mentioned that you were looking at some big names coming into your QIB. I know you wouldn't be able to share it right now. But I wish you all the best, and you may -- you get good names into your institution basket.

Yes, exactly, it is the same target we are also driving projects for [Technical Difficulty] out of this transaction.

We have our next follow-up question from the line of Prateek Bhandari from Aart Ventures.

Can you just let me know as to the way you are saying that the top line from the EPC division is the revenue growth should be coming from there. So do we see the margins to be improving from 9% to 10%, that range of 9% to 10% to a bit higher side?

So firstly, the revenue growth, hopefully going forward, will be coming from both divisions, EPC and real estate. Because I think real estate is punching way below our capacity. So we want real estate to grow faster and try and catch up and the profit percentages in real estate are also higher. Having said that on the EPC [Audio Gap] currently performing at around we did INR 660 crores last year, we hope to exceed that, exceed INR 700 crores maybe this year. And next year, we have set a target of INR 1,000 crores. As the top line increases, the PBT will inch up...

Sorry to interrupt sir, but your voice is breaking in between.

Yes. So I said as the EPC revenue goes up from the INR 660 crores, INR 700 crores levels that we are currently in the last 2 years. And next year, we hope to cross the INR 1,000 crore mark of third-party EPC execution. And as these top lines go up, the PBT will go up. We've been tracking our PBT quarter-on-quarter. This quarter, we are happy to see that we have actually crossed 8% PBT. And as we touch INR 1,000 crores next year, we hope to inch this closer to INR 10 crores, cross INR 9 crores and then go towards INR 10 crores. I wouldn't want to take my head out and say [Audio Gap] as our topline is over the next few quarters.

Yes. Sir, there was a slight interruption at your end in the voice.

Yes. So as the top line increases, we want to push this PBT levels of the EPC division from 8% towards 10% step by step.

And also let me know as to what is the planned CapEx for the upcoming year?

We do not have much CapEx actually because again even for 1 more year, we have significant amount of assets in place. And so -- and as the new project might need a little bit of investment at the project, I mean, not more than INR 15 crores, INR 20 crores is what we see as potential -- those are also equipment, machinery equipment and staging materials that we might need to procure over the next year.

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

Thank you. Thank you, all shareholders. We have had a good quarter. We are looking at a good fourth quarter as well, and we hope to have even a better next 4 quarters in the year coming ahead. Thank you for your continued faith in the company, and I'll see you all again next quarter. Thank you. Bye.

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