Vascon Engineers Limited (VASCONEQ) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vascon Engineers Limited Q2 and H1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Mehta. Thank you, and over to you, sir.

Thank you, Shlok. Good morning, everyone. I, Vishal Mehta, on behalf of Stellar Investor Relations, welcome you all to Vascon Engineers Limited Q2 and H1 FY '25 Earnings Conference Call. We shall be sharing the key operating and financial highlight for the second quarter and half year ended September 30, 2024. We have with us the senior management team of Vascon Engineers Limited, Dr. Santosh Sundararajan, Group CEO; and Mr. Somnath Biswas, Chief Financial Officer. Before we begin, I would like to state that this call may contain some of the forward looking statements, which are completely based upon the company's belief, opinion and expectation as of today. The statement made in this call are not a guarantee of future performance and also involve unforeseen risks and certainties. The company also undertakes no obligation to update any forward-looking statements to reflect developments that occur after the statement is made. Document relating to the company's financial performance, including the investor presentation have already been uploaded on the Stock Exchanges and the company's website. I now invite Dr. Santosh Sundararajan to state his opening remarks on the company's performance for the second quarter and half year ended September 30, 2024, then we will open the floor for Q&A session. Thank you, and over to you, sir.

Good morning, everyone. [indiscernible], and I wish everyone a prosperous New Year. We are happy to report a significant growth in our overall revenue, driven primarily by our EPC segment. Despite a slowdown in the overall sector and severe monsoon these few months in several parts of the country, the timely execution of projects and the smooth operation has led to significant improvement in our overall performance. We have achieved a remarkable 22% year-on-year revenue growth in H1 FY '25. This focused approach not only boosts our efficiency, but also foster the culture of accountability and excellence within the team, ultimately contributing to our sustained success. Let me reiterate that the Ind AS accounting treatment and real estate can result in timing differences between the recognition of expenses and revenue, which has resulted into decline in profit as compared to previous year quarter. Going forward, the outlook for EPC segment continues to stay robust backed by a healthy and strong order backlog of INR 3,267 crores, which is 4x the FY 2024 EPC revenue. This demonstrates the solid foundation for growth and for successful execution going forward. Out of the total order book, INR 2,781 crores comprises of external EPC and INR 486 crores comprises of internal projects. Approximately 82% of these orders come from government projects, providing reliable cash flow and ensuring swift execution timelines. We anticipate this momentum will continue in the coming quarters, backed by strong and healthy order book. In terms of bidding new orders during H1 FY '25, the company has received new orders from PWD, Sindhudurg for the construction of a medical college worth INR 332 crores and has also received a letter of acceptance from Mumbai Metro Rail Corporation at Kalbadevi for INR 57 crores. Our balance sheet has remained robust over the past 6 months, resulting in significant increase in our bank guarantee limits. This enhanced financial strength provides us with the capacity to support further growth in our EPC division, ensuring continued expansion and success in this sector. Coming to the Real Estate segment, the market looks promising for us, and we intend to launch 2, 3 new projects in FY '25. Our first redevelopment project, home sign-up located in Santacruz, Mumbai, is expected to be launched in the month of December. The Powai residential and commercial project is also expected to be launched in early 2025, and other projects are expected to be launched in FY 2026. This will contribute towards revenue in coming quarters, and we remain positive about our business prospects in the coming year. In H1 FY '25, we achieved new sales bookings totaling 22,152 square feet, generating a sales value of INR 14 crores and a total collection of INR 25 crores. We are optimistic about our real estate sectors trajectory, strong pipeline of upcoming projects to strengthen our confidence in sustaining and enhancing positive momentum. We are committed to leveraging these opportunities to drive growth and performance. Lastly, coming to GMP business. I would like to inform you that all the divestment of its 100% equity stake in GMP Technical Solutions was announced by the Board meeting held on July 17, 2024. The company has received the sales concentration of INR 157 crores against the transfer of 12,689 equity shares on October 20, 2024. And on 10 October, 2024, the money has been received. GMP Technical Solutions has ceased to be a material subsidiary of the company. As against the company's share of INR 157 crores post-tax and other allied expenses, we are expected to have a net cash flow in the range of INR 100 crores to INR 110 crores. This fund will be majorly utilized as growth and opportunity capital for both real estate and to create some assets for the EPC division, which in turn will be used as collateral for augmenting the EPC working capital limits. We are happy to inform you that CRISIL has upgraded our credit rating for term loan of INR 725 crores. And the rating has been upgraded to CRISIL A- stable for long-term facilities and CRISIL A2+ stable or short-term facilities. This was from CRISIL BBB+ and CRISIL A2. The ratings upgrade reflects our sustained operational and financial risk profile driven by healthy execution of the EPC segment. The upgrade also take comfort from the enhancement in working capital limits and also factors in the extensive experience of the promoters. Our healthy execution track record in the civil construction business and reputed client types, comprising primarily public sector and government entities. This upgrade will play a crucial role in negotiating favorable interest rates in the company's favor. Coming to the financial performance of the company in Q2 FY '25. Let me start with the stand-alone numbers during Q2 FY '25. The company reported total income of INR 202 crores as against INR 176 crores in the corresponding quarter last year with a growth of 15% year-on-year. In Q2 FY '25, EBITDA stood at INR 17 crores as against INR 25 crores in the corresponding quarter last year. The EBITDA margin was at 8% and a net profit of INR 8 crores in Q2 FY '25, as against INR 20 crores in Q2 FY '24. At a consolidated level, Q2 FY '25, the company reported total income of INR 202 crores as against INR 174 crores for last year with a growth of 25% year-on-year. The EBITDA stood at INR 17 crores as against INR 25 crores in the corresponding quarter. And the EBITDA margin is at 8% and a net of INR 9 crores in Q2 '25 as against INR 20 crores in Q2 FY '24. In summary, our various initiatives are successfully driving growth of the company with a healthy order book in the EPC segment and upcoming new projects in the real estate segment and a strong balance sheet, mainly focusing on solidifying our financial as well as market position. With all the above mentioned points, we are very much confident to grow ahead and achieve our goals. Furthermore, by the sale of GMP business, this divestment will allow us to focus on the 4 business operations, which is now well positioned. We are excited for the future and committed to using our innovative solutions and dedicated teams to drive value and excellence for our stakeholders. With this, we can open up the floor for question and answer. Thank you.

[Operator Instructions] The first question comes from the line of Himanshu Upadhyay from BugleRock PMS.

The first question was you stated that Ohm Sainath redevelopment will be launching in December. So have we got the RERA number and commencement certificate for construction in that project?

The commencement certificate we're expecting with this next 7, 10 days. It is [indiscernible] and then it will take another month to get the RERA, so that's why we are expecting to get it launched by end of December.

And the other project you stated, which you want to launch in FY '25 is?

Yes, the Powai is very much on the card. We are just expecting the EC very shortly. So once the EC is being done, Powai [indiscernible] parameter of EC, since it is more than 2 lakh square feet. So any time in November, we are expecting that EC and then the commencement certificate and RERA will follow subsequently. So already -- early calendar year FY '25, the Powai is expected to be launched. So probably in the Q4 of the financial year.

Okay. Yes. And any thoughts on how is the EPC business coming up and what is the new orders you are expecting? Or how are you expecting FY '25 to grow in the -- generally second half is more orders or get more orders. Any thoughts on that?

Yes. Actually, we have a target of INR 1,500 crores order booking for the year, which we've been maintaining. And we have only achieved about INR 400 crores so far. So we do have a backlog on that front, partially also was because of the impending elections in the state. And so we've kept our order booking plans on hold for a bit, we would wait for the elections and then from December onwards, try to bag a few more orders in Maharashtra. Also, we were waiting for certain BG limits to come through new assessment from our lead banker, SBI, which is also almost at the final stage, will happen any time. And with certain provisions of terms, our ability to bid will be better. But yes, we still have about INR 1,000 crores, INR 1,100 crores target for the year, which we have taken, and we hope to achieve before April. In terms of execution, also the quarter 3 and quarter 4 are historically always much better than quarter 1 and quarter 2 for us. We crossed INR 400 crores almost in quarter 1 and quarter 2 as EPC. Our target for the year was INR 1,000 crores, and we are well poised to touch that target for this year. Fingers crossed, we should be achieving that.

And one thing on the current real estate projects. Is Goodlife -- what is the progress? Because the collection this quarter versus last quarter remains the same and again, the sales are constant. So what progress are we seeing in that project?

You're right. See the reason that we, in general, have constant sluggish sales is primarily because we have not put up much new inventory for us to focus on sales. We have a few units left in Coimbatore, say, the first building Phase 1, and then we have a few units in Talegaon and few commercial units in Tower of Ascend project. These are the 3 projects where we have inventory which we are focusing. But the amount of unsold inventory not so big for us to continuously be scaling up sales quarter-on-quarter yet. Only after launching 2 or 3 new projects will we be having unsold inventory to focus on sales velocities.

And by when do you expect the completion of Goodlife project and Tulip?

Goodlife, we have been completing in phases. We completed 1 phase last year. We will be completing 1 more phase this year. Tulips, again, 2 phases. One phase will be completed before March this year and 1 phase before March of next year.

So Phase 1 and 2, what you are saying is Tulip -- in the Tulip Phase 3 also, there are 2 parts?

Yes, there are 2 towers. The Phase 3 is the biggest of the 3 phases in Tulip. So Phase 3 has 2 big Towers; Tower 6 and Tower 7. So Tower 6, we will be finishing in this financial year and Tower 7 in the next financial year.

[Operator Instructions] The next question comes from the line of Aadesh Gosalia from Spark Capital.

Sir, I had a couple of questions. The first one is with regards to the gross margins. We have seen a reduction in gross margins so even, I think, quarter-on-quarter and even on a year-on-year basis. So any views on that?

Yes. I don't think there is a -- if you talk about -- if you want the segment analysis, the EPC gross margin remain unaltered, maybe 0.25 basis plus and minus keeps on happening, what kind of project contributing more revenue in a particular quarter. But EPC margin, if you look at it, range between 14.5% to 15% -- anything between 14.5% to 15% gross margin is happening throughout the year. Real estate, yes, that is happening as because this is the effect of Ind AS 115, depending upon what kind of completion you are recognizing. So if you look at the stand-alone profit and loss, yes, obviously there due to the impact of real estate in certain quarter. If you look at this quarter, real estate contribution is -- in top line, real estate contribution is almost 0. But whereas there is some bottom line expenses contribution coming from real estate. So that will impact in the bottom line in overall basis. But if you look at segment-wise, EPC remains stable and steady towards the couple of -- at least last 8, 10 quarters or more, it is quite consistent at the range of 14.5% to 15%. Real estate, it keeps on moving, depending upon what kind of revenue you are recognizing in the particular quarter.

Okay. And sir, any view on the order book since there are elections that have already went by in the first half of the year and now there are certain state elections that have happened and one like Maharashtra elections that are coming up. So any view on the order book and about like how you are seeing this overall picture turning out with regards in the second half? And also how has the month of October went by for us?

Just prior to this, I think Mr. Himanshu also raised the same question with Mr. Santosh at the start. This year, we have targeted an order book of INR 1,500 crores, so as to maintain that run rate and all these things. Out of that, almost close to INR 350 crores, we have already backed in the H1. Yes, you are right, that impending election for central and state impacted to some extent, but we are very confident that in -- on H2, we'll be able to bag another INR 1,000 crores. So the bidding process and everything [indiscernible] on. We are also, with some margin realignment of working capital limit, we are expecting from the lead bank by November. So we'll be able to leverage more BG level. So we are well poised to bag almost INR 1,000 crore plus order. So our target, we are quite confident to achieve the target.

Okay. And sir, how about this Q3 has been right now? Like if you can share some light. The previous month, how has it gone by? And if any short term like view over this quarter?

No, Q3 is going as per plan. A couple of projects, Moshi and [ Police Housing ] in Pune and now Capgemini, all 3 have taken off. And so the billing trajectory on these projects, now the S-curve is climbing. So month-on-month, the value of the bill is increasing on these projects. So same the case is Supaul, Bihar. So Q3 definitely will be, in terms of top line, much better than Q2.

The next question is from the line of Rajendra Kulkarni, an Individual Investor.

First of all, sir, I appreciate your results for your previous commitments and promises like disinvestment of GMP, et cetera, I just wanted to know company's view on the so-called the Third Mumbai, which is coming up that is developed towards a Panvel region and other extended Mumbai area. How do you see the real estate market coming up in that area? And do you foresee any solid durable business coming out from that area? So you can already -- you're already in the Mumbai business, though I feel redevelopment projects have their own limitations. To grow in a meaningful way, you need to start new green freight projects in Mumbai. So please throw some light on the extended Mumbai region and some company's thought on it.

So we've maintained over the last few quarters that we will not want to digress on our short-term strategies to do with real estate, which has been one, growth in Pune through strategic joint ventures in developed locations, not on the outskirts where we are still doing 50 or 100-acre projects, but closer to where development from the government has already reached. So whether it is 2 acres, 5 acres, we are looking for parcels which are ready to sell in Pune, similarly in Coimbatore, where we have a brand. And in Mumbai, it has been our new entry into Mumbai as far as real estate is concerned. We haven't done much in Mumbai in our past. And considering our company size and our size of our balance sheet, our ability to raise finance, we do not want to be aggressively jumping into a bigger game in Mumbai. There are enough players in Mumbai with bigger pockets who have done much bigger projects. We are, therefore, happy at this point of time, taking niche projects in prime locations like Santacruz, where we can showcase our quality of construction, quality of design, which we feel are superior to a lot of the competition that is offering in Mumbai. And once we are in a position to execute these 3 that we have in hand, 2 in Santacruz, 1 in Powai, then we will see how we want to take our next steps in Mumbai. So at this point of time, we do not have any aggressive plan to look for big greenfield projects in extended Mumbai. But having said that, we have our own land in Thane. And so that we are working on, and that is also prime location as far as extended Mumbai is concerned. So by the time that land, we had mentioned last call also, we are working on acquiring -- ring-fencing about 20, 25 acres road touch in that location. And once we reach that stage, we will deliberate at the Board level what we want to exactly do with the 25 acres, whether we want to sell some or develop some.

Okay. And one more question. In the same real estate division, are you planning to launch any new projects in Pune right now?

In Pune, we have one project in Kharadi, which is yet to be launched. We hope to launch in the next financial year. And we are in the process of tying up at least a couple of more joint venture projects in niche locations, as I said. So if tie-ups happen then within 6, 8 months again next financial year, we may be able to launch 1 or 2 more. One is confirmed.

2 in confirmed, eventually, one is the [indiscernible]. That is coming up with almost 1 million square feet and another one is the Kharadi, which is 0.5 million square feet. So next financial year '25, '26, you will see 2 launches for 1.5 million square feet in Pune.

The Kharadi project is besides the Tower of Ascend project?

Not besides the Tower of Ascend.

No, no. I mean despite other, that is separate project?

Yes, yes, yes.

And the next question comes from the line of Ayush Kataria, an Individual Investor.

So I wanted to understand, as we have sold our GMP business roughly towards 30% of our business previously. So how much will it be replaced by real estate business going ahead? As you have said, we'll be focused on real estate business as well?

So if you see our last year's consolidated revenue was in the range of INR 1,000 crores, INR 1,050 crores. And this year, we are targeting to cross last year's revenue in spite of not having GMP in hand. So GMP had contributed about less than INR 300 crores, almost INR 300 crores last year, INR 270-odd, I guess, towards that top line. So this year, that INR 270 crores would disappear from our consolidation. But still, we have a plan to not dip our top line, achieve the same amount of top line, if not a little bit more. Primarily that is driven by additional INR 200-odd crores that will come from the EPC segment this year. So what we are losing in GMP this year will be augmented by what EPC has scaled up, not yet real estate. But real estate project, the top line will start appearing in our books, a couple of years from now. And so by the time we reach INR 1,500 crores, there will be good contribution from real estate as well.

Okay. Okay. I wanted to understand, as we have [ decreased ] our margin, so from 14% like last quarter, it was 9%, now it's [ 4%. ] So as you are saying we'll be buckling up on EPC projects and real estate, so where we can see the margin going ahead because in EPC, generally, we have 14%, 15%, in real estate, we have 25% at EBITDA level. So how will be the blended margin?

Again, so what happens, unfortunately, when quarter-on-quarter, when we compare, just because of the real estate recognition not happening in a linear fashion or the stand-alone EBITDA margins keep going up and down a little bit. So that's why we provide segmental accounts or segmental analysis of our 2 divisions. EPC has been quite stable with the growth in scale of EPC, we hope to achieve EBITDA of -- in the range of 11% and 12%. Hope to get a PBT closer to -- our target is to reach -- step-by-step reach close to 10% in terms of PBT. We are currently closer to 8%. We would like to, with scale, hopefully, this year, we can touch 8.5%, maybe 9%. And next year, we can inch towards 10% at PBT level for EPC. That is an internal target, which we definitely focused on maintaining extreme discipline in monitoring our projects and controlling our margins. On the real estate side, the EBITDA as well as the PBTs could be exactly double. Again, as a blended, what is the contribution of top line from each division. That is what would give you your blended results. So even this year, when we are saying we'll do INR 1,100 crores, INR 1,000 or do we know would come, we are targeting for INR 1,000 crores coming from EPC only and only about INR 100 crores coming from real estate. So again, the blended margin would not go up much from EPC levels of 8%. It might come towards 9%. But next year, as we -- the execution of these new projects that we are launching, the revenue will only start coming in 2 years, 2.5 years' time into our books. But as I said, when we touch INR 1,500 crores top line in 2 years from now, hopefully, INR 250 crores, INR 300 crores comes from real estate. And so the percentage contribution of top line from real estate will continue to increase step-by-step from here. And so the blended margins also would go up. But I can just say that in general, you can take the numbers segment-wise, whatever numbers we are saying, is we are targeting to achieve.

Understood. Also, sir, currently, we have INR 3,200 crores, INR 3,300 crores of order book and execution time line would be around 2 years because generally contracts are for 2 years. So -- and you're saying INR 1,000 crores will be achieved this year. So like INR 2,000 crores remains for the next year. So I'm not able to understand that.

So we are at INR 3,300 crores currently, let's say, and only INR 600 crores more will be achieved this year, INR 400 crores is already gone. So INR 3,300 crores minus INR 600 crores, we will come down to INR 2,700 crores, if we do not book any more orders, right? Now next year, we want to do, say, we want to keep INR 1,200 crores and not INR 1,000 crores, which means we should start the year with INR 3,600 crores in hand.

Right, right, right.

So that is why I keep saying that we definitely have a target of about INR 1,000 crores more of order booking by April to keep this growth [indiscernible].

So roughly 25%, 30% growth in order book each year we can expect, right?

Yes.

And also, sir, on a bank guarantee and performance guarantee front, so how much is required, like for fund for -- because we have INR 3,200-odd crores order book. So like that bank guarantee and performance guarantee should be given. So for that, order book will be required?

No, no. So for the order book that we already have in hand, the guarantees are already upfronted. So we do not require any more funds for providing guarantees for this order book. Where we would need is, as I said, we have another additional INR 1,000 crores target for the year of order booking and to achieve INR 1,000 crore order booking, you need 5% eBG and conservatively speaking, another at least 5%, 7% of advance that we would like to draw down to start those projects, so about 10%. So INR 100 crores of BG limit would have to be fronted over the next 6 months to achieve our order booking targets.

Okay. Understood. And one more question. As currently, we are more -- like more business is coming from government projects, roughly 82%. So any plans for reducing that?

See, at a very strategic level, we would like to be at least 60-40 or 65-35 government to private. Now one good thing is that as a composition of our total order book of INR 3,300 crores, INR 400 crores orders are internal orders, which can be classified as private. So if you consider that, then the government order composition or the overall [indiscernible] is only about 70%. Still at a theoretical level, we would like to have this towards 60%, at least 60-40 and not be skewed towards one direction. But having said that, at this point of time, over the months, whatever best orders come, we will take -- if it's government orders that is what we are getting, we will go for it. We will not be rejecting a good government order just to maintain a ratio that we want to maintain.

Okay. Okay. And sir, also, as you mentioned, internal and external. So have you thought of any blended ratio for that as well for like 10%, 20% from internal order book, 80% from external order book? Any target...

Ideally, see, as I said, we would want -- let's say, we want a 60-40 government to private. Now, in the 40% private, maximum that comes from my internal order, I'm happy. It is better to be working for Vascon Real Estate as our clients than any other private builder because obviously, Vascon Real Estate is the best private client the EPC division can have. Our risks of money coming in, BG risks and all the other risks are much better controlled if we are working for our own self. So ideal ratio would be 40% coming from our own real estate and 60% coming from EPC outside. For that, we would take 3, 4 more years to achieve, but we're working towards that.

Okay. Okay. And one last question, sir. Sorry for asking so many questions. So we have already entered Pune, Mumbai and Coimbatore real estate business. So any plans for any additional cities?

No. In the short term -- short to medium term, no.

The next question is from the line of Balasubramanian from Arihant Capital.

Sir, my first question is regarding, we have received INR 157 crores for divestments. So like what are the plan for the fund allocations for deploying those plants. My second question is regarding margin improvement from 8% to 10% on the EPC business. What kind of initiatives we are taking to achieve those kinds of margins?

So from the GMP sale, we received a net cash from the range of [indiscernible] post tax and certain expenses, cost of sales, all of that being funded. [Technical Difficulty] Some real estate projects with [indiscernible] gone through. So we had some temporary borrowings, which we will try and pay off towards the real estate and use a little bit of the funding towards [indiscernible]. Balance 20%, 25% towards EPC, we will try and create some collateral for EPC, which we can then pledge with the bank because we are expecting augmentation in BG limits with our rating improvement and the continuous process with the bank. But once the BG limit augmentation happens, we would need collateral to avail the limits. So that is the focus as far as the fund usage is concerned. And sorry, what was the second question? Sorry, what was your second question?

[indiscernible]

Yes, 8% to 10% is, yes, it's a challenge. The answer is in 2 fronts. One is that we can hopefully keep healthy mix of order booking that we have skewed towards design and build process because that is where we are able to add efficiencies on the drawing board by doing efficient design, by being optimal in our consumption and increase our margin 1 or 2 basis points. That is one strategy. Higher the design build projects we have in hand, higher our chance that we can pull this margin up from 8% to 10%. And the second aspect is that scale is improving. We were doing INR 700 crores last year. We're doing INR 1,000 crores this year. We're doing INR 1,200 crores next year. So our overhead will get spread out on higher denominator. So that will also help us improve our margins from 8% to 10%.

There is another aspect also, that we are quite confident of. If you look at what pre-COVID -- that during the COVID kind of whatever the order book was having some kind of a little bit competitive margin as compared to what we are getting today. So most of those orders have been almost executed. So now whatever we are executing, I think quite a good range of healthy margins. So we are confident [indiscernible] it will remain constant. So the absorption will be much better. So the way we move from 8% to 10%, the way we'll keep on increasing the volume.

Got it, sir. So you have mentioned about fundraising through QIP. So what is the plan? How much we are planning to raise and when it is expected to complete?

Yes. As of now, we will put QIP in the backseat as because if you look at the market and all these things, we are not very hopeful to go with the QIP as because dilution of the existing stakeholder will be quite substantial with this price. So we are not interested to go for that. We are looking some other option. But in worst-case scenario, the plan b, what we thought of earlier days, we will raise capital through debt and all these things.

Or through equity. See, the original plan was to fund real estate project by project level equity. When the prices of -- share price went up to 75%, 80%, we thought it was probably an opportune moment to do a QIP and raise INR 100 crores rather than raise private equity at project level. But now with the market again having fallen and we don't know when we will get back to those levels, we are -- if we have to launch a couple of projects, we'll go ahead with the private equity path or short-term debt path and carry on our growth story rather than diluting equity [indiscernible].

The next question is from Praveen Jay from Sincere Syndication.

My question also was on the line of QIP, which was being answered previously. So my doubt was even when our share price is in 75% range, how viable would the QIP be? As our credit rating is now being increased, why are we not going for this? I'm not saying that debt in books also high -- in a high range. So why are we not exploring debt as an option, sir?

Which option?

Rising debt as an option instead of going for QIP?

No, no. So see, we've been very clear on our strategy. For EPC, we do have a certain amount of debt to do with working capital, about INR 60-odd crores gets utilized. And we have then advances available to us from clients through BGs. And sometimes, we do take short-term -- 6 months, 8 months short-term debt, if that is a more viable option than using the advances available from clients because many of these advances are anyway interest-bearing plus you have to put up your BG margins. So it's a call project to project, how we fund. But yes, mostly, these are short-term debt funded only. On the real estate, there are 2 aspects to funding. One is the construction finance, which we are very happy to avail at low interest rates, which is when the project has been launched, the approvals are in place. Again, it's a short-term funding, which may be extinguished by the project receivables within a period of a year or so. However, we are wary towards using NBFC high-cost debt at an early stage of real estate where we are at a stage of joint venture where we need to upfront the money to maybe pay the deposit to the partner or to get approvals in place because there is always a huge delta in terms of time lines to approval in our country and the interest meter keeps running and these are high-cost debt. So that is the only debt we are wary about. Sometimes in real estate, we would rather part with higher IRR towards an equity partner at a project level, who will probably take some stock from the project at a discounted rate upfront rather than go for debt at a very early stage.

But keeping in view of that also whatever you are talking, we are also exploring some kind of opportunity where it is a structured debt where the content is very low kind of rate of interest and it is back-ended to some extent. So then probably since all these key projects what we are looking for Bombay plus QIP are the aim for this project since it is at quite an advanced level of launching. So we are also not ruling out that debt option. But if we get that kind of structured debt, that content is very low margin, low rate of interest and it is a little bit back ended, we are open to do so, and we are exploring that also.

Right, sir. Sir, one more question on a similar line. Like we initially planned for QIP of around INR 100 crores to INR 150 crores. And with the situation, as we explained, we are not going ahead. So whether our growth is getting hampered on this aspect, like the purpose in which we have initially planned for this QIP, whether we are going for the same targets or we are revising the targets based on the QIP, sir?

No, no, no. There is no change of target. Nothing is there. So growth will not be hampered. So we had that plan B on the place because if you look at our current gross debt also increased because in just the delay, we took some kind of debt from ARKA Capital and infuse that in the project so that approval process should not get delayed or stopped. So that our time line and schedule whatever the launch is very much on the card. So there is no delay. And subsequent to that, that the part of the JV sale proceeds, which we received. To some extent, it will be utilized to mitigate that requirement also. So our growth process will not be delayed.

The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, when I look at our FY '24 annual reports, out of the -- we have given, we have around INR 266 crores of receivables. Out of that, INR 84 crores are pending for more than 2 years. How much of that was the retention money? And I guess INR 103 crores receivables from the GMP would have gone, I think right now?

[Foreign Language] close to INR 65 crores to INR 70 crores is retention.

Okay. Sir, there is another line item of INR 97.7 crores that is retention money that is pertaining to EPC. So I'm not trying to understand why this -- like you are saying INR 65 crores, INR 70 crores is the retention, but also there is a line item where it says INR 97.67 crores is the retention money pertaining to EPC.

I do believe what -- my call is that if you're talking about that aging-wise, it is [indiscernible] But there is some current retention which is very [indiscernible] 5% retention has been bought. So almost INR 20 crores to INR 25 crores is less than [indiscernible].

Okay. Sir, as on date, sir, how much would be the retention money? And what would be the long-term and short-term bifurcation over that?

Mr. Madhur, does that answer all your questions?

No. I just was asking that. Sir, how much of retention money have we given as of date? And what would be the bifurcation of the short term and the current as well as the noncurrent portion of it?

If I look at the number, total receivable is INR 91 crores, out of that INR 76 crores is the retention, [indiscernible] I can look at.

Okay. Sir, and second question was, sir, we have given INR 62 crore loans and receivables to related parties where KMP have key influence. So what is this regarding? And what kind of interest do we earn on this?

So that includes some project, [indiscernible] you infuse that includes our infusion in the Powai project [indiscernible].

I think last few quarters, sir, you have mentioned that you would do a QIP. So are there any plans to go forward with that QIP going forward? Or are we planning to keep it on hold currently?

Already we've answered. It is on -- we have kept it on hold in the current market condition, all the things. There is no point of making a dilution of the existing stakeholders. So we are not -- as of now, it is on hold.

Okay. Sir, my apologies, I joined late. Sir, just a final question. Sir, I think we had guided for INR 1,000 crores EPC revenue in FY '25 as well as INR 125 crores revenue from earlier. But sir, in our credit report, it has been mentioned that INR 850 crores kind of revenue will [indiscernible] on the EPC segment for FY '25. Sir, why is this -- why is the INR 150 crore difference between what we have said and what we have said to the credit rating agency?

See, we are always a little bit conservative in terms of our CMA and rating agencies are concerned. So there is no point of underperforming in any [indiscernible] with the rating agency rather than overperforming what we are doing. So that is the policy even in all the CMA for the banks and all these things. We are a little bit conservative while projecting that number with the banks and rating agencies.

Okay. So can we expect to be closer to the INR 1,000 crores that we have guided for on the investor presentations and like con calls?

Yes, we are very well for that. If you look at H1, we already did INR 400 crores. So we are quite confident to achieve close to INR 600 crores in H2.

Sir, I wanted to understand like we have guided, I think, around 15% to 18% kind of PBT margin on the real estate segment. And sir, we also do our EPC. So is this including the EPC margins? Or is this pure play, the marketing and as a developer kind of margins and the EPC margins are different. So that's why it looks lower than other players like Suntec who have similar EPC as well as the marketing in-house.

I think it's very difficult to -- as I said, we are in 2 divisions. We are in EPC and real estate. I'll reiterate that in EPC, we are currently at around 8% PBT levels. We want to move towards 10% from here on. And that's a conscious attempt or strategy that we have with scale as well as with certain other ways of improving efficiencies. On the real estate, our gross -- our PBT would come about double of our EPC PBT. It would be in the range of 17% -- 16%, 17%. Now how much is our blended stand-alone margin quarter-on-quarter and year-on-year would entirely depend on the proportion of real estate and proportion of EPC. At this point of time, it's 90% contribution is coming from EPC and so our margins would remain skewed towards EPC margins. Only when our proportion of revenue contribution coming from real estate increases, will our blended margins go up? It's very difficult to compare with peers who are in both these businesses because it all depends whether it's a joint venture, whether it is land owned by them in the books traditionally and what proportion of real estate, what proportion of EPC. So I think the best way would be to separate the 2 segments and compare EPC to EPC peers and real estate at this point of time is contributing very little. But as it grows, then we'll start comparing it to real estate peers.

Sir, my question was more regarding does the EPC margin that we have guided, is it excluding the -- so I think on the EPC segment, we bifurcate what is the captive EPC project and what is the outside EPC project. So including the captive EPC project as well as the marketing that we do for the real estate segment, our margins would be combined of these [indiscernible] so it would be around 25% PBT level. Is that understanding correct?

No, in our segmental reporting, if you split the 2, then the -- in our -- we do not then consider our in-house EPC revenue.

So overall, the margin will...

In PBT, that has been [indiscernible]. But in financial, that has been eliminated.

So your marketing costs and all go as cost of real estate, nothing to do with EPC.

No, sir, I'm not talking about cost, but I understand that the 15% to 18% margin is the margin for that, and we don't take any kind of margin from the EPCs that we do for the in-house real estate. Is that understanding correct?

Yes. Correct.

Okay. Sir, just a final few questions. Sir, why -- so what is the contingent and performance guarantee that we have given to banks on behalf of our group that is around INR 228 crores versus INR 160 crores on a Y-o-Y basis?

I couldn't get it. Can you just repeat the question?

Sir, we have given around INR 228 crores of performance guarantee for our group companies to banks. So what is this regarding on the contingent liabilities?

There's only one -- as of now, there is only one guarantee which was towards GMP. That will also be now released. It released with the sale of GMP. So we do not have any guarantees [indiscernible] that will be towards any of our group companies.

Okay. [indiscernible] So like when I look at our balance sheet around, out of, sir, how much of this INR 228 crores would go?

[indiscernible]

Does that answer your question, Mr. Madhur?

We'll get back to you. We have a time guarantee of more than INR 200 crores in the market to third-party clients. As far as GMP was concerned, how much is the value of our guarantee? INR 100 crores -- [indiscernible] was the value of our guarantee towards GMP, which is now gone. But even then, we will be having more than INR 200 crores of bank guarantee in the market to do with our EPC clients. The exact number we'll have to verify and get back to you.

Okay, sir. Got it. Sir, just a final question from my side. Sir, why is our cost of borrowing so high? At around 12.5% to 15% rate of interest. And what -- when can we expect this to reduce going forward?

See, there are 2 aspects to our cost of borrowing. One is our CC limit, which is I think at around 9% from SBI or the consortium of bankers. But the other borrowing for us, we only borrow -- most of our borrowing is partially collateral-free short-term borrowing to fund the launch of a real estate project or to fund interim funding of an EPC project for a few months. So consciously, I mean, these borrowings, even if they come at 12%, they are generally collateral free. And so that sort of benefits us. And that's why I think the overall [indiscernible] is going towards 11%, 12%.

So can we expect some kind of improvement in our cost of borrowing going forward with the GMP coming in as well as the, I think, Thane land monetization post elections we can expect?

Cost of borrowing, I think although we would like to attempt to bring it down at this point of time, as I said, for the kind of loans that we look for, which are short-term loans in both real estate and EPC collateral free, they would come in that range of 12% only. So at this point of time, we do not have any real plans to drastically bring down the cost of borrowing going forward.

As there are no further questions from the participants, I will now hand the conference over to Dr. Santosh Sundararajan for closing comments. Over to you, sir.

I would thank all of you for actively participating in our call and tracking us, and wish you all a happy New Year, and I'll see you again next quarter. Thank you.

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