Welspun Corp Limited (532144) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of Welspun Corp Limited, hosted by Emkay Global Financial Services. We have with us today Mr. Vipul Mathur, Managing Director and CEO; Mr. Percy Birdy, Chief Financial Officer; and Mr. Akhil Jindal, Group CFO and Head Strategy, Welspun Group. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Karan Shah from Emkay Global. Thank you, and over to you, sir.

Good evening, everyone. I would like to welcome the management and thank them for giving us this opportunity to host the earnings call. I would now hand over the call to the management for their opening remarks. Over to you, sir.

A very good afternoon to everyone. Welcome to our Q3 FY '21 conference call. I wish to extend my sincere thanks for taking time out to attend this call. Let me run you through the key highlights of our operational and financial performance during the quarter ended 31st December 2020. Our pipe sales volume was at 285,000 tonnes, up 14.3% on a quarter-on-quarter basis. Our income from the operations was at INR 1,393 crore, up 20.4% on a sequential quarter basis. Our reported EBITDA is at INR 252 crore, up 5.1% on sequential quarter basis. Our PAT is at INR 195 crore, up 28.1% on quarter-on-quarter basis. Our cash profit is at INR 264 crore, up 29% on quarter-on-quarter basis. Our EPS for the Q3 stands at INR 7.5 per share. And on top of it, our current order book stands at 612,000 tonnes, and with an active valued at almost $770 million and an active bid book of almost close to 1.5 million. On the balance sheet side of it, we stay at a net cash company, our net cash position is INR 314 crore. And the free cash flow, what we have generated over the last 9 months in FY '21, stands at INR 435 crore. Let me also give you my broad outlook and update for the key drivers what we see in each and every market. As all of you would recollect that the H1 of this year, primarily full of Q1 and part of Q2, we lost in pandemic, lockdown and where we have seen a complete demand destruction and value erosions happening there. However, in the last -- or let's say, from the mid of the second quarter, we started seeing an uptick in the economic activity, and it seems to be gradually picking pace now. As the environment is now stabilizing by virtual rollout of vaccines and the fiscal stimulus programs, we feel that there could be a stronger-than-expected recovery, which will result in an improved scenario for oil production and demand. If we talk about EIA forecast, the Brent pricing is average around $53 a barrel, both in '21 and '22 compared to an average of $42 a barrel in 2020, which augurs well for us. If we specifically talk about India, I'm sure you would have noticed that the central government has asked the oil PSUs to make a quantum jump in their capital expenditure in the current financial year, so as to stimulate the economic activity. The Ministry and the PMO has directed 13 petroleum sector PSUs to double their CapEx to INR 2 lakh crore in FY '21 from the initial target of INR 1 lakh crore, and are also endeavoring to scale it up further to INR 3 lakh crore in FY '22. The intent is to mitigate the blow to the economy from a sharp drop in private and state government investments due to this pandemic. As a result of this, we have seen increased tendering activities, which has led us to win several orders, and we expect this trend to continue. The push for City Gas expansion continues to be strong. This is a part of the government plan for raising the share of natural gas in the country's energy basket to 15% by 2030, from the current 6.3%. The 11th gas -- City Gas distribution authorization round is being planned and is expected to be launched soon. Some 50 to 100 districts will join the City Gas network, adding the existing coverage of more than 400 districts. The demand in the domestic water segment across states have been muted as resources have been diverted in the fight against pandemic. A significant increase in steel price has created an additional disruption as project costs have considerably escalated. However, water remains a key focus area, and the momentum should pick up soon. There are more than 31 river interlinking projects planned in this country, of which we believe Ken-Betwa is the first that has reached an advanced level of planning. There is also a strong resolve to provide drinking water to all households by 2024 under the ambitious Jal Jeevan Mission program. These projects would require huge investments in creating the necessary infrastructure both in line pipes as well as for ductile iron pipes. Our prospects in the export market have significantly improved in a better global environment. Southeast Asia and especially Australasia stands out as the most attractive market, where, as you know, we have bagged some highly prestigious order in the last quarter, and we are having -- we are seeing the potential to win a few more. There is also an increased traction from Middle East, East Africa and Latin America, where we are in close discussion with various customers and are in contention to bag some new orders. The flare up in the steel pricing is a key risk to all these projects as they significantly increase the project cost. However, over the last few weeks, last 2 weeks, we have seen minor corrections also started happening on the steel pricing side. And we hope that this correction will continue further. Coming to U.S.A., the overall environment for oil and gas has improved with a pickup in oil prices and better-than-expected production and demand. However, many companies in the midstream sector, where we play, are extremely cautious with spending on growth projects. In the next few months, we expect the prevailing uncertainty to settle down as the new administration assumes -- settles down and roll out their energy policy. Based on the current order book what we have, we have a visibility of production till the end of Q1 of FY '22, and thereafter, we would be in the market, securing certain businesses. Looking at the oil pricing, which is fairly steady; looking at the oil demand, which is also almost to pre-pandemic level, it is a -- we feel very optimistic that it would be only a matter of time before the demand in the U.S. market would also pick up. We remain completely focused on the same, for each and every business opportunity, which is going to arise. And we have seen such things in the past. And the turnaround in that market, as you all know, is also extremely fast. It's only a matter of time, we believe, that things should settle down there. Coming to Saudi Arabia. We have an unexecuted order book of more than 160,000 tonnes, comprising of orders both from oil and gas sector as well as water segment. With this order book, the Saudi facility has a clear business visibility till the end of Q2 FY '22. We are also in a favorable position on few large orders in the water segment, as you would recollect, on which we have participated in and the awards for those projects were due. With now the new budgets in place, we are expecting some positive movements around these projects. Further, a pickup in oil prices is also lending Saudi Aramco the necessary space to start their CapEx program, and we are seeing quite a few inquiries seems to be coming out from them at this point of time. I would also like to inform you that we had gone ahead with our -- we had gone ahead for the local listing of our Saudi JV in the Saudi Stock Exchange. At this point of time, as we speak, we have given -- our application is under process, and we expect to get the clearance by end of this quarter. The process of listing would invest -- would mean divestment of 30% of the stake by both the shareholders put together, which means it will be split proportionately between the JV partners. WCL currently holds 50.01% in the JV through our overseas subsidiary. This divestment would further improve liquidity at WCL. The process is absolutely on track, and we are endeavoring to have the listing sometimes during the H1 of FY '22. I also wish to give you an update on our ductile iron plant. As we have previously communicated to you, we see the ductile iron plant has a very attractive industry prospect and synergistic to our existing business. Accordingly, we had gone ahead for setting up this greenfield facility at Anjar. The project, as we speak, is moving at a very fast pace. And as informed earlier, we are all set to commission it by the first quarter of FY 2022. I would also like to give you an update on the divestment of one of our assets, which is the plate and coil mill division. As you would recall that we have a binding BTA agreement between the parties. And the date for that -- and the BTA validity is up to March 31, 2021. You are also aware that we have received advance amount as per our understanding for the aforesaid transaction. And considering the strong fundamentals, the high demand growth, the margin uplift in the steel sector, we are very optimistic that this deal will get consummated in the financial year.

CCI approval also.

And the CCI approval. You're right, Akhil. Lastly, on our Bhopal project, I am very glad to inform that the Bhopal project, including expansion, stands successfully completed. The total capacity at our Bhopal project is now close to 300,000 tonnes. We are looking at this facility both in terms of catering oil and gas demand and the water infrastructure demand in the Central and East India. This facility was formally inaugurated by the Honorable Chief Minister of Madhya Pradesh, Mr. -- Shri Shivraj Singhji Chouhan on the 20th December 2020. We are also pleased to inform that we recently got this facility audited through API, and we have been successfully recommended for the same, which gives us the platform to execute API projects from this facility as well. With this, we conclude our opening remarks. We will be happy to take any questions. I -- please open the floor for the questions. Thank you.

[Operator Instructions] The first question is from the line of Nirav Shah from GeeCee Holdings.

Congratulations for a decent set of numbers. Sir, I have 3 questions. Firstly is on the Saudi operations. So for few quarters, we have been the preferred placed on couple of orders from the water segment. But now considering that steel prices, the way they have risen in the last 3 months, you see these contracts for L1 being renegotiated or they'll be rebidded? How will that happen? Because, I mean, you would have put in a bid, say, 3 quarters back or 4 quarters back where the scenario was completely different. So now how would that adjustment happen for those orders that we had preferably placed?

So technically speaking, we have been pushing them for soliciting revised pricing from us in line to adjust the -- in line to capture the steel price hiking -- hikes which has happened. And recently, we got a small order from them, in which they have gone ahead and given us the flexibility to adjust the pricing. I am not sure that for all the large projects, they will agree to that, but they are completely mindful of this particular fact and they have shown flexibility in terms of acknowledging and accepting that there is a steel price increase. They have adjusted us and accommodated us in one of the projects recently, which got awarded. I am very confident that as we move forward towards finalization for these particular projects, a fair opportunity will emerge on the table, either for us to calibrate the steel price or by that time the steel price would have, in any case calibrated, then we would like to go forward accordingly. So it would be sort of a continuous engagement. But I can tell you that we are seeing a very flexible approach coming from there.

Okay. So the chances of the rebid are very less?

You may consider that, yes.

Okay. Sir, second question is on the U.S. operations. Now I believe for us also, we have not seen any inflows, and we are executing and we'll be technically done with in a few months. The same should be the case for the industry. So in the first phase of awarding, you see the competition intensity over there. How do you see that? Will the margins be slightly different in the initial round of orders? And then once the book fills for everyone, we can expect some sanity to return to the margins?

See, it all depends who are the players who are going to come back into the field -- into the play. Assuming that, there are 2 scenarios. Let's say, you have a project, which is of a very small quantum, right, and where -- there you can -- there we can definitely see a little more aggressive competition. But if it is a large project, which is coming up, then they would like to go ahead with very established leading players into the field, and it is in which category Welspun stands up, number 1. Number 2, we also have to be mindful of the fact that post this shutdown, not too many competitors would also have the ability to come back in the game. That is the impression we are getting. So the competition is not going to be as -- in terms of numbers. We don't -- we are not seeing too many competitors likely to come back into the play when we -- when the revised bidding activity starts. So it's a -- we have to be mindful. We are extremely watchful. We are seeing each and every project. We also must understand that we have historical relationships and tie-ups with all our customers. We are a preferred supplier to them. So all those factors will all play -- will continue to play a major role before any project is -- a large project is going to get finalized.

Got it. And 2 questions on India operations. Firstly, on the DI pipes, we have given the scheduled commissioning of April 22. Now how will the CapEx split be between FY '21, FY '22 and '23, I mean, in terms of the breakup of that INR 1,250 crores?

So largely, it will be -- a large portion of the CapEx would happen in FY '22. Let's say, if we have to split, we would say around 40% of the CapEx would happen or 40%, 45% of the CapEx would have happened by the time -- by FY '21, and the balance would get spilled over into FY 2022.

Okay. So at least INR 500 crores will be spent this year itself?

Close to, yes.

And maybe, say, 10% in FY '23, we'll be paying, I mean, post completion, all the cash outgo.

I'm sorry, come again?

So the balance, I mean, 10% will be in FY '23 and another 40%, 45% will be then in FY '22 also?

That's correct. That's correct.

And sir, we saw some -- we read some positive announcement on conclusion of sale of Jorabat Shillong. I mean Edelweiss was in the news of buying back. Plus, we have -- what we are reading in the -- is for the DHFL and Reliance Home Finance. So what's the update on the bond portfolio? Have we heard anything there? There's a possibility of a write-back of whatever amount that we've written off in the past?

So we are also hearing the same news as what you are hearing. We are very optimistic about Jorabat Shillong. DHFL, IL&FS are work in progress, and we will continue to watch them. But our optimism around Jorabat Shillong is extremely high as it is yours.

[Operator Instructions] The next question is from the line of Pratiksha Daftari from Aequitas Investment Consultancy.

Sir, I just wanted to know a little bit about the acquisition that we have mentioned, the Welspun Metallics one and the other company. And what is the rationale for such an acquisition? And what is it that, like, what kind of approvals or assets are that we are acquiring in this company since they're newly incorporated?

So as you know that we have announced our intention of going and venturing into the DI pipe segment. We see a -- we see that segment as a high growth segment. And it was in -- and we see also synergistic to our business operations. It is in that backdrop we had forayed into that particular segment. This acquisition is -- we have procedural approvals in place in a different company. And it is -- by the time they have all got transferred, that is a logical and strategic acquisition, which we are now bringing it on the table. So that it will now come as subsidiaries of the Welspun Corp.

Direct subsidiary.

Yes, direct subsidiary of the Welspun Corp.

Sir, basically, the approvals -- like we are paying about INR 99 crores for both of these companies put together. So this consideration is towards the approval?

No, no. This consideration is towards the expenses this company has done in the intervening period. We started this project around 3 months back. So within 3 months, this is the type of expenditure this company has done. So the acquisition is being done absolutely at the book value on -- with them.

Sir, these -- had like -- had we -- like if you had to take these same approvals in the company, the same amount of money that we would have to spend for approval?

It is not only the money for approval, it is also towards the cost of land acquisitions, the mobilization advances and some equipments, which have -- long lead items, which have also been ordered. So it is a cumulative sum total of all these things. It is just not only for the approvals, please.

Okay. So what -- like how much land are we getting? I mean if you could just tell us a little more about that?

So we are setting up this project. From a details perspective, it is like this. We are setting up this project with a capacity of 400,000 tonnes of manufacturing DI pipes. As you know, for setting up a DI pipe plant, you have to have on the back end side of it a steel plant. And accordingly, we are putting up a blast furnace, a sinter plant, a coke plant, and along with that a DI plant. So the total capacity for DI plant, which is the end product which we are going to sell, is going to be 400,000 tonnes per annum capacity, which we are putting, number 1. It will be a complete size range, full size range as what is being prevalent into the market. And this -- and from a land perspective, this is probably we would be utilizing close to 150 acres of our land to set up these projects.

No. I mean the land that is there in the companies that we are buying?

So part of the land -- see, of this 150 acres land, what we intend to set up our project, part of it we are buying from outside, part of it is already available into Welspun Corp., and part of it is available with the group company. Just to see that everything is absolutely fair and under legal entity, we have rationalized -- we are buying from the private people also the portion of the land which is not there with us. And also -- we are also rationalizing the land within it, so that they are all sitting under one legal entity.

Okay. And sir, this INR 100 crores that we have -- we will spend will be over and above the CapEx that we have envisaged for DI, right?

It is inclusive of that.

Okay. So INR 1,250 crores would be inclusive of this?

At this point of time, yes.

Okay. Okay. My next question, sir, was regarding impact. Like, you just mentioned about the impact of steel on Saudi. So overall operations front, we have back to back arrangements immediately when we get a new order, right? And the current order book, is it safe to assume that we have our steel booked at the prices when the orders were received?

We are completely covered for all the orders what we have in our hands.

Okay. So then, sir, the steel price rise would impact only for bid book? Or would we see -- like I think Saudi was the only place where we had open position. Apart from that, everywhere we stand booked. And Saudi also -- Saudi is something where we still will have open exposure, right, the order book of 160,000 crores?

We will not have.

160,000 tonnes.

No, no. On this 160,000 tonnes, what -- which is a confirmed order book at this point of time, we are completely insulated from the steel rise. We are -- we have a back to back arrangement. The question on this call, earlier on the call was that in certain projects where we are lowest bidder and the contracts have not been awarded, what is the potential risk to that? That was the question, and that is where I have answered earlier. But as to your question that on this 160,000 tonnes, the confirmed order book what we have? We are fully insulated.

Okay. And do we expect any deferment of projects which are not yet, like which are up for bidding or -- overall, any lowering of demand because of the steel prices going up in any of our geographies?

Not -- we are seeing -- see the steel price increase, sudden price increase in the steel is definitely impacting our water business in India, there's no doubt about it. Because the prices have gone up so high and the contracts which have been awarded, they cannot afford to have these pricing. So we are seeing a little bit of slowdown on the water side of it. It could be a matter of time. When the corrections would happen, they will also get a price increase and there would be certain corrections which will happen. So both these activities put together, we will see the demand coming back. But other than that, the steel price increase is not as such per se we are seeing any demand destruction. Now let me tell you that, let's say, from an oil and gas perspective, I think so the Indian PSU business continues to be strong. We are seeing a huge traction, as we have seen in the first 2 quarters and even in the last year. We are seeing a continued traction coming up from the PSU business on that, so -- which means that the steel demand is not impacting that traction. In Saudi, as I said, we are completely secured. And in U.S., unfortunately, we do not have any business visibility beyond Q1 on which I have to take an exposure. So to that extent, we are completely covered in U.S. as well.

Okay. Okay. And sir, our gross debt has increased by about INR 325 crores this quarter. So any particular rationale as to why we didn't deploy our existing funds and chose to increase our gross debt? And where exactly was this deployed?

So the gross debt has increased, which is mainly in the U.S. So as you know, in U.S., we have got one order, which is there in the pipeline, and the steel had to be procured for that. So we have taken a short-term loan to procure the steel for that. So that's the main reason. Apart from that, in India, we have just taken some commercial paper. So as of September end, it was INR 60 crores; December end, it was INR 120 crores. And commercial papers are at very attractive rates of close to 4%. So generally, while the gross rate you will see has gone up, but the increase is in the dollar debt in U.S. and as a result, the average borrowing cost has come down substantially.

Okay. And one last question, sir. The EBITDA per tonne for Saudi was substantially high on sequential basis. So any particular reason? And how sustainable is this EBITDA per tonne?

So you have seen that -- see, EBITDA per tonne is a factor of the product mix. Fortunately, in this quarter, the product mix was very favorable. We were executing in the full quarter the order which was very, very profitable. So that is the reason we have seen -- you are seeing that very high contribution, high EBITDA margins in this particular quarter.

so sir, would this be sustainable for the balance 160,000-tonne order book or the mix changes?

See, we have always told as a guidance that in Saudi, we are -- let's say, the guidance is always around $100 a tonne EBITDA. And then we -- depending on what product mix we get, what is the price advantage you are able to capture, this keeps on changing, right? But from a guidance perspective, we stand consistent in our approach that it will be more than $100 a tonne EBITDA, which we're always going to make that. And that stands true for 160,000 tonnes, it could -- depending on what -- which -- how we are going to execute it, at what price that steel has come in, those factors will positively influence that EBITDA in the subsequent quarter.

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

Sir, what is the volume number for the U.S. operation as well as say from -- for 3 months and 9 months?

Sorry, I...

Volume number?

What is the volume, this quarter sales volume and sales figure for U.S. operation?

So for this December quarter, we had consolidated sales volumes of 285,000 tonnes, out of which India is about 183,000, Saudi is 97,000 and U.S.A. is 4,000.

U.S.A. is?

4,000 tonnes.

U.S.A. is 4,000 tonnes.

In U.S.A., this time there was -- it was only a quarter in which we have been producing. The sales did not happen. The sales will happen in the subsequent quarter.

So first 9 months nothing has happened. Nothing significant has happened in U.S.A., right?

We are talking of first quarter -- this quarter, not in the 9 months.

Okay. And what about 9 months for U.S.?

9 months for U.S. has been at 58,000 tonnes.

58,000. Okay. So next quarter, probably, we will do about another 30,000, 40,000 from U.S., right?

Should be more than that.

Okay. Okay. And sir, what kind of valuation we are looking for our Saudi JV? We are like this thing is going to non-card.

Right now, we are in the process of doing all the administrative formalities, completing those formalities. We have merchant bankers who are there. It will all depend when -- at what time we hit the market, what is our order book, how is the Saudi market at that point of time looking. I think it's fairly speculative at this point of time to answer that. But all what I can tell you is the market has a lot of appetite, the market is fairly buoyant, and we intend to ride that way.

Okay. So we will amortize our 15% share? Like our shares will come down to 35%, right?

That's correct.

The next question is from the line of [ Harshit Khandelwal ] from -- a retail investor.

My question is, what is our further capital allocation plans? Like how we are going to utilize our net cash provision?

Capital allocation.

So we have already announced certain projects like the DI greenfield, which is already there in the public domain. Apart from that, we would be having certain maintenance CapEx, which typically is there in India and in U.S. in our existing plants as well. Apart from this, we keep looking at any M&A opportunities. So we have our dedicated team, which is continuously looking at all these type of acquisition opportunities as well. And as and when we get some attractive opportunities and attractive assets, we will utilize the funds that are available with us.

Okay. And sir, my next question is what is the R&D expenses, like R&D to earnings ratio...

We may not have crystallized it to the last dollar value. I think so we can work out that information and share it with you separately.

The next question is from the line of Rishikesh Oza from RoboCapital.

Sir, can you please provide the revenue and PAT guidance for FY '22 and FY '23?

See all -- it's impossible to give a guidance. See, there are so much of variable factors which are playing into the market at this point of time. And none of us is not that -- everyone is not aware of it. Even you are aware of it that what are the various factors which are playing at this point of time. How is the pandemic going to pan out. How quickly the U.S. economy is going to revive. What will be the situation of the state's funding. All those factors are going to play a major role in terms of deciding that what are the volumes and the earnings are going to be there, FY '22 and '23. However, having said that, I think so there's quite a bit of an optimism. We stay very positive because we are seeing a very strong revival, which is happening around, right, both in the -- as I told you that we are seeing strong signs of revival in the oil and gas sector in India. But at the same time, the water is taking its own time, right? We are seeing the demand coming back in Saudi. But at the same time, we are seeing that in U.S., things have to stabilize a bit, and we are watching it very carefully. So in this element of uncertainty, it will be wrong on our part to give you any guidance or any numbers, which we are not able to sustain. So I think so as we go in subsequent quarters, as and when more clarity emerges, as the market starts stabilizing, I think so we can revisit and address these issues.

No problem, sir. Next question would be what is the revenue potential for your DI pipe, sir?

See, if -- our DI pipe business at its peak capacity would be producing close to 400,000 tonnes of pipe, right? The revenue, the top line potential could be as high as INR 3,000 crores to that on a stand-alone basis.

The next question is from the line of Vikash Singh from PhillipCapital.

Sir, I just want to understand one thing. If I just subtract the consolidated from stand-alone, I see that the U.S. EBITDA per tonne comes more than INR 40,000. So is there any one-off for what I'm missing here?

So Vikash, in U.S., as we have disclosed in our results, we had 1 fire insurance claim of about INR 27 crores. This is appearing as a note in our published results. So $3.5 million, that's roughly INR 27 crores, has come as an income for us.

Okay. So on a net-net, the continued business would have done some EBITDA losses this quarter also?

Yes. I mean as you can see, U.S. volumes were only 4,000 tonnes. So obviously, on a 4,000-tonne volume, you really can't expect to make profit.

Understand. And sir, coming back to our debtor situation, see our total order book size has been on a lower side because we have executed some order this quarter also. So even if I assume that 40,000, 50,000 tonnes or so some orders, which you would have booked in U.S. still it doesn't overall matches the kind of the net debt increase of INR 340-odd crores is there. So anything else which is there in the line items which we are missing?

So in U.S., at the end of December, we have 2 projects in hand on the spiral side. One of the projects we have finished the production, finished goods is sitting in the inventory and it will get accounted as sales in Q4, that is in March quarter. For the second project, we have the raw material. The inventory is already brought in. And that's the reason why there is short-term debt that you see in U.S. But both these orders are committed orders, and we don't have any concerns on that. So the sales which are executed in Q4, Q1, it will get executed, and the inventory will get converted finally into cash. And of course, the debt will be repaid.

Okay, sir. And sir, regarding this Welspun Metallics Limited and DI Pipe Limited. Sir, this INR 95-odd crores, it would go to the promoters or it would -- it was previously also a part of the overall Welspun Corp only?

Vikash, sorry, I didn't get your question. Please, come back?

Sir, this Welspun Metallics Limited, that INR 95 crore, which we are selling out, sir, it would go to some other -- our group -- another company or the promoter? So this consideration is going to whom, this is what I wanted to understand.

So Vikash, first and foremost, you have to understand this consideration is nothing else but a reimbursement of the expenses, number 1. Number 2, this -- because for the bridge period, when we were trying to regularize everything under Welspun Corp., including transfer of all the approvals and accreditations, that is for that period the promoter entity got -- had bridged up these expenses, and we are only reimbursing that. And it is purely at the book value.

Book value transaction.

So it is backed by hard assets, which are recently created. So recently in the last 3 months, land and whatever back-end machinery advances. So there is nothing which is like some speculative, subjective valuation element coming here. This is hard assets created in the last 3 months.

Okay. So basically, I thought that the land was already available to work in our existing plant. So I thought that we are using that land for this purpose. Like last time you have indicated as in the con call.

So some land is there within the group. Some of that land we are even leasing it out to this Welspun Metallic and Welspun DI. But some land has been purchased from third parties as well. And third-party purchase obviously requires cash. So it's absolutely an independent transaction.

The next question is from the line of Sriniketh Narayanan from B&K Securities. As there is no response, we take the next question from the line of Rajesh Agarwal from Moneyore Investments.

My question is on U.S. Are you hopeful for orders from U.S. because the activity in Permian Basin has reduced considerably? And second, the new administration is agnostic to fuel, fuel oil and gas or this one? And the second question is, are we bidding for Namami Ganges project in India? And third question is, how is the CGD pipes order? The 3 questions, sir.

Okay. With respect to U.S., I think so, irrespective of whichever administration, U.S. is a net oil exporter. They have earned this position after considerable effort. Irrespective of whichever administration it might be, it is our assessment, it is our feeling that they would not like to leave this pole position which they have earned over few years -- a hard work of a few years. So we would -- that's one. Two, that decision would have become little questionable provided the oil prices would not have been firm and the demand would not have come back. But you see that their oil prices have also firmed up significantly. They are almost at the pre-COVID level, and the demand is also almost at the pre-COVID level.

Sir, that is because of reduced supply from Saudi and other countries?

There is. There is enough supply. If you see, earlier, it was all OPEC maneuvered oil supply. Today, it is no more OPEC maneuvered oil supply. I think so U.S. has a dominant and a pivotal role to decide the oil supplies today, right? So -- and that position is very hard earned positioned for them. So I am very -- we feel that they will not relinquish that position so very easily irrespective of the political assignments, number 1. Number 2, Permian Basin is a very cheap, low-cost basin available to them. And that is one of the key drivers for the economic resurgence. So it is just a matter of time, they would have to reset and recalibrate their priorities and align them, and they will come out with their new policies. So I'm sure this period of uncertainty is rather shorter than longer.

Is it for future CapEx or the last mile sort of pending?

Both. Both of them. Both of them.

You feel like that $52 NYMEX crude, still it is sustainable for them to make money?

Oh, yes, 100%. 100%. Anything which is more than $35, they make money. Coming back to your third question, I would come back to the second one, for CGD demand. That was on CGD, right?

Right.

CGD rounds are going exceptionally well. The headcount, biddings are all over. We are now into the 11th round. And with every round, almost 100-odd cities are getting added up into the city. Today, as we are talking, almost 400 cities have been talked about for complete City Gas distribution network. And today, the work is only -- the work is happening only on the fifth or the sixth round of the city. So there's a huge upside which is available. So we see a lot of traction in the City Gas business even in substantial -- in future to come as well. Coming to your -- what was the third -- which project were you mentioning to?

Lot of -- I'm seeing lot of other water suppliers are getting lot of orders, including contractors from Namami Ganges project in India.

Namami? What they are...

Namami -- Namami Ganges.

Yes, yes. Right. So those -- we have...

These are all DI pipes orders.

Yes, yes. We are not into that particular space at this point of time because we are on the mild steel large diameter, and that is also one of our reasons for venturing into the DI pipes where Namami Ganges is going to be a huge project, Nal se Jal is going to be huge...

No, no. Right. Right. But by the time we come, sir, it will be late, you don't feel it will be late because lot of orders are getting huge now? Lot of companies -- Indian companies have got huge orders?

The future, if we go by all the assessments and the reports, which [Technical Difficulty] which we are making this investment. This business is going to grow at a rate of at least 6% to 7% of CAGR growth over the next 7 to 10 years' time. That's what is being -- that is what the rationale for us to get into that business.

And sir, CGD orders have got margins, no?

What margins?

On the CGD orders?

Yes, sir.

They have fairly reasonable margins. Fairly reasonable margins.

Okay. Better than the water segment? No?

Yes, much better than the water segment. Much better than the water. Yes. Yes. It's a very organized and very developed market. And we are very satisfied with the margins what we are getting there.

[Operator Instructions] The next question is from the line of Sagar Parekh from One Up Financial.

Just one question on this Keystone project. Recently, there was this news article where the Biden administration, they canceled that project. So just wanted to check on the -- sir, I believe you've already done the construction and the inventories lying with us. Just wanted to double check that. Any kind of impact on us?

So Keystone pipeline, we -- from a Welspun perspective, we have completed the production. All the pipes are sitting on the ground. Our contractual obligations completely protects our interest to 100% of our receivables. So we are absolutely on a firm footing. There is nothing called surprise. And on top of it, we were supposed to get -- that money is supposed to come up in tranches as per the contractual terms. The first tranche of money has already hit our account. So we are not seeing any challenge whatsoever on the KXL project concerning WCL.

So the -- we have executed the project, but the inventory was lying with us, right?

We have produced the pipe. The pipe as per agreement are stored at our facility, as per our agreement. And on top -- and there is a separate commercial agreement for storage and handling as well over and above our pipe manufacturing contractual obligations.

Okay. And how much is the receivables pending from that project? You said it's 100% financial guarantee, but just wanted to check on the total receivables pending from that project.

It would be close to like 60-odd million at this point of time.

60 million.

Yes. Yes. 60 million would be an outstanding, which should come over the next 3 months time, in a progressive manner.

Okay. Fair enough. And lastly, any future impact you think from the new administration? You mentioned obviously that -- about the U.S. shale industry in detail, but just wanted to check if the policy is more focused on the cleaner energy such as renewables, there could be some implications for the oil and gas sector, right? So just wanted to check your thoughts on the same in U.S.

See, it's too early for us to comment on the policies of the new administration. I can only reflect that -- and I was privy to 2 of the debates, which has happened during this substantial campaign. And in both the debates, the President elect and now the President has categorically mentioned to continue to the policy of keeping the momentum up on the oil and gas industry. He was specifically being asked questions around that debate. And his position was very, very unequivocal, very clear that I would like this momentum to be maintained. And we are all expecting to get that translated into a policy, which I'm sure should get rolled out sooner rather than later.

Okay. So this Keystone project was just one incident where the environmental issues cropped up. But other than that, you don't envisage any such problems as such for the newer projects.

See, Keystone is -- we have to see Keystone in a very different perspective. Keystone is a crude coming from Canada into U.S. for the Gulf Coast refineries. The crude which is coming up from Canada is out of the oil sense and which they feel it's a dirty fuel. It's a -- so that is where their concerns are, that it is an oil sands fuel, so it is a little bit of a dirty fuel, and they don't want that coming from Canada into their domestic market. That is where they stand. But when it comes to the projects or when it comes to drilling and extracting and transporting their own fuel, which they are producing in their own country, I don't see that there should be any reservations or any issues around that.

Okay. Fair enough. And out of the total $1.5 million bid book that you mentioned in the beginning of the call, can you give us a broad split up between how much is it from India, U.S. and Saudi and other countries?

Almost 1/3 of that happens to be from Saudi, the other 1/3 happens to be out of India, and the balance is splitted between the Rest of the World, let me put it this way.

Okay. So U.S. is very small right now?

We are -- the way -- see, what happens, traditionally, if you look at the U.S. market, it goes -- when we -- when this pandemic had hit, right, at that point of time, there were some 6 or 7 projects which were ongoing. Out of that, 2 or 3 projects got shelved and 1 or 2 projects got canceled. We already had the project. They got canceled. The moment that clarity would start coming in, like what is the direction of this new administration, all those players are going to come back very quickly on to that particular field. So right now, we may not be seeing there -- because they have not yet come back, so their numbers are not getting reflecting here. But we have to step back and analyze that when we were -- just around the pandemic time, there were some 6 or 7 projects, which were up for running and 3 of them were awarded already. So those projects are -- the moment that clarity emerges, I think so things are going to come back on track. We stay very, very optimistic. I don't want to sound exuberant but I'm equally careful. But I'm very, very positive about the resurgence in the U.S. market. We have seen that in the past, in the previous administrations also. I hope it will also be the same this time as well.

And U.S., we used to do about $300 EBITDA per tonne at our peak. And now when do you think we can come back to those levels? Let's say that you assume that the 6, 7 projects that you're talking about, they come back, so you think we should be having such kind of margins in those orders again? Or you think it's still some time away?

It's possible. It is definitely possible. It's possible. If those projects comes back, and the competitive landscape has shrunk and is likely to restrain further. I mean it's all a matter of demand and supply gap. And I hope that if these products do come back quickly on the table, and it gives us a vantage point in terms of exploiting the commercial milage of that.

The next question is from the line of Pratiksha Daftari from Aequitas Investment Consultancy.

Just 2 data points, sir. What is the amount that is already received for the PCMD transaction?

We -- as per -- we have an agreement, which was the business transfer agreement. As per the business transfer agreement, we were supposed to get some INR 50-odd crores, and we have already received that. But that was a long time back. So it is already there with us.

INR 50 crores?

Yes, yes.

And how much is then balance yet to be received, sir?

INR 800-plus crores.

Okay. And the order book breakup, if you could give between the 3. So 160 is Saudi and between U.S. and India, the breakup would be?

U.S. would be close to 130,000 tonnes of the pending order book, which will get converted into sale. And almost 300-odd thousand tonnes would be from India.

Okay. And this would be executed between Bhopal and Bhuj -- Anjar?

Dahej, Mandya. So we have 4 manufacturing locations in India, and it will get executed out of these 4 locations.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Thank you very much for taking time out for this particular call. I hope we have answered all of your questions. If you still feel that there is some clarity which is required or some additional information which you may need, you may -- you can definitely -- please feel free to reach out to our Investor Relations, or to Gaurav, for this particular matter. And we would be very pleased to answer all -- if anything else which you want us to address, please. But once again, my sincere thanks for taking time out and attending this call. Thank you very much. Have a good day.

Thank you very much, sir. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.