Welspun Enterprises Limited (WELENT) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Welspun Enterprises Limited Q4 and Full Year FY '20 Earnings Conference Call. Before we begin, I would like to state that some of the statements made in today's discussion may be forward-looking in nature and may involve risks and uncertainties. [Operator Instructions] Please note that this conference is being recorded. From the management side, we have Mr. Sandeep Garg, Managing Director, and CEO; Mr. Akhil Jindal, Group CFO and Head Strategy; Mr. Ved Mani Tiwari, Deputy CEO; Mr. Sridhar Narasimhan, Chief Financial Officer; and Mr. Jitendra Jain, President of Finance. We will start with an update from the management for the past quarter. And then proceed to the Q&A session. Thank you. And now I hand the conference call over to the management for the opening comments. Thank you, and over to you, sir.

Thank you. I'm Sandeep Garg, Managing Director. Good day, ladies and gentlemen. On behalf of Welspun Enterprises Limited, I welcome you all for Q4 and Full Year FY 2020 results Analyst call. I hope that you, your family, and colleagues are well, and taking care, and necessary safety measures. On this call, from the management side, in addition to the usual participants, that is myself; Mr. Akhil Jindal; and Jiten Jain, whom you are familiar with, we have Mr. Ved Mani Tiwari; and Mr. Sridhar Narasimhan, who have recently joined the management team. Mr. Tiwari joins as a Deputy CEO; and Mr. Narasimhan as CFO. Both of them come with some impressive experience in Infra domain. And I'm sure that your company will be immensely benefited from their expertise. Before we go into the detail of this quarter, let me quickly start with the recent developments. As you would have seen from our recent disclosures. We are in the process of acquiring a BOT Toll project, namely Mukarba Chowk - Panipat through harmonious substitution. I will be sharing some more details about it later on. We have also raised INR 375 crores through NCDs in May 2020 at a very attractive rate even in this difficult market environment. Both these are very significant steps in our growth journey. You would also see that we have announced a dividend of INR 2 per share yesterday for FY '20 to reward our shareholders. Now coming to the operational performance. Without a doubt, this was a very challenging year on the macro front. In spite of that, our revenue in FY '20 is up by 1.2% year-on-year basis. Our operating EBITDA margin for FY '20 is at 12.2%, in line with our guidance. Coming specifically to Q4 FY '20, we reported a revenue of INR 450 crores. Revenue during the quarter was adversely affected due to a few major factors. We faced some unseasonal rains across our 5 project sites and lost approximately 55 working days cumulatively, which is about 12.5% of the golden period of working time for the quarter. In addition to this, the world and the country faced the challenge of COVID, which also led to a loss of about 9 days for the quarter, which is about 10% of the working time of the quarter. Effectively, making us lose almost 25% of the golden time to work. In addition to that, there had been some minor delays on some routine forest matters, which was -- we were supposed to get some approvals, which should have allowed us to generate more revenue, those sites got delayed and we could not generate that revenue in Q4 FY '20. Overall impact of these would be in the range of INR 225 crores to INR 250 crores, which we believe that we will be able to recover in the Q2 to Q4 of FY '21. To protect the company from costs and attendant issues because of this lockdown, we have written to the authorities Invoked Force Majeure, which ensures that the interest of the company is protected under the concession agreement. I would also want to update you on the COVID-19 impact and its implications. So as far as COVID-19 is concerned, post partial opening of lockdown from 14th April onwards to about middle of -- up to about 22nd of April, we started work at our various project sites in accordance with government guidelines. We expect the pace of the work to gather momentum gradually and are confident of making up the revenue loss. We have incurred in April, and continue to do so because of slow progress over the next 11 months. We have adopted several measures across our sites and offices to ensure that our commitment to our customers is not compromised. We have implemented work from home for employees and the safety and well-being. Extreme caution and higher standards of hygiene and safety is being practiced at our sites by our staff. In order to create awareness and protect our employees, additional efforts have been implemented such as thermal screening at all our offices and sites, following social distancing norms. Sanitization measures for employees and officers, medical assistance. These are some of the major elements that we have covered. We are -- there is a detailed SOP that we have prepared to protect our employees and workers from this COVID-19 disposal. Now coming to our project updates on our road portfolio. Just to recollect, most of you know that we have currently 7 HAM projects, a total value of more than INR 8,500 crores. In addition, we are currently in process of acquiring a BOT project with a value of about INR 2,100 crores. The current order book which is unexecuted portion stands at approximately INR 4,862 crores, which gives revenue visibility for FY '21 and FY '22. Now coming to specific projects. Delhi-Meerut Expressway Package 1. It is a completed project, and it has received its third annuity in January 2020 within this stipulated time for completion. The project was also refinanced at a very fine rate of 8.17% to the top-up loan of INR 65 crores in these challenging circumstances. The next project is Gagalheri-Saharanpur-Yamunanagar or GSY project. The project -- the physical progress of the project stands at 91%. And at the end of Q4 FY '20, the project has met its fifth milestone and has received a payment against it in March 2020. The adjoining project with this Chutmalpur-Ganeshpur & Roorkee-Chutmalpur-Gagalheri or called CGRG. The physical progress of this project at the end of the Q4 FY '20 stood at 89%. However, we have progressed way beyond. And we have put in the fifth milestone, which is 90% post the lockdown. And part payment against that has also been received. Chikhali-Tarsod, a project in Maharashtra. The physical progress of the project is about 60% at the end of Q4 FY '20. We have invoiced the third milestone, and also received the payment against it. The PWD project at Maharashtra Amravati or AM2, the physical progress of the project stands at 54% at the end of Q4 FY '20. We have invoiced the third milestone for this project and received a part payment from the client. Next project that I would want to talk about is Aunta-Simaria. The physical progress of this project stands at 21.8%. For this, we have invoiced the first milestone and received payment against it. The last project that we would -- I would want to talk about from the HAM portfolio is Sattanathapuram-Nagapattinam. As I've explained in the earlier call, NHAI has been advised to do a environmental study. NHAI is currently undertaking an EIA study to obtain environmental clearance. The concession agreement is intact. In fact, a supplementary agreement has been signed, extending the validity of the concession agreement up to 30th June 2020. For this project, there is the implication of the environmental CRZ clearance is only to the extent of about 650 meters, which we believe if all other things are settled, all other preconditions are met by NHAI, we can easily re-scope it and get the appointed date. We are targeting the appointed date before 30th of June, 2020, and NHAI is currently working to meet its obligations under the CTS so that the appointed date can be granted before 30th June, 2020. The last project that I can -- I would want to talk about is the recent project that we are acquiring, that is Panipat Mukarba Chowk. It's a toll project. We are acquiring it from SL Group. The total project cost is about INR 2,122 crores, out of which INR 1,593 crores is balanced to be incurred to complete the project. The project is fully financially tied up and adds around more than INR 1,100 crores to the EPC order book of the company. We expect to complete the project in H1 of FY '22. Coming to Infra projects for the water. The Dewas Water project, it achieved its commercial operation date in -- as on 30th of April, 2019. Since then, it has been operational, and it has stayed operational as essential services during the COVID situation. We have generated a revenue of INR 7.9 crores and an EBITDA of INR 3.6 crores during the year. Coming to oil and gas, there are 4 relevant blocks. Kutch block or GK1, as we say. The field -- the operator for this block is ONGC and is in process of developing the field development plan. The second block that we talk about is Mumbai block. And it is already the approval for entry into Phase 2 has been achieved by us. And we expect the drilling to start post-monsoon. The last block that would -- I would want to talk about is B9, which is a discovered small field. After the drilling in the Mumbai block for the first well, we intend drilling post-monsoon the developmental well in B9. In these 3 fields, the overall back end play is in the range of 0.9 Tcf, that is trillion cubic feet. This -- that initially in pairs has been reviewed by a peer group, and they have actually come up with a higher number. The expected EUR from this gas box is about 70% of G gas in place. The fourth block, which we are still holding on to is Palej block. That block continues to be under litigation. And we -- since it's all gearing block, we are continuing with that. And also trying to have discussions with the government authorities to revive. So coming to the outlook of road projects. Currently, there are around 42 HAM projects announced by NHAI with a total project cost of about INR 4,000 crores -- INR 42,000 crores. The government's focus continues to be on highway and water sector. And as a part of national infrastructure pipeline enhancement, which really present excellent business opportunities in the next few years is our view. The company is focused on selective bidding. And targeting to explore business opportunities, while preserving its threshold return expectation. In the water sector, we will continue to focus mainly on sewage treatment plant, desalination, and bulk water transmission projects either through EPC mode or HAM mode. The company will continue to explore inorganic growth opportunities through measured evaluation of risk return parameters. The company will continue to pursue an asset-light model while focusing on operational excellence and prudent risk management. We will also continue to focus on value unlocking through divestments and our refinancing of projects. And so that we remain focused on our asset-light model. With these words, I will now hand over the call to Mr. Akhil Jinda for financial highlights. Over to you, Akhil.

Thank you, Sandeep. I would complement Sandeep on the kind of growth that he showed despite some of the challenges. And however, because of the -- some of the issues that he mentioned about the extended rain and a bit of a COVID, the revenue was down from a Y-o-Y perspective, although, on an overall basis, we still achieved our objective. It was down 37% to almost INR 450 crores. But importantly, the EBITDA was up -- was down by 32% against 37% of revenue. In fact, our operating margin for the first time, it stood at almost 13.5%, which used to be 12.6% in the corresponding quarter last year. So clearly, an improvement in the EBITDA, but a little bit of a setback on the revenue side and corresponding effect on the EBITDA side. And as a result, the EBITDA on the overall basis was down 18% to INR 74 crore. While these are the numbers which are more like historical numbers to us, and clearly, the business going forward will cover up many of these numbers because all of these projects are in-house projects. So some of these revenue numbers, which could have been achieved in Q4 are going to be achieved in the subsequent quarter. So these are more like a deferment rather than loss of business permanently or completely. So to that extent, I think there is a jump in the -- this financial year that we will see on account of the last year's shortfall in the revenue. The important thing is that the company is fully geared to meet its obligation and to also have enough cash and bank balance to meet the further requirements and to capitalize on the opportunity that we come through. So as on 31st March, the cash balance was nearly INR 532 crores. Additionally, as Sandeep was mentioning, we have raised INR 375 crores in the last few days. In fact, yesterday was the last payout. So today, the company has got INR 375 crores in NCD at a very competitive rate. So together with INR 375 crores and INR 572 crores as the last year balance, we are talking of a fund of almost INR 900 crores. Additionally, you must have seen our efforts, which are going to be more clear as we go along to raise further equity capital in the range of INR 250 crores to INR 300 crores that we are contemplating. So all in all, there would be a healthy balance of INR 1000 crores to INR 1,200 crores to meet our further requirements and to look at the other projects. When we visualize the equity -- pure equity requirement in some of our existing projects, we have almost INR 450 crores required immediately, some of them in the HAM projects which were historical, where some significant work has been done and part equity is left to be infused, that is around INR 135 crores. The recently acquired BOT project that we mentioned as Mukarba Chowk, there the pure equity requirement is INR 200 crores. And then the oil and gas, which is the third business or a third leg of INR 150 crores. So if you see against INR 1,000 crore of cash kitty that we are trying to create, INR 450 crores is the immediate requirement in many of these projects, plus some other for DUs that we can plan. So to that extent, I think there is enough gunpowder in the -- with the company to capitalize on any opportunity. We have got a short-term loan of INR 277 crores as on March number, which has again significantly come down while we are talking. But these are, of course, supported by the net current assets and everything. So there is no challenge in terms of the current assets versus the current liabilities chart. And to that extent, the current assets are adequately sufficient, they were almost to the range of INR 1,700 crores, including the cash, of course, which were supported by the cash. And accordingly, the short-term loan of INR 277 crores is a very small number against that. If you see, we have continued on our journey of growth. Operational excellence has been our DNA. And we have now got a portfolio of almost INR 10,600 crores, including the last project that we acquired, which Sandeep mentioned from SL. The company is really focused on value unlocking. There is, of course, recycling of capital that we are contemplating. Now since our one project, which is Delhi Panipat -- I mean Delhi-Meerut is near to its 2 years completion, 2 years post-completion. This is a right time for us to start looking at the unlocking there and many more projects, which are going to be commissioned in this year. So of course, we are now getting geared where the completed projects will be unlocked as we go along. And many of the projects, which are under various stages of implementation, the efforts are to expirate them to complete it. So I think with this, I hand over the floor for question and answers, myself, Kevin, and my colleague, Mr. Sridhar, we all 3 are available for any financial questions. And Sandeep and, of course, supported by Vinoo are available for any operational and other strategic questions. Thank you.

[Operator Instructions] First question is from the line of Mohit Kumar from IDFC Securities.

Yes. Sir, primarily I have 3 questions. The first is on the fact that the GSY, CGRG, and Chikhali-Tarsod. I think I -- my question is whether all these 3 will get completed in this fiscal year? Or do you think there's some delays possible in one of them and take it postponed to FY '22? And how much leeway we have got by NHAI, is it for 6 months? And secondly, on is Mukarba, the Panipat, the tollway is limited, which you have acquired from the -- which the -- are there any considerations to aid? What was the process? And I understand that as you told that the equity requirement total equity outgo from our side is INR 200 crore, is there anything else which we need to pay or which we need to invest in this particular project? And what is the kind of the time line where do you expect this project to get complete? And are there big thoughts, are they in a risk, which we are not here, which you can tell us in this particular project? And thirdly on is the order inflow, how do you see the order panning out from NHAI for HAM -- HAM project? And also on the waterside, if you could throw some more light?

I will take this call, Akhil. So the first question that you have is on the CGRG, GSY, and CTHPL. Do we see these projects getting completed in FY '21? The answer is positive, yes. The 2 projects that is CGRG and GSY were -- should have achieved their PCOD by the March. But for these rain and the COVID intervention. So we expect somewhere around July, these projects to be completed, at least achieve the PCOD, the COD may be slightly at about 90 days. The other project, CTHPL will definitely achieve its PCOD within this financial year. The CDO -- the COD is expected provided NHAI is able to handover certain lands within this year. So we expect both -- all these 3 projects to achieve the PCOD and COD this year. In addition, I think we are also reasonably confident that the Amravati project will also achieve the PCOD and the COD in this financial year. So we'll have 4 projects, which will achieve the revenue generation point in this financial year. Now coming to your second question about the acquisition cost of Panipat Mukarba Chowk, we have not paid anything to SL for acquiring. This was an harmonious substitution, wherein we have taken over the debt, the past debt of the project. And we are likely to complete the project going forward. In terms of the risks, there are practically other than the construction risk, which is a part and parcel of the business in the current situation of COVID. I don't see that this project has any challenges. The land is available for us to get the PCOD. We need to complete only the Haryana section to get the PCOD. We can continue this [indiscernible] those actions are significant [indiscernible] complete COD. So I don't see any risks other than the [indiscernible] risks on this project. It is already [indiscernible]. So it's very prestigious project as well. So in terms of the positioning of [indiscernible]. Sorry...

Your voice is breaking slightly.

Okay. So I will repeat as far as the Panipat and Mukarba Chowk is concerned, other than the risks associated with any construction project, I don't foresee any risks on this project. And to give you an idea for us to complete this project to the level of PCOD, only Haryana section is completed, it should be able to achieve its PCOD. So we are practically very hopeful that we will be getting the PCOD in this financial year. However, the complete project may take H1 of FY '22. Coming to the third question that how do we see the NHAI's awarding on HAM project. The reality is that currently, there are about INR 42,000 crores of bids on HAM. And if the public domain information is to believe that the client is clearly focusing on PPP projects rather than the EPC projects. So there is -- we don't see any challenge. We expect something like about INR 4,000 crores to INR 5,000 crores of orders to be out there in FY 2021, which will amount to about INR 100,000 crores. And we estimate about 60% of this new order flow to be from HAM. I hope I've answered all the 3 questions.

The last question was this partly on the water reset, have you heard -- are there any orders in the market right now?

So as we speak, there are currently about MCGM is out there with 22 -- little bit about INR 12,000 odd crores of projects. There are about EOIs of about INR 12,000 crores in AP, and there are various -- another project of Marathwada, which is another INR 12,000 crores. So from our canvas, see, the water is a very large business. So there are -- I think at any given point in time there are at least INR 20,000 crores, INR 30,000 crores, INR 40,000 crores of work floating at various states of municipal levels. However, from the canvas that we are interested in looking at it is these large projects where we can bring in a differentiated value. Currently, in various stages of EOI stroke actual bidding, there are something like about INR 30,000 odd crores of projects which are under contemplation with us.

Sir, last question, if I may, excuse me, sir. Sir, is there any clarity whether this force majeure is the political force majeure or not political and will not be compensated for any additional cost? Do you think there's any chance that we get compensated for some of the costs, which might come in because of the delay?

So let me answer this question in the best manner that I can. If we are looking for the words political force majeure, I have not seen any memorandum which the directive of the government, which says it's the political force majeure. However, if you look at the intent what they have done to the BOT projects of seeing that to extend the collection period by so and so period and this is how they will compensate. So all those provisions, which are enabled political force majeure [indiscernible] that target. So to answer the question, the intent of the government is very clear if they don't want the industry to take the hit. If the BOT projects are any indicator. However, I'm sure, as the time will evolve, in addition to statement that they have made, there's 3 to 6 months of extension will be granted. I'm sure that that clarity will come in post the lockdown and in interactions between the industry and the NHAI's not to become more [indiscernible].

[Operator Instructions] Next question is from the line of Sagar Parekh from Deep Finance.

So firstly, on this -- there was about 2 orders of MCGM that we had bidded for the switch treatment plan. So because I think INR 2,000 crores each. What is the status on that? Have you won that orders? Or it's still underbidding?

So those tenders got canceled and the re-invitation has taken place. Right now, the prebid for those re-invited tenders is likely to take place post the lockdown.

So the INR 12,000 crores that you mentioned for MCGM includes these projects and these new projects?

Yes. These -- the earlier bridged projects are included there.

And would you like to give any kind of order inflow guidance for FY '21?

See, my views are obviously, we have our internal targets. However, given the overall situation in terms of the industry, I would want to wait till I give a guidance going forward because the -- how the whole thing unforced as well at the government level also needs to be seen as to how many projects they will be able to take it through the EPC route.

Fair enough. But even this given this INR 42,000 crores of HAM project. There would be some kind of visibility for us, maybe get 1 or 2 orders or something. And even in the waterside, you will have some orders delayed, right?

So to give you an idea, yes, we would definitely be bidding for projects that these INR 42,000 crores of project and expect at least a couple of projects to be won from the road product. The way we will approach the project is that we need to meet our threshold return expectation. However, otherwise, we -- there are enough stressed assets available in the market, which allow us to continue to improve our order book and turnover. So there is no reason for us to just focus on the digit projects because there are enough opportunities in the secondary market also to pick up.

So coming to the stress project that you mentioned this SL project. We have taken it at -- there's no haircut on the debt, right, in that project at least this -- as is basis, right?

So there is no haircut on the debt. There is a haircut on the equity.

Okay. And so just taking this forward, basically, we are talking about INR 300 crores revenue from that project, and it's a INR 2,100 crores project. So -- and possibly about 11 years, right? So what kind of IRR? Because if I calculate just INR 300 crores also on a full year basis, that comes up to about INR 3,300 crores of revenue for the next 10 years or 11 years. And you have paid INR 2,100 crores in total, so that's about INR 1,400 -- INR 1,300 crores, INR 1,400 crores of incremental cash flow for us, am I right in my understanding or?

I don't think we can do that maths so easily. Because there are 3 things that you need to understand that. For us, the project has in addition to the debt that has been taken out, the future project is valued only at about INR 1600 crores. Secondly, the traffic also grows as the time evolves. And there is a WPI CPI-linked increase in the revenue as well. So to give you an idea, the project will -- we expect the project to have a 15% IRR post the completion.

But this INR 300 crores number is [ back to the same ] because there can be a downside risk to that as well, right?

See the -- this is the major artery into connecting the Northside to the Delhi. I don't think that this project has a risk of traffic. Nonetheless, there is a in-built security in the concession that in 2025, revenue will be seen. And if the traffic is below a particular set point, the concession period will be extended accordingly. So there is a inherent contingent measure given in the concession. So there is not a risk in terms of any revenue loss.

Fair enough. And on this oil and gas side, when can we expect the revenues to flow in towards the P&L and what kind of initial estimates do we [indiscernible]

So all in that...

Sir, sorry to interrupt, your voice is not so clear. May I request to repeat the question once again?

Yes. Is it clear now?

A little bit.

Yes. Hello...

Yes, go ahead, sir, much better. Thank you.

Yes. Just wanted to know on this oil and gas front, what can be the revenue -- first year revenue? And when can we expect the revenues to flow in?

So one step at a time would be my guidance on oil and gas. So first, we need to do these 2 wells to convert the resources to reserves. Which is what we are trying to do, and we will be knowing the results by March of '21. We planned it 3 months on, but for the COVID situation, we -- the whole program is deferred by 6 months because COVID and then thereafter the monsoon. So we could not have spud our well during this phase. So the gas reserves, as I said, are about 0.9 Tcf or 900 Bcf. Now in terms of the 900 Bcf at about $4 [ MMS CMD ]. The evaluation of the resources will be somewhere close to something like about INR 6,000 crores. So that's what the numbers are. So numbers are huge. I don't want to give any false expectation here. So one small step at a time would be my suggestion. And we would want to first convert the resources into reserve. And once the reserves are proven, then we would want to convert them into the revenue and the return expectation. However, I would want to add that given what we know about these blocks, we are reasonably confident that not only the current investment but also the past investments are -- and the most likely situation secure.

Sorry to interrupt you, Mr. Parekh. We will request you to come back in the question queue for a follow-up question. Next question is from the line of Rohit from Antique?

Hello, am I audible?

Yes, yes. Please go ahead.

Sure, sure. Sir, I had this -- you talked about some divestments or maybe value unlocking mechanism that in the initial remarks. I understand that Delhi-Meerut is probably one of those assets that becomes prequalified. But we also understand that this sector is facing some headwinds in terms of the returns of all these HAM projects which are linked to bank rate worth 300 basis point. And they are currently lower than typically the project debt cost. So would it impact the valuation? What is your observation on that?

Akhil, would you want to take it? Or would you -- do you want me to take?

So -- no. Sandeep, that's -- yes, I can. No, you're right, absolutely. The sharp fall in the bank rate which has been driven by the government's response towards this COVID in the last 2 announcements that the government has made, has been quite sharp. In fact, before that, our NHAI cost was around 8.4%. I mean the revenue that we would collect from NHAI was 8.4%, and our borrowing cost was around 8.5% for the Delhi-Meerut. So we were almost at par, in line with what was there. Now of course, since the 2 announcements that had been made, which has been 75 bps and 40 bps, naturally, this 115 bps reduction has not been something that the lenders had been able to pass on. Maybe they have passed on like 30, 40 bps. So there is a 75 bps difference which has got created because of this sharper fall. And we are aware of this, and we are in discussion with the lenders to sort out this issue. But I think in the projects where there is a right bidding and the right O&M cost, which has been accounted for, and I'm sure this gap that you're seeing today will not remain like a gap forever because ultimately, the interest will correct for itself. And it will start reflecting with a certain time lag effect, this margin. We believe that at any point of time, our bank rate, equivalent of NHAI and our lending rate, will be more or less a few, maybe to 25 basis point here and there to each other. Anything over and above that would be a little artificial, which, in our opinion at least, will be corrected shortly. And we are anywhere talking with the bank for the refinancing and to kind of this thing to reduce their interest rates. So I believe that till that is done, there is a bit of an anomaly. But as I mentioned, at least in our mind, this is a little temporary. Sandeep, you want to add on something to this?

No. I think the other thing that I would want to add is, is government is fully aware of the situation and they are also trying to find solutions. Because this is not a company-wide, but a countrywide issue. And there are a lot, many HAM players, almost INR 150,000 crores of the orders are ongoing. And I think the resolution is likely to take place soon.

Sir, my question is more on the -- when you sit with the new buyer, would you be resetting your expectations in terms of valuation? Or would you want to stick to at some premium to the invested amount that you were seeking for? How is that approach from a management perspective that you have?

So if you put it in the perspective, even we are industry people and the buyers are industry people, both are aware that this anomalous situation is not going to continue for a long time, something is going to correct. So both are taking a cautious approach of reconciliation rather than terrestrial and standing on those. So the deal has to be done, therefore these will take. And I don't think any substantive value erosion will take place in terms of risk as everybody takes a long view on it, rather than not immediate, right now, right here view.

I understand, sir. Sir, now coming to this project, labor availability, we have been hearing that is a major challenge. I also learned that you have given some PCOD targets for some of the projects. But sir, what is the labor availability in some of these critical projects, especially Aunta-Simaria, AM2? Or how is the tackling these labor issues as of now? Do you face such an issue?

So everybody is facing the country-wide that there is a labor migration taking place. We expect the labor migration to be taking place for next few months. How will it stabilize? As I said Q1 is going to be a bit of a challenge. So I expect the operating manpower availability to be in anywhere between 35% to 50% on project sites. However, post the monsoon, I expect the complete workforce to be back on all project sites. So this is going to be a phenomenon that we will face this quarter and most probably in some portion of the next quarter.

Okay, sir. And sir, I've heard something on oil and gas, especially, we have been hearing about this pricing of natural gas has come down drastically. What is the breakeven price that you would require in your fields in comparison to what is prevailing in the market? Is there an impairment of this asset risk that you see? Or how exactly is that the IRRs work out over there?

So let me answer this question in twofold that is the gas pricing, current gas pricing causing a concern to us, the answer is, no. Because what it means is that our cost of doing the [ gas sol ] gets get reduced. Because the industry can support us. In any case, we too are a very low-cost base validity of project. So we have abilities of the projects at core dollar [indiscernible], the pricing...

Sir, sorry to interrupt you.

Sorry.

Sir, once again, we are losing the audio, sir.

So we are priced the cash at around $4, and we are pricing the liquids at $30 to establish our viability. So we do not see any viability issue. And there is under us if we see it's under our likely circumstances, irrespective of the gas pricing until and unless it becomes close to 0, which is unlikely to happen, the assets remain

[Operator Instructions] This question is from the line of [ Niral Shah from GP Holdings ].

3 questions. Firstly, on the acquired project, the BOT one, how much is the debt we are assuming? I mean from the takeover?

Yes. So the total project cost, the debt is in the range of INR 1,200 crores, out of which around INR 550 crores is already disbursed to the company. So we are taking over that INR 550 crores and the balance, INR 600 odd crores, INR 650 odd crores would be disbursed in line with the construction schedule of the company.

Got it. Sir, the second question is, independent engineer for GSY and CGRG we had given us some extension, and we were waiting for the final approval for that extension of consistent period -- construction period. So has that been approved and based on whatever the revised time lines are for completion, is there any likelihood of we receiving any early completion bonus?

So not really. There are no early completion bonus granted. The project is behind the agreed schedule of completion, no matter whether it is because of the delays by NHAI or otherwise. So it is not likely to be earning any early completion bonus. But we will complete before the revised schedule completion that is propose by the IE is what we'll be satisfied with.

Got it. And just the last question on the Aunta-Simaria execution. I mean till date, we have completed around 21%. Any particular issues or this project is facing for slow execution because last 3 quarters, I mean, we have been executing only 3% of the total project cost for quarter.

So let me put the issue in perspective. The project is primarily this project, and we are working only on the grid section of the project. So we did not get 48% of the land, which is holding us from doing the land portion of the works. So initially, if you look at it, this section you are only working on [indiscernible] of the foundation of the [indiscernible] progress is coming from old wells to be at [indiscernible] this project. However that full project...

Hello. Ladies and gentlemen, please stay connected. The line for the Chairperson dropped. Ladies and gentlemen, please be connected, while we join Mr. Garg back on the call. Ladies and gentlemen, thank you for your patience. We have Mr. Garg back to call.

So the challenge is because the road is not available for the Aunta-Simaria work to progress. The progress is only taking place on the Ganga Bridge. And since we are only working on foundation, the progress is going to be low. Once we start working on superstructure, the progress will pick up. We also expect the solution of the balance land to take place in the next 3, 4 months. So post the monsoon, we expect the full-fledged growth, a full-fledged progress to take place on the project.

[Operator Instructions] The next question is from the line of [ Ajay Gupta from JM Financial Limited ].

2 questions. You seem to have, after raising these NCDs of INR 375 crores. And hopefully, the preference says you will be having free cash of almost INR 450 crores to INR 500 crores. Some of it will be interest paying on the debentures. What is your plan for deploying this plus cash? Or what's the thought process going forward? And secondly, what's your guidance for FY '21 for revenues and percentage of operating profits?

Let me answer the question on the deployment first. So we have given the guidance of around INR 450 crores to INR 500 crores of the equity required in our ongoing projects, including the one that we have acquired. So INR 500 crores would be required there. In addition, just to keep the interest cost also under check, we would make sure that our CCs and CPs, which were nearly drawn in the range of INR 250 crores as on March are not drawn till the time we are able to deploy our funds more effectively. So the idea would be to super balance this deployment of the funds in the ongoing project, but at the same time, keeping the interest cost at check. And clearly, this gunpowder allows us to look at some viable meaningful projects, which are having decent project IRR as Sandeep mentioned for the Mukarba Chowk, which is in excess of 17%. So similar attempt would be there to acquire more projects and to see -- and of course, the bidding, as Mr. Garg mentioned that a lot of new biddings are happening while we're talking. So we won't be starved of capital or, I would say, the balance sheet strength, not to wound up...

Is there something under consideration that you're looking to acquire or nothing under consideration right now on negotiations?

At this venture, there is none. We are in the closing stage of this Mukarba thing, as Mr. Garg mentioned, we have just got the approval today with its final, final clearances. So to that extent, I think this is getting under the implementations zone very, very quickly. There's nothing that is under consideration immediately.

Okay. And on the second question, I would appreciate your guidance.

So in these trouble times, giving guidance is a bit of a challenging scenario on a year-on-year basis. Subject to 2 things, I would say that we do not hit any other roadblock like what we had in the COVID, which impact the complete planning of the work. And it's now these projects except for the date very close to June or July. We expect year-on-year growth of revenue of about 20%.

And EBITDA margins or operating margins?

Will remain in the guidance of 12% plus.

12% plus.

Next question is from the line of Prem Khurana from Anand Rathi Share & Stock Brokers.

2 questions from my side. So first one was essentially, I mean, somewhere in your comments, you spoke about a number of projects available on -- I mean inorganic growth opportunity, which is available in the market today. And essentially, I'm assuming and you are looking at 2 kind of assets. One is BOT toll what you're doing with Mukarba. And then, I mean, given the fact that we've been very active in -- on annuity side, so that would be the second asset class that you would want to have in your portfolio. But I think with both these assets, I mean there are some issues at this juncture. I mean with BOT you're facing, I mean essentially you have to take a call on traffic recovery? And on -- I mean, if it is hybrid annuity that you're looking at. Then you would have to take a call on whether the bank rate would may come back in the immediate future or whether you will get to see MCLR come down? So how do we intend to kind of approach inorganic growth? And is there any preference in terms of, I mean, which asset, would you -- I mean which asset kind would you prefer over the other side thing? I mean, essentially BOT over hybrid or hybrid over BOT?

So we are kindly -- kind of clearly in our mind that we are guided by what makes economic sense for us. So we -- given that is the returns expectation for both HAM and BOT are same, we possibly will refer in sand project. However, the returns from the BOT project, [indiscernible] are effectively higher. So it depends upon what are the kinds of returns that we are looking at. We are absolutely a risk and reward balanced company. So I can't give you a general answer here. However, our return expectations for the 2 models are different, and that's what we factor in when we pick up a job. So as long as those jobs will meet the threshold, which we have a specific model, we would be looking at both these model projects. We also -- I also would want to add here that, as we said, that the water side of the business, we are looking at EPC in any case. So we are not ever as to -- we are not -- we maybe preferring a hand project. But we are agnostic to model. What we are really clearly focused is a risk-reward return equation, and that's what works for us, we go for that.

Sure. No, basically, what I wanted to understand was, I mean, in your thought process, which is easier to predict. I mean the traffic growth is the easier project? Or I mean, taking a call on bank rate recovering or MCRR coming on is easier?

So see, we factor all these risks into our risk model and take that considered view, both our risks, both are had to -- to be factored in. And there is a cost of mitigating them or pricing them in.

Sure. And just one small clarification on this Mukarba Chowk - Panipat project. So you gave us a total cost of around INR 2,100 odd crores, and the debt number was quoted at around INR 1,200 odd crores, which leaves me with a number of around INR 900 crores. And this INR 200 odd crores of money, which is supposed to come from the government authority, right? I mean in the form of grant. So -- which is -- there's a gap of around INR 700 crores. So INR 200 crores is what you're planning to infuse. So is it fair to assume that the INR 500 crores was the equity that was infused by the earlier concessioner and he's taking a haircut of around INR 500 odd crore?

So I don't remember the exact number, Akhil, would you want to say how much of it is equity infusion?

Yes. So INR 200 crores would be the pure equity infusion. And then, of course, the INR 200 crores, INR 188 crore would be the grant number that he had mentioned. Then there would be some -- INR 1,200 crores is a main debt, and there would be some subordinate debt also which the company is in the process of tying up. So I think from that angle, there has been a write-down on the equity, as Mr. Garg mentioned on the asset side also. So the balance work left is nearly around INR 1,100 crores, INR 1,200 crores of EPC, is what we are focusing on.

So besides INR 200 crores, you would also be required to infuse some sub debt, am I right in my understanding?

Yes, we are in the process of tying up with some of the lenders because we have just taken over this project and because clearly, the economics of the project supports the subordinate debt provisions as well. And there's no bar by the existing lenders or by NHAI to take over the subordinate debt. So normally in a BOT project, one can go up to 80/20 or at least 75/25, it's not 80/20, at least 75/25 of the debt equity. So there are a lot of possibilities to recapitalize the company.

So just a small clarification on this, sir. Essentially, I mean, the project cost is still the same. I mean the project has already seen more than 2 years of delay. But it is still INR 2,100 odd crores, which is what people used to quote earlier as well. So does it mean, I mean there's no cost escalation that we've seen over the last 2 years or for the delay period? Or this is the original cost, and it could go under revision, I mean, you are still in the process to kind of do these numbers?

So let me take this question. So the forecasting of the EPC project of INR 1,100 crores plus GST is the current forecast of completion, not the historical cost of competition.

Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments.

Thank you. So once again, I would want to say that at [ WL ], we continue our journey of operational excellence, and our current portfolio stands at about INR 10,600 crores. We -- as a company remain focused on value unlocking through recycling of capital. Our focus is shareholder value creation. Currently, we are going through an unprecedented situation and I thank all the shareholders for standing by us through this difficult time, these challenging and uncertain times. These are -- sorry, these are challenging and uncertain times, but we feel confident that as a company and community, we can get through this together. Thank you for your -- participating in this call. And for any further questions or queries, you may get in touch with the Investor Relations team. And I wish you all a safe time and be safe, be healthy. Thanks once again.

Thank you very much. On behalf of Welspun Enterprises Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.