Welspun Enterprises Limited (WELENT) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Welspun Enterprises Q2 FY '21 Earnings Conference Call, hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from DAM Capital Advisors Limited. Thank you, and over to you, sir.

Thank you, Lizan. On behalf of DAM Capital, we welcome you to the Q2 FY '21 earnings call for Welspun Enterprises. We have with us Mr. Sandeep Garg, Mr. Ved Mani Tiwari, Mr. Kevin Daftary from Welspun Enterprises. So without much ado, I'll hand over the call to the top senior management. Over to you, sirs.

Thank you. Good day, ladies and gentlemen. On behalf of Welspun Enterprises Limited, I welcome you all for Q2 FY '21 results con call. I hope that for you, your family and colleagues are all well and are continuing to take the necessary safety precautions. On this call, from my -- from the management side, we have myself, Mr. Sridhar Narasimhan and Mr. Ved Mani Tiwari. I believe you would have already gone through the financial results published yesterday. Before we go into the details for this quarter, let me quickly start with recent developments. This quarter has had 2 major milestones. The first being achievement of PCOD for our projects, Chutmalpur-Ganeshpur and Roorkee-Chutmalpur-Gagalheri HAM projects. We also received appointed date for HAM project, Sattanathapuram-Nagapattinam, worth INR 2,004 crores as a bid price project cost. Meanwhile, to assure you, we, at Welspun, are taking extreme caution and highest standards of hygiene and safety and are being practiced not only at our headquarters but also across all our sites and locations. We are also taking utmost effort and precautions to create awareness to protect our employees from the pandemic of COVID-19. We are also following the guidelines as per the central and respective state governments with respect to attendance at office and policies for safety and well-being of our employees. Now with these words, I would want to move on to the operational performance. At our various locations across various sites, our current manpower is ranging in the range of about 80% to 85%. In the July to September quarter, labor availability has been in the range of about 70% or there around. Our revenue in Q2 FY '21 is up 7% year-on-year and EBITDA margin is at 13.9%. Our revenue in H1 FY '21 is down by 39% year-on-year, mainly due to Q1 FY '21 numbers, which were affected by COVID and hence are not comparable. In spite of this, we have maintained our EBITDA margin at about 14.3%. I would now like to update the investors on our current project portfolio for roads. As you know, our current HAM portfolio stands at 7 projects, totaling to an approximate value of about INR 10,000 crores. In addition, we have a BOT project valued at about INR 2,100 crores. So approximate portfolio of road stands at about INR 12,000 crores. The current order book, which is unexecuted, stands at about INR 4,370 crores. Now coming to specific projects. The first project that we completed was Delhi-Meerut Expressway Package 1, which was completed in the month of July -- June '18 and the last -- or the fourth annuity was received in July 2020. As you know, the project is -- has an annuity phase of 15 years, out of which 2 years have elapsed. We have bridged the -- brought down the borrowing costs, and the current borrowing cost of the project stands at about 7.8%, which is almost close to the revenue that -- or the interest that we get from NHAI, which is bank rate plus 3%. We also -- the next project that I would want to talk about is the Chutmalpur-Ganeshpur and Roorkee-Chutmalpur-Gagalheri, or CGRG, project. We received the PCOD for the project on 5th of August 2020, and we are working for it to get our COD as soon as the obligations are completed by NHAI with respect to the balance of works and the change of scope. The third project that I would want to talk about is, Gagalheri-Saharanpur-Yamunanagar project, or GSY. The physical progress at the end of the Q2 FY '21 stands at 98%, and we are expecting its PCOD anytime now. As to the best of our knowledge, the independent engineer has recommended to NHAI for issuance of PCOD and only the formalities are balance to issue the PCOD. The third (sic) [ fourth ] project that I would want to talk about is the AM2 or Amravati project in Maharashtra, which is a PWD project. We have completed the physical progress of about 71% at the end of Q2 FY '21, and we are targeting to achieve the PCOD for this project in this current calendar year. The next project that I would want to talk about is Chikhali-Tarsod, which is an NHAI project in Maharashtra. We have completed 56% progress at the end of Q2 FY '21, and we are likely to achieve the PCOD for this project during the current financial year. So out of these projects, we expect all these 5 projects to become operational within this financial year. So approximately, INR 6,200 crores value of HAM portfolio out of INR 10,000 crores would be complete within this financial year. Coming to the balance portfolio. The other project is Aunta-Simaria in Bihar. As most of you know that this time, Ganga was in spate much earlier than expected, and it started rising from middle of June. And this being primarily a bridge project where we are working, the -- there has been almost insignificant progress on the project for the Q2 FY '21. The other project that I would want to talk about in the road portfolio is the Sattanathapuram-Nagapattinam, which is in Tamil Nadu. After a long wait, we finally received the appointed date for the project on 5th of October 2020. There was a change in the scheme that was finally acceptable to NHAI. They changed the configuration of the road from for 4-lane main carriageway and 6-lane structure to 4-lane carriageway and 4-lane structures, and this resulted in slight reduction in the civil cost, and we expect the BPC because of this to change in the range of INR 100 crores to INR 150 crores with a proportionate reduction in civil cost for -- as our cost to execute the project. On this reduced width, the NHAI handed over at the appointed date a land of about 29.4 kilometers, or 52.71% as against the requirement of 80%. We expect the -- another 6.1 kilometer to be -- or 10.9% to be handed over to us by 30th of November. And the additional 6.3 kilometers or 11.4% by 31st of December 2020. To meet the mark of 80%, we expect about 4.85 kilometers to be handed over by NHAI by 15th of January 2020 (sic) [January 2021]. Out of the 55.75 kilometer length we expect by 15th of January to have 83.7% or 46.67% land. This project is very important in terms of its value. So it is one of the largest projects in HAM project -- HAM model for the company. And we expect it to start giving the revenue generation in the Q4 of the current financial year. We have -- as you know, we acquired a BOT toll project from Essel through a harmonious substitution route, which became the concessioner, which is the first harmonious substitution completed by NHAI. The total project cost was estimated as INR 2,122 crores, out of which INR 1,593 crores is expected to be completed by us. The project is fully financed. And the order book for the company, that is Welspun Enterprises, stands at about INR 1,100 crores. The physical progress of this project at the end of Q2 FY '21 stands at 53%. And we expect to achieve the PCOD of -- it will be our endeavor to achieve the PCOD for this project in the financial year 2021. As you know that once we achieve the PCOD, we will be entitled to proportionate tolling of the project. Now coming to water infra. The other project that -- the major project that we have is the Dewas Water project, which supplies water to the industrial units of Dewas. The commercial operation for the project became -- began on 30th of April 2019. The revenue for the project stands at INR 4.7 crores and EBITDA of INR 2.3 crores. I would now want to cover the Oil & Gas sector. There are 4 relevant projects or 4 relevant fields. The first being the Kutch block or GK1 block. ONGC is the operator for that particular block, and we are owning 25% PI on the block. And ONGC is in process of developing the field development plan for the project, which is getting delayed because of the COVID situation. The other project, which is a substantial 100% owned by Adani Welspun, which is a joint venture between Adani and Welspun Enterprises, is the Mumbai Block or MB/OSN/2005/2 block. We expect the Phase 2 exploration starting before end of November 2020. The one well that we plan to drill, we start -- we plan to start its drilling in a month from now. The other adjoining field to this block is the discovered small field called B9. We would drill 1 well in the B9 field post completion of the well in the Mumbai block. The overall GIIP for these blocks stands at about 0.9 Tcf on 100% basis, which has been not only estimated by our technical team but has been peer-reviewed as well. The ultimate recovery -- economic ultimate recovery from these blocks is expected to be about 70% of the GIIP. As you may recall, there's one more block, which is Palej block, which is oil-bearing block, but is under dispute. We are trying to -- we are continuing with our efforts to revive the block with Ministry of Petroleum and DGH. I would now want to move to the current outlook on the covering -- would want to cover the road. The current bids at the NHAI level are 34 for HAM and about 26 for EPC. So total 60 bids are out for bidding, totaling to about INR 50,000 crores give or take. And 2/3 of these bids are in HAM in value terms and about 1/3 in EPC. So the company is targeting to bid for these projects, both in HAM and also in EPC on a selective basis for the projects which will allow us to achieve our threshold returns. Apart from these NHAI bids, the company is also evaluating road projects at the state level in the states where the payments are not at risk. On a good note, I would also want to share with my investor community that the company has bidded for its first major projects in Nal se Jal scheme in Uttar Pradesh for opportunity in water segment totaling to about INR 2,000 crores. We expect that the water segment, what we are expecting the unfolding and opportunity in that sector has now started. The advantage of the scheme is that the substantial monies come from the central -- center rather than only relying upon state finances and the support is anything between 50% from the center to 100% of the center, depending upon the state and union territory. So we see a lot of opportunity going forward in this sector, and we expect to bid at least for about INR 5,000 crores of projects in the -- additional INR 5,000 crores projects in water sector this financial year. Being a strong and healthy cash flow balance sheet, we expect and are well positioned to do early financial closures of the projects that we win. We -- I assure you that the company will continue to pursue its asset-light model and continue to focus on operational excellence and prudent risk management. With this, I would now want to hand over the call to Mr. Sridhar Narasimhan, the CFO, for giving you the financial highlights. Over to you, Sridhar.

Thanks, Sandeep. Good afternoon, everyone. This has been a pretty satisfying and encouraging quarter. And as far as operations are concerned, we are close to the pre-COVID levels, as Sandeep explained. The revenues for the quarter -- revenue for the quarter was at INR 324 crores and operating EBITDA at INR 38 crores, which is 5% up from the corresponding previous quarter. EBITDA margin stood at 13.9% as against 15.2% in the previous quarter. Cash PAT at INR 35 crores for the quarter. And the company has adequate cash to fund the future equity requirements for the ongoing projects and in the purchasing pipeline. The long-term loans are adequately supported by the current assets. And as we speak, we have our entire working capital undrawn, which gives an additional flexibility to the company in terms of its liquidity position. With these words, I suggest that we move to the question-and-answer session and would want to hear from the investors what they would want to know from us.

[Operator Instructions] The first question is from the line of Rohit Natarajan from Antique.

Sir, my question is more to do with that the first half has gone through and we still have deliverability at 80% to 85%. What will be the revenue guidance at this juncture for FY '21? And would you want to hold on to the EBITDA margin guidance too as well?

Thanks, Rohit, for this question. I -- to answer your question short, yes, we are holding on to our guidance on both revenue and the EBITDA margins.

Okay. Sir, my next question will be more on to the -- a long-term outlook. If I have to look at numbers from FY '23 perspective, you have hinted that you're looking at a very good traction of order inflow for this particular year. Can you talk about any guidance of order inflow part, especially on the road segment because we see that there is a lot of lag in terms of when you get the order and when it starts the construction. What exactly is the quantum over there in OI for order inflow part so that you have a sustainable revenue coming in FY '23 onwards, something of that sort?

So Rohit, to answer your question, there are two-pronged approach that the company is taking. We recognize that the HAM and the BOT projects, there is a lag between the order won to order conversion and execution. So we have started looking at strategic opportunities in EPC's place as well, which get converted into revenue generation quickly. So that is one aspect that the company has responded to the current opportunities. The second is that even with the current order book on the road, we have a clear visibility of 2 years of revenue, which is forecasted, so which is a healthy situation, wherein there is no time lag per se, as you say. So I think the company has responded in 2 ways to the situation of a lag between order won to order conversion to revenue.

Sure, sir. I appreciate that part. Sir, more to do with the cash position, I understand the gross cash position is robust enough. But when you look at from that net debt -- net cash position, that has actually a little bit stretched a bit. What exactly is the outlook over there? I understand you have some plans to sell off the assets once you get the PCOD in place. Are there any talks that is going on? What stage are we in, in terms of asset monetization?

So as I have been saying, we will be going -- taking a portfolio approach towards asset monetization. We believe that once we have the PCODs and the CODs of these balanced projects that we expect to come on within this financial year, that will be the most opportune time to create a portfolio and talk about investor interest at that -- in these projects. However, to liquidate our equity, we do an interim stage of refinancing the projects once they have achieved the PCOD and draw the additional debt, which we can draw because we don't draw the full debt during the construction phase, which allows us approximately 30% to 50% of our equity return immediately. And thereafter, we wait for the portfolio to build up and liquidate the portfolio. We followed the same principle in Delhi-Meerut, and we expect to follow the same in the balance projects which are getting completed.

Sure, sir. And finally, if I may, I just have the question on Sattanathapuram project. The descoping or that portion which was supposed to be removed from the order backlog, has it been done? Is that being considered when you talk about the current order backlog?

That is correct. We have factored that.

[Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital Advisors Limited.

Congratulations on the better run rate in the Q2 FY '21. Sir, my first question is on the water segment. You said that you are participating in the Uttar -- in the UP Jal Jeevan opportunities. And this -- I believe this all these tenders were bid out somewhere in May -- April, May and June. Is that right? And secondly, do you see any further opportunities in the Jal Jeevan in the JJM across the country because we haven't seen any other state coming out with the tenders in JJM apart from Uttar Pradesh?

Thanks for the question, Mohit. These -- the projects that I referred to are the Nal se Jal scheme in Uttar Pradesh. This is a large plant that Uttar Pradesh has come up with. And it is as recent as yesterday that the bids went out. So it is not that you may -- episode that we are talking about. So Uttar Pradesh has come up with that. If you look at currently, Rajasthan is already in the process. The second is, if you see, Maharashtra has already started the empanelment of advisers for similar schemes. So these schemes practically will be spread all over the country because this is a quick measure -- method of making the water available to the villages for household purposes. I think it has taken a bit of a time to -- for the center and the state to configure the way these projects are going to be done because these are going to be large projects. But, however, I think these issues have been settled, and we see a lot of such opportunities coming in a very quick succession from now.

Okay. Secondly, on the Mukarba Chowk-Panipat project, I think -- have you started execution? And what kind of run rate you're expecting in H2 FY '21? And what kind of run rate you're expecting in FY '22? And is there any case for extending the concession agreement? Or this extension is primarily linked to the traffic? Or is there something on the -- given the delay and everything, is there something on the block to extend the concession agreement?

So to answer the question on Panipat-Mukarba Chowk, the project is in full swing execution as we speak, and we expect the PCOD level execution to be achieved within this financial year. So from 53%, we will quickly reach to a level of 75% plus of the land available so as to be able to get the PCOD. So that's #1 question -- answer to you. In terms of the extension, yes, there is a provision on the contract which measures its traffic at the 2025. And based on this, the project can have an extension of up to 25% of the total contract period due to traffic variations. So this will only be determined when the actual traffic is measured for over a period of 3 years and average traffic flow seen. So that is as far as the extension is concerned. Yes, there are reasons of extension on the project, which are obviously due to COVID, which is the case in every BOT project, which is already an announced policy by the government. So that is another reason of extension that we see of the collection toll period -- of collection of toll period. Am I -- have I answered your question, Mohit?

Yes, sir. And I look for the kind of run rate which can generate -- which can come to us on a quarterly basis going forward for our P&L.

So there will be -- we expect, at least -- if we have to hit the PCOD in the Q3, we expect it to be at least every quarter anything between 18% to 20% to reach from 53% to 75% plus. So we expect the promise to be in the range of 15% to 20% on a quarter-to-quarter basis.

Understood, sir. And sir, thirdly, on the Sattanathapuram-Nagapattinam, have you started the talk on the financial closure of the project? And what kind of rates are possible? And linked to that question is, so there was a talk with -- from the industry of linking the -- removing the bank rate, linking the payment to the MCLR or some of the SBI bank rate -- SBI base rate. Has there been any progress? Do you expect it to happen? Or do you think this is still not applied retrospectively, it will apply only prospectively?

So it's a very tricky question, but I will answer the easier portion of it quickly. The easier portion of the SNRP is the project is totally financially tied up. So there is no financial tie-up required for the project. So it's totally financially tied up. So we have no problem in starting the project and completing the project. Now coming to the question of bank rate, whether it will be done prospectively, retrospectively or will it happen? The answer is the industry is really pushing it for applying it to both prospective and retrospective projects. How the government will deal with it is something that only the government knows, but the industry is definitely pressing very hard. And hopefully, the government will respond positively because the government has been responding to the industry challenges across board, not only for infrastructure in a positive manner to -- because this reduction in bank rate is primarily because of its response to COVID-19 situation and not a natural reduction in bank rate.

The next question is from the line of Sanjay Parekh from Nippon India Asset Management.

So you always followed a discipline of asset-light model with least working capital gurgling and being margin focused and executed projects on time. So this character is what we've adhered to in all our projects. So I just wanted -- the question is, the acquisitions that we did for Essel, and you did explain, but just a little bit on that. When you do these acquisitions, what sort of return thresholds do you keep in mind? Also, what recent bid that you submitted for the UP Jal se Nal? What sort of returns can we get there? Essentially, the question revolves around the discipline that we've maintained in all our HAM biddings. Also, are they better or within -- some of the projects that we are bidding in the water and the exploration projects.

So thanks, Sanjay. Interesting question, why did we acquire Essel project? And what is the return that we are expecting? So the rationale of acquiring the Essel project was that we are seeing a significant change taking place in the way NHAI or the North is looking at the toll projects. This project had a sufficient history of toll collection since it's a 6- to 8-laning project. And we could rely upon a reliable data point of the toll collection. The other reason was that this was partially completed and we saw a lot of upside on the project. The returns on the equity level was phenomenally high and it had a reasonable amount of equity so as to justify this investment. And it was a quick turnaround project. So to get into a project in -- somewhere in the month of June, July of a year and to be able to achieve a PCOD for the same in that same financial year is a very quick turnaround for the equity. There are prospective buyers and suitors for this project which have been approaching us, even prior to our entry. So there was a reasonable surety on its -- our ability to flip it at a reasonable number. And to answer your question, is the return expectation higher than the HAM returns? The answer is yes. It met a higher threshold than the HAM projects. So that's the rationale of our getting into the Essel project. In addition to that, it is a marquee project and it gives visibility across to the most important populace and a lot of people who get the brand value and there was a lot of suffering that was taking place for the people on that road, which I'm sure is going to be recognized by the authority and the people when you give them the relief. So these are the few of the rationales that we applied in addition to our normal return threshold. In terms of the water bid, it is an EPC bid. It is not an investment bid for the Nal se Jal scheme in UP. And it is pretty well funded by the center schemes. So we expect a same level of return that we would expect on hand sans our equity investment. So we are not an investor here. We are just returning -- taking a return on EPC. And whatever EPC margins we expect on our HAM projects is what we would be making in these projects as well. This is what our target is. Coming to the question of continuing to -- the discipline of bidding right and executing it better. I can assure you we will not -- these are our principles. These are not token of negotiations. These are the values that we live by. So we will continue to do so. All our decision makings will factor in 2 things for sure: Number one, am I going to be able to complete the project in time? And will I make the returns that I set up -- that I need to make to keep for my stakeholders? And can I derisk that return? So these principles will apply all across, Sanjay.

The next question is from the line of Nirav Shah from GeeCee Holdings.

Sir, few questions. Firstly, in your opening comments, you mentioned that you have selectively looked at EPC projects in the road segment. If you can just elaborate on that front, how competitive we can be in that space?

Okay. Nirav, it is a competitive landscape, for sure, and we will have -- to run the project, we will have to find ways of being competitive. We believe that the experience of about INR 10,000 crores worth of orders executed or under execution. We have found the way of doing these bids because we need to complete the projects before the HAM returns start to kick in. We have, over the last 3.5, 4 years, understood the way we can optimize the EPC cost. The competitive scenario will be the projects. The answer is only bids will tell us how competitive we are. But we definitely believe quantum of workaround -- or to be executed in the country, there will be select opportunities. And we don't need to -- I don't want to grow very big very soon. It will be a gradual buildup. The way we build up our HAM portfolio, similarly we will build up our EPC portfolio, if we get our pricing right. And should we not be able to find the right solutions and returns, we will look at adjacencies rather than getting to a model [indiscernible] in terms of our [indiscernible]

But it will remain an asset-light business, if at all?

It surely will remain asset light. We do not have the intent of becoming asset-heavy at any given point in time.

Sir, second question is, I mean, we are amongst the 15 players who have prequalified for the passenger train operations. So how are we looking at opportunities in that space per se? I mean what was the thought process behind bidding? And what is the outlook over there?

So railway, as you know, the worldwide it is known as they railroad. And passenger train is going to be a stable means of transportation. So the company enlarged its views to think about it that this is a new business that has personal advantage to anybody, the railway. So we decided to get into it. We believe that with our kind of balance sheets and our kind of thought process in terms of looking at infra space, this could become a stable business line, and hence went into the prequalification of this bid. We do generally believe that there is value to be made there. However, this is of more detailing whether we will bid at point, so we will bid, et cetera, et cetera, which is -- it is too early to predict that. And it will also be determined by the stakeholders that come along with us in this journey of looking at privatization of railways. But I think our journey has begun on the railway side which will -- which has started with the stations, now the rails or the means of transportation. I think the journey has begun, and we wanted to be having a first-mover advantage to try and see if this is synergistic to our current portfolio and can we make a dent and create a business line which is -- meets return expectations we prequalified.

Got it, sir. And just a last question or clarification. I mean you mentioned that the revenue booking from the Tamil Nadu project will start from 4Q onwards?

That is correct.

So we'll reach the threshold -- I mean have we started to work over there?

So we were already mobilized on SNRP. We had done some work during the developmental phase before the situation of court case happened. We had started some work on developmental phase of the project. So we are fully mobilized on that. So we are taking over the land. However, at this point in time, due to COVID and other situations, we expect the extension of time to be granted by the client, primarily because of the reason of COVID and the design that is required to accommodate the request of changing the structures from 6-lane to 4-lane. So we expect anything between 3 to 6 months of extension being granted by the NHAI. And post the monsoon and these minor changes to the project being agreed between the parties, we expect the revenues to start from Q4 of FY '21.

Got it. And sir, just -- I mean what is the guidance? I mean it's 15% to 20%? Or you can just update that?

The guidance is approximately 15% of revenue growth for -- between FY '20 to FY '21.

The next question is from the line of [Sagar Parekh] from [OneUp Finance.]

My question is on the Oil & Gas business. So till now, how much have we invested in total in the Oil & Gas segment?

So in terms of our investment -- would you want to take it or should I take it?

Please take it.

So approximately -- on book is approximately INR 250 crores at this point in time towards Oil & Gas investments.

But that is on the book. We would have written off a lot of things. So broadly, if I have to look at the cash flow, how much cash would have gone into Oil & Gas business?

So in terms of our total investment, it would be standing somewhere around INR 500 crores, out of which about INR 250 crores is written off already, is possibly where we are.

And another INR 100 crores is mentioned in the press release that is yet to be invested in Oil & Gas.

Yes, that is correct.

So basically, INR 600 crores is the total investment that we would have made by the end of this financial year in Oil & Gas, and there is no sign of revenue or -- forget about profitability, but no sign of revenue. So in terms of capital allocation, this comes out as a concern. It's been almost 4, 5 years that we have been investing in Oil & Gas. And there is no sign of return coming our way. So what is our thought process here? And how should we look at this business going forward? And when should we expect the first line of revenue to come through?

Sagar, as you know, Oil & Gas is a long gestation period, the E&P. So I haven't seen any company achieve from the exploration phase to a revenue in less than 7 to 8 years. So that's a normal business cycle that you look at because just to tell you how the Oil & Gas works is that you first bid out for the project, Then you do the assessment studies for the project, then you interpret those studies and find whether there is sufficient trust that there is a likelihood of finding the oil and gas. And based on that, then you plan for drilling plan, which gets approved with the DGH and ministry level. Then you plan for those wells, these are long-term planning and then you go ahead and execute. You establish the resources. Once the resources are established, then we go ahead and get those reserves certified. And then you do a field development plan and then that is when you start to get the revenue. So this is a normal cycle of Oil & Gas. So we are not any -- we are following the cycle that has happened. However, to answer your question short question -- in a short manner, our intent is to prove the reserves -- because we have invested substantial cash into the business, is to prove the reserves. And once the reserves are proven, try and monetize those fields or those resources by way of exiting the -- from a PI and make our returns of investment quickly enough so that -- we do not see us becoming a large enough player. And as a business house that we are, we want to stay in a situation in a particular field if we can be a large enough player on that particular share. So we -- our modus operandi for this business would be that we will exit the business by selling it to players who have a long-term view on it rather than going the full house or developing the fields ourselves. So that's where we are. So we will know a better position on these projects, both these 2 fields, that is the Mumbai block and B9, somewhere around -- we should complete the drilling by March and should have reasonable clarity on the resources available by June 2021.

So basically, FY '22 also, would we be seeing some incremental investments in Oil & Gas? Or like this INR 100 crore would be the peak and, let's say, this INR 600 crores that we have invested would be the peak investment that you would make in the Oil & Gas business?

So this is the peak investment that we expect to make in this Oil & Gas and then we expect the larger sales to take over because there is substantial resources in the block is our belief.

So FY '22, would we see any kind of monetization of any of the blocks, the 2 blocks that you mentioned?

Sagar, it would be premature on my part to say that FY '22, we will be exiting the business. But it is fair for me to say that '22, we will have the clarity as to how many resources we have in these 2 blocks. And we will start our attempt to engage with the players to see how best we can exit from those -- this business.

Okay. Fair enough. But at least we can hope that this INR 600 crores, there would not be any further capital going from our balance sheet to the Oil & Gas business?

We have no intention to invest more at this point in time in this business. As I said, we -- our intention is to exit and not to get deeper into it.

The next question is from the line of Rachit Kamath from Anand Rathi Shares and Stock Brokers.

Yes, hello? Is my voice audible?

Yes, you are perfectly audible. Yes.

Sure. Sir, asking, one of my first question is pertaining to the revenue guidance. Even a 15% kind of revenue guidance implies that in H2, we look at revenues of almost around INR 1,500-odd crores. So I just wanted to understand which all projects are we targeting for this INR 1,500 crores kind of revenues, if you can give me some kind of -- because given the fact that we're seeing that Sattanathapuram will only contribute from Q4 and not in Q3 like we could have expected. So just some color on that.

So the -- as I said, the balance projects that are 4 projects, we will achieve the PCOD or have achieved the PCOD. So 5 projects. So those projects will be almost complete or nearing completion in terms of their revenue. And there is substantial revenue to be earned from Amravati, the substantial revenue to be earned from Chikhali-Tarsod. And then we are -- we have a huge run rate, as I said to you, recently that from the Panipat -- Mukarba Chowk, so which is the full swing right now. So these 3 projects are going to be the drivers for the Q3. And Q4, I think the SNRP will start chugging in whilst Amravati will start falling off.

Okay. So sir, I think in this quarter, you've done almost all INR 120-odd crores from Mukarba Chowk. So can we expect around INR 300 crores kind of run rate -- INR 300 crores, INR 400 crores from next quarter onwards?

We definitely expect that.

Sorry, can I -- can you repeat.

We definitely expect that.

Yes. Sure, sure, sure. Sir, then one question is again, regarding the cash reserves that we have. We -- our cash reserves have fallen down almost around INR 267 crores this quarter. So just wanted to understand what were the exact outlays towards this? Is this mostly was equity infusion? And if so, what would have been the amount, like which project?

Rachit, Sridhar here. Yes, you're right. It's for the planned equity infusion into the project. And predominantly, it has been to the Mukarba project.

Okay, Mukarba Chowk. So I think that would be around INR 114 crores to Mukarba Chowk?

That's correct, yes, in that period.

Okay. Sure. And I think another INR 50 crores would have been towards your HAM projects because you guys give the quarter-on-quarter estimate requirement -- additional requirement. So when you do that. So I just wanted to understand Mukarba Chowk and this together comes from INR 160 crores. So what would have been the other INR 100 crores, sir?

No. Mukarba and HAM put together itself covers for the entire cash. And also, on the cash, we also had a debt of around INR 75 crores which was repaid. The CP has been repaid. From a net cash position, we are the same. But INR 75 crores was used for repayment of the CPOs.

Sure, sure, sure. I get that, sir. And sir, second thing is, sir, as consolidated gross debt, can you just give us the number for the consolidated gross debt assets because I think it would have shot up to almost INR 1,600 crores on account of acquisition of this asset?

That's correct. On a holding ratio, yes, it's around INR 1,600 crores is the gross debt.

That's all gross debt, right. And I think you would have already started booking revenues from the tolling -- we do the partial tolling because this is 6-lane to 8-lane project. So I think what would have been the revenue for the quarter, BOT collections?

So the current collection for only Haryana section is approximately INR 50 lakhs to INR 55 lakhs per day. We do not have an authentic information, but that's the information that we have available. However, since we will be adding Delhi section, the -- that particular section will also be added for our trolling purpose.

So this will be get added from March '21 onwards, like when we get the PCOD or how will that work, sir?

We are entitled to collect the toll on the proportionate basis for the length of road that we have completed from the PCOD date.

Sure. And sir, one last question will be on this water project that we say is INR 2,000 crores. So we are sole bidder of this project versus I think the bids are not opened at these. So we just bid for this project, right?

We have just bid for this project and only today, the bids have -- it's -- technical bids have opened. There are -- in most of the projects that we have bidded, there are 5 to 6 bidders that is there. But the work is substantial. And the other reason is that it is not an NL1 bid concept. It is also a concept which within L1 bidder gets a particular portion of it and you can match the price of the L1 bidder and take the balance for despite not being L1 bidder. So this is concept of -- the way it is structured, it still allows you to take up the bid. It's not 0-sum -- 0-1 game. It is a shifting sliders game that plays in. The price is fixed at the L1 price level.

Okay. So let's say, if you bid, you will -- you're willing to match the L1's price. So how would -- how would you differentiate between the person who has come and now that you are coming to meet the advanced price?

So each person has a bid capacity, and they have bidded for the number of villages that they want in a particular revenue division. And there is a predeclared method how these villages will get allocated, how much maximum the L1 bidder will get and the balance villages will still be available to L2, L3 players.

And somewhat similar to our road margins like we do on our business we do somewhere around 11% to 12% kind of EPC margin. So this -- I mean on these projects will be 11% to 12%?

Yes, sure. For sure.

Sure. And then on -- so even on the road EPC projects, looking at -- we are looking at somewhere around 12% or we'll have to go a bit slightly lower because given the fact that CPCN tend to give out the entire work subcontracting, we would have to afford some margins to the subcontractor?

I think we don't lower our return expectation. We change our business models to make those returns. We don't change our return expectations. To us, return in the business is of critical importance.

Sure. So what kind of order inflow, I think -- would be the last question, I'm looking at you. What kind of order inflows are we expecting this year, sir?

So as I've been maintaining between water and road split between the 2 of them, I would want to win at least INR 3,000 crores plus orders in this financial year.

Okay. So this will be split of equal split or like some split like between water and roads?

I'm agnostic to the split as long as my returns are maintained.

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

Thank you, everyone. So it has been a very interesting quarter for the country and for the company. Welspun Enterprises continues on its journey of operational excellence on our portfolio of approximately INR 12,000 crores at this point in time. The company shall remain focused on value unlocking through recycling of capital. And I thank you all for joining me on this investor call. And should you have further questions or queries, please get in touch with our investor relationships team, which will be very happy to address any questions that you may have. Thank you, and good day.