Welspun Enterprises Limited (WELENT) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Welspun Enterprises Limited Q4 and Full Year FY 2021 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; and Mr. Akhil Jindal, Group CFO and Head Strategy. I would now like to hand the conference over to Mr. Mohit Kumar from DAM Capital Advisors Limited. Thank you. Over to you, sir.

Thank you, Malika. On behalf of DAM Capital, we welcome all the participants to the Q4 FY '21 and FY '21 earnings call for Welspun Enterprises. From the management side, we have with us Mr. Sandeep Garg, Managing Director and CEO; and Mr. Akhil Jindal, Group CFO and Head Strategy. We'll start with a brief update for the quarter and then proceed to the Q&A session. Over to you, sir.

Thank you, Mohit. Good day, ladies and gentlemen. On behalf of Welspun Enterprises, I welcome you all for Q4 and full FY [Technical Difficulty] results con call. I hope that you and your family are keeping well and taking very good care. On this call from management side, I have Mr. Akhil Jindal with me. As we continue to sail through these unprecedented times, we at Welspun are extremely cautious and are following higher standards of hygiene and safety. In order to create awareness and protect our employees, we have put in additional efforts and have implemented these across all our locations. I'm thankful to all our colleagues for rising to this challenge and ensuring business continuity. I am confident that these times will bring out new learnings and would shape us to emerge stronger and more resilient as an organization. Now I will cover the key business highlights, and later, Akhil will take over for the key financial highlights. Let me first begin with quickly recapping the recent developments. Welspun Enterprises has, through the process of harmonious substitution, agreed to take over a Hybrid Annuity Mode (sic) [ Hybrid Annuity Model ] Project, that is Six-Laning of existing Kozhikode Bypass road of NH-66. This is in the state of Kerala. And the existing concessioner is Calicut Expressway Private Limited. The proposal of Harmonious Substitution has been submitted by the existing concessioners to the lender and lender in turn have recommended the same to NHAI. As you all know, the proposed takeover is subject to the NHAI approval. To recap the details of the project, this project as originally built for a 28.4 kilometer length is approximately of INR 1,700 crores. The current estimated bid project cost due to price index escalation stands at about INR 1,900 crores, and the first year operation and maintenance is INR 6.3 crores. Our proposal is to take over this project in a wholly-owned subsidiary of the company. Coming to the other development of Varanasi-Aurangabad NH2 project, for which the company has entered into agreement with the concessioner to execute the procurement and construction works. The discussions between the concessioners and NHAI are in final stages for the descoping proposal and terms thereof. You would recall that this project is supposed to have a descoping to certain extent for the land, which is not available by NHAI. However, our current proposal is only for 136 kilometers of the road, for which ROW is completely available, out of the 192 kilometers, which is in total length for the project. The contract value for this 136-kilometer of the road stands at INR 2,366 crores, which is inclusive of GST. We expect the project construction to start somewhere in August '21 and is likely to be completed in 24 months. Further to the disclosure that we made in the Q3 FY '20 1 earnings call, I would want to brief about the water segment, which is a joint venture between Welspun Enterprises and Kaveri Infraprojects, the project that we had won in UP. The joint venture shares standing at 74% for Welspun Enterprises and 24% for Kaveri. The contracts have been entered into between the joint venture and the authority, which is the state water and sanitation mission department. And the expected value for EPC phase is INR 2,544 crores taken as INR 1 crore per village for the villages allotted to us. This excludes the O&M phase, which is for 10 years for this project, this estimate of our EPC contract, which is over and above this. The project's final value can only be determined once the detailed project report for these villages are submitted to the authority, and they are approved by the State Water and Sanitation Mission. So the DPR are supposed to be completed and the project in totality to be completed within 21 months from the award to 28 months from the award. And thereafter, the maintenance period will begin for 10 years. Updating you on the recent announcements from the joint venture, Adani Welspun, wherein Adani owns the 65% shares and the Welspun shares is 35%. The block B9, which is in the area of Tapti-Daman sector of Mumbai offshore. It -- just to recall, this project was a discovered small field. It was won by the entity in the discovered small field round one. In this block, ONGC had drilled 3 wells and declared it as a find. Out of these 3 wells, 2 produced approximately 10 million cubic feet gas per day during the testing. I would also want to say that this block is strategically located to the major blocks that we have, which we call Mumbai block or MB-OSN-2005/2, for which the commercial viability has already been -- potential commercial viability has already been declared by the company. In this B9 block, we have done the coring of the gas zone bearing portion. And this has been subjected to various advanced stage studies to ascertain the potential reservoirs of the field. The current estimate for this particular block that is gas initially in place, or GIIP, as they say, is expected to be about 85 billion cubic feet. With these 2 adjoining block, giving a GIIP of approximately 600 billion cubic feet, we plan to do a field development in a synergistic manner, which should improve the commercial viability of both the blocks. I would want to now talk about the order book as on March 31, 2021. Our current completed or under construction HAM portfolio stands at 7 projects, worth approximately INR 10,000 crores, out of which 3 -- worth INR 3,400 crores have achieved COD/PCOD, and others are in advanced stage of implementation. Additionally, we have 1 BOT project of INR 2,122 crores. The same is also in advanced stage of implementation, taking the total portfolio of PPP road projects to about INR 12,000 crores as on 12th March -- March 31, '21. In addition to the HAM and BOT portfolio of roads, we have 1 project on procurement and construction basis worth the contract value of INR 2,366 crores, including GST. As on March 31, 2021, the EPC order book stands at INR 8,437 crores which includes INR 5,983 crores of road and INR 2,544 crores in water segment. This order book excludes the Kerala project, which we have proposed to take over through the route of harmonious substitution as the agreements are still not in place. This order book gives us the visibility of revenue for the next 2 to 3 years. Now I would want to cover the specific road and water projects. Delhi-Meerut Expressway package 1. The project has received a swift annuity in January 2021 within the stipulated time. We have refinanced the project with a top-up loan of INR 65 crores, and the present effective rate of debt is 7.82% per annum. The other project, Chutmalpur-Ganeshpur and Roorkee-Chutmalpur-Gagalheri, which we call CGRG, this project received the PCOD on August 5, 2020, and the first annuity has been received. This project also has been refinanced at a very fine rate of 7.75% per annum with a top-up loan of INR 58 crores. Coming to the third completed project, Gagalheri-Saharanpur-Yamunanagar, or GSY, project. This project received its PCOD on October 31, 2020 and has received its first annuity in -- on a timely manner. The project is also refinanced at the rate of 7.75% per annum with a top-up loan of INR 63 crores. Coming to the under construction projects, the package AM2 or Maharashtra Amravati project from PWD. The physical progress for this project is about 79% at the end of Q4 FY '21. Payment for the -- from Maharashtra PWD has been received for the third milestone in complete. We have also built for the fourth milestone of the project. However, part payment there against has been received from the client. Coming to the Chikhali-Tarsod Road project, or CTHPL, as we say. The project is right now 83% complete at the end of Q4 FY '21. And the payment for fourth milestone has been received from the client, that is NHAI. The third road project under construction is the Aunta-Simaria Road project, or ASRP. The physical progress for this project is about 26% at the end of Q4 FY '21. And we have received all payments in a progressive manner under Atmanirbhar Bharat scheme on a monthly basis. The last project -- HAM project under construction, Sattanathapuram-Nagapattinam, or SNRP, as we call it. The project received an appointed date on October 5, 2020. As you would recall that the project change the -- authority changed the construction of the configuration of the project. It was changed from a 4-lane road and a 4-lane structure from the existing or the proposed -- or the earlier bidded 4-lane road and 16-lane structure. The -- as we anticipated last time that the negative change order could be in the range of about INR 100 crores plus. However, happy to inform that the change order -- negative change order for this change in configuration as has been estimated and recommended by IE is INR 29 crores. Thus, the big project cost, which was INR 2004.5 crores is now approximately INR 1,976 crores at the base value. The -- for this project, the first installment of mobilization advance has been received and the second mobilization advance payment is under progress. Coming to the only BOT project that is Mukarba Chowk-Panipat Road project or MCRP (sic) [ MCP ], as we call it. The project is physically complete by 71% by the end of Q4 FY '21. Talking about water infra. I would once first want to cover the Dewas Water project. The projects started its commercial operations at the end of April 2019. In FY '21, these revenue stands at about INR 10.3 crores with EBITDA of INR 5.3 crores. In this project, both revenue and EBITDA have taken heads impact due to extremely low take off by industrial clients, which are facing lockdown or are stressed due to inactivity due to pandemic. Coming to the outlook. Outlook in the road projects seems to be healthy. The HAM projects of NHAI are about 27 to be bidded at this point in time with an approximate value of INR 31,000 crores. We will continue to selectively bid for these projects, whilst preserving our threshold return expectations. Apart from NHAI, Welspun Enterprises is also evaluating road HAM projects of state and municipalities, municipal agencies provided, those are healthy states or municipal corporations. We are also selectively bidding for EPC and BOT toll projects. And when I say selectively, it has to meet our return threshold requirements and should be value-accretive for the business line that we have. On the water segment, the Jal Shakti Ministry's Har Ghar Nal se Jal scheme is providing -- scheme of providing drinking water access to all by 2024, is expected to result in an opportunity of INR 60,000 crores over the next 4 years. As a company, we will continue to actively focus these projects. Company is also looking at adjacency in railways to diversify its offerings. We will continue to explore inorganic growth opportunities through a measured risk return parameters evaluation. As a company, Welspun Enterprises is well positioned for early financial closures of new projects won, given its healthy balance sheet and cash position. The company will continue to pursue the asset-light model while focusing on operational excellence and prudent risk management. With this, I would hand over the call to Mr. Akhil Jindal for financial highlights. Thank you.

Yes. Thank you, Sandeep. And this was a very elaborate commentary on each and every point. So good morning, everyone. Clearly, the numbers which have come through late last night. I don't know how many people got a chance to go through it. But just as a quick summary, the revenue in the last quarter, which is Q4 FY '21, was around INR 505 crore. This was up -- though up by 24% on a Q-o-Q basis and a 12% on a Y-o-Y basis, but clearly, as Sandeep mentioned, we got severely handicapped due to various reasons, so these numbers could have been much better. And FY '21 revenue is, of course, INR 1,410 crores. We expect that going forward, all of this -- the revenue which has been deferred to the next quarters and the next year, we would be able to make good for them. And clearly, because of the agitation, Kisan rally and NGT ban in the Northern India, Delhi region, there has been a setback on the order book -- I mean, on the order execution. Also, we have been developing a healthy order book position, which would mean that a lot of visibility on the future revenues are something that we can probably say are now available to the company. And in that sense, going forward, the revenue numbers would be expected to be far more better. The operating EBITDA in the quarter 4 was INR 70 crores, which is marginally up on a Y-o-Y basis, 15%. But good thing is that we have been moving around our guided number of 12% to 13% on the EBITDA side. And this quarter, we had done a little better at 13.9%. But again, 12% to 13% EBITDA is something that we have been focused on. So it is a profitable growth that the company is promising and trying to deliver. And in that sense, though there has been a setback on our execution front, but clearly, the EBITDA was not compromised, and this will be the trend continuing going forward. That is INR 43 crores for -- the cash paid is INR 43 crores for the Q4 and INR 130 crores for the entire year. Now of course, all of this cash gets very deployed in the business. So this is 1 number that we very, very carefully track. And as I mentioned, as the revenue line becomes a higher and higher, the cash spread will also become higher and higher going forward. I just want to take a pause and tell you a little bit about the investment and what we have done on the balance sheet side. So till March 31, 2021, the company had invested substantial amount of money in our businesses. So almost INR 2,000 crores, INR 1,942 crores to be precise, is something that has been invested into the businesses. The breakup is INR 1,000 crore, INR 1,030 crore in HAM projects, INR 444 crore in the BOT assets, INR 93 crore in the water BOT project, INR 320 crores in the oil and gas sector, and INR 54 crore in other assets. What it means is that these are all investments into the future. And all of the roads project, as Sandeep, are either getting complete or about to get complete. So these are something which has been very, very productive assets. And of course, the silver lining has been the oil and gas sector, where, up till now, we have not been able to give clear guidance. But now with the recent discoveries and the technical reports that are available with us, we feel very confident about this investment that we have made. So a significant amount of the company is invested, as you would see, almost INR 2,000-odd crore. That also means that our future investment requirement based on the current order book based on the current project is also significantly down. So our existing projects need only INR 220 crores for the HAM and BOT and INR 40 crores for the oil and gas, so a total of around INR 260 crore is what we further need to invest, and against that, our cash balance at March 31 stood at INR 375 crore. So one, possibility of some liquidity events into some of these assets that we are holding; #2, the profit generation in this coming year; and of course, a better efficiency and better collection at the client end, all of this could mean that there is no challenge as far as the cash flows are concerned. So going forward, we would believe that the company will remain substantially invested into these assets. And as we liquidate some of them, we will also be looking at new revenues. At the same time, the financial position of the company is quite, I would say, well established. The debt on the books is hardly anything, if I count the total debt, that is INR 602 crore, which is INR 500-odd crore in the long term, actually, INR 475 crore is a precise number, and the balance of the interest accrued as on March 31, and short-term debt of INR 97 crore, which is more of a working capital. So clearly, the -- against a net worth of close to INR 1,900 crore, INR 1,819 crore to be precise, the debt of INR 500-odd crore on a long-term basis is hardly, let's say, debt-to-equity of 0.3x. And clearly, all of this money had been judiciously used to make further investments into these projects and which are now almost reaching to the completion stage. Many of them are reaching to the completion stage. Some of them will be significantly covered in this financial year also. So with this, I take a pause and invite questions from anyone. And in that sense, I can only want to give an assurance that both from the rating side as well as on the fundraising side, the company has been super fine in its cost of funds, 7.25% is what we have got for our AM2 project. 7.5% around about for our GSY, CGRG project. Naturally, some of the PCOD letters are still to be received. Once we get that, it will be 7.5%, 7.6% level, currently being 7.75%. And as we go forward, our endeavor would be to refinance all of these projects, not just refinance, but also be able to get a much higher loan, which can further improve the liquidity of the company. So with this, we open the floor for the question and answer. Anyone has any question, please feel free to reach to the operator, and they will guide you.

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

Sir, a very strong order backlog and the strong outlook, I suppose, is on the cards. Just to elaborate on that particular point, the Calicut Express -- the HAM project that we have under negotiation. What is the time line you expect this particular project to be a part of your order backlog? Also, my second question will be, given the current scenario, the backlog that we have, in fact, if you add that Calicut orders, we could be staring at a order backlog of INR 10,000 crore. And the execution period of 3 years has also been considered because a stretched by all means. We should be staring at a revenue run rate of INR 2,300-odd crores kind of number. Is it something that is company thinking on these lines? Could you just elaborate on these lines?

So taking the first question. Thanks, Rohit. So Kerala project, the expected finalization should take place in next 60 to 40 days. So that is what our expectation is at this point in time. And we would want to start the work post monsoon so that synergizes practically with the time line as well. Coming to your question of the order backlog plans that is a healthy order backlog. And we expect it to be liquidated in 3 years. However, your estimate may be right, but I would want to avoid giving any guidance at this point in time because of the uncertain situations of pandemic, which can offset the -- any forecast. Given that if the situation does not get worse and depend on when situation improves and the -- we do not try into the challenges that recently that we have run into, I think we should be able to target the numbers close to liquidating this order backlog in about 3 years.

Sure. Now just to follow-up on the earlier part. What is the labor availability and other execution level of efficiency that you see on the ground as of now?

So it has slightly improved, but it is still not at the level that it was prior to the pandemic. There is a challenge. And there is a productivity challenge as well because the COVID across the period does put some pressure on the productivity as well. People are ready to live with this challenge, and this is, I think, over a few months or some period, this will become a normal way of working, and we should be able to see the productivity rise. The other issue is that, obviously, in the team, it's a few people all itself is on some productive to a large extent. So those challenges continue. However, I think the situation is that, by and large, people have accepted that this is the way to work and hence, are coming back to work.

I understand. I appreciate the point. But if you have to quantify a number in terms of, say, 80%, we are back to pre-COVID levels or 70% [Technical Difficulty] some number, is there any number that you want to talk about?

It's also a geographically spread issue. But at a macro level at the company level, we would say about 75% to 80%, of course, becomes available. We still are starting to get the balance back to work.

Great, great. Sir, then I have 1 more question, is more to do with your strategic composition of your order. We have done exceptionally well. We have walked the talk about tilting our order backlog exposure to EPC. In fact, as I see right now, 30% you have water exposure of EPC and you have 25% coming from road EPC. So 55% of the order backlog is EPC. Is this EPC exposure going to be external EPC exposure, I meant, going to be the major driver ahead? Is there a number that you can quantify in how the order backlog composition would look like for external EPC project?

So Rohit, it's a -- so we would definitely bought a healthy combination of various offerings that we make. As you know, these are large orders that are booked. So any guidance on that, that it is the target mix is a difficult thing to do. However, I would want to be at least a business, which is stable, it's on 3 models or 3 offerings to make into the market so that it becomes a stable situation. It does not change with the vagaries of the competitive intensity as well as the change in the government procurement processes. So this is my intent. So if you see, I'm also targeting the private players to make sure that, to a certain extent, the projects on my reliability of revenue is just not dependent upon the government procurement processes.

And I think just to add, clearly, in the last 5 years of the operation of the company effectively, the company has developed a few skill sets, which can be replicated in other businesses also. So when we started this whole business, we were focused on HAM road assets, and slowly, we moved to water. Now we are also -- had been invested in oil and gas. And the same model can be replicated in some other areas. Now of course, we are playing a much larger role in the water with the UP villages and other things. So the model is same basically. So wherever it's profitable and the same skill set can be used and the developer role can be played along with the EPC, is something we would like to balance it out.

Sure, sure, sir. Finally, sir, my last question, be they targeting close to 6 projects or HAM projects, which will achieve PCOD and we will get them into a monetization That was the target in FY '21. I understand FY '21 was a challenging year. We have achieved, the 3 projects we have PCOD -- [indiscernible] in PCOD and 1 is already operational. Maybe are we targeting another 3 more, I think, projects? And maybe the operation drive can we kick start that process this year, FY '22? Do you see such possibility?

So this question has 2 parts. So let me talk about the first part of that when do we expect the PCOD for the balance project. So we expect the -- in the next quarter -- this is the next quarter, the Chikhali-Tarsod, Amravati, AM2 and the Mukarba Chowk-Panipat Road projects to achieve the PCOD. So the expectation is within next 30 days to 90 days, these projects will achieve the PCOD. So the booking of offering will become substantial for us to approach the market.

Also, I think there is a process to this. I mean this is not something which is -- can be done overnight. We have seen the projects achieving PCOD. Then the revenue line get established on the PCOD date. The further assurance comes in the mind of people, both the lender as well as investor when the annuity gets received, and balance whatever are the punch list gets complete. So I would say we would be ready in -- not before 6 months' time, to be able to offer the entire completed project portfolio, as Sandeep mentioned. The aim is to get liquidity in this financial year. But clearly, we want to do many things before we start offering, for example, the refinancing. It's something that we believe that we are able to do it at a very fine effective rate, which ultimately benefits the incoming investor. Second is completion of the project completely and establishing the track record of annuities and other things. So these are the few things that we will continue to do so. And once all the 3, 4 check box, which are important for the investor and important for us, gets ticked, then it's the time for the effective monetization.

The next question is from the line of Riddhesh Gandhi from Discovery Capital.

Sir [Technical Difficulty]

Sorry to interrupt Mr. Gandhi, sir your voice is not audible, sir.

Sure. Can you hear me now?

Can you use -- I mean, can you come on the phone directly. Seems to be using the speaker phone.

Sure. Is this clearer now?

Much better. Thank you.

Okay. So just wanted to understand, as we look at your portfolio of oil and gas, how should think about potential NPV of that business, valuation of that business? And I mean, how should we be looking at that?

So Riddhesh, the only thing that we can talk about right now is water resources are in the block, so which is about 600 billion cubic feet. And I can give an idea of what the reserves in terms of revenue means at a -- however, what it will take to develop this field, what the IRRs will be, what the NPVs will be, will be determined by the field development plan that will get developed over the next 6 to 8 months. So to give you an idea, and this is something which is just to give an idea rather than anything else. At a gas price level of about $7 per MMBtu and a condensate price of about $55 per barrel, this resource, what we can produce approximately values at around $4 billion. So that is what the...

That's the revenue potential.

That's the revenue potential that we are talking about. As the field development plans for these get funder, and the actual commercials can be worked out, we will revert back to you all with what we see in this sector. Did I answer your question?

I think his line got disconnected. Operator, you can move on to the next question.

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

I have a few questions. Sir, firstly, if you can -- in the UP water project, we own 75% while we have accounted for 100% of the orders. So what is the nature of our agreement with our partner Kaveri Infraprojects for this particular project?

So to answer your question, Nirav, it is the construction per se is 100% belonging to the Welspun Enterprises. So 100% construction. EPC work is to be done by the Welspun Enterprises. The partner in the business is looking at building up the books for their sales.

So is there any share in terms of -- any amount that we have to pay them annually or some part of 11-year profit to your partner?

Nothing significant.

Nothing significant. Okay. Sir, second question is from media reports. We were one of the Mumbai SPP projects. So what is the status of that? Any update that you can share?

So MCGM projects are because of the COVID and everything into kind of slow movement. However, I think the movement has begun now, so the authorities started to pre interacting on those projects. And I think the clarity shall emerge in the next 60 days part days as to what is likely to happen on those bids that are already in.

And Akhil, sir, if you can just repeat the breakup of our investments of INR 1,940 crores that you just mentioned, can you just please repeat the numbers?

Yes, Nirav, I will do that. So total of INR 1,940 crores -- let me just -- yes. It's here. So the HAM project comprise of INR 1,030 crores. It's a HAM road project. The BOT road project is 4-4-4, INR 444 crores; water duty, INR 93 crores; ONG, INR 320 crores; and INR 54 crores in other assets. So this is a breakup of INR 1,940 crores that we have invested as of 31st March.

Okay. And coming on the oil and gas front, our pending equity is just about a INR 40 crores. So can we expect any revenue contribution to start in, say, second half or fourth quarter? Is it possible to see something in this particular year?

No need of -- not a possibility. This year, we will only develop the field development plan, and get it approved by DGH.

So next year should stop any sales?

No, we will -- see the -- once the field development plan is approved, we will -- somebody will have to execute that field plan, which takes about 2 years, and then the revenue starts.

Got it. And against the book investment of INR 320 crores in oil and gas, what is the actual investment that we have done?

Partly around INR 500 crores plus is the actual investment in terms of cash input.

Yes. We have taken some write-off in the previous year. So you're right, this is a net of figure. So total being INR 500 crore as a company, plus/minus a few crore here and there is what we have done.

The next question is from the line of Prem Khurana from Anand Rathi.

So 2 questions. So one was on the liquidity even that you spoke about in your opening remarks. So basically, 2 questions here. One was, given the fact that when I look at the portfolio, I mean, we already have 3 operational assets in Chikhali-Tarsod would attain PCOD very shortly, even AM would be able to get the COD in place soon. So from PCOD standpoint, I mean we would have everything in place, but then basically on returns the bank rate was 300 basis points. And even after the refinancing number that we spoke about 7.5%, there still seems to be some kind of gap. So the idea would be going to wait for this disconnect to kind of correct and then approach the market or we don't mind compromising a little in terms of valuation, but go ahead with the transition because the idea is to kind of show on cash flows and look for more growth opportunities? If you could share your thoughts on this, please?

Let me try and give that answer, though it's not a straight answer. So clearly, all of the segments will happen at the right value. Let me make that as a first statement. There's no pressure of any kind because we are well funded in the company. And to that extent, the debt equity ratios are well under control. Net debt-to-EBITDA is very, very healthy. So there's no, I would say, liquidity issue because of which we have to these assets at any distressed value. You're right, the interest rate regime during COVID has been unfavorable to us, where the interest rates reduced by the RBI, which is bank grade, which is a revenue line for us, has been around 120 bps, while the reduction in the cost of rating had been around 70 bps. So there has been a difference of 50 bps roughly, which has got created as a negative carry in our books, which used to be positive earlier. However, given that so, this is not the -- we will not like to just wait on this basis. Clearly, the cycle will correct itself. This is normally due to external factors, and we believe that this will get corrected pretty soon. As I mentioned, we are waiting for the assets to be ready. Once these assets are ready more in the second half of the year, where 5 or 6 assets will be PCOD, revenue line established, annuity collected, all the pre-work all done. That is the time when we start aggressively in the market. So I think I tried to answer your question. So at the right valuation, we will be certainly keen to exit this asset.

Sure. And sir, just to continue to understand, how do you see NHAI decision to kind of either go for TOTs or private and with now is what I'm talking about. Do you see NHAI, I mean, if you were to come up with these kind of things on a regular basis on a very frequent basis, and it could come to crowd out market because when you look at the buyers, especially in the private market you get to feel -- I mean there too fewer buyers, and there are too many sellers in the market today. I mean besides [indiscernible] I mean there are a number of private players also there in the market to kind of try and offload their portfolio. So how do you see NHAI's decision to kind of go ahead with private end to kind of impact monetization process in general?

I think the market is big enough for all of this to be absorbed in a right manner. See, let me tell you all this institutional player in this country are far and few. And to that extent, the NHAI TOTs were well received. And going forward, whenever the NHAI private investor comes into play, it will only widen the market. It will attract more global players than what currently India has. So while you may say that it may compete with some of our plants. But at the same time, it will attract more growth capital from the international giants who are waiting for the right assets for the right size, and it would be very condense for the industry in the medium to long run.

Sure. And second question was on our strategy because I think when we started in the business, I mean, we're looking at asset ownership business, wherein the idea was going to outsource the construction part and manage the design and the financing part, which is where you can generally get to create more value for the shareholders. Gradually, I mean, we've been able to kind of size about third-party EPC now, including the that you have today. Would that make you kind of go and build your own capacities in terms of construction activity? And in terms of the Varanasi project, I mean, would you be required to kind of support this project in terms of working capital cycle because so far what we hear from the market is not doing great in terms of liquidity at this point in time?

So you have 2 question part of questions are 2. #1, that in terms of our business model, we are now capturing most of the value chain other than the construction. So we believe that we will have construction partners to some extent. And that is the model going forward we shall follow. We will continue to try and increase our share in the value chain in terms of engineering and procurement. The second part of the question that you raised is about the liquidity of the project that we have taken over because of the challenges Soma versus is looking at. So as we understand this, the project currently has enough money in escrow because of the past collections and that assure that they don't need to put in any equity from Soma or any other player of any substance. So there is -- we would not have taken this project, had this not been that it is already liquid to the extent that the contract has been entered into.

Sure. Okay. And just 1 last one from my side. I mean if you could share a as on the margin profile you and message for the water supply project picture and will be comparable to the numbers that we've seen in the past or because there is this bot of component as well in these projects?

So to answer the question, we are extremely aware and we are very mindful of the bottom line when we talk about top line. Our return expectations are broader equal or slightly higher than road and they will -- they are not lower than the road, I can assure you. So we do not expect the margins to go south where we expect the water to contribute for the margins of north ward.

The next question is from the line of Meet Vora from DAM Capital.

Yes. My question was regarding the fixed asset segment. So now basically, in these segments, we are acquiring 3 projects from lenders. So does it mean that the return expectations are better in this segment? And the follow-up question on this is that out of the order book of INR 84 billion, does this new HAM project is also considered in this calculation?

So to answer the second part, the -- we have not accounted for the new HAM projects in the order book until those equipments are in place. We will not be accounting for it. Now coming to the return expectations, we get opportunities to look at secondary acquisition almost every month a few of them come through to us. And we are -- we only look at the projects which have -- which meet our return threshold expectation. So we pick almost 1 of 20, 25 opportunities that we look at.

Also, when you use the word stressed, I want to just clarify that, the amount of projects that we have taken, to any haircut by any lender. If at all, by us coming into the picture, the viability of the project has only improved with a better equity commitment and a more timely execution. So we are not looking at stress in that technical world. For us, the projects are early stages, where the project has not probably started the work or maybe some small work has been done. And we come up for the large part, which is as we are bidding for this project ourselves. So it is a choice between a buy versus bid model. And in that sense, as Sandeep has rightly said, whatever fits into our internal criteria are important for us. I mean, otherwise, taking these projects are so easy. We could have promised you our 3x a book than what we are currently telling you, but that would mean that we would have compromised on our return expectations.

Sure, sir, understood. So we can term that as harmonized substitution, basically.

These are favorable to us and nothing acrimonious about it. NHAI is supporting it. The lenders are not against that, they are not aggregated. They are not having any haircut. So it's all in a good split.

Sure. Sure. And I had 1 more question from my side regarding -- so I just wanted to know the order inflow guidance for FY '22, and specifically, I also wanted to know the pipeline for order inflow in water segment.

So see, I think we have a very healthy order book at this point in time. We are awaiting the water segment, the large project, which has yet not decided whether which way it is going of about INR 3,500 odd crores EPC value. In terms of the order pipeline, there are enough orders in the market as to how much we would want to pick will depend upon what happens to this major order that we are awaiting a decision on. We do not want to grow at a rate, which we cannot sustain our operational excellence and deliver the projects in a timely manner. So we will be very prudent in our decision-making as to what to pick and what not to pay.

Sure. So can you give any number on that either the...

So we can only say that we would want to definitely have this order, which we have element. And that is the case, we are not going to -- in this year, at least the initial 6, 7, 8 months, we are not going to be targeting any major project thereafter. But at the end of the year or early next year, we would want to target a few projects. We want to space it out.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, everyone. I really appreciate your participating in this investor call. From my side, I can assure that Welspun Enterprises will continue its journey of operational excellence on approximately INR 1,200 crore road portfolio...

INR 12,000 crores.

INR 12,000 crores, my apologies. INR 12,000 crores of road portfolio and additional about INR 2,500 crores of water portfolio. We remain focused on value unlocking through recycling of the capital. I thank you all for the questions. And if there are any further ponies, you may see -- please get in touch with the Investor Relationship team, who would be very happy to respond to your questions. Thank you. Good day, and be safe. Thank you.

Thank you very much. Thank you.

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