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Anup Engineering Ltd
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Ladies and gentlemen, good day, and welcome to Q4 and year ended FY '23 earnings conference call of the Anup Engineering Limited. [Operator Instructions] Please note that this conference is being recorded.
Before we proceed to the call, let me remind you that the discussion may contain certain forward-looking statements that may involve known and unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risks that could cause actual results, performance or achievements to differ significantly from what has been expressed or implied in such forward-looking statements.
Please note that the company has uploaded the results press release, investor presentation and also the outcome of the Board meeting on the website of stock exchanges and website of the company.
I now hand the conference over to Mr. Punit Lalbhai. Thank you, and over to you, sir.
Very good afternoon to everyone on the call. It's a great pleasure to interact with you all today. We've seen a very uncertain and difficult year due to global geopolitical situation. And in that, I'm very happy to say that the team has -- at Anup has come out with a good performance.
And to take you through the details of the year and the quarter, I now invite our CEO, Mr. Reginaldo Dsouza, to sort of give his presentation, and then we'll all jointly take the calls. Thank you.
Thank you so much, Punit. Hello, everyone. Greetings from team Anup. It's wonderful to be with you all again as we close the year FY '23 and embark on our growth journey. We are truly grateful to all of you for your support, your confidence in our business and being with us as we take this growth journey.
The year FY '23 has surely been a challenging year with the geopolitical uncertainties, supply disruptions, volatility in raw material prices impacting even the logistics side with challenges on shipping availability and cost. But with a strong result of our spirited team at Anup and our partners, we were able to sail through and end the year on a decent note.
Talking on the market side, the story has been favorable with many projects kicking in and also order release from our customers being concluded. We booked around INR 500 crore plus new orders in the year FY '23. This has ensured a healthy opening balance of around INR 500 crore plus as we began the year FY '24. This favorable trend has continued, helping us book over INR 150 crores, INR 1-5-0 crores already in this year till date, of course, most of them executable in the year FY '25.
Now talking about our performance in quarter 4. We achieved a revenue of INR 144.2 crores against INR 100 crores quarter-on-quarter of last year. That's about 44% improvement over last year. With an EBITDA of INR 30.2 crores against INR 23.8 crores quarter-on-quarter, that's about 26.8% improvement.
For the year ended March 2023, if you look at the whole year FY '23, the revenue stood at INR 411.3 crores, INR 4-1-1.3 crores against INR 288.2 crores in the year FY '22, that means it's a growth of about 42.7% to be precise. With an EBITDA of INR 82.7 crores, that's 20.1 percentage against INR 70 crores in FY '22 at 24.3 percentage. That's a change of about 18.2%.
PBT is at INR 70 crores, 7-0, that's 17% against INR 61.1 crores last year, that's 21.2%. That means it's a change of about 14.5%. The PAT is at INR 51.4 crores at 12.5%. Against INR 62.1 crores, that's 21.5%, a drop of about 17%. But that's mainly due to the tax reversal that we had in the last quarter of FY '22 of about INR 15.5 crores.
So if you take a net of the tax reversal, our PAT for this year stands at INR 51.43 crores against INR 46.49 crores last year. So we have made some improvements even on the PAT net of the tax reversal.
The working capital has improved from 155 days to about 148 days, 1-4-8. And also, we have maintained our position of almost being debt free even with our new investment in the new facility at Kheda.
Our exports revenue stands at 19%, which I did mention on the call last time that this is a very important factor for our business. It stands at 19% for FY '23. And on the product portfolio side, heat exchangers still remain dominant at about 74%. So we are almost there year-on-year on heat exchanger component being around that 74%, 75% mark.
So this was the performance of FY '23. So now how do we see ourselves in FY '24? As I mentioned, we have a very healthy order book of about INR 530 crores opening. We expect to continue our growth of 25% to 30% with an annualized EBITDA of around 22%.
Our export is expected to grow to 30% of our sales revenue. So this is what I said earlier, last year, it was 19%. We expect it to grow to about 30% in this financial year, that is FY '24.
So what's important for us, we will continue to focus on consistent quarter-on-quarter performance. I'm sure you would have seen our last 3 quarters, which were all INR 100 crore plus. And we, as a team, wish to continue and ensure this consistency going forward.
On the capacity front, I'm happy to share that our new facility at Kheda is now ready with the trial production on. So we are placed very well on that front, which we've been discussing over last couple of calls.
So this Kheda facility, which is about 40 kilometers from our existing facility Odhav, will surely help us boost our revenue in quarter 3 and quarter 4 with the first dispatch from that plant expected in August 2023.
I'm also happy to share a dividend of 150%. That's INR 15 per share, which translates to about 29% of PAT. I'm sure this clearly demonstrates our confidence in the business, its growth journey and what the future holds for us.
So with this, I end my small briefing. Thank you once again for being strong supporters in our growth journey and for giving us your valuable time today and a patient hearing. Thank you once again, and we will be happy to take your questions if any.
[Operator Instructions] First question is from the line of [ Tushal ] from [indiscernible] Wealth Management.
Congratulations for your good set of numbers. Sir I just want to understand the revenue potential of the Kheda facility going forward. And also the incremental day which we can add in every phase [indiscernible] going forward. That is my first question.
Regi, I think you're best placed to answer the potential of the CapEx that we have done plus how we are looking at the future.
That's right. Right. So as we've discussed over the last call, in Kheda, in the first phase, we have these 1.5 days literally, which we have built and which is operational now, ready to kick start commercial production. In the first year, we are expecting a revenue of about INR 60 crores coming from that plant.
Of course, that's the first year. So we need some time to stabilize, and that's the reason it is at INR 60 crores for this year. Going forward from next year on, when we have the full complement of 12 months at our disposal and the plant completely stabilized, we can look at a turnover of INR 150 crores plus. Of course, that all depends -- will all depend on the product portfolio that we are able to get from the market. But at a broader level, I would say INR 150 crores to INR 200 crores is what we can look at Kheda.
Fair enough, sir. And with the guidance which you gave of 25 -- approaching 25% to 30% [ indiscernible] for the next 2, 3 years, what would is the margin for those? And in the past, you have mentioned the long-term guidance of INR 1,000 crores till FY '27. Sir do you hold that?
Yes, we very much hold that. So even at this 25% to 30% growth, if you work out the arithmetics, it would come to that. So we hold on to that. And on the margin side, we are looking at -- as we grow, we -- obviously, as I explained last time, as we grow, we will have to move to a little more complex and higher metallurgy products where we are expecting to maintain our margin of 22% plus.
Sir, my last question. Sir, [indiscernible] clearly expanding their capacity from 3.2 billion metric tons to 6.8 billion metric tons in the next 3 to 5 years. They also came out with a pet chem facility of INR 61,000 crores [indiscernible]. Sir, I just want to understand how the bid pipeline is looking? And what would be our conversion from that bid pipeline in the percentage terms.
Yes. So you're right in whatever you mentioned about the project. In addition to that, there are many projects which are kicking on. So on the market side, we see a very good traction. We are good on that.
Overall, on the inquiry side, the conversion side, we are at about between 15% to 20% conversion. That's more to do with our choices that we make. Of course, it can be higher if we have to make a choice. But considering our growth aspirations and along with the profitability that we desire, the conversion is about 15% to 20%.
The next question is from the line of [ Naysar Parikh ] from Native Capital.
My first question is on -- can you give some sense of the sector split and industry split for your business currently and the new orders pipeline, et cetera, which are the sectors that you are seeing more traction in?
Yes. So I'll take that. So on the sectors, oil and gas and petrochemicals has always been dominant for us. And even in this order book that you look at, you will see a dominant portion coming from oil and gas and pet chem.
But having said that, that chemical industry is also growing and lends a lot of growth for us. So that's about 11% right now. But of course, dominantly, it is oil and gas and petrochemicals.
Okay. Understood. And in terms of competition, bunch of people are obviously growing or aggressively increasing capacity in your space as well, including people, larger players like TATA Projects and all of that. So are you seeing increased competition and pricing pressure on your products in the market?
Yes. So let me just make a small clarification there. The TATA Projects is generally our customer. They are EPC companies, so they are our customers. Of course, as you rightly said, the capacities are growing. But in the same breath, the CapEx cycle is on the positive side today. So based on our analytics, we are very confident of the share of growth that we need in the market.
Got it. And last question on the margins. So you obviously mentioned 22%. In this quarter also, it was a bit subdued. But if you look at your order book that you have INR 530 crores and assuming the current price as they are, how do you see the margins on that for the next year? Or how should we think of that? And is there any scope for improvement over there?
Yes. So in this current year that we speak about FY '24, we see EBITDA levels at about 22%, as I mentioned, because we completely have the order booking on our hands today. So we very clearly have a handle of the numbers. And going forward, as I mentioned, our growth aspirations are there in the line of 22% -- 25% to 30% year-on-year with an EBITDA margin of 22% plus. That's going to be our guiding principle going forward.
Okay. Got it. And just maybe the last thing is on your working capital cycle, right? It's obviously elongated. Is there anything that we can do to bring it down? Are you doing anything to bring it down?
Yes. So you rightly said it's a long gestation project. So our cycle terms vary anywhere between 10 months to about now as we move up the ladder in terms of product complexities. It would go even up to 14 months. So what we are focusing internally is just to give one picture of what we are doing is focus on consistent quarter-on-quarter performance.
I'm sure you would have seen the last 3 quarters that we had was all 100% -- INR 100 crore plus, which historically would have seen a spike. So that's where the focus is. So that we get our collections on time, we got our money back on time and improve our working capital. That's the predominant focus that we have, considering that we have long-cycle projects on hand.
Next question is from the line of Saket Kapoor from Kapoor & Company.
And thank you for the opportunity...
Saket, you're sounding very distant. Can you speak through the headset.
Now can you hear me, sir?
Yes.
Sir, when we look at your order book currently at INR 530 crores, does the impact of the higher raw material prices, and the lower margin profile is not totally executed. And now we are back to the old regime of this 22% margin that we would be expecting going ahead?
Yes. So Saket, thanks for your question. Yes. If you recall our words in the last call, we wanted to close all the executions of the past, which had this high material cost impact because of which we had projected lower EBITDA last year. But there was some realignment of some of the projects where the deliveries were a little postponed from the customers and/or we realigned it.
So with that, some of [indiscernible] is still pending in Q1 and a little early in the Q2. But lastly, to answer your question, yes, the challenge that we had of the past in terms of raw material price currently is out of our way. It's only whatever is on our plates we are executing.
All the new orders that we are -- so you'll see a very healthy EBITDA level, 22% plus in Q3 and Q4. On the overall annualized level, we will be surely 22% plus and plus.
So you are referring to quarter 1 and quarter 2 will have some impact of the...
That is...
Hello?
Hello?
Yes, sir. You are articulating to have some impact on the Q1 and Q2 numbers on the margin front. And Q3, Q4 will have the higher margin profile.
Yes. So at EBITDA level in Q1 and Q4, you'll see around 20-plus number because we will complete all the executions which were pending of last year. And Q3 and Q4, we would -- you would see at a much higher level. So on an annualized basis, you will see 22% plus.
Right sir. Sir, when we look at this capital work in progress, the figure is now at INR 87 crores. So what should we be capitalizing it once Kheda is commissioned, sir? What portion of this INR 87 crores will get capitalized?
We would be capitalizing the complete 87% -- INR 87 crores, sorry.
INR 87 crores. And this will be for the first quarter itself, sir? I missed your deadline, sir. When will Kheda get commissioned?
Yes, in quarter 1.
In quarter 1. So what would be the depreciation impact, sir, for the 9 months -- for the entire year, I think so.
Around roughly INR 4.2 crores.
INR 4.2 crores. And now sir coming to the [indiscernible] profile for our order booking, I think, sir, you spoke about 30% of the total order book to be executed towards the export segment, and the order book itself stands now at the same mix. And earlier also in our last conversations, you did spoke about garnering more orders from other geographies.
So if you could give us some more color on how the pipeline is there in terms of the export market, and what are we eyeing in terms of the -- in improving our order booking going ahead in terms of the export?
Yes. So of the INR 530 crore opening balance that we have, this year, that is financial year FY '24, we should be about 30% on the export side. So from 19% in FY '23, we move up to about 30% export. And I recollect on the last call, we did say that we have a plan to go up to 40% in 3 years horizon, but we should look at 40% by FY '25 on export side.
Overall, on the market side, exports -- that traction is -- we are feeling right now is very good. In fact, the last couple of months, the order booking that has been there has mostly come from export. I would say about 75% to 80% has come from exports, which was a focus on, of course, we targeted those, and we could win them.
So all in all, on the market side, the scene looks pretty good on the CapEx cycle. We have been successful in the export orders. And we wish to take this export portion from 30% to 40% by FY '25.
And one small clarification, sir, this INR 530 crores is executable over the 12 months, and the INR 150 crore order intake takes our order book, closing order book as on 17th May or even date to, what figure?
Yes. So this INR 530 crores, I would not say 100% executable, give and take here and there some which are greater than 12 months and 13 months of execution would move some in that. This INR 150 crore plus that we have booked in this year, some of them would be executed. So overall, it would give a bunch of sales order that would give us a 30% growth for this year.
30% growth on revenue terms.
That's correct.
So we are eyeing to close this year on a top line growth of 30% on what we posted for FY '23 with an EBITDA margin in the vicinity of 20% to 22%.
That's correct. So I reclarify. So we stand with our growth aspirations of 25% to 30% year-on-year. 30% looks very strong for this year with a 22% plus EBITDA.
And you give me -- sir, can you give me the closing order book number as on date, sir?
So we opened the year at INR 530 crores. We booked about close to about INR 150 crore. So that's about INR 680 crores.
Okay. And there will be execution as of now. That does mean that it's the normal course of business. Right sir.
That's correct. So I would say, on a round off figure, INR 150 crores plus would release already for FY '25. So in short, we -- the order booking strategy we are doing now going forward is for not this year but financial year '25.
And sir, thanks to the Board for increasing the dividend payout. This gives us clear indication on sharing the cash with the investors.
Thank you so much, and thank you for the confidence in our business, Saket.
Thank you. Thank you.
Next question is from the line of Abhishek Agarwal from [ Naredi ] Investments.
Sir, my first question, how many orders are you expecting in FY '24? And out of that, how many orders are for Kheda plant? That's my first question.
And second question, when will we start doing CapEx in a Kheda Phase 2? And how much will be the CapEx? So will we take any loan or raise liquidity for CapEx?
So let me try and answer that. I think as Regi has just mentioned that we want to target the 25% to 30% growth year-on-year. So the arithmetic is simple. If you are at INR 530 crores and you add on 30%, you have to book that much or more orders in this year. And I think the way the year is started, the team is pretty confident in doing that.
As far as Kheda is concerned, since we are just starting out, the real dispatches will be only in Q3 and Q4 this year to which Regi has already answered. But we are probably going to have about a INR 60 crore kind of turnover from Kheda. But the investment that has already been done should take us anywhere between INR 150 crores to INR 200 crores at a good capacity utilization.
And I suppose we can anticipate kicking off an investment for the next phase sometime during the next financial year so that we are ready with the -- and that would be INR 80 crores to INR 100 crores kind of CapEx. That will ready the next INR 150 crore kind of turnover that we can expect from the -- as that stabilizes and goes towards utilization. So that's a brief idea of how we are planning to invest.
In Phase 2, INR 80 crore CapEx will be done from internal approach?
Yes, more or less, I mean, that is the plan. And if this 30% growth and profitability expectations are met then there should be -- we should be on track. But we'll have to, of course, based on the detailed cash flow working, we'll have to probably decide closer to date as to whether everything is matching up, there are no timeline mismatches, et cetera. So very hard to confirm that. But as far as possible, we will try and keep it that way.
Last question, how much the CapEx was done in FY '23? And how much will be CapEx in FY '24?
So Regi, we have those numbers on hand?
So in FY '23, we have done INR 47 crores -- sorry, sorry, INR 75 crores.
Okay. And for FY '24, what is plan for CapEx?
INR 47 crores. So if you remember, we had articulated that it will be roughly about INR 120 crores of total CapEx for Kheda. So that's the breakup. So INR 47 crores, which I cited wrongly earlier, it was for FY '24 and 70-plus was for FY '23.
Abhishek, do you have any follow-up questions?
No sir.
Next question is from the line of [ Sonya ] from Dalal & Broacha.
Sir, I just want to understand -- I just want to have some details on other expenses. If we look on quarter-on-quarter basis, other expenses have increased from INR 164 crores (sic) [ INR 16.4 crores ] to INR 286 crores (sic) [ INR 28.6 crores ] -- sorry, on Y-o-Y basis. Even in last quarter on Y-o-Y basis, there was a sharp jump. So can you share some details on this and why it has increased so much?
Yes, we got the question. So if you look at on the other expenses, if you look at the product portfolio that we have executed, most of the projects that were executed were Helix heat exchangers, which is a licensed product from Lummus heat transfer.
And for these kind of licensed products, where we have a license fee adjustment, we need to pay up some royalties. So these are royalty payments, which normally kicks in once we execute this particular order.
Okay. So is this expected to continue in coming quarters or it's one-off kind of a thing?
No, this will continue based on the product portfolio. So if the product mix contains a lot of Helix heat exchangers, then it would have these royalties built in.
Okay. So this is our current order book. Do we have such kind of products in the overall orders?
We do have, but not at the levels that we had in FY '23. FY '23 was really more loaded onto the licensed equipment. But in FY '24, we do not see that kind of unloading on royalties.
So can we...
Ma'am, I think this is already factored into the cost sheet. So it's only the allocation of expense that goes under a different head, but it will be part of the 22% margin going forward as well.
Okay...
Yes. So these do not impact our margins. These are factored in our costing when we work out.
Next question is from the line of Apurva from PhillipCapital.
Yes. Congratulations for a good set of numbers. First thing, it's more of like a clarification. So as we are moving from domestic to export and maybe 30% this year and 40% next year, and similarly for the product diversification from heat exchangers, having complete [ tools, we see ] wide variety of products, including tower and et cetera. So would that have any impact on the margins? Because is so that domestic product's margin is higher than or lower than the exports and similar for the other product categories?
I would not say really, Apurva. What happens is moment we move to exports the chances of availability increases because the competition level drops down in a sense the of competition. That's one.
And of course, on the ForEx side, sometimes we have to benefit. But overall, on the profit share numbers perspective or the costing level, you may not see that kind of a huge difference.
Okay. And sir, I was coming to the hedging part only. So what would be our hedging policy? So would we be open or would we be partial hedging? Because if you move from 30% to 40%, and if I remember clearly, we have a fixed price contract. So despite of this fixed price contract, is ForEx fluctuation adds up, then probably that could open up a more risk area. So how would you see that as a risk or has a potential to benefit from the higher exports?
Yes, Apurva. So I understand your question. So what we are doing today is since we are evolving on the export side and then moving up in terms of the percentages, currently, what we are doing is we are protecting ourselves at being conservative at the costing level right now.
But as we move up now, we are going to have a case-to-case basis hedging principles moving forward. So we work that out internally, and we would protect ourselves with the timely interventions.
Fantastic. And sir, just last one question on the proprietary products. So what is your thought on [indiscernible]. What -- how many proprietary products we may expect over the next 2 to 3 years, which can like elevate the company from a current level to the next level because we are very ambitious on that segment as well. So can you throw some thought process for proprietary products?
Yes. So Apurva, it will be hard for me to exactly name which are those products which we will finally be able to succeed. But I can tell you that there are 3 or 4 products which we are in discussion currently to help us move up the value chain in terms of product portfolio.
So surely, we should get a handle of a couple of them, but we'll wait for -- because it does not depend only on us. It also depends on the other side of the license to provide us for those proprietary items based on our past record. I can tell you today, Anup Engineering enjoys a very good repute in terms of on-time delivery performance and quality. So we should be sooner than later.
So sir, out of that, any would be exclusive or like Helix there are other licensee as well. So are we looking for any exclusive tie-up with the global technology trend?
Our intention would be to have exclusives. But finally, as I said, it will depend on the license. We would prefer an exclusive license like what we have for EMbaffle technology, right? It is from Brembana & Rolle, it's an Italian company, where we have the licensee agreement, which is completely exclusive. That's the kind of contract we would prefer, but we will take it as per the license's recommendation because if the pie is large, like what Helix is, we would not mind taking that up.
Next question is from Rahul [indiscernible] from Ambit Capital.
Sir, just want to understand, when I look at your historical growth trend, it has been roughly a 5% top line CAGR, say, from '19 to '22. So want to understand what has really driven this 40 percentage-plus growth during '23? And why do you think that the current order growth momentum that we are seeing is sustainable? And why has the oil and gas sector sort of contributed a lot to that? Your thoughts there?
Yes. So obviously, the most important factor for this growth has been the market. Market -- the CapEx cycle allows us to get this kind of order intake.
The second portion is the capacity that we built up. So with the expansion of Kheda now, it throws up capacity for us to add up to our Odhav, current facility.
And also third, internally, you would have seen the execution capabilities that we've brought about in terms of consistency. So market tailwinds, the capacity additions that we've done and execution excellence that we brought about internally to bring about quarter-on-quarter performance, which smoothens up the executions in terms of the final turnover.
Right. Just more nuance on that, I mean, what has really changed over the last year that there has been so much demand in the market for your products, be it exchangers or be it the reactors, vessels and everything else that you sell?
Yes. So if you see the CapEx cycle currently, it's like projects are announced all across like what the earlier gentleman said. So if you've heard the -- even the Indian government -- why the domestic market is picking up, even if you listen to the Indian government, we just announced a couple of months back that we want to double our refining capacity by 2030.
And now that brings about a lot of investment from public sector units like ISCL, BPCL and HPCL in bringing about more refining capacity, and that's where you see these projects coming up. On the other side, chemicals, you know how things have changed after the pandemic and [ all of them ] have been the growth story.
So that is the reason why petrochemicals and specialty chemicals are picking up. So the demand on the product side is what's fueling this CapEx. And as for me personally, if you ask me, even after the pandemic and the geopolitical scene around, every country want to be now self-sufficient and avoid importing these items. So that's the reason as we see every country would try about putting up more projects to be self-sufficient for these kind of resources.
Understood.
I would also add that the last few years are not representative of normal market conditions. I think the whole COVID pandemic disrupted the order flow significantly for quite a while.
And in addition to the Kheda CapEx, we've dramatically added capacity both in terms of area under the crane and also what we can do under the crane in terms of higher metallurgies, higher thicknesses, higher weights even in our old Odhav facility.
Over the last 2 years, we've done a lot of changes to be able to get a much better product mix. So the revenue per square meter, the capability to do higher on that has gone up as well. So there has been a lot of change both on capacity, market.
And plus the last factor that Regi mentioned is probably the most important, very, very good execution to where better and better customers are trusting us with their orders. And so we are seeing different quality of conversations going forward.
So I think all of these things give a lot of confidence that this is a new trajectory that we are charting. And with the kind of CapEx cycles already announced, we see good demand for at least 2 to 3 years going forward. So there's no reason to believe why this should not continue.
Understood. Sir, this is very helpful. My last question was in terms of the competition on the exports market. I mean, who would you really be looking to replace?
So if you look at Indian context, we would be amongst the top 4 in terms of making these complex equipment, static equipment for oil and gas. So it would be the competition among these 4 and the competitiveness that we hold augurs well for us to have a higher win rate as compared to our competition.
And I'd like to also add that it's not all about taking a share of the pie. I think the overall pie is growing at a healthy rate. So I think we are expecting more oil now than even pre-COVID. That's one data point I -- correct me if I'm wrong, Regi. So the demand overall in the petrochemical and refining space is likely to be strong globally. Plus our emergence in a relative competitive landscape in India is -- we are well positioned, both on cost and track record, especially in the last 3 to 4 years.
Plus I think India in its global position is enjoying an advantage, both geopolitically and also from sort of a competitiveness perspective. So I think all those things are in favor for us to be well positioned in exports as well.
Next question is from the line of Rohit from Vijit Global.
If we look at annual report for FY '22, which shows company has contingent liability of INR 175 crores in the form of bank guarantees. Are they in the form of performance-fees guarantees or financial bank guarantees? And can we see these coming down in future?
Yes. So these are the bank guarantees that we need to give in 2 parts. One is against advances, which we call as ABGs. And the other is we generally have to give 5% to 10% performance-bank guarantees, which remain for the valid warranty period. So more so it is going to be in line with this. And as we grow on our top line, it may go proportionately higher than at the current level.
So at what number are you seeing this to go further up?
It would be hard for us to predict the exact number. I'll tell you why -- sorry, this would all depend on the advances that we get against a particular order. Some orders would have an advance of 20%, where we will have to give an ABG of only 20%. Some may have 50%. So it is in proportion to the advances that we take on the order. PBG is more so -- it will be 5% to 10% around that range. That do not change much.
5% to 10% of top line you are seeing?
The post -- PBG is the performance bank guarantees that we talk about, is generally 5% to 10% of the PO value.
Yes. So you're right, top line.
Next question is from the line of [ Naysar Parikh ], from Native Capital.
On the vessels and the reactor spot you have, which is expected to be 35%. One is -- what are the margins on that versus your heat exchanger? And secondly, you did mention briefly, but what kind of other products are you looking at? And if you can give some idea, that would be helpful.
Hello?
Yes, Regi we can hear you.
Yes. So could you please repeat the second question? I couldn't get the second part of it.
Yes. No, my second question was that what other kind of products are you looking at, which you briefly alluded to an earlier question, besides these 2 new segments which are expected to grow in the next year?
Yes, I get that. So on the vessel side, the first question that you have on the margin side, it will not very -- of course, it all depends on the way the negotiations are. But by and large, I would put the numbers for heat exchangers and vessels to be at the same level. And that's where the -- our EBITDA of 22% plus would come in.
On the products, what we intend and our focus is to move up the value chain in terms of metallurgies. So for example, today, if we are having a carbon steel, a predominant portion of it, we would want to move to exotic material because that gives us a larger turnover for the same space and the contributions that we make. So it's more about moving up the value chain in terms of the metallurgy.
And the second part is in terms of the complexity. That is what we spoke about moving into proprietary items, which would obviously come with a little better margins, but more importantly, with a lesser competition.
Okay. And what would be some of these products which can like give you better metallurgy and higher complexity?
Yes. So for example, our vessels we are making today of carbon steel, we would get a particular rupees per kg of it. We would want to move it to, say, for example, duplex or stainless-steel material. So obviously, for the same amount of value addition that you do, you get larger returns in terms of your top line. And in terms of complexity, of course, moving more and more to the licensed equipment more into the ammonia and the urea basket.
Yes. Okay. Got it. And in terms of the competition that you mentioned, right, who are -- can you like just broadly name them? And also, how would they rank in terms of market share maybe in India or exports in your view?
So largely, it would be hard for us because these are products which are custom made. There would be vendor list which are EPCs or end customers or the licensed project from various parts of the globe. So these competition would be around the globe. And you know who all are playing in the steel and in the Indian market.
So all of them would be their in the top 4 and plus there would be the players in the international market, which are approved in the vendor list for a customer. So it would be hard for us to pinpoint a name on the competition.
Okay. Got it. And the exports are mainly to which countries?
Yes. So largely, as I know today, we are focused on U.S. market. That's something which is working well for us. And also as you know, Middle East is a hotbed for oil and gas. So these are the 2 markets which we are focused at.
[Operator Instructions] Next follow-up question is from the line of Saket Kapoor from Kapoor & Company.
Sir, when you mentioned that the contribution from Kheda would be INR 60 crores for this financial year. That take into account the -- our top line guidance also? Does this 30% growth is including the INR 60 crores from Kheda or excluding this?
Yes. This is including Kheda.
Including Kheda. So 15% would be coming from Kheda itself. Out of the total top -- growth, 15% will be from the new facility.
Yes, 1 second, let me -- so if you do the economics of it and work it out -- you're right.
Sir, when we look at the balance sheet part, we find our borrowing for noncurrent liability at INR 30 crores and for current liability at INR 4 crores. So if you could explain to us what resulted in these borrowings going up?
Nilesh Hirapara, CFO, on this side. So for Kheda expansion, we have brought out around INR 34 crores as a loan. So out of that, INR 4 crore installment would be due during this year, and rest would be in the rest of installments. So those amounts which will be due in the next financial year, that is FY '24, has been shown as the current borrowing and rest again noncurrent borrowing liability.
Just to add one line, at the end of the year on 31st March, we have been almost net debt free. That is like negative balance of INR 1.34 crores. So cash balance plus debt is roughly negative INR 1.34 crores.
What is the cost of funds, sir?
8.5%.
8.5%.
Sorry -- and also, we are expecting certain percent of interest redemption subsidy from Gujarat Industrial Policy. So that would be roughly a redemption of around 7% interest from the government, which would be equal to the 1% of CapEx core. So that will bring down our CapEx loan cost.
Sir, if you could explain it once again -- Yes, sir.
8.5% -- right? And we'll get interest subsidy from the Gujarat government, which would be nearly 7% interest cost. But in total, it would be 1% of a CapEx cost. So in total, we'll get a reimbursement of around INR 1.25 crore as interest.
Okay. So what does the policy entail, sir? It gives us a subsidy of -- interest subsidy of 7% on -- if you could entail the liquidity of the subsidy part from the government?
Yes. So government is financing 7% CapEx loan. The total subsidy would be the 1% of CapEx. So we are -- suppose we are closing Kheda CapEx at INR 120 crores. We'll receive INR 1.2 crores as a CapEx subsidy.
INR 1.2 crores, 1% of this?
Yes. That's correct.
Next question is from [ Tushal ] from [indiscernible ] Wealth Management.
Sir, I understand the competition like Godrej & Boyce, L&T and Patels Airtemp. So, sir, I just want to understand what different we do in Anup compared to those guys. And sir, I understand the pie itself is increasing. So what make us help to get such a high export target like from near to 18%, 19%, we're targeting to 40%. So I just want to understand your thought on that.
Yes. So [ Tushal ], if you look at the product portfolio that we deal with, most of these are customized products or static equipment that we make. And here, the past track record in terms of our on-time delivery performance and quality plays a very important role.
So yes, the pie is definitely better based on the CapEx cycle today. But for us to be having that growth path with a decent margin profile, we have to hit the right product and win the right order. That's where the credibility in terms of your past performance and a good repute with customers will play.
And I think that's Anup comes at the top in terms of having a good track record and relationship with the customers, especially in terms of on-time delivery performance.
I think also there's an element of the past being a capacity-constrained environment, where we didn't have to look very far beyond domestic orders that were of very high quality. So now with more capacity, with enhanced capability, we can also pick up very discerning orders from very discerning clients abroad.
And I think the sort of effort to gain more export volumes has been ratcheted up for the last year or so, and that is now paying dividends. So the growth and the capacity expansion and capability expansion has also led to this directionality of higher exports.
Yes. And also to add to what Punit said, with the Kheda facility now at our disposal, it's bang on the highway. So it opens up now a larger product basket for us. Say, earlier, in Odhav, we had a limitation in terms of the height of the equipment that we could move out mainly because it is landlocked because of all the flyovers and being in the city.
Now this new facility has opened up that channel for us where we could move equipment even up to a diameter of 7, 7.5 meters. So this opens up a larger basket for us, and that's what customers desire.
They don't want us to pick and choose products. They would want that we actually address the whole inquiry basket for them. So earlier, there were cases where we had to say no to our customer because we did not have this facility, and we couldn't move out from our Odhav facility, whereas now it opens up the gate for us to accept whatever inquiries that customer can give in. So this all put together puts us in a very strong position in terms of export market.
One last question. From the green hydrogen opportunity, do we manufacture any products catering to green hydrogen? And what sort of growth we're seeing on that?
Yes. So green hydrogen, we all know it's the next energy mix that we all are going to move. Of course, there are some challenges right now, but sooner than later, it will be addressed. But a direct answer to your question [ Tushal ], is on the generation side, we don't play a role because green hydrogen is basically electrolysis and other part where we don't have a role.
But once the hydrogen is separated out from water, that's where our role comes in, in terms of storage and transportation of hydrogen. And to clarify, we are already into that business today. We are already making these equipment for some of the customers as and when the opportunity arises.
So a short answer, yes, we are not on the generation side. We are on the transportation and transmission side. And on that side, we are already there into this business.
So the line for the participant dropped. We move to the next question. Next question is from the line of Akshay Kothari from Envision Capital.
Sir I just wanted to know the exotic metallurgy part which we are going to do, what actually drives the demand for this sort of material and in which industry does it get used?
So generally, these exotic materials, you would find more and more usage in specialty chemicals. And that's a sector, as you know, which is booming right now. So that is bringing about the change. And if you remember, probably if you heard our earlier calls, we used to talk about this clean room.
Now this clean room is exactly meant for these kind of equipment. So we have prepared ourselves for this kind of order intake. And now this capacity that we built in, which we have commissioned about 4 to 5 months back in Odhav, we are now going to customers seeking orders for this clean room.
Okay. So currently, do we have any orders for this sort of material?
At the moment, no, we are not executing, but we have a handful of inquiries where we are quoting and trying to back.
Regi, we do have a lot of exotic material inquiries, perhaps not clean room grade, but exotic metals is a big, big basket, right?
Yes. In terms of inconel and others, but I think the main question if I understand correctly, it was on the platinum side probably because of the clean room. That's the reason I was trying to answer that.
Sure.
So on the titanium side, we don't have an order right now. We are not executing. We are having inquiries, which we are targeting to receive. But from the other higher metallurgy basket like duplex, inconel, we are already making, and we have a handful of them right now under execution.
Okay. And sir, we -- you did mention that we are trying to double the refining capacity by 2030. So what sort of capacity -- what sort of opportunity does it -- does lie ahead of us in terms of heat exchangers, vessels and the products we deal in? If you can just give some metric. There is a CapEx of around INR 1,000 crores happening. Out of that, how much pie would come to us in the market as in what sort of opportunity is there?
Yes, so what I said was India, which has articulated this region a number of times that we want to double our refining capacity. So it will see a lot of refineries coming up. You would have heard in the news, even the Ratnagiri, one of the largest refining project that is being talked about, that's also now on the discussion.
So these kind of refining projects will come. In terms of what is the kind of opportunity that we have, say, for example, the example that you gave, INR 1,000 crores comes in. Static, generally in the product portfolio that we as Anup Engineering would be interested in because there are some products where we are not qualified, some products which we are not interested in because they are too small. So the pie that we would be interested is in roughly about 2.5% to 3%.
Okay. And out of that, if I get it at 15% to 20% is the conversion of the bid pipeline, right?
That is correct. That is correct. So if you see any project refining or a petrochemical project being announced, you would see a number of, say, 1 or in between $1 billion and $2 billion kind of a project. So roughly about INR 7,000 crore to INR 13,000 crores worth of project. So that's the size of the project, out of which the product portfolio that we would be interested in would be roughly about 2.5%.
I now hand the conference over to Mr. Reginaldo Dsouza for closing comments.
Yes. So thank you so much, everyone, for a very interesting and interactive session. We were quite happy responding to all the queries and clarifications that you wanted. So I'm sure going forward as well, we will have your understanding, support and guidance as we take this journey towards a glory future, creating a win-win for all our stakeholders. So once again, a big thank you, and take care.
All the best.
Thank you very much. On behalf of the Anup Engineering Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.