Bharat Heavy Electricals Ltd
NSE:BHEL
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
152.25
332.7
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Bharat Heavy Electricals Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Bharat Heavy Electricals Limited Q2 FY '23 Earnings Conference Call hosted by ICICI Securities. As a reminder, all participant lines -- There will be an opportunity for you to ask questions after the presentation concludes. Today, decision turn the conference call operator by pressing *0 on your phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Modi from ICICI Securities. Thank you, and over to you, sir.
Thank you, Aman. Good evening, everyone. On behalf of ICICI Securities, I would like to welcome you all to the Q2 FY '23 Earnings Conference Call of Bharat Heavy Electricals Limited, BHEL. Today, we have with us from the company, Dr. Nalin Shinghal, Chairman and Managing Director, along with the senior management team. We will start the call with opening remarks on the results by Dr. Singhal. First, which we will have a Q&A session. I would like to now hand over the call to Dr. Shinghal for his opening remarks. Thank you, and over to you, sir.
Thank you, Rahul. Good evening, everyone. I'm Nalin Shinghal, CMD, BHEL, and I have with me [ Shri Matienukagera ], Director, Industrial Systems and Products; Shri Upinder Matharu, Director Power with additional charge of Director, HR; and [ Shri Prakash Sagasta, ] Director, Engineering and R&D. A very warm welcome to all of you. The Indian economy is expected to be amongst the fastest-growing major world economies in the current year despite impact of geopolitical conflict, increasing inflation and subsequent monetary tightening by central banks across the world. Ordering for thermal coal-based power plants is showing signs of revival after a gap of 4 years. With increased focus on energy security across the world, especially after the Ukraine war, the need for thermal power as a reliable and affordable source of power has become obvious. With the order for 2 to 660 megawatt NTPC [ Talcher ], BHEL has asserted its market leader position in the segment and is targeting the other upcoming opportunities, which are now visible. BHEL is focusing on becoming the market leader for providing flexible operation solutions for thermal power plants, which is a key requirement for integrating renewable sources of power generation with the grid. We have achieved a significant milestone in this direction by successfully demonstrating the same at the [ 1-in600-megawatt rigger ] thermal power plant and have already received 2 more orders in this area. Government trust fund CapEx is presenting opportunities across core sectors like transportation, steel, refineries, defense, et cetera, and BHEL is looking forward to capitalize on the same. In the Transportation segment, we have received orders for 22 [ W98 ] locomotives from Indian Railways. 90 sets of IGBT-based 3 phase dry propulsion equipment for [ W89 ] locomotives from CLW, and 35 sets of IGBT-based composite converters for 3-phase WAP 5 locomotives from BLW, amongst other orders. In the transmission segment, we have won orders for execution of 400 kV Nemat new substation and extension of 400 [ kbhorga ] substation and 400 kV [ Manor ] substation from Nimac Transmission Limited, along with interconnecting transformers of various ratings from PGCIL. Similarly, various orders for compressors have also been received from both private and public sector customers from refinery segment. In this changing business landscape, BHEL has reviewed its corporate strategy and has identified cost competitiveness and timely and high-quality delivery to be the cornerstone for BHEL in the short and medium term with core engineering and technical progress as a key element for long-term sustainable growth. The recently developed corporate strategy plan 22-27 therefore, focuses on turning around the company with initiatives focused on cost effectiveness and enhanced revenue from value-added services as well as increased market share in conventional areas. Further, the company is targeting to diversify into multiple allied businesses and is building capabilities for the same through both in-house development as well as partnerships for sustained growth and profitability. BHEL being the pioneer for classification of highest Indian coals in the country is now working towards developing new markets for coal to chemicals. We have entered into strategic MOUs with Coal India Limited and Neville Ignite Corporation India Limited for setting up coal and lignite based gasification plants. Under these MOUs, BHEL will jointly set up a cold ammonium nitrate project with Coal India Limited based on gasification of highest Indian coal and a lignite-based gasification pilot plant with NLCIL for power generation utilizing BHEL indigenously developed pressurised, fluidized [ bed ] gasification technology. This is a major step towards meeting the national coal gasification mission target of 100 million metric tons and provides the twin benefits of commercialization of indigenous technology as well as substituting high-cost energy imports. Internally, the company is further streamlining its operations and improving systems and efficiencies to deliver quality products and projects within customer time lines. Amidst increased input costs, both material and manpower. The company is giving impetus to optimizing both fixed and variable costs through design optimization as well as budgetary control. As regards to order booking performance during Q2, up to Q2 FY '23, we have booked orders worth INR 14,511 crores, including taxes and duties, out of which the Power segment is INR 1,174 crores. Industry segment is INR 3,155 crores and the remaining is from exports. The total outstanding order book as on 30th September 2022 stands at INR 1,376 crores, out of which the power sector is INR 88,973 crores. Industry sector is INR 2,677 crores and INR 4,726 crores is from international operations. In addition to the above, we are favorably placed in the 1 to 800-megawatt NTTP Vijayawada FGD order and the number of spares and services orders. In captive segment, we are placed favorably in CPCL 4 to 34 megawatt GTG and 4 into 125 TPH HRSG and 3 into 165 utility boiler. Currently, tendering is underway for 300 to 800 megawatt NLC Talabira thermal power project, 2 into 660 megawatt Neyveli thermal popstation Stage 2, 12 into 240 Dibang hydroelectric project and tenders for FGDs of around 15 gigawatts are in various stages of tendering. In the Transportation segment, sizable orders for electric locomotives and train sets are under tendering. Coming to financial performance. Revenue from operations for second quarter 2023 is INR 5,203 crores, as against INR 5,112 crores during the second quarter '21/'22. The revenue numbers could have been better but for the lower opening order book available for execution. Higher numbers stand at INR 9,825 crores versus INR 8,014 crores last year. The H1 number, indicating a growth of about 23%. Loss before tax for the second quarter 223 is placed at INR 201 crores as against a loss of INR 88 crores in the corresponding period in the last year. Loss before tax for H1 stands at INR 456 crores as against a loss of INR 681 crores last year. However, there is a positive profit after tax at INR 10 crores in Q2 '22 and '23 as against loss of INR 67 crores in the corresponding period last year. In Q2 '22, '23, the company has a marginal negative EBITDA and a loss at PBT level. However, PAT is positive due to tax refunds during H1 2023. Interest income of INR 106 crores has been received on tax refunds and the same is accounted as other income. The cost reduction drive continues and the manufacturing, administrative and SMB expenses in H1 as a percentage of total percentage of revenues have come down to about 7.2% from about 7.8% last year. This saving of 60 basis points is coming on top of the 200 basis point reduction achieved in the previous financial year. The total receivables are at INR 3,718 crores as against INR 3,168 crores at the end of March 22 and INR 13,903 crores at the end of Q1 '22,'23. The cash collection ratios have also shown an improvement with current year H1 billing liquidation at 73% vis-a-vis 68% in the corresponding period of the last year. Thank you all once again for joining this conference call. We will take questions now.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press *1 on their telephone. If you wish to -- Participants are requested to use handsets for asking your questions. Ladies and gentlemen, we will wait for a moment. The first question is from the line of Deepak Krishnan from Macquarie.
I just wanted to check on the pro pipeline, why you indicated to project after January? Do you kind of expect them to be bid out by FY '23? And just maybe from a longer-term pipeline, 1 year out, how do you kind of see the tendering pipeline, especially for the power sector?
The Talabira project, we are expecting to be completed in the current FY.
[indiscernible]Ă‚Â Talabira tender is already out of which technical bid has been submitted by the bidders in [ BHEL ]. So financial bid is yet to be invited, and we hope that within this financial year, the financial bit permission will happen and that may reach maturity. And as a tender of 2 660 lignite was nearly Phase 2. That tender is also out and it's a bit submission is --
Then I don't think will... Will come in the current year.
Yes, maybe in the first quarter of FY.
Any longer-term pipeline, 1 or 2 year out that is...
Based on the ties have on interest in setting up our plants. They are the old power plants have been and they'll be setting up new power plants. We are already in discussion with Arana, Gujarat and BBC. They are close to some 4.6 gigawatts of tenders are expected to be there in the next year, next financial year.
And sir, maybe just one follow-up question. I think on profitability, we still see that a capital level the company is still reporting the offers, and you had indicated a couple of quarters ago that probably you require INR 30,000 crores on an annual basis to break-even. Are those 2 factors still there? And do you kind of see some improvement in profitability with exhibitions?
You see what has happened is material costs have continued to rise, while a lot of efforts have gone in, but in the last year and forced this the change in the geopolitical situation. Steel prices, copper prices, they have all these very various and fuel has all gone up. So that is what has really affected us quite badly. With the turnover going up, we are trying to take with our efforts on cost optimization and improvement turnover. We are looking to attack that. Of course, the old orders being on a very competitive basis that continues to be an issue for us. But as the ordering picks up, I think this should -- we should be able to do better than this.
Sure. Maybe just one last question from my side. Any the provision -- net provision created or withdrawn this quarter and any S&P that was reported in this particular quarter, this free data [ man ]?
So the net provisions in this -- We have a creation of INR 238 crores withdrawal of INR 378 crores and a net provision of INR 118 crores.
Sure. And any gain in the quarter or the one month? Any foreign exchange gain in 1. We see some of the cash flow [indiscernible]
We have a gain of INR 20 crores in this quarter.
Sure, sure, sir. So those are all my questions. I'll get back to the question. Thank you.
The next question is from the line of Mohit Kumar from Dan Capital.
Sir, the first question is on the NTPC and Adani, the EPC orders. I believe that MTPC is talking about more EPC orders, specific [ Lara, ] Singrauli and Talabira and [indiscernible]. Are you hearing something on the same? Secondly, on the Adani also 1.6 gigawatt, are we trying to -- are you bidding for it?
Regarding NTPC, the tender for Singrauli and [ Nara ], which were -- These tenders are there earlier and were [ annuled ] but we are hopeful that these tenders are being again being safe in market and in the -- Maybe in the first quarter of FY '24, these tenders should be out. Regarding Adani, Bambora, because there was certain change in the parameters. So due to this, I think the implication is there and we are waiting for the next decision from Rami in this regard.
Understood, sir. Second is given that there is a lack of competition now? Are we expecting better pricing given the last cycle, I think you suffered from higher competition, especially in FGD? Are you expecting better pricing in the coming orders for the power plants and FGD now?
Actually, if you look at the pricing, which comparing with the earlier set of orders, lot 1, lot to orders of NTPC, the pricing is better now, and it is significantly better than the one we shared a bit earlier. But this level -- but still it will be very competitive at this stage also. So the price level has increased significantly from the earlier levels.
Also, I think we are moving towards more favorable payment terms as well.
So how is the tender terms change, sir? For the EPC contract, is it better now? For [ DDM, DMD ] and the power plant?
The entire period, you see in the interim period, we have shifted to fairly adverse set of payment terms. But if you look at [ Talcher ], the term to come back to more or less come back to our earlier terms. If you look at something like a Patratu under FTD orders, terms have become quite adverse at that stage which has caused a huge stress on our liquidity as well.
Understood that. Thank you. best of luck
The next question is from the line of Atul Tiwari from Citi.
Yes, sir. Sir, just INR 14,500 crores of order inflow was from the first half, right, on or the second quarter?
This is the first half. Is the first one.
Okay. And sir, how much of it was in the second quarter?
The second quarter is INR 12,004 crores. Which is...The [ culture ] one is a very major contributor in the second quarter.
Okay. And how much of this is also in the INR 27 crores?
INR 747 crores is [ culture ]. Excluding taxes.
Sorry, this is excluding taxes.
Sorry, this is INR 840 crores, including taxes. INR [ 8,040 ]crores.
Okay so in 8 74s included or INR 7,400 crore in..
INR 8, INR 4 crores INR 12, INR 8,700.
Okay. Okay. 740 including tax rate. And say, what is the execution time line as for the EPC content for this order?
For [ Tarkett ] indication time line is 48 months... For Unit 1 and for Unit 2, there is the additional 6 months.
Okay. Okay. And sir, my second question was the cash flows and the balance sheet. So in the first half, operating cash flows have been negative against the positive cash flow in the last year and first half. Do we expect ultimately to break even on the cash flow basis on operating cash flow basis this year or... ?
We are making all efforts in that direction, but we have faced problems in certain states delaying the payment, but a lot of effort has gone into that direction. So that entire effort is there that we should improve the cash flow in the second half.
Okay. And sir, how much of a net debt as of the quarter net?
Net debt at the end of the quarter would be INR 5,680 crores.
INR 5,800 crores. Okay. And I mean just broadly speaking, as I say, for example, in this Talcher bid, how many bidders participated and if you could kind of share what was the difference between your bid and the next higher bid?
So there were 2 bidders, BHEL and LNT and the difference, including the loading it was close to around INR 1,000 crores. Including the technical loading, it would come to almost INR 1,000 crores.
Our next question is from the line of Nikhil [ Avanka ] from Dam Capital.
Thanks a lot for the opportunity. [Technical Difficulty] So the capital plan and the rail of 3.1 million... Making... Am I audible now?
Yes can you go ahead, please.
So the CapEx plan by the railway by around INR 3.1 trillion only for rolling stock. What kind of outlook do we have for the railway orders in the medium term? Also can you close some light on the defense orders as well as there is more focus on indigenous equipment and everything from the [indiscernible]?
So railway is a very serious segment for us. And you are aware earlier that we had got a first order for the [Ă‚Â transborder ] train set and going ahead, there are 3 more tenders in the pipeline. One is opening very shortly. So we are working with the collaboration with other players to bid for these orders. And we are very seriously making an effort to get into this business in a full-fledged way.
Any estimate as to what is the target for it?Ă‚Â Any estimate as to the targeted order inflow for it or railway segment?
I don't think I'd be in a position to give you any estimates on missing because we are seriously bidding for all the 3 transit orders as well as the local orders we are going for that. But I don't think we can give you a number on what [indiscernible]
And the outlook on defense, sir?
Defense, we have already got a -- for the -- you are aware, we have been a major supplier for the SRGM [ superpit ] cannon, which is the main cannon on the ships. So we are now going to upgrade the SRGM. So we've already got the order for the first 2. And in the entire -- this entire order over the next 4 or 5 years is expected to be almost 50 [ grams ]. So that process is still on, and we are the sole supplier there. Then we are also looking at a number of other areas in the defense. We are working on the marine gas turbine, we're looking at some of the development under some of the strategic projects. So there are a number of other projects that we are looking at on the defense front, on the developmental aspect. Air defense [ guns ]. So that we are -- we have -- that's another major segment for us for the future.
And sir, the order the INR 14,500 crores which you announced, it is the orders that you have already received. Can you give us a value of all the tenders that are on right now?
All the tenders will be even right now.Ă‚Â So the major one, of course, you're already aware, the major ones has already come through, which was Talcher, but as of now, what are there in the pipeline is the Vijayawada FGD, 800-megawatt the FGD and [ Ukay ], Unit 3 and Unit 5, the -- this is the R&M. I don't -- In addition to that, of course, in CTCL, as I've already mentioned, we are favorably placed in the [ 4,034 ] megawatt GTG and the [ 4,125 ] TPS HRST and [ 3,165 ] TPS utility boiler.
Okay. So the value of it, can I guess?
Value, I don't have at the moment. [ Ukay ] it will be close to INR 300 crores... It's about -- it's about INR 300 crores for the [ captive ] power, we don't have the.
This is we have the figures. The total overall industry sector, about INR 5,000 crores in [indiscernible]
No, L1. The question is [ welcome ]. About INR 1,000 crores is the figure in the... Where we are L1.
Understood. And just a final question, sir, what is the executionable order book right now in H2 '23 and '24?
So the executable order book is INR 50,426 crores, including taxes.
Understood, I will get back in the queue.
The next question is from the line of Pulkit Patni from Goldman Sachs.
So just one question. In line with the executable order book question that somebody asked previously. Sir, currently, the impact of Covid and execution has gone. We are sitting with almost INR 1 lakh crores of order book, 80,000 executable, why the top line is still not where it can be? I mean, doing INR 5,000 crores of top line on a INR 2,000 crore order book still seems quite low. So are you facing any challenges still in terms of execution? How should we look at the ramp-up of this now that you've got one large order, if you could highlight a little bit on that?
So Pulkit, if you look at the opening order books, in fact, and the percentage execution during the year, the execution during the year as a percentage of the opening order book, I think we are almost at a record level in the last year. In the current year, again, the Q1 -- that entire -- the Covid effect, which was there in Q1 last year went away in the current year, which resulted in a substantial improvement in our execution -- On the execution front. So, I don't think that is correct. We are the -- If you look at the way the order book has panned out over the years, I think the percentage execution is actually going up. We also -- as we had mentioned in the last [ con ] call when you were doing the previous year, our execution in the past year has been at perfect record levels. If you look at the physical execution.
Yes, sir. Sir, basically, what I'm coming to is that for us to get to a INR 30,000 crore kind of a top line back on back. With this rate of execution, I don't know how do we get there? So just trying to understand what is like the -- even with the new orders that you've won, what is the kind of best case top line we are looking at, say, in FY '24, if you were to look at that?
So I wouldn't be in a position to give any guidance that also for the year ahead, for the next year. But let me say that the new orders that we are getting, you see the orders you're receiving this year, almost 1.5 years, 18 to 24 months is the time when the actual execution and turnovers will start coming substantial like t[indiscernible] coming from those orders?Ă‚Â So these would start panning out towards the second part of 24. Then whatever orders for the orders, you see, we are looking at a strong while today, the numbers in the orders in the pipeline or the tenders in the pipeline are not that much as compared to what is required, you see if you look at the $5 trillion economy. And if you look at what projections are coming under the draft NEP. So, from that perspective, I think we should be expecting almost 4,000 to 5,000 megawatt of ordering in the next 4 to 5 years. You see the discussions are on a lot of those are likely to start becoming visible in the coming year, those tenders. As Mr. Mathur had already mentioned.
Fair point, sir. So 4 to 5 gigawatt each year is what we can build in for the industry.
We should be looking over the next 4 to 5 years because if you're looking at our -- the total energy requirements, so from that perspective, there's a total of almost 15 to 16 gigawatt that would be required over the next 12 almost 4 to 5 years?
[indiscernible]Ă‚Â [Technical Difficulty] there in the market, but tenders are most of the state does.[indiscernible]Ă‚Â looking at the age of the plants also, I think there is a significant chunk of power plants, which has more than -- more than 30 years old, close to some 27 gigawatts. So many of them are around 28 gigawatt plants above and need to be retired for which some plants has all been given by [ CDS ]. But tender is not happening at that base.
But we expect that situation to change in the coming year. You see as this -- as you've already seen in the current year, the shortages and the issues which have come up. So that is gradually picking up pace.
Got it. Thank you for that.
Thank you. The next question is from the line of Lavina Quadros from Jefferies.
Sir, just wanted to understand, outside of the core BTG business, you explained the orders in the trains, you explain the orders in the defense part of it. Any other areas or on the MOU side or, let's say, use of your strategic use of your facilities or something else that is looking very optimistic according to you? That could fructify over the next 12 to 18 months?
So one major area, which I mentioned also is the coal gasification. Under the national mission on coal gasification, we're looking at there, the target is 100 million tonnes per annum by 2030. The fact that we have indigenous technology, which is a commercially proofed technology for gasification of the highest Indian coals, I think that puts us in a fairly good position on the gasification front. And we are targeting that we have a team in [ Missiomore ] working on the technical side, looking at the development --- The detailed development of the commercial plant. So that is one major thing we expect to come through in the near future. Then going ahead, of course, nuclear is going to be another major area on the energy front because as we look at our net [ 0 ] targets, so we'll have to look at that for the longer term. Another area, of course, would be carbon capture. That is another upcoming area because now we see that coal is an imperative. So mitigation will have to be done through carbon capture. So that would be the next area that we would need to look at. On that front, of course, you are aware of the AUSC development that we have made. We are now looking at our first technology demonstration plant for the AUSC. So you see, if you look at it on the perspective of replacement of the -- what Mr. Mathur mentioned, almost 28,000 megawatts of plants are over 30 years old, which are so critical. So replacement of those with AUSC would make a significant impact on our emissions also. These are the sort of things that we expect to become visible in the near future.
Coal gasification, any quantification of the overall opportunity? Overall, is one part of it, but let's say, what could be the...?
As I said, it's 100 million tonnes at the coal contribution nation top 100 million tonnes over --- by 2030. So the numbers are quite substantial there.
Understood. Thank you.
Thank you. The next question is from the line of Abhineet Anand from Emkay Global.
Yes, sir. So from the 81,000 execution order book based on clients' schedule, what could be a broad number for the execution this year, sir?
I don't think we'll give a specific number on that.
So I think just a color at least may not be an exact number, but maybe something will help us because execution is something very difficult to predict. I was hoping some broader numbers from you guys would be very helpful.
Abhineet, I don't think we'll give any specific numbers on that.
Okay. So secondly, on the payment terms, can you restate what's the exact payment terms of, let's say, in Talcher, EPC contract that we are at?
Sorry, can you repeat that, please?
Payment terms for Talcher
I'll try to respond to this Payment terms of debt payment in the state right now. But these are more or less similar to the payment terms that we used to have earlier on most of the power plant orders that we had. Like there was a certain change in the case of Patratu orders where payments most of the times are backloaded and they were packed with the milestones and we can have realized in only one milestone per [indiscernible] but for Talcher payment terms are almost restored to the earlier patent that the significant payment is received upon the dispatch of which close to some 60%, 65%, around 60%. So that's why it has come back to the previous kind of payment we see.
Okay and at the end, but we'll still have for performance guaranteed, so will you still have the 10% left. Is that right?
Also quarterly [indiscernible] payments related to the completion of performance guarantee tests and trial those will continue to remain on the same pace.
Okay. Secondly, I think sir said about interest income on the tracks refund as part of other income. What is that amount?
So there is INR 160 crores tax refund and INR 16 crores interest.
So that number is [ 100 ]. So I think the tax part negative tax which is part of [ tentative ] shown. Lastly from me, this -- you told about the 15-year FGD opportunity. Can you just give some time line to it?
Mr. [ Paruthura ] will answer that
Timeline, which has given a document in which they are mentioning about 28 gigawatt that's to be set up in a timeline of 22-27. Further beyond that, also they have given a plan of around 30 as it's totaling to 45 gigawatts in total. But the tenders that we are seeing visible in the coming year. There's close to some 4.5, 16 gigawatts. Based on the indication that we get from different utilities as well as something like NTPC in a time of 2 to 3 years, close from 15 gigawatt tenders should be there in the market.
I'll just repeat what I understood because there were some things that were not clear. So 4.5% you are in something which can be near term and over the next 2, 3 years, 16 gigawatts can be expected. Is that right?
That's right. May be the tenders that will be out in the market.
The next question is from the line of [ Pashna Matan ] from ICICI Securities.
Sir, I wanted to ask you about the -- What is the proportion of our top line coming from payers and service? Maybe you can give the Q2 number or one for H1 as well.
[crosstalking]Ă‚Â Roughly about 12% or so, we are looking at INR 1,100 out of 30, 9400. That's roughly about 12%.
Sir, how are we looking at a service which number [indiscernible] going forward in the coming years.
This is an area where we are actually trying to ramp up this number because we have now taken up entering into long-term spares and service agreements with various customers. Which would speed up the ordering cycle and would also give us a bigger share if the complete ordering for those units would come to us. So with that, we -- and of course, this other -- the [ AMĂ‚Â ]to speed up, we have also started a process of advanced manufacturing action to reduce our cycle time. That, along with the flexibilization order, I think that should help us ramp up this number in the coming years.
Okay, sir. And sir, last year there was a large order from U.K. side. So going forward, what is the opportunity that we are looking for? How often can we expect a similar large order like the [BBI ] [indiscernible] you had won in FY '22.
The nuclear has been quite cyclic. As of now, we don't have any projections on that. But then there is -- you see from an imperative of the net zero, I think this is something which is -- which will go up. There is now a focus on SMR small modular reactors also to replace the old thermal sets also. So that's another direction, which it is taking. So nuclear should be going up.
Okay. Sir, any opportunity size or size of the order that you want to [ mention ] about?
No. At this stage, it will be too premature to actually talk of any numbers, but that's an area that the growth that is becoming visible.
Okay and sir, coming to the overall fixed cost. As you mentioned, our other expenses have come down to around 7.2% of the revenue. And even employee cost has been quite stable over the past couple of years. So going forward, what are the cost measures that we are taking to control our expenses and how further we can control the fixed expenses going forward?
So in fact, there is a huge effort which has already gone over the last few years in this area. I think we are reaching almost an optimal level, I'm excited about that. The fixed cost part is concerned. While we are still making efforts, but I think the major efforts now will go into areas of cost optimization, your material costs and review of -- Basically designed to cost sort of initiative that is the way we will need to go ahead.
Okay. And sir, one last question on our diversification strategies. Are you also looking at electrolyzer manufacturing?
So we had set up a hydrogen business group, which is looking at fuel cells and [ hectoliters ], but we are not in a stage to actually say anything firm on that yet.
Thank you. The next question is from the line of Harsh Shah from Jefferies.
Can you provide the split of the receivables for the quarter?
So we have a total outstanding of INR 33,718 crores with contract assets are INR 2,094 crores, and our trade receivables at INR 6,624 crores.
The breakup between the center state.
Central will be 37%. Stated 42%, private 14%; and international 7%.
Lastly, on the 2Q order book number, it would be great if you could just repeat the number [ metric ]?
The Q2 order book..
Yes.
So if you look at the order booking for Q2, the total is INR 12,004 crores, of which power sector is INR 9,600 crores. Industry sector is INR 2,286 and international operations is INR 118 crores.
Okay. Thank you so much.
The next question is from the line of Sumit Kishore from Axis Capital.
My question is that with the increase in raw material costs that we have seen. What is the new capital cost for the new debt thermal power plant today, including the emission reduction CapEx in [ a per ] megawatt, you could give us some sense.
It will vary on the configuration. So if it is a single unit that may be varying between INR 7 crores to INR 8 crores per megawatt. If it is a multiple unit composition where the OPs can have a common setup for 2 units. So that may be ranging between INR 6 crores to INR 7 crores. Of course, it will depend upon the kind of scope that is built in the EPC contract. So specifically, if you look at the Talcher order, it comes to almost INR 66 crores per Megawatt. I think that could be a [indiscernible] to look at.
So at INR 6.6 crores, you know that BHEL in the past has made a 40%-plus cost margin, which is now covering around 30%. I'm just trying to also get a sense from you that this particular bit that you have made would be sort of helping you get your gross margins back to earlier levels because of competitive thresholds and the new realities where all the others are limited, you have to sacrifice pricing also to some extent, given the difference between L&T and you, it was only INR 1,000-odd crores on this contract.
So you see we would be looking at a mix of specifically but for Talcher, of course, we are looking at improved margins over what we have had in the previous years. And as the ordering picks up, those margins should then stabilize. At the moment, you see even though a lot of lots is visible, but the real order has not yet happened. The only one which has happened after 4 years. So you can well appreciate that it has been a competitive order coming after 4 years, the first order has to be a be a competitive order. But that situation should change over a period.
Okay. And given the opportunities that you're looking in coal gasification [indiscernible], is there any CapEx that you would need to lose to sort of bring your manufacturing capacities or earning conditions then to grow -- so what would be your CapEx for FY '23, FY '24.
So the '23-'24 CapEx is still to be worked out. But we are now looking at significant transaction CapEx because we have to -- we are essentially a manufacturing company. And going ahead, we have to stay in the field with modern facilities. So that is going to result in higher CapEx in the coming years.
But you have planned, is that right? For this fiscal next.
One date is in the process. So once our budget is complete, those figures will get filed.
Okay. And just to understand, for coal gasification, what is the thumb rule on CapEx if 1 million tons of coal to be gasified. What is the CapEx for the plant that needs to be set up?
It's a little early for that. Because the first plant, we are still -- The engineering is going on. Now that first plant will be at a certain level where we are also looking at some sort of a PLI or a viability gap sort of funding to be there. As the numbers pick up, it will stabilize. So I think it's a little bit early to give us a specific figure it.
Thank you. Next question is from the line of Deepak Krishnan from Macquarie.
I just want you to understand your current order book, how is it between fixed and variable price contracts?
Fixed and what else? Can you repeat that?
How much of your order book is fixed priced contracts where you cannot pass the cost pass-through and, you know what? [indiscernible].
So I think almost 50-50 sort of a break up is there. But I think going ahead, the PBC will be -- We expect PVC to become more of a norm. But I'll share also how the PVC is [indiscernible]. Going ahead, I think ordering will largely -- I think that era of fixed price contracts, people have understood the repercussion of fixed price contracts on the execution. So, I think that is changing.
Sure. So maybe just one follow-up question. So if you look at the draft CA, it says that the process will be power plants go from about 36 gigawatts to 274 gigawatts. That's roughly about close to 43 gigawatt of gross addition. But if you take the 25 gigawatts that's under construction, that just employs a 17 gigawatt increment in capacity over the next 10 months. I just wanted to reconcile this PA number with your number of about 4 to 5 gigawatt incremental capacity additions? Just want your view a bit.
So you see this is the total increase that you're looking at. But at the same time, what we had mentioned was about 28 gigawatt of plants over 30 years old, which will need to be and which are lower efficiency, higher pollution. So they will need to be replaced. So that number will add on.
Sure, sir. Okay. And maybe just on payment conditions. How are we still have over 42% of receivables coming from Q3. Essentially, now I understand it's largely under 1 and 2. But have we seen any improvement in payment dispenses from those things? Or how comfortable are we in FGD as well as conventional power of participating in step-based orders and the agreement terms?
Over the longer term, we are actually looking at improvement. However, as you've seen for the -- when we told you the Q2 figures, there has been a fall back because there are some specific issues which have arisen over some funding issues to a couple of states. But I think over the longer period that the issue -- a lot of the issues that got sorted out [ Tango and TSMC ] and those places. I think we expect this phase to stabilize.
The next question is from the line of [indiscernible] from Omkara Capital.
Giving me the opportunity. There are 2 specific questions. I want to understand first that in terms of the EBITDA level, then we are going to see the stability in the upcoming years or in the upcoming time, [ we based ] that from this time, we are going to have a stable EBITDA at least in a real positive side. Secondly, when I see the day, now you are coming into the new businesses. So next couple of years, where do they see itself in terms of the business segment also because it's a long time. Our financials are extremely volatile, and we are not able to generate very strong margins. So first what's the focus of the management of being going forward if you can at least share with the people on the call and these are very normal questions to answer.
I think if you look at -- from the top line perspective and the business perspective, we are -- as you already mentioned, we are looking at diversification and some very strong areas that we are looking at are the coal gasification, AUSC, nuclear and then, of course, defense and railways. If you're looking at the bottom line and the EBITDA perspective, you see today, there is a lag typically between when the order is -- when we are making an effort in the technology development, getting the order and actual turnover happening against those orders.Ă‚Â So as I mentioned earlier, in the current year as well as in the short term, we are facing challenges on account of the competitiveness of the previous orders. As the new order execution picks up, I think that should reduce and we should be able to improve on both the top line and the bottom line.
So can you give some timeline in that actually tentative one? Because FY '23, I understand, we are just 6 months to over. The next 6 months, we will contribute 23. With these new orders, at least by FY '24, '24 mid of FY '25 because every PSU vertical is doing good in your thing. So I just want to understand in terms of why we are -- it means there's something that should be at a very far-side side from the this year onwards, we are going to improve this and this. But we are not coming up to that level to be very honest. And other [ PS ] plays extremely very good, though I can understand your comparison space is not possible. But at least tentative timeline you can share with the people on the call because you have to have a confident move to give to the investors, that you know from this timeline and that timeline, we are going to be there. Something like that, if you can see.
So you see, I'm not sharing any specific time lines in specific targets and time line in that sense. But I would repeat a couple of things which I have said earlier. So on the one you see the entire issue on execution fund which was our shift over from turnover centric to a project-centric operation. Now that has stabilized, and which is why I said the last year, we mentioned earlier,Ă‚Â the execution has been on a record front. And if you look at the percentage of the order book on hand, again, that has been on record front. So that is one sort of data point. The second, as I said, again, was the old orders are competitive, they will take another year, 2 years, to complete, and we have to complete. We cannot afford to sort of -- even if they ask or there are losses, whatever is there, we have to complete the others. The new orders are coming in, and as I've already said, they would take a year, 12 months to 18 months to 24 months for that execution to come in and the start contributing to top and the bottom lines. So I think between those parameters, you can see what's happening. I wouldn't go beyond that to give a specific timeline when top line would stabilize or when EBITDA would stabilize. But I think these are the parameters we are working with. And let me assure you though we may not be giving you specific numbers and the thing, but the figures you are seeing and especially the execution figures you are seeing and the order booking figures you are seeing and the diversification you're seeing is and an outcome of a very serious effort on all these fronts.
The next question is from the line of Abhineet Anand from SBICAP.
So this unexecutable order book stands at around INR 45,000 crores, because [1 Lakh, 81 ] is the difference. So what are these projects and why is it still in the book? I want to understand that?
I'll request Mr. Matharu to take to take that.
In terms of... In terms of megawatts, if the figure is part around [indiscernible] and the project is a long list. I can mention a few that there have been some orders which have already -- some projects like which are on city like [indiscernible] ..
Sorry to interest, can you speak near to the mic, we're not able to hear you.
You are still not audible.
Audio now? . So if you look at the projects which are under hold, close to some 19,000 megawatts of orders are under hold. So some of the projects, which are -- which don't have any hope of --, which are in the liquidation or are under LCLT like [ Rapindia ], [ Visa Power ]. Besides that, we have hope of real of some projects like [ Upu of Tanja ], 2 [indiscernible] and [ Damolin Ragnar ] put also, these are expected to be revived. And besides there's a long list, I will not be able to take all the names. So this figure in terms of megawatt is coming close to 97 [ awards ].
Just to understand if the contract is under liquidation or nil, has that been removed from the book?
[Technical Difficulty] -- it's not been more because we have no one.
Based on the issue is that commercial settlements are pending in a lot of these cases. So once that -- those settlements are done, then there'll be the time. So there will be 2 types of things here, you see. One is where we are expecting revivals. And the other is where NCLT case is going on or other proceedings are there, where arbitrations are on their settlement is spending. You see that we'll close then to complete this item finish quickly.
So is it possible to just bifurcate the amount in the 2 buckets that you have said because I expected on revival part is something which is crucial, which can add to our order book in coming years.
We can share that separately. That information, we are happy to share, we'll share that separately.
Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing remarks.
Thank you, and over to you. Patient hearing and an interactive question answer session. And thank you very much for your interest in BHEL and goodbye.
Thank you very much. Ladies and gentlemen, on behalf of ICICI Securities, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines. Thank you.