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Ladies and gentlemen, good day, and welcome to the Capacit'e Infraprojects Limited Q4 FY '22 Conference Call, hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shreya Manivannan from IIFL Securities Limited. Thank you, and over to you, ma'am.
Thank you, Mike. Good morning, everyone. On behalf of the IIFL Securities, I welcome you all to the earnings conference call for the fourth quarter and FY '22 for Capacit'e Infraprojects Limited. We're pleased to have with us Mr. Rohit, Executive Director and CFO; Mr. Alok, President, Corporate Finance; and Mr. Nishith, Head, Accounts and Taxation. We will have opening remarks from the management, followed by a question-and-answer session. Thank you, and over to you, sir.
Good morning, everyone. We would like to extend a very warm welcome to our Q4 and FY '22 earnings call. I hope that you and your loved ones are doing well. Along with me, I have Mr. Alok Mehrotra, President, Corporate Finance; Mr. Nishith Pujary, Head of Accounts and Taxation; and SGA, our Investor Relations team. I hope everyone has had an opportunity to review our results. The presentation and press release have been posted on the stock exchanges and our company's website.
Before I take you through the operational and financial performance, I would like to highlight a few points. For the Indian real estate sector, FY '22 has been an exciting and a challenging year, both. The sector has made significant comeback aided by healthy economic growth and sector-specific government initiatives.
The pandemic inspired trends together with low interest rates, affordability and other favorable factors fuel the sector's progress, and it is expected to continue to do this in the coming years. Commercial properties are equipped with the latest technological advancement which results in achieving new standards.
In the commercial sector, flexible working spaces and co-working have emerged as a prominent market segment. Net leasing is expected to increase as majority employers resolve to work from office. The real estate volumes were higher than pre-COVID levels on back of receiving impact of COVID-19 pandemic. We anticipate a healthy sales traction going forward once the things are normalized in the post-COVID era. Real estate sales will rise up.
Despite decline in stamp duty benefits for the consumer, the market is witnessing rise in property registrations. The new launches by large developers will be driven by multiple tailwinds such as healthy sales momentum, demand shift to organized players, which form a big and large portion of our clientele, a robust balance sheet and an asset-light model of growth.
The second wave of the COVID pandemic had an impact in the first quarter of the current financial -- last financial year. The change in contract comes from a large client in the private sector for whom materials were formerly included in billings, which are now provided by the client, had an impact on the accounting revenues in quarter 4. We are pleased to inform that the Municipal Corporation of Greater Mumbai has issued an order for proposed turnkey development of multi-speciality hospital in Mumbai worth INR 599 crores, excluding GSTs, and at the same time, the company has also received the order worth INR 227.45 crores excluding GST from prestigious private sector client for construction of residential project of driving Civil, RCC, [indiscernible] Mumbai.
These new orders allows us to diversify our clientele, drill rate, additional revenue and managed commodity risk via complete pass-through mechanisms. Now allow me to give you an overview of our operational performance during the quarter. The overall order book public plus private excluding MHADA stood at INR 8,702 crores as on 31st March 2022.
Residential accounts for 30% of the order book followed by commercial and institutional at 15%, mixed use at 56%. At the end of March 22, our order book from private -- public sector was INR 5,148 crores representing 59% of the entire order book. While our order book from the private sector was INR 355 crores (sic) [ INR 3,554 crores ], accounting for 41% of the total order book. Work is progressing at a decent pace on all fronts.
Our business model has clearly benefited from our ongoing focus on client service and cash flow management. Our standard financial performance for FY '22 is as follows: Total income for FY '22 is INR 1,347. 9 crores. Total income impacted to the extent of INR 45 crores in Q4 due to change in contract terms of a private sector large client where monthly billings are being done without value of steel and concrete as the sales are now being supplied by the client as free issue.
EBITDA stood at INR 226.6 crores with margins of 16.8%. Profit after tax stood at INR 44.7 crores. Gross debt, including promoter's debt, stood at INR 328 crores. Net debt remained stable at INR 128 crores with net debt to equity at 0.13x. The working capital cycle, excluding retention, improved from 99 days in December '21 to 91 days in March '22, indicating a positive trend. Strong collection efficiency generated INR 1,172 crores in FY '22 and [ INR 297.39 crores ] in Q4 of FY'22. With this, I now leave the floor open for questions. Thank you.
[Operator Instructions] We have the first question from the line of Mohit Kumar from DAM Capital.
Yes. And congratulations on good set of numbers, especially on the EBITDA margin, given the high [indiscernible]. So my first question is on the revenues you missed booking in this quarter. And what is the revenue and EBITDA margin guidance for FY '23? That's the first question, sir.
So the revenue, which we could not get a -- booked in the current quarter due to shift of one big project where the material was earlier being picked by us and in this quarter has been procured by the client as free-issue is INR 45 crores. So if you would have added that in a normal case, the revenue would have been close to INR 390 crores. Second point is on your EBITDA perspective. Our first 2 months of the current financial have seen good track. And on basis of that, we believe that our EBITDA profile should remain between 16.8% to 17.5% going forward.
The revenue guidance, sir? For FY '23?
FY '23, we see a revenue guidance upward of INR 1,800 crores.
What is your status of MHADA order, you start work from Q4, if I remember correctly. So how much of revenue do you expect to book in FY '23? And I think that the [ book ] [indiscernible] our portion to do direct gain to stand-alone revenues. Is that understanding correct?
Your understanding is correct. On all the projects that has started in quarter 4 of the last financial year, it has booked a total revenue of close to INR 125 crores to INR 150 crores.
None of that revenue is appearing in our books because of certain restrictions in the AS-116, that is a identification of income pipelines. And therefore, both Tata and Capacit'e have agreed to sub-contract individual works through their individual companies from the LLP, and therefore, you will see recognition of revenue in the current financial year.
At the moment, there are 6 buildings which are under construction at the project site. And we believe that a total, we have also received the IOD and CC for the sale building for 6 towers. And we should be looking at recognizing at the LLP level close to about INR 500 crores of revenue in the current financial year.
It should be remembered that the honors of giving all the permission lies with the client. And these projections are based on whatever has been received and what has been committed by the client to hand over, over the next 3 months. And therefore, we shall update you during the next quarter's earnings call on any change, if any.
Lastly, on the order inflow, order inflow has been quite muted for us in FY'22 and FY'23 -- I'm sorry, FY '21, '22, how do we see the FY '23? Do you see the order pipeline looking better than last couple of years? So any guidance or you believe the kind of orders you would like to get around the...
So if you consider that we were already L1 in 3 orders in the last financial year, fortunately, unfortunately, they got eliminated, two of them in the current financial year. The third one is expected to be terminated also in this quarter or sometime thereabouts. So the order traction from our sense -- practical perspective has not been muted.
Secondly, if you look at our order book, as we speak today, is in excess of INR 9,500 crores, INR 9,400 crores. Now, INR 9,400 crores on a stand-alone basis, excluding MHADA is a very sizable order book, which really gives you a revenue visibility of 4 to 4.5 years, or at least 3.5 to 4 years. So that's one part.
Second part in the current financial year, since you say you have seen a muted last year, we expect to book at least the order value of what we execute. So the trend should be between INR 2,000 crores to INR 2,500 crores for the whole of current financial year, FY '23.
So what is the size of the third order where we'll be L1, if I [indiscernible] can level?
It will be up all sort of INR 600 crores. I cannot divulge anything else.
We have the next question from the line of [ Dasiz Navari ] from [ DAM Capital ].
Hello, sir. Am I audible?
Yes, please go ahead.
So congratulations on a good order book and everything. So I -- most of my questions, sir, you've answered, I just wanted to ask something. Sir, we currently on date have around INR 9,500 crores worth of order. And as you just like now said that it would be a good visibility of 3.5 to 4 years. So sir, our guidance for INR 1,800 crores revenue this year seems conservative and I'm sure, we can achieve more than INR 2,000 crores. So any comment on that, sir?
Let us be a little bit conservative. We shall discuss about revised target if at all, at the end of quarter 1, when we'd have con call. And if you are present in that, you may raise this question again, and I'll be happy to answer that. Let me be very honest. We have not been able to achieve what we intended to in the last financial year, and there is no shame in running away from that fact.
We've worked on the basis of whatever cash flow we had. However, we have raised INR 100 crores debt at the end of March, which has helped us to ramp up revenue in the first 2 months of the current fiscal even after providing for the one of the major labor jobs where steel [indiscernible] as free-issue. So answering your question, yes, we have all the ammunition to increase our revenues. But at the moment, let us keep it at INR 1,800 crores, and we shall look at revising it upwards, when we speak to you during our quarter 1 conference call.
Okay, sir. And one more question, sir. I just wanted to confirm the commodity prices you are able to pass completely? Or is there some lag in it? Just...
I reiterate that we are able to pass our commodity prices in totality in private sector. In CIDCO, the same will be applicable for the new MHADA project we expect. In BMC, we are able to bill complete price variation, which at this moment for the January to March quarter stands close to 16-odd percent, which more than covers the steel and cement commodity price increase. So we may not gain, but we will not lose from any change in the commodity price upward or lower.
Thank you. We have Sagar Parekh from the Deep Financials.
My first question is on the cash flow. So if I look at your cash flow statement, right? So the overall free cash flow is still negative for FY '22. So what I'm adding is your cash flow from operating activities, which is INR 34 crores, INR 35 crores. Then I'm subtracting the interest cost, which is about INR 62 crores, and then there is another CapEx of about INR 100 crores, right?
So overall, free cash flow for FY '22 is still negative INR 130 crores. My question is, how should we think of improving this cash flow and becoming cash flow positive at least for -- because you're talking about addition of another INR 500 crores in revenue that would entail another INR 150 crores, INR 200 crores incremental working capital for FY '23. So just wanted to check how should we think of free cash flow becoming free cash flow positive in FY '23?
Good question, Sagar. The point is that I had guided that we will be over and done with major CapEx for all of our projects in last financial year due to increase in commodity prices, especially aluminum, from INR 101 kg to INR 180 kg, we overshot the budget by INR 15 crores to INR 18 crores.
However, we do not expect any CapEx -- major CapEx in the current financial year. If you see that the focus on the new projects is institutional buildings, which do not require a CapEx like in super high-rises.
You also noticed that we haven't announced any super high-rise order inflow though we had big opportunities in that field over the last 6 to 8 months because the CapEx over there is nearly 8% to 12% of the project cost, which means that cash -- the cash outgo towards CapEx will be significantly lower in the current financial year.
And only with the reduced cash outgo towards CapEx and increased margin due to enhanced turnover, can the cash flow become positive after adjustments towards investing activities. And therefore, we do believe that there is a very good opportunity for the company to be cash flow positive in the current financial year.
How much would be the CapEx estimate for FY '23 then?
So the CapEx estimate for [indiscernible] including [indiscernible] terminals is INR 24 crores and the rest you can say, will be INR 6 crores to INR 8 crores. So about INR 42 crores will be the total CapEx, but this will be project specific. And obviously, the depreciation would be close to INR 43 crores, INR 44 crores in the core assets. So net increase in the core asset will be nil or maybe on a lower side.
So this INR 42 crore number is including the maintenance CapEx, right? So including the -- overall, it would be INR 42 crore, INR 43 crores, right, versus which was about [ INR 102 crores ].
Yes. So Sagar, I would like to clarify that maintenance, we write on the face of the P&L account, and we never capitalize that. We only capitalize new purchases, any maintenance, minor, major, is capitalized -- is written off on the face of the P&L account. Hello?
It seems that the participant has dropped from the question. We'll move on to the next question, sir. We have the next question from the line of Anjana Shah from Shah Investment.
So I have 2 questions. First, I just want to understand that we have lost around INR 45 crores of revenue due to change in contract term of large private client. So can you please tell us regarding this contract? Also, are you expecting any further change in contract in coming quarters with any other client?
No, we are not expecting any change. In this particular order, the base rate was INR 27,000 per metric ton and the price of the steel has gone to INR 72,000 per metric ton plus taxes and transport and unloading charges. So in nutshell, you were procuring either at INR 75,000 a metric ton, while the base price in the tender was INR 27,000.
So you can imagine that if you start investing at the range of -- at a rate of INR 75,000 and your base price is INR 27,000. It's a substantial money inflow, which happens and the reimbursement of which comes on a quarterly basis. So that's the only change.
No other terms and conditions of the contract changed. On the contrary, performance guarantees have come down. So I don't expect any changes from any other client in the coming quarter or quarters.
Sure. Sure, sir. And secondly sir, if you could throw some light on our other income, because what has happened is it has halved compared to last year. If you could throw some light on it?
Can you please repeat your question, ma'am?
Sir, my question is that other income Y-o-Y has halved -- is reduced by 50%. So if you could tell me the reason for it?
Other income. One minute, please. It's basically cap sales. It has doubled the other income, other operating income.
Sir, I am not talking about operating income. I am talking about other income, it is a non-business income.
Non-business income. There is a impact of INR 3 crores in the service charges. And if service charges is nothing, but the rentals which we charge from our joint venture companies for equipment, which are provided. In this instance, for the current financial year, there is a reverse charge of INR 1.52 crores, thereby having the total impact of INR 3 crores. Hope that answers your question.
So can we assume this to be as a one-off situation? Is this an exceptional item?
Yes, it's a one-off because we do not, at the moment, have any other JV even except with Tata projects. And in that, I do not see the company receiving any equipment. It may give away some equipment on higher. And if that happens, there will be an increase in equipment higher charges or service charge income as the case maybe.
We have the next question from the line of Sameer Dalal from Natverlal & Sons Stockbrokers.
Regard this contract that has changed, you said INR 45 crores of revenue, of course, was not recognized. And of course, because of which the EBITDA profile changes. So my question to you is cement and steel, a lot of it is a pass-through, right, like you said. So with revenues coming down, if I were to look at EBITDA margins, the margin profile should actually increase based on the fact that you don't have it in the revenue front. So why are we not seeing that in the EBITDA margins?
You are seeing an increase on year-on-year, but you cannot compare to the pre-COVID year because the revenues were more than INR 1,500 crores. Your salary [ builds ] were similar. So the point is that there is an impact when your revenue dips to INR 40 crores as against INR 50 crores, INR 60 crores, your fixed cost remains the same.
And that is why you see an impact on the EBITDA by nearly 1.5%. So that is the reason why you do not see a positive impact on the EBITDA, even while there was a INR 45 crore impact on the top line because of not recognizing concrete and steel, even though it had a pass-through.
Okay. The second question is regarding -- again, that somebody was already asking regarding the cash flows and it's a continuation to that. So when we go up to about INR 1,800 crore turnover working capital cycle, it's at about 90 days. Will that remain at these levels? That means will the working cap -- or do you think you can bring the working capital a little further because that eventually [ comeback ] to the same question, which is how the cash flows can be managed?
So you please have a look pre-COVID level, especially the [ IL&FS ] levels. The net cash flow was 56 days, excluding retention money, okay? And this had gone up to 181 days in the last financial year because of COVID impact, 159 days to be specific. This came down -- has come down to 99 days at the end of 31st December quarter, and we have guided that it will come down substantially.
So it's come down by another 10% to 90 days now. You will see a significant improvement in June quarter and subsequent quarters, intention is to be at the 56, 60 days level, excluding the retention money by the end of the current financial year, as was guided earlier.
So that will be some amount of revenues from the cash?
That would be a substantial because the point is that your project traction has already started. As I told you the first 2 months of the current fiscal have seen a good traction as far as revenues in spite of the free-issue material is concerned. And we do believe that these things will positively impact 2 aspects of the business that convert a bit into sales and, therefore, [ debtors ] and realization of which will have an impact on working capital cycle.
#2, the operator level in spite of increase in commodity prices by nearly 70%, 80% are at INR 503 crores or thereabouts. We see a slight increase to INR 550 crores to pre-COVID level. This will again impact the net working capital. So these 2, in tandem with increase in growth in revenue, will bring -- will show you the results which you are expecting.
We have the next question from the line of [ Nisha Desai ] from [ Raga Securities ].
Sir, I just have a question, if you could give us an update on the MHADA project, I mean, what is the current status about it?
So the MHADA project, which is being executed under Tata Projects capacity construction at LLP. Work has started on 6 rehab buildings of 40-stories each . Apart from that, we expect 10 buildings further. So total 16 buildings to be under construction in the rehab portion in the current financial year over various periods.
And we have got IOD and CC approval for the sale buildings of 6 towers. We expect 2 towers to start after 3 months once the wind tunnel test is completed. So this is what we foresee as far as -- and the current status as far as the MHADA project is concerned.
On the revenue front, as I already answered an earlier question, given the current status and the commitments from the client for approvals and handover, we anticipate a revenue at the LLP level of INR 500 crores.
We have the next question from the line of Parvez Qazi from Edelweiss Securities.
First question is if you could give some update about the CIDCO project. What is the work we have there and have we've got all the work orders, will be [ all in ]?
The total status remains that we have received the seventh site also, but the environmental clearance from the client side is pending. So in effect, we have [indiscernible] 48% of the land available.
The company, as a exception, I tell you, has [ billed ] INR 22 crores in the current month for that project, and we expect that amount to increase by 33% over a month-on-month for the next 2 months. So we should be reaching the peak for the current land availability in the next quarter. That's #1.
The last, the location, I expect that given the current status, the environmental clearance should take about 2 to 2.5 months. And once we have that, we shall properly intimate you.
Okay. And in terms of our debt level, where do we see, let's say, by end of [ FY'23 ]?
So if you look at our debt level at the end of the last financial year, March '22 was -- March '21 was INR 297.99 Crores, which included CC term loan, emergency line of credit and a small portion of COVID loan of INR 1.63 crores.
As of March 22, after utilizing the close to INR 70 crores of additional debt taken, we stand at [ INR 282.42 ] crores so I do believe that this debt will increase by close to INR 50 crores in quarter 2. And thereafter, you will see a reduction of close to INR 75 crores by the end of the current financial year.
We have the next question from the line of V.P. Rajesh from Banyan Capital.
Just a question on the debt side. So are you saying that the debt by the end of the current financial year will be more like INR 200 crores to INR 215 crores?
I cannot give you an exact figure. However, you may note down that our total debt as on March 22 gross basis, stood at INR 282.42 crores excluding promoter's debt, which will continue to remain in the company. And as some portion may get converted into equity.
So INR 282.42 crores add to this as I told you, there will be a short-term increase of INR 50 crores to INR 60 crores and thereby -- thereafter a reduction of INR 75 crores by March. So nutshell, your debt should remain at close to INR 305 crores to INR 310 crores by the end of the current financial year on gross basis.
On a net basis, obviously, you will have to reduce another [indiscernible] of INR 190 crores to arrive at that. So the net debt continues to be close to INR 120 crores, which is consistent with what had we have been predicting in the pre-COVID period and over the past few quarters.
Right. That's helpful. And I think earlier, you had guided that you'll be completely debt-free by September 2023. So does the time line still stand or that has also changed?
Obviously, with the COVID in the first quarter, we remain committed if the bank releases of the margin happen, we shall be close to being debt-free in the early part of the next financial year. However, I will be able to give you a very firm and a committed answer in the first quarter conference call. Please remind yourself to log in, and you shall have the answer.
Okay. That's helpful. And just on the business side, how is the sentiment in the pipeline? And the reason I'm asking is given the commodity price increases, are you seeing the bidders pulling back on their projects and therefore, the deal pipeline has come down? If you can just give some commentary on that, sir?
You will see a certain negative impact on the low cost -- very low cost housing. I'm not talking about affordable housing. Low-cost housing means where the sales were happening at INR 2,500 and INR 2,800 because my estimate is that the overall impact on construction will range between INR 400 to INR 600 due to commodity increases.
And in a very low cost housing project, that's a sizable amount to wipe out the entire profitability, especially when the sales have already happened in the recent months. So since we are not in that segment, very low-cost housing, at all. The impact on that -- of that does not happen to capacity.
Having said that, the traction both in government and private sector is very, very high. Developers continue to benefit. Consolidation in FRA is going to happen. There has been a latest government resolution, whereby whenever financial institution's money has been stuck in FRA project. They are allowed to take a new developer of repute and FRA will transfer that project to the new developer and financial institution consortium, leaving out the 5% premium charges.
These things are very positive. And obviously, the traction looks very, very strong. I should mention that health care traction is at the highest level I have seen in my career.
We have the next question from the line of Jiten Rushi from Axis Capital.
Sir, on the [ CIDCO ] front, are you certain your book revenue of your...
Mr. Rushi, your voice is coming a little low . Can you come closer to the mic?
Can you hear me now?
Yes.Yes.
Yes. So as you said in the recent question that you were expecting, you billed for [ INR 22 crores ] in April for CIDCO. So what kind of revenue we can expect in Q1 and Q2 and then in Q3, Q4 once you get the land parcel -- remaining land parcel and total revenues from CIDCO in FY '23?
We can -- let's not talk about the total revenue, including location level. We would like to only give what is available [ INR 2, 348 crores ] is the land available on which construction is going on at the moment, which is close to 47%, 48%. And as I told you, the peak from next quarter over there will be in excess of INR 40 crores.
What I mentioned was that in the month of May, we have billed INR 22 crores. Month of June, we will increase that to INR 31 crores. And in month, the subsequent month, it will be close to INR 40 crores. Taking that into consideration, we believe that we should easily be targeting close to INR 450 crores to INR 500 crores revenue from CIDCO in the current financial year.
However, if in case, we happen to lose INR 50 crores over there. We have sizable revenues coming from MCGM hospitals, 2 of them and JJ Hospital. And that is why we are very optimistic on the INR 1,800 crore revenue guidelines.
In terms of INR 500 crores of MHADA revenue, which is [indiscernible] LLP. Our side would be [ pro-rata ] right, sir?
[ 25% ].
[ 25% ]. You also talked about the commodity price hike. So you said that your order book just fully covered with price escalation. So at the EBITDA level, there is no impact. Is my understanding correct, sir?
Yes, absolutely.
Okay. And sir, on the -- coming back to [indiscernible] numbers. So can you highlight unbilled revenue mobilization advance outstanding and [ instanding and outstanding ] as of March and also the free cash.
Yes. The total unbilled revenue has come down to INR 456 crores out of this -- in the last month, we have already got bill certifications of INR 60 crores. So that will be another reduction.
Your second question was cash on the books. Cash on the books in fixed deposit, it's close to INR 187 crores. This includes an amount of INR 27 crores lying in the bank's CC limit free for utilization.
And free cash would be how much, sir?
INR 27 crores is lying as free cash for utilization. However, this does not include the free healthy limits of close to INR 65, INR 60 crores, which are also available for working capital.
And sir, on the mobilization advance outstanding and retention money?
The retention money is INR 160 crores and the mobilization advance, other than CIDCO is INR 140 crores, and it is approximately INR 246 crores from CIDCO. So you have close to INR 386 crores of mobilization advance. However, CIDCO will reduce by approximately INR 150 crores -- sorry, INR 110 crores in the current financial year.
So these are interest bearing, right? Right?
Noninterest-bearing. None of our advances are interest-bearing except MCGM, INR 16 crores, which is a very, very minuscule part that is captured in the finance charges.
And sir, on the bank limits, total bank limits and what is the fund base in non-fund base and the utilization level, please?
The total adjust limits for FY '22, '23, assessed by the lead bank SBI are INR 1,130 crores. Fund base is INR 190 crores, utilization is INR 120 crores. Nonfund is 940 crores and bank guarantee utilization is INR 410.7 crores. LC utilization is INR 145.18 crores.
And on again, coming back to the opportunity pipeline. So with the interest rate cycle going up, commodity cycle expected to cool off. So will this help us in terms of [indiscernible] interest because it's getting offset with the pulling off of commodity prices. Do you see strong opportunities from private [indiscernible].
We should wait for at least a month before deciding on the commodity pricing. It has been more volatile than ever seen in at least my career. We have seen [ INR 43, 000 to INR 60,000, INR 72,500 ] in a period of 2 months, and we have seen a fall of INR 12 kg in a time period of 9 days. Now with the import-export duty of 15% in place, if there is a clash in the coal prices, you will see a correction of INR 7 to INR 8 kg. That is my guess, please do not take it for granted.
However, the price coming down to INR 50, 900 plus INR 3,500 as other costs, I still believe that there is a big relief to the developer community, #1. #2, but no one is going to act in haste. And all the -- steel is not only the one part, the nonferrous the aluminum prices, which have gone to INR 275 crore, INR 280 kg, seeing an 80% increase over the last 15 months. That should also cool off. Similarly, the copper prices have to cool off to see meaningful decrease in the MEP costs. So please wait for a month before we come to any conclusion.
Sir, just one last thing. Sir, we have seen reduction in the order backlog of INR 45 crores, so this reduction full and final or we see further reduction in that in the last 2 [indiscernible]?
The order book is of INR 9,000 plus crores accounts for the entire reduction of steel and concrete in that order.
We have the next question from the line of Sagar Parekh from Deep Financial.
Sorry, I got -- my line got dropped in between. So I couldn't -- regarding my question on the cash flow. So you mentioned that about INR 40 crores will be the [ basic ] CapEx for FY '23, right -- INR 42 crores?
Yes.
Okay, okay. So basically, then we will be cash flow positive. And did I hear the debt number correct, you said that by the end of FY '23, your debt would be INR 305 crores.
Approximately on gross basis.
Yes, on gross basis, INR 305 crores. So that is still an increase of about INR 20 crores from -- I'm talking about ex promoter debt. So that is still an increase from FY '22 levels in spite of us being free cash flow positive. So just like I was trying to match the 2 numbers, why would our debt increase when our cash flow is positive?
As to -- see that we have to give an indicative figure of the limits we are going to be enjoying. You always have some cash balances available. The question cannot be answered on expected terminology basis that I will be at INR 271.5 crores. I have said that the company will require close to INR 50 crores to further pick up its operations and thereby -- thereafter the reduction will happen.
Now we are targeting reduction of minimum INR 75 crores, and that obviously is going to have happen through 2 things. One is through the cash flow improvement and secondly, through the margin improvement with the bank, okay? No one wants -- intends to keep INR 190 crores at 5% and 4% in the bank. So what I have given is the maximum overall debt level anticipated for FY '23.
Yes, you are right that debt does saw a INR 15 crore, INR 20 crore increase over the current financial year but as I told you, people were expecting an increase in the current financial year also. But even after availing INR 77 crores of additional debt, there has been reduction in the overall debt by nearly INR 10 crores.
So the same thing would happen because we are not taking into account at the moment, the term loans of INR 60 crores, of which nearly INR 36 crores to INR 40 crores will be repaid in the current financial year.
So if you take that into account, your total net debt will be INR 305 crores, minus that INR 40 -- INR 36 crores to INR 40 crores. But whether it's INR 36 crores or INR 37 crores, don't hold me to ransom. That figure could be INR 1 crore or INR 2 crores plus. So I am giving you the bank limit availability on working capital.
Term loan, as you are aware, has shown a reduction year-on-year and there will be a reduction of at least INR 36 crores in the current year from the term loan repayment. So on term loan plus working capital basis, you will see a reduction of INR 305 crores, INR 306 crores minus INR 36 crores.
Okay. So this INR 282 crore, excluding promoter debt is inclusive of the term loan, right?
Absolutely.
Okay. And the INR 305 crores, which you said earlier was only the working capital loan?
In capital, so you will have to imply the reduction in term loan, which approximately is INR 36 crores. And if you put that, you will be lower in the current financial year. Let's hope that the bank sanctions are at more lucrative from a margin perspective.
We shall -- we have already the assessment note from the lead bank. Once we have the revised sanctions in place, we will be able to give a more promising or accurate commentary in quarter 2 or quarter 1 of the current fiscal conference call.
Great. So my point was that INR 1,800 crore level also if your debt levels remain same or probably go down, then the company looks in a good footing. So just wanted to give my feedback on that, that probably try to match your numbers by not increasing the debt basically. That's the point I have.
We could have increased our revenue to INR 1,500 crores and ready to sustain debt this year. We believe in long-term strategy. We have seen 2 tough years, but we have not [indiscernible] away from our aim of ensuring that the operations have to grow only on the basis of the cash flows generated and that is what we are focused on.
We have the next question from the line of [indiscernible] Verma from [ Individual ] Investors. [ Mr. Verma ], we can't hear you, please go off the speaker phone. Mr. Verma, this is the operator. Can you hear us? We move on to the next participant. We have the next question from the line of Pritesh Chheda from Lucky Investments.
A couple of clarifications of this INR 1,800 crore revenue is purely, your share, right? So when you mentioned it CIDCO will be INR 400-plus and your share is 25%. So when you were mentioning the INR 1,800 crore, you were mentioning versus the INR 1,300-plus number which you mentioned?
Yes, it is our numbers, stand-alone financials of the company.
My second question is, sir, where are we on the debt rating status. And there was this one press release about INR 200 crores debenture raising. Now this is against striking off our existing debt or I couldn't understand this press release?
#1, the rating was upgraded within 3 months time as a record, it will be stable in -- yes.
Sorry I was just...
Yes. So BBB, no one could have -- the same institution possibly couldn't have given within 3 months. However, we will be approaching them with the new financials. Our due date is August again. We will be discussing them to approach them after Q1 results. And obviously, we will be seeking reinstatement of our A-rating.
Okay. And debenture?
Yes. Secondly, we have never mentioned that we'll be raising INR 200 crores as debenture. We have given an overall approval for INR 150 crores. However, we have raised INR 100 crores as debenture. That is an increase in debt, which you mentioned, that is a part of the debt profile which we have mentioned to you.
And there will be no further increase in debt, increased to debenture hence forth. So that INR 150 crores was only enabling resolution. The company decided to restrict to INR 200 crores, which is a part of the overall net debt.
No, sir, I am confused now. So the INR 130 crore net debt that we see on a INR 328 crores gross debt. Have we raised it or it's just an enabling resolution?
It has been raised it. We are based on 31st of March -- and out of that INR 80 crores was raised on 31st of March, all right, and close to INR 60 crores was already utilized, so it appears in your balance sheet in the debt area.
And this INR 128 crores you are saying will cost rise or debt net will cost rise by another INR 50 crores, and then we'll see a tapering off. That's how you are mentioning, right?
Yes, because you are trying to increase your revenue by INR 50 crores with the net working capital of 90 days. You're looking at approximately increasing the cost of INR 75 crores.
And that is why I said including the inflows and margin release, INR 50 crores will be the additional debt increase you will see. And subsequently, you will see a reduction of INR 75 crores on the working capital side. Apart from that, the repayment of term loans will constitute INR 36 crores to INR 40 crores.
Overall, on the overall debt, you will have a similar or a lower figure in the current financial year. That is our expectation. However, as repeated earlier, we will be able to give you a perfect commentary answer during our conference of June quarter.
Okay. And sir, my last question is, we see a lot of construction activity obviously happening around in terms of newer projects. But when I see your inflow, it's still not reflecting. So any comments there?
So the order book stands at INR 9,500 crores currently with L1 position in nearly INR 600-plus crores. That's more than sufficient as the order mix is 60-40 between private and government. Now with the revenue projection of INR 1,800 crores, we can only book the orders which get executed in the current financial year.
There is no harm in going and taking orders and spoiling the EBITDA profile of the company or the cash profile of the company. The point is that why do you say that we should go and book orders more than INR 4,000 crores or INR 5,000 crores.
The company's order book is stable at INR 9,000 crores. Once we achieve INR 2,500 crores. Obviously, the order book target will go to INR 3,000 crores. And the company over the existence of its 9 years has proved that it has always taken and improved its order book profile both from a quantity and quality perspective. So this year, we have given a guidance of INR 2,000 crores to INR 2,500 crores, and we are more than hopeful of achieving that.
Thank you. We have the next question from the line of Darshan Deora from Indvest Capital.
Sir, your order book is quite large. I wanted to understand from you that what is the impediment for executing on this order book? Is it a shortage of labor? Is it working capital challenges? Or is it site availability?
Mix of it. Site availability was there pertaining to CIDCO after quarter 4 mid, which I'd explained last time that has been removed. Only one location constituting 50% is balanced to be given. And that is why our current year's revenue guideline does not include that location which is expected by end of quarter 2.
Now there were working capital challenges, which we have overcome by raising about INR 100 crores of non-convertible debentures, which form a part of our debt. And therefore, there has been increase in revenue in April and May of the current financial year. Point #2. What was your third question?
Regarding labor.
Labor will always be a challenge right from L&T to the smallest contractor. So we have close to 15,000, 16,000 workmen boots on the site. We had to take it to 19,000. And in India, we have a lot of festivals, the latest was Eid, and the labor is returning from Eid.
We should have excess labor with the onset of monsoon. So at least for over the next 3 to 4 months, we don't see any labor challenge. But as you know that there is a lot of infrastructure activity going on.
So there is infrastructure boom in buildings, it is there in the road sector, highway sector. It is there in the metro sector, it is there in practically any and every sector, which you see is at the peak of order award and execution.
So there will be a shortage of labor and only how well you pay them will be the determining factor to retain the labor workforce at site. That is what we are focused on. And 15,000, 16,000 workmen is only suggestive of the steps which we have taken to ensure that we retain that labor strength.
My second question was regarding the price increases. So as you guided, most of the price increases on the commodity side sort of can get passed on to the client. What about any increase in the labor cost?
We haven't seen any significant increase in the labor cost, which is visible from our construction cost expenses. The labor subcontractor charges continue to be between 21% to 22.5% over the last 4 years.
Obviously, a part portion of that also comes with enhanced revenue. Second push part is that, in the private sector, we add the labor cost escalation in the pricing itself. In the government contracts, there is an escalation cost to cover the labor cost increase.
So it is not that we are uncovered for labor. We are covered, but I cannot say 100%, maybe up to 80% to 85%. But the balance, which is taken into consideration during estimation takes care of any overspill.
However, when you see our financials, you will see that the stability in the cost of construction, labor, subcontract, charges when you get the entire consolidated balance sheet, it is given in the reference quote #34, which shows the stability of labor to our sales percentage has been very stable over the last 4 to 5 years.
Thank you. We have the last question from the line of [ Deep Sangoi ] from [ Banyan Capital ].
Just wanted to clarify this INR 100 crore NCD is included in this INR 328 crore number, is it?
The utilized portion is included. The unutilized portion of INR 27 crores, INR 28 crores is a part of the cash. However, as I told you, any increase in this will get offset by the repayment of term loan.
Right. So you are saying INR 328 plus another INR 30 crores of NCD is to come, and that INR 30 crore is part of that INR 50 crore you talked about that debt will go up to? Is that the right way to think about it?
Absolutely.
Okay. And then what is the interest cost on this NCD?
I can give you the average interest cost is at between 9.5%, 9.75% for the company on overall. Different costs cannot be provided. Obviously, this is unsecured and therefore, it will be higher than the bank rate.
But on an average, the rate of interest is average [indiscernible]. So that same thing, about 9.5% to 9.6% is the average cost of finance for fund-based limits across including term loans.
Understood. And then there was a notification that promoters are going to do a preference round. So should we assume there will be new capital infusion or are you going to convert your existing loans into equity?
Our existing loans will be converted into equity to enable the company, bring down the debt by INR 55 crores.
As there are no further questions, I would now like to hand the conference over to Mr. Katyal for closing comments.
Thank you for participating in the call. We hope we were able to address all or most of your concerns. If you require any additional information, please contact SGA, our Investor Relations advisers. Thank you very much, and see you in the next quarter. Bye-bye.
Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.