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Engineers India Ltd
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[Foreign Language] Good afternoon.
Sir, I'll just quickly introduce. Good afternoon participants. Welcome to the Engineers India Q2 FY '23 Earning Call. From the management today, we have Mr. Sanjay Jindal, who is the Director Finance; Mr. Suvendu Padhi, Company Secretary and IR; Mr. R.P. Batra, Executive Director, F&A and IR; Mr. Sunil Saxena, Executive Director, Technical and IR; Mr. Amandeep (sic) [ Amanpreet ] Singh Chopra, General Manager, CMD Office and IR; Mr. Vivek Midha, General Manager, Marketing and IR; and Ms. Neha Narula, Senior Manager, Company Secretary and IR.
Sir, I would request to give us some opening remarks, post which I will open the floor for a Q&A session.
Okay, sure. Good afternoon, everybody. We have declared our half year ended result for the financial year '22, '23 on 9th November 2022. With respect to financial performance for the half year ended 30th September 2022, the company has registered turnover of INR 1,587 crores in comparison to INR 1,383 crores for the last half year ended with an increase of 15%. In the current quarter, the company has achieved turnover of INR 346 crores in the Consultancy and Engineering segment, and INR 436 crores in the Turnkey business segment.
There is increase in other income, primarily due to dividend income earned by the company on the investment made in Numaligarh Refinery Ltd. and its subsidiary, CIL. During the current quarter, the company has a profit before tax of INR 102 crores in comparison to INR 68 crores in the last quarter, vis-a-vis INR 170 crores for the current half year and INR 205 crores for the previous half year ended.
With increase in profits, EPS has increased to INR 1.51 per share for the current quarter in comparison to the EUR 0.9 (sic) [ INR 0.9 ] per share in the last quarter and INR 2.41 per share for the current half year ended and INR 2.67 per share for the last half year.
Okay. Now you can start question answers.
[Operator Instructions] We have the first question from Mr. Sanketh Kapoor.
You can hear me, sir?
Yes, we can hear.
[Foreign Language] Firstly, if you could mention what was the dividend from Numaligarh for the second quarter? How much we have received as dividend out of the INR 65 crore other income, which we have booked for the quarter?
In this quarter, we have received dividend of INR 35 crores, and Numaligarh Refinery have declared dividend of INR 11, INR 6 was interim for the current year and INR 5 for the last final year -- final dividend of the last year, and total dividend is INR 35 out of which INR 3 crores pertains to CIL and balance INR 32 crores from Numaligarh Refinery Ltd. And let me give you good news also. Yesterday, there was AGM in Numaligarh Refinery Ltd. and they have declared bonus of 1:1 share.
Okay. Sir, out of this total INR 93 crores, which we have received for the first half, what would be attributable to Numaligarh then?
Yes, Numaligarh Refinery, we have received total INR 35 crores as a dividend. Mr. Jindal, Director Finance told that, we have received INR 11 per share as dividend. Out of that INR 5 is the final dividend for last financial year and INR 6 is the current year financial year interim dividend. Yes, we are having 3.21 crore equity shares and multiple by 11% it works out to be around INR 35 crores.
So out of this INR 93 crores, INR 35 crores is from this Numaligarh Refinery itself? And the balance part, sir?
Balance from the -- basically, we are having the deposit of around INR 1,100 crores. So we are earning interest on that. Majorly that party is contributed by -- the balance contributed by the deposit interest rate plus certain foreign exchange variation is also there. Plus, we have given certain extra space for the rent, that part also contributed to the other income. Majorly, it's a dividend plus interest income.
Okay. And sir, what is the outlook for our Ramagundam Fertiliser unit, sir? How is that performing? Because on a quarter-on-quarter basis, this share of profit and loss from the JV, we again posted a loss of INR 10 crore for this quarter?
Mr. Kapoor, actually, this plant was shut down in the month of September, and it was under schedule shutdown for the preventive maintenance as in the fertilizer industry, there are schedule maintenance for the plant, which could not be taken for a longer period. So it was finally decided to have shut down in the month of September. So practically, there was no production in the month of September and now the production has already started in the third quarter. So we are expecting a good profit in the third quarter.
And sir, taking into account post this shutdown, this was a planned maintenance shutdown...
This was planned shutdown.
Yes. So going ahead, what will be the efficiencies we are going to benefit from the shutdown? And how is the production going to shape up?
After shutdown, we are expecting 100% -- production at 100% capacity. And this plant is going to be dedicated to the nation by the Honorable Prime Minister of India on the 12th November itself.
Okay, sir. And sir, on the subsidy part, since I think so we are only manufacturing urea. So we are seeing in other fertilizer companies also that there is a pile-up of subsidiary that is -- there is a delay in subsidy release. So can you quantify what is -- how is the delay in subsidiary going to affect the performance for our -- this company going ahead?
Actually, [Foreign Language] for the current financial year, we are not worried about the subsidy part.
[Foreign Language] in terms of execution and in terms of our margin profile, especially for our main buyer business, that is the Consultancy & Engineering project business, [Foreign Language] going ahead, sir.
[Foreign Language] We are earning 95% from our core sector, and this turnover from the core sector is from the domestic market as well as from the foreign market. And recently, we have got our from -- we have got PMC job from the new territory that is Guyana. So we are expanding geographically also. So -- and we are getting strength in Middle East region also. We are trying to get more business in that region. And recently, we are trying to get in Saudi Arabia also. So we are focusing on the core strength. Definitely, we are focusing, and we are expanding into new geography also. So we are very confident on the core sector, and we still maintain that -- we will -- we continue to run good profit or good segment profit from the Engineering & Consultancy segment.
Sir, going ahead for H2, sir, can you give a ballpark number, what kind of execution are we going to do in terms of the Turnkey project and the Consultancy business or a business growth idea for H2 if you compare the last H2 with this year H2, what kind of growth can we anticipate?
Growth, we have already seen growth in our turnover. In the first half year, we have already turnover increase of more than 50%. And on the annual basis, we are also expecting growth in the annual turnover by 15%. And we are still -- and we are targeting the profit of INR 340 crores, which was our last year figure also. So we are very hopeful to touch all these figures.
Okay. So last year, we had a PAT of INR 343. This year also we are anticipating to...
This year, we are also optimistic about that magic figure, and we are trying hard to achieve that figure. And we are sure we will achieve that figure. Because we are working with the change order, we are working with our clients for the change orders, and we are working with our clients for the new orders also. And we are very optimistic to achieve that.
Correct, sir. Sir, lastly, said, taking into account the shareholder value creation idea. Sir, how -- so there is -- we can understand that there is lesser interest in EPC consultancy firms and especially being backed by government also having the sovereignty also, we are not getting the right valuations. We are having cash and bank balance in books. We are having a strong order book, good execution skills, good track record. But still, the capital market does not -- is not providing any -- it's not giving the right ratio or the right valuation. So what are the other steps of which the management can contemplate in terms of buyback or other ways by which you can increase your shareholder value as that has remained depressed over a longer period of time, sir?
First of all, I must say we are already paying a good dividend to our shareholders. And in the last 10 years, we have already paid around a 950% dividend to our shareholders. In addition to that, recent buyback was done in the financial year '20 and '21. And in the current year, we are not targeting any kind of buyback share again.
But dividend distribution? Yes, sir.
By way of dividend, we are rewarding our shareholders already. So I don't think a shareholder must be worried about the dividend in the Engineers India Limited. We have a good track record of dividend in the company.
The next question is from Mr. Priyesh.
Yes, Mr. Priyesh? Mr. Kunal [Foreign Language].
Priyesh?
Am I audible now, sir?
Yes.
I just need a clarification regarding you have mentioned that we are expecting growth of 15% with a profitability of around INR 340 crores, which is based on the stand-alone level or consolidated, sir?
It is a stand-alone basis. Mr. Kunal, please check the line.
Yes. I think he's unaudible again. Priyesh you are unaudible.
Can we go to next investor call? I think he's not on the line.
I think -- the next question is from Nimesh Maheshwari.
Yes, Mr. Maheshwari.
My question is related to order book. So we have seen a degrowth in the Q-o-Q basis on Consultancy as well as Turnkey. So what is your view on that side?
Growth on the turnover part you are asking?
It's complete order book. So the numbers are like INR 4,793 crores, which gone to INR 4,599 crores. Cumulative order book. So the split of Consultancy, which I'm talking about.
Okay. Actually, yes, our Consultancy order book was INR 4,029 crores on 31st March '22, and it is reduced to INR 3,779 crores because some part of the order book we have executed in the first half, and we have got new orders also, and we are working with our clients for the new orders, and we hope that the order book will be strong at the end of financial year. And definitely, our financial year order book will be strong.
Okay. So how much you are expecting?
This order book, we are going to target around INR 4,000 crores as an order book as the total order under this project -- under this -- in this financial year, out of which we consider that around INR 600 crores should be from the Consultancy and balance we will try from the EPC or LSTK basis, we are targeting various OB projects and EPC projects. But primary focus is on the Consultancy services, wherein we see around INR 1,600 crores, and balance, we'll try to achieve when secure through OB, which we are pursuing with various clients.
So you are targeting around -- so currently, it is -- the cumulative order book is INR 8,431 crore?
Yes. He is saying that we are targeting new orders to the tune of around INR 4,000 crores during the current fiscal. Out of that, around INR 1,500 crores, INR 1,600 crores from the Consultancy segment and balance in the LSTK OB segment.
So INR 4,000 crores new addition?
Yes, we are targeting that for -- during the current fiscal.
We're working towards this. Let's hope for the best. We meet it.
And so far, we have received order of INR 515 crores.
No, around INR 800 crores.
INR 800 crores.
Yesterday, we have reached INR 886 crores. You know that our recent addition of Guyana job, which is major job, which we have received outside Indian territory. It is received yesterday, day before yesterday only. Yesterday evening only it has been declared. So that's a major achievement. And now we'll be targeting more projects in that territory also.
Okay. So first half is the total new business secured is INR 565 crores.
As of yesterday...
It is more than INR 800 crores.
No, no. For the first half, definitely, whatever you are saying is correct. But as of date, we are saying that we have order -- received orders more than INR 800 crores. Out of that, around INR 250 crores in the EPC segment and balance in the Consultancy segment.
Got it, sir. Got it. And the other question is related to our split of revenue. So in the first quarter, we said our LSTK revenue is higher, that is the reason of the fall in the profits. But in this quarter also, we have seen that the Consulting revenue is a bit lower from the -- even the previous quarter. So what is the reason why we are not getting the Consulting revenue higher side? And what is your view on that side?
[indiscernible] major difference is on account of change order because in the previous year, in the first half year, we were having change order to the tune of INR 60 crores, out of which INR 50 crores was attributable to the net profit. But in this financial year, we are finalizing our change order with clients and it is in the pipeline, and we are expecting to realize it soon. And whenever our change order realizes, a major portion will contribute to profit since we have already incurred the expenditure. So this is the reason because -- as you know, project industry is a cyclic industry, and there may be a fluctuation from the first quarter to second quarter. But we are -- on the annual basis, we are expecting to increase our -- to achieve over all the targets.
Sir, can you explain a little bit more why the Consulting revenues are not catching up? Because if we can see that in like FY '20, FY '20, the old numbers in old quarters are higher than INR 350 crores. So what is the reason we are unable to catch up that?
Yes. As Mr. Jindal told that normally, we used to receive the change order during every quarter, that range from INR 20 crores to INR 30 crores. So during the first half year of this financial year, we have not received any change order from our client, although we have submitted our change order that are under finalization. That's why there is no incremental revenue in comparison to the last financial year. So going forward, we are expecting that certain change orders will materialize with our clients, and we expect to receive those change order, and that will straight away go into the turnover and maximum portion will contribute to the profits. So as such, there is incremental revenue is there, but due to non-receipt of change order, that is not showing in our results, basically.
Got it. Got it, sir. So 1 more question on the guidance side. You are guiding about INR 300 crores to INR 350 crores of PAT. So is it on stand-alone side or console side?
Yes, Mr. Jindal already told that is on the stand-alone basis.
Okay. And the RFCL JV, what we are expecting is it profitable in the upcoming half year? Or some other stabilization issues will remain there?
No, all these stabilization issues has been already addressed and the plant was under a planned shutdown in the month of September. So there is some loss in the second quarter. But this -- in the third quarter, this plant is already under operation, and it is working at more than 80% capacity, and soon it will manufacture at the 100% capacity. And this plant is going to be dedicated to the nation by our Honorable Prime Minister on 12th November itself. So we are very hopeful about the profit in the third quarter itself.
So sir, how much profit we are expecting from these all JVs and the Numaligarh Refinery, the RFCL and other JVs? How much PAT we can expect in the next half year?
[Foreign Language] In the NRL project, we are getting dividend. And we have already received a dividend of about INR 35 crores from the Numaligarh Refinery. And right now, we do not have any figure about the RFCL project and -- so I cannot comment on the RFCL profitability at this moment, but -- because the plant is under operation, and I can assure you, at this time, there will not be a loss in the RFCL project.
Next question is from Ashwini Sharma.
Yes, Mr. Ashwini?
Ashwini? Ashwini you are not audible.
You can go to the next one.
Priyesh? Ask your question.
Am I audible now, sir?
Yes.
Sorry, the previous call was disconnected due to network issue. So you just have mentioned that we are targeting around INR 40 billion of order inflow in financial year '23. Can you explain the -- what kind of order inflows are we getting in Consultancy as well as in project segment? And also, what kind of order pipeline are we seeing in financial year '24 as well in consultancy and in EPC?
This is Vivek. I would like to take that answer. Gentleman, we -- you know that there are a number of -- since this -- post-COVID -- pre-COVID, there were a lot of projects were on hold. And post-COVID there are a lot of investments are coming in. Government is also pushing a lot of investment. So we have been working on various projects, which are there in the refining sector as well as in the petrochemical sector. Various petcam projects, which we envisaged in the course towards the end of this financial year or in the next financial year wherein we would be targeting either PMC, EPCM services or the EPC services. So there a lot of projects are lined up, and we have worked on also on those projects to DFR. So we know that, for sure, these projects are viable. So these are there, like some projects out there of the IOCL, some of the projects are there of the BPRL, BPCL, ONGC has signed up future projects.
There are a few private clients also setting up various petrochemical complexes. So we are all engaged with all these clients and focusing on those projects. So some of them will realize in this year or some of them will go towards the next year. Basically, we are in the some of the proposals we are in the process of negotiation also with them. So we see there are positive things ahead.
Priyesh, are you online?
Yes, sir. He's online.
So can you quantify the order pipeline for the same that you just mentioned?
Order pipeline?
We are targeting around INR 4,000 crores from the overall business, out of which around INR 1,600 crore or INR 1,700 crore, maybe from the consultancy and balance will come from the OC, PC. So that's the target right now we have kept. And we can always improve the situation as and when we get more jobs. We're working towards it. We are putting very strategically. We are trying to get the -- working with the clients. And one of the success is the in the new territory, we have recently been awarded a major assignment. And you must have heard about various petrochemical assignments have been awarded in the last year with us. So let's hope for the best. We are working towards it.
The next question is from Amit Manwani.
My question is with regards to green hydrogen. We have been talking about green hydrogen in the past couple of quarters. And I think there was some pilot which was going out with one of the OMCs. So any development on the green hydrogen side and your thoughts on EIL's investment strategy or CapEx on green hydrogen for the next couple of years?
Mr. Amanpreet will reply this part.
So on the green hydrogen side, there are a couple of projects that we are already executing. And moving forward, we are undertaking a lot of studies with our clients, because there's guidelines for having a green hydrogen -- percentage of green hydrogen in the process plants. So we are engaging with our clients to see that what major interventions that we can have together both on the technology side and both on the business side so that they can achieve their green hydrogen targets. So as you know, that this is a very nascent phenomenon. And we, as a technology company, are working not only with our clients but also with the technology providers across the globe. We are engaging with them so that we can have some discussions so that the technology can be implemented in our process plants.
So all these aspects, we are working very closely with our clients and our technology providers.
I would like to add on this like right now, we are already executing 3 or 4 assignments. One is with GAIL, wherein we are working on the feasibility of injection of the gas in the 5% or I think some percentage of the hydrogen in the existing gas network.
One, we are starting with respect to one of the areas, which is being done by NSIDC. So I think that zone and studying the viability of the hydrogen project in that zone, that study we have completed. Another is we are doing it for one of the clients like Adani for the private sector, wherein we are working on the study. Basically, it's a data engineering and -- study as well as engineering for the transportation of hydrogen line. And we are in discussion with various clients on these kind of scenarios like green ammonia, green urea, transportation of the hydrogen, hydrogen plants, balance of plants of hydrogen. So on various proposals, we are working, including the public sector clients also.
So I would like to add because this green hydrogen is a very nascent stage of development in the country. So we are -- so that ecosystem has to be developed for the execution part. And as we are very deeply into this particular green hydrogen right from the start, we are expecting that whatever the opportunities that will be coming in this particular domain we'll be at a frontrunner to grab those opportunities.
Okay. So sir, any thoughts like we will be doing green hydrogen EPC or manufacturing of products required for green hydrogen manufacturing or we're going to do build, own, operate?
Yes, actually, all these -- actually, whatever we say that this is a very nascent -- all these products are in very nascent stage. Hardly any project has come in a big way, in a commercial way. So we will just get involved in the initial studies and acquaint ourselves with the technology because this is a new area. Even technologies are limited and the exposure to the technology is very important for execution of any of the project. Means, if you take any of the assignment as an EPC, you have to understand the complete know-how. Like in refinery, we know everything. But hydrogen is a new area we are learning their technologies by way of getting involved in the initial studies, engaging with the licenses.
So I think initially, we -- maybe in this year, we will be focusing on the studies and the engineering services. In maybe next financial year, we will try and see that if something works comes and we are able to go for that and how much risk we can absorb.
The next question is from Ashna.
Sir, you mentioned certain projects like from IOCL and ONGC where you are expecting certain orders to come in. So could you please talk a little bit more further as to what is the scope of work that we are looking at these orders? And also, if you could share some potential size of the key major orders as to what are the large orders and what is the scope of work over there?
The scope of primarily is either the PMC or EPCM services. These are mostly the hybrid projects wherein some of the units are executed on the project management mode and some of the units are executed on EPCM mode. We have bidded those, and we are still waiting for the -- offers have been submitted and let's see it hope for the best that it will come to us. So some of them are in range of INR 4,600 crores, INR 3,000 crores, INR 5,000 crores right now in these ranges. In course to come in is towards the end of this financial year or the next financial year, there will be larger projects we are expecting from all these oil companies, wherein the investment would be higher.
And again, we will be first prima facie focusing on the PMC, EPCM, and maybe -- and if it's -- found it suitable, we can also go for the EPC.
Okay. Sir, so what would be as in -- for FY '23, you mentioned an order intake of around INR 4,000 crores. And over -- next year or next 2 years, '24, '25, what would be that ballpark number?
Let's say, it's -- this is around INR 4,000 crores, then we can perceive that it could be in the range of INR 4,500 crore to INR 5,500 crores. We will gradually improve, and we will keep on improving these figures. Let's say, around INR 4,000 crores -- mean INR 4,500 crores to INR 5,000 crores, we can anticipate in the next year.
Mainly, we are targeting of INR 5,000 crores in next 2 years each year. On a yearly basis, we are targeting around INR 5,000 crores addition in the order book.
Okay, sir. And sir, for FY '23 in the execution terms, what would be the proportion of consultancy to EPC?
And I think it will be around 45% to 55%. 45% would be on account of Consultancy job and 55% turnover would be contributed by Turnkey segment.
Okay. Sir, any further details you want to give about the Guyana project that we've done day before yesterday in terms of margin profile, that being an export order. So what -- where would be the margins lying related -- in terms to our domestic consultancy orders?
Your margin will be in the line of the domestic consultancy rather more than the domestic consultancy. So there will be a good margin in that particular project.
And sir, in that target, maybe for FY '23 or '24, either you can give, what is the export like orders like the one we got from Guyana that we are targeting?
Yes, we are targeting a few orders. But right now, we cannot disclose what will be the percentage and what will be the quantum of those orders.
Okay. And sir, one last question from my side. [indiscernible] Refinery currently around -- what we were reading around 55% of the ordering has been done. So in addition to the INR 4,000 crores kind of an EPC order that we are already executing, are we expecting any follow-on orders from them?
In case of HRRL, I think we are working on some of the change orders. We might -- we are expecting something in the next financial year. We cannot tell you the value right now, but we are working towards that. There is some change order we're envisaging. But good value would be there.
This is a very big refinery. So change order will be materialized over a period of time. So going forward, maybe next financial year or '24, '25, we may get some change order to that account. But it's a very big refinery. So the settlement of change order will take time.
Okay. And that would be largely on the EPC mode.
No, no. It can be both, basically. We are doing the PMC as well as the EPC. So change order can be on both accounts.
In the [indiscernible] refinery, we are working under both methods. We are working as EPCM and we are working as a turnkey contractor also. And we are expecting change order in both segments. I told earlier, we are working -- closely working with our clients for change orders and [indiscernible] refinery is one of them.
Okay, sir. And sir, any update on the Ratnagiri Refinery project? Is it being revived or any update on that?
In the process. Until and unless we get a concrete information, we cannot say anything because -- we -- our teams are working on the EIS. They have been changing location a number of times. So nobody can certainly say that [indiscernible].
I have a question. My question is pertaining to the INR 5,000 crore top line that we were targeting for the next 1 or 2 years. So just wanted to get your views on -- are we on track to achieve that? And also, if you can speak about the non-oil and gas initiatives that we are taking and what is the share of oil and gas initiatives that we target over the next 2, 3 years?
Going on the INR 5,000 crores, we are working towards it. Mostly, it would be like what we see refinery sector is still going to prevail, the demand is going to increase, and we anticipate there's a lot of demand in petrochemical and refinery as well as most of the refineries are going towards the petrochemicals. So we are working on a list of the projects which mostly all the refineries and petrochemicals have thought about the going to petrochemicals. So those projects are already lined up because we -- in most of the projects, we have worked on the DFRs also. So we can see that there is a probability that these projects would come, may not be this year, towards the end of this year or next year. So those projects are there for and those have been accounted for or calculating this INR 5,000 crores.
Going towards the other sectors, it's always been traditionally we have been getting around 15% to 20% from the other sectors. In the other sectors, you know that we are working in the sunrise sectors and one is hydrogen, I told you. We have started getting the jobs. We have worked in coal gasification. Recently, we have been awarded one assignment from Neyveli Lignite Corporation for a coal gasification project for pre-project activities. Similarly from the coal field Coal India, we have received one of the assignments. So we are also working towards the coal gasification.
Then next is we are also going towards the waste to ethanol projects in steel sector. So we are engaged -- we are getting engaged with a few of the clients and trying to explore that possibility that we can get into that segments. So these are the new segments which wherein we are there. Apart from that, we know that we are already there in the infrastructure. And infrastructure, we are working on various data center projects, and we are anticipating various data center projects in the next financial year. There is one project with respect to international market development in Haryana. There is a project from horticulture. There is an SBA data center. A lot of projects of this sort are there. Various institutional building projects wherein we have worked earlier are going for the Phase 2 of their expansions on addition of the hostels and those cities. We are also targeting those projects.
We have been into airport last year, we have been awarded the airport in the study for the airport in Noida, Greater Noida. Similarly using that as a leverage, we are targeting for the other similar kind of projects in the future. Aman, you would like to add on this?
Sure, sir. We have one more question from Mr. Deepak.
Hello. Am I audible?
Yes.
Yes. Yes. Sir, I have a couple of questions regarding your execution. First of all, sir, I just wanted to know the quantum of this change order what you mentioned. Is it somewhere around INR 60 crores, you said?
No, that was in the last financial year. That was in the last financial year. rather last half year of last financial year. That we received during the year ended half year ended September '21.
So that change order [indiscernible] so this year, how much of the change order you are expected to receive?
[Foreign Language] Unless until it is finalized by the client, we cannot disclose because we are not also sure how much client will pass. Definitely, our figure is bigger than INR 60 crores. But I cannot ensure you what kind of figure it will be finally.
[Foreign Language] It's bigger than INR 60 crores, but [Foreign Language].
I'm not saying, boss, like this. I have said figure of INR 60 crores was in the first half year of the financial year '21, '22. [Foreign Language] Our profits were higher because of the change order to the tune of INR 60 crores. But this figure, I have not quoted for this year. And for this year, we are closely working with our client for our change orders, and I cannot commit any figure because our change orders are under process. And I cannot comment on behalf of client, how much they will pass.
Okay. Okay. And sir, regarding your execution in PMC, what I see that from FY '14, bottom of INR 1,500 crores of order book, your PMC order book has successfully increased and it has reached to somewhere around INR 5,000 crores now. But your revenues are not picking up in that way, like your revenue in that year of FY '14 was somewhere around INR 1,200 crores, and it has reached to only about somewhere around INR 1,400 crores to INR 1,450 crores. So actually, executive in PMC is coming down. So is there any fundamental reason behind that?
No, no, there is no fundamental for that. Basically, these are long gestation projects with a project schedule of 3 to 4 years. So whatever is the order book that is executed over a period of 3 to 4 years. And that also during the first year, the execution is between 5% to 7%. In the second and third year, the maximum execution takes place. And in the fourth year, the balance sheet being executed. So if you can see order book of INR 4,500 crores. So that will be executed over a period of 3.5 years or 4 year. So taking that into consideration that our order book is around INR 4,600 as of date, so that will be executed on a period of around 3 to -- 3.5 years to 4 years. So taking that into consideration, our revenue is in line with the average period for that particular project. So going forward, with the increase in the order intake, definitely, our order book will improve and the revenue will also improve.
Okay. And sir, in your LSTK, your margin has also structurally come down. Like it used to be somewhere around 10%, 12%, it has come down to like 2%, 3% now. So going forward also, will it reverse to an extent or it will be in this range only, 2%, 3%?
Yes, the margin you expected to -- taking into consideration the nature of the jobs, what we are doing as of now, basically, these are offsite and utility projects. So we're -- and these are a cost-plus project. We are not taking any risk in case there is an increase in the plant and machinery or subcontract cost, that will be passed on to the basically clients. So our margins and risk are protected. So taking that into consideration, we are expecting the margin in the tune of 3% to 4% only. But in case after the completion of the project in case any warranty-guarantee, we are also making provision for the warranty-guarantee. In case any warranty-guarantee comes, then the margin will improve in that particular quarter or that particular financial year.
Going forward, we are expecting based on the current order book, the margin should be in the range of 3% to 4% only. But in the completion of that project when the defect liability period over, we may get extra margin.
Okay. And one last question, sir. In this PMC, like [indiscernible] of margin was somewhere around 18% to 19%. But I believe it is because of some cost increase in some product -- projects, which you are saying that you are playing to the customer. So in the second half, we can expect that margin in the PMC will normalize to somewhere around 28% for the year?
Yes. We cannot say the percentage exactly. We will definitely try to improve that in case a certain change orders are materialized, that will contribute substantially to the profitability and the turnover of the company. We have already taken up with the clients for the change order that are under finalization. If those change orders are finalized during the next half year, definitely, there will be improvement in the margin as well as the turnover will improve in comparison to the first half.
The next question is from Ashna.
Sir, I just wanted to understand what is the addressable market for coal gasification today that is there in India. Currently, we are executing a consultancy project with Neyveli. So apart from Neyveli, who are the other players that today are investing in the same space?
Ma'am, you must have heard about the recent MOUs between the Coal India and Indian Oil, GAIL, BHEL as well as NLC and BHEL. All of them are going for these coal gasification projects. Apart from that, JSPL is also going for the coal gasification. So in this, we see, as per the information, the surface coal gasification would have an investment of somewhere around INR 35,000 crores in the due course. And ministries are also pushing towards this and various studies have been done on this. So we see good chances that many of these projects would realize.
And sir, this INR 35,000 crores is over a period of what?
4, 5 years 6 years and the project is installed.
Okay, sir. And then if you want to speak about the waste to ethanol on this [indiscernible] in terms addressable market...
These are basically the initial [indiscernible] we are trying to engage with some of these companies with respect to this. And initially, we had done a few DFRs also. But we are just trying to see that whether it can be implemented in some of the steel plants. So we are trying to engage with one of the licensors then trying to get in touch with the steel companies. We're working towards it. We have not got successful in this, but we are working towards it. So we are hopeful that we might be successful in due course.
Got it, sir. Sir, addressable market, if you could speak about for waste to ethanol or that's in an initial stage?
That's in initial stage. Let's not take the names of the companies. We'll let you know in due course if something happens.
Nimesh, go ahead and ask your question, please.
I just want a view on the EBITDA margin. Can you hear me?
Yes, EBITDA margin, we have already showed that going forward in the next half year, we are going to improve the margins in comparison to the whatever we have achieved in the first half, taking into consideration the better execution as well as the change order, which are being pending with ours. So taking that into consideration, we expect to improve the EBITDA in the next half.
And one more thing I just want to ask. In the P&L, there is a construction material. What does it include? And why there is an increase in this quarter? Because if we can see in the previous year second quarter, that is only INR 47 crores and it increased to INR 164 crores. So I just wanted to understand what is the construction material includes and why it has increased?
Yes. Basically, it dependent on the Turnkey turnover. It's a part of the cost of the Turnkey segment in case there is an increase in the turnover in the EPC segment, the corresponding cost will also increase. You can see the last financial year, the EPC turnover as well as the EPC cost. So with the increase in the turnover in the EPC segment, means Turnkey segment, there will be increase in the cost. That is directly proportional to the increase in the turnover for the EPC segment.
But I think in the last call, you said about technical assistance is the key relation have...
You have to take into consideration both the component. One is the subcontracting, other is the construction material, technical systems of subcontract plus construction material equipment. These two costs are directly proportional to the EPC turnover. In 1 year, one may be less, other will be more depending on the cycle of the execution of that particular project.
Got it. Okay. Is there any doubtful debts? And is there any provision in this quarter?
Yes, definitely, there are provision for the Ind AS, we are making the provision depending upon the -- basically the period of the outstanding of the debt. Those provisions are made per the Ind AS and are reviewed at every quarter. During the current quarter also, we are having a provision of around INR 2 crores to INR 3 crores, not a material in comparison to the last financial year. You just see our debt position that is almost as of 31st March '22, whatever the debt right now, also, we are having the same debt. So the provision is less in comparison to the last quarter for that output, but that is a very scientific way in the quarters with that, we are making the provisions.
Got it. Is there any other investment opportunity which company is thinking because we have a lot of cash in our balance sheet. So is there any opportunity which are in the discussion?
See, we are looking on a couple of opportunities, but this is not the right time where we can disclose this. There are a few things that are going on. It has not reached that stage where it can be declared.
Okay. So is it related to government projects or any other projects?
It's both.
Yes Mr. Kunal?
Yes. We have, sir, last question from Ashna. I think she has moved out of the question queue. So we don't have any further questions, sir. Sir, would you like to give any closing comments?
[Foreign Language].
[Foreign Language].
Thank you very much, Mr. Kunal, and we are very sure we will achieve our targeted figure in the balance half year, and we will achieve our targets.
Thank you. Thank you so much for the opportunity. Thank you so much. And best of luck, sir.
Thank you, Kunal. So nice of you.
Thank you.