Garden Reach Shipbuilders & Engineers Ltd

NSE:GRSE

Earnings Call Transcript 2022-Q2

[Operator]

Good afternoon, ladies and gentlemen. I'm Janice, your moderator for this conference. Welcome to the conference call of Garden Reach Shipbuilders & Engineers Limited, arranged by Concept Investor Relations to discuss its Q2 and H1 FY '22 results. We have with us Rear Admiral Shri VK Saxena, Indian Navy, Retired, Chairman and Managing Director; and Shri R.K. Dash, Director Finance. [Operator Instructions] Please, note that this conference is being recorded. I would now like to hand the conference over to Shri VK Saxena. Thank you, and over to you, sir.

[Vipin Kumar Saxena, Chairman & MD]

A very good afternoon to all the participants and valued investors for this con call today. And I extend a very, very warm welcome to all of you for joining today the discussions on the financial results and performance of the company quarter 2 ending September 30 of this financial year. I'm sure that you all must have had a good time after a tough phase of the corona wave 2nd and the festival season must have gone out well of the Durga Puja, the Dussehra, Diwali and all other festivals. And I'm sure that all must be safe, your near dear ones. As you know, that the company has also come out quite okay with regard to the second wave of the COVID. And of course, Q1 was affected, but quarter 2 somehow has been much better. While one would say that now the effects are much lesser, but we are still abiding by the government guidelines, norms and COVID appropriate behavior in terms of the numbers of the people that can work in various groups on board ships and workshops. Therefore, size of the groups, et cetera, remains still lesser, we cannot have the same big, big set of the people working on board ships to achieve that kind of results. However, you would have noticed that despite of all those constraints, the lessons that we have learned last year and after the phase -- wave 2 of the COVID. All those strategies which we have learned, implemented have really started giving fantastic results. And because of that, the performance in the Q2 have been very, very encouraging. And we are happy that with these kind of things happening and results being good. We are quite hopeful that we should be performing even much better in the coming quarters. Of course, we are very cautious and careful about the mildly third wave, but we all are hoping against hope that it should not really come up and impact us and the country as such. Now let me quickly brief you about the -- some of the financial aspects of the company. I would like to compare the quarter half yearly in the first half of this financial year compared to the first half of the previous year, that was 2020. You see the revenue from operations have gone up by 90% if you compare with the first half of last year, 90%. And in that INR 382 crores was last year's figure. And this year, it is INR 726 crores. The EBITDA has also gone up by around 80%. Most importantly, the operating profit has shown a very, very huge jump and improvement that is 2.9x have increased. PBT has also gone up by 94%. The PAT has also moved up to 110%. The margins have been very, very good encouraging. EBITDA margin has increased from 15% to 16%. PBT margins increased from 12% to 14% and PAT margin has gone up from 8% to 10%. Now if we compare, generally, I don't look at quarter-on-quarter comparison However, it would be worthwhile again to say because of the COVID situation and how we have moved from the last quarter to this quarter. So that is the reason I'm trying to give highlight to our valued investors how we have performed [ compared ] as compared to previous quarter of this financial year. So in the previous quarter, we had around INR 304 crores as a revenue from operations and now it has moved up by 39% to INR 452 crores. Similarly, the total income has also moved up by 33% from INR 344 crores to INR 458 crores. The operating profit has gone up by 8.5x. So the operating loss was INR 6 crores, it has now moved up to INR 45 crores operating profit. Similarly, PBT has gone up by 3x from INR 26 crores to INR 82 crores. PAT has also moved up around 2.85x from INR 21 crores to INR 59 crores. Margins, EBITDA margin has moved up from 10% to 20%. PBT margin has also moved up from 8% to 18%. PAT margin has gone up from 6% to 13%. So these are the broader financial performance. When you look in the light of the backdrop of the corona COVID impact and still, I would say the supply chain is what was the effect and impact still are linking back, and we are heavily dependent on the supply chain in manpower. Manpower, already told you that still we are continuing with all the restrictions in place, we cannot have those numbers. And also the huge amount a number of the equipment material, et cetera, which depends on the supply chain, and that is also coming back on track slowly, slowly.Against all these things, you have seen that how well we have performed. Now I'll brief you about the projects which Shipyard is handling. As you're aware that we are handling as of now. Last time I told you that we had 5 projects, but now we have the sixth project also in our hand that is basically -- 3 projects of the Indian Navy. You're aware that 17 Alpha [indiscernible]. Then we have got Survey Vessels project to support ships construction, then we have got eight GRSE Shallow Water Craft project. So all in all, 15 watches for the Indian Navy against the 3 projects. One, Fast Patrol Vessel of the Coast Guard and one export order against the supply construction and supply of the [ Karoon ] cum Passenger Ferry for government of Guyana. So that makes it 17. Now also, we have got the export order from government of Bangladesh for construction of the 6 boards -- patrol boards for the fishery department of Bangladesh. So this is how the 17 plus 6, these main numbers are the platform that is being built under different stages of the construction. And the order book is, again, healthy INR 25,071 crores is the order book as of now. And I would say that the refit material also, as I have been saying that we have been really putting a lot of efforts in sensing the refit activities in the shipyard. And as a result of that, I'm happy to inform that despite of the troubles of the COVID second wave when a ship came here from government from Mauritius all the way from there. It is offshore petrol vessel, which we needed for the government of Mauritius.She came here for the refit, and this refit was at the cost of around -- we had INR 21 crores for the cost of the refit, and we have successfully completed refit,and the shift has gone back to the Mauritius, and they have appreciated efforts put in by the GRSE. And we have also got small orders from the Coast Guard here and there on the refit. Now we have entered into the Concession Agreement with the Kolkata port trust and having the [ pre debt ] of COPT on lease, and this is all with the strategy to have the maximum marine assets with us so that the refits of the Navy and the post guard can be handled at a very efficient pace with a lease for the time because ad hoc is a very, very important initial thing. I'm sure that this initiative is going to be beneficial and helpful to the company in the coming months and years. You must be aware that we have also signed the MOU with the Naval Group France for design and construction collaboration for the surface combatant, not only within the country but also elsewhere, we can jointly go out and explore the possibilities of getting some kind of orders. As regard to the performance rating of the financials. Important point to note that so far, the company was heavily dependent on the revenue generation from the 17 Alpha projects, which you know that the highest, I would say, the biggest cost project that was INR 19,000 crores to INR 189 crores. But Survey Vessel large project and ASW Shallow Water Craft project where we are slowing -- coming out from the Phase 1, some ships and then coming towards the Phase 2. I'm happy to report to you that the Survey Vessel and ASW Shallow Water Craft project has also started giving us a good amount of revenue if I compare it with the previous year's half year performance. So in that, almost INR 300 crores in this first half of this year, we got from these 2 projects, like in SVL, [indiscernible] project, we got INR 162-odd crores as a revenue from operations. And also in the ASW Shallow Water Craft project, we got INR 141.35 crores as against INR 13.23 crores and INR 5.2 crores in the previous half of the previous year. So that is actually showing a fantastic kind of a performance. And I've been saying that. Now the ships under construction are moving into more mature phases, Therefore, we expect the larger revenue is going to be coming from all these 3 projects in addition to 17 Alpha, SVL, ASW Shallow Water Craft project also. Similarly, my other units, that is the Bailey bridge unit that has also given us a much better revenue compared to the previous year's half year performance. Similarly, the Tech machine unit that is [ Farasala ] unit. And also the diesel engine plant has given us much better revenue in this first half of this year. So all in all, I would say the various units and also the shipment [indiscernible] are giving us a very good kind of revenue generation. And also the -- now we have some major event that is scheduled, and that is actually the result of the good, I would say, construction progress. The government of Diana for whom the we are making Ferry and Passenger Craft that is the cargo passenger ferry craft. The key link would be performed shortly. That is going to be happening on the 20th of November and their high dignitaries are coming all the way from there, that is going to be a big event. We will be also carrying out the launching of the first Survey Vessel, which is under construction at the GRSE on 5th or 6th of December, and that will be a very big event. We'll be also in the month of December, we were laying the keel of the second ASW Shallow Water Craft. So this is how we expect that some of the big events that would be unfolding. We will also be seeing the launch of the second Survey Vessel, which is under construction at the L&T Kattupalli. For us, that ship is also expected to be launched by March or April, most likely in March. So that will be happening in this financial most likely, if all goes well. So therefore, the progress of a projects, especially 17 Alpha is going on quite nicely. Second ship is also expected. I told you that second 17 Alpha is expected to be launched ahead of schedule. Of course, that will be not happening now. But why I'm saying to all of you now is that the progress of the work is very, very good, very healthy despite of the restrictions which we are facing. So I'm quite hopeful that we will be doing at least 2 to 3 months ahead of schedule for launching of the second 17 that is still [indiscernible] launching. And third ship construction is also happening quite, quite nicely. Survey Vessel, I told you that first ship is going to be launched and second ship Survey Vessel, will be launched by March or so.We already completed the key deal of the first ASW Shallow Water Craft, and the [ keel ] of the second ship will be laid in the month of December. And the production of the third and fourth ship has already started. That's all under preproduction stages. So all in all, these 3 big projects are going to be doing quite well. And hopefully, they should be giving us a much more better and higher revenues in the coming months going ahead. So this is the major thing which I have to inform all of you at this juncture. And I'm sure that during the question answer session, whatever things you have in mind, I will be kind to answer, all queries that you have any. Once again thank you very much. And ready to take on any questions that you have.

[Operator]

[Operator Instructions] The first question is from the line of Bhagyesh Kagalkar from HDFC Mutual Fund.

[Bhagyesh Kagalkar, Senior Equity Analyst]

Two questions here. One regarding the order book, for the visibility for next 6 months, where we are targeting the orders both in shipbuilding and the export as well as refit vertical? And second is on the margins, margins have been quite strong this quarter, but there have been cost pressure on lot of funds, even in other expenses, essentially. So what is the strategy going forward?

[Vipin Kumar Saxena, Chairman & MD]

Yes. As far as the -- thank you very much for your questions. As far as the orders are concerned, you are aware of that. And what's shipbuilding, especially the order where it is from the domestic -- from Navy or coast guard or any other organization or even if you look at a broad, for the warships, it doesn't happen that fast. So while the -- some of the RFPs are already there with the MoD, that is for the NG-OPVs, fast petrol vessels and the hovercraft, et cetera, that is going to be -- that will be opening up, then I will get you know that who is the L1 after that P&C technical nursing gets over. So immediately, I won't say that there is any...

[Bhagyesh Kagalkar, Senior Equity Analyst]

What is the size of that RFP you think in total?

[Vipin Kumar Saxena, Chairman & MD]

So I would say that the fast patrol vessel 18 number PV construction is in the range of around INR 800 crores. The new generation offshore petrol vessels, 7 plus 4, 11. So L1 will make 7 and 4 will be made by the L2. So the cost would be in the range of around close to INR 8,000-odd crores. And similarly, the hovercrafts also in the range of around INR 500-odd crores. So this is the -- as of now, things which are -- in which we are in. And as the various process at the Ministry of Defense happens in terms of the technical evaluations, followed by opening of the bids, et cetera, we'll see that. Even then the bid gets opened and one becomes L1, still that the ordering process takes at least 1 year or so. So therefore, suffice to say that immediately next 6 months, I don't see any visibility of orders coming in hand. Of course, we have also been export fund, we have been bidding in, say, especially, Bangladesh because export, as you've seen that we have made fairly decent progress, not a big one, but a small step we have taken. We have -- last year, we got the order for the Guyana around USD 13 million. We also got a big order of the FPV, which we have already supplied. It was around $12-odd million, $25 million plus. We could get the refit order from the Mauritius, which we have completed around $3-odd million. And from the Bangladesh, we have also got a smaller order of 6 petrol vessels. We have also submitted bids for 2 odd projects of the Bangladesh. So this is something happening. And then larger orders of the warship construction, the discussions are on. I've been explaining to all our investors and everybody that. These are the -- I would say, between the bigger things in the government to government and then the business to government and vice versa. So therefore, I do not see immediately next 3 to 6 months something big that would be coming our way. Maybe the smaller orders would begin there, would be there. A substantial one, of course, I don't see anything happening. Second thing, when you asked about the margins. You have seen that the margins are improving. And in warship building, if you recall that, the margins were earlier at 7.5%. Now we have been showing good performance because of the -- a lot of initiatives we have taken, a lot of string measures we have taken, stronger measures we have taken to cut down the various cost expenditures, et cetera. And process improvements have happened, refinement of process happened, et cetera, et cetera. So therefore, I'm seeing that there's certainly an encouraging upward movement. And in coming time, our effort would be that, yes, we must be able to improve it further and make it more better. But there's a limit to -- because the margins, in any case, I'm not going to do. So whatever margins -- when we bid for it, that are not much margin. But everything is depending on what internally I'm doing within that much available it is, within the process and other things. As a result, you are seeing that those improvements, I can go up to 4%, 5%, 6% improvement at the most. So safety, I would say, around 12%, 13%. As of now, I am targeting that if I'm able to reach a PAT margin within that 13% or so. I'm targeting rules there in the shipbuilding activities. So therefore, I'm quite hopeful that the company is quite, quite well prepared now. And with those kind of things which we have already implemented, I can see much better results. Yes, I must also add up that the many other initiatives have taken in terms of bringing technology, especially in shipbuilding, which is a manual labor-intensive work and core supply chain dependent. So a lot of technological interventions have been brought in by -- in the supply chain activities, the design activity, AI-enabled designing things are there. And then in the quality assurance activities, production activity, we are getting some element of AI, et cetera. I hope that in the times ahead, these things would certainly give us much more better, I would say, margins going ahead.

[Operator]

The next question is from the line of Viraj Mithani from Jupiter Financial.

[Viraj Mithani]

Congratulations on the outstanding numbers.

[Vipin Kumar Saxena, Chairman & MD]

Thank you. Thank you so much.

[Viraj Mithani]

Sir, my question was regarding this cost of raw material and the contracting charges, how -- sir, can you explain why have they gone up so significantly in this quarter?

[Vipin Kumar Saxena, Chairman & MD]

See the cost of raw material going up and such things, you would know that the raw material costs, which is the primarily the steel as far the warship building is concerned. Along with the steel is aluminum, which is significant. And along with the steel, does it control in terms of the electrodes in terms of buyers and such other things. So globally, the prices are going up, metal prices are going up. Hence, the warship-grade steel is also going up. But when you see the quarter-on-quarter comparison, now how fast and what kind of things you are -- how many numbers of the ship you are constructing at that juncture, we are drawing up that much of material from the stores or you're procuring that much of thing. So it is a good sign that the cost of the material what you see, the raw materials is going on. It's a good sign. That means you are using so much material. We are concurrently constructing 17 ships. So imagine that no shipyard in the country is constructing 17 ships concurrently. So this is what the GRSE is actually doing. And in fact, I have not mentioned because of the paucity of time in my opening address that as per my strategy, GRSE, we are building some ships in the L&T Kattupalli as a part of our internal strategy to utilize these resources, which is idling and available elsewhere so that content construction can go on and the ships can be built faster and the revenue can come in much more higher and the delivery to the customers can happen on time or ahead of schedule. So at my cost, which I want and then the people have L&T has come up and actually giving us the kind of construction work. So this is what is paying a lot of dividend to us. So now you should read as a positive sign that raw material is getting consumed more, costs involved.

[Viraj Mithani]

And sir, the subcontracting charges, it is the same we should read it. It has gone up from INR 18 crores to INR 61 crores is the same thing, is it?

[Vipin Kumar Saxena, Chairman & MD]

Very correct because if I am growing the material, it has to be fabricated, should be elected. It should be offered it, isn't it? So that we saw number of machines are going to be working at different, different places. So the subcontracting cost also is going to go up. So this is actually a reflection of how much activity is going on.

[Viraj Mithani]

Got it. And sir, is it fair to think that in the next coming quarters, since we have built up so much, some spillover effect of the profits would be in the next coming quarters also because of charges becoming plateauing out there? And how should one read this thing in actually?

[Vipin Kumar Saxena, Chairman & MD]

Actually, let me again tell you the profit and profit margins are depending on the -- whatever I think initially have accorded the margins and based on the input and output costs, whatever things are there. So you know that equation. But certainly, what is happening is that the scale at which we are constructing, the efficiency level that is brought in, process that has improved upon, you know that lesser number of people being deployed, but I'm getting a higher outcome. My -- different activities are moving on at much more higher speed. So what does all this mean? It means my operating profit and margins, et cetera, is going to go up. If you see the results, I told you the operating profit has gone up around 3x. So this is how the trend is coming in. And I'm sure that in the coming quarters, the operating profit is going to be showing much, much better figures. So that is a very encouraging sign for all of us.

[Viraj Mithani]

And sir, my last question is how are we -- what is our thought process to get protected against surge in raw material prices because as we hear there's a lot of shortages, there's a lot of -- there are no containers and the prices are shooting. Suppose they shoot up exponentially, what are our thought process?

[Vipin Kumar Saxena, Chairman & MD]

I can tell you that thankfully India is self-reliant as far as the warship-grade steel is concerned. All this warship-grade stell is called DMR 249A is getting produced within the country. And I'm not having any shortages of any offset raw material as sort of warship building is concerned. So that is not an issue. Because there was certainly an issue and those plants where the COVID had affected, but container problem is for either receiving it from abroad or sending it abroad. So those things are not affecting us. So there is a good news for all of us, especially about GRSE that nobody has to worry as for the raw material availability is concerned. The cost, et cetera, is not that badly fluctuating, is all factored [indiscernible] the orders, and we have got a rate contract in place. So every quarter with the sale, we keep having a revision up and down, whatever thing happens. So which is within the range which has already been factored into our overall costing.

[Operator]

The next question is from the line of Rohit Natarajan from Antique Stock Broking.

[Rohit Natarajan, Associate Vice President]

Sir, you said in your opening remarks about advancing the second unit of 3 17A and help us understand how does that execution pattern changes from here now onwards? What percentage of the work will be done in this year, and how that will be sold over the next few years for all the 3 units?

[Vipin Kumar Saxena, Chairman & MD]

See, I think I have been explaining to all our investors in the previous investors meet. What has happened -- what again, I would say for the benefit of others and as well as to answer your question that in warship building, the curve of the construction with respect to the time and the percentage construction achieved with respect to the time and respect to the y axis, you see how much percentage that have been completed. And along with that, the so-called revenue recognition also. So it is divided to 3 phases. Phase 1 is primarily the hull construction, where generally the input is the yard material that is the steel and the labor. So steel doesn't give you much, so about 25% to 30% of the time and the percentage you have nothing big, but hull gets ready. And once the ship is about to get launched or getting launched, we'll get into phase 2 of the construction where we start having a lot of outputting work and a lot of machineries equipment, weapon sensors and many other things start going onboard, so they are all high-value things. Plumbing starts happening, gauging starts happening, the machinery, pumps, motors, [ execute, exist ], so many things start happening. They start getting new value. So up to, say, 60% of the time and the construction, there phase 2, you get the maximum revenue coming in on board against a particular ship construction. Phase 3 is the one where we have started having the -- almost all the equipment has gone on board to start doing the characterization, the integration, setting the work, testing, tuning, trials, et cetera. So this is the longest phase, a painful phase. You get a lesser amount of revenues once you prove a system to the customer. And finally, that means the revenue recognition start or the revenue starts dropping. We don't get much. So phase 3 doesn't give you much. So hence, your question about the second ship of the 17 Alpha, it, generally, is a very big ship, it is to 6,670 tonnes each ship, highly complicated, complex ships as far as the construction is concerned. Now the second ship. Generally, we were doing 1% per month on an average as far as the first ship is concerned, that is for 17 Alpha. In the second ship, based on the different lessons we have learned, I'm generally averaging close to 1.5% per month. As of now which give you -- still the hull construction, which is happening with the second ship, and that is actually happening very fast. So I'm going to be in a position to complete the hull construction much ahead of schedule. And along with the health construction, I am putting a lot of seeds, I am putting a lot of equipment also as a part of modular [ ADA ] construction technology. As a result, I will be having much more higher revenue getting recognized in the -- in this particular second ship based on the design maturity and many other lessons that have been learned. So it will be much better than the first ship. The second ship is doing quite well that way. And I have already achieved, I would say, close to 17% construction. And the ship is planned to be launched somewhere in May or so June next year as again the scheduled launching of August or so. So imagine that, that is the kind of a progress that is being achieved. Similarly, the third ship also, it is right now as hull construction around 3%, 3.5% is the construction that is happening. But at a number of places, the different blocks and the different units are under construction concurrently. So this is the kind of work that is happening on the 17 Alpha.

[Rohit Natarajan, Associate Vice President]

Okay. Sir, in terms of value, how much can you recognize from first unit? And how much can be recognized in the second unit?

[Vipin Kumar Saxena, Chairman & MD]

I would say that -- see, let me tell you the -- as far as the second ship is concerned, we have already recognized somewhere around INR 163-odd crores in the second ship in HY '22. As again, the HY '21, it was only INR 48 crores. We've seen that it has gone up so much. And now in coming quarters, this figure is going to be, again, going up much, much, much higher, okay? So therefore, this curve, which you are seeing that I told you that my hull is going to get ready. And by next 3, 4 months, the hull part will be coming to a good shape. And therefore, I am now lowering the equipment also because equipment has started coming. So this is how the second ship is also going to give us a fairly good revenue recognition.

[Rohit Natarajan, Associate Vice President]

Is it fair to assume that you can calculate 1% for the unit 1 and 1.5% for the second unit every month, that's the way we should see it?

[Vipin Kumar Saxena, Chairman & MD]

It is again the average. At times, you will find that if I am lowering the gas turbines, if I have lowered the main engine, which is fairly big ones. So therefore, in that month, that is -- the month which I'll do this equipment, that will also add up that much of a value. In some months, if I'm not lowering equipment, but a lot of hull which is happening. While the work has happened too much, too many [ indiscernible] units have got fabricated, erected and integrated, but the hull doesn't give you that much of the percentage, but the equipment when it goes on board ship, it not only gives you a percentage, but it gives you more revenue also. So we should not draw a straight comparison that between months to months that -- but average, I would say, if I'm achieving average of 1.5%, it's a huge ship, it's quite good. And I'm hearing that in the coming months, probably after a couple of months the revenue recognition will be much more and percentage construction would be much more higher when we have the complete hull almost getting ready, and it is ready to receive so number of equipment onboard ship. See, for example, if your hull is ready, you can have -- it has got 500-plus kilometers of the cabling in one ship. Now I can turn the cable comfortably because entire ship inside is almost, all is built. So that cabling can continue to be happening. The plumbing, which is running in and say, around close to 35 or 40 kilometers of plumbing activities that will be going on in the ship. So this is going to give me so much of the revenue and percentage construction completion also, how the technique is used in the warship construction.

[Rohit Natarajan, Associate Vice President]

Okay. Help me understand, sir, the survey vessel at AFW you said in your initial remarks, that's the number, execution has been much more stronger in comparison to the basis. If I see your margins, can I infer that unit 1, you have achieved that threshold phase 1, phase 2 strand, and now we are moving to a phase where margins are not as high. Whereas the survey vessel and AFW is the execution that helped you to clock higher margins. Is that inference correct?

[Vipin Kumar Saxena, Chairman & MD]

See, let me again tell you as far as -- when we work on the balance sheet, when we do the accounting, et cetera, yes, the individual projects are also looked at individually. But when we present the balance sheet and when we present the financials to all of you, it is the cumulative profit and the margins, et cetera. So it will not be fair to talk about -- somewhere you have a higher one, somewhere you have a lower one, so that you average it out. But one thing good or bad the -- both these projects, you know that we have won it on a competitive bidding basis against many other shipyards. And therefore, the pressure was always there. But thankfully, with the kind of things which we have been able to implement and see the success of those strategies, which is giving me confidence that even in these projects -- 2 projects also we are having a decent margin that is coming on that is also adding up into my overall margins for the company. So all in all, the margins which was not beyond 7.5% or 8%, now you see that how it is quarter-over-quarter, even the -- even last year in the peak of the corona while my top line was not that high, my bottom line was much better. And also the margins were much better than the pre-pandemic year. So the last year, you see that what we have done in this year, you've already seen the tailor. In Q1 and Q2, why margins are moving up steadily. So that means whatever I could implement in the process of the time line, the vessel time in corona, that is actually showing up the fantastic results in the, I would say, [indiscernible] were 2. And hopefully, it is going to take us forward, and we have to only continue ensuring that steadfast approach and achieve those desired results. So I'm pretty confident that we should be consistent in our performance. This consistency is important. I'm not expecting any spurt. I'm not expecting any great kind of a thing going forward. But yes, it will be consistently going up. It will be very decent and consistent.

[Rohit Natarajan, Associate Vice President]

Sure, sir. Sir, then if I have to look at the cash position is not booked as such. How does this move? [indiscernible] other interest and therefore, the cash position was lower, but your order book is intact. I mean, in fact, it's by and large steady. How does that explain the position?

[Vipin Kumar Saxena, Chairman & MD]

Yes. As far as cash is concerned, if you see that when you see a bank accounts around INR 3,600-plus-odd crores are there in that. But there's all -- except INR 96 crores, which is our internal listing approvals, that's all of the project money which has been received against the stage completions from the customer. And when I say there is again, a stage completion that is towards a project only and they are lying in the bank. So when I start -- starting certain jobs and payments, et cetera, to the various vendors and suppliers and other activities, they are going to be, again, coming out, and those will be utilized against the projects. So over the period of time, you'll find that these so-called stage payments will be eventually utilized towards the project execution. But with that, my operating profit and the margins, et cetera, are going to be going up. So in effect or in totality, I would say, the things will balance out.

[Rohit Natarajan, Associate Vice President]

If I see the cash position, is it right to infer that...

[Operator]

The next question is from the line of Hardik Jain from Whitestone Financial.

[Hardik Jain]

Sir, as you mentioned that now the second ship of 17 Alpha is also -- will also start contributing to the revenue at a faster pace and also Survey Vessel and ASW projects have come out of the first phase and now start contributing to the revenue at a faster pace, and we have other ships also, which will advance in the stage of progress. So can we assume that hence for next few quarters and also the next year, the revenue numbers will only move up as these projects go in advanced stage of completion?

[Vipin Kumar Saxena, Chairman & MD]

Yes, I would say that rather than looking at the absolute numbers, but I'm pretty confident if you see there's a trend that is happening that the Q1 and now Q2. And going forward, Q3, Q4 in this financial year, I expect -- overall, this financial year numbers are supposed to be -- should be much better than the previous financial years. In fact, all numbers, if you look at the revenue from operations, top line, you look at the bottom line, you look at the operating profit, et cetera, and all such things should be much better in this financial year and then beyond also because you see that if you have 17 platforms under construction, and they are already moving forward concurrently without much of the hindrance, of course, hindrance are there because of COVID, but you are all watching that, how we have overcome all those hindrances, and the worst 2 things was the labor shortage as well as supply chain disruption, we have successfully overcome that, and we are seeing in the Q1 and Q2 now. So therefore -- when the ship is constructed or getting constructed and different percentage of construction being achieved, but -- correspondingly, the revenue also will be coming up. If you have so many platforms getting constructed, for example, when I'm saying that the second 17 Alpha is also achieving a much better percentage of construction per month than the first ship, so obviously, the second ship of the 17 Alpha is going to be giving us a good revenue. First ship is also going -- continuing because that is now in the Phase 2 of the construction. So that is also going to be giving us a decent revenue, okay? Similarly, Survey Vessel and ASW ships. Now Survey Vessel I'm saying that second ship is also getting launched in the -- most likely in March 2022. So naturally, the number of equipment that is going onboard ships will be much higher. And within 3 or 4 months' time, the third Survey Vessel also will get launched and likewise. So therefore, going forward, in the next financial year, lot of ships will be reaching the Phase 2 construction, right? And the ASW Shallow Water out of 8 which are, I would say, 5 -- 4 ships are under preproduction stage, they all will be coming to the production stage. So they will be at least in the Phase 1, they will keep giving me some things all ships. Probably next financial year will be under fabricating different, different stages. So imagine the amount of revenue that would be coming up. So going forward, I am very, very sure -- quite hopeful that if no other impediment external to us comes in, we should be doing much better.

[Operator]

The next question is from the line of Harshit Kapadia from Elara Capital.

[Harshit Kapadia, AVP & Analyst]

Congratulations on a very strong performance in this quarter. So a couple of -- I have a couple of questions. First, if you can highlight, in one of the RFIs issued in the month of August for Landing Platform Docks in just one of the projects, are we interested in, or do we have the capability and what will be the size of that tender length? [indiscernible] at what stage do you think it would enter into the tendering season you can order it if you are able to [indiscernible]?

[Vipin Kumar Saxena, Chairman & MD]

See, yes, there was an RFI that has come out from the MoD on behalf of the Navy about the construction of 4 LPDs. And they have asked our infos along with other shipyards. We have forwarded our info to them. And if they accept our suggestions to make the RFP whenever it gets converted into the RFP form from RFI to give wider, I would say, participation by the some shipyards because we have the capability in the form of our assets, marine assets, the drydock, we have a huge drydock of 118 meters and 10,000 tonnes capacity. And there are different, I would say, propositions there, different strategy we have suggested. So some of -- there are those things I cannot reveal at this point of time. But yes, we have again a very strong kind of suggestions. And we do hope that if those things are accepted by the Navy, then we are in for the competition. And I hope that, that would be probably beneficial for the country and for the shipyards and for us. Because I would certainly say that we should look at the wider competition, more shipyards would be able to participate rather than it becoming more restrictive in nature. So those are our various suggestions we have forwarded to the Navy and MoD and do hope that some positive things will come in future. We'll have a number of deliberations in the coming months. So I'm quite sure that we should be able to convince them. Let's see that how it goes. But as of now, we cannot say that yes, we are in or we are out, this is RFI only.

[Harshit Kapadia, AVP & Analyst]

Fair enough. That was very helpful. Secondly, sir, if you can also highlight, you mentioned the launch date for your 17 ships. Tentatively, what are the under construction work that is going on? Can you also highlight the delivery time line for these ships for P-17 Alpha [indiscernible] that will give us more visibility?

[Vipin Kumar Saxena, Chairman & MD]

First of all, I must tell you that warship construction is a long lead activity, has a long gestation period. Now -- and 17 Alpha in particular, depends a lot on the maturity of the design, which is dependent on the large number of major weapon and sensors equipment that is being selected by the Indian Navy that is a prime customer. The basic design is also being done by the Directorate of Naval Design at Naval Headquarters, New Delhi. So therefore, there were a lot of -- it's the first of that sort of 17 Alpha design, which is happening by the Directorate of Naval Design. So therefore, the classical maturity of design is not possible. Hence, it has got associated impediment and time impact, time penalties. But all in all, things are going on. Now, a lot of things have picked up. And therefore, looking like that when we're talking about, first, we should look at the launching because after the launch, a lot of weapon and sensors are going to be coming on warship. So therefore, some equipment, which are very major ones, they are required to be finalized, some equipment that has been ordered by us on behalf of the Navy and they are going to be coming from somewhere from abroad. So their delivery time lines are important. So that is not directly in our control. So therefore, as of now, I would say the progress of the construction at this juncture is going on quite fine. And first ship delivery, if we are able to receive the various equipment and weapon and sensors, et cetera, we should see in around 2, 2.5 years' time of the first ship delivery, if all things goes well. The Survey Vessel -- see launching -- not all 17 ships are getting launched together. I told you the launching of the first Survey Vessel Large out of 4 ships I'm constructing that will be launched on 5th or 6th of December, okay? So that is one major event that is going to be happening. The second 17 Alpha still the Stealth frigate is also moving quite fast, and that is expected to be launched in the month of midst of June and next year, so we'll just be 2 or 3 months ahead of schedule. So at this point of time, I'm only looking at how concurrently different resources are required to put in different ships, which are moving almost concurrently. So therefore, the delivery of the first Survey Vessels should be happening, first which is going to be launched now in December, somewhere around September to October will be the delivery. Because let's not forget, there has been a 6.5 months of the 4 Survey Vessels Government of India has given us. So that is something which is going to be -- and plus other associated issues and troubles that has come in that has been recognized by the Navy also. So the first Survey Vessel is going to be delivered. So that is immediately going to be happening in next financial year, right? And 17 Alpha is little away as far delivery is concerned, subject to a lot of things coming in. So the progress of the project, generally quite, quite good. ASW project is thankfully going on quite satisfactory as far as the design maturity is concerned, around 90% design maturity has been achieved. It is being done the classical interior construction. So that is actually going on quite fine because it is our own design in-house and this was designed at GRSE, Survey Vessel and ASW Shallow Water Craft. So everything under my control. So my design is moving quite fast, my equipment ordering is happening quite fast, both for Survey Vessels and for the ASW Shallow Water Craft. In fact, Survey Vessels Large, we have been able to receive a large number of equipment, generally a few months delay here and there because of the COVID. So the situation is quite, quite good.

[Hardik Jain]

Fair enough, sir. And good to know this. Just lastly, bookkeeping question. Can you give us a breakout of the order book of INR 25,000 crores in terms of P17 Alpha as we see in corvettes [indiscernible]?

[Vipin Kumar Saxena, Chairman & MD]

Yes, I'd tell you that as far as the 17 Alpha is concerned, the total order was in the range of INR 19,000-plus crores. The Survey Vessels project was -- when it was ordered to us was around INR 2,400-odd crores was the cost, which includes base and depot spares. I'm saying that apart from the project cost, base and depot spares were also required to be given. Similarly, the ASW Shallow Water Craft, 8 ships were at the cost of around INR 6,311 crores, something like that. So 8 ships. So you can now put -- so whatever we have already included you take all those kind of things, which we have already recognized in the last 3, 4 years, so the major trend will be happening now onwards. So say that amongst the 3 large projects of the Navy, now you will see the so-called the cream or a butter of whatever you call that would be now getting skimmed. So that will be giving us a huge revenue and major equipment will start going onboard ships, so on all the 3 ships -- 3 projects. As I told you that in the beginning that you see that both Survey Vessels and ASW Shallow Water project, if you look at the last year half year -- first half of the last year, we only got around INR 18-odd crores, INR 13 crores in the Survey Vessels project and INR 5-odd crores in the ASW Shallow Water Craft project. But this year, this first -- H1 of this year, we have got INR 161 crore or INR 162 crores in SVL and INR 141 crores in the ASW Shallow Water Craft. So these figures are going to go up much, much higher because the equipment starts going on board. Right?

[Operator]

The next question is from the line of [ Vikas Kasturi ] from [ Focus Capital ].

[Unknown Analyst]

Sir, I had just one simple question. For your first P-17 Alpha ship, what is the percentage completion of that ship, sir? That's it?

[Vipin Kumar Saxena, Chairman & MD]

Now the first ship is almost around -- close to 30% has got completed. So that is the percentage.

[Operator]

The next question is from the line of Venkatesh Subramanian from LogicTree Investment.

[Venkatesh Subramanian]

So I have a question in terms of the order execution. So in the previous con calls, you had highlighted to us the bell-shaped curve of the shipbuilding cycle. So considering your current order book and the -- also the simultaneous construction of 17-odd vessels, would we consider FY '23 to be a peak revenue recognition year or FY '24, which would be -- could you give us some guidance on that?

[Vipin Kumar Saxena, Chairman & MD]

See, I'll tell you again, when I say bell curve, which is -- let's do the bell curve -- the cycle which is followed in the construction of warship. Now you superimpose the 17 ships construction. And over a period of say 2026, '27 -- FY '27 or so, now different ships will be at different phase of construction. Now what you're asking that was FY '23, no. it will not be [indiscernible]. If you see the actual spend with a lot of other investors, we per ship say, 17-Alpha is 30%, now it has entered to Phase 2, now Survey Vessel Large, first ship is going to get launched. It is going to get launched with 40% construction completed. This is the first time happening in the history of the GRSE that when you launch the ship with 40%, it will be a lot of equipment has already gone onboard ship. So therefore, you see that the second 17-Alpha I'm doing 1.5% per month, and a lot of equipment are getting lowered onboard much before the launching. So therefore over the period of -- on coming years, I would say that I would -- what question actually asking that you will just take a simple thing from me at this point of time that what you have seen in the past, now this is the -- we have entered into the golden phase from FY '23 onwards, if you see that, we'll be entering the golden phase. Sometime, maybe FY '23, maybe FY '24 or so, we'll be seeing the peaks from there. But we'll be seeing only the upward curve, there's no other going back because this is our money available, and the progress is happening quite good. A lot of lessons have been learned, okay? So therefore, we have -- [Technical Difficulty] shipyard, we have no choice, but to ensure that all those things happen as per the plan, and thankfully, it is all happening. The impacts have not badly affected us. So I'm pretty sure that the coming year is going to be fantastic as far as the revenue recognition and growth is concerned.

[Venkatesh Subramanian]

Got it, sir. Got it. So just a comment, a general point, sir. Tracking GRSE for a few years now and also, I've been speaking to market participants, I want to convey my appreciation to the way you and your team have actually executed this amidst this wave. And the way you've come across in terms of execution is phenomenal. So I've not even seen it in some private sector companies, hats off to you.

[Vipin Kumar Saxena, Chairman & MD]

Thank you so much, very encouraging words. I'm grateful to you and to all my investors that they have such kind of confidence and my job is to ensure that I must live up to the expectations of my investors and government of India, that was my job, and I'm always learning lessons and trying to implement the new strategies, new things. And do hope that company shall continue to do well.

[Operator]

The next question is from the line of Sunil Shah from Turtle Star Portfolio.

[Sunil Shah]

Yes. Sir, there's been media post somewhere in September end, it was about inviting suitable candidates for this post of CMD. Sir, so I believe all our [indiscernible] just want you to continue for a long, long time for sure. [indiscernible] But what I'm just asking here is, what is the -- what are your thoughts on leaving the [indiscernible] in the company? And what are these areas that you're seeing that you can work upon GRSE in the foreseeable near future, where we can improve upon as a company. So that's my -- if you could give me some understanding on that part?

[Vipin Kumar Saxena, Chairman & MD]

See, when we work in the company towards doing certain things, we are not doing only as an individual, of course, I have to lead the company from the front and drive those agenda and those decisions. And -- but it is the complete team which works, different department, finance, HR, production, design, so many other departments. What actually I have always worked towards is that not to attract these symptoms, not to look at these stages, not to look at the milestones alone, look at the grassroot problems, look at the issues, which generally are taking the [ PSUs or PPSUs ]. So we have, over the period of my stay here, on my tenure I have tried to address those things, eliminate wherever it is possible within my control and look at the possibility of improvement. So these all things are getting documented, different kind of things have been done, which are -- so aim is to develop that kind of a self-sustaining system and department and the people who should be able to drive the agenda. Because nobody on earth can ever continue in any position forever of itself, I should depart one day from this mother earth. So therefore, I am hopeful that the things which I have tried to set and remove the bottlenecks, remove those troubled areas, they're large number but some variables which I have targeted they have been able to take care of those things. So the company naturally is now in a position to simply move ahead, follow the road, follow the car and continue in an accelerated mode and achieve the results. Thankfully, the order book is good. And with those lessons that have been learned, we should be looking at domestic as well as export orders. Export is our big first. And I'm sure that the company is in a good position to start looking at the some more and more export orders, not only in the warship construction, but any kind of ships or platform construction anywhere. So I'm not restricting my company only to the -- simply the warships, you have seen that Bangladesh, 6 patrol boats, [Foreign Language]. But again, the aim is to get into the country, some country and so that you are having a [indiscernible] spend there. So those are the strategies, and I'm sure that my successors and others who are my teams will be following those kind of things. So I think we should not worry on that.

[Operator]

The next question is from the line of Mohit Kumar from DAM Capital.

[Mohit Kumar, Research Analyst]

So my question is [Technical Difficulty] I'm asking again, pardon me. And my question is how the order prospect looking like, which are the orders you're targeting, which you expect to close in second half of FY '23?

[Vipin Kumar Saxena, Chairman & MD]

See, I have just explained the question to somebody when he asked about the orders, you are saying about the new orders?

[Mohit Kumar, Research Analyst]

Yes, new order prospect for H2 and FY '23, which are the orders which you are chasing at this point of time? And are you comfortable with the order book right now, or are you going slower at this point of time? There are 2 questions.

[Vipin Kumar Saxena, Chairman & MD]

Yes. As far as the new orders are concerned, I told you, we have submitted the response to RFPs of the projects of the new generation Offshore Patrol Vessels of the Indian Navy, 11 in number; 7 plus 4, so 7 will be for the L-1 and 4 will be L-2, then the Fast Patrol Vessel AK number for the Indian Coast Guard, then we have the [indiscernible] number [indiscernible], hovercraft for the Army and the Cost Guard. So these are the 3, I would say, substantial orders, which we are waiting for, once the process gets completed in terms of technical evaluation, we'll get to know, and they will open up the bids, and we'll get to know who becomes the L-1 or L-2. And so these things are still in the pipeline. I am not expecting it when happening in the next 6 months or so. So it is going to be going beyond, I would say, FY '22, maybe we'll see something happening in FY '23. So as of now, no...

[Mohit Kumar, Research Analyst]

Sir, what are size of the orders, sir? What are the order size?

[Vipin Kumar Saxena, Chairman & MD]

So I think the Fast Patrol Vessel is around INR 800-odd crores. For the new generation Offshore Patrol Vessel, estimated cost is around INR 8,000-odd crores for 11 ships. So -- and hover craft is also in the range of around INR 500-plus odd crores for numbers. So these are the 3 major things there in the pipeline as of now. And of course, we have been submitting the response to the LPDs, landing craft -- Landing Platform Docks for the [indiscernible] numbers, which is a huge one, but it's RFI only, RFP will going to come subsequently. But also submitted the bids for the low-value projects and export [indiscernible] Bangladesh, we have submitted. And we have already won one order, I'll not watch the transaction, but patrol boats, the tugs are there, some other boats and all ships are there. So we are working in a direction also. But we are also focusing on the refit vertical. So hope that something should be happening on the refit vertical, we have successfully completed a refit of one Mauritian government coast guard ship, and now we are getting some smaller orders from the coast guard. So hope that this type becomes bigger in the coming time. And also we're looking at the boat building activity as well. So smaller ships, warships, the various other things which are there and export ships to other countries, smaller ones also, therefore, this is what we are looking at and also my smaller unit -- engineering products also, they are showing good performance. They're bringing some orders. But of course, compared to the shipbuilding, they are much smaller, but they are [indiscernible]. The Bailey bridge is -- unit is one, which is -- generally contribute around INR 50 crores INR 60-odd crores of the revenue. Similarly, the deck machinery is something which contribute around 25 -- INR 20-odd crores and diesel engine plant at Ranchi also contribute around INR 50 crores INR 60-odd crores per annum. So these are things which are working, and we are also looking at newer products, newer strategies that would be coming in place so see to it that these small units also start doubling up their so called -- their revenues in the coming years, apart from the shipbuilding.

[Operator]

Lost the line for the current participant. We proceed with the next question from the line of [indiscernible] from Ratnabali Investments.

[Unknown Analyst]

Sir, I have 3 questions. First question is, I want to understand that today, we have around order book of around 17 ships. So are these to be completed by FY '27?

[Vipin Kumar Saxena, Chairman & MD]

So -- yes, yes. If I look at the COVID impact and force measure that has been given by the government also, we may go to ASW Shallow Water Craft, we -- last ship probably may go to FY '28. But otherwise, we see ships all would be completing by FY '27-or-so, that is I'm sure.

[Unknown Analyst]

Okay. So my second question is, you have already -- you have around 8 ASWs ships. Now these ships, what is the cycle of execution, is it 3 years or 5 years?

[Vipin Kumar Saxena, Chairman & MD]

See, as per the contract, the ASW Shallow Water Craft ships, although they are size-wise, they are smaller compared to a Survey Vessel, but because of the complexity and equipment density, it is having a construction cycle of 42 months each ship, okay? So -- but the thing is that when the first ship construction happening, that means you are actually taking a lot of time in the design, okay? After design is getting done and then thereafter drawings are getting released and the ship construction is happening. So what strategy we have adopted is that 4 ships are getting constructed at the L&T, who's my sub-vendor to construct some of the core house and some outfitting also going to be done there. And I'll be also constructing 4 ships at the GRSE. So you'll see that 2 geography, the 8 ships are going to get constructed, of course. So it is not exactly after 42 months, there'll be another 42 months for the second ship delivery. So the second ship would be at the [ interval of ] 6 months. Third ship again 6 months. So this is what is going to be the cycle. Survey Vessel, the period of construction is 36 months, while it's a 3,400 tonnes ship, much bigger, but it is not that much complicated as compared to the smaller platform, like ASW Shallow Water Craft. So it has got 36 months, and that is what is now -- I would say the GRSE is -- we are launching the ship shortly.

[Unknown Analyst]

Okay. So my final question is related to project Alpha, the third, ship. Sir, any estimated time like it will start, it will go to the production and the launch date broadly.

[Vipin Kumar Saxena, Chairman & MD]

So I think we have not listed. I must say that the ship has already started construction, already -- production has already started, I have achieved 3%. Now 3% means it has got 92 blocks. The ship is divided into different, different blocks. And out of 92 blocks, a large number of blocks have already got constructed some places, but the integration of those blocks on the building [ but ] has happened, so which is only 3% of the -- unless these blocks are brought to the building [indiscernible], you don't get the percent. So here, I have already achieved around 3% plus. And -- but other blocks, which are ready would be also coming and going to get integrated. Therefore, this ship -- third ship will also start moving at a fast pace as for how construction is concerned. So maybe we'll be achieving around 1% or 0.8% per month for this ship, third ship, while the second ship, I am achieving almost 1.5% or so average. So this is how the -- this is a fairly big ship. I explained, that is a very, very big ship, 6,670-tonnes, 150 meter long ship.

[Unknown Analyst]

So launch date of this third ship? What would be launching time?

[Vipin Kumar Saxena, Chairman & MD]

See, the second ship, I must tell you, is going to be launched somewhere in the mid of next year, ahead of schedule. Third ship is going to get launched, that is third, 17 Alpha is going to be launched somewhere around 1 year or if all things goes well, maybe ahead of -- maybe in 10 months' time from the launch of the second ship. So suppose that the second ship gets launched in the month of [ midst of ] June, you can safely take 1 year from there. That is FY -- that is June '23 or so the third ship will get launched. If all goes well and as for my plan, probably we will be able to save 2 months further. I may launch, say, in a month of March, [indiscernible] also. The third ship, based on lessons learned and no other impediment coming in.

[Unknown Analyst]

Understood. Now last question I have. [indiscernible] has been stated like Navy -- Indian Navy has a plan to then go 200 ships from current 140-odd ships. And roughly, it will spend INR 1 crores in the [indiscernible]. So if I calculate very roughly earlier next 5 years, around [ 20,000 tonnes ] of orders, is it a fair way to calculate what kind of opportunity can come in the [indiscernible] segment.

[Vipin Kumar Saxena, Chairman & MD]

Yes. As of now, the -- if I recall the Navy's plans in the coming, say, decade or so -- the next 5 years, I expect the RFPs that will be coming out would be for the construction of next-generation corvettes, which is again fairly complex warships -- corvettes not the frigate. Next-generation corvettes, that would be around, say, 4 to 6 number that maybe will decide. And then we'll fairly [ complicate ] one. Somewhere, I don't know, smaller than frigate but larger than the frigate which we have already built, around 10 frigates were built earlier. So this is what is a major one, which is going to be coming out as per the Naval Capability Perspective Plan, 2027, they call it. And the next is that new generation destroyers. It's a huge ship, around 8,000 to 10,000 tonnes warship, which is bigger than 17 Alpha, destroyer. So this is what is also going to be coming up as a big project. So amongst the bigger ones, [Foreign Language] a number of other small auxillary platforms, [indiscernible] will be coming up. So frigate maybe some follow-on 17 Alpha or such kind of things might come 2 or 3 or 4, but as of now, that is not really enunciated by the Navy. But what we are seeing that because their plans are that 200 ships maybe by end of this decade. And how fast RFPs, et cetera, comes out and how fast we are able to convert the RFPs into the orders so that the respective shipyard [indiscernible] win will start constructing the ships.

[Operator]

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for closing comments. Members of the mangement, you may go ahead with your closing remarks.

[Vipin Kumar Saxena, Chairman & MD]

Once again, thank you very much all our investors, value investors and the analysts, they are present there and all the stakeholders for joining us in this teleconference today about the performance of the company after the quarter 2 results. And as I've just spoken to all of you and can only assure that the company is moving on the right path. And in the times ahead, the kind of things we have done and those things are implemented, I'm sure that shipyard is going to show you a good performance. And then this financial year should be much more brighter for us. And we expect a good growth for the shipyard in the times ahead and then in the coming years. So the shipyard, I must, once again, assure you that we in the shipyard are putting our best effort to see to it that the -- apart from a top line alone, the bottom line must improve, margins must improve, the so-called, I would say, various other procedural things, which are there are required to be improved, refinement of various things should happen. And more and more technology should get inducted in the shipbuilding, which has not been the norm earlier in this country, and we are doing our best to get those kind of things inducted in a progressive manner. And that is what is expected to give us good results. So once again, thank you very much being part of us and trusting us and hope that the company is going to be doing quite, quite well in this financial year also. Thank you very much. All the very best to you and to your family.

[Operator]

Thank you ladies and gentlemen, thank you for attending the conference call. If you have any further queries, please send an e-mail to [e-mail]. I repeat, [e-mail].