Garden Reach Shipbuilders & Engineers Ltd

NSE:GRSE

Earnings Call Transcript 2025-Q2

[Operator]

Good afternoon, ladies and gentlemen. I'm Yashashri, the 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 '25. We have with us today Commodore P. R. Hari, Indian Navy Retired, Chairman and Managing Director; and Shri R.K. Dash, Director, Finance and CFO. [Operator Instructions] Please note that this conference is being recorded.

I would now like to hand over the floor to Commodore P. R. Hari, Chairman and Managing Director. Thank you, and over to you, sir.

[P. Hari, executive]

Thank you, Yashashri. Ladies and gentlemen, a very good afternoon to each one of you. I'm P. R. Hari, Chairman and Managing Director of the company; and with me here are Shri Ramesh Kumar Dash, Director Finance and CFO; Mrs. Aparajita Ghosh, General Manager of Finance; and Shri Sandeep Mahapatra, the Company Secretary. I extend my warm welcome to each one of you for sparing your valuable time to attend this call.

Our Q2 results have been very encouraging. And before I provide the highlights of our financial performance, let me provide you an insight on our fiscal performance. Our order book as on 30th September 2024 stands for INR 24,221.37 crores. This comprises of 12 projects with 43 platforms, including 4 export projects comprising of 10 platforms. These include 17 warships for the Navy that is 3 P-17 Alpha advanced stealth frigates; 4, next-generation oceangoing petrol vessels, 8 anti-submarine shallow water crafts; 2, Survey Vessel (Large) and 1 oceanographic research vessel for the Ministry of Earth Sciences; 1 acoustic research vessel for DRDO organization, the NPOL, 15 hybrid ferries for the government of West Bengal and oceangoing tug for the government of Bangladesh and dredger and 3 petrol boats again for the government of Bangladesh; 5 multipurpose vessels for a German client and 1 fully electric ferry for the government of West Bengal. So as I said, 12 projects, 43 platforms.

I will now give you an insight as to what the projects are currently, what status the projects are currently at? And what is our execution plan. Coming to the P-17 Alpha project, it's a 3-ship project. All 3 ships have been launched and the first ship has already attained around 83% of physical progress, the second ship around 65% and the third ship around 50%. The first ship is expected to be delivered during the mid of next year, that is August 2025, and we intend completing this project by August 2026.

Coming to the Survey Vessel (Large) project. This is a 4-ship project, and we have already delivered 2 ships. The second ship, first ship was delivered last year, that is December 4, 2023, and the second ship was delivered on 8th of October 2024. Now the next 2 ships are at advanced stages of construction with the third ship of the project having completed around 78% physical progress and the fourth ship following closely at 72% physical progress. We intend delivering both these ships by the mid of next calendar year. That is the first quarter of FY '26.

The next project is an anti-submarine shallow watercraft project. This is the 8 ship project and the first of these ships have already completed the contractor fleet trials, and it is now getting ready for delivery. We expect the ship to be delivered during January 2025. So from then, the second ship is right now at around 83% physical progress. The third ship is around 70% and so on. And we intend completing this project by October 2026. That means delivery of all the 8 ships by October 2026.

The fourth project that we are undertaking for the Indian Navy is the next-generation offshore petrol vessel. This again is a 4-ship project. The progress is good so far. We have commenced production of all the 4 ships and the keel of 2 of these ships have been laid very recently. The first 2 ships have touched around 35% progress and the last 2 ships around 25%. The delivery of these ships will be completed by 2028. As I mentioned earlier, in addition to these projects for the Indian Navy, we have a plethora of projects being undertaken, both for the state government, the central government research organizations and also a few export projects. As per our current assessment, all these projects will be completed by 2028, that is FY '29.

I have so far given you a glimpse of the orders currently in hand and what is now on the anvil. Again, I shall give you a glimpse so you get an understanding as to what are the orders that are likely to be -- that are likely to materialize in the coming years. We had concluded a contract initially for 4 multipurpose vessels with an option clause for another 4 vessels. This option clause has been exercised and the fifth vessel contract has been signed, and we intend signing the contract for 3 more vessels by March 2025. We are also the L1. We have been declared L1 through a tendering process for 2 coastal resource vessels for the Geological Survey of India and the price negotiations are currently in progress. This is a 2-ship project.

One project that I have been mentioning in every interaction that we had before is a next-generation corvette project. The bids have already been submitted. And currently, the technical evaluation of the bids is in progress, and we expect the L1 declaration sometime during December '24, Jan '25. This is the 8-ship project with the L1 shipyard getting 5 ships and the L2 shipyard 3 ships and the L1 shipyard for 5 ships, the expected order value is around INR 22,500 crores. The RFPs that are likely to come from the Navy and the Coast Guard in the near future are for the next-generation Survey Vessels (Large), that is 5 ships, approximate value of the project is around INR 3,000 crores; next-generation oceangoing patrol vessels, offshore patrol vessels for Indian Coast Guard; 6 ships, approximate order value is around INR 2,000-plus crores. Next-generation Fast Patrol Vessel is a big project in numbers, 18 ships and the order value is around INR 3,500 crores to INR 4,000 crores and 2 multipurpose vessels for the Indian Navy, approximate order value around INR 1,200 crores.

This is in addition to the other projects that the Navy has plans for the P-17 Bravo project for which the AoN has already been accorded. This is a 7-ship project and the total order value is around INR 70,000 crores. So as per the DAC time lines, the RFP will be promulgated in the due course. We expect the RFP to come out in the financial year 2026. This gives you also a highlight of the orders that are on the anvil.

Now I'll touch upon the financial performance of the company for the quarter ending 30th September 2024. As I had mentioned, the results have been very encouraging. And if you are doing a year-on-year comparison, our revenue from operations have gone up from INR 898 crores to INR 1,153 crores, that is registering a growth of around 28%. Total income from INR 969 crores to INR 1,228 crores, 27% growth. The EBITDA has gone up from INR 120 crores to INR 145 crores, 19% growth and the profit after tax registering a growth of 21% from INR 81 crores to INR 98 crores.

Our order book is good. We are flushed with orders, as a matter of fact. And -- we expect more orders to come in the future. And I have been consistently maintaining that we have a very clear execution strategy. And so the future looks bright.

With that, I close my introductory address, and I'm open for any questions as the moderator conducts the further course of events.

[Operator]

[Operator Instructions]

We'll take our first question from the line of [ Rafat Fatma ] from Yashwi Securities Private Limited.

[Unknown Analyst]

So my first question is on the gross margin front, why are we seeing the costs going up so high this quarter?

[P. Hari, executive]

Could you please -- ma'am, could you please repeat? Your voice sounded a bit blurred.

[Unknown Analyst]

Yes. So I was asking why has the cost gone up so high in this quarter?

[P. Hari, executive]

Cost, is that what you mean?

[Unknown Analyst]

Cost of materials.

[P. Hari, executive]

Yes, yes. Yes, definitely, the cost has gone up because the cost is directly dependent on the project maturity space. What I'm trying to convey is that in the initial stages of the project, the material cost would be less. And as the projects mature, the material costs automatically goes up. This in turn gets translated into the value of production.

Now just to give you an example, in conventional warship composition in terms of value, the material cost has gone from 65% to 70%. In the initial stages of project when the basic hull construction and the design and the commercial activities are in progress, the material input is very, very less. When the project reaches the maturity stage of between 40% to 60% of physical progress, then the material input goes up and therefore, the cost. So it is a natural phenomena in a shipbuilding cycle.

[Operator]

We'll take our next question from the line of Karan, an individual investor.

[Unknown Attendee]

My first question is like what is the current utilization rate of dockyards?

[P. Hari, executive]

Okay. Do we have any more questions, then I'll address all of them together.

[Unknown Attendee]

Hello?

[P. Hari, executive]

Do you have any more questions? You asked a question on the utilization of...

[Unknown Attendee]

Okay, sure. I have like total around 3 questions. The first question is like what is the current utilization rate of dockyards. And the another question is like which countries do you see importing from you like most?

[P. Hari, executive]

This question, I didn't get -- which country would be importing?

[Unknown Attendee]

Yes.

[P. Hari, executive]

Could you repeat the second question once again? Which country...

[Unknown Attendee]

Which countries like you see like exporting the most?

[P. Hari, executive]

Okay, okay, okay. Next question? You said 3 questions.

[Unknown Attendee]

Yes. And the last question is like can you brief us about like more about nameplate 70 steel and daily business JV with NHAI? Like how will this benefit you in the long term?

[P. Hari, executive]

Okay. Third question is on our MoU with NHAI, how is this going to benefit? Okay. I'll answer your first question. Price -- okay. I'll take on the questions one by one. The dry docks and building berths are the key assets that any shipbuilding industry acquire and Garden Shipbuilders have got adequate facilities. So you may be aware that they have got 3 dedicated shipbuilding units all in Kolkata. And in addition, we have also taken over a facility from the Kolkata Port Trust, the Syama Prasad Mookerjee Port, which comprises of 3 more dry docks. So we are good with the dry docks.

Now coming to your question regarding the utilization. Right now, these dry docks and building blocks are at around 70 percentage of utilization. And again, I would like to highlight, I think I mentioned during the last earnings call that we -- our stated shipbuilding capacity was for concurrent construction of 20 platforms, 20 warships, 8 large and 12 small and medium ships. What we have done was considering the orders that we currently have and also the orders on the anvil.

In addition to taking 3 dry docks on long-term lease from the Syama Prasad Mookerjee Port, we had also revitalized some of the existing facilities that we have. So with this initiative, we could augment our shipbuilding capacity from 20 to 24. And our current capacity is for construction of 24 warships concurrently. That is 8 large and 16 medium to small. So to put in a nutshell, our capacity utilization with respect to dry docks and building berths is about 70% as of now.

Your second question was on the country which is importing and our export potential is very high. Most of the European nations, that is Germany, Netherlands and so on, they are now looking at India as a commercial shipbuilding hub. The results are very evident that almost all the Indian shipyards have orders from these clients. Earlier, they used to go to other nations for shipbuilding requirements. But now India is a sought-after destination. And we have orders, as I mentioned that we have an order already for 5 multipurpose vessels, which will go up to 8 by March '25 and so do the other shipyards. So we expect this trend to continue and the export potential would be more towards the European nations who need commercial vessels and that too large numbers.

Coming to your third question was the significance of the MoU with National Highways -- NHIDCL, National Highway Infrastructure Development Corporation. Now this MoU, we had concluded for a product of ours in the Bailey bridges segment. As you are aware, Bailey bridges is one of our -- that is portable steel bridges is a strong business vertical that we have, and we are market leaders in this segment. We already had live MoUs with the Border Roads Organization earlier. We have expanded this to NHIDCL. With this MoU, we expect orders to come in from the NHIDCL over the next 2 years for 75 bridges, the portable steel bridges. I hope I've addressed all your 3 queries.

[Operator]

We'll take the next question from the line of Hiren from Axis Securities.

[Unknown Analyst]

Yes. Just 2 small questions. First is on the breakup of the export and the domestic order book in terms of quantum and the percentage? And second is, I would like to know your outlook on the green energy vessels and how that space is developing going forward, sir?

[P. Hari, executive]

Sure. I will -- when I bring out the data regarding exports and domestic breakup of orders, I will first address your query on the green energy segment. See, this is a segment that has got huge, huge potential. Now some of the nations have mandated go green by as ambitious a target as 2030. India too is moving in the right direction. Already, the Ministry of Shipping has promulgated The Green Tug Transition Program, the GTTP. And in addition, many of the state governments are going green. When you say green, they are looking at zero emission platforms. And the GRSE has already made a foray into this segment by -- through a partially research and development funded project on a fully electric ferry for the government of West Bengal. And we have successfully completed this project. We are awaiting the formal handing over of the vessel to the government. And just for information, this is the largest in terms of passenger capacity, 150 passenger electric -- fully electric ferry for the government of West Bengal.

In addition, we also won an order for 13 more hybrid ferries again from the government of West Bengal, it's World Bank funded project. So currently, in India, 2 shipyards, that is Cochin Shipyard and GRSE have successfully completed green energy vessels. So this is an area where we see huge potential, and we will definitely be an active part of the Green Tug Transition Program, which I'm very confident is moving in the right direction where all the ports will be mandated to use fully green tugs. In addition to the GTTP, that is the Green Tug Transmission Program, the Inland Water Authority of India, the IWAI also has got requirements for green vessels for inland water transportation. So this is an area where we see huge potential in the future. Thank you.

Now coming to your first question on the breakup of export and domestic orders. As again I reiterated before, our core business is domestic warship building and majority of our orders come from domestic warship building. And now since we have made a foray into the nondefense platform also, still the shipbuilding segment is almost 99% of our orders. And coming to exports within the shipbuilding segment, exports comes to around 3.17% as of now. And the domestic, that is the domestic value is around 96%.

[Operator]

We'll take our next question from the line of Harshit Kapadia from Elara Capital.

[Harshit Kapadia, analyst]

So 2 questions from my side. Could you please share the order book breakup project-wise? That is the first question. And second, sir, as you are now looking at 40% to 60% of your projects are in the mature state. So once we cross this mature state, again, the margins will look up at a gross margin level as well as at EBITDA margin level? And would that be at least 2, 3 quarters away, would that be a right assumption to make?

[Operator]

Harshit, if you can self mute please, there is background disturbance. Thank you.

[P. Hari, executive]

Coming to the order book breakup. The current order book is, as I mentioned earlier, is INR 24,221.37 crores. And this, again, as I mentioned, comprises mostly of shipbuilding orders, which comes to 99.4%. Now coming to the order book breakup project-wise, the P-17 Alpha, the balance order remaining is around INR 13,927 crores; the anti-submarine shallow watercraft is around INR 4,331 crores; Survey Vessel (Large) project 2 ships, remaining around INR 729 crores. The next-generation offshore patrol vessels, INR 3,023 crores. Oceanographic research vessel for the NCPOR under the Ministry of Earth Sciences around INR 800 crores. That is INR 796 crores. The multipurpose vessels around INR 520 crores, 2 export projects for the government of Bangladesh around INR 314 crores and naval surface gun project around INR 235 crores.

So this gives you a breakup of the current order book. Your second question was on the margins. So we -- I have been stating this consistently that in shipbuilding, the margins -- optimal margins where satisfactory efficiency is existing is around 7.5% to 8% when we are in a competitive environment. And we have been maintaining this kind of margins, and we are hopeful and very confident of maintaining similar margins in future too.

[Harshit Kapadia, analyst]

One more question. On the net generation corvette order, what is the status by Q4, are the tender results expected out or there could be a delay and probably in FY '26, the results would be out? And second thing, you mentioned on the pipeline P-17 Bravo frigate. So is that something so destroyers will not be coming, is that a correct understanding because what we understand, either frigates would come or destroyers would come in terms of order pipeline over next 2, 3 years? Any color on that would be helpful.

[P. Hari, executive]

Okay. I'll give my views on this. The next-generation corvette, as I had briefed before, that we have already submitted the bid. There are 4 shipyards who have bid for this project. And currently, the technical evaluation is in progress. And we expect the bid to be opened either in December or January -- I mean, December '24 or as close as January '25. What I'm trying to convey is that in our appreciation, the bid results should be declared during the current financial year itself. Of course, then the contract negotiations will happen, and we expect the order to be signed only during the next financial year.

Your next question was on the P-17 Bravo project and the next-generation destroyer project. For the P-17 Bravo project, the DAC, the Defense Acquisition Council has already accorded the AoN. And again, what I'm trying to convey is the clock has started. So once the AoN has been accorded, the Navy finalizes their SOTR and the RFP will be promulgated. We expect the RFP to come out sometime in the calendar year 2025. That means during FY '26, we expect the RFP to come out.

And coming to the next-generation destroyer, yes, in our appreciation as per our assessment of the prospective plan of the Navy, Navy's need of this vessel. At this moment, we do not have any clarity as to when the project is going to fructify because they have not yet gone for the AoN.

So does that answer your query, NGC, P-17 and Bravo and next-generation destroyer.

[Operator]

We'll take our next question from the line of Amit Dixit from ICICI.

[Amit Dixit, analyst]

And congratulations for a good set of numbers. Just I mean 3 questions from my side. So this quarter, if you see the gross margin has declined, it is now below 30%. While I understand that quarter-on-quarter, we should not look at a defense company. But since the 30% -- below 30%, we have not seen for a very long time in many, many quarters. So just wanted to understand what is behind that? Is it just the execution phase or we expect to see margins -- gross margin at these levels only?

[P. Hari, executive]

Okay. If you are looking at the gross margin, during our earlier interactions also, I have maintained that we will be providing a margin, which are consistent, consistent in terms of you are looking at the PAT margins around 8%, which we are maintaining. And I expect a similar trend to continue in future also. We don't see any decline nor we do not expect any steep price. We'll be maintaining this kind of margins in future too. The margins in -- most of our revenue is coming from shipbuilding. Yes, we have entered into ship repairs where the margins are much better. So as and when our ship repair revenue goes up, the margins -- the margin -- the high margins of the ship repair segment will offset the lower -- relatively lower margins for shipbuilding, and we could see an increase. But all I can say at this moment, considering our current order book and the execution strategy, the current margins, we'll be able to maintain.

[Amit Dixit, analyst]

Okay, sir, that's very clear. The second one is on next-generation corvette. Now 2 parts here. The first one is that when you mentioned to Harshit's answer that do you expect the contract negotiation to go on in the next financial year? Now assuming that we finished the contract negotiation in next financial year and we are ready for and we get the order. So how much time will it take for us to mobilize and start recording the revenue?

[P. Hari, executive]

Okay. Very interesting question. If you just take the time line, logical realistic time lines. Now if the bid is going to be opened by December '24, January '25, and let us put a very reasonable figure about 6 months for contract negotiations and 6 to 8 months that means in our Q3 of FY '26 if the contract is concluded, the revenue recognition will start 2 years from then. if GRSE gets this order, it is perfect in terms of the time line. Why perfect it is -- I think from '26, if you take 2 years, that comes to 2028. And that perhaps is the time when our current order book will get exhausted. So time and space-wise, the NGC project is moving in the right direction if we get it. I'm just crossing my fingers. If we get it, 2026 means 2 years' time, the revenue recognition starts and that is the time when more or less our existing order book gets exhausted. Does it answer your question?

[Amit Dixit, analyst]

Yes, sir. Certainly. And the part B of this question is at what kind -- what level of indigenization are we targeting on this NGC?

[P. Hari, executive]

Okay. See indigenization, if you see, I'm sure you are keeping track of not only our company, but all the shipbuilding companies in India. Indigenization is the focus area of the government. And almost all the shipyards have a clear mandate to maximize the indigenous content on both the ships. And as evident over the last 2, 3 projects that we have completed, be it the landing craft utility project, be it the antisubmarine corvette project or something like the Fast Patrol Vessels for the Indian Coast Guard, the indigenization content has been hovering between 80% to 92%.

Now for the P-17 Alpha project, it's a major project where certain equipment are of import nature, the indigenization content is around 80% to 82%. But the other 3 projects which we have, again, it hovers in this direction. I am not at this moment, assuming any major change in the indigenization content even in NGC, I expect it to be -- it's our appreciation that it will be between 85% to 90% tugs. So there will still be an element of import contenting that may be in part of the propulsion package or some of the [indiscernible] so around 10% an optimistic level import content and 15% at the [indiscernible] level.

[Amit Dixit, analyst]

Okay. That's very clear, sir. The third question from my side is that there were some media articles suggesting that we are planning indigenous hovercraft for military operations. So just wanted to get your thoughts on this. and we are trying to collaborate with some private sector also that is what that media article says. So are we doing something on that front? And what kind of market you see? And if so, when it will translate into revenue or orders for us?

[P. Hari, executive]

Okay. As far as hovercrafts are concerned, so far, hovercrafts have been used only by the Indian Coast Guard and Indian Coast Guard has 2 sets of hovercrafts, one which they directly imported from U.K. based company Griffon. And second, manufactured by GRSE through a collaboration with Griffon. This is past history.

Now both the Coast Guard and Army, they need hovercrafts. The business volumes of this venture, I will not see it very, very attractive, but there is a need to indigenize hovercraft because of hovercraft manufacturing technology so far is not available in India. It is this intent that we have taken an initiative. And you may be aware that there is Department of Defense production has a [ iDEX ] scheme for encouraging start-ups to come up -- start up and private sector to come up with solutions towards indigenization and new product development.

So we have put this as a challenge. And we have identified a partner, a private sector partner, and we are confident of achieving indigenization of hovercrafts by 2027, because it takes time, because certain components, the technology has to be developed. So we expect a 3-year period to develop this product.

And second question what you asked is, what is the potential? Both the Coast Guard and Army has got the requirement. And if the product is indigenous, naturally, the cost is going to be much lesser and the maintenance aspect will be much better handled in India. So I expect the potential -- I would not say a huge potential, but reasonable market potential for this product sometime in the early '30s.

[Operator]

We'll take the next question from the line of Sunil Shah from SRE PMS.

[Unknown Analyst]

Sir, just need to have an understanding on the P-17 Bravo project. Sir, our P-17 Alpha is going to get completed by August '26 is what I understand from your notes. Sir, what would be the time line for this P-17 Bravo to recognize the revenue for us, the way in which you explained about the next-generation corvette, which is 2 years after we get the order. Similarly, if we get 4 orders for P-17 Bravo, sir, how would the revenue recognition happen in terms of the time line? If you could make me understand that piece.

[P. Hari, executive]

Okay. You heard about Nostradamus?

[Unknown Analyst]

Sorry, sir?

[P. Hari, executive]

You heard about Nostradamus?

[Unknown Analyst]

We are working with an assumption of 4 out of the 7.

[P. Hari, executive]

I have already bitten the bait, because anything which is predictive is interesting. But I guess you will take it in the right spirit, as the market takes the right.

[Unknown Analyst]

Yes, sir.

[P. Hari, executive]

The fact is that P-17 Bravo, the AoN has been already accorded in the last year. So the clock has started ticking for Navy to come up with the RFP. The best case scenario the RFP could come out during is our assumption, it's only an assumption that RFP could come out during mid-2026 calendar year. The project is a big project. It's 2 shipyards would be taking this project. It's a 7-ship project and whole cost is around INR 70,000 crores. The L1 shipyard could get INR 40,000 crores close worth order around and the second shipyard 3 ships at the proportionate cost. So if the RFP is out during mid '26, you keep near from the RFP to contract signing, best case I'm telling. That means mid-2026, contract is signed. And as with the other project, it will take 2 years for the revenue recognition, which should come to 2028, '29. This was the...

[Operator]

We'll take our next question from the line of Vijay Bhayani from SAMYAG FINANCIAL CONSULTANTS.

[Vijay Bhayani, analyst]

Sir, I would like to understand about the government's new initiative of -- the Indian shipbuilding industry right now is very small in the global context. And we are hearing that the government wants to bring Indian shipbuilding industry among the top 5 in the world and that the government is planning to give it an infrastructure status and all kind of incentives to boost the Indian shipbuilding industry. So if you can explain sir, what exactly is the government is planning to do, what kind of incentives they are likely to give, by what time frame this is likely to come. And most importantly, sir, how can GRSE benefit out of these 4 things, sir? That is my one question, sir.

[P. Hari, executive]

Whatever is -- yes, it's the fact that the government has already started the process of formulating a shipbuilding policy framework to -- with the sole aim to bring India into the top nations in terms of shipbuilding. Yes, our market share in the overall global shipbuilding scenario as a nation, it is reasonably low. And the intent is to enhance this and become one of the top nations. Whatever initiatives currently, the government is taking is all that is available in the open media, open source information only, it's available. Now our assessment is that the shipbuilding financial assistance scheme would continue because right now, the scheme is available and it is for a specific time frame that scheme will continue.

Second, there will be focus on green initiatives with a clear intent for a transition from conventional energy-driven platforms to green energy platforms. Third, there would be a focus on ship breaking -- linking ship breaking with the shipbuilding, which means if a very innovative scheme they are proposing, they're likely to propose is that if a shipowner break the ship in India, he gets a certain amount of credit. And if he builds the next ship in India, he can avail the credit. So such very, very innovative schemes are likely to come up. As far as the time line is concerned, it's anyone's guess. It's one of the -- as I understand, it's one of the focus areas of the government. So any time now because as I understand, the process is at advanced stages. So any time now, maybe in the next 3 to 6 months, the policy framework would come out.

Now coming to GRSE, while our focus has been -- is and would be -- primary focus would be on -- war shipbuilding for which there is already a structured process because war shipbuilding price on a prospective plan of both the armed forces, that is the Navy and the Coast Guard and the budget availability. So there is a very structured plan. Our primary focus would remain on war shipbuilding, but considering the opportunities available in the nondefense segment, we are already -- I mean, we are aware that this policy framework is going to come. The government focus will be on encouraging shipbuilding in India. So with that clear understanding, we are slowly diversified into and prepared ourselves into one -- rather prepared ourselves through one gaining experience in construction of commercial ships. The results are here, gaining experience in building specialized research vessels. Again, the results are here to see. We already got order and execution, gaining experience by developing green energy vessels, again, we already developed more orders already in hand.

And fourth is capacity enhancement. There is capability already we have capacity enhancement. Infrastructure enhancement process has already commenced what we had targeted. My target and GRSE's target would be to achieve a shipbuilding capacity of around 28 ships concurrently. We are at 24 now. By 2025, we'll be able to achieve that. So to answer your specific question, what is in store for GRSE very much is on the anvil, and we are fully geared to take on this challenge in the coming years.

[Vijay Bhayani, analyst]

So will there be some kind of a PLI scheme for shipbuilding industry under the financial assistance program?

[P. Hari, executive]

As per my understanding, while the infrastructure status may be there, at this juncture, it's my understanding that there is no thought process to accord rather to provide a PLI scheme for shipbuilding.

[Operator]

[Operator Instructions] Next question is from the line of [ Basant Bansal ] an individual investor.

[Unknown Attendee]

I have 2, 3 questions. The first one is that in your opening remarks, you said that you are working on 3, 4 projects for the government of Bangladesh. So are you facing any challenge in terms of execution because of the social unrest kind of situation prevailing over there? Secondly, you are working on 24 projects, as you said. So are you facing any challenge in terms of again execution due to supply chain-related issue or any other issue which can delay the execution part -- and the third one is that in the first half, you have clocked 30% revenue growth. So will it be maintained for the full year, for the current year as well as for the subsequent years?

[P. Hari, executive]

Okay. Thank you, Mr. Basant. I'll address your questions one by one. You asked about Bangladesh. Yes, we are executing 3 projects for Bangladesh. But if you see our overall order book and compare it with the orders in hand for Bangladesh, the total order value from Bangladesh is just about INR 300 crores, which comes to about 1.5% of our total order book. So the impact on the company is negligible. Now coming to the impact on the projects. We have been undertaking a patrol vessel project -- patrol boat projects for Bangladesh, 50% of the boats already delivered and the other 3 boats will be delivered by end of the year. We don't envisage any issue with that.

The other 2 projects, again, are very, very small projects. One is for a dredger and one is for a tug. The dredger project is moving in the right direction. The tug project is still in preparatory phase. So net, we don't see any impact. And on a positive note, I feel as a nation, this is just a passing phase. It's a dip that they have. Once the things stabilize, I don't see any issue, especially considering the shipbuilding, unlike any other manufacturing industry, the projects are long-term projects. So by the time the situation becomes normal, the project continues what it has been doing and it will catch up for whatever initial taking issues of vessel. I don't see any problems with the Bangladesh project.

Coming to the supply chain impact on shipbuilding, there was a time in the post-COVID phase, not definitely in the COVID phase and post-COVID phase, there was an issue with the supply chain. But those issues have been fully tided over. And at this juncture, we do not have any supply chain issues. When I said 24 means what I meant was that GRSE has got the capacity to construct 24 vessels concurrently within our physical boundaries. To answer your question, nil impact on supply chain as of now.

Coming to revenue growth, yes, we have registered 30% growth during the first half of the year. Here, I would like to make a statement which I'm only reiterating what I had mentioned during our previous interactions that we had assured a CAGR of around 25% during the 4-year period from FY '23 to FY '27, we are confident of maintaining that kind of CAGR. We'll only exceed your expectations, maintaining similar growth rate.

[Operator]

We'll take our next question from the line of [ Kartik Bhat ] from Kuber Investments.

[Unknown Analyst]

Sir, if you can throw some light on the contract that we signed with this German company. I think as for multi-purpose vessels, was it a competitive bid, how any other companies are bidding? What is the order value and the time line over which it should be delivered?

[P. Hari, executive]

Could you -- sorry, Mr. Karthik, could you repeat that? Perhaps I didn't register properly. Could you please repeat the question?

[Unknown Analyst]

The contract that we signed with the German company for multipurpose vessels, 8 multipurpose vessels, I believe. So was it a competitive bid? What is the order value and the time line over which it to be delivered?

[P. Hari, executive]

Okay. Yes, this is for the orders for our German client, 8 multipurpose vessels. And the initial contract when we signed about 4 months back was for 4 ships with an option clause for another 4 ships. And we already expected the option clause. And as of now, we have signed contracts for 5 of the vessels and the total order value and the next 3 ships, we'll be signing the contract by March '25. And the total order value for the 8 ships is around INR 890 crores.

And to answer your question, foreign clients, they do not go on a conventional tendering and competitive process. They approach potential shipyards directly, do a capacity assessment. And when they find a particular shipyard is competent and capable of undertaking, executing their project, they take a, let us say, cost a bid from us that they negotiate with us. They have a method -- I'm sure they would have approached multiple shipyards, which were coming on to GRSE and assisting our capacity. To answer your question, the order value is around INR 890 crores.

[Unknown Analyst]

Okay. Okay. And sir, I believe this is the first contract with a European company. And I think in the last call also, you were alluding to a lot of European nations looking at India as a destination for construction of commercial vessels. So are we in talks with most such companies? I mean, is it a sign of things to come that we'll be participating in more such contracts and tenders.

[P. Hari, executive]

Yes, this is a sign of things to come. And more and more European clients are approaching not only us, all the Indian shipyards, and they are looking seriously at India as the hub for commercial shipbuilding. It is a very, very positive sign and good let us say, sign of things to come in the future. And we will be actively pursuing more opportunities in this segment.

[Operator]

We'll take our next question from the line of Harshit Kapadia from Elara Capital. .

[Harshit Kapadia, analyst]

Sir, my question is largely on your working capital. So there has been a specific budget, which is given to Indian Navy. Until now, your working capital has been extremely good. Now there are 2 big projects which Indian Navy is going to import. One is a drone and the other is Rafale as per news reports by in this financial year. Do you think this can strain your receivables at least for a year as we approach March 2025? Any color would be helpful.

[P. Hari, executive]

Okay. I'll put it this way. In the budget capital budget allocation, all 3 services are given the funds based on the projections and of course, the decision of the government. In our appreciation, the budget allocated to Indian Navy is more than adequate to meet the requirements of the ongoing projects. Neither would the drone nor the Rafale projects, which have been publicized now would have any impact on the fund flow from the ongoing capital projects of the Indian Navy. Coming to the future projects, once an AoN is recorded, it is with the consideration that the budget is available. So I'm even talking about be it an NGC or be it I'm not talking about the orders already in hand, where I told zero impact. I'm only speaking about the orders on the anvil, be it NGC or be it P-17 Bravo, these considerations have already been factored while according AoN or coming out with RFP. So we do not see any budget constraint.

And another point I would like to highlight is that unlike an outright purchase where you extend the complete project value in one shot. In case of shipbuilding, it is spread over a period of time, sometimes ranging from 3 years for a small platform or a project to 5 to 10 years for a large project. Some of the -- like you take the indigenous aircraft project which was being handled by one of the other Indian shipyards. The project is almost 12 to 13 years long. So budget is not a constraint in my appreciation as far as the projects which we are executing or what we are likely to get in the coming years.

[Harshit Kapadia, analyst]

Okay, sir. And just one final question on the electric ferry. So just help us understand what -- there is no change in the design of a ship. You largely replaced a diesel engine in a ship with an electrical engine. Is that a correct understanding? And are you right now manufacturing or importing these engines? If you can give a color on that?

[P. Hari, executive]

Okay. In case of -- when we say a zero emission vessel, what we try to convey is that the emissions which come from a diesel engine or a gas turbine or erstwhile coal engine, that is no longer there. While an engine is not there, we -- the propulsion mode that is used in a ferry electric ferry is the battery. The batteries drive a propulsion motor and the propulsion motor in turn drives the shaft, which propels the ship. This is the basic difference, whereas in case of a diesel engine or a gas turbine-propelled or a steam-propelled ship, the steam engine, the diesel engine of the gas turbine drives through a gearbox the shaft. Here, the shaft driving is undertaken by a propulsion motor, which in turn gets power from a battery pack. The batteries are of different types. I'm sure you would not like me to get into those details. But the basic difference is the conventional propulsion methods are not there.

[Operator]

We'll take our next question from the line of Basant Bansal, an individual investor.

[Unknown Attendee]

Sir, when I see your trade receivable turnover ratio for the last year 6 months, it was 39.48 and now it is 19.64. so this sharp variation, can you explain this?

[P. Hari, executive]

Can you repeat the -- turnover to what ratio?

[Unknown Attendee]

Trade receivable turnover ratio. So last year, for the 6 months, it was 39.48. And for the current year 6 months, it is 19.64. So can you explain what is the...

[P. Hari, executive]

I will just request my director finance and CFO to answer this question.

[Ramesh Dash, executive]

Actually in shipbuilding, last stage of payment -- we take as per -- it is the receivables get delayed. Initial period the receivable is very fast. In the last moment, there is some guarantee period. Because of the guarantee period at least the last stage payment will get delayed by 1 year. So because of that, whenever the delivery, there will be more delivery, receivable accumulation will be low. So whatever disturbance you are finding, the reason is because of [indiscernible] now, we have started delivery. So receivable will go up.

[P. Hari, executive]

See in the last few months, we have delivered 2 vessels; 1, 2 Survey Vessels and their last stage payment, the last trade receivable stage payment is contractually also. It is linked to the guarantee period. And that is the reason why the turnover to receivable ratio is varying.

[Operator]

Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments. Over to you, sir.

[P. Hari, executive]

Thank you, Yashashri. And it has always been a pleasure, ladies and gentlemen, to interact with you, and I look forward to such interactions because it's an eye opener as to what you expect from us. And I'm very confident that to the best of our ability, we have tried to clarify all your queries and looking forward to meeting you next. Thank you. Thank you, Gaurav and S. Thank you.

[Operator]

It was our pleasure, sir. On behalf of Garden Reach Shipbuilders & Engineers Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.