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Garden Reach Shipbuilders & Engineers Ltd
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Good evening, ladies and gentlemen, I'm Stephen, the moderator for this conference call. Welcome to the conference call of Garden Reach Shipbuilders & Engineers Limited, hosted by Concept Investor Relations, to discuss its Q3 and 9 months FY '20 results. We have with us today, Rear Admiral Shri VK Saxena, Indian Navy, Retired, Chairman and Managing Director; and Shri Sarvjit Singh Dogra, our Director of Finance. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the floor over to Mr. Irfan Raeen. Thank you, and over to you.
Good afternoon, everyone. Thank you for taking time out for the Q3 and 9 months FY '20 conference call of Garden Reach Shipbuilders & Engineers Limited. We have with us today, Rear Admiral Shri VK Saxena, Indian Navy, Retired, Chairman and Managing Director; and Shri Sarvjit Singh Dogra, Director of Finance. We will begin the call with opening remarks by VK Saxena, and then we will have the question-and-answer session. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. I am Rear Admiral VK Saxena, Chairman and Managing Director of Garden Reach Shipbuilders & Engineers Limited. I send a very hearty welcome to all of you for this conference, and thank you for joining us today. Certainly, we'll be talking about the results of the Q3 as of 31st December 2019. But before that, I would like to take you through, once again, for the investors who are new joining and brief you quickly about the company. You all would know that we are the warship building company of the country. We have a team of shipyards. We celebrate a huge contribution in the maritime security of the nation, and we have the distinction of delivering 100 warships. We have, in fact just completed delivery of 100 warships last year in March 2019. And as of now, we stand with a figure of 103 ships delivered to the Indian Navy, Indian Coast Guard, which is the highest number of the warships delivered by any shipyard in the country. I would also like to highlight an important point that we have been successful in delivering 3 warships to the Navy and Coast Guard in this financial year. And in fact, 5 warships in the last 10 months, which is a cost in itself. So you'll appreciate that the physical performance of the company has been quite good. The customers, that is the Navy and Coast Guard, are quite satisfied, and the way the projects which are going on, and we have intended to deliver around 6 ships in this financial year, are well on my course. The company delivered 3 more warships before the end of this financial year. So I would say that as far as the performance of the company is concerned, the company is doing quite well in terms of production of the ships, the rate at which we have been able to complete the construction and deliver the ships. Coming back to the financial performance of the company. But before that, again, I would like to tell you that we are handling the 6 projects of the Indian Navy. Of the 6 projects -- sorry 5 projects for the Navy and 1 project of the Coast Guard, that is for the construction of 5 Fast Patrol Vessels. And of these, 3 projects are going to be coming to an end by this financial year-end. That is the P-28 ASW blue Corvette ships for a number. We have completed delivery of 3 ships earlier. Today, in fact, the last ship, named as Kavaratti, is 3,200 tonnes of a major weapons platform. We have completed the -- all the trials and [indiscernible] for the projects. So by around 10 to 11, the formality of adding of the delivery document will get over, but that deposit comes to an end. Then we have also Landing Craft Utility program of the Indian Navy. That was the construction of 8 ships. 7 ships have already been delivered. 8 ships is also on -- well on course for delivery by around April or so, we should be able to complete the delivery of that ship. And with that, that project also will get completed. We have the project of Coast Guard. I told you that 5 Fast Patrol vessels. We have already delivered 3 ships and 2 more ships are also at advanced stage of construction. And we do hope that these 2 ships will also get delivered by this financial end. So with that, the 3 projects -- important projects for the Navy have been going on would get completed. And we'll be left with 3 more important projects of the Indian Navy, new ones. So one is the biggest one-off, Project 17, basically the 3 Shivalik-class frigate, a big project around INR 19,236 crore worth and the construction of the ships are doing quite well. The fourth ship construction has already progressed very well, and we have achieved around 15% plus construction progress. We have also laid the keel of the second 17 alpha project. And the production of the fourth ship is going to commence shortly. So this is a major one, which is a very high-value project for the current shipbuilders. And generally, we are doing quite fine on this particular project. We also have the transaction of 4 [ carriers ] of the Indian Navy. And in that, the first ship construction has already started last year. And the second ship, also the construction has commenced. So this ship project is also moving quite well. The third ship declared for further contract in 2019 April for construction of 18 number ASW kilowatt. We are in the design phase, and we do hope to start the construction of ASW kilowatt aircraft project by August 2020. So that is the plan about the ongoing projects. I must say that these [ 10 years out projects ] is giving the maximum revenue to us and has given us the revenue of around INR 583 crores till December 2019 as compared to INR 450 crores in the corresponding period 9 months 2018. For this particular, the biggest revenue generation for us. And I must say that we are quite hopeful that in the coming months and years, this particular project is going to be giving to the max revenue. And coming to the financials of the company. I would like to read this one important fact, and I want to once again apprise our valued investors about the fact of the company. You would all know that and I have said that we are into the warships construction. We have separate kind of a nature of the business as compared to any other normal products that get manufactured at a short duration. Basically manufacturing, assembly and delivery happens in a month, so a quarter or maybe year time. But you all know that warship construction has a long gestation period, and it takes years of efforts. Therefore, at times, a complex project takes around 5 to 6 years' time, less accounted for logistics , 3 to 4 years' time and so on and so forth. So therefore, comparing the results of the warship construction activity on Q-o-Q basis -- quarter-on-quarter basis, did not really reflect the current performance of the company because in 1 quarter, based on the cycle of the shipbuilding. And I say that it has never been a straight line. In fact, I've explained to the investors earlier during my interactions that it's different kind of a curve, it gets followed and being a long gestation period, we -- there, we don't compare the quarter-on-quarter kind of a performance, whether physical performance or the financial performance, because it does not give you a real and true picture. So what generally we do is that we continue adding up quarter-on-quarter to quarter performance and the financials, and we finally lead to our performance at that juncture when we compare and say, now we're discussing about the Q3. So I would be very happy to inform you that 9-month period -- when we add up together from Q1, Q2 and Q3, by 31st December 2019, we should compare with 2018 December figure, if you don't already see the performance of that company because of the nature of the shipbuilding process. From that end, I'm happy to report to all of you that the revenue from operations have grown by 9%. The total income has grown by 13%. EBITDA has done well, that is -- 37% is an improvement. The PBT is in the range of 46% increase. Inquiries expanded 49%. The margins, particularly EBITDA margins, is up to 16 from 30. EBITDA margin has moved from 10 to 14. That margin is from 7% to 10%. And the EPS has gone up from INR 6.66 to INR 9.93. So that is the kind of performance. And you must see that despite of having a little, I would say, lesser as compared to previous quarter or corresponding quarter of last year 2018, we have still done quite well in terms of the bottom line to see these things -- the figures per se. It shows that the internal efficiency, which we have been always promising that we are working hard to ensure that internally we change the -- of the shipyard improves a lot, therefore, should be able to get a better margins. And the margin [ which we all return ] to you is reflective of that kind of a confidence, the way we are working towards ensuring that we should be able to get the better margins in the coming months and years. So I'm quite hopeful that the kind of plans which we have with us in terms of delivery and particularly the construction of P17A alpha. For example, I must explain to you that right-- since last quarter, Q2, whatever was the plan of putting suddenly equipment onboard, the fast ship of P17 Alpha, that gives a higher revenue before the moment the equipment goes onboard ship because they are INR 250 crores, INR 300 crores. Revenue recognition is based on specific completion. So that has given relatively high revenue. But this quarter, as for the build plan, we did not have that kind of high-value item going onboard ships. So there was nothing to do with these performance of the company as such, but it is subject to the cycle of construction with which the latest equipment would be going onboard ships. So therefore, it would be in that fashion. And I would once again request and recommend that we should not look at a quarter-on-quarter kind of results, but we must look at the year-on-year. And I'm quite confident that the way the construction of the ships are progressing, especially of the new ships construction, the [indiscernible] radius program and serves as a large project, which are going to be giving us more revenue. I'm sure that by this year-end, financial end, we should be doing better than last year. That's what my expectations are. Apart from that, the other areas where we have done well is -- you know that we are aerospace company. We are also entering [ jeweling ] business. We have got easily [indiscernible] [ Rakhis ], where we undertake the assembly, overall repair of the diesel engines for marine applications. There also, the -- that plan has done well, and we have around INR 17-odd crores. We have got the revenue basically for overhauling of the engines -- marine engines for the Indian Navy. And also, to celebrate, there's another division where we have the portable fuel frigate we made that is also doing reasonably well. And also, we have all type machineries where we record at [indiscernible] at Kolkata. So we have been all around. We are really doing well in green segment as well. So I'm quite sure that the company is poised to do well in the -- this financial year as well and of course, thereafter. In the next financial as well. So that is from my side. Thank you very much.
[Operator Instructions] The first question is from the line of Jonas Bhutta from PhillipCapital.
So basically, from your comments, one could understand that Q3 was more or less -- the performance in Q3 was more or less expected and it's not way off from what your internal estimates were. But if you can highlight what is our full year revenue target given that you've already done close to INR 980 crores in the first 9 months?And within that, if you can help us understand, with the deliveries of 3, 4-meter -- 3 legacy projects. What could be the total revenue recognition in -- for the full year FY '20? And within that, if you can break it up for P-17 Alpha and survey ships. That's my first question.
Right. So let me -- still with having the question about the delivery of the warships. I have a plan that we're delivering the 3 ships in this coming 3 months. I would say, 2 months, we are really -- do hope that the ASW new Corvette, last 1 ship delivered around 7th or 12th of February. And then once we deliver the ship, we do have some kind of revenue that would get recognized. We have another 2 ships for the [indiscernible] direct SCV that is also planned to be delivered before March -- end March. That will also bring in some kind of revenue. Of course, this is not big ships, powerful -- but the revenue in terms of the last phase of the delivery, whatever is that phase commence, we should be getting that. And the longer track, we'll be having some revenue relations that are taking place. So that will certainly add up to our revenue from the operations. Coming to the new project, if you ask. 17 Alpha, in particular, that is a biggest fund with us, and we currently appreciated that. We don't look at the quarter. In Q3, you said that it is not -- not necessarily going to be a reflection of Q2 was better in terms of the revenue recognition. Q3, as for the plan, did not have the kind of a brand and steel on installation of major equipment on board ships. Basically, when the major equipment is put onboard ships, it gives you higher revenue. So accordingly, now [ third ] quarter onward, we do hope that the way construction is happening, this is going to add up to our other revenue, but for better manner than the previous quarters. So I had a hope that this particular coming quarter, that is now in Q4, would be better as far as new ship constructions are concerned. Similarly there, I told you several projects, which is also new. The construction of these warships has already started. Second ship, already the production has commenced. So I'm sure that these -- in coming 2 months also, some sort of revenue will come from the [ presidential ] [indiscernible] as well. So all in all, I'm sure that it should be generally doing better in terms of our top line as same level as compared to the previous year. That's what my expectations are. And to extent my bottom line, all the 3 parameters, that is the PVC or [indiscernible], have actually done quite well, just because of the various measures which have taken internally, and if we are to improve the operating efficiency in various area of operations. That is -- and confident as well that we would have a better -- a much better the bottom line. And, of course, the top line could be slightly better than -- hopefully the previous year, but the bottom line is going to be hopefully much better.
Okay. And my second question was that in that first 9 months, what is the quantum of [ levity ] that was levied? Because you've -- and particularly in Q3, where you've delivered sets. And for the full year, what is the target? Because I think most of you mentioned that it's around INR 15 crores as what you're looking at, and there's been a deviation to that, for the full year '20.
See here, in [indiscernible], both on the ships or on the delivery of the ships, there is one note that you sign in the shipyard and the Indian Navy and the Ministry of Defence to get the clear [indiscernible] around the attributability of the LAs. But most of the time, it so happens that to file the number of months during the delivery delay. But actually the attributability, when it is worked upon, when we put up the pace to the -- our Navy, and the Coast Guard and finally, the MOD. That some -- that I would say, hardly any amount gets done. So as of now, while we have delivered the ships, this is rather still being put up to the MOD through the Navy and Coast Guard. For those figures, I have yet to comment, but we have taken the provision of INR 2.89 crores up through December 2019.
And the comparable number for the last 9 months was?
The comparable number of the last listing was INR 11.22 crores.
The next question is from the line of Ravi Sundaram from Sundaram Family Investment.
Yes. So my first -- I have 3 questions. My first question is, apart from the pipeline that we have right now, have we bid for any other orders?
Okay. So I'll answer this one first?
Yes.
Right. So we have already bid for 3 Coast Guard projects the last 4 or 5 months, 1 is for the construction of 2 number Pollution Control vessels for the Coast Guard. RFP was there, and we have responded to the RFP. Then, we have also bid for the construction of 18 number Fast Patrol Vessels for the Coast Guard. You know that we are already building 5, [ 3 ] for the Coast Guard. And we have bid very, I would say, smartly and aggressively. We are hopeful that whenever the bids get opened, we should hopefully do well and that we win these projects. And whenever the bid gets opened up. So it has been on the [ 12 ] number and pushing vessels for Army and the Coast Guard. So these are 3 RFP we have responded to. And we are also -- today, we have submitted a bid to the -- for the Indian Navy big project on that 60 numbers, new generation side vessels. It is going to be around 1,300 -- INR 13,000-plus crores throughout all those projects. So that is 1 big project, which we have responded to. And in a month's time or so, we are going to be responding to another 2 more RFPs of the Indian Navy. And that is going to be for construction of 1 survey training vessel. And 1 will be for 3 number multipurpose vessels. So I would say that the pipeline seems to be quite good, and we are bidding -- because we have not good experience of winning these contracts on a competitive bidding basis. And the way we have devised our method and strategies, I'm hopeful that some of the things would come our way. That's what our hope is.
Okay. Okay. So I went through the history of some of the contracts that were awarded so far. I noticed that apart from our company, GRSE, we have MDL, Mazagon Dock Ltd. And there are only, I can say, very few players who are eligible to -- I mean, I can't say eligible, who have the capability to support all these orders. Are you seeing any competition coming in the form of, let's say, big private JVs? Or something that are also bidding for this? Or just trying to understand the probability of odd RFPs getting awarded?
I just want to give you an input that it's not only them, but there are total 4 defense public sector shipyards. There is Goa shipyard, MDL, Hindustan Shipyard Ltd. And [ Ezera ]. There are 4 ones. And then we have got a [ 14 ] shipyards which is again a PSU under the Ministry of Services and Transport. They're the fifth player. Sixth player is the LNP. So there are 6 players, which are eligible for bidding for all these projects. And I'm saying that maybe 1 or 2 small players for the PV or maybe for Air Cushion ventures. There could be some more people may get tied up. But these are the 6 major players who are our competitors. And yes, there will be -- because it's a competitive bidding process, and I'm pretty sure that there will be a very, very tough competition that is going to be there.
Okay. Okay, sir. I'll go on to my next question. Last year, I think we paid a dividend around -- of around INR 7. Is there any guidance on our dividend for the current financial year?
See, it won't be appropriate for me to actually talk on the dividend. But you know that my track record at the company has been always a dividend-paying company for last 35 years. And the level of dividends which have been paid out has been quite consistent and quite attracts you. Last year, we have gone up much higher as compared to the previous year than that. And that's what kind of dividend we have paid. The company is doing well, and I'm sure that we will certainly have good results. And thereafter, the Board of Directors would decide about the -- what kind of dividend that would be paid to our valued investors.
Okay. Sir, my last question before I come back on the queue. This P-17, which is our major order, I think you've mentioned that we have completed 50 percentage construction so far. So I think this reaches a maximum revenue paying capability. I think I looked at your whole deck where you had mentioned after completion of something like 24 months of construction, this gives us maximum revenue in the third year and the fourth year. So given that, if I look at FY '21 versus next year, can I -- can we say that FY '21 is going to be the major year where the first P-17 vehicle will start giving us some maximum revenue?
I would say that what explained earlier also about the shipbuilding cycle of our major projects, like this self-designed corvette project. Of 6,600 tonnes of size. A very huge, big one. So now we have already done well in terms of achieving the 15% progress. It's primarily on the construction of the hull and some of the equipment that has gone in. So we are looking at the way that the cycle of the construction has been prepared. Last year, I told you that at the time of 60% of the construction period, there is the -- as we speak in terms of the maximum revenue definition. So I do hope that from there, '22, '23 is the time we are going to have the max net revenue that would be coming.
Okay. And this is for the first ship?
Yes. But at the same time, I have said that the second ship already -- the keel has already been laid by the Vice Chief of the Naval staff just on 10 days back, and then the keel wheels and entire block has been constructed and large in the blocks are getting ready and active in different places. They are following in the model of engineer's construction concept, a modern new concept. So the assembly and integration of all the blocks would be happening quite fast. So second ship will also start moving up, going slowly and catching up. Of course, there will be a gap of 1 year between the 2 ships. But we will -- good news is that we'll have a construction of the 2 17 Alpha major ships happening almost together. Of course, there'll be a lead and lag. So the first ship will be leading by year-plus. And of course, this ship will be also giving us good revenue in terms of the steel construction.
The next question is from the line of [ Umesh Awut ] from [indiscernible] Securities.
Sir, my question pertains to the working capital. So seeing the current fiscal situation of the country, are you seeing any delays happening in terms of advanced payments from the Indian Navy, sir?
See, So far, [indiscernible] that is supposed to be coming to us for stages -- projects. And I'm sure that in the coming month or time ahead, we should not be seeing a profit. So far, we have not really seen any problem with regard to the payment from the Navy or from the Coast Guard.
Okay, okay. And in terms of new project acquisitions, I mean, given the capital budget for defense has increased marginally for this year. So how do you see a prospects of coming -- or the prospects of converting all these RFPs into the award order -- awarding?
See, it so happens that, first of all, the good news for my company, and it is a good news for my investors, is also that we have a good order book in hand, number one, that is good INR 37,000-plus crores of the order book pertains to 6 projects, 3 will get completed, but 3 major projects of the Navy we'll be continuing with. So therefore, I'm quite sure that the current project, the new ones, that is still the time to get project, so 3 ships, and these are the water, kilowatt aircraft, 18 number of ships and 4 number, [indiscernible] vessels, very large ships. Again, these 3 builds amount to 15 platforms. It's a large number of the platform that has given us a good amount of work. So that would continue to give us good revenue from these projects. And also, I would say, the future projects, which, in fact, I just said to somebody that the number of RFPs that have come out. Now the RFP when it comes out, suddenly has the approval of the DFCs, thereafter, it gets published, which shows the intent of the government, Ministry of Defence, and the plan for the Navy and Coast Guard to become 200-ship fleet each by 2027. But it looks like quite positive as well as the approvals for the new projects that have been given in the form of the RFPs. And we have already responded to 3 and 3 more is going to be responded to in next 1.5 months so. So I'm sure that the -- some of the orders would come our way. And naturally, if the government has decided to come out with the RFP, I'm sure that in there, we also we'd concluding the contract and placing these order.
Okay. Sir, in terms of next-generation design project, would that project be based on the nomination basis? Or that will be on the base of competitive bidding?
So it is based on the competitive bidding, and we have already submitted our day-to-day, today was the last day, and we have submitted our bid daily, except [indiscernible] these ships construction and the total project cost is in excess of INR 13,000-plus crores. So in fact, we have a good experience and expertise and wherewithal in terms of building the corvette. You know that we have already built a 16 number design corvette and [ 4 ] number Anti-Submarine Warfare corvette. So put together, 10 Corvettes we already built for Indian Navy. So I'm sure that this experience will be of great help to us in going ahead with this particular contract increase even.
Okay. Sir, on the CapEx side, how much of you have time to building 9 months of FY '20? And what are your plans for FY '21?
Yes. For CapEx for up to December 2019, Q3, we have spent around INR 36-odd crores. And we expect that, that will go beyond INR 55 crores to INR 60 crores or so. This is the plan as of now for this financial year.
[Operator Instructions] The next question is from the line of Hardik Jain from White Stone Financial Services.
You said that we have submitted 4 bids for Pollution Control Vessel, SPV, air cushion vehicle and NuGEN missile vehicles.
[indiscernible]
Yes. So is there any time line by which you will get to know the outcome of the bidding?
See, the -- it is basically the priority that has been accorded by the Navy and the Coast Guard and the MOD. And actually, they undertake the intelligence. They opened a bid with regard to the technical negotiation that goes on, commercial negotiations and thereafter, the price bid. So usually, as per the defense procurement procedures, once the bid gets opened up, the process from bid submission till contract conclusion, they give around 2 years' time. And most of the business general cycle, from there, it could be -- maybe it could be flat, in some cases, may get a little bit dragged because of the complexity of the project or too longish technical negotiations or the price negotiations which are the way they issue contracts.
Okay, sir. And one more thing, sir. Out of the existing projects that we are doing, the core -- which ASW core so which is bigger that ASWC, 2 of this is we have won on bidding. Sir, my question is the margins on the projects that we have won on bidding, should we assume that margins on the bidding projects should be higher than the nomination projects?
See, you would understand and appreciate one important thing that whenever you have to compete, you have to actually lay around and be smart enough to decide about the margins if you have to be winner. So these things have been accordingly -- what the Board has prepared as to what is going to make you win. So we have decided, based on that, the various outfits that goes into our warship construction, including the margins. So it has been quite smart. That's what they have done. And -- but before that, in times to come, we should be able to prove that. Yes, we can build that ship at that kind of cost and at good profit margins that would come to the company and to the investors.
And sir, now we've -- in the last call, we were also talking to Navy for maintenance of 8 ships. So is there any progress that has happened there?
Maintenance of the?
8 [indiscernible]
Yes, yes, yes. We would say that we've actually decided to have a good business vertical for repairs and visits of the ships, warships particularly what has been built and delivered by the [ DRSC ] to Navy and the Coast Guard. We are in talk with the order services. We have submitted our proposal to them, even given them strategy and idea as to how that can be done. They are all expecting some kind of response from all these services and hopeful that something should come positive from that side.
Okay. And my last question before I get back on the queue, sir. What is the cash position of the company? And how much would be the stage payment that we have received from the customers from this? And how much would be our cash, like we have as of 31st December 2019.
See, the cash position of the company as of now is around INR 2,700 crores, as of now. And as far the state's permits are concerned, I have already said to -- one of these -- Defense tax. Generally, we are not facing any problem as regards to the regulated payments coming from the Navy or the Coast Guard. But at the same time, what is there in the -- and in the cash, that gets, of course, in the bank. That, of course, are get utilized based on different strategy of the various projects. And they are paid for whenever any equipment is ordered as advanced or also the steel or several items and the materials. So that is getting well-utilized as far as the things which are shared with us as, I would say, in the banks and the cash.
Okay. And so there's 1 marking by the auditor in the result, it's about INR 77 crores of contingent liability. So do you -- can you talk something about that?
See, these contingent liabilities are called there. And I've said the last corvette that is [ these are two in the yard, correct me, ] that has just gone today to revise that, so they will get delivered. I have to take the provision of this particular thing into our accounts as ELD. So that kind of thing is being shown as a contingent. And once the customer is seeing a response comes from that side, we'll be taking a call and getting them addressed at appropriate forums and get it written back to us.
So if I got it right, you're saying that the INR 77 crores, we have not yet taken the provision because it is under discussion with the customer. And if the liability gets crystallized, we take the provision?
Okay. This is desktop finance. See, if we take what the [indiscernible] correct. Since we take it as contingent liability level if it is not delivered. Post-delivery of the ship, we put them the case for delivery expansion and based on the customer assessment, we take a provision in the hope. But for your information, in the past 3 ships, we have the last 3019 lot, so it should be taken 1.33% at AB. On the similar lines, these ships will also be netting that around the same level.
The next question is from the line of Sunisha from Total Portfolio Managers.
Sir, my question is on the frigate. Sir, in a lot of your presentations, you have stated that you have a bell curve that in some of the time it gets occurred, our revenue starts going in a J-curve. That is the way it escalates. Sir, our margins also moving similar tender? Could I get some clarification on the margin on about Project 17-A?
As far as we -- 17 Alpha, Shivalik-class frigate program we have been discussing. Yes, it looks like the -- absolutely like that bell. It is, I would say it goes up to, say, 35%, 40% of the construction period. And thereafter, it moves stacking up and at the time of 60% of the ship construction and also that time in terms of the construction period as for the contract, it's not -- it goes 60% of the time to return the construction. It's not normally peak, it could be 60%, 65% and have start coming down sharply. So this is about the curve that we follow. This particular project is on a nomination basis. And it has brought up margins [ 6% ] by the Indian Navy and the MOD that is 7.5%. So that is the margin, it is already fixed. However, based on our internal efficiencies that various kind of leases which we have taken in terms of improving various area of operations, if at all, we were in those areas that is a material procurements or where it comes for the better construction method which we deploy and so on and so forth. So whatever profits we accrue around improvements in our operations, that certainly get tied up towards this 7.5%, which any case, have to come from the project.
So everything is a pass-through for us? Every cost is a pass-through?
It is. Every pass would be?
So as through to the government, any improvement in cost? Everything is a pass-through?
That's true.
Right. Sir, my -- another question is on the capacity that the Project 17 Alpha where we'll now be constructing the 3 frigate. Perhaps, we are bidding for another orders, and you just mentioned that a tender was given today for about INR 13,000 crores, et cetera. Sir, how does the capacity play out? Meaning, could you just give us some -- really, some kind of understanding on that?
Okay. Now what happens in case of the warship building or the shipbuilding, the capacity normally of the shipyard are determined by way of having the drydock, the ship base and other construction area in terms of the fabrication area, in terms of the [ FPs ] for carrying all the outfitting work. So altogether, these -- all these things determine the capacity of any shipyard. And I must tell you that the [indiscernible] junction has got the capacity to build 20 ships concurrently. That is 8 large ships and 12 medium now warships. Why? Because we are -- first, we have modernized our facility in 2013 at a cost of INR 605 crores to have the most modern, integrated, modern construction facilities, number one. That will actually add our capacity, and we are now into 20 warship construction concurrently. We have got 3 units, which are colocated along the river fully. But I've got a huge flexibility of having the large ship construction at the main unit, which is at [ 40th ] [indiscernible] area. We've got the modern infrastructure of the [indiscernible] there. We've got a relevant [ dock ] which is not steam-driven totally, but got 31 acres of the area. There earlier, we had only 1 drydock, which was accepting small and medium ships. Now we are generating and growing a lot of infrastructure augmentation at a good amount of CapEx. So we have already got 1 drydock that we claimed with all the facilities it had. So now we have reclaimed 1 drydock there, and we are well on our goal to reclaim the shipments, such other things in that particular place. And also that we have got a fitting out units where we carry all the [ 450 ] meters of the 2 [JTs] we have got. And then, we carry out the outfitting of various ships once they get launched from drydock [indiscernible] currently and the main unit. So this way, I've got a fantastic flexibility to undertake concurrent construction of variety of factors of the warships. So as of now, I told you that once these ships get delivered, we'll have the sales-defined figures. We will have only the large and we'll navigate the evolution over the track. So we'll have the capacity with us to take on more and more ships.
The next question is from the line of Rohan Jain from ICICI.
Sorry. My question was relating to the budget released yesterday. So the naval fleet budget part of the Navy, which we have seen. The on -- hello?
Yes, I can hear you. Go ahead.
Yes. So the naval fleet part of the budget, we saw a 33% increase in the FY '20 revised number well by FY '19, to deliver the [ 30 billion ] delta between FY [ '19 ] [ budgeted ] '20 [indiscernible]. Sir, I wanted to understand, is there -- what can be the reason for the increase? Is there any relation to GRP, firstly? Secondly, [indiscernible] something down to 127 billion. So when the numbers come down, can we -- is it fair to assume that there will be 3 months of difficulties in FY '21 of GRP because maybe budget has come on FY '21?
Yes. I would like to say that, so far, in many years where we had set in of a budget going up and down with regard to the -- some of the factors in some cases, it depends, a lot can happen, et cetera, have been definitely percentage [indiscernible]. Very much stated, that past so many years of our expense cannot fill any tranche regard to the availability of funds. It is supposed to be paid to, to the expected shipyard, particular the RFC. So records are quite encouraging so far, and I do not really foresee any such shrinking in the payment, et cetera or any trouble as of now. But I still hope that the Navy, what they're paying us when we complete the stages of the ship construction. So that's why I can't cite such any trouble with regards to this payment.
Okay. Secondly, can you just give the [ LG ] numbers for 9 months FY '20?
Can you just repeat what you asked?
Can you restate [ LG ] numbers in FY '20?
Yes. As of 31st December of [ 2 Q3 ], the INR 2.89 crores is the LD that has been taken by us. That compared to INR 11.22 crores compared to the last 9 years -- 9 months ending FY '19.
The next question is from line of [ Shveta Jain ] from KMS Wealth
I have a question regarding the new bidding that you've done for the Pollution Control vessels in SPD and the air cushion vehicle and the new generation missile. So you said the value for new generation fixed number with that is INR 13,000 crores. Could you give a sense as the book value of the other vehicles that we'll produce for?
See, this is supposed to be what I'm saying that about the new-generation missile whether the area [indiscernible] cost that had been approved by the BOC. So that actually tough concept. So there are other things also like air cushion vehicles. Right now, I do not have the figures with me in hand. Okay. But they are not very big platforms. They're small platforms, the air cushion vehicles. The activity is also not very, very, very big platforms, which is equaling to 5 ships which we are making. So it would be in the range of, to my mind, would be around INR 7-odd crores for 8 [ FTBs ]. Okay. And similarly, for the pollution control vessels to a number, these ships could be in the range of around 6 -- close to 600-odd crores. But then what is -- I guess, any of the value that has been approved by the TSE,
Okay. So my last question. So I am just curious regarding this order book. If you can just run me through the order book, if it is possible?
Yes. Yes, at this juncture, we have an order book of around INR 27,046 crores. And in that, the shipbuilding dividend itself has the INR 26,731 crores. And the total entering division, that is our [indiscernible] and the SEC machinery is 109 crores. And the diesel engine plant at roughly INR 205 crores. Put together, it comes to INR 27,046 crores at this juncture -- as of 31st of December.
Okay. Sir, and in shipbuilding, we have surveyed that's [ in-force? ]
Correct.
For submarine fleet.
No, no. It is the ASW, Anti-Submarine Water -- Shallow Watercraft, 18 numbers. And see, in numbers, 10% Frigates, so these 3 projects constitute 15 warship construction. These are the new projects that are underway with us.
The next question is from the line of [ Deepak Kumar ] from [ IO Capital ].
So my first question is regarding your...
Speak more louder, please, Deepak.
Now is better, sir?
Yes, it is better. You have to be louder. Thank you.
Sir, my first question is regarding your revenue. Now you did mention that FY '22, '23 would be a peak revenue. Now in FY '20, we are looking at a flattish kind of revenue. But going into FY '21, do we expect some growth? Some comment on that would be useful.
Yes. I've said that these -- construction of the new projects are happening. I'm quite hopeful that we should be gradually moving up. It will not be a very sharp jump, in fact, because of the survey, the construction of the 17 Alpha as well as survey vessel, which is going on as of now. So therefore, in this financial year and as well as our next FY '21 also, I do not see a huge jump, but it -- hopefully, it would be better.
Better. So what does that mean, like 5%, 10%?
I certainly can't give you a figure at this juncture because I've explained that shipbuilding has gone through a lot of issues there. But I -- based on my assessment and kind of a plan we have in hand, these new projects, both the frigate program as well as survey vessel project programs, should be giving us good revenue. But still, we'll be going on with the application of the hull and I must say that the ship's hull does not provide you huge revenue. That is basically the steel and the labor, which goes into that. And some equipment, of course, will go into that. So both these projects are doing well in terms of the time line, et cetera. And as for the construction plan, the equipment would get fitted onboard these kind of platforms, which are under construction. So all in all, I would say the growth would be steady in the coming, I would say, financial years.
Okay. Fair enough. And coming into this FY '20, our growth at the bottom line is coming -- is driven by mainly because of your PAT margin expansion, right?
Yes.
So is this kind of a margin sustainable?
Yes, I would say that we are taking a lot of measures to improve our internal efficiency. Only way in a -- the 2 projects, which we are actually including as of now, is basically one on a contributing basis, that is survey vessel large and ASW Shallow Water Craft. P17A would have fixed, I would say, margins. So unless you will do some good efficiency improvement, you will not have better margins. So the way you are all seeing the results, bottom line, in particular, the measures which we have taken, implemented in the shipyards, that is giving us decent results. And I'm sure that coming the months and quarters and years ahead, we should be doing well.
The next question is from the line of Jonas Bhutta from PhillipCapital.
Just on the -- just another question here. I wanted to get better clarity on, and maybe you guys can help me. If we've recognized percentage completion on method on the P17 Alpha, so is it safe to assume that you would have recognized 7.5% margin on that entire 580-odd crores that you've recognized -- revenue recognized in this year, so far?
Yes. The one is that revenue, which we're recognizing, so far, on 17A, certainly, we will be taking this profit margin of 7.5%. And that's how it would be happening.
So sir, if I see that INR 580 crores of your revenue so far on [ 980-odd ] crores in the 9 months, which is almost 60%, should that yielded you a 40-plus crores kind of PBT, excluding other income, while that number on a reported basis is a loss of INR18 crores? So is it safe to assume that the balance 40% of your revenue actually lost 60 crores for you? Is that the right way of saying?
I would correct you that with regards to the revenue from operation of INR 977 crores up to December 2019, of these, only INR 583 crores have come from 17 Alpha. So rest -- others have come from other projects. That is the delivery of the Fast Patrol Vessels and the progress of LCUs and the FACs and ASW Shallow Water Craft. So from other projects, that revenue has come across something from the diesel engine plant right here and so delivered. So those are the other components. But largely, I would say, 17 Alpha, only [ INR 586 crores ] is the one. Of course, these affects what you're talking about is in terms of the -- some impact that has come largely because it actually amounted to some sort of a negative figure. That is primarily the delay of the departure of the large ASW corvette. We had plan to deliver the ship by November 2019. But ship is going to get delivered now. There would be certain point of the ASW as planned. This is primarily not in our control. It will be taken on the [ different ] [ teams ] [indiscernible] for further delays on account somewhat if we can end that, but I mean some are used by the Indian Navy. And that modeling had to be completed prior to departure. Therefore, these 2 months have had [ impacted ] our bottom line as well. And what you're seeing is that [indiscernible] look very good figures.
Okay. So sorry to harp on the second. So you're saying that change in scope for the delivery schedule could have the -- be at least as 2 crores, right? So you've incurred certain costs for which you will bill the client later.
I would say that [indiscernible]. Actually that ship, that's delivered. This entire thing has taken a contingent liability. When the ship gets finally delivered, so I've told you around 11 or 12 of February, we'll be finally signing the formal delivery certification of the -- this corvette. And after that, the Naval headquarters and the reps of the Navy who are called [indiscernible] team here represent the resident of Kolkata will be actually checking out as to what are the things amounting to the GRSE. And then there's going to be just 1.2 months or 1.5 months, depending on how do we prove it to them that these things are not on account of the GRSE. Based on that, the figure would arrive. That would get factored into the LD for the contingent liability of 77-whatever crores are there, that finally we'll convert it to some few crores, depending on what -- how many months or days as it comes to.
Sorry, sir. I'm not able to reconcile this number. So the PBT that you have, excluding other income for the 9 months, is a loss of INR 18 crores. While on the INR 580 crores, theoretically, you should have recognized almost INR 40 crores of PBT because it's a 7.5% margin. So it effectively tells me that on the balance, INR 400 crores of revenue, you lost INR 60 crores of profitability. So you made a loss of INR 60 crores. Is that the right way of seeing it?
Can I come back separately on this issue?
All right. And my second question was, sir, on the order backlog breakup. So in the last call, you've sort of given us a breakup between the legacy projects in the shipbuilding backlog that you have. The legacy projects at that point in time accounted for INR 800 crores roughly. What are they accounting for today and the breakup of new projects, sir? And what is the updated order books in 17 Alpha, survey vessels and ASWs?
Yes, I must tell you, right now, we have the 3 legacy projects in our hands. And first, I would say, ASW corvette. And in that, we have gotten around [ INR 720 crores]. And with the delivery of this, which is going to be happening in short terms that corvette should be squaring of the account. Then we have got the [indiscernible] project last ship build under the advantage of construction, I mean I am not able -- but this is around INR 113 crores left to work against the delivery of this. Then we have got -- with that, there is 3 particular projects, which are an FPV, of course. There are 2 more ships on hand, which amounts to around close to some 22-odd crores, which is supposed to be recognized. So this is what about the legacy business and rest orders on that, new projects are [ 26,731] [indiscernible].
So how much would be the frigates?
Frigates is around -- total order book value of the frigates is around 19,000-some-odd crores. Of that, we have already recognized the -- yes. And that -- so right now, we have 17,499 crores is the value with that [indiscernible].
The next question is from the line of Rohan Jain from ICICI Securities.
Just a follow-up question. I understand the revenue that you spoke off peaking will be somewhere around '20 to '23. But can we just get, based on internal calculations, of a broad ballpark number as to what that revenue can be, which we can assume?
It will be very, very difficult. And it will not be appropriate to say about what would be the exact revenue, et cetera, when we move to that -- come to that stage of '22, '23. But as I have explained that based on the construction schedule on the graph, it's a huge order. You know that huge value is there with us in hand. And the various equipment, very high-value equipment, I would say, that they will go on board ship like these are more missiles, launchers, the LR, long-range guidance MSI systems, the various kind of radars, 3D radars and so on and so forth, the gas turbines, diesel engines. So these are the high-value equipment when they start going onboard ship. Thereafter, we will start recognizing the value of these equipment costs. So that's why I'm saying that when we go and enter into the zone of that particular phase of ship construction, the flagship of 17 Alpha, we'll be having a fantastic revenue that would be coming our way.
The next question is from the line of [ Manohar M ] from Credential Investments.
Yes. I just wanted to -- so just you mentioned the term vehicle. Is it in collaboration with them or you're doing it on our own sales terms?
No, there is no collaboration. We are doing on our own because we have a good experience of delivering 10 corvettes to the engineering. Nobody else has the kind of on and off experience and solid and wherewithal. We have delivered 6 missile corvettes and 4 anti-submarine warfare corvettes. So this is a new-generation missile of vessels which are there. So I'm sure that we would be doing quite well in terms of this particular project as well.
And sir, who were the competitors during this corvettes business earlier?
In fact, the corvettes that we are building were the nomination basis to us, to GRSE. But as of now, I see that new generations missile vessels, the competitors are GSL, MDL, the Goa Shipyard limited LNG, et cetera. There is a good competition.
Okay. Okay. And sir, all of them were delivered on the -- you were the one that first deliver them? Or they were already delivered?
No. Except MDL -- as further corvettes are concerned, MDL has delivered some missile vessels, and few are delivered by the GSL also, but they were quite small in size.
And sir, if you can help me understand. In terms of this tendering process, still now how many tender will you exercise and how much do you tender for the period we have now?
In last 4 or 5 months, we have already responded to 4 tenders. In fact, the fourth one has been responded to today. The first one was for the pollution control vessels, two in number for the Coast Guard, then we had another tender responded work for construction of 8 fast patrol vessels again for the Coast Guard. Then the third one was for construction of 12 numbers, air-cushion vehicle for the Army and the Coast Guard. And of course, fourth one is a new generation missile vessels.
Sir, the value -- sir, the number of tender, which was quoted around by the government of the Coast Guard, the value of the total tender, that's 1 year or whatever? And how much will be the exposure?
I told you, these are the 4 tenders that has come out in the last 5 or 6 months, and we have already set for 4 of them and 2 more, which is to be responded to. That is a construction of one in number survey turning vessel. And the another one, which is to be responded, is also for construction of 3 numbers by the purpose vessels. So it is how these tenders are there. So I would say, altogether, there are going to be 6 tenders in such a short duration from the Ministry of Defense. So these all work very well for all the shipbuilders on the country. Huge amount of tenders are there and give us the opportunity to all of us to bid for it and look forward for orders.
And sir, coming back to the new-generation missiles, are the nomination confidence same as the previous one or there have been some changes?
No, no, no. It is on a competitive bidding basis. And I look to that, there are other bidders also who will be competing with us.
The next question is from the line of Abhijit Mitra from ICICI Securities.
Just asking on some of the previous questions on capacity. So you did mention that you have a concurrent capacity to build 20 ships, 8 large and 12 small. Can you just highlight how many ships you are building right now? And as the numbers move up, what kind of sort of benefit on the margins that one should expect? Because I do understand that a lot of your employees and probably some of your facilities are also a baseline now, which has probably been highlighted at the PBT level, right?
Yes. Okay. So as far as the capacity is concerned, we -- I wouldn't guarantee the importance to have a fantastic capacity of 20 warship construction confidently. That's very important. Concurrently, I can construct not in sequence. I see different facilities which are colocated. They were along -- they were homely. So there is a great advantage to us as compared to any other shipyard, one. But two is that I'm already -- as for my plans, we are working on expanding our capacity from 20 ships to 24 ships in coming 3 to 4 years. We are focusing on the Raja Bagan Dockyard, which got 33 acres from the area, which had a lot of the fund old facilities, marine facilities, that we got from Central Inland Water Transport Corporation in 2006. So we have now given a lot of focus and regeneration and declamation of sort of number of dry docks, where we've done the declaration of one dry dock already. There are slipways, there are some other dry dock, which we want to convert to wet basin. We want to have some GT coming up there. So as of now, coming to the second part, we are having 19 ship construction happening at this point of time in the shipyard. So of this, the one corvette has already been -- they're basically -- they already left today for the [indiscernible] to get delivered to the Indian Navy at [indiscernible]. That leaves the 3 of 18 ships. Obviously, 3 ships, I'm having plans to get delivered in the next 3 months' time or so. So that would leave us with 15 ships only for the Indian Navy for the 3 projects, 17 Alpha that is still beside frigate 3 numbers. But -- and the 4 number, currently [indiscernible] and it is to do Shallow Water Craft. So there is a total of 15 ship construction that would be happening for the Indian Navy. But I must say that what we have done, that we have also adopted a new strategy, which is very, very, I would say, attractive and good. And we have decided to work with another capable shipyard in the country, and we have chosen the LNG to do some kind of hull construction work for us for the [indiscernible] 2 in number. So that will help the -- with us in particular to expedite the construction progress using the available capacity. Elsewhere, the 3, I would say, the kind of facilities, which are there in other shipyards. So L&T has come up to do some kind of construction, for hull construction in particular, and they have to restore what we will do ourself. So that will help the Indian Navy and us also to expedite the -- this particular project to move on a very fast track. We have 2 ships we are constructing in the GRSE and 2 ships will happen at the Chennai Kattupalli of L&T. So the 4 ships will move in a quite fast pace. So this is a strategy we're adopting that wherever capacities are available, wherever the facilities are free and somebody is offering a very good attractive price for the construction of that hull, et cetera, we are also looking at them favorably.
The next question is from the line of [ Shveta Jain ] from EMS Wealth.
I have a follow-up question regarding the current construction of ships that you mentioned. Sir, out of the 19 ships, that one which is delivered, it is -- this is a legacy project, right, sir?
Yes, yes. That's delivered -- it's -- we delivered around 10 or 11 of the sales months. We just today [ WJ-FAC ].
Okay. And so the balance 18 ships are from the new orders?
No, I'll just explain this. Out of that 18 ships, 3 will also get -- 2 are for the Coast Guard FPVs. It will also get delivered by March this year and for the LCU, that is for the Navy. So all these 3 ships will get delivered in the next 3 months or 4 months of time, and that will leave us at 15 ships for 3 projects of the Indian Navy.
Okay. Got it, sir. Sir, and what is the CapEx that we are expecting next year, 2021? Any guidance?
See, 2021, we are actually targeting the range of around, say, 60-odd crores, roughly the CapEx for augmentation of our facilities at the Raja Bagan Dockyard and of course the improvement in our various machineries and other paraphernalias to improve the efficiencies of the production, et cetera.
Okay, okay. Sir, and in the June call, you had mentioned that they are doing some work on the panel fabrication facility that was supposed to be ready by October 19. So any update on that?
Yes. Basically, at Raja Bagan Dockyard, I told you that we are investing a good amount of money to create a base infrastructure for carrying out these panels fabrications for new ships projects, especially for 17 Alpha Shivalik-class frigate and for the vessels also. And that is a huge, I would say, covered structure that is coming up all the way at a plan to have it completed by October. But it is just almost nearing the completion. There's a delay of around 2, 2.5, 3 months. So we do hope that by February, end of March, that would get completed.
Ladies and gentlemen, due to time constraint, we take the last question from the line of Ravi Sundaram from Sundaram Family Investment.
Sir, one quick follow-up question. Maybe a little early on this. How long does it take for a typical RFP to be awarded into a contract based on your past experience, turnaround time?
Normally, as for the DPP provisions, Defence Procurement Procedure, from the issue of RFP deal contract conclusion, it is around 2 years' time they cater for. So usually, it happens in this period. But in some cases, it's depending on the complexity of the project and, of course, the various particular negotiations and commercial and finally, the P&C. It may -- and sometimes, it just gets extended beyond that. But in some cases, it's concluded earlier than that also. So average, you can take around 2 years' time as for the DPP itself.
Okay. So the projects that we have bid for today, submitted our bids today, it might take 2 years for it to get awarded as a contract. Have I understood it correctly?
Yes, that's the way it is defined in the DPPs. But in some, I would say, yes, this is a complex project. But on other projects, which are basically of the Coast Guards, say, ATVs are 20 numbers and FPVs, they're not just very complex, not very big ones. So at times, things move quite fast, and their values sorted are very, I would say, competitive. But they may decide to conclude earlier than that.
Thank you. I now hand the conference over to the management for closing comments.
So thank you very much to all of you for joining us for this conference call, and I can only assure you once again that you need to kindly take into consideration the typical build cycle and the nature of the business of the warship building we are dealing with, and therefore, this quarter-on-quarter comparison will not really provide you a right understanding and right input. You must look it on a year-on-year basis comparison, or as I explained that, the best thing is that the 1 or 2 things are to third quarter ending December '19 compared to December '18 figures, that would give you much better understanding about the whole thing. And I can reassure you that the physical performance of the company in terms of the ease with which we are delivering the ships despite of various importable and constrained challenges in the warship construction, we are going to be completing the delivery of 3 more ships. So that's the speed we are actually achieving and delivering. And with the 17 Alpha Shivalik frigate program and also the survey vessel large project happening concurrently, and the L&T also, the work has started in here also. But I'm quite sure that these projects would be moving at a good pace. And in coming years, that should be giving us a good revenue. So all in all, the company is poised to do quite well in the times to come, and we are on a growth path with a lot of internal improvement in efficiencies. We are seeing that despite of a tough top line at times not doing -- not showing great. Despite of that, the bottom lines are quite, quite encouraging, and I'm sure that you will appreciate that. And I can only wish you, all of you, on all the very best and very happy year. Thank you very much.
Thank you all for being a part of this conference call. If you need any further information or clarification, please email [indiscernible]. Ladies and gentlemen, this concludes your conference for today. Thank you for using Chorus Call Conferencing Services. You may now disconnect your lines. Thank you.
Thank you.