Garden Reach Shipbuilders & Engineers Ltd

NSE:GRSE

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon, ladies and gentlemen. I'm Shehzad, moderator for this conference. Welcome to the conference call of Garden Reach Shipbuilders & Engineers Limited, arranged by Concept Investor Relations, to discuss its Q3 and 9 months FY '21 results.We have with us today, Rear Admiral Shri VK Saxena, Indian Navy Retired, Chairman and Managing Director; and Shri RK Dash, Director of Finance. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Shri VK Saxena. Thank you, and over to you, sir.

[Vipin Kumar Saxena, Chairman & MD]

A very good afternoon to all of you, ladies and gentlemen. I'm Rear Admiral VK Saxena, Chairman and Managing Director of Garden Reach Shipbuilders & Engineers Limited. My sincere and very hearty warm welcome to all of you to this conference call to discuss our financial performance ending 31st December 2020, that is Q3 for FY '21.I've got the honor and proud privilege of informing you certain important achievements that we have had up to Q3. In fact, I'm very happy to inform you all that Q3 has been quite encouraging for us as against these troubles and difficulties, what we have faced during the quarter 1 and quarter 2 because of the known issue of the COVID-19-related challenges. And we were trying hard with new ideas, new methods, new strategies, new systems to be put in place. And certainly, those things have paid some good dividends in terms of the better results in the Q3 of FY '21.And when we ended the year 2020, that is on 31st of December calendar year, we have really achieved a number of important milestones in the month of December itself. In fact, before that, you are aware that we have already delivered ships during the pandemic. On 8th of June, we have delivered the Fast Patrol Vessel to the Indian Navy. Thereafter, we conducted a number of sea sorties for the Landing Craft Utility ship of the last one of the series of 8 ships, which were under construction.December, we had -- on 1st December, we completed the keel laying of the second Survey Vessel Large. You all know that we have got a contract for construction of 4 Survey Vessel ships of the Indian Navy. The keel laying is basically performed when you have the complete block. One major block gets replicated and put on the -- basically, the dry dock or at the slipway. So that's a very important milestone in the construction phase of the ship.On 14th of December, we launched the first 17 Alpha ships that is stealth missile frigate, 6,600 tonne ship, massive ship, ahead of schedule -- 2 months ahead of schedule. And that was a very, very big event.And the third thing, which happened on 31st December, that last ship LCU after successful trials at sea, was delivered to the Indian Navy. With that, we successfully completed the LCU program of the Indian Navy. That is the construction of 8 Landing Craft Utility ships for them.On the same day, we started the production of the ASW Shallow Water Craft. You are all aware that we have got a contract for construction of 8 ASW corvette Shallow Water Craft for the Indian Navy. And after the design phase, we have commenced the production of the first ship.So these are the highlights of the year. Despite of the COVID, I'm very happy to share with all of you that we did end the year with a lot of positive news for everybody, good for our shipyard and good for the nation and good for everybody.Year 2021, of course, I also would like to inform you that in the month of January, we received the export order for the Y number, 1,700-tonne ferry -- ocean-going-passenger-cum-cargo-ferry for Government of Guyana, South America. That was a major export order we've received. We have also got a contract signed for the supply of 1 Fast Patrol Vessel for the Government of Seychelles. So these are 2 important export orders that we've received in the Q4. And that is amount to around USD 26-odd million of the contract. Also, we have received the contract for the refit. I've been telling you that refit is going to be our major vertical and focus. And we have actually been working hard on that. We have been getting some smaller refits of the Coast Guard. But this is the foreign ship that is going to come here at GRSE for the refit. And that is around USD 3-odd million, is going to be the cost of this foreign ship.So with these major things happening in the Q3, and of course, Q4, I told you at the beginning, has been also very, very encouraging for the shipyard. So therefore, we are moving at and have good pace with a lot of good positive results that is happening.Coming to the financial performance of the company, as you are aware that, as of Q3, I've told you that whatever strategies and methods and systems had put in place have yielded good results. We had a very good, I would say, performance as compared to the Q2. In terms of revenue from operations, they have gone up by 32%. The total income has gone up by 25%. The EBITDA has moved up by 35%. The PBT has also moved up by 35% as compared to the Q2 of FY '21. Margins of PAT has also gone up by 53%. When we talk about the margins, the EBITDA margin has -- now it stands at 20% as against 19% in Q2; PBT margin is 18% as compared to 17%; and PAT margin is now 14% as against 12% in Q2.What has actually transpired is that we are seeing good, I would say, results of the initiatives that we have taken, especially in the backdrop of the lot of troubles with regard to the manpower availability in a labor-intensive industry, which is what we are. As a shipbuilding company, we are heavily dependent on the supply chain, being a platform integrator that got disrupted badly. Now all those things seems to be getting behind us, and I'm sure that the Q4 is going to be much, much better than previous quarters. And therefore, the pace which we have gained now will be eventually, is going to show us the fantastic results.As far as the company is concerned, I'm quite hopeful and quite buoyant with regard to the performance of the company in Q4 and beyond because the number of orders, you know that we have got a healthy order book of INR 25,887-odd crores at this point of time. We have also received 2 more orders for export. And the fact that the 3 major projects of the Indian Navy that is already going on, you know that 17 Alpha stealth missile frigate project, 3 ships construction. Then another project of 4 Survey Vessels Large and another project, 8 ASW Shallow Water Crafts. So that was actually 15 ships. So having the Government of Guyana order for the ocean-going vessels, coming to us, that makes it 16 ships. And also the ship which we have given to the Government of Seychelles, that was -- which was built for the Indian Coast Guard against -- was a seed program of warship construction. We will be making another replacement ship for the Coast Guard. So altogether, there will be 17 ships that would be there in our -- on our place. And that actually gives a lot of happiness and confidence to us.The way the ship construction is going on, the number of ships that would be under production in FY '22 will be around -- out of 17, around 12 ships will be under construction. In fact, for both the Government of Guyana vessel as well as 6 Fast Patrol Vessel, for which we are going to be making for the Coast Guard as a replacement vessel, the construction is going to be commencing in the next 2 months' time already.I'm also happy to inform you that all the 3 ships of the stealth missile frigate program are under different stages of construction. The first ship has already been launched on 14th of December, and we expect that this ship should be entering in the Phase 2 of its outfitting by end of, I would say, FY '22, that is somewhere in December or so. By Q3 end, it should be entering in the Phase 2. That is a massive outfitting phase that will be coming up. And second and third frigate also will be going through with the improved hull construction percentages. So altogether, these 3 ships put -- having the highest, I would say, cost of the project, is expected to bring a much more bigger revenue recognition as compared to FY '21.Along with that, I told you Survey Vessel Large project is also going on. And the first ship of the Survey Vessel Large is going to be launched by mid of 2021. And therefore, by around June -- or June, July, we should be launching the first Survey Vessel Large. Along with that, the second and third ship construction is already happening. Both ship construction is going to be starting shortly.So all in all, all 4 ships remaining in the construction of the Survey Vessel Large will also add up to the revenue that would be coming to us. Along with that, I told you December 31, we started the production of the first ASW Shallow Water Craft. That is also going to start giving us some revenue, of course. And hull construction initial phases, you don't get much, but it already begun. By March -- by April '21, we will be starting the construction of second and third ship of the ASW Shallow Water Craft.So all in all, FY '21 ending will be better. And FY '22, we see much, much better revenue growth. And of course, margins, I've already told you, are doing quite well, especially the bottom line. When you look at EBITDA, PBT, PAT, I'm sure that FY '22 is going to bring us much, much better results.That's from my side. You have -- I will be very happy to take on any questions from your side and clarify those things. You know that along with me is my Director of Finance, Mr. Dash, also there; and also my senior in Finance, Mr. Siddhartha, is also there; along with company Secretary, Mr. Mahapatra.So I will be very happy to take on any query or issue which you have, and we will try to answer it. If possible, if something is not immediately available, we will have it conveyed to you. Thank you very much.

[Operator]

[Operator Instructions] The first question is from the line of Jonas Bhutta from PhillipCapital.

[Jonas Hemant Bhutta, Research Analyst]

Congratulations on a great set of numbers, sir. Two questions, one of which is bookkeeping. Sir, in the 9 months revenue, it would be great if you can share what has been the revenue contribution from 17 Alpha? And then what are the legacy projects that we delivered, the LCUs and the balance of SPVs? How much did -- have they contributed insofar?

[Vipin Kumar Saxena, Chairman & MD]

Can you just repeat again?

[Jonas Hemant Bhutta, Research Analyst]

Sir, just wanted to know the revenue contribution from 17 Alpha in the 9 months ended December.

[Vipin Kumar Saxena, Chairman & MD]

Yes, 17 Alpha, as I said that, it is the biggest revenue contributor. It is around 4 -- INR 34-odd crores has been the revenue on 17 Alpha. Of course, the legacy project has already been completed. For example, the LCU, we have booked around INR 31-odd crores in that program. The Fast Patrol Vessel program, around INR 15-odd crores. So these are things which have been already completed. And the stall is now -- the new project for a Survey Vessel, the ASW Shallow Water Craft.

[Jonas Hemant Bhutta, Research Analyst]

Okay. Okay. Sir, my second question was trying to understand the margins. So for 2 consecutive quarters, we reported greater than 10% of EBITDA margin. Is this likely scenario, because it's more of a sales mix where the 17 Alpha has significantly higher margins because of lack of LDs because we are not providing for LDs as of now?Or if you can throw some light, because we were made to understand that GRSE's business model, at least, especially on order book that is under construction, was more at 7.5% PBT margin, while the PBT margins, excluding other income, are still higher at 7.5%. And if you can clarify whether the 7.5% PBT margin should include other income or it's excluding other income?

[Vipin Kumar Saxena, Chairman & MD]

See, let me start from the last point which you have asked, is that -- and in fact, I think from last couple of interactions with all our investors, we are trying to clarify that while what you see on paper is the other income that is coming out of the interest component, but in the entire gamut of the, I would say, costing for the shipbuilding projects when we go for putting our bid to the Indian Navy and MoD, we do not have any financing cost. No, we don't -- we're not given the financing costs. Therefore, the phase payment that has been decided in that DPP provisions, there are 15 phase payments are there. If you already factored those kind of payments that would be coming to our Phase 1, Phase 2, basically, we receive the payments against the milestone deliverables. So therefore, we always look at both set of interests that would be coming out, not as, I would say, anything to do with regard to the -- our different expenditures and other things. It is going to be very much part and parcel of those projects for which we get the phase payment. And they are temporarily put in the banks where you see the interest income that is getting accrued. So therefore, it becomes part of my working capital, in fact. And therefore, things are very much part and parcel of our entire costing system strategy. So therefore, in the -- I would say, general parlance, we see that it is other income. But the fact is that, that remains part of the project income, working capital, and whenever the requirement comes up, we spend that money because we can't spend it elsewhere. That's number one.Number two, the margins which, in case of nominated projects, the 17 Alpha, while the government gives us 7.5%, but you -- we have all the flexibility to have a strategy put in place, improve our internal efficiencies, improve our different supply chain systems and so many other things which are there, design optimization, okay? So those are the good, much better planning, use different tools, Industry 4.0 kind of concept that is already being put in place in our shipyard. So that is actually, I told you, has started showing good results to us. And having a better margin, 7.5%. In fact, that is applicable to more tougher projects of the -- won on a competitive bidding, Survey Vessel ASW Shallow Water Craft project.So therefore, all in all, we see that the possibilities with regard to -- while shipbuilding per se is labor-intensive, don't have much greater margins as compared to any other industries. But within that, we are trying to do our best to improve the margins. That's why you are seeing that now, whether you talk about EBITDA margins, PBT margin or PAT margins have really done well. And you see the track record from where we started a couple of years back and where we stand now with regard to the consistent improvement in our margins despite of suffering from the pandemic, despite of having labor issues, despite of having total lockdown for 90-plus days, nothing happened, okay?And then, therefore, when on supply chain disruptions, but we are fast catching up. That all reflects at what kind of internal efficiency improvement measures we have put strongly in place. So that has given me the confidence and belief that what all things -- in fact, the pandemic has driven us to learn new tactics, new strategies. That is -- I'm sure that now we are seeing the good results. And we have to continue with the same strategies in the quarter-to-quarter -- on a year-on-year and quarter-on-quarter. I'm quite sure that we will have consistently good results in times to come.

[Jonas Hemant Bhutta, Research Analyst]

Great, sir. And last question, if I can just squeeze in. Sir, has there been any LD provision in the 9 -- if at all?

[Ramesh Kumar Dash, Director of Finance, CFO & Director]

This time, actually we don't have delivered that much and we don't have any LD provisions. Major provisions already were provided. You might be knowing that as per index, whenever anything is due or provisions which are due for delivery, all the provisions have to be met. So accordingly all the -- whatever already due for delivery, all those ships we have already provided. So there will be no major LD provision during this.

[Vipin Kumar Saxena, Chairman & MD]

So we don't have -- to summarize that, we don't have any requirement as of now in accordance with the index. And financially, we don't expect.

[Operator]

The next question is from the line of Abhijit Mitra from ICICI Securities.

[Abhijit Mitra, Analyst]

My first question is on the execution outlook for the next couple of years. You did mention that FY '21 will be better than initially thought and FY '22 would be much, much better than '21. So if you can sort of highlight, project-wise, the execution targets that you see now feasible based on the current order book, that will help a lot.

[Vipin Kumar Saxena, Chairman & MD]

I would like to first clarify to you that when I say that FY '21 will be better and -- from the point of view of the troubles we have faced quarter-on-quarter in FY '21, so Q4 is going to be -- I said Q4 would be further better than the Q3. But certainly, FY '21 will not be, I would say, better in terms of FY '20.So despite of the challenges suffering, while the top line may not be good because of the obvious reasons of the lockdowns, nonability of the labor and the lot of disruptions, supply chain equipment items not being available, those certain things cannot be, I would say, circumvented, so they will always remain. But the fact is that the changes in improvement have already been done. While top line remains, I would say, a little struggle as compared to FY '20 when you see.If you see that FY '21 Q3, with respect to FY '20 Q3, there FY '23 -- '20 Q3, it was -- revenue from operations was around INR 370-odd crores. Our past quarter and come so close despite of those backlogs and troubles in Q3 of FY '21, they have come to INR 360 crores. When you see the improvements in the margins, there is substantial improvement in the margin because of the much more improvement in the internal efficiencies and the process procedure. Like if you see the EBITDA, that -- I mean if I compare Q3 of '20 to '21, you see there's around 62% EBITDA improvement, PBT has gone up by 78%, PAT has gone up by 95%. Margins, if we talk about that, EBITDA margin has gone up by 8%, PBT 8% and PAT 7%. So this is the comparison I'm trying to make out between the bottom line and other margin factors, even compared with the non-COVID year. So that is actually -- if you see that in effect, we have done very, very well. I will not say reasonably well, but we have done very well.Coming back to the future outlook, as you correctly asked for, is that we have already completed the LCU project. And we have already signed the 2 contracts for the export vessels, that is USD 26-odd million worth, 2 contracts. Export has been my focus area, and it has started showing results. To a good extent, of course, not a very, very hugely big order, but it's better to start from somewhere. So 1 is for Government of Guyana, 1 1,700-tonne vessel; and other one is -- we are going to be spending for 1 Fast Patrol Vessel to the Government of Seychelles.So you know that we have got 3 major projects of the Indian Navy that amounts to 15 warship construction. Now having this Government of Guyana ferry coming in our way and also the replacement vessel which we have given to Government of Seychelles for the -- again, the Coast Guard ship, that replacement vessel also will be made. So in effect, there will be total 17 ships that would be having the orders with us. INR 25,887-odd crores is going to be the -- is the order value as of 31st of December 2020.So I told that we already launched the first 17 Alpha, it's a big ship, ahead of schedule 2 months despite of COVID challenges. So now this ship is going to now -- going to be in the second phase of the outfitting by -- I would say, by November to December of 2021. And similarly, second and third stealth missile frigates, the construction already started, hull phase. So in the -- and similarly Survey Vessel ship project, all hull construction phase is on. And the first Survey Vessel ship, we expect to have it delivered by somewhere in the [ middle of 2020 -- I would say '22 but '23. ] So that is -- sorry, '22 -- middle of '22, it will be delivered.So likewise, I'd say there will be 10 -- in fact, these 2 ships have come, the Guyana ferries, their construction will start in the next 2 months. Fast Patrol Vessel replacement, yes, construction will start in the next 2 months' time. So therefore, there will be 12 ships that will be in construction in FY '22. And cumulatively, we expect -- and 17 Alpha going into the, I would say, different zones of the construction, that is going to give us substantial amount of revenue from 17 Alpha itself.Similarly, the first Survey Vessel, when it goes to Phase 2 of the outfitting, which gives you a lot of the equipment will go onboard ship after the launch happens. So in FY '22, expect a lot of revenue that will be coming up on the first Survey Vessel launch. Similarly, second, third ship, Survey Vessel, also will start giving us some amount of decent revenue. ASW Shallow Water Craft, I told you the first ship construction has already commenced on 31st of December 2020. The second and third ship construction will commence in the month of April. So altogether, I see, if you see cumulatively, the revenue bookings that is going to happen against these, I would say, 5 projects, that is certainly going to be much more brighter as compared -- and better as compared to FY '21. And all the ships, as per the shipbuilding construction cycle, I told you they are -- this is skewed -- left skewed bell curve, okay? So therefore, we see that a number of ships will be going into the Phase 2 of the outfitting. And therefore, we expect a much more larger revenue. And FY '23, we are going to having much more, much more better revenue as compared to FY '22. So therefore, in effect, when you see that INR 25,887-odd crores is a total thing and I have to complete by FY '27. Based on this bell curve, which I told you, we expect that it will be picking up somewhere in the 2024 or '25 or so. So therefore, cumulatively, all the ships only giving us more and more and more revenue. So things would be much more better and I think quite good as far as the total revenue growth of the shipyard is concerned. And with that, I've told you the margins -- we've started showing could be good margins we expect. I hope I have answered it.

[Abhijit Mitra, Analyst]

Yes. This was extremely helpful. And just to -- I have one follow-up question. Just to sort of see the incremental order booking possibility, I think there are 4, 5 projects which you have kept mentioning. And in fact, most of the shipyards keep mentioning. If you can sort of broadly highlight the status which they are in, including 8 Fast Patrol Vessels, 12 Air-Cushion Vessels, 6 New Generation Missile Vessels and 2 multipurpose vessels, which have been made?

[Vipin Kumar Saxena, Chairman & MD]

Yes. That said, we already submitted the -- our bids and we are all expecting that when these will get opened up and who becomes the successful bidders, we're all waiting for it.

[Abhijit Mitra, Analyst]

So none of them has progressed beyond technical bids?

[Vipin Kumar Saxena, Chairman & MD]

Yes. Some projects have completed technical evaluation. For example, the ACV is a -- I don't think that has moved anywhere, but New Generation Missile Vessels, of course, it has completed that TLC phase. And we hope that, very shortly, they should be declaring the winner for that or a successful bidder for that. Similarly, we are also waiting for the cadet training ship evaluation process, TLC is yet to happen. So -- and in fact, we have a lot of such requirement that would be coming up as far as the Navy and Coast Guard is concerned.And we are going forward with a much more bigger and more and more push towards the export market. And you have seen results that, although not greatly huge, but we are seeing some interest in the -- some of the friendly foreign countries for our products. So we are now moving in a full swing with regard to making some impact in terms of the export as well.

[Operator]

The next question is from the line of Bhagyesh Kagalkar from HDFC Mutual Fund.

[Bhagyesh Kagalkar, Senior Equity Analyst]

Sir, can you share with us what is happening on the working capital front? And on next 2, 3 years, as the revenue ramps up, how does it look like?And the second question is regarding this NGMV, the New Generation Missile Vessel, what is your sense, sir? Will this project be split like the P-17 Alpha was split between you and Mazagon -- Mazagon and you? And there is a talk of New Generation destroyers also. Obviously, that is further down the line. So what is your view on that?

[Vipin Kumar Saxena, Chairman & MD]

Okay. I will take the last question first, that New Generation destroyer, still, I would say, it seems to be a little away as far as RFP is concerned. So I don't see that it should be happening -- it could be anywhere in kind of next year that will be coming RFP.With regard to NGMV, there are 5-odd players there in the fray, not only the GRSE and MDL, but there is GSL, L&T and CSL also are there. And all of them are technically cleared. So we'll see that who becomes the lowest bidder and who gets the contract for that.Now other part, with regard to your working capital, I must say that as far as the working capital is concerned, in our kind of shipbuilding, there has not been ever any trouble with respect to the working capital of the shipyard, because we already -- always have kind of a steady inflow of the phase payment that keeps coming up. We also have the money that we come -- get it from the other income against a particular project. So normally, the working capital has never been any issue as far as the warship building is concerned. And that is still quite, quite healthy. And my DF will further add up some more things.

[Ramesh Kumar Dash, Director of Finance, CFO & Director]

As far as the already past the [indiscernible] that whenever we're giving any contracts or all these contracts, we have not factored the element of working capital or financing cost. That means the customer is providing working capital throughout the project. That's why customer is paying the money in 15 phases.First, the number of phases are defined with respect to requirement of our total working capital. So there was -- and as on that -- as regard to fund problems, this is where we have not faced any fund problem. Of course, last year, in the last quarter, some problem was there. But during the year, we are getting funds. And afterwards, there is no problem. And working capital is not at all problem for the project.

[Operator]

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

[Dixit Doshi]

Sir, firstly, it was good to hear that we launched the first frigate ahead of schedule. Sir, you mentioned in the last con call that we are managing the construction work in a ship -- multiple ships and thereby, the construction work is going fine. But there may be delay from the vendor side where -- from where the equipments are going to come. So now that we have already launched the ship, how do you see the equipment coming in next year from the vendor side? Is there a much delay or it will come on time?

[Vipin Kumar Saxena, Chairman & MD]

See, in fact, it's not only that ships which are launched, that is the first stealth frigate, but all other projects, which -- there are 2 parts in shipbuilding. One is the construction of the hull itself, that is a basic structure in a, say, building. Similarly, the ship's hull, its compartments, its strategies and different kind of things which happen. Then comes the installation of various equipment items, yard material, et cetera, et cetera. Now after that, we do the installation and integration of various equipment.Now as you said that, yes, there is some kind of a disruption in the supply of the equipment because everybody is claiming the force majeure given by the Government of India to everybody because of the COVID. And, yes, there is likely to be some kind of an effect on the availability of the equipment and materials. But looking at the long gestation period of the warship construction, we -- what -- yes, we did have certain target dates, et cetera, on that day. If I receive the equipment, that will be taken onboard ship. It may not be happening on that day. Most of the suppliers are looking around to kind of contain the delays and try to improve upon their production. And we think the -- some of the delivery dimension, will be delayed, et cetera, no problem. So therefore, in a larger, I would say, game plan of the warship construction and shipbuilding cycles, as far as shipyard is concerned, we -- I do not foresee major worries because -- of course, there will be some delays, no doubt about it, but we'll try to catch up. And the critical thing for us is that when the ship equipment comes up, they are lowered. And at the moment it is lowered, we have the revenue recognition taking place. For example, if there are some guns, which has got a value of X amount, the moment it goes onboard ship, you book that much of value. Similarly, if there is a gas turbine, say, in a stealth frigate, that gas turbine has already gone onboard ship. So therefore, you have booked the gas turbine. So therefore, in effect, the delay, et cetera, of -- may not have a very, very major impact because we have a time to catch up also.

[Dixit Doshi]

Okay. Okay. Second question is, sir, you mentioned that the margins are 7.5% PBT margin. And in the larger scheme of things, we consider other income, interest income also as a business income. So -- and obviously, anything above that is because of our efficiency. If I see the current quarter or even the 9 months numbers, we have done close to 13%, 14% PBT margin, including the other income. So this is substantial compared to the 7.5% margin. I mean the efficiency is substantially higher. So is it sustainable kind of thing? Or is it that the -- on a let's say, 1 ship is of INR 8,000 crores. So over the entire life, the profit will be 7.5%, and there may be some period where the margins will be 15% and maybe some period the margins will be less, sir? If you can just help to understand this.

[Vipin Kumar Saxena, Chairman & MD]

Let me tell you, it happens like this. That 7.5% is already given for 17 Alpha. But you may lose out even that profit margin also that has been given to you if you don't efficiently execute the project. If you get unduly too much delayed on your account as a shipyard, not on account of delay in availability of the customer-nominated equipment or customer-supplied equipment. Because if the project gets delayed, accountability is not on the shipyard. Therefore, we will not get penalized, while there may be some delays.So therefore, as I see, the changes that have happened in the entire working culture of the shipyard over the last few months, we're tracking the performance of the shipyard, it's not just this year or last year, but if you see last 4 years, how our improvement has happened right from these PAT margins to the PBT margins and EBITDA margins, there's been a consistent increase -- improvement. That's what I want to say. And therefore, I have -- we are now trying to reach to some kind of good figures, where we should be able to -- to my mind and just my own plans, I feel that we should try to -- as a shipyard, certainly I should try to get that kind of margins. But as I said that subsequently, because of something which is not in your control, that is the availability of material or items equipment that is totally in the control of the customers, or something like COVID that has happened. We are all hoping that COVID should become better to ease out, therefore, things should be all back to normal. But these are the unforeseen things which happened. But as far as I'm concerned, as a CMD and as a company, we are trying to see that if I have reached to a particular level of efficiencies, our systems have been put in place in a different manner, by putting down the best practices, by bringing in the Industry 4.0 practices in the automation, in my design planning, in my quality assurance, in my production, so all these things are actually showing results. And over the period of time, I do hope that we should be able to maintain a decent level of margins.

[Dixit Doshi]

Okay. Okay. And now just two small questions. One, if you can update anything about the repairs and maintenance which we are trying to build? And secondly, on the OFS, so I understand that DIPAM has to decide on the OFS, but anything you can suggest? I mean will that happen within this current financial year itself?

[Vipin Kumar Saxena, Chairman & MD]

See, I don't have any kind of control on other things or certainly, if it is totally the decision of the DIPAM, Government of India. So they will take the decision at appropriate time for the OFS. So I certainly cannot say and comment that when it's going to happen. But as regard to the refit and repairs of the ships, which we have started off against this vertical, which is good and results are showing of, we are now getting the refit order for one foreign ship, which is USD 3 million worth and that refit will be starting next month itself.So this remains our focus area, this vertical of refit/repair. And shortly, we should be, I would say -- also another vertical which we are focusing on is the boat building and yard craft ferry, et cetera, for Indian Water Authority requirements. As we are hearing or you must have heard that we have signed the -- a slew of MOUs during the Aero India show. We have signed MOU with [ with one of the number ] foreign firm for the electric propulsion and of course energy-efficient propulsion system for the ferry, et cetera, and other vessels which can fly in the [indiscernible] area.So therefore, these are the future R&D projects that are also being taken up. And we do hope that these verticals will help us in adding up to our revenues. And we see a good prospect for all such things, not only within India but abroad as well.

[Operator]

[Operator Instructions] The next question is from the line of Ashok Damani, individual investor.

[Ashok Damani]

Congratulations on a great set of numbers. Sir, I have a question regarding your dividend policy. As we noticed, because -- as you just mentioned right now, we don't have any cash flow problems as such because the interest income is used as working capital and we get paid in advance. So will we maintain similar aggressive dividend payout policy?

[Vipin Kumar Saxena, Chairman & MD]

Mr. Damani, you all know that this is a kind of a thing which is going to be driven by the government policies and also by the Board of Directors. And we, as of now, continue to follow the government policy of the dividend distribution, whether it is 30% of the PAT or 5% of the net worth, that is what is the thing which is being followed. And keeping that in view, we are trying to ensure that at least that much is made available in the form of dividend. So that is what we have seen in the form of interim dividend. Despite of the issues of the COVID and other things, and we being a labor-intensive industry, another challenge is the phase. So therefore, I would say that we are trying our best in terms of the levels, in accordance with the government policy.

[Operator]

[Operator Instructions] The next question is from the line of Samiksha Jain from ANS Wealth.

[Unknown Analyst]

Sir, this is Samiksha. Sir, most of my questions are answered. I just have two questions, sir. Sir, I think we had earlier guided for a CapEx of INR 140 crores in FY '22 and INR 60 crores in FY '23. So can we assume that these are the numbers that would be there, like a guidance for the next 2 years for CapEx?

[Vipin Kumar Saxena, Chairman & MD]

See, as far as the FY '21 is concerned, we have catered for the goliath crane. That was a big one. And that is going to be capitalized in this financial year. The crane is going to be coming next -- this week itself, and should get installed next 1.5 to 2 months of time before the end of the financial year. So that is a big amount of the CapEx that was planned in this FY '21. FY '22 and '23, of course, we have the plans in hand, and I'm sure that the figures which we have indicated earlier would be maintained.

[Unknown Analyst]

Okay. Okay. And sir, one last question. How is the payment from government being -- I think in between, you had mentioned on the one of calls earlier that there were some interim payment issues that you're facing from the government. So how is the situation now, if you can update us?

[Vipin Kumar Saxena, Chairman & MD]

Yes. We did face some trouble in the, I would say, the last quarter of the last financial year and the beginning of the FY '21 first quarter, and it continued for the early part of the second quarter. But because of the obvious reasons of the government needing the money to be prioritized for the health care and many other things because of the COVID. But things have improved a lot, and as of now, we really do not have any issue of the fund flow as against what are supposed to be going as part of our claims and different milestones which we are completing. So no, no problem with the fund flow as of now.

[Operator]

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Shri VK Saxena for closing comments.

[Vipin Kumar Saxena, Chairman & MD]

Well, ladies and gentlemen, once again, thank you very much for sparing your valuable time to be there with us to discuss and hear us out, our viewpoint, and of course, the performance evaluation. And whatever question you had in mind, I hope that we've been able to answer it to your satisfaction.And at the end, I can only assure all of you, all my valued investors, that the company is trying its best and we are determined to improve despite of the challenges. And we have already shown in the end of, I would say, 2020 calendar year, December, different milestones have been achieved, unprecedented milestones. And we are going forward full steam at those changes and improvements in our strategies. And I expect that Q4 should be better than Q3. And thereafter, the number of ships that are under construction and picking up very fast the backlog which we had because of the labor problems and the supply chain disruptions should not be there in FY '22. With that hope, I'm sure, and I'm very much hopeful that company is poised to do much better in FY '22 and beyond.That's from my side. Thank you very much, and all the very best to all of you.

[Operator]

Thank you. Ladies and gentlemen, if you have any further questions, please send us an e-mail to [e-mail] behalf of Garden Reach Shipbuilders & Engineers Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.

[Vipin Kumar Saxena, Chairman & MD]

Thank you.

[Operator]

Thank you very much.