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Garden Reach Shipbuilders & Engineers Ltd
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Good morning, ladies and gentlemen. I'm Inba, the moderator for this conference. Welcome to the conference call of Garden Reach Shipbuilders & Engineers Limited, arranged by Concept Investor Relations, to discuss its Q4 and FY '20 results. We have with us today, Rear Admiral Shri VK Saxena (Retired), Chairman and Managing Director; and Shri Sarvjit Singh Dogra, Director, Finance. [Operator Instructions] Please note, this conference is being recorded.I would now like to hand the conference over to Mr. Irfan Raeen. Thank you, and over to you, sir.
Good morning, everyone. Thank you for taking time out for Q4 and FY 2020 Conference Call of Garden Reach Shipbuilders & Engineers Limited. We have with us Mr. VK Saxena sir, Chairman and Managing Director of the company; and Mr. Sarvjit Singh Dogra, Director, Finance. We will begin the call with the opening remarks by VK Saxena sir, and then we will have a question-and-answer session.So I would like to hand over the conference call to Mr. VK Saxena sir. Over to you, sir. Please.
Good morning, ladies and gentlemen. I'm Rear Admiral VK Saxena, Chairman and Managing Director of Garden Reach Shipbuilders & Engineers Limited. I welcome you all for this conference call to discuss about the financial results of FY '20. Before actually I move on to the details and other parameters, I would like to quickly brief you about the company because some of you must have been joining for the first time. As you all know that the Garden Reach Shipbuilders & Engineers Limited is a pioneer shipbuilder of the country, and we are part of the Ministry of Defence. We have delivered almost [ 105 ] ships till date. We are a diversified company. We have a business -- apart from shipbuilding, we also have a division, which is Engineering Division. That is why name that Garden Reach Shipbuilders & Engineers Limited. Under the Engineering Division, we have a unit which manufactures portable steel Bailey bridges of variety of sizes that is supplied to the Indian Army, BRO and many state governments' civilian use, et cetera. We also have a deck machinery manufacturing unit at Kolkata, Taratala, which primarily goes onboard warships.We have with us another unit at Ranchi, which is called Diesel Engine Plant, where we undertake the overhaul and repair, testing, tuning of MTU made by these diesel engines, which again goes on board warships. So these are the activities as a part of Engineering Division we undertake.Now I would like to give you a very good news. Just an hour back, I've completed the handing over of the last of the Fast Patrol Vessels which was for the project of Coast Guard, where we were given the order for making 5 warships to the Coast Guard. Now this is the large ship, Kanaklata Barua, an hour back I've handed over to the Coast Guard headquarters. And with this, the GRSE completes the delivery of 105 warships to the Indian Navy and Indian Coast Guard. Now this ship is, I've told you, part of the 5 FPV project and it is much more, I would say, interesting that we just opened up a couple of days back, although the ship was planned for delivery in the month of March 26, but because of the COVID-19 lockdown, we could not do so, but the moment we opened up, we have achieved this important milestone.Another thing that it was a 5-ship project. The fourth ship, that is the #4 ship, fourth ship of the project, which was to go to the Coast Guard, the Ministry of Defence and the MEA, Government of India has earmarked it for the purpose of export to a friendly foreign country. The talks were on with this friendly foreign country but because of the COVID, there has been some delays, but I'm sure that, shortly, all those things will get resolved, and this ship will also go for export. What it means is that GRSE what I've been actually looking at expanding the export front, that actually helps a lot to us in meeting those commitments of exporting our warships as well. While we had the contract of 5-ship delivery, that means I have to make another warship for the Coast Guard for which we will be receiving another order from the Coast Guard under same terms and conditions. That means the GRSE will have another order for making a sixth FPV also.Another good thing happened in this previous financial year, that is FY '20, that we completed the delivery of the last ASW corvette ship. You must be aware that we have been making 4 warships. Out of that, 3 were delivered to the Indian Navy earlier. And the last ship called Kavaratti is a big weapon platform that was under construction, and that has been delivered in February 2020 to the Indian Navy. With that, the ASW corvette project comes to an end.Similarly, FPV project has come to an end, provided that we get the order for the sixth FPV. Right now, we are handling -- if you take out these 2 projects, we are handling 4 projects of the Indian Navy. Now these -- out of the 4 projects, 1 project is of LCU. You would be aware that we have been given a context of constructing 8 LCUs for the Indian Navy, Landing Craft Utility ships. 7 ships have already been delivered.The last ship, seventh, was commissioned recently, last month, at Port Blair by the Commander-in-Chief of the Command on 14th of May. Now this eighth ship, which was planned to be delivered in the month of May through June, because of the lockdown COVID, it has got a bit delayed, but we are having all the plans to deliver this ship by somewhere in the August end or September at the most.Now we will be handling these 3 new projects of the Indian Navy. You are aware that we are handling the biggest and largest project of P-17 Alpha stealth missile frigate construction, 3 in number, which is a very large INR 19,260-plus-odd crore worth of the cost. The first ship construction hull part is already going on at good speed. Of course, there has been a lockdown, so no work could happen. The second ship of this particular project, we have already completed the keel laying of the ship, second ship, I'll say. And third ship production has already commenced early March. So all these 3 ships of this particular project is now moving on at reasonably good speed. And we are planning to deliver -- launch the first ship of the P-17 Alpha project somewhere in the end of this year or early next year, that is the last quarter of this FY. So it will be ahead of schedule as per the plan what was earlier made out with the Indian Navy. If we launch the ship by December, it will be ahead of schedule.The next project, which is being handled by us, is the 4 in number, that is quite a large project. And the first ship keel was already laid at the GRSE. And second ship we have commenced the production at L&T Kattupalli because we have outsourced the construction of the hull to L&T Shipyard, and the production of the second ship has also commenced in the month of December. And shortly, we'll be commencing the production of the third ship there in the next 2 or 3 months' time.Now the third project, which we have received the order in the month of April 2019, from the Indian Navy for the construction of 8 ASW Shallow Water Crafts at the cost of INR 6,311 crores or so, the -- it is a, I would say, complex weapon platform, not so big, but it's small and compact platform, therefore, lot of design efforts are required to be done. So this ship is at -- project at this stage is at the designing stage. So we expect that by end of this year or maybe next -- last quarter of the financial year, we will be commencing the production of this ASW ship as well.Now I also would like to brief you about the Engineering Division, some very good achievement that has happened in the Bailey bridge segment, in particular. We were doing lot of R&D efforts to develop a new design for double lane portable steel bridge. Double lane has got a width of 7.50 meters and the length is 160 feet and can carry 100 metric tonnes of the load on it. So we did the R&D, we could manufacture and have successfully completed the load trials in-house. And we have got the directives from the BRO to have these bridges -- one bridge, which we have already completed load trial, will be given on NCNC basis to the Border Roads Organisation shortly. In addition, we have also experimented and designed a new single-lane bridge, which was 190-feet in length and a width of around 4.25 meters and a load carrying capacity of 100 metric tonnes that was supplied to the BRO and this bridge is of modular in nature and got a new 7-feet panel. So it's all together, a new design, and this bridge has been installed over River Asiganga in Uttarakhand region, very close to the China border, and the trials have been so far successful. And with this new model, we expect that we would be getting orders from BRO and other organizations.Third thing, you would recollect that, we were also developing the portable assault bridge of small size that is 30-feet in length and having a completely different carbon fiber kind of materials, which was making it very light. So this bridge has also been developed successfully. Trials have been completed. And this bridge is ready for marketing and supply to Indian Army, in particular, and other customers as well as it could be for good export potential. So these are the development that has happened on the physical front, delivery of the ships, progress of the projects which are right now being handled by us.Let me quickly brief you about the impact of COVID, which you will be very keen to know. Undoubtedly, COVID lockdown started at the GRSE from 24th of March onwards. Shipyard had planned lot of things to be completed during the last, I would say, 8 to 10 days of time. In our shipbuilding, a lot of thing happens that way also. We had actually planned to deliver this ship which we had just delivered, Yard 2117, to the Coast Guard on 26th of March, but we could not. Similarly, lot of components to the Bailey bridges which were planned to be sent across with Indian Army and the BRO and Nagaland, et cetera, we could not send because the trucks, et cetera, had stopped. Then also a lot of B&D spares, which was supposed to be supplied to the Indian Navy, could not go. So we did have the impact in last 8 to 10 days of the previous financial year. But now with the lockdown, nothing could be done in any of our new production units of the GRSE.All the units were in the containment zone in Kolkata. And we could get the permission partially to open up only from 1st of June onwards on 2 or 3 units. But from 8th June onwards, we have now got the permission for other 2 units as well, and we have commenced the production activity. But still the number of people who are supposed to be coming in are not sufficient enough because of various other, I think, restrictions and issues, but it will smoothen up slowly.You all know that shipbuilding is a manpower-intensive activity. A lot of work has been outsourced also non-core activities to the contractors and the contractors deploy a lot of migrant workers. They've gone back to their respective villages and places. So I think they will take some time to return back. Therefore, the normalcy to return back to the level where we started off would take some amount of time.In addition, lot of supplies of the yard material, major equipment, et cetera, everybody asked for the force majeure which we have to give. So therefore, from that front also, we expect some delays in availability of the material, et cetera. But we have devised a plan. We are working in shift system with lesser number of the people, trying to make sure that we follow the due safety precautions, social distancing norms. And of course, personnel who are coming here, they should not get infected. So all precautions will have to be taken, and the shipyard is doing its best to ensure that whatever is required, that should be done.Amphan, you all know that the super cyclone that happened on 20th of May last month certainly had devastated the entire city of Kolkata and West Bengal. We were also affected largely. The roof of many workshops were blown away. A lot of water logging did happen in the substations, et cetera, a lot of trees had fallen. And because of that, the number of walls, et cetera, have got affected. Thankfully, we did not have any major setback in any of my assets, which had to impact my operations. So that is one thing good happened. And the insurance surveyor has already come and seen the things, and we are putting the claim accordingly. So these are the issues and the performance of the shipyard as far as the delivery of the ships and ongoing projects are concerned.Now I'll brief you quickly about the financial performance of the shipyard during FY '20 over FY '19. You know that the total income of the shipyard has gone up by 6.49% from INR 1,557 crores to INR 1,658 crores. The operating revenue has shown marginal improvement, despite a lot of challenges or issues, by 3.38%, that is from INR 1,386 crores to INR 1,433 crores. The PBT is up by 25.10%. That is from INR 178 crores in FY '19 to INR 223 crores in FY '20. The profit after tax has also shown, I would say, very impressive growth, 48.70%, up from INR 109 crores to INR 163 crores.The earnings per share has also shown very good improvement from INR 9.60 to -- from, yes, INR 9.60 to INR 14.27 per share. Also, the thing is that we have received the order of INR 6,311 crores for construction of 8 ASW Shallow Water Crafts ships. In the month of April 2019, we signed it. With that, the order book has gone up by 29%.EBITDA margins have also shown good improvement from 13.56% to 15.39%. The PBT margins has also gone up from 11.49% to 13.50% in FY '20. The PAT margin has also shown good improvement from 7.06% to 9.86%. And the dividend per share, you know that last year it was INR 6.9 per share. Now the Board of Directors has proposed INR 7.1 per share. We have already paid the interim dividend of INR 5.74 and rest is INR 1.40 that has been proposed. So altogether, dividend will be INR 7.14 per share.Also, I would like to highlight now Q4 of this last financial year to the Q4 of FY '19. While the figures are all there, but I would like to only highlight and submit to all of you that in warship building, where the gestation period is very long, the complete shipbuilding cycle does not follow a straight-line or a steady path. The entire curve is completely different which I explained earlier to the investors and analysts. Therefore, comparing the Q4 of this financial year with the Q4 of previous financial year may not be appropriate. So that's the reason I'm not trying to compare here. But however, any questions are there, we'll try to answer to your satisfaction.But what is important I want to highlight to you is that I took over the company in March 2017. And I'm trying to baseline the company performance from thereon. You are all aware that FY '17 was a tough financial year for the company. And from thereon till FY '20, in last 4 years, we have really done quite well in all area of operations.The company has achieved consistent growth in all segments. Especially, the operating revenue has increased by 54% from INR 929 crores in FY '17 to INR 1,433 crores in FY '20. The PBT has gone up from INR 20.12 crores to INR 223 crores. That is about 1,120% improvement. The PAT has -- which is very important, it has grown from INR 11 crores in FY '17 to INR 163 crores in FY '20, a growth of 1,482%.So this is the kind of consistent growth, despite of challenges, despite of the issues, we have achieved, and we are trying to do our best to continue achieving the good performance financially as well as the construction activities of the various projects. In fact, the EPS was INR 0.94 in FY '17, that has grown to INR 14.27. PAT margin was just 1% in FY '17. Now that is today, FY '20, is 9.86%.And also, during last 3 years, we have delivered 13 warships to the Navy and the Coast Guard, which is a record of sorts, between the 2 ship delivery period is just less than 3 months. So the shipyard, I would say, have done really well on all accounts, and we are committed to overcome the challenges of the COVID that has come our way. And we do hope that company achieves a better result in this current financial year.That is what is from my side as of now. I'm ready for any questions that you have. Thank you very much.
[Operator Instructions] Our first question is from the line of Umesh Raut from YES SECURITIES.
Sir, I heard your comment about the advance launching of first ship from the P-17 Alpha project. So just wanted to know more about, I mean, how we are trying to make up the loss in execution for the month of April and May going ahead? I mean, if there is a scope to add the further shifts into the working hours or additional day or additional labor to our sites? And also the update on the labor availability at our sites, various sites. And the -- suppose, the labor migration has -- I mean, is kind of a big issue for the industry. So how are you planning to, I mean, kind of bring back the skill labor or the replacement for the skill labor?
Yes, very [Audio Gap] question. I have said that it is going to be the challenge as of now, in coming months, to see the return of these laborers who have gone back to respective places. But we have drawn out the plans. As you said that, we have drawn out the plans to work in the ship systems. Attempt is to increase the time on task with whatever number of people that are available with us. We have to amend our entire sequencing of the activities. We have to change the complete planning process so as to accommodate the lesser number of people with lesser number of groups working in the close confines of the compartment. We know that it's going to be a challenge, but, as a shipyard, as I've stated, GRSE is always trying to come out against these challenges, against such tough situations. We are trying to work in a manner, where with the limitations and limited manpower that will be available to us, we have set the target for all offices, entire workforce and the contractors, everybody that I have to launch the ship. I had the time to launch the ship by February 2021 as per the contractual provisions but I'm trying to set always a difficult benchmark in a sense that I should be able to launch the ship with whatever, I would say, if it was 35% or 36% of the hull construction, with that I would have launched but I can launch it with 30% also, 29% also, it does not make any difference. But launching even itself will, given a lot of fillip, push in the entire approach and psyche of the people, including the customers. Because lot of things can happen when a ship is launched. So this is what is my strategies as of now. And we do hope that, if not complete, but partially or to some extent, I should be able to catch up in terms of the lost ground.
Okay, okay. Sir, coming back to our CapEx program at Rajabagan Dockyard. So with this COVID impact and crisis and all, are we expecting any delay happening on that front? And with that delay in mind, do we expect any impact on FY '22 execution as well?
See, for projects we have planned FY '21 for infusion of the CapEx, we have planned around INR 52 odd crores of expenditures. And I do hope that there will be some issues, I've said that, because of labor, et cetera, but I'm sure that we will be able to catch up on these CapEx plans, which we have in mind.
Okay, okay. Sir, coming back to your order pipeline. As you have mentioned during the last con call as well that there were almost 6 projects in the pipeline. So -- and the RFPs are also submitted by the company. So how do you see now the progress on those projects? Do we expect any delays happening in the awarding front because of the fiscal situation of the government right now?
Some of the -- first of all, like this, the response to the many RFPs have already been submitted to the Ministry of Defence. The RFP response to the projects of -- in fact, we have submitted to the PCV for that -- that is Pollution Control Vessel for the Coast Guard, it has already got open, and we are not the winner of that particular contract. Then there is a 12 ACV, which we have submitted the bid, Air-Cushion Vehicles. We have also submitted the response to the RFP for construction of 8 Fast Patrol Vessels for the Coast Guard. We have also submitted the bid for, 6 in number, New Generation Missile Vessels for the Indian Navy that is a big project. And now we are going to be submitting the bid for the multipurpose vessels, 2 in number, for the Indian Navy. That bid submission date is 14th of June. And thereafter, we also have the RFI that has come for the, 6 in number, NG-OPVs. So what I'm seeing like now where the bids have already been submitted because of the lockdown, the Ministry of Defence, Coast Guard and Navy, they will be taking time to open up the bids and conducting the technical negotiations and so many other process that goes on because you will appreciate that it takes good amount of time from the day you open the bid till finally signing you a contract takes not less than 12 months to 18 months of the time if all goes well. So therefore, these things are not going to be coming up immediately in terms of signing of the contract even if I become the winner.
Okay, okay. Got it. Sir, on the payment front, do you foresee any changes in government policy in terms of stage payments? Because right now, I think most of the collections are pending from the government side to the various industries. So how are you planning to cope up, if suppose there is a delay in collections?
See, correctly understand the whole thing that the entire country's focus, government's focus is to look at the other or to the social sectors and health sectors and all other things which are badly affected, and MSMEs, about that, and many other sectors, infrastructure, et cetera. There will be some pressure in terms of the stage payments. We are aware about it. And there could be some, I think, first or second quarter, that is what a hint we have got. But good part is that we are hopeful that we would be able to continue with our operations without getting hampered badly out of this situation. So we have the plan made out, along with the Finance Department with Director of Finance as to how to go ahead, how to continue with activities of the production, et cetera, procurement of various items. So I do not foresee that any great impact in the production and procurement actions for my projects. So I don't see that projects will get badly hampered because of this issue.
Okay, okay. Sir, 2 bookkeeping questions on FY '20 number. So just would like to know the project-wise revenue contribution for full year '20 in terms of P-17 Alpha and then Fast Patrol Vessel and LCU?
Okay. I'll just get it taken out. In fact, he wants project-wise, whatever thing, VOP that has come. 17 Alpha [Foreign Language]. You know that INR 1,433 crores is the total VOP, right. Out of that, INR 1,250 crore has been done by the ship division, okay? And rest all actually belongs to the -- okay, rest all belongs to the, I would say, other engineering divisions. Now if you see the LCU has given us around INR 61 odd crores of the VOP. FPV project has given around INR 79.34 crores of the VOP, ASW corvettes has given INR 270 crores of the VOP, largely on completion of the stage payments and delivery of the last corvette. Then the 17 Alpha has given the highest, INR 754 crores. In fact, this is the largest one, and that is kind of giving the maximum revenue as well as the profit margins. Survey vessels, good news is that the work has already started, around INR 75 crores of the revenue has been booked against this project, and it is going to be increasing and improving further with the construction progress happening much faster in case of survey vessel project. So these are the major projects and the revenues, which I've told you, has been booked against this project in FY '20.
Okay, okay. And sir, second question is on the liquidity provisions. So what was the figure in FY '20?
Liquidity provisions.
You're saying -- hello, you are asking for our liquidity damage?
Yes, yes. Yes, sir.
I will just tell you.
Mr. Raut, sorry to interrupt. After this question is answered, may we request you to return to the queue, please?
Sure, sure, sure.
We have taken this thing to INR 24 crores.
[Operator Instructions] We'll take our next question from the line of Jonas Bhutta from PhillipCapital.
I hope that everybody at GRSE is safe and healthy. So I have 2 questions. So first is and then something that you alluded to in the previous participant's question as well. In terms of execution, given the lost time, do you believe that sales in the current year would be sharply lower than what you've done in fiscal '20? And what could be the reason for the same? Because survey vessels, there are aspects which you've already outsourced like the survey vessel project. How much of it can still be recouped through various other means? So what are the strategies undertaken? If you can elaborate on that briefly? That's my first question.
Okay. Thank you very much for asking the wellbeing. We are all fine in the shipyard. And we're taking all the precautions. And I do hope that all of you also take lot of precautions for yourself and your families. Now coming back to your question which you asked about the time lost due to the lockdown, we are fully aware that there has been a stoppage of the production activities, and there will be a trouble of availability of the workforce especially from the contractors, migrant laborers or skilled workforce, they've gone back home. But I think this kind of extraordinary situation gives you an opportunity to work out the extraordinary measures. We have devised new strategies and with those strategies being put in place, I'm only hoping for the best that if not completely 100% but somewhere close to 90%, I should be able to -- or 80% or 90%, I should be able to make up the lost ground, subject to solely the people trickling in and doing their bit, I'm going to be increasing the productivity norms, throughput norms, trying to do certain things in such a manner that whatever was the level by 1 person should go up by 20% to 30% in his productivity.So what you asked about the likely impact in this financial year as compared to the previous, I feel that at this point of time, I'm quite hopeful and confident that this year will not be bad. It will be also equally good, if not great, but in my opinion, it should be decent, and that I would say, good as compared to the previous FY '20. That was my strategy as of now. We'll see how the things works out. But as a CMD of this shipyard, I believe in fighting the challenges and putting across all those kind of measures to see that the targets are met. Let's see what happens.
Sure. My second question was, again, now that most of your legacy ships have now been delivered barring 1 LCU, what would be the likely LD provisioning that you see for fiscal '21? And have you started to provide for LD in the relatively newer projects of 17 Alpha and survey vessels because -- or will you start providing for, given that you already know that given the lost time, the delivery schedules of these could get stretched ultimately. So would you start preempting LDs on 17 Alpha and survey vessels right away?
Yes. Let me again clarify to you that last LCU which is there for that, already the provisions have been taken. So there's now nothing left. There's no LD which is going to be coming up anymore. As far as ongoing projects, there is survey vessel which you are talking about or the P-17 Alpha, their delivery periods are still far away. When we get the sense of -- where there's going to be a known delivery delays, then we start taking care of that. As of now, I do not foresee the delays happening on survey vessels at large. Also, whatever lockdown-related delays have been there, force majeure is already sought for, and that will be given. So those things will be factored. So at this juncture, in this FY '21, we are not looking at any LD provisions or any other end of LD expectations.
Sir, this number of INR 24 crores will be 0 in FY '21. This INR 24 crores would effectively become 0 in FY '21.
FY, INR 24 crores, this basically was taken for the last ASW corvette which we've delivered. I think it is around INR 22 crores is the thing which is coming for 1.4 months only is LD for that ship. So that has been now taken care of, INR 22 crores. And INR 2 crores is on other sundry Engineering division-related delays, et cetera. So now there won't be -- with this happening, nothing is going to be any more fresh. There may be some write-backs. That's what I'm looking.
Our next question is from the line of Abhijit Mitra from ICICI Securities.
So I have 2 questions. Firstly, on the -- on account of the lockdown, how much sales have you lost? If you can sort of quantify the sales lost number for the month of March or for the Q4, that would be of some help.
Can you just repeat again the last -- your question?
Yes. So how much sales have you lost in Q4 because of the lockdown?
See, let me tell you that as far as the last 8 days are concerned of the month of March, we were expecting around INR 80 crores to INR 90 crores of these sales in terms of VOP that certainly could not come. Otherwise, our top line would have been much better for FY '20. So that would now shift here because those things are almost ready or they were getting completed almost. So yes, that will be -- now we have opened up, so that will come into the Q1 of this financial year. With regard to the ongoing projects of 17 Alpha and survey vessel, in particular, and of course, LCU minor works which was remaining for 2 months of the job, so we have not yet worked out the exact quantification of the financials, et cetera. But, yes, there are impact because of the lockdown in terms of the progress of the production and the exact amount we will be working out. As of now, we have not come to the figures because of lockdown, the people were not available, we have to ascertain from all the groups, group heads, subgroup heads as to what all things were targeted and how much we have achieved. So we'll get to know about it. But I do not see that, that would be such as serious, very serious hampering or impact. And I'm saying that we will be mitigating those delays over a period of time. And I do hope that we should be able to catch up a lot. That's what is my expectation is.
Right, right. And what is your expectation of P-17 Alpha in FY '21?
See, I've told you that 17 Alpha has given good revenue from operations in FY '20, INR 700-plus crores, and hopefully, it will be much, much better in this financial year because -- but the fact of the matter, I must tell you, Abhijit, is that once it is launched, that you achieve basically the hull construction does not get you a much, much higher in terms of the revenue, but once the launch happens, and then slowly, slowly the equipment, et cetera, start going onboard ships. So when the equipment start going onboard ships, you'll start getting the better, I would say, revenues. You can book the revenues on that. So from FY '21 end onwards, and FY '22, we expect will be extremely good for the first ship and on 17 Alpha. But FY '21 also would be better than the previous year, this is FY '20. But survey vessel is also going to give pretty good, I would say, revenues. It was INR 75 crores. It is going to go up.
Our next question is from the line of Dixit Doshi from Whitestone Financial Advisors.
Sir, you mentioned -- you did mention about the impact of COVID and Amphan. And you mentioned that how we are planning to cope up. But do you feel that in terms -- due to the any delay, there may be negative impact on our margin?
I would say that the plans which we have laid out, I do not think that there should be impact, much greater impact and as per my plan, as per my strategies, I want to at least, if not go much higher, but remain where I am, that is what is my strategy and plans are there in terms of catching up, in terms of doing the things in a different way altogether. The things which has never been tried out in the shipbuilding -- warship building process, I'm going to be attempting all those techniques and tactics and measures so as to maintain that levels and not to come down whatsoever. So that is what is my thoughts and strategy.
So let's say, due to any delay, if some cost eventually goes up, then still our 7.5% margin, PBT margin is protected?
In my opinion, I -- as per the indication that is available to us, that sort of things should not really be coming up. Whatever are the indications of the market, indications from the suppliers, indications from the other sources that is available to us, unless there is a drastic change in terms of the labor costs, the government comes up and doubles up the wages, et cetera, then yes, there could be some impact. But as of now, you'll see that there's nothing which has come out, or there is some huge impact in terms of the cost of the items, et cetera, though that is -- there's no such indication available so it'll be hazard a guess as far I'm concerned to say something on this front.
Okay. Secondly, sir, even though -- so you did mention that it's not good to compare the quarter-on-quarter revenue. But if I see your last year Q4 revenue and this year, there is a decline in the revenue, but there is almost a 50% jump in the contracting charges, subcontracting charges. Can you just explain?
See, I must tell you that, and I've explained to somebody, that the last quarter, Q4, would have been higher compared to the previous Q4, thanks to the COVID where last 8 to 10 days I had planned around INR 80 crores to INR 90 crores worth of the revenue that would have come up through the delivery of the last -- this ship which I had just delivered today and a lot of the base and depot spares worth around INR 30 crores to INR 40 crores, they were supposed to get dispatched to different locations. Then lot of components of the Bailey bridges which were supposed to get dispatched through the trucks, so all those things could not happen. So had this happened, the results would have been different. The Q4 of FY '20 would have been better than the Q4 of last -- FY '19. So that's why I'm saying that the cycle -- if you talk about shipbuilding and revenue coming from there, the cycle is totally different. And I would, again, try to tell you is that it will not be a good idea, it will not be, I think, appropriate to try to compare quarters, it's too small a duration. And it'll -- our graph is -- our shipbuilding cycle is never generally straight on and in a particular -- at a gradient. It is going to be absolutely different. 35% of the ship construction time, it starts going up, when the hull almost comes to completion, then the equipment and our installation will start for 35% to 65% of the construction time and construction progress, you will have the maximum values getting booked and then starts declining. So it is all based on that. So therefore, which ship falls in which quarter, which point of time, it will be all depending on the progress of the work.
Okay. And secondly, sir, in your opening remarks, you mentioned that we have got a new order of sixth FPV for INR 8,600 crore, is it right? So is this a new order?
No, you're I think maybe -- see, I have got the order construction of 8 in number shallow -- ASW Shallow Water Craft project, INR 6,311 crores worth from the Ministry of Defence for Indian Navy that was signed in April 2019. But I am also likely to get the 1 FPV, which I am diverting it to the -- for the export purpose. If you recall, I stated that I had a contract for delivery of the 5 FPV to the Coast Guard. I have completed delivery of the 4 ships. But the 1 ship has been earmarked for delivery to the friendly foreign country. So in lieu of that ship which will be now exported, the Indian Coast Guard and MoD is going to give me an order additional FPV. So that is what is the sixth FPV, I would call it. We had the order for 5, 1 more now will be built by us. So I expect that order would come when the contract will get signed with that particular foreign country.
Okay. And sir, last question. So in our other expenses, there is a huge jump from almost INR 34 crore to INR 53 crore. So is this due to LD? Or is there any other item in queue?
Can you please repeat again your last question?
In our Q4 numbers, the other expenses have increased from almost INR 30 crore, INR 34 crore to INR 53 crore. So is there LD charges? Or is there anything else which has increased?
Yes, yes, there is -- I told you that there's total INR 24 crores of the LD charges, INR 22 crores is for the last ASW corvette we have taken and INR 2 crores is for other sundry equipment, et cetera, the INR 24 crores is on account of the LD charges.
Okay. So it's included in Q4 only?
Yes, yes. That's correct.
Our next question is from the line of Lakshmi Narayan from ICICI Mutual Funds.
Just a couple of questions. First is that what is the -- in terms of your cash on books, we have around INR 2,600 crores, which is cash and cash equivalents and bank deposits, in cash. So can you just reconcile if the cash number is true? And second is that, what percentage of this is actually customer advances and what is outside the customer advances?
Banks make -- just a minute. Yes, and right now, in the banks, we have the figure of around INR 2,600 plus crores are there in the bank, which is, again, I would like to clarify that it's not the customer advance. In warship buildings, there are stage payments and the customer gives against that stage payments. Now that is expected to be spent on particular activities, which is supposed to be performed. Till then, if you don't perform and don't do that, that is remaining in the bank. So that's how you look at them that they're there in the bank, but whenever requirement will come up, now the COVID situation has come, you will not have that stage payments that would be forthcoming. But now these are the things which will be utilized appropriately for expenditure and procurement of the material item and so on and so forth. So there will be, at times, delays between the stages. So all those things are factored in our costing, whenever we do the costing and submit it to the Navy and the Coast Guard or any other customers. So these kind of stage payments are factored, that would be available to us for various kinds of activities. So they are in no way advances.
Got it, got it. So you're saying that this essentially belongs to the company completely?
Can you repeat? You were not clear.
So is it right to assume that this cash just belongs to the company, and it is not an advance, right? So that's just up for you.
Not an advance.
See, that's what I've clarified to you that it is not an advance. There's no word we are using ever in our accounting system as advance. It's always stage payment. It's always stage payment which is factored into our all the costings and our entire planning process, construction process.
It's our money.
It's our money.
Okay, okay. Sir, in terms of your order book, I missed -- joined a bit late. What is your order book at the end of the year, financial year 2020?
As of now, my order book is INR 26,544 crores. In that, the largest share is of the Shipbuilding Division, INR 25,281 crore is for the shipbuilding that is all ongoing projects. And rest all is for the Engineering Division.
Okay. Sir, the third question which I have is that we make the P-17 Alpha and LCUs and the other vessels. Now in which we actually have a better position with respect to the other? And how large is that from the order point of view?
I could not get you.
Mr. Lakshmi Narayan, if you're on a speaker mode, please switch it to handset.
No, I'm on a handset only. Sir, I guess, my question is that, amongst the types of -- 3 or 4 types of vessels we actually make, in which we have a distinct advantage over all the others?
See, in terms of distinct advantage compared to other, I would say, competitors, yes, we have got certain strengths which is there with us, especially the kind of infrastructure have got very, very, I would say, modern infrastructure. I've got 3 units. I've got lot of flexibility for construction of different size of ships, in different units, which I don't think others have got. I've got a very strong, competent, capable, 100-member design team, in-house design team, which is very, very major, I would say, plus point. In addition, I've got 60 years of experience of construction of the warships. 105 warships delivery, nobody has achieved it. So these things are certainly a great advantage to us in comparison to other competitors. And I would say that, you will appreciate that, 2 projects I've won on a competitive bidding basis. That is the survey vessel project and 8 ASW Shallow Water Craft project. Both the project, having won on the competitive bidding basis, things are progressing quite nice. You can see my margins, that is PAT margins and EBITDA margins and all, how they have shown improvement. So that certainly shows the kind of improvement, efficiency measures and certainly, these trends are really giving us those dividends in terms of getting better margins in all areas.
We'll take our next question from the line of Bhavin Vithlani from SBI Mutual Fund.
And at the outset compliments to the management for achieving a remarkable performance despite the challenges. So a bookkeeping question. If you could actually help us with, you mentioned INR 26,500 crores is the order book, if you can help us at key projects that are there, P-17 Alpha survey vessels, how would you break that up?
See, I tell you that we have got P-17 Alpha order that is worth around 9 -- INR 19,260 plus odd crores for 3 ships. Then I've got the contract for 4 in number survey vessel large. Okay. The cost of this project is INR 2,435 crores. Then INR 6,311 crores is the project cost of 8 ASW shallow water aircraft. Other projects, I have already completed the FPV, also we have delivered, but there are some last stage payments, et cetera, there, that would be coming our way. So that's why I'm saying that put together, as of now, we have 26,000 plus something on the DEP, Ranchi, around INR 230 odd crores worth of the 28 number 1 megawatt diesel alternators that is getting assembled there for Project-17 Alpha and the Bailey bridge and the other deck machinery, orders, et cetera, but they constitute quite less as compared to Shipbuilding division. So these are the major, I think, components of the existing order book, which has yet to be excluded. So excludable order book available with us is INR 26,544 crores.
All right, sir. The second question is, if you can maybe help us with -- before the lockdown actually commenced, what was the total workforce, including the contract workforce at the site? And as on date, what is the current workforce, which is there at the site? And the related question is, you mentioned that every crisis calls for a change. So are you also looking at more automation and robotics in your manufacturing process, given the disruption that you are seeing currently?
Very -- I think, very interesting question. And the first question answer is that the -- our own manpower, own workforce, including offices around 2,000 odd people, the workers are around 1,500-odd people -- workers and the rest are the officers and supervisory category. Then we were deploying on our own on an average 3,500-odd workers, which included also the support services such as housekeeping, such as ship cleaning, shop cleaning, et cetera, et cetera. But for the core activity, I would, altogether 35-plus 100-odd people were working from the outsourced contractors. Now the -- this was being prior to lockdown. Now when we opened up because of the restrictions placed by the respective state governments and the need for working in the shifts you cannot have concurrently so many people working whether it's office white-collared jobs or it is a blue-collared job that is performed in the workshops. I have said that we are working out the revised plan, the entire planning process is being revised, working in the shift, working in smaller sizes of the groups. But I must say that the warship building is a manpower-intensive work. Robotics, while it is easy to say, but anything which we want to get in warship is different than the commercial ship because commercial ships, you can see it as like a matchbox or [ the box ]. When it comes to warships, you have different curvatures of the hull, small ships, very compact compartments, very less space, et cetera. So the entire fabrication work itself is a challenge and a different thing. So amount of automation that can come in, certainly, there are possibilities, we are looking at that in certain areas like inspections can be automated in terms of the radiographies, et cetera, a lot of other things that can be done through the, I would say, automation or, I would say, in terms of the AI, those things are being planned, but it will not give you immediate results because it is going to take a couple of months or maybe 6 months, 8 months, by time you have a proven product of AI or automation that could be put in place. We are looking at a smart shipyard concept where all machines, equipment, operations can be linked up whereas to bring down the number of the people required to work and to man and command and control those things. All such things have already been planned. I've explained that. I've drawn some strategies. So that with a limited number of people, still, we should be able to continue operating them, also looking at the possibility of reskilling, upskilling, multiskilling the available workforce so that their throughput also goes up. The productivity norms have to be increased, benchmark has to be improved, then only we'll be able to catch up. So I think the COVID has given the challenges but has also given you a lot of opportunities, and we are certainly seized to it and plans have been drawn out. Only time will tell how much we succeed.
Sure. Sir, what would be the total workforce, including the contract workforce as of date? A rough number also would be...
We have started the operation from 8th onwards. We got the clearance to open up in our 2 of the major production units that is the main and the Raja Bagan Dockyard. So these places, we got the approval only to start from Monday onwards. Two units were given permission partially to operate but they were not actually involved in the major production activities. But now the people we are getting them in the 35% of the shift, okay? And also, we are making sure that the old workers coming, staying very far away, having some co-morbidities, other diseases should not be exposed. So all these things would be there. So I would say in a day, we may have around with 2 shift system could be having 60% of the -- or 70% of the total workforce that is going to be permitted to come inside. But yes, contractor workforce will be a challenge. Their numbers will be much lesser in, I would say, 1 or 2 months. June or July, we don't expect exactly the same number that would be returning back. So we have to work around with that. I hope I have answered you.
Our next question is from the line of Sunil Shah from Turtle Star Management.
So first of all, congratulations on the delivery of the 105th warship. So a big thank you from all of us for working towards the safety of our country. That is my first point. Sir, I have 2 questions. The first one being that on the Project Alpha, 17 Alpha, the frigates business. Sir I understand that the entire manufacturing of frigates takes multiple years. And once we cross some 18 months to 24 months into the production process, the revenue actually shoots up and it moves in a bell curve. So is my understanding correct? And where do we stand on the 3 frigates? Meaning in the first one, I think you were saying that by the fourth quarter of this year we should really reach that point of inflection for our revenue recognition. Could you just help us understand for the 3 frigates where we stand?
Yes. I think you understood correctly the kind of a curve that is normally followed in case of the complex and major warships. The first 30% to 35% is the construction of the hull. And this hull is very large, very, very big hull. And it does not, of course, give you a very heavy and major revenue. But before that, there's something called a design phase, pre-production phase, which for this kind of ship takes at least 18 to 24 months of the time. So in light of that, we were in the predesign phase. And now production has commenced in the month of somewhere 2017 end or so. And that is now -- right now, we are at around 20% of the hull construction. And around 30% to 35% of hull construction and she's about to get launched or she is getting launched then the equipment starts going onboard ship. So 30% to 35% going up and peaking to 65%, and then starts to come down. So I would say for the delay, there would be this 10 more percent that will have to be achieved before we launch the ship at least with the hull. So we have not reached to that particular stage, what we are asking for. I expect in FY '22 in real sense, the large equipment will start going on board ship. So FY '22 would be interesting to see.
Right. So that would be for the first frigate. When will we reach that stage for the second and the third frigate?
Yes. So lagging -- see the first and second ship. Second ship is lagging by as per the contractual provisions by 1 year. So the progress of the hull and all things are happening in that fashion. Resources are being deployed accordingly. The manpower is being deployed accordingly to keep up with that kind of planning of the ship construction. So the second ship is going to be lagging by that much time. So when I say FY '22, somewhere, we may reach that figure of 30%, 35% when it starts shooting up that means say that the second ship will be 1 year behind, would have reached to some -- when it goes to 35%, this ship would have reached around 20%, 22% of the construction, second ship.
Right. The third one, sir, will be around FY '24, FY '25?
What is that?
The third frigate would reach the same stage somewhere in FY '24, FY '25?
See, I would say that the -- yes, if you're saying that the -- first ship would reach in FY '22 say a level of [Audio Gap]and beyond. So you can see that the second ship is 1 year, so it will be in FY '23 to end of FY '24.
Correct. Sir, my second question would be on the margin. Sir, I believe this is a fixed margin business. So most of the things would be a pass-through for us. Sir, does the margin also move in a similar bell curve fashion? Or in the designing stage, it is very high margins and when we are uploading the equipment at the low margin. Just want to get a clarity on the movement of the margin, along with the revenue recognition.
See I tell you one thing that the revenue recognition is based on whatever percentage progress you achieve. So that is the first thing which we have to keep in mind. And second thing is that the profits are on whatever production we have done. So it is 7.5% that is fixed one as far as this is concerned. But nothing stops us to gain more profit because Navy will give you only 7.5%, but nothing stops me to work better in my own internal operations, when I do the negotiations of various items and equipment, which is in my purview. If I do it better I would get better margins that means lesser cost. And I can prefer what I've costed so the material itself can give me -- if I do better negotiations, better cost being paid to the various suppliers, where I can make the money, if I am able to do more efficiently with lesser number of people, lesser number of contractors, I would have to pay a lesser amount of money to the contractors and the workforce. Likewise, there are a lot of ways where 7.5%, there's a fixed margin, which Navy will give you whatever you claim, but internally nothing stops me to be more efficient. So that is what is my -- and you are seeing that I am having a margin of 9-point some percent, 9.86% It's better off worrying that the -- if my 7.5% is the margin, can I ever go beyond that? Now you can see the results, I have gone beyond that.
Yes, yes. Sir, appreciate that. I just wanted to understand that the margins will move in tandem. So as we go along completing the project, at that point in time, also, the margins would be there at least minimum of 7.5%, and our efficiencies will help us to gain higher margin. So that is what I wanted to get clarity on.
Right, that we should not be coming down in our margins less than 7.5%. But if at all, there are severe, I would say, inefficiency creeps in or there is some severe delays happen, it will either way because it's a delay, you have to pay more money for the guarantee, warranty, the escalation to the cost of the service engineers, their own contract workers, all those things will eat away your profit margins, right? So we have to be alert and agile to make sure that we are on track.
Our next question is from the line of Ravi Naredi from Naredi Investments.
Sir, in other current liabilities, it is INR 3,523 crores versus INR 2,563 crore, so what is the figure?
Can you just repeat this question? Let my finance team answer you.
Other current liability...
Repeat again, and they will note it down and answer you.
Other current liabilities are there...
Mr. Naredi, we are not able to hear you that clearly, sir.
Other current liabilities -- hello?
Yes.
Other current liabilities INR 3,523 crores versus INR 2,536 crores. So what is that figure, INR 3,523 crores?
This is Director of Finance. This is on account of the payments which we have got from the customer, the work is underway that is why it is shown under other current liabilities.
Okay. Okay. Okay. So you have received the advance for against the content, right?
Not advance.
Not advance. This is stage payment, and the work is on, it is not completed. If you find a similar item it will be there in other current assets also where we have done the work. But credit payment has not come and bills are not certified. So this similar item will be appearing in the asset side also.
Okay. Okay. And sir, one more point. This year, our top line is INR 1,433 crores, while our order is INR 27,000 crores. So this INR 27,000 crores order, how many years it will take to complete?
See this what is a little misnomer because as of now, what you are seeing that our top line is INR 1,433 crores. Because all the new projects, old ships which have just got delivered last year were in the last stage of the construction and the VoPs were almost completely booked on them. The new projects of 17 Alpha are only at the fabrication stage. That is our first ship is of 17 Alpha which is the biggest project, is going through the hull construction phase. Second ship is also of the 17 Alpha is going through the hull construction phase. But somebody has already asked me which I have clarified that. The shipbuilding, what you're looking at is not going to follow a straight line. It is a different curve, at some point of time of the shipbuilding, around 30% to 35% of the construction when it reaches, the revenue from operation goes up tremendously. It starts moving up and it goes up to, say, 65%, it peaks at 65%, where maximum equipment would have gone on board ship. Therefore, you would have booked considerable revenue. So whenever we reach the figure of 30%, 35% of construction of the first 17 Alpha, and then we move beyond that, in that financial year, we will have the maximum booking against the first ship. If the first ship cost is INR 6,000 some odd crores, I would be booking the maximum revenue of this INR 6,000-odd crores in that financial year. So FY '22 and beyond, the first ship, I said that FY '22 onwards, the first ship will start booking the much higher revenue, much higher spending, okay? It is going to be actually substantially high in certain years, say FY '22 to FY '25 till then or could be a little more depending on the progress of first ship, when the first ship it will cost 65% your booked maximum revenue, it will start declining because maximum equipment has already gone. It will be going through the trial, testing, tuning, acceptance phase. By then the second ship, after 1 year would come to 35%, when you reach to 65% second ship has reached to 30%, 35%. That ship will also start booking the maximum revenue. So this target is for third vessel also. You'll find that in certain years, from, say, '22 or '21 also will be, I would say, a good year, but increase will never be a straight line. It will be a different, different curve altogether.
Right. But if I summarize, if I take you this way, INR 27,000 crore order will be completed in 5 years or 7 years?
See, as per the current plan of the delivery schedule of the 17 Alpha survey vessel large and ASW shallow-water craft, the first ship of survey vessel is expected to get delivered in October 2021 that is next year. Maybe because of COVID 2.5 months post measures, it will take. By end of '21, that is next year, the survey vessel large will go. Now the cost of 1 survey vessel would be around -- see INR 2,400 crores was the cost of 4 ships, so it could be around INR 600 crores is the cost of 1 ship. So I would say the first ship [Foreign Language] delivery over end of May, somewhere next year early, I'll be booking the maximum revenue on survey vessel itself, first ship. Second ship also would be going through some phase of the construction, I would booking on survey vessel. So collectively, I will say, this INR 27,000 crores, INR 26,500-odd crores, which you are seeing, the current order book, executable order book, I'll start having good revenue coming from these projects of survey vessel and 17 Alpha, somewhere from '21 last quarter and then '22, then it goes on thereafter. So this is how I'm seeing -- and then '22 and beyond is going to be kind of a golden period for the GRSE. This is what is my -- as of now, appreciation that '22 onwards, it will be a golden period. It will last for 3 years -- 3, 4 years. By '27 end I would be completing the delivery of the ASW shallow watercraft last 8 ships. So till '27 3 projects which are there with us they would be in various different phases of deliveries. So it is not going to be -- today, we are in 2020, 7 years.
We'll take our next question from the line of Parimal Mithani from Credential Investments.
Sir, this is regarding your Project 17 Alpha. So due to the coronavirus, in case of any delay, is there a room for negotiation with the army in terms of the LD charges because it's not in the event, it's not because of internal events, but it is due to external events, is there any...
Yes, there's already provision exists for force majeure, and that has already been -- request had already been submitted with the Indian Navy and Ministry of Defence. We should not be charged LD because of the COVID.
And sir, second thing, I wanted to know earlier in your con call, you mentioned some of the orders, which were in the pipeline by the government for advance corvette? And any update on the status on any of them sir? are they on the hold or what's the scenario right now going on?
As of now we have not been told that they have been kept on hold that is not known to us. And we have submitted the RFP responses to 3 or 4 odd projects of the Navy and the Coast Guard. And in fact, on 14th of June, we'll be submitting the response to the RFP of construction of 2 multipurpose vessels. So therefore, I do not think there has been any indication has come as of now from the Navy or Ministry of Defence that they are keeping on hold any of these new projects at this juncture.
And sir, second is the financial question in terms of the 2 critical projects that is Project 17 Alpha and ASW corvette. Sir, since these are milestone payments and we get payments from the government in terms of milestones, do you see any time or foresee in future that the government may ask us to borrow the money because of their own finance is under strain? Or is it provided for sir?
See, yes, the government funding will be a stress undoubtedly. We have -- we foresee some kind of stress in terms of the stage payments that would be coming up. But as of now, yes, for the first quarter, certain payments, which were expected to get have got delayed. But I do hope that some way forward would come out from the government, and we have to wait and watch to see as to how they respond to it. But I said that we have got this year, this financial year, we should not be suffering because of the nonavailability of any funds or stage payments. We are reasonably comfortable. That's why we call it stage payments for all such eventualities. We have got enough cash in the bank. And we will continue with the operations. I do not see any reason that any of my investors or companies should ever worry on this account as of now.
Okay. And sir, last for LD charges, are there any LD charges returned back this year, in the current year?
Any LD charges returned back in...
Yes, yes.
No, we now -- I'm expecting in this financial year '21 something might get returned back to us.
Our next question is from the line of Bharat Parekh from CLSA.
Congratulations on the competitive bidding win on ASW Corvette. If you can help us understand, sir, the component of FX that's the foreign exchange purchases both in terms of direct imports versus what you could buy from your vendors? And also, if you can help us understand the price variation clause, given that the delivery time is like 6 to 7 years? If you can help us understand that? That's my first question.
See Bharat, it's like this, in case of survey vessel and ASW shallow watercraft project, both are on a fixed price, having won on competitive bidding basis. The price variation clause is -- it is there in survey vessel, but it is not there in case of ASW shallow watercraft, that craft project. Yes, in case of survey vessel we do not have any big equipment that would be coming up. Yes, some equipment is there, but not huge in numbers that would be coming from the foreign suppliers. ASW shallow watercraft, we have some, and there will be some, I would say, stress coming out because of the variation in the currencies where the dollar and the euro has gone up. Yes that is the front where it will be tough, in fact, the ASW shallow watercraft does not provide us [ means of getting help ].
Sir, hello.
Yes, I can hear you.
Sir, so if you can give us even some rough estimate of potential foreign exchange component in ASW and any potential given the government's plan to indigenize, do you also have a plan, sir, given that FX has already moved 10% in the last 1 year, which is very difficult to bake into any bid, otherwise, you won't win. So can you help us understand approximate percentage of foreign exchange component of ASW?
See Bharat, as of now, I don't think that would be possible. We will have it as help to you and contact the finance department that is Director of Finance. They will give you all the details of all these things. But I can tell you that as regards to indigenization in case of survey vessel project, we have already gone ahead with one of the items because of substantial value. We have done successfully the -- some firms identified who can do that manufacturing and the supply of the specific item in case of the survey vessel project. In case of ASW shallow watercraft also, we have represented to the Ministry of Defence and Indian Navy background. We have some important sensors that could come within India. And that is also seems to be happening in some manner, but we are yet to get some kind of a definite, I would say, final answer from there. But certainly, the government and all of us are working together to go for maximum indigenization of the important and major equipment, et cetera. So this is all happening. But now since they are all ongoing projects because indigenization is a long-term activity. It doesn't happen in 1 month, 2 months, when you talk about the major equipment and items. So it is a process, which we have started, maybe in long term that may give -- fetch some good dividend. But as of now, whatever is feasible, we collectively, along with the Ministry of Defence, defense production, the Navy and the shipyards are working along with the industry to see that what all things we can perhaps indigenize.
Great, sir, and wish you best luck for that. Sir, my second question is on this -- the second vessel, the survey vessel, where the hull will be made in Kattupalli. Can you help us understand the logistics, sir, in terms of even the part of the assembly can happen there as well in the subsequent contracts? Or if only hull gets delivered back here and then the fit-outs happens here? If you can help us with logistics on the remaining three, that's the second, third and fourth vessel?
Yes. Bharat it's like this that the 3 ships, which we have given for construction, primarily of the hull to the Kattupalli where we utilize their idling capacity, which we feel that is going to fetch us good dividend. In terms of the faster construction that can happen because here, we have large number of projects already happening. So Kattupalli has taken at a very good cost that particular work from us. Now the first ship, we expect to get completed with around 50%, 55% of the hull and certain equipment. So percentage of construction that can be done and will be done as per the contract on the first. That is the first hull of the Kattupalli contract. That means the second ship will be delivered with 50%, 55% of the construction. Second ship will be beyond that. Then third also. For that, we already drawn out the plan to supply the material, which includes the steel, which includes the certain equipment, which includes the [ double chain ] machinery, which will be installed by them under supervision of the GRSE and the Indian Navy representatives and class authorities. So all those things, all the equipment and the steel plates are being supplied to them and all things have been well planned now to ensure that it goes systematically and seamlessly.
Yes. Great, sir. So just to clarify, sir second, third and fourth, all the 3 ships to the extent of 50% to 55% will be made in Kattupalli?
Yes. Third and fourth could be a little beyond that or depending on the progress, how they show the progress. We have the option to decide to send across some more equipment there and get them installed.
Great. That's really helpful. And sir, lastly, the project pipeline, which you highlighted, I know the final bid will be competitive and is secret. But even if you can give us some perspective in terms of magnitude of the value of those tenders that will be really helpful, sir. Whenever it is decided it's fine, but just to get a perspective on the 12 SEVs, 8 SPVs, the 6, the next-gen missile vessels and 2 MPVs, yes?
This is what is the -- something called AIP value by the -- given by the DAC that is the Ministry of Defence, you know defence acquisition comes... [Technical Difficulties]Bharat, can you hear me? We'll go to next question.
Sir, Bharat is there, sir.
Yes, sir, please go ahead.
Yes, Bharat, to give you the sense of, say, 16 number new generation missile vessels, and we have a very complex kind of ships, not very big in size, but complex so the cost would be in the range of around INR 12,000 plus odd crores, as per the AIP. I do not have exact figures at this juncture with me, but it is in that range, similarly around 8 FPV, which we have responded to, would be in the range of around INR 700 crore to INR 800-odd crores, okay?So these are the things, PCB already opened up. So that is already out. So likewise, I say that this is what is the likely cost of the projects. So NGMV is going to be, certainly, very, very high value.
We'll take our next question from the line of Ritika Agarwal from QUEST Investments.
Sir, this question is in regards to the ship repair business that in the last quarter, you alluded to. So have you been able to get into that segment?
Yes, you see ship repair business, we are actually working hard towards that. We have already -- I told you last time also that we have already got a department established for that separately. There are certain officers that are also appointed. It is being headed by a level of AGM rank officers. And we have been working hard with the Indian Navy for giving us the contract of the refits on the long term, we call it a multiple refit contract for ships that we have made LPUs for the Indian Navy, they are all based at the Port Blair. But I think there is some decisions and discussions are happening at Naval headquarters. But we are very much on with the -- and we have been bidding actually for looking for the refit, Coast Guard, we have bid, but unfortunately, we did not become the L1. But we are on with this particular business vertical. We have just got the -- some repairs contract of the Coast Guard, not high-value, but it is just going to be around -- shortly, we'll be receiving the order for that INR 3 crore to INR 4 crore. So we are started off in that direction, and we are sincere and serious about it.
Okay. Okay, sir. Sir, my second question would be, is it correct to assume that the projects won on the competitive bidding would have slightly higher margins than the nomination-based projects, which has 7.5% of PBT margin?
See, I would say that it will not be appropriate to reveal these strategies. See the nominations, you know that it is 7.5% as per the current norms, government-approved norms. In competitive bidding, it could be anything. And it will not be right for me to reveal those strategies, could be higher also, could be lesser depending on the type of the project, depending on the competitors. So that actually varies, depending on various kind of possibilities and other market conditions.
Right. Sir, I understand. Sir, my last question is your view on the export orders -- getting into export orders for the company going ahead.
Yes. I've just explained to somebody that there's 1 hospital vessel, which was being made for the Coast Guard, already trials completed. Good part is that, Government of India based on their various plans to the various friendly foreign countries, they are going to be giving this ship, and this ship will go as export. So GRSE would be delivering this ship as export order to a friendly foreign country shortly. And we are continuing to work hard with lot of foreign countries, with respect to Defense Attaches and lot of agents, et cetera, who are working around in certain countries, which we are targeting. And we do hope that in times to come we should be getting some orders. But this is something which is not in your hand, and we have to only attempt and keep trying and international markets is not that easy. So we have to keep attempting and keep trucking.
We'll take our next question from the line of Deepak Poddar from Sapphire Capital.
Sir, in one of the query, you did mention that for FY '21 you are looking to maintain or looking to reach the targeted revenue. So just wanted to understand what is the targeted revenue for FY '21? And FY '22, we have been talking about higher growth FY '22 onwards. So do we still maintain that?
Yes. I'm aiming as then FY '20 in '21. And I do hope that FY '22 would start giving the GRSE and all the shareholders, everybody, a huge, huge kind of a happiness in terms of the revenue generation and all doing much better. That's what is planned.
Okay. So FY '21, what is the MOU target? Is there any MOU target effects?
See, it is because of the COVID lockdown, et cetera, a lot of things are still not happening at the deep sea MOU committee. But I told you that it will not be hugely -- it will not be less than last FY '20, but it will be -- see we should target at least doing a little better than FY '20 that is what is my...
Okay. Okay. Sure. Understood. And sir my second query is regarding, is there any thought process on consolidating the defense companies basically or any kind of merger with any other defense companies. So any kind of thought process that is going on within the ministry or anything on that?
No, I have not received any such communication. I'm not aware of any such thing, and I do not know at what level it would be -- these are all hearsay things, and I've not received any such thing, and say very much on as GRSE and continuing with -- because we have got so many projects in hand, we have -- our hands are totally full. We're all looking up to do good things in the shipyard and deliver good results.
Next question is from the line of Hardik Jain from ISJ Securities.
Sir, most of my questions are answered. Just a very small clarification sir. So when you say that Ministry has -- we are witnessing some kind of pressure from the payments from the customers. And -- but you will be sufficient -- you have sufficient cash on the books, and you can use that cash for the operations this year. But that can affect our other income -- is that -- is my assumption right?
Yes. I think we have to actually draw some balance somewhere rather than starving and waiting for the funds to come from the customer. When you have planned out stage payments which actually comes up to you and you have not gone to that stage, you have not completed that thing, so therefore, these are things which are already factored into your various as a part of its factors into your overall costing. Therefore, it is very much on that, I have to use this money which is there with us, maybe it will certainly impact our other income. But I think, in bigger game, if you plan how much you will get impacted if your production gets affected, so therefore it is wise for anybody to use the money that is available with you, because you are not getting great amount of interest, interest rates have come down drastically, it is better that you use this money appropriately, wisely, okay.
Okay. And do you see a possibility of us taking any kind of borrowing to complete to do our operations? Or will this kind of cash that we have on balance sheet should be sufficient enough?
Hardik, at this point of time, I don't think I have to really think of in that direction, whatever things are there as per my plans and as per my assessment, from the finance team, with the current year's requirements for the funds for various activities, I think we should be comfortable.
Our next question is from the line of [ Manoj Shah ] from [ LEFCO Investments ].
My question is also with respect to the receivables. The receivables has gone up from the INR 220 crore to around INR 535 crores. So I just wanted to check, have you received any payment from the government in the last 6 months? And what are they saying that when you're going to get the payment this year? The next 6 months? Or how is it? Have you received that communication?
Can you repeat that? What is...
What about the receivables since the last setting or actual payment that is why the cost has gone up.
[ Manoj ], the Director of Finance has clarified that, yes, because of the COVID situation some payment was supposed to be coming to us, it did not come. That's why the receivables existing numbers have gone up. And first quarter, of course, is stressed. And I do not really see -- foresee that something -- entire thing would be coming our way. There could be some cuts, et cetera. So -- but we have to wait and watch.
Okay. So you expect only in second half the payment to get -- to get some payments in second half. Is that correct way to you?
It's a guess only that, yes, we hope that from second quarter onwards things should become better, if not great. But hopefully, we should start receiving something that' what my expectations are.
Okay. But you have not received any official communication that, okay, you might get delay in payments, so we get that accordingly kind of it? And any communication in that matter or not?
Yes, there has been some indications from the ministry that because of the COVID and requirement of expenditure in other areas, other segments of the department, we may expect some cuts, okay? Some percentage has been indicated in the first quarter itself, but funds are yet to get released, and then only we will be able to see that how much cuts, what they have indicated would really get affected and implemented. But there is going to be...
Some percentage -- yes, percentage cut, does it mean that you will get that money later? Or you will not get that money?
No, no, you will get the money. But only thing is that as of now, when they go for payment, you may not get the full amount. Say if it is, say, INR 100 crores, if there's a 20% cut or 30%, 40% cut in the payment itself, so they will cut that much of amount, and that would be paid to you later, whenever the government gets...
Okay. Basically, you will get part payment and then that's how it will be.
Yes, yes.
Ladies and gentlemen, that was the last question. I now hand the floor back to the management for closing comments. Over to you, sir.
Thank you very much, ladies and gentlemen, for having joined us in this conference call. And I do hope that I've been able to bring forth in front of you the various operations, both physical and financial operations and performance. And we tried our best to answer you to all your questions, et cetera. But I can assure you that the -- despite of the limitations and troubles of the COVID or challenges, we are preparing ourselves. We have drawn out our strategies to overcome all those setbacks and issues in due course of time, FY '21 is certainly with the challenges we have got lot of opportunities to work around with the new philosophies, new techniques and tactics. This is what is my plan that I will try to implement, but only time will tell us as how much we succeed. So I can assure you that the company should be performing still reasonably well despite of these troubles in FY '21. But once again, my request is that quarter-to-quarter comparison will not be right. We will have trouble in quarter number one, first quarter. And we would hope that from second quarter onwards, at least the physical things, physical activities onward in the shipyard would pick up. So all in all, shipyards in my expectation is supposed to be doing good work and we'll implement all the new measures possibly in various areas of operations. And once again, I would like to thank you and assure you that the company will continue to perform nicely and would try to grow further. Thank you very much, [Foreign Language]. And if you have any questions further on any account, you can kindly -- on financial matters or any other matters, you can contact Director of Finance and Chief General Manager of Finance. They'll be prepared, and they'll be happy to answer you. If you have anything much -- something different more than that, you can contact me also if I can help you to answer that. Thank you very much.
Thank you very much, sir. Ladies and gentlemen, thank you all for being a part of the conference call today. If you need any further clarification or information, please e-mail to gaurav.g@conceptpr.com or irfan@conceptpr.com. 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, and have a pleasant day.