Garden Reach Shipbuilders & Engineers Ltd
NSE:GRSE
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
685.8
2 710.65
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Garden Reach Shipbuilders & Engineers Ltd
You don't have any saved screeners yet
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 Fourth Quarter and Full Year ended March 31, 2022.
We have with us today, Shri Commodore P. R. Hari, Indian Navy Retired, Chairman and Managing Director, Additional Charge; and Shri R.K. Dash, Director, Finance. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Shri Commodore PR Hari, Chairman and Managing Director. Thank you, and over to you, sir.
Ladies and gentlemen, a very good morning to all of you. I'm Commodore P. R. Hari, Chairman and Managing Director of the company. And with me here are Shri R.K. Dash, Director Finance; Shri Sandeep Mahapatra, the Company Secretary; and Mrs. Aparajita Ghosh, Additional General Manager, Finance.
I welcome you all to the conference call to discuss the financial performance of the company for the fourth quarter and the year ended 31st March 2022. At the outset, I'm indeed honored to interact with the investors, this being my first interaction with you all after assuming charge as the Chairman and Managing Director of the company.
Before I talk about the financial results of the company, let me brief you on the projects in hand and the typical performance of the shipyard during 2021-'22. As regards to the projects in hand, on the shipbuilding side, that is our core business vertical, we have 6 projects concurrently being executed. These include the prestigious P17 Alpha, advanced Frigate program for 3 ships for the Indian Navy. A 4 ship project, Survey Vessel Large, for the Indian Navy, 8 ASW Shallow Water Crafts, again, for the Indian Navy, 1 Fast Patrol Vessel for the Indian Coast Guard, 1 Ocean Going Passenger cum Ferry Vessel for the Co-operative Republic of Guyana and 8 Patrol Boats for the Fisheries Department of the Government of Bangladesh. The last 2, that is the Ocean Going Passenger cum Ferry Vessel for the Government Republic of Guyana and the 8 Patrol Boats project for the Government of Bangladesh have been won on a competitive bidding basis.
In addition, we have also been declared L2 in a bid for next-generation Ocean Going Patrol Vessels for the Indian Navy. And as per the tender condition, we will be concluding a contract for 4 of these OPVs during the current year.
On the other verticals, we have orders on the Portable Steel Bailey Bridges in the Bailey Bridges division, an ongoing project for manufacturing of 1-megawatt diesel alternators by the Diesel Engine division at Ranchi and, of course, deck machinery from the Deck Machinery division. As stated by my predecessor during earlier interactions with the investors, ship repairs have been a focus area and happy to inform that we have taken off in the right direction with orders coming in from the Indian Coast Guard for refit of their vessels.
Coming to 2021-'22. It has been a challenging year. Of course, the intensity of the challenges posed by COVID pandemic have been lesser than the previous year. However, the first half of the year, especially the first 2.5 to 3 months, we too have been impacted by the second and third waves of the COVID pandemic. And along with that, the associated restrictions imposed by both the local and the central administration. As with the previous year, we have come out of these challenges through innovative build and operational strategy, ranging from staggered work timings, curtail shift was being undertaken at scattered location to weaken just our manpower, and we have come out unscathed with production progressing unhindered. I'm happy to inform you that all the project milestones that were envisaged to be completed during '21-'22 have been successfully achieved.
On the shipbuilding side, let me inform you that in a shipbuilding process, KEEL laying and launch are 2 major milestones. Laying of KEEL or KEEL laying means the key block is directed in the building birth or building dock and around the steel block forms the hull of the ship. The next major activity is the launch of a ship when the entire hull form of a ship was formed she, we call the ship, she. The ship is put to water for the first time. Again, happy to inform that during '21-'22, we have laid the KEEL of 6 vessels big ships and also launched the first Survey Vessel Large on 5th December 2021.
As I had mentioned earlier, ship repairs have been a focus area. Let me inform you that during 2021-'22, we have carried out refits for 4 ships, 3 for the Indian Coast Guard and 1 for the Government of Mauritius, CGS Barracuda. During the last year, that is '21-'22, we have successfully installed and commissioned a 250-ton Goliath crane. This crane was procured on a global tender basis from Korea. And the interesting part about this crane is that, this huge crane was brought in fully assembled condition by sea in a 38-meter [Technical Difficulty] ship and shifted on to the GRSE premises. Thereafter, it was successfully installed and commissioned during June '21. This crane, why I'm speaking specifically about this crane is that, it's the major capacity enabler and it's extensively used for production activities, wherein large size units and blocks are shifted for erection.
On 8th of April 2021, Zoroaster, a Fast Patrol Vessel was handed over by our Honorable Prime Minister to the President of Seychelles. Happy to inform you that this -- the guarantee refit of this ship was also concluded during the same year by March 2021-'22 at GRSE.
During the year, we have concluded 4 major MoUs, Memorandum of Understanding, 2 with global shipbuilders for collaboration in design and construction of ships. We concluded a Concessional Agreement with Kolkata Port Trust for strategic lease of 3 drydocks. The intent of taking over these drydocks was to provide an impetus to ship repairs, and the results are here to see and we are already having almost 90% occupancy of these docks during the last 3 months.
We also signed an agreement with the Border Roads Organisation, DGBR, for 27 modular bridges. This is a breakthrough in the modular bridges segment, and we expect further orders from the Border Roads Organisation for these bridges. For our performance -- demonstrated performance, we have been assessed as Excellent in the MoU ratings by the Department of Public Enterprises for the year ended 31st March 2021. Happy to inform you again that we are the only defense shipyard to get an Excellent rating. And only 1 of the 2 defense public sector undertakings to get an Excellent rating. And 1 of the 14 of the 200-plus PSCs to get an Excellent rate.
Now coming to the plans for the current year and the future. As mentioned earlier, we're undertaking 6 shipbuilding projects. Coming to the prestigious P17 Alpha project. The first vessel that was launched in December 2020 is now undergoing outfitting and has already achieved 37% physical progress. The launch of the second ship is planned next month, rather next month during July '22, with a percentage construction of around 27%. The third vessel is on track for launch 3 months ahead of schedule during May 2023.
Coming to the Survey Vessel Large project. As I had mentioned earlier, the first ship was launched in December 2021 and has now achieved nearly 50% physical progress of construction. The second ship was launched just 5 days back on 26th of May, and we intend launching the third ship in November this year and the last ship during April '23. As well as the ASW Shallow Water Crafts project is concerned, concurrent construction of 4 out of the 8 ships have already progressed, and we intend launching the first and the second ship by October '22 and March '23, respectively. The Guyana Ocean Going Passenger cum Ferry Vessel is well on track with the launch planned on 15th of June, that is coming month, in another 15 days, and the delivery of this vessel is planned in February '23. As mentioned, we are also carrying out undertaking a project of a Fast Patrol Vessel for the Fast Patrol Vessel has already raised around 70% physical construction and was launched on the 2nd of May, earlier this month, and the delivery of this vessel is planned in Jan. '23. The Bangladesh Boats project -- Fisheries Department of Bangladesh, we are constructing 6 Patrol Boats and delivery of these vessels are planned by August this year.
On the ship repair front, as I mentioned, 4 refits completed last year. And this year, presently we are undertaking refit of 1 Coast Guard ship and we expect the ship repair business to strengthen in the coming days.
Now coming to the financial highlights. 2021-'22 has been a successful year for the shipyard in terms of financial performance, having achieved the highest-ever revenue from operations at INR 1,758 crores, with an increase of INR 617 crores and registering a growth of 54% from the previous year. Same goes for the total income also, we touched INR 1,918 crores, an increase of 45% over the last financial year. Happy to inform you that we have also achieved the highest-ever PBT and PAT at INR 257 crores and INR 190 crores, respectively. Our EBITDA has increased by 24%, and the earnings per share has risen from INR 13.40 per share to INR 16.55, again, the highest-ever. The highest revenue per employee of INR 98 lakh again was achieved during this year as against INR 60 lakhs during the last year. And the employee cost to VOP has dropped some 23.78% to 16.61 percentage. So in a nutshell, 2021-'22 has been a highly successful year for us in terms of both physical and financial performance.
Thank you. Over to the moderator, please.
[Operator Instructions] We will take our first question, that's from the line of Harshit Kapadia from Elara Capital.
Good execution in challenging times. My first question is, sir, can you please elaborate on the order pipeline which we have for the shipbuilding business? That would be the first question.
As far as the current order book is concerned, we personally have orders worth as on 31st March, INR 24,072 crores. On the shipbuilding side, we have -- as I mentioned earlier, we have the P17 Alpha project, 3 ships with a balance order book value of around INR 15,780 crores. Then 4 ships of the Survey Vessel Large project, 8 ASW, Anti-submarine Warfare Shallow Water Crafts, 2 export orders, one for a Passenger cum Ferry Vessels for the Government of Guyana and 8 Patrol Boats for the Bangladesh Fisheries Department. In addition to this, we also have an order in hand for a Fast Patrol Vessel for the Indian Coast Guard. I had mentioned earlier that we had delivered last year a Fast Patrol Vessel to the Government of Seychelles. So this vessel is being constructed as a replacement for an earlier project for the Indian Coast Guard from where we have diverted this vessel to the Government of Seychelles. So this in a nutshell is the order book on the shipbuilding side.
As far as the orders on the pipeline -- in the pipeline, as mentioned earlier, we have been declared L2 in the next-generation Ocean Going Patrol Vessel projects for the Indian Navy. And as per tender conditions, 4 of these ships will be built by GRSE. So this order value will be approximately INR 3,200 crores. We expect this contract to be signed during this year. In addition, we are looking forward to the RFPs coming in from the Navy and the Coast Guard in the coming days. This is as far as the domestic shipbuilding is concerned, with respect to the orders on the pipeline. We are also looking forward for export opportunities where we are targeting certain countries where we feel there is potential for export.
And is it possible for you to give the breakup of the INR 24,000 crore order book in terms of how much is [ P72 SVC ] and ASW corvette, sir?
Sure, sure. As far as the P17 Alpha project is concerned, the total order value is INR 19,293 crores and having completed -- executed almost INR 3,500 crores so far. We have a balance of INR 15,780 crores in this project.
As far as the Survey Vessel Large project is concerned, the total order value is INR 2,455 crores and having executed the INR 583 crores so far, we are left with around INR 1,850 crores year-to-date balance.
Coming to the Shallow Water Crafts project, and Anti-Submarine Shallow Water Crafts project, the total order value is INR 6,311 crores. And having executed INR 374 crores so far the balance is INR 5,937 crores. I hope this answers your query.
Please go ahead, sir.
No. I was just mentioning that, hope this addresses your query.
Yes. Okay. This was very helpful, sir, giving us the detail. Also I wanted to check with you on the Q4 results, the revenue growth has been exceedingly well. But whereas the gross margin came -- was on the lower side. So is there any particular reason we can highlight why the gross margins were much lower than what you possibly were looking at?
Yes. Now it is not only the Q4, if you take the full financial year, as I had mentioned, the operating profit has gone up, our overall performance is definitely good. During -- just to explain why the margin has dropped marginally. In '21-'22, our interest income has dropped by INR 18 crore. This was primarily due to the reduction in the interest rate from 4.7 percentage to 4.2 percentage. And for an average deposit of around INR 3,700 crores, this 0.5 percentage translates to INR 18 crores. In addition, as I had mentioned during my initial address that we have acquired the Goliath crane during -- which was capitalized during the last financial year '20-'21 and operationalized during the last year. This was at a cost of approximately INR 160 crores. So the depreciation here works out to about INR 6.5 crores.
Next is that, during -- if you're comparing the '20-'21, there we have been similarly lucky to get an IT refund during that year where the interest component works to about INR 8 crores. So the net effect INR 18 crores plus INR 6.5 crores plus INR 8 crores work out to INR 32.5 crores, which is around 1.8 percentage of revenue from operations.
Another aspect is that, as you are aware, we are executing the P17 Alpha projects where the profit margins are around 7.5 percentage. And the other 2 major projects, the ASW Shallow Water Craft and the Survey Vessel Large project have been won on competitive bidding. And therefore, the profit margins are narrower. In '20-'21, the proportion of our revenue from operations between the P17 Alpha project and the other ships was 56% to 44%. Considering the project execution cycle, wherein the other ships have started picking up, the proportion between P17 Alpha and the other ships has dropped to -- rather changed to 52% to 48%. All these factors have resulted in a marginal drop of the margin.
Now shipbuilding, if you take shipbuilding industry as a whole, the profit -- healthy profit margin is anything beyond the 7.5 to 8 percentage. Now if you take the last 4 years, our margin -- the PAT margin has increased from 6.04 percentage 4 years back touched the peak of 10.87 percentage during the last year, and now it is steady at 10 percentage, which I feel indicates healthy operating condition.
Mr. Kapadia, may we request you to please return to the queue. There are several participants waiting for their turn. [Operator Instructions] Our next question is from the line of Venkatesh Subramanian from LogicTree Capital Advisors.
Congratulations on a good performance and also for being 1 of the only 2 companies to have Excellent out of 200 PSUs. So I have a simple question, sir, which is the current order book and what you have indicated, as per the last many con-calls, it was understood that FY '23 and FY '24 could be peak years in terms of production, especially in terms of value of production. Is that right? And are we on track to get that done, sir, in this year, FY '23? If you can kind of give us an idea on what could be the execution rate?
As I stated during earlier interactions with the investors also, yes, the coming years FY '23, FY '24, FY '25, these are going to be the peak years with respect to execution of the current order book. I had mentioned that the P17 Alpha project actually -- I presume I had indicated the percentages progress also. The first ship has touched around 37%. The second ship is hovering around 22% to 23%. And the third ship is catching up fast. So in a normal shipbuilding cycle -- I'm just taking P17 as an example and this is applicable for every project. These are normal shipbuilding cycle. The maximum revenue from operations of the VOP is accrued when the ship moves from -- around -- again, depending upon the size of the ship, the complexity of the vessel. On an average, if the maximum VOPs generated when the ship moves from around 35% to 60%. So this is the phase when the equipments are lower, the integration start. So as indicated earlier and now I'm reiterating that our peak performance in terms of execution of orders and then translating it to VOP would be in the coming years, that is '23, '24, '25.
Our next question is from the line of Viraj Mithani from Jupiter Financial.
Congratulations on a good set of numbers. I have basically 2 questions. My first question is on the cost of materials when I see from quarter-to-quarter comparison has actually gone up from, say, 36% in the last quarter to the sales to 57% to the sales in this quarter.
And the second question would be, on the export, which you mentioned. Can you give more color on that, like what efforts are being made and are we -- what are we planning to export and et cetera? That's it from my side, sir.
I will start with the first question that you posed with respect to the cost of material. Rightly pointed out that the cost of material has gone up from 36% during the last quarter to 57 percentage during the previous quarter that is Q4. Now this clearly indicates that the projects are progressing in the right direction. As the projects progress and especially when they are reaching a phase wherein equipment and systems get lowered and [ indicated ] onto the ship, the cost of material automatically increases. With the projects maturing further, this percentage -- the cost -- material cost would definitely increase. Material input onboard any shipbuilding project is directly linked with the physical progress of construction of the ship. And as I had mentioned, the equipment lowering happens generally, again, depending upon the size of the ship, maybe around 30% when it -- when the ship achieves around 30% progress and the peak by the time it touches 60%.
As regards to the export orders and efforts towards improving our export content, we have identified certain countries having potential for exports, targeted these nations, and we already appointed the marketing representatives in these nations. And this is a long-term process. If you -- it's not that when we appoint an agent the results will be immediate. We have to be patient. And in our case, the result already evidence, having made a breakthrough in Bangladesh, wherein we have bagged an order on a competitive bidding basis. So we expect in the coming years with, not only GRSEs, but the government trust is also on exports, we expect the export orders to increase in the coming years.
And sir, what would be the -- this thing commodity inflation in this cost of material consume like, say, steel price are some days it's normal, not the equipment? And what would be the percentage of the commodity inflation in this material consumed would be, sir, if you could give some color on that?
Sure, sure. Now in a ship, steel -- let us take steel then what we call as yard material, that is generally the installation, the minor fittings. These comprise a very less percentage of the overall cost of a ship. In case of steel, steel just takes around 4% to 5% of the overall cost of a ship. And the entire yard material that is inclusive of steel is to the tune of 10% to 12% as far as the overall cost of a ship. The maximum value comes in terms of equipment, the propulsion machinery, the communication systems, the weapon sensors, they carry the maximum cost. To answer your question, steel and the yard material consume around 10% to 12% of the overall cost of a ship.
We'll take our next question from the line of Abhishek Poddar from HDFC Mutual Fund.
Sir, regarding the order pipeline that you mentioned, you're talking about the next-gen vessels and also, previously, you have spoken about ASW Corvettes. Given these pipelines, sir, would you expect your order book to come down from INR 24,700 crores in the future after 2, 3 years when you see the peak execution of the current orders? Or these pipelines will be enough for you to maintain a healthy order book even after 2 or 3 years, sir?
As far as the orders already in hand, we expect these orders to be exhausted by FY '27, considering the current progress of the ship and the equipment availability and the project execution plan. We also have -- as I had mentioned, we also have one more order in the pipeline, which we expect to conclude during the current year for 4 next-generation Ocean Going Patrol Vessel and the value of that order is approximately INR 3,200 crores. What we also expect is, for the Navy to come out with an RFP for next-generation Corvettes. And as you may be aware, we, GRSE, have built 9 Corvettes both surface, whether it's Missile Corvettes and Anti-Submarine Corvettes for the Indian Navy. So with our experience and expertise and the technical know-how in building Corvettes, we will be accordingly bidding and very confident of getting results in the right direction.
To answer your question, right now, the existing order book, excluding the next-generation OPVs will last us till FY '27. And considering the build period of the next-generation OPVs, we will have orders in hand at least 2029. And as I had mentioned, if the next-generation Corvette comes to us, it's a big project, INR 13,000 crores, INR 14,000 crores, that project will spill over up to 2032.
Understood. And sir, on the margins, one question. As we move with higher execution, would the operating leverage benefit us in terms of reporting better margins? Or is it that higher equipment cost and all will kind of eat up into those benefits that we can accrue because of higher operating leverage?
When I was explaining to another investor who had asked a similar question earlier, shipbuilding -- in the industry of shipbuilding, I'm not talking about ship repair. In case of shipbuilding, the profit margins -- healthy profit margins are in the range of 7.5 to 8 percentage. And as we have seen our own performance, this year, we have touched 10 percentage. Last year, we have -- I have explained how -- when the deviation from last year to the marginal drop which is because of the specific rating. Now if all the bids coming in a competitive basis, we are very confident of maintaining similar margins in future also.
Second point is that, we are also venturing into ship repair, where the profit margins are high. High to the tune of 15% to 20% in case of some of the ship repair contract. So we feel we'll be able to strike a balance and maintain similar margin.
Sir, understood. Just one follow-up on this, sir, when you say a PAT margin of 10% that you have achieved this year, there is a large portion of other income, which is interest income included in that. So do you mean 10% including the other income? Or it should be the -- interest income should be excluded when we are calculating that 10%?
It is including the other income, naturally. It is including the other income.
And sir, that you would include because that is an advance from the orders and that's part of the profitability outlook for you?
It's not an advance. In case of shipbuilding, there is nothing called advance. There are 15-stage payment, and this was just one stage payment, which is given during the preparatory phase that is the pre-production phase. So it is not an advance. It is a milestone -- project milestone. That is payment milestone. Yes -- to answer your question, yes, it is inclusive of our other -- this is included in our other income, which in turn manifests into the profit margins.
Our next question is from the line of Mohit Kumar from DAM Capital.
Congratulations on a good set of numbers. My first question is how you see the FY '23 revenue and margins to pan out? And can we expect by FY '24-'25, you will touch the INR 5,000 crore kind of top line given the jump you are expecting? And will the margin profile be similar for the '23, '24, '25?
And as I had mentioned to a previous question, '23, '24 that is FY -- current financial year, FY '24 and FY '25 would definitely see a growth in our revenue from operations. At this moment, I can only indicate that we are on a growth trajectory upwards. And along with that, we are confident of maintaining the margins that we have achieved this year.
Sir, talking about the PAT margin, right, of 10%? Am I right, sir?
[indiscernible] you're right.
Yes. And sir, out of this, of course, there are some nomination and some completed projects. Given the mix, you still expect the margin to be 10% and don't expect the margin to deteriorate in the medium-term?
Can you repeat your question, please?
Given the fact that a part of the order book is on a competitive bid basis and part of it's on cost plus basis, we still believe that you should be able to hold on to a 10% margin. Is that correct assessment?
Yes. That's what I have mentioned. It's a hybrid equation. That is a competitive bid orders procured at -- obtained through a competitive bidding, orders or nomination that's the P17 Alpha project, plus what is in the pipeline, including our ventures into export or ship repair, all put together, we expect to maintain similar margins in the future.
And lastly, on the ship repair, sir, how do you see ship repair revenues panning out in medium-term? And what is the aspiration and what is the kind of margin possible in this line of business?
Ship repair has been a vertical which we have started focusing from the previous financial year. And to give you a background, we -- to provide impetus to ship repairs, we have acquired the 3 drydocks on a long-term that is strategic lease from the Kolkata Port Trust. And we have started in a modest way with a very, very clear plan for the coming years. The results are here to see and all the obtained orders for refit from the Indian Coast Guard on competitive bid basis. And of course, a few commercial vessels also. So to answer your question with respect to revenue expected from the ship repair business, at this juncture, I can only state that we have aspirational targets in mind. But I expect in the coming years, that is FY '23, '24, '25, and thereon, first for us to stabilize and thereafter, an increase of around 10% to 15% every year.
As far as the margins, profit margins in ship repair is concerned, ship repair is a profitable segment where the profit margins are to the tune of 15% to 20%. And in some cases, it is in the range of 20% to 25%. So it's a profitable business. And that is the reason why we have ventured into this in an aggressive manner.
All the best, sir.
We will take our next question from the line of Ankit Babel from Subhkam Ventures.
Yes. Ankit Babel here, sir. Sir, you have a large portion of your profits coming from other income. Now as you alluded the fact that from here on, the execution cycle will pick up drastically. So do you feel that a lot of your cash balance would be utilized to take care of your working capital and other execution-related requirements and hence, there could be a sharp drop in your other income in the coming years?
The sales were the projects are picking up. And so, naturally, a certain amount of our cash balance will be utilized for execution, that is procurement of material, payment to our sub-contractors and so on. But on the positive side, some of the projects are also getting completed. They are getting delivered. In addition, as mentioned, we are also expecting the contract for the next-generation Ocean Going Patrol Vessels to be signed during the current year. So what boat goes out will come in also. So I don't expect any major dip in our cash balance. And also with the higher VOP, our operating profit will also correspondingly increase. So it's a balance between all these factors. And this will compensate for the dip, which I don't feel there will not be a major dip because with the next projects coming in during the current year, [ it will ] balance.
Okay. And sir, any broad range of revenues, which you are looking at in FY '23, I mean, like INR 4,000 crores, INR 5,000 crores, what is the broad range you're looking at considering your execution cycles?
Considering the execution cycle, we expect around 20% increase over the current year, 20%, 25% increase. That's what we are targeting. Again, this target is an aspirational target. That's what we are targeting.
So on a base of INR 1,750 crores - INR 1,760 crores, you are expecting a 25%. I mean, just INR 2,200 crores of revenue you're expecting in this year?
See, the figures at this juncture, I cannot comment on the figures.
Sir, just a range, sir, because the expectation was like INR 5,000 crores. I mean, what the other investors were -- and analysts were expecting. And you are saying around INR 2,500 crores. So there is a drastic difference. That's the reason I need to understand.
One thing you must understand is that, shipbuilding is a process wherein the -- I cannot lower the equipment or systems till the time the ship reaches a certain level of maturity. So when we are considering the completion of the ongoing projects by 2027. We are in a phase where, yes, there is a physical progress is increasing by the day, equipment will go. So FY -- when I started the discussion since I had mentioned that FY '23, '24, '25, these are the years when the projects will reach a phase that is P17 Alpha project that is our biggest revenue earner, reaching a physical progress percentage of that is ranging from 35% this year to 60%, 65% in the next 2 years, the ASW Shallow Water Craft project, ranging similar or -- they are much smaller ships, similar or better percentages. And the Survey Vessel project getting concluded in the next 2 years, all put together, we can increase -- we can see a steady rise in our income in the coming -- in the -- sheer rise in our revenue from operations in the coming years.
Our next question is from the line of Akshay Kothari from Envision Capital.
Sir, just wanted to know what would be the defense budget allocation to Navy? And how do we see going forward how would it increase? And currently, our order book is at around INR 25,000 crores. So next 4 to 5 years down the line, where can we see this order book, just a ballpark number?
See, at this juncture, I cannot tell you the exact defense budget allocation for the Indian Navy. But I'm clear about the RFPs, which the Navy is going to come out in the coming year. One of the major projects that is going to come for RFP, which we expect RFP to be published this year is for the next-generation Corvettes. The order value of this project is to the tune of INR 13,000 crores to INR 14,000 crores. Another project that Navy is likely to come out in the current year or the next year could be for the follow-on Water Jet FACs. This, again, order value would be to the tune of INR 2,500 crores [indiscernible].
In addition, the Indian Coast Guard is -- the order is in the pipeline for all of us, that is for the 15 SPV project. Again, the order value is to the tune of around [ INR 1,800 crores ] to INR 2,000 crores. These are the major orders that are expected in the near future, plus there is a big order for construction of 4 landing platform dock, LPDs, for which the RFI had come out last year. So this year, towards the end or next year, we expect the RFP to come out. This order value could be to the tune of INR 25,000 crores. So this in a nutshell are the orders that are expected from the Indian defense sector, that is between the Navy and the Coast Guard.
As far as our order book, I had answered to a previous query that the current order book of around INR 24,000-plus crores. Plus the order, which was already on the pipeline this year for the 4 next-generation OPVs around INR 3,200 crores, that means in a -- all put together it was INR 27,000-plus crores will easily last us till 2029, that is FY '29. And we're very confident of getting at least a couple of these orders, which I had mentioned, which are likely to come through RFPs in the -- this year, next year.
Okay. That's great. Also, I wanted to know what we have been hearing is, there are certain orders of frigates, which we have co-developing with Russia. So look, why are we actually developing it with Russia? We are self-sufficient. Or is it like our capacities are fully utilized? So what is the basic reason behind that?
Yes. There is an order which is being co-developed with Russia for a frigate that is 11356, the project. Now the background is that, initially, India had imported a few vessels of this class from Russia. Now the aim of the co-development is simple. It is to develop the capability to build these ships within India. It is with that intent that the project is being co-developed. Now as you may be aware, 2 of these ships are being built in India at Goa Shipyard. And a couple of vessels are being concurrently built abroad. But the intent, to answer your question, if this is only to ensure that capability for full-fledged development, that is desire and construction of the ship is developed within India, that had abated.
Okay. That's great. And lastly, a booking question. Could you explain the exceptional item which is there?
I will request Director, Finance, Shri Dash to answer this question.
These exceptional items already you see in our note elaborated. During the pandemic last year FY '21 and FY '22, in FY '21 81 days, in FY '22 31 days there was no operation. But we have to pay wages for operators and also that our -- [indiscernible] also operated and some depreciation all which in classes were there. So this is the expenses which we have incurred which have not given any VOP or revenues, and this was written off. So that we have categorized as exceptional items.
Our next question is a follow-up from Harshit Kapadia from Elara Capital.
Sorry to harp on this pipeline thing, sir, you mentioned for the next-generation Corvette, the RFP will be issued this year. So the order finalization will happen next year. I just wanted to check, will it be split between you and other shipyard companies or it will be entirely given to one company? That's the first question.
And secondly, of the order pipeline, which you have mentioned for water jet FPVs, and even LPDs, where do you think given that GRSE capability is to win in these other 3 orders? That would be helpful.
Coming to the next-generation Corvettes, one statement that I had made was that between all the Indian shipyards, we are the most experienced with respective construction of these products having delivered 9 vessels, which are still in active service at the Indian Navy, that is the -- that is Missile Corvette and the Anti-Submarine Warfare Corvettes.
Now to answer your question whether this will be split or a single shipyard would get it, I would not be able to comment on that at this stage because we are not clear about that. But anyway, just to give confidence to our investors, we are very confident that our bid would be appropriate to get a positive [ result ] for our company.
As regards the Water Jet FACs, again, like Corvettes between Navy and Coast Guard, we have delivered over 30 platforms -- similar platforms. And during 2012 to -- 2013 to 2015 -- 2013 to 2016, we have delivered 4, that is the latest set of Water Jet FACs that we have delivered to the Indian Navy. And as you are aware, we are currently executing what is termed as Fast Patrol Vessels, but in effect, they have Water Jet propulsion. So we have vast experience in constructing these jets. Again, the confidence levels with respect to within these Water Jet FAC order is high.
As far as the LPD is concerned, the RFI had come out last year, and we expect the RFP to come out maybe end of this year or next year. That's all I can state at this moment with respect to LPD.
Understood, sir. And just wanted to check with you on the numbers which you just mentioned to one investor. So you're expecting revenue growth of around 20%, 25% in FY '23. Is that what you're trying to say? Is that like on a conservative basis is what you're trying to say or that would be a minimum that you would be doing, sir?
Yes, I cannot put a figure to the exact revenue that we'll be generating in the coming years. But just to suffice to say that considering the project progress, we are very confident of giving a good result next year with respect to revenue and profitability. And earlier we had one of the investors had asked what is going to be the performance during '23, '24, '25, that will peak or not? Yes, as per the project build schedule, we will peaking during this year. And we are on a steady upward path for the next foreseeable future that is next 3 years for sure.
Our next question is from the line of Abhishek Mody from Emkay Global.
Am I audible?
Absolutely, I can hear you.
Yes. Just 2 questions. First, you spoke about order book. Is it INR 24,072 crores or INR 24,700 crores? I was unable to get [Technical Difficulty] one of the gentlemen told...
Mr. Mody, I'm sorry to interrupt, but there is some disturbance coming in. Can you just take off your earphones and speak?
Am I audible now?
Yes.
Yes. What is the order book, INR 24,700 crores, INR 24,072 crores? Because there was some missed. I think I heard a bit -- I had a different number.
Okay. I will answer the question first. It is INR 24,072 crores, not INR 24,700 crores, INR 24,072 crores as of 31st March this year.
Yes. The second question, I think, regarding the commodity inflation, you had spoken that steel and the yard materials were 4% to 5%. And the largest cost comes from communications and weapon system. So does the communication and weapon system not improved commodities like steel and those? Because you -- Garden Reach might -- will it be impacted to some extent or because they are those kind of components where the inflation is yet to have an impact?
Okay. I'll answer the question. What we term [ in the column ] for shipbuilding is that, we segregate between equipment and systems and yard material. What we term as yard material is generally the ship construction material that is steel, which the cost of steel comes to around 4% to 5%.
And the second part is yard material like fasteners, insulation, the consumables used for steel fabrication building. So we -- all this put together, it comes to just about 10% to 12% of the overall project cost. Now what you termed as commodity, like let us say, the main propulsion system or the communication weapons, now our contracts are fixed price contracts with the customers. And in turn, we have fixed price contracts with our OEMs and vendors. And all these orders have been placed in such a manner at appropriate time of the project execution cycle. And therefore, the question of inflation and escalation does not arise.
And further, as far as steel is concerned, information that we have -- we procure steel from indigenous sources, and we have running MoU contracts with Steel Authority of India, a major steel manufacture, PSUs in our nation. And there again, we do not see such price variations because the MoU is already in existent. So the impact of inflation, yes, it is there, but it is not so much on the overall project cost because around 60% to 65% of the project cost comes out of the equipment. And that's the orders that are already placed and they are all fixed price contracts.
So you mean to say since both your supply and your input, it's a Memorandum of Understanding and the contract is fixed, hence, what -- if it is fixed in the current high prices are least likely -- they are going to impact to a lower extent for your company, correct? Am I right?
Could you repeat this question, please?
Yes. It means you mean to say that you, for example, to Steel Authority of India, you already have an understanding in terms of the steel prices and your contracts are fixed term contracts. And since these are fixed term contracts with current commodity, high prices are not going to impact your company much?
As far as steel is concerned, no. As far as the equipment and systems are concerned, no. But as far as the yard material, which comes to a miniscule percent of the overall project, yes, there is an impact, but the impact was limited to an overall project cost deviation of maybe 0.1, 0.2 percentage.
Yes. Okay. I think that answers my question.
We'll take our next question from the line of Venkatesh from LogicTree.
Yes. Sir, just summarizing on the order flows that you talked about. If my understanding is right, the current order book will last us till FY '27. And during the course of the time, we are perhaps may get a Corvette order, which could be worth INR 15,000 crores, another INR 2,000 crores in terms of -- I didn't get that one, sir. And then about INR 20,000 crores of orders work in progress, which we are bidding for. And apart from that, there is a big ticket order of a landing pad, which could be in excess of INR 20,000 crores. So there is a possibility of bidding for approximately more than INR 20,000 crores. Is that right, sir?
I will answer this question. As you rightly said, we have current order book of around INR 24,000 crores till last of -- till FY '27, considering the project execution cycle. And I had also mentioned that we have been declared L2 for the next-generation Ocean Going Patrol Vessel. This, we expect the contract to be concluded. As well as tender conditions, 4 ships are going to come to GRSE. And we expect the contract to be signed during the current financial year. That is approximately INR 3,200 crores. The balance, that is the next-generation Corvettes, the Water Jet FACs or the LPDs, they're all going to come out on -- for competitive bidding. Okay? See, we will bid aggressively. If we get it, it's good for all of us.
Right. Okay. Total value of orders that will come up for open bidding could be in excess of INR 20,000 crores, INR 25,000 crores. Is that right?
Yes. Absolutely. Orders which is there -- and the bouquet of orders, which are likely to come up in the next, let us say, 3 to 4 years, if you look at realistically, will be to tune of INR 20,000 crores to INR 30,000 crores.
INR 20,000 crores to INR 30,000 crores? Okay. Great. And my last question, sir, one of the participant was asking about revenue guidance. I'm not -- probably not going to ask you for a number, sir. But in our previous con-calls where the former MD, he broadly gave us a visualization of how the industry works in terms of peak cycle. It's like a bell-shaped curve. So the understanding was FY '23, FY '24, '25 will be the peak years in term. So maybe this INR 20,000 crores could average out or could be up and down. So our sense is that what you gave -- this order should be above INR 4,000 crores, but I don't want you to confirm what it is. But is our thinking right that the next 3 years will be the peak years for the current order?
Yes. As you rightly said that you don't want me to confirm, absolutely bang on. But yes, these next 3 years are going to be good for all of us in terms of revenue from operations and the profitability.
Our next question is from the line of [ Arjun Goel ], an individual investor.
I actually wanted to follow up on what one of the other participants asked regarding the other income. Now you mentioned that the yields this year are falling from 4.7% to about 4%. Now if I see FY '18, '19, '20, I think the yields were somewhere about 10%, 11-odd percent. So my first question is, one, why did they fall so drastically? And if you can throw some color as to what kind of process is followed that, "okay, we received stage payment from the government, then what happens to that money? Like what kind of securities do we invest it in? What process do we follow to determine the appropriate yield? And how is it going to change going forward? So this is like my broad line of question.
Mr. Goel, just I want to tell you that this -- whatever the money is in our account, it is not for investment purpose. This is only a temporary [ money ] for working capital because you see that in case of shipbuilding or any defense contract, we don't factor the financing cost. Our -- because our payments are in such a manner that whatever working capital is required, it will be available to us. So this is nothing but working capital. So whatever now deposit were already seen -- has sold that now the peak time is coming and peak time will come, naturally, there will be a drainage of this money, it will reduce. [ It is natural ]. Initially, it will go up, then gradually it will come down and sequence of some order book coming, again, it will be replaced. But at the same time, as regards to profitability, I'm telling that because whenever our VOP will go up, now you see that in FY '22, 92% was our other income, 8% was our operating income. Now these are gone up. This year, our operating income -- operating profit has gone from last year, INR 40 crores to just gone INR 104 crores. So gradually -- so operating income will go up and this will compensate the loss of our -- this other income, interest income. So this is a cycle.
No. So sir, my question is basically that earlier, when the yields were about 10%, they were 10%, right, approximately in '18, '19, '20? The yield that you were getting on other income, right. So now it has fallen from 10% to about 4%, right, in '21 and '22. So my question is, what has changed in the cycle of execution -- in the cycle that you're talking about that the yields have fallen from 10% to 4%? That's my question.
Yes. [ Actually ], I'm telling something that because this is not -- our objective is not that other income. Our objective is only against the income from operating income because this is an manufacturing organization. Our main objective is our operating income. This is a temporary money available with us and sometimes when the interest rate is higher, we are getting more. And now interest rate has gone down and expected -- as per the [ present trade ], I am expecting that the interest rate in next year will go up. So this is not our -- the core business of this income. The core business is operating profit.
You can assume out a 4% yield on the cash balance or whatever is the benchmark rate? Would that be fair?
Yes. It is now 4.2%. So what -- I am expecting because now the interest is going up.
Right. As the inflation and the RBI raises rates, then, of course, our interest rate will go up. But broadly speaking, it is you're getting savings account rate, right? That is...
Mr. Goel, after this question is answered, we request you to return to the queue, please.
Yes.
Ladies and gentlemen, due to time constraints, that was the last question. I hand over back to Shri Commodore PR Hari for closing comments. Over to you, sir.
Thank you, Inba. And to conclude, financial year '22 has been a successful year both in terms of physical and financial performance with us recording the highest-ever turnover and operating profits in the history of the company. We have effectively managed the challenge posed the COVID pandemic, especially during the first half of the year, specifically the first quarter where we lost a certain amount of production time, but managed to come out unscathed and met all the planned shipbuilding project milestones.
With a healthy order book of plus INR 24,000 crores and a very clear project execution strategy, the company is on an accelerated growth trajectory, and we are very confident of meeting our customer and investor expectations. Our focus in addition to domestic warship building, will be on exports, ship repair, product diversification, with thrust on green energy platforms and digitalization in the entire spectrum of operations.
Thank you, once again, Inba, and thank you, Gaurav from Concept Investor Relations for organizing the conference call. And I would like to pay my sincere gratitude to all my analysts and investor friends who have taken time out of their busy schedules to listen to us today. Thank you. Stay healthy. Stay safe. Jai Hind.
Thank you. Ladies and gentlemen, on behalf of Garden Reach Shipbuilders & Engineers Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.