Garden Reach Shipbuilders & Engineers Ltd

NSE:GRSE

Earnings Call Transcript 2024-Q4

[Operator]

Good afternoon, ladies and gentlemen. I am Aditya, 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 '24. We have with us today, Commodore P.R. Hari, Indian Navy Retired, Chairman and Managing Director; and Shri R.K. Dash, Director of Finance and CFO. [Operator Instructions]. Please note, this call is being recorded. I now would like to hand over the floor to Commodore P.R. Hari, Chairman and Managing Director. Thank you, and over to you, sir.

[P. Hari, executive]

Thank you, Aditya. Ladies and gentlemen, a very good afternoon to each one of you. I'm Commodore P. R. Hari, Chairman and Managing Director of your company. And with me here are Shri. Ramesh Kumar Dash, Director, Finance and Chief Financial Officer; Shrimati. Aparajita Ghosh, General Manager, Finance; and Mr. Sandeep Mahapatra, the Company Secretary. At the outset, let me thank each one of you who have taken out of your valuable time to attend this con call.

I shall now cover my introductory talk, starting with the current order book, the status of the ongoing projects -- what are the orders which are expected and what are our future plans. The order book as on 31st March 2024, stands at to INR 22,652.68 crores. This order book mainly consists of orders from the shipbuilding sector, comprising of INR 22,593 crores, with the P-17 Alpha project having a value of INR 12,174 crores; Survey Vessel Large, INR 940 crores, the Anti-Submarine Shallow Water Craft project, INR 4,886 crores; and the Next-generation Ocean-Going Patrol Vessel at INR 3,359 crores.

Coming to the P-17 Alpha project. This project, as you are aware, comprised of 3 warships. And all the 3 ships have already been launched, and the first ship is currently at 70% physical progress of construction. The second ship is closing 60%; the ship is currently at 58% construction. And the third ship is at 47% construction. As per the current build schedule, we intend delivering the first ship during mid-2025, that is mid of next year, and the third ship during mid of 2026 calendar year, which means by August 2026, we'll be completing this project.

Coming to the Survey Vessel Large project. This is a 4-ship project. Again, as you are aware, we already delivered the first ship to the Indian Navy. This ship was commissioned into the Navy on 21st of February 2024. After we delivered the ship on December 4, 2023, the ship is fully operational now and is under exploitation by the hydrographic arm of the Indian Navy. The second ship is at 87% construction. The ship has already undergone the [ contractual speed ] trial, and it is now getting ready for final machinery and the subsequent delivery.

The third ship is at 70% of construction and the 4 ship is very close by 68% construction. We intend delivering the second ship, which is currently at 87% construction by August this year, and the second ship will be delivered by the end of the current financial year and the last ship, the fourth of the series will be delivered by the first quarter of the next financial year.

Coming to the Anti-Submarine Shallow Water Craft project. This is a 8-ship project. You may be aware, Navy had a requirement of 16 antisubmarine shallow water crafts, and they have split the order between 2 shipyards: Cochin Shipyard and GRSE. Of the 8 ships that are being constructed by GRSE, 6 have already been launched. And 1 more ship is expected to be launched during the first -- second quarter of the current financial year and the last ship, the eighth ship will be launched during the last quarter of this financial year. Of these 6 ships that have been already launched, the first ship has touched 87% physical process of construction.

The basin trial -- the harbor trials of the ship have already been completed. The ship will -- is getting ready for the [ speed ] trial and thereafter for handing over to the customer. That is the Navy. The second ship is at 70% construction, the third ship at 63% and the fourth, fifth and sixth ships are around 40% to 45% of construction. We have signed a contract for 4 next-generation ocean-going patrol vessels for the Indian Navy. This contract was signed on 30th of March 2023. We already commenced production of all the 4 ships and the ships are presently at a percentage construction between 15% to 20%. We are also undertaking a project for the Government of West Bengal for a fully electric ferry. The technicals of vessel is fully ready.

All the trials have been completed and the technical acceptance of the vessel has been undertaken by the Government of West Bengal on 21st of March this year. The vessel will soon be handed over to the Government of West Bengal during mid of June this year. We are also executing a project of 6 fast patrol boat project for the Government of Bangladesh Three of these boats are already ready and have completed the trial. We are expecting the Government of Bangladesh to take over these vessels during June this year. We have recently won an order from the Ministry of Earth Sciences. We were declared L1 sometime during the mid of last year -- third quarter of last year.

We have received the Letter of Intent from the Ministry of Earth Sciences. This is for an oceanographic research vessel. The order value is approximately INR 840 crores. We expect the contract -- the formal contract to be signed sometime in June, that is next month. Coming to the orders that are on the anvil. We have been declared L1 for an export order for the Government of Bangladesh for a 1,000 meter cube dredger and the order value is approximately INR 135 crores. We have received the LOI and the contract is expected to be signed during the first week of June this year, that is next month.

Happy to inform you that we have also been declared L1 for an ocean-going tug for the government -- again, for the Government of Bangladesh -- also an export order. The negotiations are in progress. And the order value could be around INR 160 crores to INR 170 crores. Again, as late as 2 days back, we have been declared L1 for a DRDO research vessel, the order value is likely to the tune of plus INR 500 crores. These are in a nutshell. The status of our existing order book, the status of the projects that we are executing and also the orders that are immediately on the anvil where we have ever been declared L1 or where we have received the LOI. Coming to the orders that are expected in the near future, where the RFPs are expected in the near future. I have been talking during the previous interactions that we are expecting next-generation corvette project RFP to be restored by the Navy. We are expecting this RFP in the coming month. And as you are aware, this is a 8-ship project with the L1 shipyard taking 5 ships and the L2 shipyard getting 3 ships, and the order values likely to the tune of around INR 36,000 crores.

There is another project, again for the Ministry of Earth Sciences for coastal research vessel, 2 numbers coastal research vessel. The shipyard has already submitted the bids for this project and the order value is likely to the tune of around INR 500 crores. Navy is likely to come out with an RFP for 2 in number, multipurpose vessels. The order value is likely to be to the tune of INR 1,200 crores. We expect the RFP to come out during the third quarter of the current financial year. Similarly, during the current financial year, again, maybe in the last quarter, we expect the RFP for 5 in number next-generation survey vessels to come out. The order values to the tune of around INR 3,000 crores.

I have covered briefly about the orders that are likely to be on the anvil. And coming to our focused areas. In addition to domestic warship building, as evident, we have now ventured into nondefense platform, like oceanographic research vessel, the [indiscernible] research vessels, the coastal research vessels that we have bid for, the Bangladesh dredger and so on. In addition, we will also -- we aggressively pursuing commercial shipbuilding for exports. We are in the process of negotiations with potential owners -- shipowners for multipurpose vessels. And hopefully, in the next interaction, I should be able to share some positive news with you.

Our trust area in addition to domestic warship building, commercial shipbuilding as we just stated, would also be towards the development of green energy platforms. The first such initiative has already been successfully completed with us completing the next-generation electric ferry for the Government of West Bengal. We have submitted our bids for a larger project, 5 in number vessels for the Government of West Bengal, again, Bengal Water Metro and also for a project by the Kerala Water Metro. So this is an area that we would be focusing on in the near future. Also, autonomous platforms, again, as I stated during the last few interactions, that we have ventured into development of autonomous platforms in all 3 domains of operations, that is surface, subsurface and aerial. Both in surface and subsurface domain, our products have already been -- the prototypes have already been successfully tested. And on the aerial front, the drones capable of maritime operations, the development is still in progress, and we expect this product to be successfully launched by end of the calendar year. Just to place on record that these initiatives towards autonomous platforms are long-term investments as we expect the Indian Armed Forces especially to have a large quantum of autonomous platforms in their inventory in the coming years.

One of the surface vessel that I had mentioned, we already got an order from the -- and it is still a very low-value order, but its a beginning that we have won this on competitive bidding, and this order is likely to be completed by July this year. We had concluded Memorandum of Understanding with both -- Rolls-Royce for coproduction of marine diesel engines, and also with Kongsberg Finland for development of water jets. Of these, one of them, the MOU with the Rolls-Royce has been converted into a license agreement. And similarly, the MOU with Kongsberg is now in the prospect transition into a license agreement. With this license agreements in place, we expect to be a strong contender for getting orders for both propulsion engines, diesel engines and for water jets for the -- water jet [indiscernible] and similar platforms for which the Navy RFPs are likely to come out during FY '26, '27. Exports continue to be a focus area. As mentioned earlier, that we are currently focusing on European clients for multipurpose vessels, in addition to the [indiscernible] region countries where we already made our footprint.

Ladies and gentlemen, this in a nutshell gives you our intent of what our operational performance and what all we expect in the near future with respect to potential orders and areas of focus. Now coming to the financial performance. I'm very happy to state that for the seventh quarter on the trot, our financial performance has been on an upward and steady upward trend. Our revenues from operations -- if you're taking financial year, that is FY '24, we have registered a 40% growth over the previous year, jumping from INR 2,561 during financial year '23 to INR 3,593 crores during financial year '24. Similarly, the total income has registered a 48% growth with the current year's figures, that is FY '24 figures, touching INR 3,892 crores. The EBITDA has jumped by 41% to INR 533 crores and the profit after tax, currently, that is the financial year '24, stands at INR 357.24 crores, registering a growth of 57%.

Our net growth also has been showing a steady increase from INR 1,413 crores during the financial year '23 to INR 1,673 crores during FY '24. The investors have shown confidence in us as evident from the market capitalization, the share price and in turn, the market capitalization. You know about this better than me, so I would not like to delve much on this topic. Quarter-on-quarter, our earning from operations as compared to the last year has gone -- 69% increase is there, it has touched for the first time plus INR 1,000 crores. During Q4 FY '24, the revenue from operations stands at INR 1015 crores, the EBITDA registering an 84% increase with PAT 102% increase and EPS 102% increase, touching INR 9.74 as against INR 4.83 during the corresponding quarter of FY '23.

Ladies and gentlemen, with this, I sum up -- I conclude my introductory address. I'm open for any questions from you. Thank you.

[Operator]

[Operator Instructions] Our first question is from the line of Amit Dixit from ICICI Securities.

[Amit Dixit, analyst]

I have a couple of questions. First of all, congratulations for a good set of numbers in this quarter. The First question is essentially around your EBITDA margin. So if I see the EBITDA margin for Q4, and I'm excluding other income here, it was a very healthy level of 8.9% almost. Now this is the highest margin that we have witnessed since last several quarters. Just wanted to understand the key drivers for the same. One thing I can see that the contracting charges have declined Q-o-Q. But other than that, if there is something -- apart from revenue that you would like to highlight? That is the first question.

[P. Hari, executive]

Yes. Could you say -- tell your next question also. I'll answer it together.

[Amit Dixit, analyst]

Yes, sure. The second question is more on the long-term prospects. We have talked about the RFP of next-generation corvette, which will be out in June, which is a very welcome news. So just wanted to understand the order time line from hereon. Whether you expect any delays in there? And if you could also highlight what about P-17 Bravo frigate project. That's it from my side, sir.

[P. Hari, executive]

Okay. Thank you, Mr. Amit Dixit. I'll start with -- as I said, thank you for congratulating us. I think, we all, we means the management, the entire company and also each one of you, the investors for giving us this opportunity to perform to your expectations. Now coming to the NGC corvette. This is a project that we are eagerly looking for. And -- as I mentioned, we expect the RFP to come out sometime in June. It's an optimistic assessment, but we expect it to come out in June.

And this is 8-ship project. And as per our understanding, as per the RFI conditions, there are 4 of us who have qualified for that. 2 of these shipyards would get in the ratio of 5 and -- in the number, 5 and 3 ships, those probability factors very high. The L1 shipyard could get around INR 22,500 crores order and the L2 shipyard around INR 14,500 crores. So it's a very high-value order and with our experience of having built and delivered both missile and antisubmarine corvettes to the Navy.

Just to place on record, we have the only shipyard to have built and delivered 9 corvettes to the Navy and all of them are in active service with the Navy. So it's that kind of experience and the expertise, we would be, let us say, bidding to win, that will be our strategy. As for the time lines, you had asked about the time lines. This RFP comes out in June. Let us take a normal time line of around 4 months from RFP to bid submission, which means the L1 could be declared towards the end of the current calendar year. And from there, you take the best possible scenario of around 7 to 8 months for conclusion of contract. Navy is also putting a lot of effort in streamlining the RFP this time.

So we expect, let's say, lesser discussions and negotiations between the L1 declaration and the contract signed. So I expect, again, optimistically by July, August next year for the contract to be signed. Coming to the P-17 Bravo project, Navy has the requirement as per our understanding and input for [indiscernible] ships, that is P-17 Alpha class. Right now, there's a 7-ship P-17 Alpha project going on. And as you are aware, 4 of these are being built by Mazagon Dock and 3 by GRSE. The first of the class -- and this definitely would be -- is one of the ships that is being built by the [indiscernible] the Mazagon Dock, and we expect -- it is assessed that this could come out sometime during the current calendar year.

So the next ship, that is our ship, could come out sometime during the second quarter of the -- the first quarter of the next financial year. And the project completion is expected by 2026 mid. So my assessment -- our assessment is that the requirement of Navy being genuine, they would like a continuity in production of these ships from then onwards. So Realistically, the RFP for this project could come out by 2026. That is the earliest I expect the RFP to come out.

Coming to the -- are the margins. Margins this quarter have been encouraging -- have been very encouraging. And as you rightly said, this has been one of the best with respect to margins. And yes, the contract -- subcontracted value has come down, but also production efficiency. I would -- revenue expenditure reduction, the contracted value reduction and overall efficiency improvement is what has resulted in the margins being high. Thank you.

[Amit Dixit, analyst]

Okay. Sir, one of the follow-up, if I may. Now you mentioned that the subcontracting cost was lower. Some of the efficiencies have been built in. So do we expect that going ahead as well these -- I believe these efficiencies that you have built in over a period of time would also be sustainable. So would you be able to guide the margin -- sustainable margin over the next couple of years? Would it be more than 5.5% that we have been accustomed to seeing?

[P. Hari, executive]

See -- I have been regularly interacting with you all during the last 7 quarters. So we have been consistently stating that unlike any other manufacturing industry, in case of shipbuilding, healthy PAT margin, so I repeat, PAT margin, to something 7.5 percentage. We have been maintaining this, and we are very confident of maintaining similar margins. To answer your question in a simple sentence, we are confident of maintaining a similar margin in the coming times too.

[Operator]

Our next question is from the line of Venkatesh from LogicTree.

[Venkatesh Subramanian, analyst]

Sir, first of all -- congratulations on a consistent performance and uptrending performance. So to be honest with you, I think we have been tracking this company for many years, probably since IPO times, and one thing that we really appreciate is what we see is what we get. You don't make any fancy statements. Neither do you make conservative statements. It's extremely realistic and lots of clarity. So I appreciate you for keeping the investors informed on this, sir. Thank you for that. That's number one.

And secondly, 2 questions, sir. One is, while you gave us a visibility on the possible orders over the next 12 months. In one of your earlier media interactions, you had pointed out that GRSE has the ability to attract a INR 120,000 crore order book over the next 3 years. Can you throw some light on it, sir? We don't exactly need any commitments or anything like that. What is the -- what are the possibilities considering various circumstances? That is question number one. Sir, question number two is, the Rolls-Royce Marine diesel engine opportunity and the water jet opportunity with the Finland company, what is the size of the opportunity, sir? What is it that one can expect if things go well over a period of time? That's it from my side.

[P. Hari, executive]

Thank you -- thank you, Mr. Venkatesh. I'll start with the MOU likely to be translated into a license agreement with Kongsberg Finland for water jets. See, most of the high-speed small-size ships of Indian Navy and Coast Guard are having water jet propulsion. And with the Make in India initiative really gathering momentum, it is imperative that all the future -- marine platforms, there is Navy and Coast Guard platforms have a certain amount of indigenous content in their equipment fit.

And as we said, water jets are definitely used in large numbers in these ships. So once translated -- once our license agreement gets translated for coproduction, the opportunity is huge. To put an exact number, I would not be able to do it at this stage. But what I would just say that there is 120 FICs, fast interceptor crafts, coming up for the Indian Navy and the 22 water jet FAC project again coming from the Indian Navy. And an 18 fast-patrol vessel project coming for Indian Coast Guard. All these are likely to come up in the next 3 to 5 years.

And it is at that time. It is by that time that this collaboration will gain momentum. So at this juncture, I would not be able to put a value to these numbers, numbers, I mean the cost to these numbers. But all I can state is that, yes, there is opportunity, a huge opportunity on this front. Now coming to the INR 1,20,000 crores that was mentioned. Now let me again clarify this. See -- I'll put it this way. Again, I'm repeating something which I stated earlier, but I'm repeating purely to provide clarity. As far as domestic war shipbuilding, I will just keep the other freights out at this moment. As far as domestic washer building is concerned, there are 4 defense public sector undertakings, that is we, plus MDL, plus GSL, plus HSL, plus another public sector undertaking, that is the Cochin Shipyard under the Ministry of Shipping, [ Ports and Transport ] and a couple of private players to lead the leader among them in the private sector being the [indiscernible] Shipyard, plus [indiscernible] and so on, there are smaller shipyards.

These are the shipyards available in India who are eligible for competing or bidding for various types of ships depending upon their classification and the assessment by the Navy or Coast Guard. Now -- coming to the value of INR 1,20,000 crores order. The first one is the -- what I had mentioned at that point of time that these are the things which are likely to come up in a span of 3 to 5 years.

Now, One of them is definitely the next-generation corvette project. The second one that is likely to come up is the multipurpose system. The third is the next-generation survey vessel. The fourth is the [indiscernible] craft for the Navy. Then there is a project for 2 in number landing platform deck for the Indian Navy. Then there are more platforms, again, coming up like Coast Guard is looking for 18 next-generation fast-patrol vessels. So all put together in a span of 5 -- 3 to 5 years. Likely order value is to the tune of INR 1,20,000 crores. Now for this, depending upon the capacity at best. Capacity means in terms of building capacity and the capability, Navy and Coast Guard have shortlisted shipyards. Now again, -- coming to -- one, I'll just give you 1 example. As I mentioned, there are 7 shipyards that I stated, 4, plus 1, plus L&T, plus a couple of small shipyards.

But of these 7 or 8 shipyards for the [indiscernible] project, as of now only 4 shipyards are shortlisted. So this INR 1,20,000 crores that is coming in the next 3 to 5 years, depending upon the classification and the capability, some of us qualify for -- so in a very conservative manner, if you put it across -- a substantial amount of this would come to GRSE too. That is a statement which I had mentioned about the orders on the anvil. Hope that clarifies.

[Venkatesh Subramanian, analyst]

Yes, absolutely. So I think just trying to get the understanding right? When there is a significant flow of orders and the order flow of GRSE is able to secure over the next 2, 3 years, sir, because we will achieve pretty much peak revenues in FY '25, FY '26, et cetera. Will these order flows help us to maintain the run rate of the revenue over the foreseeable 5, 7 years, sir, if we are able to secure those orders?

[P. Hari, executive]

Yes, we actually need these orders. At least on INR 20,000, INR 25,000 crores we need to sustain the revenue tempo beyond 2027 -- as you rightly stated that with us moving definitely on an upward trajectory, the current order book being around INR 20,000-odd crores, with next year, next, next year taking, we need orders at least in -- calendar year -- financial year 2026 to sustain beyond '27.

So that is why we are looking at attractive projects, projects like the next-generation corvettes. And also, if you see absurd, we also not shied away from taking small orders. We have taken orders worth around INR 840 crores from the Ministry of Earth Sciences. As I mentioned, we have been declared L1 for another INR 500 crores plus. So we are maintaining our kitty reasonably filled and sustain the revenue flow happens, even if there is a -- let us hypothetically say we don't get one -- any big or, let's say, we don't get [ NGC ], so what. But we will fill the gap with these small, small orders that we are taking. And of course, aggressively looking for a big order like the NGC and relentlessly pursuing Navy requirements for P-17 Bravo.

[Venkatesh Subramanian, analyst]

Sir, green energy platforms, autonomous platforms, Rolls Royce, marine engines. These are also of significant opportunity -- quite a lot. Would you say that?

[P. Hari, executive]

See, if you're looking purely from the money part?

[Venkatesh Subramanian, analyst]

Yes.

[P. Hari, executive]

Money comes from domestic warship building models. The bigger chunk of money of the order value of the warship because purely because of the equipment fit, the weapon fit, the value [indiscernible] let's say, conventional green energy platform. The cost is nothing much. Cost is not -- but the volumes could be more. That is where we tend to make profit or we tend to capture the market.

Same for autonomous platform. Autonomous platform in the -- we are now investing towards development of autonomous platforms. Realistically, we will not see much revenue coming from these platforms for the next 3 to 5 years. But fully acknowledging and understanding that this is the future because -- Navy has already got a road map, an autonomous road map chartered out, 5 to 10 years, we'll start getting revenue from autonomous platforms. [indiscernible] mentioned about green energy. There are countries who have decided and promulgated that they will go green, some of the Scandinavian countries, that by 2030, we will go green. This means all the inland water transportation, all their tugboats, ferries, barges, the commercial ships, which are plying within their waters, they will go green. Similarly, India also, I'm very confident, will take a step to go green in a timebound manner. At this time, all the conventional platforms, diesel or similar energy using platforms will get phased out and that is okay. That's why we are developing capabilities in these 2 domains, green and autonomous.

[Operator]

Our next question is from the line of Umesh Raut from Noruma (sic) [ Nomura ].

[Umesh Raut, analyst]

Congratulations for the good set of numbers and excellent ending to the year as well. So this is Umesh Raut here from Nomura India. My first question is more of a follow-up on Amit's question, where you mentioned that there are 4 total shipyards who have qualified for next-generation Corvette contract. So can you please specify other 3 names?

[P. Hari, executive]

See, I am not sure whether it is available in the open domain or not. Frankly, I'm not sure, at this juncture, whether it's -- other 3 shipyards name is in the open domain. Since I'm not sure I would not like to mention, all -- it's suffice to say that they are among the 7 that I mentioned earlier.

[Umesh Raut, analyst]

Okay. No issue, sir. Sir, my second question is more of on the indigenization. So if I remember correctly, if I look at warships in 3 aspects, float, move and fight content, I think as a country, we are relatively having lower indigenization towards move and fight content, basically about closer to maybe 60% indigenization content and moving components for warship and about maybe closer to 30% kind of indigenization content for fight equipment. So is it -- is there any idea or any thought process to increase indigenization for move and fight content within warships?

[P. Hari, executive]

Thank you. Very interesting question. Yes, in any kind of marine platform, there are 4 components. That's float, move, fight and survive. In case of float, float as well -- that -- as very evident, comprises of the steel hull and the float worthiness of the related aspects. There, we, as nation, we have achieved 100% indigenization, including the special steel that earlier used to be imported, all of those items are being presently manufactured within India and there 100% indigenization is there. Now I'll come to the last one, survive.

Survive as in their life [indiscernible] their lifeboats, their firefighting equipment, LSFF, it's called LSFF, the lifesaving and firefighting equipment, survival related equipment. And we, as a nation, we have achieved over 90% of indigenization. Even the last 10%, as a country, we are on the threshold of achieving that. No issues with that. Now comes to the move and fight. You're bang on. The -- no component -- as of now, we have an indigenous percentage of just above 60% and fight is around 50% -- 45%, in some of the cases. There is a definite impetus being given by the Government of India to increase the percentage of indigenization to an extent that it is being monitored very, very closely at the apex of my ministry and also the other -- my -- in our -- counterparts in the other ministries.

The move component mainly comprises of the propulsion-related equipment and, of course, the associated electronics, which are the control systems and navigation aids and so on. In this, why 60%? Because as a nation again, we have not yet developed a competency to have our own propulsion engines, which form the heart of the move component. As you actually may be aware, there are various DPP procurement methodology, one of the Make I, Make II, Make III and so on. The propulsion engines are getting indigenized under the Make I category. It is -- and in the Make II category, some -- I think again, the propulsion engines tend to classify into high power engines and low power engines. We -- you might have heard about our collaboration with Rolls-Royce towards coproduction of the high-speed, low-power engines . The low-speed, high-power engine, that is beyond [ 6 megawatts ], [ 6 megawatts ] and above, there is a Make project, which is already going on and we expect it to see the light of the day, that it's completion by 5 years from now. That is our realistic assessment.

So with this getting covered, the move component, the indigenization component will definitely go beyond 85% to 90%. Coming to the fight component. See, here, the growth -- the indigenization percentage growth has been very steady and systematic. The country has got a very, very clear policy towards indigenization of weapon systems. The immediate target, in my approximation would be to increase this percentage from 30% to -- 60% to 65% by 2030, this is my current approximation of the indigenization process of the move and fight components.

[Umesh Raut, analyst]

Got it, sir. Sir, my next question is more of a difference between NGC and ASW corvette that we have delivered earlier. So basically P28 contract and now the upcoming contract, which is coming up for NGC. So in terms of technical aspects or maybe the kind of missile systems that we are kind of thinking to kind of install on that particular NGC, so how it will be different and what additional systems or other things we are talking about in terms of upgrades?

[P. Hari, executive]

See, I just talked about the anti-submarine projects. The anti-submarine projects have got both the [indiscernible] and torpedoes which are capable of anti-submarine operations plus SONARs which are capable of underwater threat detection. Since the RFP for the NGC is not yet out and since it is just around the corner, I would not like to actually compare the specs of this, just to state that they'll be the most advanced corvettes that has yet been built in the country.

In fact, just to give you an idea. You know, so that you can make a guesstimate from that, just to give an idea. Now in every ship, equipment component is around 60% to 65%. And it could even touch closer to 70% in case of weapon inventory, likewise. Now the cost of a ASW corvette, close to around INR 1,600 crores -- INR 1,615 crores, actually. Now the cost of an NGC, the AoN cost is around INR 4,500 crores. You can imagine, if you are just extrapolating the weapon -- sorry, the equipment content of around 65%, naturally, the cost -- the value -- the value has gone up is because of the advanced weapons and sensors that are going to be [indiscernible] in this platform. As I said, since RFP has not been published, I would not like to comment further on it.

[Umesh Raut, analyst]

Fair enough, sir. My last question is pertaining to status on landing platform dock program because it has been delayed for quite some time now. And whether this time, private sector along with public sector will kind of compete among themselves in terms of bidding as well? Or is it only for private sector in terms of participation?

[P. Hari, executive]

As you rightly said, this LPD, landing platform dock project has been shuttling, yes, no, for the last 7 to 8 years, that sort of [indiscernible] or even beyond that. This is a requirement of Indian Navy, very much known because it's a part of the -- their perspective. As per my understanding, it is going to be a competitive bid between capable shipyards, which include both private and public. When the RFP is likely to come out, at this juncture it is not known, it definitely would be somewhere in the queue but the priority projects like the NGC or the NGSC or the MPV are far more advanced with respect to [indiscernible].

So I don't see, if you're asking my approximation, I don't see this RFP coming out in the current financial year. But to answer your question, when it comes out, as for the existing policy, it'll be a competitive bid between both public and private capable shipyards.

[Operator]

[Operator Instructions]. Our next question is from the line of [ Debojit from Roop Investments ].

[Unknown Analyst]

And congratulations for good sets of numbers, which the company has delivered on consistent basis. My first question is, sir, recently, our defense minister and even our Navy Chief has mentioned, there is a need of an hour for aircraft carrier warship. And it has been mentioned currently, India has only 2 aircraft carrier warships and in the need of time, in coming time frame, we at least require 8 to 9 warships. And the size of this warship is also going to be very huge. So can you just throw some light on the same?

[P. Hari, executive]

Thank you. I understand you're asking about the indigenous -- sorry, you're talking about the aircraft carriers.

[Unknown Analyst]

Aircraft carrier warship.

[P. Hari, executive]

Yes. India currently has 2 of them, one, that is INS Vikramaditya and second -- that is a Russian-origin ship. And the second is gas turbine-propelled indigenous-aircraft carrier, the first aircraft carrier to be built by India by, one of our sister shipyards. As for what -- you had stated, the nation -- the addition because -- has expressed their intent to enhance the aircraft carrier fleet of India. Definitely, this is also there in the prospective plan of the Navy. So it is very much on the handle. But when it is going to come out that is not known at this stage.

But from what we have heard and what we have seen, today, the focus is on indigenous shipbuilding and of the 66 platforms that are being currently built in India for the Indian Navy, 64 are being built by Indian shippers. So definitely, if the same philosophy is going to be followed, the next aircraft carrier is also most likely to be built in India. So this is all I state at this juncture, though it is known and it has been published in the media that the decision makers had expressed their intent to expand the aircraft carrier fleet of the nation.

[Unknown Analyst]

So what is the value of our carrier fleet, if you can throw some figure for fleet, the value content, it has been mentioned that it would in lakhs of crores to build a warship carrier, so just [indiscernible] understanding on the same.

[P. Hari, executive]

And I'll give you an analogy, if you're buying for a -- if you're going in for an SUV, you can get a Scorpio, you can get whatever, the Innova and so on. Even within aircraft carriers, depending upon the displacement and -- of the carrier, the cost varies. Like the first aircraft carrier, which was built by India, aircraft carrier, the indigenous aircraft, Vikrant, the cost could be to the tune of around INR 35,000 crores. That is a 40,000-tonne vessel. So if the country is looking for an aircraft carrier of similar tonnage, because it depends upon the tonnage because as the tonnage increases, the fit -- ship -- the size increases and sort of the number of aircraft which are going to be there and so on and the equipment fit and so on. So if we are looking for a 40,000-tonne aircraft carrier or a 50,000-tonne of aircraft carrier, the value could be to the tune, considering the current price is between INR 35, 000 crore to INR 40,000 crores.

[Unknown Analyst]

And my next question will be, sir, recently, you have conducted -- well, for investor interview in the month of March. And at that time, you said there were some share capital, which was -- which has been introduced from DIPAM, if you can throw some light and any plan for any bonus share for the shareholders?

[P. Hari, executive]

Can you -- could you -- your voice got distorted. Could you please repeat this question? Then I will hand over to my Director of Finance to answer this question.

[Unknown Analyst]

Sir, recently, in the month of March, you have conducted 1 investor conference. At that time, you have mentioned that, that there is some introduction of share capital, which has been mentioned from DIPAM side. So you said it will be shared to the investor in coming few months. So any update on the same? And any plan on bonus shares?

[Ramesh Dash, executive]

Actually, it was not discussed, share purchased, you asked -- some of the -- this -- investors they asked regarding this authorized share capital. So actually they think actually -- as per the DIPAM guidelines until now no final decision has been taken on this issue.

[Unknown Analyst]

Okay. So there is no further action taken on that.

[P. Hari, executive]

As of now, it is work in progress. So we will let you know as soon as we get clarity on this.

[Operator]

[Operator Instructions]. Our next question is from the line of Viraj from Jupiter Financials.

[Viraj Mithani, analyst]

And congratulations on the outstanding numbers. Sir, my question is, since you talk about so much of orders coming into the -- for the Navy in post 2027 onwards, are we looking at any sort of capacity expansion? And right now, at what level of capacity do you see -- are -- that is my question #1, sir.

[P. Hari, executive]

Yes. Could you ask -- you have any more questions, you can ask then I'll answer together.

[Viraj Mithani, analyst]

Yes. And my next question is, sir, are we -- are there any plans to do offer for sale, means, to your knowledge, if you can share some light on that as well. That's it from my side.

[P. Hari, executive]

See, I'll answer the simpler question first. Offer sales at this juncture, we are awaiting further inspections from DIPAM. As and when we get clarity on this, naturally, we'll let you know and you'll automatically come to know. Coming to the orders which are currently under execution, where -- and also where we are getting and then we are the L1 and the negotiations are in progress and where we are expected to conclude the contract soon and also the orders that are expected from the Navy in the near future and beyond 2027. You had asked a question about current capacity utilization and also the plans for capacity enhancement. You may be aware that we have -- unlike many of the shipbuilding companies in India, we are based and focused on -- within Kolkata, we have 3 separate shipbuilding units.

In addition, we have taken on 3 dry docks, dry docks being one of the core assets that are there for shipbuilding construction -- shipbuilding projects. We have taken over 3 more docks on long-term lease on the Kolkata Port Trust. We are in the process of taking over 1 more dry dock in the Kolkata Port Trust. In addition to that, we have revived or we have taken over 1 facility from the Central Inland Water Transport Corporation way back in 2000. This facility was completely defunct. So we have taken up an infrastructure augmentation or rather rejuvenation projects. All these put together, our capacity as of now stands at -- capacity to construct 20 warships concurrently to build 8 large and 12 medium and small.

Now, we fully understand, we are fully seized of the requirement to enhance our capacity. So we had gone ahead with a new strategy, which has been effectively put across there in the utilization of the spare capacity of the partnership yards, that is effective. In addition, work is already in progress for enhancing our own internal capacity from 20 to 24. By the end of this calendar year, our capacity for concurrent construction would be 24 ships, instead of the current 20 ships. So these put together, what I'm trying to say -- and I understand of the captive capacity from 20 to 24 ships.

In addition, the peculiarity of shipbuilding where ship construction is at various stages there could be a point of time the pylon space, where the ships are constructed in building or berths on dry docks, there'll be a post-launch phase when they're outfitted in berths and jetties. So all put together, we are good to take the orders that are on the anvil and also to execute our current order books.

[Viraj Mithani, analyst]

And sir, when you utilize partners' capacity, do we pay the lease? Or what sort of agreement is there?

[P. Hari, executive]

Could you come again, when you increase the capacity...

[Viraj Mithani, analyst]

When you utilize the partner's shipyards capacity, how does it work? Do we pay them the [indiscernible] fee or what we...

[P. Hari, executive]

I'll explain this. What we do is, we identify -- we -- through a standard EOI stock tendering process, we identify capable shipyards who at this point of time have spare capacity. So we offload, outsource part construction of few of the platforms to facilitate -- basically to facilitate concurrent construction. The complete design of the ship design, the equipment -- this procurement is completely by us, the project management is completely by us.

A part of the construction happens in this vendor premises. On completion of this part of construction [indiscernible] But I are brought back to the parent facility, that is ours, where the final outfitting happens and the ships are taken out. So very effective model that we have rolled out. That is the reason how we could get good progress on the anti-submarine and watercraft project.

[Operator]

Our next question is from the line of Venkatesh from LogicTree.

[Venkatesh Subramanian, analyst]

Sir, couple of follow-up questions, sir. One is on the ship repair facility, which you have mentioned some time back in a few calls. Would you say that, that will come into effect in the few years because I think it's a high-margin business. And I remember that Cochin Shipyard has signed a contract with the U.S. Navy or probably has signed or something is in the anvil in terms of repairing ships for it. Do we have some plans like that going forward in the future with the India-U.S. strategic partnership? Second question is on Rolls-Royce marine diesel engines, if you can elaborate on that opportunity.

[P. Hari, executive]

Coming to ship repairs, we were not -- in this period ship repairs -- around 3, 4 years back. As late as end of 2021, the actual operations commenced sometime during early '22. So we have taken over 3 dry docks from the Kolkata Port Trust from -- just to state that we almost have 100% occupancy of this dock since then. We have completed the 21 refits for the -- sorry, 14 refits for the Indian Coast Guard. And currently, we are executing 1, an normal -- or a refit for the Indian Navy.

So this facility has actually -- this vertical has actually taken off. Coming to your specific question on the Indo-U.S. collaboration for ship repairs. As of now, the 3 shipyards who are on the -- those are direct PSUs, that is Cochin Shipyard, then Mazagon Docks and Larsen & Toubro Shipyard. They have agreement wherein these ships, whenever they come for operational turnaround or minor repairs, they have to take the repairs there. We have not yet got into this agreement with -- under this scheme, there is a U.S.-Indo cooperation for ship repairs. We have not yet got into that.

We will be examining this but please understand 1 constraint, it's a constraint that we have -- ours is a river [indiscernible] which means when a ship comes for a very short duration, most of the U.S. ships will be coming for a very, very short duration. So when they come in for a short duration, traveling through the river, coming in, finishing the repairs and going back, the feasibility and the viability of that -- we should be -- further examined. So instead of focusing on that, we would rather go in for a refit of ships who are likely to stay for longer duration, like what we are doing for the Navy.

That would be our focus. Now, coming to the Rolls-Royce and our agreement, the intent of going in for -- okay, we have a long association with MTU, now taken over by Rolls-Royce for assembly and testing of marine [indiscernible]. We have just shifted gear and instead of just assembly and testing, we are going in for co-production. Co-production with the -- under the Make-II philosophy that we would be initially looking for a indigenous content of 60%, the opportunity that is available is again for the water -- I think earlier you only had asked regarding the -- what is it that is -- what is the [indiscernible] -- so on the -- on these ships -- these ships are high speed ships. These ships, while having waterjet proportion, need high-speed engines, very, very high-speed engines. And it is for those high-speed engines that we are working on a collaboration with Rolls-Royce. So akin to the revenue expected from -- again, I mentioned I cannot translate the number of ship stroke engines to waterjets to cost but the opportunity is similar to what is the existing product, waterjets.

So in this case, we have already signed the license agreement also. And we expect the first of the RFPs from -- maybe for the [indiscernible] to come out sometime during FY '26. Yes. There these engines are expected to be used.

[Venkatesh Subramanian, analyst]

Yes, yes. Any little bit, if I can squeeze in, on any small businesses coming in terms of the bridges and other unique things about GRSE, sir?

[P. Hari, executive]

Oh, yes. I was trying to -- I mean, just to confine my introductory talk, I did not speak about which is very interesting business vertical. It's a small vertical, very, very attractive business, compact vertical, where we are the market leaders in India. And just to see the growth we have got, the last year, FY '23, the revenue from operations from the Bailey Bridge segment was just INR 69 crores. In 24 -- FY '24, it has shot up to INR 140 crores. And no, this is very, very interesting. Actually, I'd like to speak on this at a much longer duration some other time.

But the team, very, very skeletal team is managing this business, good connect with the potential customers and our major customers are the Border Roads Organisation with whom we have live MOUs for multiple projects, the Indian Army and the National Highways Infrastructure Development Corporation. So as far as this diversification is concerned, one of the verticals, which we are going to focus on would be the bailey bridge or the prefabricated steel bridges there, like that. And of course, you have already listened to what I mentioned about green energy platforms and autonomous vessels.

[Venkatesh Subramanian, analyst]

I missed the part on who are your core customers in the bridge one, sir. Is it National Highway Authority sir?

[P. Hari, executive]

The major customer is the Border Roads Organisation, BRO, Border Roads Organisation. Next is the Indian Army. And the third is the National Highways Infrastructure Development Corporation, NHIDCL and of course, various state public works departments.

[Venkatesh Subramanian, analyst]

Sir, what is the operating margins of this particular business segment, sir? If you have a revenue of INR 140 crores, what will be the operating profit or EBITDA .

[P. Hari, executive]

This is around -- bit around 7% to 7.5%.

[Venkatesh Subramanian, analyst]

Is there also fixed margins basically.

[P. Hari, executive]

See, it's -- again, it's competitive. It is competitive except for some of the products where we have IPR, which is our patented products. The others, bridges, as far as the Indian Army are under competition. So overall, our margins would be to the tune of around 7% to 7.5%.

[Venkatesh Subramanian, analyst]

And over a 5-year period, can this revenue be about INR 500 crores or something like that, sir. would that be an internal vision for you, in this segment?

[P. Hari, executive]

See, INR 500 crores would be a bit too ambitious for my own liking. But I would definitely like to double this in the next 5 years, against that within the next 5 years. Again here, again, just since you mentioned that the total markets, when I proudly state that we are the market leader, we own around 70% of the market, the market size itself is limited.

[Venkatesh Subramanian, analyst]

It's a very unique business, I guess, yes.

[Operator]

Our next question is from the line of Abhishek Poddar from HDFC Mutual Funds.

[Abhishek Poddar, analyst]

Sir, could you guide us how to think about the revenue booking for next 2 years, as you mentioned that you would see a peak revenue in the next 2 years. So 1 is that. And second is also, let's assume that in 2025, you are able to win a next-gen corvette order. So first couple of years will be hull construction. So how will '27, '28 look like, would be a lean period or we could see some growth there also.

[P. Hari, executive]

Thank you, Mr. Abhishek. Now yes, you're right, the next year and the next, next years are going to be the peak revenue regulation years. I had at earlier interactions I had assured a revenue growth of around 20% to 25%. We have -- I hope we have surpassed our [indiscernible] expectation for [indiscernible]. So we have a current order book of INR 22,000-plus crores and keeping the NGOPV apart, that is around INR 3,500 crores, I mean, INR 3,400 crores remaining and the one-off projects that we are winning now, that is 800-plus crores also that oceanographic research vessel. Our majority of the revenue in the next 2 years will come from the P-17 Alpha project and the anti-submarine shallow water project with the surveys that's been already held across that [indiscernible].

Now the next year and the next that is INR 22,000-plus crores of that, if you subtract around INR 3000 crores, INR 4000 crores, INR 5,000 crores, balance order book will be executed by FY '25. So again, I'm going back to what I mentioned, we'll be aspiring for a growth of over 20% to 25% year-on-year from now, in the next 2 years. Now coming to your -- you had asked a second question. You had asked a second question about the order expectation on the NGC. Definitely, we'll be pushing for that. And if the order comes in financial year '26 fiscal year, mid of calendar year '25, the actual revenue recognition will start sometime 2 years down the line because the first 2 years, 1 year, the first year is the pre -- with preparatory phase, predesign phase and the initial phase thereafter after the production starts would be mostly for hull construction where the revenue recognition is minimum.

And this actually augurs well for us because it is, by that time, that means by FY '28 -- '27-'28 is when our existing order book gets wiped out. So that is the time when some of the NGC will start giving us returns. And also to offset this, let us say, the gap, as I mentioned in one of the earlier discussions that we are bidding and winning orders from multiple customers, including the DRDO, Ministry of Earth Sciences. And definitely, in the next con call, hopefully, I'll be able to convey the happy news regarding the commercial shipbuilding. So that will offset the gap, if at all any, which I don't see it happening considering that the NGCs are done.

[Abhishek Poddar, analyst]

Understood. But would the commercial shipbuilding orders, if you manage to win it, would it be large?

[P. Hari, executive]

No, we're not yet -- no, no, no, we are not yet won yet -- we are not yet won. Commercial, okay, I'm not counting the Bangladesh export project, which is commercial in nature but the order value is just about INR 130-odd crores. I'm looking at multiple purposes for European clients who have shown interest because now the market is open and there -- these European clients are looking at India as a potential destination for shipbuilding.

So we have indicated our willingness. Negotiations are in progress. We will be starting definitely in a modest fashion at first because we have not yet been in the serious commercial shipbuilding except a one-off project for the government of [indiscernible]. So we'll start in a modest fashion and we'll pick up from there. So then just to answer your question, the numbers are going to be attractive in the coming years with respect to orders on commercial ships.

[Abhishek Poddar, analyst]

Understood. And sir, one last question. On the margin side, you mentioned about 7.5% is what you're looking at. But if I look at the PAT level for last 2 years, you have been doing about 10% or so. So should we assume this level of margin, what you're doing now will sustain? Or should we assume 7.5% is what...

[P. Hari, executive]

We will be sustaining the level of margin that we are currently achieving.

[Abhishek Poddar, analyst]

Understood. And we should not look at from the EBITDA margin perspective but we should include it -- look it from the PBT perspective because other income kind of will vary. EBITDA margin and other income will keep on varying.

[Operator]

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Commodore P.R. Hari sir for closing comments.

[P. Hari, executive]

Thank you, Aditya and thank you, Gaurav from Concept IR for organizing this conference call. I would once again like to express my sincere gratitude to all the investors and analyst friends who have taken their time out to attend this con call and listen to what we had to communicate to you. And in case you have any queries, you may kindly contact -- get in touch with us and we will clarify each one of them. We'll be happy to address each one of them. Thank you once again and Jai Hind.

[Operator]

Thank you. You may now disconnect your lines.