HG Infra Engineering Ltd (Part IX)

NSE:HGINFRA

Earnings Call Analysis

HG Infra Reports Strong Revenue Growth and Strategic Developments

In Q2 FY '25, HG Infra Engineering reported a robust revenue growth of 22.4%, reaching INR 1,064 crores, up from INR 859 crores the previous year. The profit after tax for the quarter stood at INR 189 crores, with an improved margin of 8.3%. For the first half of FY '25, the company generated INR 2,570 crores, up 20.1% year-on-year. Looking ahead, they forecast revenue growth of 17% to 18% in coming quarters. The company is actively pursuing projects in solar and infrastructure, with a targeted order inflow of INR 11,000 to INR 12,000 crores for the fiscal year.

Introduction to Recent Performance

HG Infra Engineering has recently reported its financial results for Q2 and the first half of FY '25, demonstrating solid growth indicators. The company recorded a 22.4% increase in revenue from operations, reaching INR 1,064 crores, up from INR 859 crores in the prior year. This trend reflects a commitment to operational efficiency and execution across its projects.

Earnings and Margins

The profit after tax (PAT) for Q2 FY '25 was INR 189 crores, yielding a margin of 8.3%, an increase from 7.1% in Q2 FY '24. Across the first half of FY '25, PAT stood at INR 228 crores, with an improved margin of 8.9%. The EBITDA margin for Q2 FY '25 moved up to 24.3% from 23.1% the previous year, showcasing better cost management amidst rising revenues.

Sector-Specific Updates

The company continues to strengthen its foothold in the highway sector, having successfully secured projects exceeding INR 11,000 crores for FY '25. Recent government approvals for new initiatives include significant funding in highway infrastructure and a commitment to major railway projects. Additionally, the solar segment remains a critical area of expansion, with plans to increase capacities significantly.

Debt and Financial Strategy

As of September 30, 2024, the standalone gross debt stood at INR 884 crores, primarily attributed to working capital and term loans related to accelerating solar energy projects. The management expressed confidence that this debt level can return to INR 500-600 crores by Q3 FY '25 as projects stabilize and cash flow improves.

Future Growth Projections

The company aims to achieve revenue growth of 17% to 18% in the coming quarters, banking on a robust order book and strategic project selections. This projection aligns with the company's ambitious target of around INR 6,000 crores in annual revenue, supported by diversification into solar energy and railways, besides maintaining its traditional highway project strengths.

Conclusion and Investment Considerations

Investors should note the company's growing order inflow, which already stands at approximately INR 5,500 crores in roads and INR 780 crores in solar. The long-term financial outlook appears promising, especially with the government's push for infrastructure development. Despite recent challenges in margins in certain projects, the overall growth trajectory suggests opportunities for value creation.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day. and welcome to the HG Infra Engineering Q2 FY '25 Earnings Conference Call, hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. [ Aloni Ajmera ] from Go India Advisors. Thank you, and over to you, ma'am.

[Unknown Attendee]

Good afternoon, everybody, and welcome to HG Infra Engineering Limited earnings call to discuss the quarter 2 and FY '25 operational and financial performance hosted by Go India Advisors. We have on call with us Mr. Harendra Singh, who is Chairman and Management Director; and Mr. Rajeev Mishra, the CFO from HG Infra.

We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore more in conjunction with the risk that the company faces. We now request Mr. Harendra Singh to take us through the company's business outlook and subsequent performance, which will open the floor for Q&A. Thank you, and over to you, sir.

[Harendra Singh, executive]

Thank you, Aloni. Good afternoon, everyone, and welcome to the HG Infra Engineering Limited earnings call for our quarter 2 and half yearly FY '25 numbers. As we reflect on joyous deliberations of Diwali and welcome to the New Year, I would like to extend my warmest greetings to each of you. I hope you have had a chance to review the investor presentation and the financial results, which are now available on the exchange. I'm pleased to share that our company has built a strong [ legacy ] with decades of experience in India in [ virtual ] sales. We have firmly established our leadership in the highway sector and successfully expanding our expertise into railway and solar projects. Our focus on operational efficiency and execution has led to interest in performance across [ key messages ]. Let me now provide some updates on the individual sector.

Talking [indiscernible] sector, which has been a key focus on the Indian government, and we expect this momentum to continue. Recently, the government approved a higher [ project INR 150,665 crore ], combing a length of [ 936 ] kilometers. These projects are part of 8 national high-speed corridor initiatives. By December, the cabinet is expected to clear project worth [ INR 2 lakh crores ]. All the project awards slowed has been -- is quite low in [ FY '22, '24 ] due to election relays financial challenges and cost overall, a stronger recovery anticipated in the second half of FY '25. More plans to award around [ $3 trillion ] in contracts during '24, '25 and has recently approved 215 kilometers of higher projects across [indiscernible] valued at INR 5,000 crores. Despite the slowdown in the bidding pipeline, we remain confident about the road and highway sector and a strong financial backing and support [indiscernible] policies are set to drive rapid growth and modernization.

In railway, the cabinet has given the green light to 8 major railway projects with a total investment of INR 24,657 crores set to extend India's railway network by 900 additional kilometers across 7 states. With additional initiatives supported the [indiscernible] master plan, which focuses on enhancing multi-model connectivity across the country. Significant opportunities are emerging in the railway sector as well, especially in modernization [ infrastructure ], key areas, including electrification, the development of high-speed corridor, merger tracking and compressive patients [indiscernible] operation under [indiscernible] [ scheme ]. Additionally, the introduction of Metro Line and Metro Neo systems in smaller cities aim to address [indiscernible], with [ 2.55 trillion ] allocated to railway production, the government plan for -- also includes the rollout of 50 high-speed [indiscernible] by FY '25. This gives us ample opportunity to expand our presence in this sector.

In renewable energy, [indiscernible] renewal policy target 65 gigawatts of solar and significant wind energy capacity by [ FY 2012, 2013 ], advertising wind solar hybrid system for efficient resource use and real stability. Meanwhile, the central [indiscernible] that is [indiscernible] projects of 4 gigawatts battery storage, that is [indiscernible]. By 2030, supported by the government fund scheme of INR 3,760 crores of 4,000 megawatt hour, this funding this will push renewable energy integration into the national grid. India's renewable energy momentum has been [indiscernible] with the Ministry of new and renewable energy, initiating annual risk for 60 gigawatts with solar energy comprising around 80%. This major push towards a solar renewal energy sufficient future present [ EPC ] player with an annual opportunity of INR 150 million. Looking ahead, Solar Energy will be critical in achieving India's ambitious target of 500 gigawatts of renewable energy by 2030 that plans to hit 200 gigawatts by FY '28.

Let me begin by sharing the journey in this quarter and providing you a bit glimpse of our operational highlights. As of first half of FY '25, our order book totals around INR 15,624 crores with a breakdown of INR 12,326 crore of roads and highway, INR 2,387 crores from railways and metro and INR 1,911 crores [indiscernible]. Our portfolio consists of 67% EPC and 33% [indiscernible] project reflecting a [ VA-balance ] approach, we are currently active across [indiscernible] states, demonstrating a strong and diversified geographical [indiscernible].

Regarding the upgrade of EPC projects, the [indiscernible] sales projected 71.5% complete and progressing on schedule, and we expect to complete by end of this financial year. The Delhi unit has reached [ 96.4% ], where the completion has already been applied, which we expect during this quarter only. The [indiscernible] project is currently at its early stage with our progress of around 3.7%. The appointed for this project was recently received on 13th of September '24. Meanwhile, the [indiscernible] projects which stands at 26.5% due to land availability challenges. We are actively collaborating with NHI to expedite regulatory clearance and are also discussing with potential [ thermal ] agreement from pre closure on this project, with the some delinking at rescoping, and we expect the same to be growth before in this quarter only. The [ MSRDC ] project where the alloy has been delayed mainly due to nonavailability of adequate land position.

Regarding the [indiscernible] project, the contract interest project have achieved 46.1% to [ risk ]. The [indiscernible] project for [ 45 ] and [indiscernible] are progressing well at 79.1% and [ 86.6% ] completion, respectively. The [indiscernible] project, that is AP1, which is 81.3%. The [indiscernible] project has achieved 59.6% in package 1 and 62.7% in packaged 2. We would complete all the three projects of [ Orica ] and AP and both projects of common [indiscernible], that is [ KP1 ] and 2 before March '25, and will target -- sorry and by June '25, the project of balance of the scope of completion with all 45 will be done. The [indiscernible] package that is currently at the initial stage of fulfilling condition [indiscernible]. With a financial merger achieved in September '24, we anticipate the [indiscernible] date to be in December '24. [indiscernible] [ package 10 ] and 13 of [indiscernible] are currently in the advanced phase of [indiscernible] forest clearance. Apologies these projects as is indicated in the third and fourth quarter, respectively.

Regarding the equity requirement of hand projects, [indiscernible] project requires INR 1,458 crores. As of September '24, 790 crores have already been included with a projected infusion of INR 70 crores in the remaining 6 months of FY '25 and balance will be improved in FY '26 and '27, respectively.

Turning on to the project of railway. The [indiscernible] project is at around -- progressing well at around 53.9% and [indiscernible] further scheduled time lines. The [indiscernible] project or of [ RVNL ], 42.8% is being completed. And now we are on track and targeting as the completion within the time line. The [indiscernible] project is 10.3% complete, and there has been some clearance issues of land and utility in this, which is now settling down. The appointed [indiscernible], which was received on September 4, 2024 is currently at 7% completed. The [indiscernible] and therefore other railway projects where the project was declared on 22 June, they are around 3.3% and 2.4% competed, respectively.

Regarding the total project, during the financial year, we strategically capitalized on the promising [indiscernible] in the rapidly growing solar sector by actively pursuing and securing solar power projects under the [indiscernible], the [ core ] initiative aimed at promoting the development of renewable energy across India. And [indiscernible] of these efforts, the company has fully acquired a total of one utility solar power plant, collectively contributing a substantial capacity of 700 megawatts of BP. Of this total [indiscernible] plans representing a total capacity of [ 628 megawatts ] with an estimated EPC value of INR 2,243 crores, which is excluding the [ GST]. The language agreements for these projects are progressing well, with more than 50% of the requirement already leased. The company is actively working on identifying and securing the remaining land parcels with the expectation that all land regions will be finalized in the coming quarters. As of now, the execution of this project stand at 14.8% with the work [indiscernible] and in line with the project timeline. The debt funding of solar projects will start rolling out from this month only and will be concluded in next few months, fulfilling our debt requirement for the [indiscernible] project and all the [indiscernible] December '24.

In terms of funding, the total liquidity requirement from these [ solar projects ] are estimated at INR 732 crores. And as of September 30, 2024, just INR 3.5 crores has been [ used ] in this project. It is [ engineered ] that additional INR 350 crores will be included during this financial year, that is '24, '25 and that the remaining balance to be contributed in FY '25, '26. This structured capital infusion plan ensures that the company can maintain the financial security needed to meet its collect milestones while supporting the long-term growth of its solar energy portfolio.

Let me now share other significant updates for quarter 2 and half yearly FY '25. In Q2 FY '25, we successfully secured two [indiscernible] projects. Those are newly declared [indiscernible] with a B2C cost of INR 753.11 crores and upgradation of 6 lanes from [indiscernible] in Gujarat, [ INR 171 crores ]. Additionally, we recently have been selected as the [ successful pillars ] by [ NTPC ] [indiscernible] spot of 185-megawatt that is equal to 375-megawatt hour just in a share of [ 200-megawatt project ], this will be a tariff rate of at [ 2,038,004-megawatt per month ] expected to yield annual revenue of approximately INR 52.83 crores. Over the tenure of 12 years, this project is to generate a total revenue of around [ INR 633.9 crores ] per [indiscernible]. The COD of [indiscernible] was received on October 2024. The COD of [indiscernible] was received on July 2024.

Now I will provide you an overview of financial highlights of Q2 and half [ year ] FY '23. The [ final ] financials in quarter 2 FY '25, our revenue from operations grew by 22.4%, reaching INR 1,064 crores, up from INR 859 crores in Q2 FY '24. At the south, while the quarter stood at INR 174 crores with a margin of 16.4% compared to INR 138 crores and a margin of 15.9% in the same period last year. Profit after tax for Q2 FY '25 [ INR 189 ] crores, reflecting a margin of 8.3%, and [indiscernible] and a margin of 7.1% in Q2 FY '24. The revenue for half yearly FY '25 stood at INR 2,570 crores, marking a 20.1% year-on-year increase compared to INR 2,141 crore in first half of FY '24. For the half year stood at INR 418 crores with an EBITDA margin of [ 15.3% ], showing a 21.7% growth from INR 343 crores in first half of FY '24. [indiscernible] the half [indiscernible] stood at INR 228 crores with a PAT margin of 8.9% compared to INR 180 crores and a margin of 8.4% in the half year FY '24. On a standalone basis, our gross debt stands at INR 884 crores. This comprises INR 279 crores in working capital debt, INR 588 crores from term loans and current maturities along with INR 15 crores of [indiscernible]. There has been significant increase in the working capital and term loans to accelerate the solar power project progress as a bridge the funding requirement for the procurement of solar modules and inverters and other [ long ] works. Thus, Same [indiscernible] was also eager to give momentum to the progress of highways, which was slow down due to erratic and good rent for and during the monsoon.

Moving on to the [indiscernible] numbers. In Q2 FY '25, our consolidated revenue from operations stood at INR 902 crores compared to INR 955 crores in Q2 FY '24 and EBITDA remained steady at INR 220 crores with the margin improved to 24.3% from 23.1% in the same quarter last year. PAT at Q2 FY '25 was INR 81 crores with the margin of 8.9%, down from INR 96 crores and a margin of 10.5% in Q2 FY '24. And for half yearly FY '25, we reached a revenue of INR 2,430 crores, reflecting a 5.4% year-on increase from INR 2,306 crores of half year FY '24. EBITDA stood at INR 532 crores with a margin of 21.9%, up slightly from INR 501 crores and a 21.7% margin of the same period last year. [indiscernible] for first half FY '25 was INR 243 crores with a profit margin of 10% compared to INR 247 crores, with a margin of 10.7% and [indiscernible] FY '24. On a consolidated [indiscernible] loss that stands at approximately INR 2,404 crores. Just the reason for it in revenue and PAT in console are from the inter group connection between HG and [ SPVs ] related to solar projects. We eliminated our [ consult ] financials. As a result, revenue and expenses from these projects do not appear in the consolidated P&L statement but are recorded as a capital working progress under [indiscernible] at the standalone level, HG Infra recognizes remaining from EPC work and sales and onset income. However, in the consolidated accounts, both revenue and costs from these intercompany transactions are [indiscernible]. Reducing the overall figures and margins compared to the [indiscernible] financial. The test expense in these earnings remains impacting consolidated margins negatively until the [ CV ] generated revenue from unit production. [indiscernible] start growing, this effect will reverse improving the [indiscernible] financial performance. This is an update regarding the monetization of [indiscernible] as informed earlier, we have successfully monetized our three projects, [indiscernible] expense consideration of INR 315 crores for [indiscernible] FY '23, '24 only and the [indiscernible] received in October '24, post approval of [indiscernible] [ GST ] change in the opening.

Regarding the [indiscernible] was received from NHI and [ lenders ] in March '24. The compliance with [ SPV ] condition is in progress and expected to complete by '24. There is around INR 145 crores including the residual amount of INR 6 crore of [indiscernible] expected to be received from the [indiscernible] where we have invested equity of [ INR 7.7 crores ]. We are targeting an order inflow of between INR 11,000 crores to INR 12,000 crores for FY '25 until that we have successfully secured approximately INR 5,500 crores in projects from highway sector and around INR 780 crores from solar sector. We are confident to maintain our EBITDA margin of [indiscernible] and achieved revenue growth of 17% to 18% in the upcoming quarters. Furthermore, we are actively pursuing opportunities in new segments where computing and operational efficiency, prudent capital allocation and a strategic project selection to sustain margins and enhance shareholder value. With that, I conclude the update and [indiscernible] Q2 and half yearly FY '24 and I'll open the floor for question and answers.

[Operator]

Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question comes from Shravan Shah from Dolat Capital.

[Shravan Shah, analyst]

Sir, just to clarify, you said that 17% to 18% revenue growth in coming quarters. So does that mean in the second half, we are looking at 17% to 18% growth?

[Harendra Singh, executive]

So overall, as we have added about INR 6,000 crores, which of INR 5,100 crores is around 18% to 19%. So we have already held around -- touched about 20% growth in first half and we are targeting to [indiscernible] that number coming in around INR 6,000 crores as an entire year top line.

[Shravan Shah, analyst]

And then even going forward, the similar 15% plus kind of a growth can be looked at?

[Harendra Singh, executive]

Yes. For the [indiscernible] 20 years.

[Shravan Shah, analyst]

And in terms of the order inflow, so we have already -- I think, if I total it about close to INR 6,280-odd crores, I think we have received. So now remaining -- we don't tell [indiscernible] how much are more we looking from the road, how much we have already [ bidded ] previously. We have mentioned that we have bidded in the road, railway, all these if you can help us in terms of how much we have already bidded in each such a role railway or maybe any other sector and how much more are you planning to bid? And how much in terms of the broadly we are looking from the influenza road, railway and solar water.

[Harendra Singh, executive]

As far as roads [indiscernible], we are already -- say, awaiting the results, which [ bidded ] around INR 21,000 crores per project [indiscernible] railway is around INR 7,400 crores being -- already being delayed -- solar also, we have bidded around, say, INR [ 600 ] crores. So again, these are the projects which are results are [indiscernible] apart from the building pipeline, if we see that the -- of course, it is being delayed, but we are looking at about [ INR 74,000 crores, INR 5,000 crores ] of project pipeline, which for us, we have taken into consideration for NHI as [indiscernible] project. And railway also, we have identified INR 25,000 crores, which are yet to be paid, where the purchase pipeline is there for the new project. And for solar, we are looking to the opportunity we have battery storage [indiscernible] as well as hybrid projects are yet to be and even a few of the projects we're celebrating [indiscernible] is being by infant government of [ ham ] models.

[Shravan Shah, analyst]

So in terms of value would be broadly how much for solar?

[Harendra Singh, executive]

We are looking at about INR 10,000 crores to be billed in the bid pipeline, which is already visible.

[Shravan Shah, analyst]

Just a couple of things. So in terms of the -- whatever the pointed date is that if you can help us project-wise when whatever the projects are pending for appointed date when the contract is likely to be received?

[Harendra Singh, executive]

Yes. As of now, the project [indiscernible] so these are the projects, which in any case by December, we are expecting to get the -- [indiscernible] and followed by a number of [indiscernible] in March quarter. Apart from these, there are two new projects, which are Financial Closure and Condition [indiscernible] likely to happen in quarter 1 of FY '25, '26 only [indiscernible].

[Shravan Shah, analyst]

And in terms of the [indiscernible].

[Harendra Singh, executive]

And the project [indiscernible] released [indiscernible] the 70% of the land, which is the commission set for insurance [indiscernible] which will be in by January, it will be complicated post that only the LOA will be issued and followed by the [indiscernible].

[Shravan Shah, analyst]

So most likely [ MSRDC ] revenue should very, very, very [indiscernible] revenue in this year. So execution will be [indiscernible] onwards.

[Harendra Singh, executive]

This year, hardly there can be any single percentage of evolution possible on those projects.

[Shravan Shah, analyst]

And lastly, just a data point, the equity requirement in hand in FY '26 and '27 and returns on money mobilization advance and unbilled revenue.

[Harendra Singh, executive]

[indiscernible] is concerned, around INR 790 crores already done, balance of INR 670 crores in FY '25, INR 370 crore and followed by INR 177 crore and INR 131 in '26 and '27. In solar, it is INR 728 crores, this is in [ '25 ] is around INR 300 crores, followed by INR 420 in FY '26. [indiscernible] and what about the [indiscernible] INR 239 crores.

[Shravan Shah, analyst]

Unbilled revenue and returns on money?

[Harendra Singh, executive]

Retention money is INR 110 crores peak on all the projects and debtors is INR 1,035 crores [ base ]. That includes retention [indiscernible] as well as SPV and one of the fee approval, which is yet awaited in [indiscernible].

[Shravan Shah, analyst]

INR 1,315 crore of unbilled revenue?

[Harendra Singh, executive]

Okay.

[Operator]

[Operator Instructions] The next question comes from Vaibhav Shah from JM Financial Limited.

[Vaibhav Shah, analyst]

You mentioned that the solar order inflow for the year is around INR 780 crores. So last quarter, the order book was around [ INR 700 ] crores. And this quarter is -- look at the order book, it's around [ INR 1,900 ]. So I have seen the order inflow for 83-megawatt solar projects in [indiscernible], which was INR 499 crores. So apart from that, which is the other project beyond the ultra vibrant Solar Energy project?

[Harendra Singh, executive]

So this is one project which we have received as [indiscernible] year-on-year the NTPC but also those have contributed to it.

[Vaibhav Shah, analyst]

So that is another INR 300 crores?

[Harendra Singh, executive]

Sorry?

[Vaibhav Shah, analyst]

[indiscernible] of the project?

[Harendra Singh, executive]

This is around INR 450 crores.

[Vaibhav Shah, analyst]

NTPC [indiscernible] that project?

[Harendra Singh, executive]

Correct.

[Parikshit Kandpal, analyst]

And sir, we have seen EBITDA margins have been quite good in second quarter as well, and we have done significant execution on solar side as well in the first half of around 14-, 15-odd percent. So have you [ been ] the margins in the solar segment so far?

[Harendra Singh, executive]

Solar has showed us the significant good margins around 18%. So that's why we have seen a significant jump during this quarter where solar execution is around INR 262 crores, which is being executed that has been attributed during the quarter only.

[Vaibhav Shah, analyst]

Sir, are these margins sustainable ahead in the solar segment?

[Harendra Singh, executive]

Yes. Solar margins because they are two, three reasons. One is the [ stabilizing ] or the price of [ premium ] volumes that is very low now and we all booked the orders. And then why we have taken that order has been booked without [ safe price solution ] also. So [indiscernible] gives us a sensible result when the margins that would be in this range only for the entire balance completion of these [ projects ].

[Rita Tahilramani, analyst]

Sir, and lastly, on the railway side, how are the margins?

[Harendra Singh, executive]

Railway, we do have the margins of around 10% to 12% in [indiscernible] of the project, except for macro [indiscernible] rest all because it is a very small portion versus INR 100 crores [indiscernible] Rest all projects do have the margin of about [ 20% ].

[Vaibhav Shah, analyst]

I think that the [ DMR ] [indiscernible] is 3% margins.

[Harendra Singh, executive]

Yes.

[Vaibhav Shah, analyst]

Why the margins are so low at 3%?

[Harendra Singh, executive]

There has been some issues with respect to the design and with respect to the [indiscernible] underlying. So because of that, there has been some time overrun and the cost of overhead increase, which we have both anticipated in a similar way when we are doing more higher projects to cost of overhead which remains around 6% where this project is way up at about 12% to 13% because it's a very less production every month.

[Shravan Shah, analyst]

So initially when you build for the projects, the margins were in the 10% to 12% range, but it is [indiscernible].

[Harendra Singh, executive]

[indiscernible] 8% to 10%. Yes.

[Operator]

The next question comes from Maximal Capital.

[Unknown Analyst]

[indiscernible] [ need ] a consolidated numbers, these are quite low compared to the stand-alone number. So you are knocking off the related party sort of transactions, right, which you're one entity, stand-alone entity doing the EPC work for your solar [ entities ]. That is the reason, right?

[Harendra Singh, executive]

That is the reason in all solar projects once this project being commissioned. So until the time, whatever execution is happening. As for the top line, which is coming into stand-alone and the margins are also there. But in consolidation, the margins are totally eliminated, but there the text [indiscernible] also is there. So this is the top line and bottom line net effect, which in this quarter, which around INR 62 crores of bottom line is being affected. So this will happen for subsequent quarters as well. [indiscernible] will come back with a [ call ] correction, worthy commission and start building the project.

[Unknown Analyst]

So the overall impact, sir, how much? You mentioned INR 62 crores was the overall impact on profit before tax or profit after tax?

[Harendra Singh, executive]

Profit after tax, INR 62 crores is a profit PAT which we have seen during the quarter.

[Unknown Analyst]

INR 52 crore, sir?

[Harendra Singh, executive]

INR 62 crore.

[Unknown Analyst]

So it would have been INR 140 crores instead of INR 80 crores.

[Harendra Singh, executive]

Yes. Definitely, this has impacted the [ absolute ] numbers, which I'll say.

[Unknown Analyst]

Yes. So net of this impact, it would have been INR 140 crores instead of INR 80 crores should be reported.

[Harendra Singh, executive]

But this is accounting standard, which always would be coming in such kind of a solar project. So solar projects and [ BOT ] projects, they do have a different set of accounting standards.

[Vibhor Singhal, analyst]

And sir, you mentioned about higher solar margins, right, which you are [indiscernible] knocking off so this is because they are related parties. So in that sense, because these are all related party contracts, then what is the sanctity of the 18% margin in this contract because you may get higher margins [indiscernible] other party because that is anyway the related party. So how should we read both margins?

[Harendra Singh, executive]

In any case, any project being executed for the SPVs or other [indiscernible] holding companies. So they are all the subsidiaries where the contract is awarded to [indiscernible] doing the project where the last procurement to bought our patents to execution [ EPCs ] there. So put together, general margin there. So if we are keeping a balance of the equity I have, which is more important as well as the EBITDA margin [indiscernible].

[Unknown Analyst]

And net of all this, sir -- so because [indiscernible] mentioned [indiscernible] so what is the target equity including the EPC markets and the cash flows that been occurring the BOT of solar?

[Harendra Singh, executive]

So if we consider that the [ equity, IRR ] along with the EPC margin would be roughly around 30%, 32%.

[Operator]

The next question comes from Vishal Periwal from [ Anti Stock ] Broking.

[Vishal Periwal, analyst]

Okay. Sir, this is regarding your one slide in which you mentioned that the [ L1 ] orders that you received, See, for the ultra-vibrant client in EPC mode, the solar plant that we are building in. This is the EPC project costs include even the module and the cell that you need to procure or it's only the EPC work, the [indiscernible] structure?

[Harendra Singh, executive]

[indiscernible], the project was [ 63-megawatt ], they are acquired from Altamira. So once we have acquired the project so that the entire acquisition cost, being paid. And post that, whatever EPC, including solar [ PV ] modules and inverters transport, everything is included in the cost.

[Vishal Periwal, analyst]

So basically then the cost works out to be INR 4 crore, INR 19 lakh per megawatt. So that is -- I mean [indiscernible] presumption in this particular element order rate?

[Harendra Singh, executive]

Correct.

[Vishal Periwal, analyst]

And similarly for this NTPC 1, the INR 370 crore project cost, which is there, so this includes your battery or it includes only [indiscernible].

[Harendra Singh, executive]

This includes battery as well as some bought out by [ other ] than battery items, which are inverters and others creating that [indiscernible].

[Vishal Periwal, analyst]

So I mean, generally, these -- I mean, the NTPC order that you are saying even the IRR will be -- What, upward of 13%, 14% equity IRR and then plus EPC margin will be there. Is that a fair way to understand?

[Harendra Singh, executive]

Yes. That is again a similar question. The EPC margin are around 14% and then QDR that is again 14%.

[Vishal Periwal, analyst]

And maybe one last thing from my side. I think, initially, you touched upon like the [ PMO ] in the road side, they have done an approval of INR 50,000 crores worth of order. So anything that you're hearing like when this will see a light of day in terms of tendering because this is -- this was approved long back, but not heard anything in terms of award.

[Harendra Singh, executive]

So one is the [indiscernible] approval of the project [ whereas ] any greened or any such kind of a project for [indiscernible] approval then post approval is the second part, which is the [ SSP ] approval, which is now really say the committees which we are going to approve, the [ DPR ] and everything. So [indiscernible] keeping on a strong and fast pace is being done. So we are expecting right after this over also in December, January, February, the very thing which they are then planned 5,000 kilometers is likely to be rolled out and to be awarded.

[Operator]

The next question comes from [ Ajay Kumar Suria ] from [ neveshai.com ].

[Unknown Analyst]

Sir, I'm new to the company so I just wanted to understand on the custom order, which we have got. So we have an order of around 700 megawatts or [indiscernible] INR 1,800 crores to INR 2,000 crores. Sir, if you can help me explain the understand -- the working of this order like -- it is a part of [indiscernible] component as well as the fee level solarization. And we commented that we have started ordering the models and other components. Sir, will the pumps will also get changed in the [ FLS ] part, if you can help me understand or give us some thoughts on the working of the [indiscernible] in the order which they are won. And sir, we have been hearing the pace of execution, and this [indiscernible] has been pretty slow compared to the [indiscernible] component so if you can also highlight the problems we are facing maybe in terms of acquiring the land or getting any regulatory approval. So as you can just what is working in the industry as of now, that will be very helpful.

[Harendra Singh, executive]

[ This ] sector is a [indiscernible] where we need to align the land, which is being taken on the lease basis, so over 50% of the land parcels already in place. And we have all started -- they all -- wherever we having the land in place, we already started the project around 60 to 65 days, we usually are looking or seeing that once the project being started, the completion is happening then 15 to 20 days more for the commissioning. So this we are seeing that if the land availability is insured, then most of the [ 88%, 89% ] of any problem and any dynamic problems [indiscernible] settled. And other regulatory affairs, where the PPAs being signed, and we are receiving the [indiscernible]. So these are the regulatory things which are happening [indiscernible]. So in this [indiscernible] as well as [ PV ] modules and our veteran transformer, we have already have jumped orders whether all such big chunk of supplies should be aligned well with completion. So this we have done. And within the last three months, see most of those things being done, design being done. So now the progress is on track, we believe, that, say, in the month -- in the quarter of December, January and March and June. So most of these projects will be completed.

[Unknown Analyst]

And sir, on the [indiscernible] part, are the pumps also getting replaced? Or like the pumps are not getting [indiscernible] and it's only the electric farms are getting solarized?

[Harendra Singh, executive]

No, these are not pumps. They are nothing related to electric pumps. They [indiscernible] power, the energy, which we are producing. The power is to be sold to the nearest [indiscernible] of this call. So it's very near [indiscernible] 1.0 - 1.5 kilometer of transmission line needs to be laid.

[Operator]

The next question comes from [indiscernible] from Tiger assets.

[Unknown Analyst]

[indiscernible] looking at any recent -- upcoming government orders?

[Harendra Singh, executive]

Sorry?

[Unknown Analyst]

Are we expecting any upcoming government orders?

[Harendra Singh, executive]

Government orders?

[Unknown Analyst]

Yes.

[Harendra Singh, executive]

[indiscernible] of order which we are -- the projects which we are bidding. Already -- continuously [indiscernible] continuation, we're already [ upgrading ] the project. But as of now, there is no result yet [indiscernible] the results which I just -- has expected that in highways, around INR 20,000-plus crores and then railway INR 7,000 around projects where the results are yet to be declared.

[Operator]

The next follow-up question comes from Maxim Capital.

[Unknown Analyst]

Yes. So on the railway part, you mentioned that the margins are 10% to 12%. So that is significantly below the company average. But on the capital side, is it more capital efficient in terms of the cash flows or what is the benefit apart from diversification that we are getting by aggressively getting into that [indiscernible].

[Harendra Singh, executive]

So railway project, one thing is very unique. It's not that [indiscernible], there is a big difference between the capital allocation of working capital cycles, it is almost similar as in highway APCs. But very important is if we are looking into projects where the weighted margins are very important, it can be [indiscernible] highway, road projects and then highway EPC projects. And the highway EPC projects, which we are having a similar kind of margin around 12, 13%, even in a project like [indiscernible] we are doing, it's a similar kind of margin. So in the high CBC, margin gains are [indiscernible] only and [ hand project ] the margin [indiscernible] around 18%, 19%, then solar also margin also around 18%. Put together, weighted average is around [ 15% to 17%, 15% ].

[Unknown Analyst]

And the core assets that we have sold. So I think the price to look on that was around [ 1.4% ]. But on our invested equity, what kind of IRRs were we able to get, including the EPC margins that we had accrued earlier?

[Harendra Singh, executive]

So as far as the EPC margins, it's a totally different subject, that's [indiscernible] usually is executing the project on a EPC lump-sum model only and first for including the price escalation or including anything with a plus side [indiscernible]. So this is one way when we are calculating the margin for coming to EPC [indiscernible]. And regarding the equity IRR, which we have seen in the earlier past, that wherever a percent of [indiscernible] projects for solar projects, we are usually maintaining about 14% of our guidance, and we should get equity at around 14% to 15%.

[Operator]

The next follow-up question comes from [indiscernible].

[Unknown Analyst]

Sir, my question is on, again, the [ custom componency ]. Sir, If you can also explain us the tender, how are [ you ] awarded? So isn't [indiscernible] gets the order? Or is it some technical qualifications, which are required, which is providing an advantage to [indiscernible] new orders?

[Harendra Singh, executive]

Sir, earlier, the strategic partner was there. So we partnered with a technology partner while we bid for those electing last year only. Now in [indiscernible], there is a different model where the [indiscernible] so now the projects are of a totally different model. So we are not at -- and if at all, participating in such kind of orders in this financial year also. So we are looking into these newer opportunities coming in where kind of a segregation of the distribution and networking with the best projects, which is a [indiscernible] energy storage solutions. [indiscernible] kind of projects are now in pipeline.

[Unknown Analyst]

And sir, if you can also throw some light on the opportunity side because if I look at the order book as of date, solar orders are around 9% to 10% of an order book. If you can also explain the opportunity size [indiscernible] component for [indiscernible] on the overall solar scheme of things which are happening across the country?

[Harendra Singh, executive]

So right now, as far as [ our total ] order is concerned it is around 14.5% of the solar orders. And a part that already has explained, that we would not be very keen on adding more of the [indiscernible] but -- again as we are looking into some hybrid kind of a budget where it can be better [indiscernible] block power to be generated. But then again, there are tenders which we will try to set up some -- project power plants and it had to be a kind of a [indiscernible] government also is inviting some projects on a [ HAM model ], where are the EPC projects. They're all EPC.

[Operator]

The next question comes from [ Kumar Srimal ] from Axis Securities.

[Unknown Analyst]

Sir, currently, we have already diversified from roads to railways to solar and to power also. So are you also looking to diversify into power transmission segment and I think there has been a lot of traction from the government in this particular segment?

[Harendra Singh, executive]

We have -- technically our team is examining such kind of projects where -- because they are, again, such kind of our project where [indiscernible] transmission or [indiscernible] there and the [indiscernible] cost trend is again prohibiting sector, which such [indiscernible] project because the project being delayed when the earlier part was another hour ago also. So the moment we are also helping giving the new guidelines for our [indiscernible] also. But we are working on it. As of now, we do not have any product pipeline where we may be bidding at least.

[Unknown Analyst]

And sir, how is the [indiscernible] intensity currently in both [ EPC and HAM ] projects?

[Harendra Singh, executive]

I think not many projects have been bidded. But for sure, there are cost-cutting and aggression has been seen in highway. But there are chances that the big [indiscernible] criteria and something is going to be changed very soon in highway as well.

[Unknown Analyst]

And sir, what would be your CapEx guidance in FY '25 and '26?

[Harendra Singh, executive]

Not much of a CapEx is required because the project which we are operating at railways or solar, we do not have such a big CapEx requirement. [ I will do all ] already having the [indiscernible], which is available. So hardly, there is a INR 35-odd crores, which is likely to be their [ end case ] of requirement -- any such requirement for the year.

[Operator]

The next question comes from Shravan Shah from Dolat Capital.

[Shravan Shah, analyst]

Sir, just to clarify, did you mention that the solar order book of INR 1,900-odd crore which is that will be completed by June '25?

[Harendra Singh, executive]

Around 90% of this would be completed.

[Shravan Shah, analyst]

And sir, debt has gone up to [ INR 84-odd ] crore to INR 62 crores in Q2. So previously, we were looking at INR 500 crores to INR 600 crores kind of cost stand-alone date.

[Harendra Singh, executive]

As I already had explained in my remarks that because which we were very -- it was very important for us to block the [indiscernible] at a fixed price as well as transfer the inverter and all cable items. So these are the one item which we have [ booked up ]. That's why for [indiscernible] huge advances has been paid as well as what we have exhibited in solar so we have seen that [ there are ] solar is either unbilled or it is or say, to receive as a debt of the balance. So this is because of [indiscernible] but it will be coming back to the normal level in Q3 and Q4.

[Shravan Shah, analyst]

So by Q3, Q4, it will be, again, back to INR 500 crores, INR 600-odd crores?

[Harendra Singh, executive]

Yes.

[Operator]

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

[Harendra Singh, executive]

Thank you. I appreciate you all for taking the time out for attending today's investor call. And I hope all of your questions were answered adequately. In case there are still any follow-up queries, please feel free to reach out to us or our IR advisers, Go India Advisors. Thank you.

[Operator]

Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.