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Ircon International Ltd
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Good evening, ladies and gentlemen. I'm Stephen, the moderator for this conference. Welcome to the conference call of Ircon International Limited, arranged by Concept Investor Relations to discuss its Q3 and 9 month FY '22 results. We have with us today Shri Yogesh Kumar Misra, Chairman and Managing Director; and Shri Surajit Dutta, Chief Financial Officer and Executive Director.[Operator Instructions] Please note that this conference is recorded. I would now like to hand over the floor to Shri Yogesh Kumar Mishra, Chairman and Managing Director, for his opening remarks. Thank you, and over to you, sir.
Thank you, Gaurav. Ladies and gentlemen, good afternoon to all of you. I'm Yogesh Kumar Mishra, Chairman and Managing Director of the company. I welcome you all to this conference call, which is -- which we are holding after declaration of our financial performance for Q3 and for the 9 months in FY '21, '22. So I have with me my colleague, Mr. Surajit Dutta, Chief Financial Officer and Executive Director Finance.We have already uploaded a detailed presentation on the stock exchanges for your reference. So I hope you had a chance to go through it. Although we have -- we have faced COVID-19 situations during the current year as well, but the impact has not been as much as the previous years, which shows in our results. We are -- now we have resumed operations in a full-fledged manner, and we are operating now at the pre-COVID level. We have secured good orders during this quarter, and earlier during the year. Our order book as on 31/12/2021, stands at INR 43,505 crores. And out of which INR 11,000 crore orders -- worth of orders have been won in Q3. Now as we all know, since most of our orders are coming on competitive bidding, so the share of orders under competitive bidding has now come up to almost 45%. Some of these orders that we have secured are from highways -- in the highway sector under the HAM projects. And we have found 2 FPDs already in this quarter. And after closing of the quarter also, we have formed three more subsidiaries. So we have 5 now projects under HAM, which we are going to implement. During the quarter, we also signed an MOU with 1 of the leading consultants [ Systa ] for cooperation in the tunneling sector. They are a name to reckon with in the [ Bijan family ] and the firm has done good work in NATM tunneling. So we thought we'd join hands together, and go together in lockstep both the technologies are being used. And now as we're pleased to summarize the financial performance of the company in third quarter. Our total income stands at INR 1,709 crores as against INR 1,304 crores in quarter -- in Q3 FY '21. The revenue from operations stood at INR 1,639 crores as against INR 1,246 crores in Q3. Core EBITDA reported was at INR 107 crores as compared to INR 86 crores. Profit before tax stands at INR 169 crores as against INR 134 crores. And PAT reported was at INR 130 crores as against INR 103 crores in the Q3 last year. EPS stands at INR 1.38 per equity share of face value of INR 2 per share. I'm happy to -- of course, it has been announced already, but we have approved an interim dividend of INR 0.70 per rupee share on the face value of INR 2 per share. So we are maintaining our dividend as per the previous years to our shareholders. Now I would like to make the floor open for question-and-answer session.
[Operator Instructions] The first question is from the line of Shreyans from Equirus Securities.
Sir, basically, my question is pertaining to -- I mean, if you could give us -- if you could help us with the order book or the key projects which have contributed to the revenue?
You want to talk about the, out of the existing order book you want to?
So key projects like [ Shiran Kampur ]
Our key revenue has come from the projects of the main is Dharam-Qazigund or the Udhampur-Srinagar-Baramulla Rail Link project. Then we have the Sivok-Rangpo railway project. We have revenue from DFCCIL. Vadodara Kim Expressway, [ continued separator ] project. And then we have other projects. These are the top 5. So others, I think, should be available in our presentation. I think you can see.
Sir, [ if we could start with ] the numbers or probably I'll take it off-line.
Okay. So no numbers means in each of these projects, what you...
Yes. What is the contribution or probably if you could help us out with the outstanding order book?
So you want for the quarter or 9 months?
For the quarter -- for the quarter.
Okay. So for the quarter ending 31st December, our U.S. BRL project, we have -- it has contributed INR 506 crores. Sivok-Rangpo has contributed INR 274 crores. [ CSCCIS TP12 ] has contributed INR 164 crores. [ Hydro Drakim ] has contributed INR 65 crores. Katni grade separator has contributed INR 80 crores. [ Akora Dasambai ] has contributed INR 71 crores. Chhattisgarh project has contributed INR 61 crores, [ Unter Dubling Sikh ] has contributed INR 55 crores. [ Contiba Koli ] has contributed INR 37. I think so these will be the top 10.
Sure, sir. Sure. So now coming to our revenue guidance for FY '22 and FY '23, how do you foresee quarter 4 planning out? And how do you foresee FY '22 and FY '23?
I think we are going to significantly increase our revenues. Of course, last year, our revenues in the last quarter was also pretty good. But since we have already done well in the 3 quarters, so my overall revenue, I would expect going maybe INR 1,000 crores more than last year.
So roughly INR 2,300-odd crores for fourth quarter of FY '22.
'22 or '23, you can say.
Okay. Okay. And for FY '23, what is the target now?
FY '23 would be similar to this, maybe an increase of about 5%.
Increase of 5%, right?
Yes, yes, yes. There won't be any decrease. We will be able to at least maintain the revenues to this level FY '23 also.
So I just want to understand that we have an order book of INR 40,000-odd crores plus -- and despite that, we are talking this about 5% growth in FY '23. So just wanted to understand what is stopping us from going to that 10%, 15% mark?
See, the projects that we have, many of them, you can see they are like the HAM projects. You have -- they take a lot of development time also. Our JV projects in the coal SPVs also are -- they are in the development stage. So although they are in our order book, they are still land acquisition going on, [ foresting ] going on. So the construction is starting a little later -- so that's why it is taking -- so if you see right from the concept to commissioning, about 5 years, but once we start the construction, it's about 3 years. So that's why our revenue is close to this.
Got it. Got it. Got it. So sir, now coming to our margins. I mean, we've been talking about 9% to 10% in terms of operating margins. But we -- since last 4 quarters, we are on track as far as execution is concerned, and margins are still not showing [ some any ] signs of recovery.
You are right. And last -- I think in the last conference call also, I had said that since we are now going for more and more competitive bidding projects, and the portfolio of our foreign projects, unless that increases, our margins are going to be under pressure. But we will maintain the margins that we have achieved in this quarter in future quarters as well.
So sir, could you assume that 7% is -- I mean, in terms of operating margins, 7% is a realistic number going...
7% to 8% is a realistic number.
Got it. Got it. Got it. Sir, a couple of questions from my side. Additional questions. One is as far as highway sector [ certain bidding ] we recently won HAM projects. If you see our bid was very, very competitive. In fact, a couple of projects are at a discount to the authorities' estimated cost. So just wanted to understand the thought process behind this?
Actually, if you see the entire bidding -- we have analyzed the earlier bids also where we have participated, we have become -- we have come at L9, L10 or even lower than that. You see so many [ bidders ] have now come up. It's basically -- we always do the work from scratch in the -- based on the first principles. So we don't go by what others are going to do or what is the estimate. So you can see in some of the tenders, the bids have gone below the estimate, which would not happen normally.So which obviously means that there has been something wrong which the client has assumed or done. So we have done our engineering, we have done our calculations. And we are pretty sure that we will be able to get both our EPC margins as well as the IRR on our investment. So we are very sure. In fact, we have gone ahead with the EPC contract also. And very soon, you will also know, we will also know that our prices have been quite competitive. Although they have been competitive, but still we are going to make our margins.
Sure. Got it. And sir, last question, as far as our CapEx plans are concerned, what is the number for FY '22 and FY '23? And for the solar power, how much investment have we lined up?
For although we are -- for our CapEx, we don't have any targets as such. But for the solar grid, cost of the project is around INR 2,500 crores. And we intend to finance it with a debt:equity ratio of 80:20. So in which Ircon's investment will be about INR 201 crore.
INR 200-odd crores. Got it.
Yes.
And sir, this would be invested in a period of next 2, 2.5 years?
Yes, yes, yes. Our target is June 2024, and the major -- the requirement of this was that we were to sign a power purchase agreement with the consumers. And I'm happy to tell you that we have already finalized it with Indian Railway. So Indian Railway will be purchasing all the power that we'll be producing. The entire 500 megawatts will be uploaded by the railway itself.
Okay. Okay. And it will be on a fixed charge basis?
See, yes, because I think you know probably that this bidding was done under the -- from [ ibida ] under limited competition with PSUs. So where our -- the tariffs that we charge is fixed. That is that we can charge. So we have -- actually, railways is already buying power in the range of INR 5 to INR 6 [ per unit ]. And we would be giving them at about INR 2.45 and which is good enough for them. So they are very happy to even purchase at that price. But we also cannot go in for a higher tariff because of the conditions of the bid, which we had accepted.
Sure. And just in addition to this, sir, what would be our investment in roads in next 2 years?
Our road projects, I think order book [ is somewhere ]. See, I think the total right now, projects that we are going to implement in the next 2 years we have a total investment of about INR 4,000 crores to INR 5,000 crores.
So that would be debt plus equity rate?
Yes, yes. That's right.
So assuming that we have to increase around 20-odd percent in the comp, so back [ order 20% ] will be increased from -- in next 2 years?
Yes, yes.
The next question is from the line of [ Arem Brevedi ] from [ Axis ] Securities.Yes, sir. We could not hear you clearly, sir. Please...
So just 2 questions. One is on the road asset. So given the recent projects just on the infrastructure sector and especially roads, what would be your plan on the road assets? And how do you see your company benefiting from this announcement? And secondly, the nomination contracts have remained in the range of around 24,000 to 27,000 in the past few quarters. So that would also be remaining the same going forward? Is that a correct assumption if we were to think of?
Okay. So regarding the road projects, we -- our portfolio as of now is about 20% after the recent bids. And we will continue to maintain this. So we'll be finishing 2 HAM projects this year. And so that -- basically, our limitation is the amount of equity that the total amount of equity that we can put in -- so as our network goes up, the amount that we can invest is higher. We have the cash, but we have limitations in terms of the regulation.So we intend to take highway projects almost in the same ratio in which we are doing right now. Regarding the railway nomination projects, I think I told that the -- we are not going to get any more nomination projects. That's why we have started bidding for railway projects wherever it's possible. We normally are competitive in the large value projects. So we have received orders for the T2 package of National High Speed Rail Corporation, which is INR 5,100 crores. And we have another C7 package, which we have won, which is in with our JV partner, this was INR 3,400 crores. So we are also participating in the bids of the railway sector, and we hope to get [ out ] a significant share from there.
The next question is from the line of Mohit Kumar from DAM Capital.
Afternoon, sir. Sir, how are the ordering outlook from the railways looking like in FY '23?
Sorry, can you please repeat the question? I didn't hear it properly.
Can you please elaborate on the order opportunities in FY '23 from the Indian Railways?
Not. I think if I understand correctly, you're talking about the orders from the railways.
Ordering opportunities available in FY '23.
Available on the FY '23 here in [ the railroad ]
Available in '22, '23, there are going to be some bids coming up in -- there's going to be some bids coming up in the dedicated rail corridor in the Eastern sector which will be under [ TCP ] -- then the national high-speed rail corporation, there are more bids coming up. We have participated in some, won some also, but then -- now we have more bids coming up.We have also participated in -- we have also won projects in the National Capital Regional Transport Corporation, NCRTC, which is an electrification project. So I think they are going to go for new corridors. There also we see some opportunity, that also gets classified in the railway only. And we have some metro projects where we have the track, the tender towards track construction coming up. We have won a project in Chennai. So we hope to participate and get some projects from the metros as well.
So I'm trying to figure out the limited participation opportunity, which happened between Ircon right and the other PSUs, what is that opportunity in FY '23? Is it possible to quantify that number?
No, no, no. I think probably, I think maybe you're not aware, this limited competition has also been done away with by the railway. So now they have said we have to go in for competition with private players -- now these owner railways will be inviting the bids, and we will be going like any other [ firm ]. Right now we are getting products from high speed or dedicated freight corridor or NCRTC. We'll have to get projects from railways as well. So there is no more limited competition now.
Understood, sir. Secondly, sir, on the high speed rail and the high speed [ electric ], I think you've won around a lot of orders of around INR 68 billion. Do we need to subcontract this order to party? Or are we capable of executing this project on our own?
See, in such large contracts, nobody does any of all the activities on their own. Basically, you have to work like an integrator, because the [ L&T ] also work in such projects, we also do the same. So we have to basically put together a set of people with whom we have to integrate, design and integrate and [ task ] projects. There are some procurements, which we do directly, but then most of the contract works, like if there is a casting yard to be set up if there is some playing to be done.So part of that, maybe the machinery we buy operate on our own, but then the labor contractor has to be there. So that way, we're capable of doing it on our own. So in C7, we have a partner, and he is doing a significant part of the work, but Q2, yes, we have -- we can do it on our own. We are going ahead like that.
Who is the partner in C7?
C7, we have Dinesh Agrawal, he is our partner.
Understood. Sir, on the highway side, I think we have floated tenders to subcontract. Am I right in saying that?
Yes.
For both the packages.
Yes, because in highways, we have earlier tried to do some projects on our own in the sense that -- we had our own backing plants, our own [ oat mix ] plants, our own plant and machinery operated by our people. But gradually, we have found that some subcontractors are able to somehow use all those more efficiently. So we are now subcontracting a large part of the work to the subcontractor directly, keeping our margins, of course.
When can you expect the spending to happen, sir?
Already, 2 tenders have been invited and 3 more are going to [ sound very ] soon. What is already invited.
What is the kind of margin expected on our books? Orders?
[ We see ] margin would be about 6%, 7%. But our IRR is going to be in the range of 12% to 13%.
The next question is from the line of [ Raj Owar ], an individual investor.
I have just 2 questions. Okay. First is on -- like could you give us a quantum of international orders we have in our [ kitty ] in coming quarters?
As of now, we have not won any big order in the international market in the recent past. We have become L1 bidders in 2 projects, 1 in Sri Lanka and another in Bangladesh, but we are yet to receive the orders from there. We hope to get 1 project in another 1 of our other neighboring countries, which we are trying to secure directly through the ministry, but that may happen soon. Other than that, there are not many tenders which have come up in the recent past, probably because of COVID-restricted international travel. So not many opportunities are coming up. We are following all the developments very closely. We hope that we'll find some opportunities very soon and be able to get something. As of now, there is nothing concrete which I can see other than the Bangladesh, Sri Lanka and maybe a project in Myanmar.
Okay. And my second question is like we have heard that the government will ask PSUs for mandatory quarterly payout of dividends. Have we received any such notification from the government? Can you just put some light on that, sir, that would be helpful.
Yes, yes. We have received the directions, but they are not mandatory. We are not -- they have not been asked to give dividends mandatorily -- but as a good practice, we are giving it. So we have given the dividend in all the quarters now. All the 3 quarters, we have given the div.
The next question is from the line of [ Sanjay Awatramani ] from Envision Capital.
Sir, and thank you for giving this opportunity. So can you get me the debt on debt figure and for this until 9 months?
The debt figure.
Yes.
We have no debt on our books. We don't have any debt on our books. Whatever entries are there, that's a pass-through entry and guaranteed by the government of India Ministry of Railways. Repayment is to be done by them.
Okay. Okay. Okay. Got it, sir. and next, sir, that someone previous participant told that we [ rolled ] the project investment [ to be 4,000, 5,000 ] crores. So just wanted the clarity that this is would be 20% of the overall revenue share, right, road projects for us.
Yes, yes, almost.
Okay. And sir, what are the challenges we might face in the near future? As you said that the private companies were also coming in for competition for orders with railway, right, as we mentioned previously. So what will be the challenges we face on this?
No. See, since we are -- we have already been -- we have also been getting projects earlier. So we got our DFCC project on competition there, we had L&T now coming up as our competitors, big companies. Our Bangladesh project we won in competition, Sri Lanka project, we have won in competition. So -- and this high-speed project. We have 1 in [ propagation ]. So I don't think that is a challenge for us because we are not dependent only on the nomination portfolio. You are in any case going for bidding for highway projects. But yes, because we had a large portfolio on a nomination basis, it was serving as a sort of a secure order base on which you can rely on. But then since it is not there, now we have the entire market open to us, and we will keep making more attempts at securing projects from there because we're not going to get anything from the railways.
Okay. Okay. Okay. So understood, sir. And lastly, you said that we have INR 11,000 crores order book. So what is the time line to complete this order?
See the INR 11,000 crores that we have secured INR 5,100 crores is the high-speed railway project. The high-speed railway is basically traveling on the elevated tracks. So the elevated track is also under construction. So the total work is to be done in about 4, 4.5 years. right? So in the -- in that project, it is 4, 4.5 years. But all our highway projects, they have to be completed within the 1 project which is to be completed in 18 months, there are others which have to be completed in 24 to 30 months. So highway projects, we have shorter time lines. In the high-speed project, we have a slightly longer time.
Okay. So if we see that the range will be around approximately 3 to 5 years' time, and this is what we can get out of this .
Yes, yes, yes, exactly. See, the -- when we get projects on nomination, when we used to get projects on nominations on the railways, the projects were -- when they were given to us, they were like our big projects. So we had to do a lot of development where before we could actually start working on those projects or getting revenue from those project. So that is why the time period taken and railway, there are a lot of approvals to be taken. And the railway just handed over the project to us without giving us all the approvals. So that's why the time line there, normally, if you see falls within the range of 5 years, 4 to 5 years.But I think with the -- with now -- in the bid-out contracts because the time is of essence and everything is very well defined at the tender [ sale ] itself. And everything is defined. There are penalties if the client is not able to give me land. In the nomination project, if I didn't get land for 5 years, nobody bothered because we also did not bother because it was a cost plus project. But here, when we go for a project which we have won on bidding, there, both the client is also answerable for that, and he has to compensate me for that. So I think the time lines for completion will become shorter.
The next question is from the line of Shreyans from Equirus Securities.
Sir, just wanted to understand what is the cash on hand?
Cash on hand is about -- cash on hand is our own fund is INR 428 crores, and the client and other earmarked fund is INR 3,680 crores.
Okay. Sir, last quarter, it was roughly around INR 600-odd crores. And now we are at around INR [ 40-odd ] crores. So what is the usage of funds, which you've done?
See, we have projects on the SPV model with these in Chhattisgarh, in Jharkhand, in Orissa, which are basically with the coal companies where we have an equity share of 26%. We have contributed some there. And about INR 90 crores we have contributed towards our working capital requirements.
So could you quantify how much has been for those PVs, the SP ones? [ A round ] number will also do.
Sorry, -- can you repeat the question?
So I'm asking you to quantify the investment, which -- I mean the cash which has gone towards the SPVs, if you can quantify?
I'll just tell you. Not -- in this quarter or you are saying overall?
This quarter, this quarter.
This quarter, INR 90 crores has gone to the SPVs.
INR 90 crores for working capital.
Yes, yes.
Sure, sure. And sir, last question, what is the update on the [ BK promotion ] project where we were supposed to get some approvals. And at the same time, our NCR project, the mall project.
Yes.
So I wanted an update on the same.
One is the mall project, the 1 which 1 did you say?
With BKC land.
BKC land. The [ B Bandra ] land, I think we are still struggling with BMC and [ this Greater ] Mumbai corporation. We have to sign a tripartite agreement with the railways. And the conditions which they are trying to impose are not acceptable to the railways. So possibly, there is some kind of a sale made there because the access to the land has to be provided from the expressway. And unless the MMRDA facilitates that, we cannot realize the value of the land which is there. So as of now, that is right now a little stuck up unless something comes up at the political level, maybe then only we'll be able to resolve it. Regarding the mall, we had invited tenders and we have issued a letter of acceptance to 1 of the operators. And what we are going to get is a INR 25 crores upfront and INR 8 crores annually. So we have given it for 9 plus 9 plus 9, so 27 years.
Sorry, 9 plus 9 plus 9.
Yes. So nine dependables. Another nine of course on mutually agreed term.
And would there be any escalation clauses out there?
There is an escalation clause in that.
Okay. Okay. And sir, this will be effective for, I mean, when this thing can happen?
As soon as we give the upfront payment, I think after that it starts, we had some rent-free period in which he had to develop because he will need some time to do the furnishings and then give it out to the secondary, to the other retailers. So there is some rent-free period. And after that, we will start revising I think. But it will start from the day he gives our upfront payment of INR 25 crores.
INR 25 crores. Okay. Okay. And sir, in terms of accounting, this will be a part of a stand-alone revenue, right?
Yes, it will be our stand-alone revenue because this investment is from [ a gone onto ]
Okay. And sir, just wanted more details for the same. So INR 25 crores ideally would be in terms of probably INR 8 crores would be coming to the top line? And anything in terms of costs, which you would be concurring? Or it would be majorly going to the bottom line?
No. It will mainly be adding to the bottom line. There are very -- because most of the maintenance, the -- all the charges for electricity, everything is included in his -- I mean, this INR 8 crore is net of all that. So we are not going to incur any expenditure there.
Got it. Got it. Got it. And this INR 25 crore is the deposit amount?
No. It is going to come as revenue to us.
Upfront.
Upfront.
The next question is from the line of Vishal Periwal from IDBI Capital.
A couple of questions. One, you mentioned the INR 8,000 crores orders that you received in high-speed. So what is our share of work in this?
No. There are 2 projects which we have won. One is INR 3,400 crores, in which our share is 50%, so INR 1,700 crores. And we -- the other one is INR 1,551 crores, we keep on as 1 on its own. So there are no partners in that. 100% is to be done by Ircon.
Okay. Got it. And another thing, I mean, you mentioned that the clarification on this part, the total investments that we plan to have right now is a INR 200 crore in the solar that is over the next 2 years. And then, I mean, like you have on a road asset of around INR 2,500 crores. So incrementally, like I mean, like INR 500 crores in a road investment over the next few years?
Yes, because we have got 5 projects, the value you know is INR 4,000 crores -- around INR 5,000 crores. Yes. So we have about INR 5,000 crores worth of highway projects, in which we will be providing our share of the equity. So that will be about 20% to 30% depending on how -- what we are able to negotiate. So if it is 30% also, we'll have to provide about INR 1,500 crores in that.
Okay. So what are your thoughts on funding this? I think the reason I'm asking is like on a run rate on an annual basis, our PAT is something like INR 4,500-odd crores. And we are going in this investment that we talk about solar and other good assets. And plus, we have a dividend again, like a 40%, 50% dividend payout that you've [ been ] doing it until now.So how exactly we plan to fund it?
No. If you see our cash balances and some of the cash that we have put in our earlier projects, if you see, we have all refinanced our debt in those projects and brought the cash out from there. So all our earlier road projects where we had initially put in our money. Later on, we have substituted our loan with a loan from the bank. So that is the cash that we have or we will have for our investment for other projects.
Okay. So this own cash of INR 450-odd crores you mentioned, it includes the money that you received from the bank after refinancing of [ the loan ].
No, no. This INR 430 crores is already available with us. Like we already have a loan of sanction for the Incon [ Shipuli ] project. We already have a sanction available from the bank and approval from the NHAI to take the loan and substitute the money that we have given there. So once we do that, we'll get about INR 500 crores back from that project. So we'll have INR 900-odd crores to be invested.
Okay. Okay. And then I think earlier, you were planning to sell off the road assets and operation 1. So any -- I mean, like any time line that you see your [ program as happening ]?
See, this substitution of the loan -- our own loan with the bank loan was a step in that direction. We were planning to go ahead with the sale of road assets. But because I think last time also I said, there are guidelines from [ BPAM ] now -- and probably these -- some of these assets may be taken under the national -- the monetization -- the monetization of the asset program that the government had. So we are waiting for more clarity on that. So because in any case, we'll have to go to them for taking the approvals now. So we are waiting for some clarifications on that. And once we have the clarification, either will offer it to them for monetization or we will monetize it ourselves. So that clarity has to come.
Okay. Okay. And then you mentioned in 1 of the previous participant question that INR 90 crores is the investment that we have done in [ all SP or rail SPV ] ?
Yes, yes. We have 5 rail SPVs. One is Chhatisgarh East railways, Chhatisgarh East West Railway, Manabi Coal railways, Jharkhand and 1 and the BRPL, the Bastar Rail. We have 5 SPVs, in which we have 26% stakes. The majority stake is in 4 companies is by the coal companies. The Central coal field, the Southeastern coal fields, the Manati coal fields and in Bastar Rail, it is by NMDC. So we are there in these projects -- so 1 is we are also the executing partner. So we have put in our equity. We are also executing these projects. So we are realizing our share of revenue and turnover from there, revenue and profit from there. And once the project becomes operational, so our first project of Chhatisgarh East Railway has become operational already. Initial 30 kilometers was commissioned last year, 44 kilometers we have commissioned this year. Some more [ spare ] lines and sidings are now getting commissioned this year. So once the traffic picks up, that SPV will also start getting some revenue. And maybe at some stage, it will also come to be [ profiting ].
Okay. So what is the incremental investment that you see, which will go in probably next year, 12 months, 18 months [ or really a see ] Any spending which is there, that is done?
We have yet -- I think in these projects, we have to invest about INR 76 crores more as of now.
The next question is from the line of [ Arkesh Riyas ] from HDFC Mutual Funds.
A few questions from my side. First one, just a clarification on the investment required in the road projects. So effectively, our total loan portfolio is closer to INR 5,000 crores, as you indicated. But you highlighted that 30% equity contribution could be close to INR 1,500 crores. I was wondering because these are HAM projects, so 40% of funding will come from NHAI. So only 50% .
I was saying that because as just being offhand calculation. 40% will come so the investment is much lower [ is my hedge ].
It will be closer to INR 900 crores, I guess.
Yes, yes, yes. You are right. I think I made a mistake there. Yes, they are all HAM projects, so 40% is going to come from NHAI during the [ session ].
Got it, sir. So that clarifies. Sir, secondly, you were in 1 of the response indicating that you can't take more HAM projects because of the limitation of net worth. So I didn't got that clarification. Is there a restriction on what percentage we can invest in growth?
[ The Department ], the public enterprises guideline where we can invest only 15% of our net worth in 1 project or 30% overall. Okay? So as equity. So that is the -- that is 1 limitation.
Sorry, 15% in 1 project, another 30% overall [ that cover ] any number of projects put together?
Yes, any number of projects put together. So 30% of net worth as equity. So [ and ] we are also able to manage as a promoter, contribution and all. But then we also -- then you have to see how much cash you have or how much cash you have put in and how you are going to get it spent. But there is a limitation on the net worth, based on the net worth, which is private [ DT ] 30% of net worth is what we can actually put in.
So just pardon me my ignorance, but let's say, our net worth, let's say, is closer to INR 4,500 crores totally as of now. So 30% of that is almost INR 1,350 crores. This is the total investment that you can make across road projects, across coal SPV and solar, all of the assets that you will actually own in which you can put up equity, right? So current costing is limited to INR 1,350 crores across all of them put together.
Yes, I think this is strictly as equity. This is the contribution that we can make. We can also contribute some amount as an interest-free loan or promoted equity. So to that extent, we have some more leverage. But primarily, we also tend to follow this limit, and not try to overstep too much in putting our equity in [ BOT ] projects.
And just for clarification, sir. The loan substitution that you are doing for, let's say, [ Shipuri Kuna ] INR 500 crores is coming back, of which, how much is coming as part of equity return? Or this is all that you have actually given as the interest-free loan from...
No, no, this was not interest-free loan [ a tee ] In the initial projects, when we first took up some BOT projects at that stage, because it was taking time for us to go for loans from the banks. And banks are not easily forthcoming. So we provided that loan from our company itself. So they are -- that is an interest-bearing loan. And later on now because then we decided that we should now get out of these projects and probably try to sell them. So we tried and substituted these loans out, and we have taken out our own money -- so now we have more cash available to be deployed for other purposes.
Got it, sir. And just rounding this up on this particular aspect that so INR 900 crores is the kind of equity that you have to put in the [ hyfan ] projects. INR 200 is the equity that you have to put in solar and you already put in some money in coal SPVs and more to be put. So effectively, we are reaching to the INR 1,300 crores range already. So unless we do...
INR 1,300 is pure [ equity ] that we can. But we have also. So we have already -- we have invested already invested INR 1,098 crores in equity. And in our earlier projects, we have INR 134 crores more, which we have to invest. And now we'll be putting in the new SPV. In the new SPV -- in this, we will be going for a very small equity contribution and more amounts will go as interest [ payouts ]. We have the cash but we cannot contribute in the form of equity. So we will be going for interest free loan.
Okay. Got it. But just on this, sir, given this limitation, it essentially means that unless we are able to monetize some of these investments over the next 1 to 2 years, our ability to take newer projects will be fairly constrained. So I agree that we will have good profit, but [ not ] 50% of profit going into dividend, our net worth will only increase by that much. So we will get constrained unless we have recycling of these assets.
You are right there. But I think we have also -- we are also going to start getting some dividends from some of these SPVs, which we are already getting from 1 of our companies, which is [ econsulmatule ]. We have already -- this year, we have got about INR 41 crores as dividend from that company.So we are also now getting some returns. And maybe in the next quarter, we will get some revenue from some of our other SPVs as well. So we will get some money. But yes, you are right. the ideal thing to do would be to monetize these assets and get the cash so that we can invest more. But because being a government company, we have a limitation. So we'll see when we can do that. But as soon as we get an opportunity, we'll try to do that.
Got it, sir. And 1 last question, sir, you did integrated the coal connectivity CERL status. If you can also highlight the broad status for the other projects, where we are today?
One is that we have 1 SPV, which is Chhattisgarh East Railway Limited, which is our CERL. It has got CERL Phase 1 and Phase 2. Phase 1, we have nearly completed. This is in the Southeastern coalfields. Phase 2 is in the process of land acquisition. Then we have another SPV, which is called Chhatisgarh East West Rail Limited. We are also our majority partner is Southeastern Coal Fields. In this, the land acquisition, forest [ clearing ], everything is done, and now the work is going on in the entire project. So this is the second…
Sorry, I'm interrupting. But when do we expect these 2 commission, sir?
No, no, no. The work is going on. Right now, civil works are going on. This will take time. It will take about 2 years more.
Take 2 more years, okay. That is helpful.
And then we have the Mahanadi MCRL, which is Mahanadi Coal Railway Limited. Here, our majority partner is the Mahanadi Coal Limited. So the Phase 1 of that is about 14 kilometers, but it is going to be a very good project in the sense that the revenues that we are going to realize from this 14 kilometer itself will be very good. So this project, we are going to commission in June this year.And the Phase II, of course, has -- is in the preliminary stages, land acquisition, forest clearance and other things. Then we have our current coal railway limited, Jharkhand Central Railway Limited. It is in Jharkhand. This is a project from Shivpur to Kathautia. So here also, basically, we have done all the engineering work. We have done the -- we have almost reached financial closure. The banks -- we have actually got the loan sanctioned from the bank. Only the papers are under signature, but we have started the work in 1 part of the section. And this also, this will take about 3 years to materialize, but this will also be a very remunerative project. So this is another one. And we have Bastar Rail Private Limited, which is Rowghat to Jagdalpur railway line. Here, NMDC is the majority partner. So here, again, there were -- there are some issues, there were some issues with land acquisition, but I think they are getting sorted out. And very soon, we expect things to move. The financial closure is yet to be done. But once that is done, we'll go for the execution of the work.
Great. Sir, that was very, very helpful. One last question, sir, this loan substitution that you are doing for [ chepugurna ], is at what interest rate and what time frame, sir?
The loan that we have got is at 6.95%, in 10 years. I think it's for 10 years. I'm not very sure, but my colleagues are telling me that it's 10 years.
Got it. So that is very, very competitive. Great. Congratulations and good luck, sir. Thank you.
The next question is from the line of [ Hakim Azari ] from Global Capital.
So I just want to note that the company has an internal target of order inflows every year that it sha to achieve.
Yes, I think till about last year, we also had this, it's not just internal. We also have the target as an MOU target within [ the midsee ]. But now because the ministry itself has said that we are not going to [ handle ] you for any orders, so you go on your own. So now we have our own orders, but then we have our 5-year business plan. And we have targets of both our revenue as well as order book, because both of them are linked. And based on that, we have our internal targets.
So what is the internal order inflow target that you have? Like the minimum order inflows that you try to achieve?
Right now, I think what we have targeted is about reaching about INR 50,000 crore order book in the next 5 years. So minus the turnover that we will achieve. So the order inflow has to be between INR 10 and INR 15,000 crores. So I think I'll have to go into the details, but they are available. We have a business plan [ thought ] out and based on that only, our every year, we fixed our -- the order inflow target.
Right, right. And just coming back to your revenue guidance, so the increase of 5% in FY '23, is that 5% over FY '22 revenues, total revenues?
Yes, yes. It's going to be over FY '22 revenues..
The next question is from the line of [ A Girau of A Trend ] Research.
[ First congratulations ] on your different approach [ Daniel just said ]. You have taken a new way of coming to your results. Most of the questions that I intended to ask were covered by HDFC Securities [ I thank them for the percent ]. Regarding the recent budget guidance, around INR [ 247 ] crores outlay of your plan for the next 3 years. How will you -- Ircon is planning to [ manage ] most of the outlet, sir?
See, as I already said, most of the work will be tendered out by the government directly by the railways directly. Zonal railways will also come up with big size tender. Right now, we are not doing that. So once they come up with big 5 EPC tenders, we will be participating in them and then trying to secure from them directly. As we have done for -- as I said, for right now, big tenders are coming only from dedicated rate corridor or high-speed rail where we have already bid and secured projects. So we also hope that we'll be able to compete with the best players in the country and that some of these projects that are going to come up for [ sale ].
Last one, I mean, [ wish ] from me. Actually, India's [ is tan ] was not valued properly in the marketplace. As part of the very good results, it is regarding year-after-year. And your [ ITM ] relationship, I hope that [ IASM ] will be getting [ a reportable ] valuation at the marketplace, especially well before the LIC, before the oncoming IPO issue, I hope that Ircon will be in getting its new valuation at the marketplace?
Well, thank you very much. That's what we also hope but unfortunately, the market is not valuing us as you rightly said, correctly, probably whatever -- I don't know what is the reason because nobody can understand the markets. But then we also hope, as you are saying, to see better valuations in future. Definitely, we are a very strong company. We have delivered good results. Our -- the results going forward that I see are also going to be better -- so I don't see -- I don't see why our share price or our valuation should not improve.
The next question is from the line of Shreyans from Equirus Securities.
If you could touch with the investments which you've done in this SPV till date, that could be really helpful.
The investments that we have planned?
No, no. The investments, you have already done till date for a railway and for the road projects?
Okay. So if you -- so in the road projects, we have already invested INR 562 crores.
This is the reviewed amount, right?
In equity, and INR 1,019.85 crores, so INR 1,020 crores as loan, which I said we are substituting with the bank loan. So in equity projects, we have invested INR 420 crores as equity.
So of which project?
Coal, as I said, SPV projects, the coal projects. We have taken -- we have formed [ SP ] vehicles with the coal companies. There, we have invested INR 420 crores as equity.
INR 420 crores.
Yes.
In total in 5 SPVs.
Yes. And then we have some other -- like our subsidiary, Ircon ISL, the station development corporation, INR 117 crores in that. So a total of INR 1,098 -- almost INR 1,100 crores we have actually invested.
Sure. Sure. Sure. And sir, coming back to the role, as you said, that INR 1,020 crores is given as loans, so which [ in ], we are expecting INR 500-odd crores coming back to us. So the remaining INR 500 crores, is it that we are yet to -- I mean, we'll be going for a similar thing?
Yes, yes. See, depending on our requirement of cash, see, again, there is a problem there because we, as a government company, we cannot invest this cash. We can only invest this cash in government securities or in FDs of the public sector bank. So there are also guidelines there. So that's why since we go out and get a good return on our cash that is available with us, we would take it out as and when it is required, where we can really put it into use.
[Operator Instructions] As there are no further questions, I now hand the conference over to the management for their closing comments.
Yes. Thank you, Gaurav. Thank you for organizing this conference call. And I would like to really pay my sincere gratitude to all the analysts and investor friends who have taken the time out of their busy schedules to listen to us today. I hope I have been giving them the information and answers to satisfy them. And if you have any more questions, please feel free to connect with us in case you have, and we'll be happy to get back to you. Thank you.
Thank you. Thank you all for being a part of the conference call. If you need any further information or clarification, please mail us at gaurav.g@conceptpr.com. Ladies and gentlemen, this concludes your conference call for today. Thank you.
Thank you.