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Ircon International Ltd
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Ladies and gentlemen, good day, and welcome to the Corporate Access Conference Call of Ircon International Limited to discuss the Q4 and FY '20 results, hosted by Reliance Securities Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Ankit Merchant, Research Analyst at Reliance Securities. Thank you, and over to you, sir.
Hello, everyone. We welcome you all to quarter 4 FY '20 Ircon post results conference call to discuss the quarterly performance. Joining us today from the management is Mr. M.K. Singh, Director Finance; and Mr. Alin Roy Choudhary, GM Finance, from Ircon Limited. We will first begin with a short commentary on the quarter 4 FY '20 results and a quick update on the pandemic-related disruptions followed by the Q&A round. Thank you, and over to you, sir.
Thank you so much. Ladies and gentlemen, first of all, I wish you a very good evening to all of you. I hope that during this trying times, you are safe and sound. And this pandemic situation has really put us back a little, about which I will be talking a little later.I welcome you all to the conference call to discuss our financial performance for the fourth quarter and the fiscal year ending March 31, 2020. First, I will give you a short brief about our company, then I will talk about the financial performance of the company for Q4 as well as for the entire year ending on 31/03/2020. As you are aware, Ircon International is a leading turnkey construction company in the public sector known for its quality, commitment and consistency in terms of performance.As you may have seen since the last 2, 3 years, from the time we have been listed, we have been consistently performing well. We specialize in constructions which covers all the high-end infrastructure activities and services, our major focus being on railways, highways, railway electrification, metro projects, and other infra projects, which we consider as our forte.Ircon operates not only in high -- highly inaccessible areas like Jammu and Kashmir, Sikkim, Nathu La pass, et cetera, but also, we also participate in competitive intensive environment, and we bid along with other infrastructure companies to get work and execute them on a purely professional basis. Till date, we have executed many important projects of national importance. Domestically, we have completed around 3,025-odd projects in India. And internationally, we have executed around 110 projects in more than 24 countries till now. That makes Ircon a highly recognized global name in infrastructure sector. The company has a strong aggregate order book of INR 30,700-odd crores as on 31 March 2020.As I stated in the beginning, we mainly work in the rail-related infrastructure projects. So obviously, our order book will constitute majorly the projects on rail-related areas. So out of INR 30,700-odd crores, INR 26,000 crores comes from rail-related projects.The key strength of the company is that it has diversified into various infrastructure sectors over the period of time. And we are an established player in the field of highways, railway electrification, then making big workshops for Indian Railways and for other clients. The broad geographical coverage has helped the company to diversify through DBFOT, EPC, Hybrid Annuity models and other type of contracts as well as the project development and operating through JVs and SPVs. You can be rest assured about the liquidity of the company. In fact, if you have seen the figures cursorily, then you would find that we have a cash balance of around INR 2,500 crores with us, out of which INR 675 crore is company's own money and rest is the money which we have got in the form of advance from our clients.Ircon International Limited is financially strong enough and has all the resources to safely sail through these tough times, which we are going through. We have already commenced operations wherever possible, ensuring all the government directives with respect to social distancing and other necessary precautions in order to avoid COVID-19.Now I will give you a brief idea about the financials, about which we have just had a BOD last Friday, and we have passed our financials and also declared the intent to pay dividend.So I will first speak about the Q4 FY '20 performance. In Q4 FY '20, our [Technical Difficulty] stood at INR 1,788 crores as compared to INR 1,533 crores in Q4 FY '19. And PAT stood at INR 122 crore in Q4 FY '20 as compared to [ INR 95.59 crore ] in the same quarter last year. The PAT margin stood at 6.69% for Q4 FY '20 as compared to 5.95% in Q4 FY '19.Core EBITDA for the quarter stood at INR 130 crore compared to INR 157 crore in the corresponding quarter of the last year. However, if you see the overall year figure, then this particular aberration will be more than covered. So talking of FY '20 performance as year as a whole, the turnover on a stand-alone basis stands at INR 5,202 crore as compared to INR 4,415 crore in last year, witnessing a growth of around 18%. Similarly, the total income stood at INR 5,442 crore against INR 4,680 crore of the last year.Core EBITDA has grown to INR 477 crore against INR 378 crore last year showing a growth of 26% on a year-to-year basis. PAT for FY '20 for the year as a whole was INR 490 crore as compared to INR 445 crore, which shows an increase of 10%, and the PAT margin stood at 9%. The EPS has gone up from INR 47.28 in FY '19 to INR 52.08 in FY '20.I am happy to share with you, you must have gone through the financials and also the announcements made by the company, the BoD has recommended a final dividend of INR 2.06 per share, face value INR 2 after the splitting, in addition to the interim dividend of INR 13.45 per share which we declared. And at that time, the face value of the share was INR 10. So if we take INR 10 as the face value, then for the entire year, the dividend is roughly INR 23.70 per share.Now having shared the salient features of the financials, this brings me to the end of my comments -- initial comments. Now I would like to leave the floor open for questions. And of course, I'll try my best to answer all of them. And others will be pitching in wherever necessary because I may not have all the written information readily with me. So maybe Alin and others who are also in the con-call, they will pitch in with their portion as and when I ask them. So the floor is open for the question and answers.
[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities.
Sir, I have 2 questions. First is, sir, on the -- given the COVID situation, how do you see the execution in FY '21? And given our strong order book, do you have any guidance on FY '22? And sir, secondly, on the -- do you think the CapEx, railway CapEx to be affected because of COVID in FY '21? And have you heard anything from the Ministry of Railways on the bidding pipeline or something you can paint a picture on the order inflow and order pipeline?
Okay. I will try to answer both the questions. So far as Ircon's project execution is concerned, of course, it did get affected in the month of April and May. [Technical Difficulty] but we started taking daily steps to retrieve our situation. And we have now started actually going full hog also in some of the areas. But I can't really say that it has come back to the normalcy as it prevailed in, say, month of February or in the month of January. So having said that, the first 3 months of the quarter have seen a downfall in terms of physical execution as well as in terms of financials, which we are approximately trying to calculate. But going forward, since the labor, et cetera, have been largely mobilized and our operation of execution largely depends on [Technical Difficulty] and plants and equipment, so we hope to gear ourselves in top form, say, in another 1 month or so, provided the things keep on improving as a whole in the country. So we'll have hiccups here and there. And in the first quarter, we expect a significant drop in execution as well as in financials. So -- but if we go down the second quarter, then as a guidance, I can tell you that we'll try to match whatever we have done in the current financial year. So under the circumstances, even this will be a wonderful effort if we are able to achieve this. But that is internally what we are aiming for, and we are pushing hard to at least be where we have ended the year FY '20, that will be great, number one.Number two, coming to railways and the scenario obtaining regarding CapEx to made by Railways, I can tell you that it has now been a conscious policy of the Ministry of Railways that being a important infrastructure company, the expenditure level cannot be allowed to come down because that is the only way to kick start the activities everywhere. So that also includes same level of CapEx as they have projected in the budget, especially in the areas where we work, for example, new line construction or gauge conversion or doubling or railway electrification, et cetera, they are not going to lower the expenditure. And we have a clear-cut visibility that they will stick to what they have presented in the budget, that is around INR 150,000 crore of expenditure on an annual basis in the Indian Railways budget. And out of that, a large part of it would be in the construction activities, of which Ircon is a part. We are doing railway projects, and we do not foresee any reduction in the allotment of all these railway projects. In any case, all these railway lines have capacity-enhancing projects of Indian Railways, which Ircon is doing. So they will in any case go ahead with the projections made, so far as funds availability is concerned.And as you are aware, a lot of funds for Indian Railways projects are coming from extra budgetary resources, like lending from LIC through Indian Railways finance and so on. So railway will be a glimmer of hope, I can tell you this much. And we don't see any shortfall in fund -- whatever we will require, they will give us.
Okay. Secondly, on the highway side, we haven't seen you -- bidding any order, HAM order for -- or any order for last few years. So how do you think -- is it competition -- is the competition tough? Or is it that the order pipeline, something is very low? Can you please comment on that?
Yes. In Hybrid Annuity model, if you see the highway tenders and make an analysis, you will find that Ircon is the only public sector undertaking in the horizon. No other public sector undertaking bids for any of the NHAI projects. All the players in the market are private players. So given this scenario, we have had a look, a hard look at the methodology in which we are making our bids and submitting them. So what [Technical Difficulty] found that we are almost at the -- we are going to hit the jackpot very soon. In a tender which was opened last Thursday, we were second lowest by a margin of [Technical Difficulty], which can be called -- by a whisker, actually. So we have also participated in 5 or 6 HAM models, the results of which are awaited. And we certainly hope to get at least 1 or 2 of them. And we will continue doing -- being in the [Technical Difficulty] come what may. We are also preparing ourselves for the forthcoming Zojila tunnel tender, which is roughly INR 5,000 crore. So we are in association with a known player in the field from the private area, and we are joining hands to participate in that. So we are upbeat about getting a few projects in highway also.
The next question is from the line of Saurabh Poddar from Lucky Investment Managers.
I hope everyone is safe and sound at your end. I had a couple of questions for you. My first question was, I think in Q3, the company guided for shifting about INR 900 crores of loans and advances or equity investments to third-party finance. Instead in Q4, I think there is a rise of INR 600 crores in total in equity investments and loan and advances. Can you tell me the rationale behind that, as to why we didn't go towards third-party finance?
Yes. That's very right that you remember that we gave a guidance regarding shifting some of the loans, which we have given to these SPVs. I am happy to tell you that we have tied up for the loans with 2 banks for 2 HAM projects. And the proposal is lying with NHAI for its final approval. And the amount called will be in the range of what I had indicated in the third quarter results conference. So it could not materialize by end of the financial year, but certainly, I think, as I speak, maybe it is getting approved. I can tell you only this much.
Understood, sir. That's great news.
Yes, yes, yes. So we are into tying up for takeout loans even for Shivpuri Guna project, where our loan amount is almost INR 564 crore to that SPV. We have received the in-principle approval from the lender, and we are tying it up and I will keep my promise.
Got it, sir. My second question was towards -- sir, in terms of -- we do on a very -- we have a very strong working capital cycle, and we also do get advances for our projects. Do you see any fundamental change? While the government might not cut down on CapEx in terms of railway infrastructure because we are, I think, rightly one of the highest priority sectors in terms of CapEx, do you see any change in payment structure? Because then our working capital gets hit quite significantly. Do you see any fundamental change, given that it's been a tough -- it's going to be a tough financial situation for the government to deal with going forward as well?
Yes. I mean, so far, as I told you, the rationale for actually a good pickup in the remaining of the financial year would be how much government is able to put cash into nongovernment hands. And that will also include spending on the infra projects to companies like us, RITES, RVNL, et cetera. And as you have seen the figures, financials, which have been put in the public domain, we have around INR 1,800 crore of advances with them. And the [ first ] quarter experience, let me tell you what I have, that whatever work we are doing in the first quarter for the railways, we are spending from their advances given to us, but those advances are getting recouped in no time. So I do not see or foresee any fund crunch from government side to us. They too are aware, as I told you, a lot of [Technical Difficulty] resources by way of lending from LIC, et cetera. So funding, I mean, everybody should rest assured, is not an issue, thereby meaning that working capital management for a company like us should not be a headache.
Understood. Understood. And my final question was towards your MOU. Is there -- when do you sign this year's MOU? And actually, sorry, I'm going to squeeze my last question is -- another question. In terms of what's the total executable -- total order book -- I think the executable order book you gave out, but the total order book, has there been any growth in that as well?
Yes. The executable order book is INR 30,700 crore, as I stated. The total order book would be around INR 45,000 crore. And that we have not taken into the executable order book as yet. So that is one figure which I can share with you. And what did you ask? You asked something about the...
The MOU, the yearly MOU. When do you...
As you are aware, the memorandum of understanding is between Department of Public Enterprises, Ministry of Railways on one side, and then company on the other side. Because the pandemic situation and the lockdown in the government machinery, we have had our meeting through videoconferencing of a body called Permanent Negotiating Machinery, PNM. And that is conducted by Secretary VP, that has happened. We have indicated our targets because of the same scenario. But since the things are still evolving, so the meeting of the Inter Ministerial Group, IMG, hasn't happened as yet. But I think it should happen in 1 month's time, and we will be signing the MOU for our -- all the performance parameters by end of July or mid of August, and that will be the FY '21 target.
[Operator Instructions] We take the next question from the line of Jonas Bhutta from PhillipCapital.
Congratulations on a decent set of numbers despite the challenging environment. Sir, my question was from -- the first question was more from a data point of view. So basically, the calculated order inflow; so, A, if you can tell us what is the kind of order inflow that you've seen through the year, because based on our calculation, it should have been about INR 7,500 crore; and where did these orders come from, if at all that number is correct?
Yes. As you are aware, since you people keep a tab on the railway ecosystem, the Railways have introduced a bidding system amongst the PSUs for the projects, which they want to get executed from PSUs, like Ircon, RVNL, RITES, CONCON, et cetera. So I am happy to share that in all the categories, which they have made for giving the work to their PSUs, Railways have included Ircon in all the groups. By -- when I say groups, then I mean to say civil engineering work, workshop works or railway electrification works and so on.In civil engineering, of course, there are vast number of areas where we work, for example, new line construction, then making -- doubling or tripling of lines and so on. So we have been shortlisted. And for the first time, they are going to invite bids, limited bids, from the PSUs shortlisted to award the work to PSUs based on the PMC fee. And by this exercise, earlier -- in fact, let me tell you that earlier, last we got any significant work from Railways was in 2016. And most of the works were being given to RVNL because they were considered as extended arm of construction for Ministry of Railways.So now since RVNL is on the same pedestal as we are in terms of submitting our bids for getting the work from Railways, we hope to get at least INR 7,500 crore would be an underestimation. We have a good figure in our mind, which, of course, I can't disclose at this moment, it won't be proper, but [Technical Difficulty] we are very, very optimistic of getting good chunk of work from railways. And bidding will happen within maximum 2 months, and we hope to get good orders from them.
Okay. But my question was in FY '20, what was the order intake? And like you said, it was not -- you didn't see any order intake, is it?
Yes. From Ministry of Railways, of course, we had 1 or 2 small works from railway electrification or we got a work last year of a wagon repair workshop in ECo Railway for INR 546 crore. So of course, these small things, we don't consider as very sizable order for us, but we did get in trickles. And besides that, of course, we have had success in highway also. This -- Vadodara-Kim came in FY '20 only. So yes, we do have in trickles, let me tell you this way, yes, it was not a significant order bagging in FY '20.
So an interconnected question, sir, you said the order book, including the nonexecutable part, is INR 45,000 crore. But in Q3, that number was INR 52,000 crore, sir, while you executed...
Yes. We have executed also -- we have executed. This year also we have executed.
We have executed. So between Q3 and Q4, you've executed only INR 2,000 crores, sir, but the reduction has been INR 7,000 crores, so we had some orders for a...
I just gave you -- the exact figure of what is the order book, total value of the order book, I will get back to you. INR 45,000 crore, I just gave you of approximate number, it can be INR 47,000 crore, INR 48,000 crore also. We'll have to see the exact order book and then get to you. Since we talk only on the executable portion, so I have exact figures for that.
Sir, my second question is, sir, we have almost INR 1,400 crores as loans and advances to subsidiaries. You had indicated that you were looking to sell out 2 road projects. I think to an earlier participant's question, you did mention that you're looking -- so the file is with NHAI. Was it to that same effect or these are 2 separate things? Just wanted to know how the company looks to release that INR 1,400 crores, which is in loans and advances.
Yes. As I had shared on earlier occasions also that we have finalized an MOU with NIIF with regard to sale of our equity in the projects, which we have completed and where NHAI permits us to divest our equity. Even if it is in the construction phase, still we can sell 49% of our equity. And for that, we are in advanced negotiation with NIIFL, of course, details of which I can't share for obvious reasons. We are in advanced stage of negotiation with them for the sale of equity to them in -- mainly in 3 projects: one is IVKEL, that is Vadodara-Kim highway project under HAM model; then the second is Davanagere-Haveri project, again in HAM model in Karnataka; and the third is Shivpuri Guna project, for which the tolling is already underway for which toll -- tolling has already started. So in these 3 projects, we are in advanced stage of negotiations and discussions for sale of our equity.For take-out loan, I stated in an answer to the earlier question that we have tied up with the banks, the lenders. And for -- in 2 cases out of 3, the file has already gone to NHAI for approval because that is a formality which we're required to do. For third, we have got an in-principle approval from the lender and the follow-up actions are underway. So we are well on course to what I had promised and what you have asked. This INR 1,400 crores is going to be sizably less very soon, sooner rather than later.
The next question is from the line of Chintan Sheth from Sameeksha Capital.
Congrats for a decent annual performance as per our guidance. Sir, on -- again, on the subsidiaries, if you can provide a toll collections happening right now in the 2 projects where collection has started?
Yes. As you are aware, we have 3 road projects where toll operations are underway. The first is in a joint venture with Soma tollway, which we call as Ircon-Soma Tollway Private Limited, ISTPL. So that is a project in Maharashtra. The second project where we are tolling right now is Bikaner-Phalodi and the third one is Shivpuri Guna. Shivpuri Guna toll is, as per the expectation, of course a little less. Then Bikaner-Phalodi has not been very encouraging. There have been issues which we are trying to sort out with NHAI. And ISTPL has done very well for itself. And we are getting revenue more than our expectations, and we'll earn a decent profit by end of the concession period. And the end of the concession period is happening 6 years from now. And we have started getting good revenue from them.So far as Shivpuri Guna, the second road project, is concerned, there also we are getting a decent toll amount, but it could have been a little better. But since it's still a long way to go, and our [Technical Difficulty] stretch is yet to be constructed, the target for which is FY '21, so once we get that 12-kilometer stretch, then we hope to look forward to getting more than what we have in mind.For Bikaner-Phalodi, we need to really weigh our options and take a hard look as to how to make this whole thing going for us. So I must [Technical Difficulty] at this time, it is engaging most of our attention.
Right. And sir, on the Bandra land project, what's happening there? And a bookkeeping question on what will be the amount, equivalent amount on the asset side? We have debt of around INR 1,850 crores on the liability side related to IFRS loan. What will be the equivalent amount sitting in our current asset side, if you can provide that?
Yes. So far as Bandra plot is concerned, the situation is at a standstill, I must admit it and say you, because that has not [Technical Difficulty] date for many of the stakeholders. The MMRDA, which is a key player into the entire game and entire scenario of Bandra plot development, MMRDA has put certain conditions for Ministry of Railways to accept. They had certain agreements in the past to share the revenue by sale of FAR, et cetera. And MMRDA wants Ministry of Railways to reiterate that they will agree to do sharing formula. And the case is lying with the minister himself, actually at the highest level now. So hopefully, once that is decided, then we can go ahead with the bidding. Everything we are just keeping ready. The moment we get a green signal from MOR, we go for the bidding.So far as the figures of loan and on the asset side as well as on the liability side is concerned, Alin, can you just show them exactly because I don't have it readily available with me?
Yes, sir. Actually, the entire loan amount is covered by payment from RLDA, or Ministry of Railways. And the entire amount has been shown under other financial assets. The entire amount of liability which has been reflected is covered by entire amount of assets shown on the other financial assets.
Okay. So it will be INR 1,856 crores as shown in the loans borrowings? That will be the actual amount sitting on asset side?
Yes. Exactly.
Okay. And I see a slight jump in -- excluding that also, I see a slight jump in overall current assets. And that too, related to, I guess, loans -- additional loans given to subsidiary. If you can point out which subsidiary, larger amount we have provided for this year, that would be helpful.
Actually, in the fourth quarter, we have provided around INR 213 crore loan: INR 146 crores to Ircon Vadodara-Kim Expressway and INR 67 crore to Ircon Davanagere-Haveri Highway. We have the INR 213 crores which we have paid in the fourth quarter.
Okay. No loans to coal projects.
In the fourth quarter, no. We have not provided any loans to the coal projects.
Okay. Any plans for -- or any outstanding we have to pay over the course of this year in terms of loans...
Actually, we have settled them in full.
Yes. So far as all those JV projects are concerned, that is the coal connectivity project, we don't intend giving any loan to any one of the JVs. So far as the SPVs are concerned, the work where we are in the full swing, like Vadodara-Kim, and also this Davanagere-Haveri, there, obviously, till the NHAI gives us approval, we have to keep on pumping money. So very soon, we'll have the lenders replacing us for giving money to these 2 projects also. So I do not see any further infusion of loan or, for that matter, even equity once we have the NIIF on board in these 2 projects also.
Sir, lastly, if I can chip in, what will be the use of these loans, which will recover from SPV? How are we planning to utilize those? Are we -- do we expect incremental higher dividend payouts from Ircon? Or we are going for growth CapEx in the form of bidding for projects or something like that, if you can directionally provide us some guidance on that front?
Yes. Ultimately, whatever cash we raise from these places, so-called financial investments, which we have made, in fact, you would all appreciate that these are essentially all structures made within Ircon. So everything is under control of Ircon and all the money, whatever we have lent to this 100%-owned SPVs are ours only. Yes, we will substitute this so as to release our capital for new areas of work where we are eyeing participation from now onward. For example, we are eyeing our participation into solar energy area. So again, we'll require money for that and also some investments to be made by us to begin with. We have tied up with a very known company. Of course, I will not take names at this stage, which are -- which is into this area. And we have written to Ministry of Railways to give Ircon some work for solar energy generation so that we can proceed in this. We also intend participating in tenders of solar energy floated by REMCL, which is a subsidiary, solar energy subsidiary of RITES. So as you see, new areas of business will require money. So all this money, which are released, to some extent or to a large extent, will go into this. And of course, we'll also not forget our esteemed shareholders. Definitely, money is theirs, and rightfully it will go to them also.
[Operator Instructions] The next question is from the line of Ankita Shah from Elara Capital.
Sir, I have a couple of questions. Firstly, sir, although it's good to see that despite pandemic, we did a very good execution for the quarter, but there is an impact on margin. We see increase in cost of materials and other things. So any exceptional item there? Or these are the kind of expenses that will be incurred in the future as well? And some guidance on margins, if you can help us with that.
If you see the margin for the entire year, in fact it has...
No, sir, for the quarter. I appreciate the entire year we've done an improvement in margins, which is commendable. But for the quarter, I just wanted to understand if there is any one-off or anything, or these kind of costs can continue going forward?
See, we always believe in a right mix of projects where we have good margins and where we have not so good margin. So yes, the turnover, it so happened that it came from those projects in Q4, where the margin was under a little pressure. So that explains why Q4 margins have been little less. But as you all know that we do -- even in the FY '20, our entire turnover, 81% of that constitutes from rail projects. And rail projects have fairly good margins. Whether we are doing for MOR or whether we are doing it for the coal connectivity JVs, there are good margins. So aberrations, although I do not consider as an aberration in Q4 regarding margin, but it should even out and average out in the course of the year.
Okay. And sir, what are the margins we get on railways projects?
See, it varies from project to project. In Jammu and Kashmir, we get 10% net after meeting all the expenses; our staff cost, our office cost, everything is reimbursable separately. And then on the value of the work whatever I do, I get a 10% state margin. Similarly, in Sivok-Rangpo project, which is a INR 4,200 crore project and where the turnover for FY '21 will be coming in large numbers from this project, that is a really big number turnover from this project. There also, we have similar margins because these are difficult areas, so we have got good margins in that. For other railway projects, we have 8.5% of the MOR, of the Ministry of Railways project. But again, the rail-related projects in the core connectivity area would have a margin of roughly 9% to 12%. So the margins are varying. Again, DFC is a rail project, but here the margin is low, it's not very high because we took that on a competitive bidding. So it is obviously expected that we can't have such fantastic margins.The good thing is that most of the railway projects, the establishment costs and other office expenses and fixed costs which we have, those are getting reimbursed to us. So even though 10% doesn't seem to be a very big figure, but if you see this as almost a net figure, and this is a [ wonderful ] margin.
Perfect. Perfect. Got it. And sir, till the time the takeout financing or the asset sale is not done, how much could be the loss funding which would be required for the road assets? And any equity requirement for the under construction projects going forward for the next few years?
For road projects equity requirement, we do not actually foresee a huge amount of equity requirement because as I told you that we have an advanced level of discussions with NIIF. They will pitch in with equity or at least reimburse the equity which we have already invested. So far as loan is concerned, we are already tying it up. So loan infusion will also not be required. So the projects should fund and finance for themselves, and we'll be happily taking the construction margin on the execution for Ircon.
Perfect. Sir, do we have any experience in solar energy generation or this will be like a completely new thing for us?
Yes. We did not have any earlier experience in solar generation, but we have tied up with a known player with [ excellent ] credentials. And since we are doing it for Ministry of Railways, so we know railways, and they are our parent organization. So we feel safe working in a familiar ecosystem even though we may not have done solar energy per se. But then solar energy has not been a very old area of investments or old area of play for any big player in the country. So we don't start with any handicap as such. We feel confident enough to go into this and make some quick money for our shareholders.
Okay. Does this require huge investment? It's very CapEx-heavy or investment-heavy business proposition that we are looking at?
So we'll be arranging funding of the project, of course. Everything can't be in-house investment. So we'll have a good and optimal mix of equity as well as debt. So to that extent equity participation should -- if I am going in a JV with somebody, so even if 30% equity is the total requirement, we'll end up paying, say, around 15%, 20% of equity, and that will come from the partners and balance money will be arranged through market lending.
Sure. And wish you all the very best.
Thank you.
The next question is from Dixit Doshi from Whitestone Financial Advisors.
Yes. Many of my questions have been answered. Just a couple of things. Firstly, can you update any -- in terms of order pipeline from international segment, in last call, we were expecting some biddings in for Ghana, Jordan and even in some Sri Lankan projects. So if you can update anything?
Yes. Regarding Malaysia, there is an update that we have got an invitation from Government of Malaysia for presenting our case for 2 of the railway projects, which we have been mentioning in the past in various con-calls. So -- but for this scenario which is obtaining today, we would have seen some progress on that. But at least there is a crystallization of thought process in Malaysian government to call Ircon for consideration for 2 very important projects, which will be roughly INR 10,000 crore, INR 12,000 crore. So that is one which we are eyeing on very, very seriously.And elsewhere also, since the time we talked last time, hardly anything has happened, because of this scenario and overall gloom in all the countries wherever we are operating. Nothing substantive have moved except for this significant news which I shared with you regarding Malaysia.
Okay. And secondly, sir, in terms of labor, so I understand, sir, most of work -- most of our work is executed by Ircon itself. But we also subcontract or outsource some of the work. So how is the situation, let's say, at subcontractor level regarding the labor issue?
Labor issues are -- were difficult, of course, till end of June. But now it is brightening, the scenario is getting brighter day by day. And we are getting labor. As I said, almost, say, in the month of June, we could do almost, say, 2/3 of what we did in last June. So the recovery is quite bright, and the green shoots can be seen on all the fronts. The laborers are coming back. And as I said, we are a very optimal mix of using the plant and equipment as well as the labor component. It's not only the raw labor and in large numbers that we require. We do a lot of work which otherwise require a lot of labor through plant and equipment. And we ask our subcontractors to bring these equipments in fairly good numbers. So for example, in J&K, for all the tunneling, we require apart from labor -- of course we'll require that -- apart from that, we require all the machinery, all the plants, heavy earthmovers and so on, tunneling machines and so on. Similarly, in DFC project, we are doing a lot of work through our rail equipment which we have purchased. And most of the subcontractors have been able to get there at least half of the laborers at site. And in Bihar, we are working in a big way. So Bihar has been an area which is -- which has not been greatly affected by outflux of labor. Actually, there has been a case of influx into Bihar. So in that sense, we have 3 projects going in Bihar. So there, we don't face any problem.Similarly in Sikkim, Rangpo project, there also the labor have come down -- come back by and large. So in totality, the -- say, you can say around 70% of the work -- 70% of the strength has been restored back what we had seen in February or January.
The next question is from the line of Anurag Patil from Roha Asset Managers.
Sir, on -- due to this bidding among PSUs, do you anticipate any kind of pressure on the margin at a broader level going forward?
Sorry, I couldn't catch you very clearly.
Yes. So due to competitive bidding among the PSUs, do you expect any margin pressure on the broader level?
Okay. That's a very good question, in fact, because the things are going to change, so this is expected. Now, I have shared with you that they have shortlisted PSUs for various categories. And the list, if I scan through the list, I find that except for one area of road over bridge and road under bridge, in this road over bridge and road under bridge there are PSUs other than railway PSUs also, which they have shortlisted. But elsewhere, it is only 3 or 4 PSUs which are shortlisted depending on what has been their strength, respective strength.So if you take, for example, railway electrification, there, only 3 PSUs have been shortlisted and all 3 of them happen to be railway PSUs: RVNL, Ircon and RITES. So I do not see any significant drop in the margin which we are getting, because railways were giving us margin only after making a hard [ roll ] bargain with us and seeing the costing, et cetera, I do not see any significant fall. In fact, maybe it is for -- good for everybody that we may get actual cost. And the definition of cost which they have now crystallized for bidding out these works to PSUs, definition of cost is very good. In fact that was suggested by us, and they have included practically everything in the definition of the cost. So P&C -- so margin of even 8.5%, 9%, what they have been giving now should make -- should result into more savings for us rather than less.
Okay. So, sir, this -- cost items, can you explain in short what could be considered? Means, any major change from previous considerations?
See, the definition of cost for a project, obviously, includes all the direct expenses into the project, then all the consultancies, all the technical inputs, all the costs pertaining to plant and equipment, the costs related to land, costs related to contract management, like arbitration, court cases, et cetera. So all these are on the -- on account of railways, and they will bear all these costs pertaining to a project. And so far as the PSUs which have bagged the work, they will supervise the execution of the work and with some technical value addition, of course.So for that, the margin which we expect should be actually leading us to more savings rather than what we see at present. At present, a lot of things are being spent from Ircon's own kitty also. So at that time, we hope to maintain the same margin as we are doing today.
The next question is from the line of Ravi Naredi from Naredi Investment.
Sir, we expect one investor presentation along with the results. If you give the detailed one, it will be helpful for us. And sir, second, order book, you were telling INR 47,000 crore around in line and INR 4,500 crore is maybe taking in next few days. So how many years it will take to complete these projects, sir? If you can give broader outlook, it will be helpful.
That's why we only show the executable order book because now, see, we have crossed INR 5,200 crore during the current year. Had the year been a normal one, we were aiming at INR 6,500 crore, INR 7,000 crore of execution during the year. So with that, if we take the executable order book, then it should be roughly 4, 4.5 years, that is what we look at. So at any given time, the executable order book will consist of workload for 4 to 5 years. That is the optimal level of executable order book which one should have in the domestic segment of Ircon. Of course, in foreign, the scenario is different. You have to complete the entire value of the work in 3, 3.5 years at the best.So far as INR 47,000 crore concern -- is concerned, that's why I say many of those -- the difference between INR 30,000 crore and the rest is on the drawing board, is on the -- it's still on the anvil, in the sense that land acquisitions will happen, the approvals are yet to come, forest clearances are yet to come. So all those time period, unfortunately, takes quite a bit of time in India. So INR 47,000 crore in how many years is a difficult question because we count the years from the time it is converted into executable order book. So in executable order book, you have a visibility as to when we will be reaching there, provided everything remains normal. We should be doing it in the expected time of 4, 4.5 years, that is the way we look at it.
The next question is from the line of Vipul Shah, who is an individual investor.
Sir, I think sometime last year in one of the call, it was mentioned that you were pursuing an international order worth INR 14,000 crore, if I remember correctly. So can you provide any status on that, where things stand right now?
As I hinted in my earlier part of answering question to one gentleman, we have been invited by Government of Malaysia for discussions on 2 of their projects, which will be roughly of the size which you are talking. Depends how much we actually are able to negotiate as cost of the project; should be around, I mean, INR 12,000 crore, INR 14,000 crore, in that range only. So -- but [Technical Difficulty] period because of the pandemic, things would have moved a little bit. And in fact, let me tell you why it should be a fairly reasonable thing for us because they have said, we have offered them a barter trade kind of payments. And they have really liked this idea that Ircon will go for the barter trade for receiving the payments from them. So they will give us palm oil, which we will sell at the high fee and get our money as a fee for doing the project. So...
But in that case, you don't have any expertise in palm oil selling, no? So a minor change in realization can result losses for the company.
No. We have done it in 2003 earlier also on barter basis from Malaysia only. And we have tied up with MMTC for actually lifting the oil and doing the sale for us. They will give us the money. We are not going to sell it on the high sea.
And generally, sir, international projects are at lower margin, right?
No. On the contrary, they are on higher margins. In fact, the significant portion of the net worth of Ircon have come from international projects. I will go to the extent of saying that around 70% of our net worth is because of the surpluses generated from international projects.
So as a thumb rule, what should be the higher additional margin in terms of percentage?
Roughly, it will be 15%.
[Operator Instructions] The next question is from Mohit Kumar from IDFC Securities.
Yes. Sir, can you please update us on the IRSDC, what's happening out -- what's happening there? And secondly, sir, on the Chhattisgarh railway, what kind of freight you saw in the Q4 FY '20 and FY '20?
Yes. So far IRSDC is concerned, they have now gone into a real drive mode, in the sense that a group of secretaries have been formed by Union Cabinet to see the redevelopment of stations being done by IRSDC. So as a matter of principle for IRSDC, they have decided that they will go for the PPP mode of redevelopment of stations entrusted to them. In first phase, they are taking 85 stations for such development, 5 of those stations have been already tendered, and the tender is under finalization, the big 5 stations, actually. So they are in the process of floating tenders for rest of the 80 stations also.Other than that, they have gone into an area of -- area something called station facility management. So station facility management is, again, an area where large players have shown interest in manning the stations, in managing the stations. And the revenue inflow will be out of non-fare and non-freight revenue, that would include advertisement, the eateries, the parking and things like that. So the station facility management is one vertical which IRSDC is pursuing very seriously. They have almost taken 14 stations under this station facility management. And the works, they have already started, it is functional.IRSDC has also roped in a third equity partner [Technical Difficulty] now in the form of [indiscernible] RITES. RITES is again a railway PSU. They have also chipped in, in the development of IRSDC. So they are a third equity partner. So now the present equity structure of IRSDC would look like something like this: RLDA, that is Rail Land Development Authority, which in effect is Ministry of Railways themselves, they would hold 50% of the equity for obvious reasons because stations are essentially their properties, and they want only IRSDC to develop them; rest of the 50% equity, 26% will be of Ircon and 24% of RITES. So that is a shareholder agreement which we have signed.And this will be given effect to very soon. An EGM needs to be held to ratify this. And then RITES will be onboarded so far as IRSDC is concerned. So with 3 strong partners being part of IRSDC, we hope to see brighter days for [Technical Difficulty] and thereby, it will bring benefits to all the shareholders, especially to Ircon. We are the founding equity holders of IRSDC, so we hope to now get some return for our -- all the efforts these years. So -- so much so for IRSDC. And they have raised their authorized share capital from INR 80 crores to INR 200 crores. So the increased share capital will be taken by RITES and by RLDA. We are not putting any extra money into that.
Sir, secondly, on the freight, which you saw on the railway line?
Freight? I'm sorry, I don't get you, which freight?
The volumes which you saw on the railway line which you own, Chhattisgarh Railway?
See, as I had told you that we have commissioned 44 kilometers of line, and another 36 kilometers will be commissioned by end of September, but for the COVID -- because of the COVID, otherwise, we would have done it by 31st March in any case or at the most by 30th of April. But we got stuck for the large phase. So with this 80 kilometers of line commissioned, more important things in order to realize the full potential of loading for this section is to get the feeder lines, the sidings, the spur lines, those constructed. And for that, we are in the process of fixing agencies.Once we do that work, that will take at least 1, 1.5 years more to complete all these feeder lines, sidings, et cetera. Then we'll realize the full potential of this line, which is at least 14 to 15 rakes per day. Rakes means, when I say rakes, then you -- entire goods train. So 14 to 15 rakes is the forecast for loading of coal. And that we can achieve only when we get all these sidings and spur lines, et cetera, made. As on date, we are getting only 3 to 4 rakes per day for the simple reason, see, the lines are not being fed by the associate line, so to say.So we'll have to wait for full potential to be realized for another 1.5 years or so. So those freights will materialize. In fact, recently, we have got a letter of comfort from South East Coalfields Limited that they will offer the coal traffic to this SPV the way it has been projected in the DPR. So that gives us more comfort. So even if -- so -- and there are many more players also on the way to this railway line. There will be many more coalfields also. They will also be pitching in with their requirements. They will come to load with us. So we expect a volume of traffic which is in consonance with the figures shown in the DPR, and for that we have got a guarantee from the subsidiary of Coal India Limited also. So SPV is fully confident of doing well once we complete all these spur lines, sidings, et cetera.
The next question is from the line of [ Aziz Bharmal ] from HSBC.
Can you give me management projection for the next 3 years past the COVID pandemic stage, where do you see your turnover to be in '22-'23, and the confidence level of your margins being about somewhere at a net 10%?
Yes. Thank you. As I said in the beginning that we have a pressing requirement for infrastructure expenditure in the country, and that continues. And since we operate in the area of railways and highways, we do not expect any let up in these 2 segments and the spending will be great by Government of India. That is what we expect.Having said that, we do have certain figures in our mind going forward for next 3 years. As I said, had there been no pandemic, then our FY '21 guidance would have been roughly INR 6,500 crore to INR 7,000 crore. Of course, that is not possible in the current year. But once the things normalize, as I sincerely hope, by FY '22, we will be around INR 8,000 crore. And year after that, it should be around INR 11,000 crore, INR 12,000 crore. That is the understanding which I have seen the strength of the company and also the spread of work which we'll require to do.And in addition, if we are sprinkled with foreign projects, then these figures will shoot up, for sure, and we'll have to perform much better than what I have just indicated.
And you still have confidence of maintaining in the -- sorry, in forecasting a bidding process for winning tenders, you still forecast, on average, a 10% margin across the board?
Yes. That is right. We have been doing it since long time now, a 10% margin, and we are confident...
But that was based on the nomination process, yes.
Yes. But nomination process was not something of a windfall for any one of us. Actually, the strength of us lied in the foreign projects. There, the margin used to be 15% to 20%, at times even 30%, 35%. So that usually gave us a secular margin of 10%. And we hope to have a right mix of projects, which may include some value-added projects to be undertaken by us so that our margin is protected at 10% level; that we will ensure. And since the bidding -- as I explained, the bidding is limited to the PSU sector of railways, so we are used to working in that kind of margin only. So we do not foresee any downfall in the margin or any cut on that front.
The next question is from the line of Vishal Periwal from IDBI Capital.
One question for me. You mentioned a couple of ventures, like railway development, solar energy. So any CapEx plan that you can highlight or even in another ventures, total CapEx plan for the company for FY '21 and '22? Any rough cut number or any number that you have spoken in MOU that you like to share.
See, for FY '21, it's really an uncertain water going ahead. But in FY '22, certainly, our CapEx would be in the range of INR 800 crore to INR 1,000 crore because then we see a lot of our vision and a lot of our projection materializing. By that time, we'll have a good CapEx infusion. And for FY '21, we'll be a little cautious in parting with our cash for obvious reasons, you never know what happens. And given the scenario of lockdown and uncertainty, we need to sit pretty tight on our cash. So not a lot of venturing out into CapEx expenditure. But we'll certainly -- I mean the areas which I have just now mentioned, those areas are under focus. And if those fructify, we'll certainly not hesitate in putting CapEx up there also. For example, solar or even in high speed, if we are going there, we'll put in our CapEx in those projects.
And just one more thing. So INR 800 crores to INR 1,000 crores for FY '22, is it possible to give the segment wise, like railway development or solar, any rough cut numbers there, if you can?
So I'm sorry, I will not have any number for each of the segments stated just now. I will have to do some work on that.
Sure, sure, sir. I'll probably reach out to you some time, sir.
Yes. I think that would be good.
We have one last question in queue. We take the last question from the line of Dixit Doshi from Whitestone Financial Advisors.
Sir, one last thing. Can you just explain the business model of IRSDC, how the revenues will be coming? And will they invest a significant amount of money or they will be just getting the fees or PMC margins?
Yes. The business model of IRSDC, as I told that there are 2 clear verticals: one is station facility management, means existing system in the stations will have to be managed, so revenue coming from that stream; and the second is revenue generated out of PMC work done by IRSDC on PPP projects of redevelopment of stations. So these are the 2 broad categories of revenue streams for IRSDC. So I will just give you a specific example for this. If a station is bid out to some player, say, at a INR 600 crore-odd of premium to Indian Railways, so out of INR 600 crore revenue which the bidder is willing to pay to Indian Railways, of course, he gets to develop commercial spaces available in those stations, et cetera. And then he has to build the mandatory area for the station use at the cost of the bidder. Still he finds that he will be able to pay to the railways a onetime premium of, say, INR 500-odd crores. So out of INR 500 crore, 10% will be retained by IRSDC as their fee. So essentially, it is a PMC fee for overseeing the construction activities of the commercial area as well as the mandatory area of the railways and keeping a watch on the private developer who is there for developing the station. So that is one scene.Second is the surplus generated out of station facility management. For example, if you earn more in advertisement or platform ticket or parking, et cetera, and you spend less on the maintenance of the station, then you get to earn, and that money is of IRSDC. So these are the 2 broad streams which they are now eyeing at.
Thank you very much. That was the last question in queue. I would now like to hand the conference back to Mr. Ankit Merchant for closing comments.
Yes. Thank you. So thank you, everyone, for joining us on the call. And we wish the management all the luck, and we look forward to meet soon. Thank you.
Thank you very much. And please engage with us in case you have any further query, any one of you, or any information that you require from us. And I thank Reliance Securities and Gaurav from Concept IR for organizing this conference. Thanks a lot.
Thank you very much. On behalf of Reliance Securities Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.