ITD Cementation India Ltd
NSE:ITDCEM

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ITD Cementation India Ltd
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Earnings Call Analysis

Q3-2024 Analysis
ITD Cementation India Ltd

ITD Cementation Reports Robust Q3 Growth

ITD Cementation India witnessed a stellar financial performance in Q3 FY '24, achieving a 52% increase in operating income to INR 2,017 crores. EBITDA soared by 87% to INR 220 crores with a solid margin improvement from 8.9% to 10.9%. Profit after tax more than doubled, posting a 113% growth to INR 79 crores. The company's balance sheet remains strong with a low net debt to equity ratio at 0.3x. They received new orders worth INR 1,300 crores during the quarter and have already surpassed the previous fiscal year's total income in just nine months. For the year, a CapEx of INR 200-250 crores is projected. ITD Cementation expects to maintain revenue growth, leveraging their strategic focus on large projects which include major infrastructure developments like metros and marine works.

Impressive Top-Line Growth and Profitability

ITD Cementation India Limited reported a powerful performance in the third quarter of FY '24, unveiling a remarkable surge in financial metrics. The company's total operating income soared to INR 2,017 crores, marking a year-on-year expansion of 52%. This upswing can be attributed to the completion of legacy orders and a renewed focus on high-margin projects. The EBITDA intensified by 87%, signaling operational efficiency, and profit after tax doubled to INR 79 crores, achieving an impressive growth of 113%. Their efficient cash management is reflected in a modest net debt to equity ratio of 0.3x, underscoring the company's financial prudence.

Strategic Execution and Expansive Portfolio

With a strategy centered on larger-scale projects, ITD Cementation is currently spearheading around 52 to 53 ventures. Among these projects, a core group of ten contributes over INR 15,000 crores to the company's robust work in hand amounting to more than INR 20,000 crores. This approach not only streamlines project management but also ensures substantive revenue streams. Noteworthy projects include Chennai and Bangalore Metro developments, the Ganga Expressway, and significant marine and navy infrastructure projects, cultivating diversity and resilience in ITD Cementation's portfolio.

Margin Improvement and Legacy Project Wind-Down

ITD Cementation is transitioning away from older, lower-margin legacy orders, now nearly phased out. This strategic move has already paved the way for improved EBITDA margins, which the company expects to enhance further. The continuing shift towards newer, more lucrative contracts awarded in recent years suggests the potential for a sustained margin ascent in the current and upcoming fiscal years.

Robust Bid Pipeline and CapEx Planning

With an eye on growth, the company boasts a robust bid pipeline encompassing a diverse mix of projects summing up to around INR 13,000 crores. In line with the required investment for these potential projects, ITD Cementation has earmarked a capital expenditure (CapEx) target between INR 200 crores to INR 250 crores for the present and subsequent fiscal year. This level of investment underscores their commitment to nurturing their execution capabilities while maintaining fiscal discipline.

Consistent Order Book Reflects Selective Quality Focus

Despite the substantial opportunity scale, ITD Cementation maintains a consistent order book capped at INR 20,000 crores, signifying a deliberate selection of quality over quantity. This steady state between December '22 and '23 represents a conscious decision to prioritize profitable, manageable projects, enhancing the company's ability to deliver on its commitments while sustaining an admirable execution trajectory, having increased their output from INR 800 crores to INR 2,000 crores.

Earnings Call Transcript

Earnings Call Transcript
2024-Q3

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Operator

Good afternoon, ladies and gentlemen. I'm Pelcia, moderator for the conference call. Welcome to ITD Cementation Q3 FY '24 Results Conference Call. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Nikhil Abhyankar from ICICI Securities Limited. Thank you, and over to you, sir.

N
Nikhil Abhyankar
analyst

Thank you, Pelcia. Good afternoon to everyone. On behalf of ICICI Securities, I welcome you all to the Q3 FY '24 Earnings Call of ITD Cementation India Limited. Today, we are pleased to host the management of the company, which is represented by Mr. Jayanta Basu, Managing Director; and Mr. Prasad Patwardhan, CFO of the company.

Without much delay, I'll hand over the call to the management for their opening remarks, which will be followed by Q&A. Thank you, and over to you, sir.

P
Prasad Patwardhan
executive

Thank you, Nikhil. Good morning, everyone, and thank you for joining us on this Q3 FY '24 results con call. This is Prasad Patwardhan, CFO of the company. Before I begin, I would like to remind everyone of our standard disclaimer that this call may contain certain forward-looking statements and business prospects of the company, which are subject to a number of risks and uncertainties, and the actual results may differ materially from those made in these -- in such statements.

I will start with the financial performance of the company during the quarter and subsequently, our MD, Mr. Basu, will take you through the operational performance.

We are happy to report a very healthy financial performance in this quarter. Total operating income for the quarter was INR 2,017 crores as against INR 1,327 crores, which represents a growth of 52% year-on-year. EBITDA was INR 220 crores in the quarter as against INR 118 crores a year back, resulting in a growth of 87%. EBITDA margin stood at 10.9% as against 8.9% a year ago. Profit after tax was INR 79 crores during the quarter as against INR 37 crores a year back, representing a growth of 113%. Our balance sheet and leverage of the balance sheet continues to be at subdued levels. Our net debt to equity is about 0.3x. We have secured orders worth about INR 1,300 crores during this quarter.

If you look at our 9-month performance, our total operating income was INR 5,460 crores as against INR 3,460 crores a year back, which represents a growth of about 58%. In the 9-month period, we have exceeded our turnover that we achieved in the previous financial year. So we have exceeded the entire previous year's performance in terms of top line. Our EBITDA for the 9-month period was INR 567 crores as against INR 315 crores a year back, a growth of 80%. And PAT came in at INR 185 crores for the 9-month period as against INR 87 crores, which again represents a growth of 112%.

That's all from my side at the moment. I'll now hand over to Mr. Basu for his initial comments, and then we'll take your questions.

J
Jayanta Basu
executive

Yes, Prasad, thank you, and good afternoon to all. Thank you for joining this con call. As we have seen and noted that our Q3 performance was significantly better compared to what used to do a few years back. INR 2,000 crore revenue we have achieved. At the same time, bottom line also is quite healthy. And we expect to maintain this sort of revenue and the growth coming forward. We are able to manage the cash flow also very well. Debt to equity ratio is under control. We have almost secured INR 6,000 crores plus jobs in this year. And there are a few more on pipeline.

In terms of execution, I'd like to highlight one point here. We have got around 50, say, 52, 53 projects going on. Out of that, our work in hand is around INR 20,000 crore plus. But if you see 10 projects, that will still contribute more than INR 15,000 crores of work in hand.

So that is the beauty of doing bigger work. If we monitor 10 projects very closely, 80% of the project control we can have. And these big projects are Chennai Metro underground, Bangalore Metro on verge of completion and tunnel at Sikkim also doing well. Ganga Expressway, a large contribution comes from Ganga Expressway. Udangudi marine job. I'm happy to say that 2 critical items that is ship unloader, which was ordered through Chinese company has reached site yesterday. With that, we have almost completed the job. We have started a navy job for Indian Navy at Project Varsha that is near Vizag port. Seabird, another navy job is on verge of completion. And this other job in marine is going pretty well.

In building sector also, Thal Sena Bhawan that is army headquarters, took off very well. Customers are very happy. We are doing Sikkim University. Recently, we have completed 3 airports, you must have noticed that PM has inaugurated 3 months back and Pune Airport also has been completed. The executions are quite under control, and they are good jobs in pipeline.

So that's all from my side, and we'll request you whatever questions you have, we'll be happy to answer them. Thank you.

Operator

[Operator Instructions] First question comes from Deep Mehta from Bank of India Mutual Fund.

D
Deep Mehta
analyst

Congratulations for a very robust set of numbers. A couple of questions from my side. First is, what is the contribution of legacy low-margin orders in this quarter in overall revenue?

P
Prasad Patwardhan
executive

Well, the legacy orders are mostly more or less out of the system now. There are a few residual work that is pending on the projects. But the largest contribution is coming through from the newer projects that were awarded to us maybe last year or last couple of years. So the contribution of legacy orders now is significantly lower and probably it is out of the system now.

D
Deep Mehta
analyst

Okay. And now with these legacy orders being more or less over, do we expect similar margin trajectory for this year as well as next year?

P
Prasad Patwardhan
executive

Well, we have seen an improvement in our operating margins. The EBITDA margins have been improving during the year. And our endeavor is to keep performing the way we have performed during the year. And hopefully, we'll see an improvement in the margin going forward.

D
Deep Mehta
analyst

Sure, sir. That is very helpful. And my second question is regarding bid pipeline. What is the bid pipeline currently? And how should we look at it going ahead?

J
Jayanta Basu
executive

Well, I think we have around mix of all the jobs if you take around 12,000 plus jobs in bid pipeline. They're tender submitted or tender to be submitted. So they're a mix of submarine jobs and few of the jobs close to water, industrial structure and building. There are around INR 13,000 crore jobs in the pipeline, yes.

D
Deep Mehta
analyst

Sure, sir. That is very helpful. And last question, what is the CapEx target for us for this year as well as next year?

J
Jayanta Basu
executive

Our CapEx was a little bit more last year because of a few jobs where we had to invest big amount of plant and machinery. This year, CapEx target will be around INR 200 crores plus, say INR 200 crores to INR 250 crores.

D
Deep Mehta
analyst

And for next year?

J
Jayanta Basu
executive

It will remain almost in the same range, not much.

Operator

Next question comes from Sunil Kothari from Unique PMS.

S
Sunil Kothari
analyst

Congratulations for such a good performance. Sir, one question is on, our execution capability during the last 3 years has gone up from, say, 2021 December, '22 December then '23 December. We are executing almost from INR 800 crores to now reach INR 2,000 crores. So looking at the opportunity available, the way you choose your orders, you don't want to increase substantially your order book, and that's why you are remaining at same INR 20,000 crores order book December '22 and now '23 also. So quality of orders and quality of our execution capabilities, if you can talk a little bit more on this aspect will be really helpful.

J
Jayanta Basu
executive

Okay. See, work in hand depends upon not only how much work we have secured. It depends upon how much we are able to do per month. You have rightly said that earlier it was INR 700 crores, now INR 2,000 crores. That means we are consuming the work in hand very fast. That is the reason why the work in hand looks like in flat. It is really not flat. In real terms it is much more. If we have done INR 700 crores in a quarter, then work in hand today would be much more than INR 20,000 crores. That is one aspect.

And second aspect is that earlier, we had got few legacy jobs, which is over now. So that was also contributing to work in hand. But as you have rightly said, we should really target for some more jobs. We are a little selective now. There is no point going for everything. So we are comfortable with the work in hand or whatever in the pipeline considering our execution capability.

S
Sunil Kothari
analyst

Sir, will you be choosing the work because our capability is more in marine, port-related work, under -- tunneling work, underground, all these things. And there are enough opportunities available for next 2, 3 years.

J
Jayanta Basu
executive

Yes, opportunities are there, but still we will be very choosy because marine job, of course, we'll go for all out. Tunnel job, it depends upon the terrain. If it is in Himalayan range, we'll have less appetite. If it is Southern India, yes, we'll go for that. And of course, there are competition as well. So airport, underground metro, marine and few overseas jobs that will be our focus now going forward.

S
Sunil Kothari
analyst

Right, sir. Sir, last question is with this INR 200 crores type of CapEx, given our opportunity and size of orders, if we increase our execution substantially, if we want to increase the way you are targeting some -- whatever growth rate of 20%, 25%, this will be -- the CapEx will be enough or we will require something to do, say, quarterly run rate of INR 3,000 crores, annual rate of INR 12,000 crores, INR 13,000 crores size of the business. This capability manual -- I mean, manpower, technical capability and machines are enough or this INR 200 crores is good enough to support that?

J
Jayanta Basu
executive

Yes, if you see one by one, first of all, manpower. Manpower, we have got enough knowledge. Number wise, is another thing, another thing is quality. So we have got quality team. That will be a problem for us to manage. Workforce is always challenging in Indian scenario, so we are trying to migrate to the more some mechanism in the work so that we rely less on the labor force.

And third is of CapEx. The CapEx sometimes what happens nowadays because a lot of modern technique has come, people are more educated, lot many good plant and machinery you get on rent. There is no point buying a costly machine and leave it for a year or less than year and wait for future business because those are available in market and you can hire internationally. So we have to make a balance. And I hope that INR 200 crores, INR 250 crores should be enough considering the rental plant.

Operator

Next question comes from Dhananjay Mishra from Sunidhi Securities & Finance Limited.

D
Dhananjay Mishra
analyst

Congratulations on a very excellent set of numbers. Sir, now we have quite good growth and good high base in terms of revenue and we are...

P
Prasad Patwardhan
executive

Hello?

D
Dhananjay Mishra
analyst

And we are -- hello, am I audible?

P
Prasad Patwardhan
executive

Yes, now are you audible. Can you please repeat the question?

D
Dhananjay Mishra
analyst

Yes, so we are talking about 25% growth next year, which will be around -- we'll be reaching close to INR 9,500 crores kind of turnover. And we have -- current bid pipeline is INR 12,000. And being election year, do you think we will be able to maintain INR 10,000 crores to INR 12,000 crores of order inflow for this year just to maintain the momentum of growth? What is your take on that?

J
Jayanta Basu
executive

Yes. I mean rightly said, this we are doing day in, day out. We are doing such exercise what are the opportunities and mostly that we try to increase our geographical footprint in the segment where we are strong, like marine and underground metro. The moment you increase your geographical footprint, your opportunities are also more. It is a routine work. I think -- and I don't think that the growth of 20%, 25% in terms of bidding and getting job is a problem.

D
Dhananjay Mishra
analyst

Okay. So you are maintaining this year's guidance of INR 9,000 crores order inflow?.

J
Jayanta Basu
executive

This year means up to '24, '25, yes, INR 9,000 crores.

D
Dhananjay Mishra
analyst

For FY '24, you are saying we have done close to INR 6,100 crores till date. So FY '24 will be around INR 8,000 crores?

J
Jayanta Basu
executive

Yes. See, hardly another -- not even 2 months, 1.5 months. So some of the orders, if it matures, it will be around INR 8,000 crores or little less than INR 8,000 crores, or maybe a little more than INR 8,000 crores. It depends if the order...

D
Dhananjay Mishra
analyst

Next year, you are guiding for how much in terms of order inflow?

J
Jayanta Basu
executive

Around INR 10,000 crores, INR 8,000 crores to INR 10,000 crores.

Operator

Next question comes from Nihar Shah from Crown Capital.

N
Nihar Shah
analyst

Sir, just one small question on the revenue side. This year, we are expecting to cross INR 7,000 crores, right, in revenue?

J
Jayanta Basu
executive

Yes.

Operator

Next question comes from Shrey Gandhi from Mangal Keshav Financial Services.

S
Shrey Gandhi
analyst

Yes. So basically, my question would be regarding the quarter 4. Like quarter 4 what kind of revenue growth rate you are expecting? Because see historically, we have seen in quarter 4, like it has -- revenue has grown by around 20% to 30%. Can we expect the same growth rate for quarter 4 also?

J
Jayanta Basu
executive

Actually, we have already done quite good in quarter 3. So what we used to do in quarter 4, we have achieved in quarter 3. So quarter 4 will be almost same like quarter 3.

S
Shrey Gandhi
analyst

It will be same like quarter 3. And margins you have told you'll be hunting double-digit margin, last time you had given the guidance. So you have been maintaining 10% margin around, 10.3%, so can we expect the same margin to go or some improvement like 200 basis points going forward or [indiscernible] going forward?

J
Jayanta Basu
executive

I don't expect growth in margin. Margin will be almost whatever we have achieved in quarter 3 in that range.

S
Shrey Gandhi
analyst

It will stay like around 10% around.

J
Jayanta Basu
executive

Yes.

Operator

Next question comes from Vignesh Iyer from Sequent Investments.

V
Vignesh Iyer
analyst

Sir, congratulations on a strong set of numbers. Sir, my question is on the interest paid part of our line item. So we have paid around INR 58 crores interest in this quarter as compared to INR 52 crores last quarter. So just to have an understanding what is our borrowings as on 31st December? And what is the way forward? How -- I mean, how -- what would be the ramp-up in the interest payment as we keep on scaling the execution?

P
Prasad Patwardhan
executive

Well, the gross debt on our balance sheet as of 31st December is about INR 860 crores. We do not expect any major variation in the debt number in this quarter. It should be around the same level, maybe a little bit 5% up or down.

V
Vignesh Iyer
analyst

And what is our cost of debt?

P
Prasad Patwardhan
executive

Well, cost of debt is around 10%, 10.5% of the bank debt. And this interest cost also includes the guarantees -- the payments to the banks for the guarantees and letters of credit and it also includes interest on the mobilization advances that we get from our customers.

V
Vignesh Iyer
analyst

Okay. So if I read it right, so as we keep on scaling this revenue, more or less on the proportion, the interest will keep on scaling, right?

P
Prasad Patwardhan
executive

Well, I would expect that to be, but it depends on the mix. One is the rate of interest which the banks charge for the borrowing on the guarantees and LCs. The second aspect is the interest on the customer advances. So that also is more or less linked to market. So these 2 factors impact the interest cost readily.

V
Vignesh Iyer
analyst

Okay. But sir, historically I see, okay, like around 2013, '14, '15, so we have been to a point where interest outlay has been very high, okay? So I wanted to understand what is the steps that this management is taking to ensure on that part where interest outlay is less. I mean we are doing excellent EBITDA as of now but that is not much transforming into the PAT level side.

P
Prasad Patwardhan
executive

No. If you see our profitability has improved significantly in this year, and I would not be able to comment right now on what happened in 2013 or '14. But if you see our balance sheet, the debt on our balance sheet is significantly within manageable levels. We are not overleveraged. There is growth in our operations. So I mean -- I really don't understand your question. The debt is at a manageable level.

Operator

Next question comes from Mehul Mehta from Nuvama Wealth.

M
Mehul Mehta
analyst

Congratulations on great set of numbers. My first question is, sir, you have been guiding for a focus on entry barrier businesses like say, underground metro, marine as well as tunneling kind of. And if I look at say, December '22 end, our order book was comprising about 67% from these businesses, which has increased to about 73%. So going forward, can we expect maybe this double-digit margins, which we have achieved, going forward exceeding even that?

J
Jayanta Basu
executive

Okay, true that these businesses are -- we are good in these. You have to also understand that no business perpetually gives equal results. Now underground metro also will be crowded soon. So the competition will still be there. So whatever margin we have achieved last year, coming years budget will be less if you have to win the job. So that is one factor. So that is why we are planning to go elsewhere like abroad marine job so that we can -- we are able to maintain the margin.

M
Mehul Mehta
analyst

All right. Got it, sir. And in terms of -- Mr. Patwardhan, regarding working capital cycle, is there any change for -- as compared to September '23 to December '23, or it remains in the similar line?

P
Prasad Patwardhan
executive

Actually, the net working capital in terms of number of days has improved in this quarter as compared to the previous quarter. So the change is...

M
Mehul Mehta
analyst

So can you mention that? I mean, in terms of numerical, how is that like?

P
Prasad Patwardhan
executive

I don't have the exact numbers right now, but it's around 80, 85 days. And hopefully, our endeavor is to maintain it at the same level or improve it if possible.

M
Mehul Mehta
analyst

That should be maintained, all right. And debt is about INR 865 crores, you mentioned, right, as of December '23 end?

P
Prasad Patwardhan
executive

That's the gross debt.

Operator

Next question comes from Rajesh Kumar Rathi from Right Shopping Private Limited.

R
Rajesh Rathi
analyst

Congratulations for a good set of numbers. My worry is, again, regarding the order intake. Order intake of late has not been as great as a lot of other infra companies. So can you elaborate a little more on that? Although I understand that you guys are a little choosy, but still the order -- total orders are not increasing as much. So can you please explain?

J
Jayanta Basu
executive

Yes, we are constantly working. Sometimes [indiscernible] The moment if we get an order of INR 2,000 crores, INR 3,000 crores at a time, suddenly we will find the number has changed. It is not that every month we are getting at the equal rate. It comes once in 3 months, a big number, it is like that. So we are constantly working on that comparing that how much should be the order intake and what will be the revenue next year. So we are quite aware about situation.

R
Rajesh Rathi
analyst

So you are still optimistic about the whole thing.

J
Jayanta Basu
executive

Yes, yes, yes.

Operator

[Operator Instructions] Next question comes from Nikhil Abhyankar from ICICI Securities.

N
Nikhil Abhyankar
analyst

I wanted to get the clarity on what -- which you mentioned that we might also look up at marine jobs overseas. So which exact markets will you be looking at? And what kind of opportunities are available out there?

J
Jayanta Basu
executive

There are three areas. One is Bangladesh as because the election is over, and they have a long list of marine work in pipeline around Chittagong port. So that is one area we are focusing. Two jobs in Middle East, we have submitted our offer. And one job in West Africa. All are marine jobs.

N
Nikhil Abhyankar
analyst

All are marine jobs. And sir, on the domestic front, a lot of companies have -- are increasing their CapEx on port development. So any opportunities over there?

J
Jayanta Basu
executive

You mean to say that new ports coming...

N
Nikhil Abhyankar
analyst

Greenfield expansions, yes. Yes, greenfield expansions.

J
Jayanta Basu
executive

Yes, [indiscernible] JSPL. So yes we are there, we are there always.

N
Nikhil Abhyankar
analyst

Okay. Sir, and also just a final word on recently, I mean, a year back, government had announced container terminal in the Nicobar Islands so that might be a very big opportunity for us. So do you think it might take off anytime soon within next 1 or 2 years?

J
Jayanta Basu
executive

See what's going on at government level, but I think it will take some time because feasibility study, and it is almost 1,000 kilometers away from Ahmedabad mainland. So it is not going to be very easy but yes, government is working behind that, yes.

Operator

Next question comes from Abhishek Dixit from [ Hem Securities. ]

U
Unknown Attendee

Congratulations for the great set of numbers. Sir, my question is regarding around 2 months ago with our news channel, we had guided for INR 7,500 crores revenue guidance. So are we sticking to that?

J
Jayanta Basu
executive

Yes.

U
Unknown Attendee

Okay, sir. And sir for 22%, 25% growth in the FY '25 also?

J
Jayanta Basu
executive

Yes. Around that, yes.

Operator

Next question comes from [ Vipulkumar Shah ] from Sumangal Investments.

U
Unknown Analyst

Sir, one of our peers continuously reports 14% to 15% EBITDA margin. So our margins are 10%. And previously, it was around 8%. So what is preventing us to reach those type of margins, whereas they are also doing almost same type of work?

J
Jayanta Basu
executive

Well, I cannot compare with other company. See, the business model is different and we had some legacy jobs as you must be knowing so that has daunted our margin till now. We really aspire to do margin of that kind. Let us hope for the best rest, let us see.

U
Unknown Analyst

So I think one of the previous participant had also asked about legacy projects. So what is the quantum of the legacy orders which is left if you can quantify in terms of hundreds of crores? How much work is left for these legacy orders?

J
Jayanta Basu
executive

So today, it is nothing, I mean virtually 0 almost.

U
Unknown Analyst

Today it is 0?

J
Jayanta Basu
executive

Yes.

U
Unknown Analyst

Yes, so still in this -- so in this quarter also, there is a -- if our peer is reporting a margin of 400, 500 basis points more than us so it's a little difficult to understand why we cannot report.

J
Jayanta Basu
executive

No, I disagree with you. You may be comparing with some 1 or 2 companies, but you have to see general in construction space. I think 10%, 11% is quite standard. So I don't want to comment on others. But I don't think that you can expect 14%, 15% EBITDA consistently going forward. It is difficult, very difficult.

Operator

Next question comes from Kaushik Poddar from KB Capital Markets Private Limited.

K
Kaushik Poddar
analyst

See, you have an exposure to a leading group when they were in a problem because of some reports and all those things, your stock price had come down very sharply. So when will that orders get executed completely? The one in Sri Lanka as well as the road project.

J
Jayanta Basu
executive

Road project almost by end of the year or beginning of next year should be completed.

K
Kaushik Poddar
analyst

Okay. And the Sri Lankan project?

J
Jayanta Basu
executive

Sri Lanka project mid of next year, 2025 June, July.

K
Kaushik Poddar
analyst

Okay. Okay. They're on schedule, I mean in the sense that there's...

J
Jayanta Basu
executive

All are going on schedule. We are getting well paid. There is absolutely no problem.

K
Kaushik Poddar
analyst

And are you guiding for a 15%, 20% growth next year?

J
Jayanta Basu
executive

Yes.

K
Kaushik Poddar
analyst

Okay. And see, the government's CapEx has come down. The growth of CapEx projected for the next financial year is down to 10% from 25%, 30% last year. So because of that, do you see any kind of order slowdown?

J
Jayanta Basu
executive

No. As far as we are concerned, I don't think that will affect us.

Operator

Next question comes from Sunil Bhojwani, an individual investor.

U
Unknown Attendee

Congratulations on a good set of numbers. Sir, I just want to know, in international work, do we have better margins? Or is it similar to domestic?

J
Jayanta Basu
executive

International business should fetch you better margins than domestic. That is our idea for going outside.

U
Unknown Attendee

So going forward, as we secure more orders from international, there is scope for improvement in margin. And on a medium term, say, 1 to 2 years basis, we see further scope of margin improvement from you since legacy orders are now out of -- are mostly completed?

J
Jayanta Basu
executive

Yes, there are 3 things here. One is that, as I mentioned, legacy orders are no more there. So that is a good thing. And if we get international business, we can make better margin. That is a good theme. But at the same time, the bulk of the revenue, which comes from Indian market, the competition will grow, more competitors will be qualified. So if you have to beat them and get the job, your margin will be a little lower than what it is today.

U
Unknown Attendee

So you mean to say, sir, our medium-term margins can go lower, is that what you're trying to...

J
Jayanta Basu
executive

Yes. I mean -- see, if we have to maintain around double digit, it won't be possible going forward with the Indian domestic business because competitions will be more. That we have to compensate by some job in overseas, it's like that.

U
Unknown Attendee

So on a consolidated basis, double-digit margins is not sustainable?

J
Jayanta Basu
executive

It's sustainable, we have to continuously make a strategy. But if you are remaining only one segment in one geographical area and still the margin has to come down because today -- if you see 4 years back, we were really 3 players in underground. Today, at least, there are 7, 8 players. Next year, it will be 10, 12 players. So more the number of players, the margin will come down. That is the business.

U
Unknown Attendee

But all players must be catering to different categories, right? I mean sub-INR 1,000 crores project or sub-INR 500 crores project or above INR 2,000 crores project. So in that way, I think you would have -- be having a few competitors.

J
Jayanta Basu
executive

So it is then today a job of INR 1,000 crore plus. [Foreign Language] will get around 6, 7 competitors.

U
Unknown Attendee

Okay, okay.

J
Jayanta Basu
executive

[indiscernible] at this point to discuss in detail [Audio Gap] how to go forward.

U
Unknown Attendee

So you will try and maintain these double-digit margins as much as possible. But in case there is more competition, the margins might face a little pressure. Is that what I can deduce from what you are saying?

J
Jayanta Basu
executive

Yes, you are right. Absolutely right.

U
Unknown Attendee

Okay. And secondly, sir, what is the kind of order pipeline, the bid pipeline as of date? And what would be the success rate out of that as per your assumption?

J
Jayanta Basu
executive

Order pipeline will be around INR 13,000 crores plus, and ballpark is 20% statistically.

U
Unknown Attendee

20%. Okay. And the new orders will only start flowing in post elections and government...

J
Jayanta Basu
executive

You are right. You are right.

U
Unknown Attendee

Okay. But if I have to take your outlook for the next 2 or 3 years, what would you say in terms of the business and the scope of work coming in and the outlook?

J
Jayanta Basu
executive

Well, whatever work we have, that will cater for this year or up to 2025, '26 middle of that. So we have to secure some jobs but the opportunity what we have and what is our capability, I can see that 20% growth we'll be able to maintain coming 2, 3 years.

Operator

Next question comes from [ Kunal Patodia, ] an individual investor.

U
Unknown Attendee

Fantastic results, the best ever performance, congratulations for that. My question is regarding arbitration awards. Last quarter con call, you guided that we are expecting some inflow so has that -- have we received that award the money is in? Or do we expect any new awards inflow in this current quarter?

J
Jayanta Basu
executive

Few arbitration award we have. Some of them have been challenged to the court and some of them will get sought out through new scheme called Vivad se Vishwas. But during this quarter, we have not received any inflow. We hope that, yes, some time something will happen. But as you know that this particular thing goes very slow in our country. But we have got some positive side from 3 or 4 projects as well today.

U
Unknown Attendee

Sir, my second question is, as you've seen that new participants are now eligible to bid and the competition is increasing, sir, aren't we also improving our eligibility for bigger and better orders like INR 2,000 crores, INR 3000-plus-crore orders?

J
Jayanta Basu
executive

Yes, you will see still, historically, we used to joint venture with our partners that is our promoter to get qualified. And now we are able to do by ourselves most of the job, including underground metro and airport. Now going forward, there will be a bigger jobs and in some of the job definitely, we have to partner outside expat agencies and the work is in progress.

U
Unknown Attendee

Right, sir. So whenever the shipping terminal in Andaman will come, do you think we'll be eligible to bid for those projects?

J
Jayanta Basu
executive

Yes, yes, we are eligible. I mean, they will make us eligible to participate in that.

U
Unknown Attendee

Perfectly fine. Sir, my last question is, in the overseas orders that you mentioned, the bids that we have submitted and you gave a guidance that the margins will be improved better. So will it be 15% plus margins in these orders? Or are we still expecting the same margins that we get in our marine jobs in India or Bangladesh?

J
Jayanta Basu
executive

It is difficult for me to say for future job absolute number in terms of percentage. It will be better that much I can tell, Kunal.

Operator

Next question comes from [ Nirvana Laha ], an individual investor.

U
Unknown Attendee

Congratulations Mr. Basu and Mr. Patwardhan for delivering on what you've been promising. Congrats on that. My question is, how much can you tell me the CapEx that we have done for 9 months? And you -- the kind of CapEx you indicated for next year, I think you mentioned INR 200 crores, INR 250 crores. Mr. Patwardhan, can you help us with the depreciation number, the expected depreciation for next year?

P
Prasad Patwardhan
executive

Well, we have done CapEx of INR 200-plus crores in this year. And regarding the next year, I think Mr. Basu answered one of those questions earlier. Our depreciation charge for the quarter is about INR 56 crores.

U
Unknown Attendee

Yes. And going forward, would it be possible to help us model that? How that will evolve?

P
Prasad Patwardhan
executive

Well, it will be difficult for me to give any indication because in the last couple of years, we have done a lot of CapEx. There will be some CapEx going forward as well. And the depreciation typically depends on the useful life of the asset and different assets have different life cycles. So it will be difficult for me to give you an estimate of the depreciation. But historically, we have seen it is around 2%, 2.5%, 3% of our revenue. Maybe for your modeling purpose, you can take that number into account.

U
Unknown Attendee

2.5% to 3%. Okay. And what is our net debt position today, and by end of FY '25 where do you expect that to be?

P
Prasad Patwardhan
executive

Our net debt as of December is INR 400-plus crores. And as I mentioned earlier, we don't expect the debt to go up significantly going forward. So I guess it could be at the same level. While I can't give you an exact number at this stage, we expect it to be at similar levels as of March '24 as well.

U
Unknown Attendee

And -- okay. And 1 year forward, it's not possible for you to project that?

P
Prasad Patwardhan
executive

It will not be possible to give you any number.

U
Unknown Attendee

And with the improved performance on margins and balance sheet being very strong with good pipeline, are you expecting a credit rating upgrade any time soon?

P
Prasad Patwardhan
executive

Well, we are working with our credit rating agency. We are talking to them. And hopefully, we should have some good news on this front maybe once we complete -- conclude our discussions with the rating agency.

U
Unknown Attendee

And at what time frame do you think that is expected, the news?

P
Prasad Patwardhan
executive

Well, I won't be able to comment on that right now. We want to discuss that with the rating agency. It will be premature for me to comment on that right now.

U
Unknown Attendee

Sure. So Mr. Basu, we are very strong in marine. I wanted you to tell us a little bit more about the competitive dynamics in marine both for jobs in the SAARC region, India and also for the jobs that you're completing outside. So can you give us some picture of how it looks like in terms of competition?

J
Jayanta Basu
executive

Competition in India, we have 2 kinds of jobs, which are more than INR 500 crores and more than that INR 1,500 crores, INR 2,000 crores. In that range, I think they are hardly 3 or maximum 4 competitors we have. Below INR 500 crores, INR 400 crores, there will be another 2, 3 more. Below INR 100 crores there will be plenty. So that is a number of competition in marine in India. Abroad, there are foreign players mostly Japanese and Korean. They don't come for any job, which is less than INR 5,000 crores to INR 6,000 crores. So that is the opportunity you're looking for. Whereas too small jobs, abroad there are small players. In between that layer, there is nobody, nobody much. So we're trying to do that.

U
Unknown Attendee

And you said that margins are higher in these international projects. But obviously, there will be some risk, like political risk will be there. And of course, price escalation risk, et cetera, will be there. So is your parent experience in the geographies that you mentioned, Middle East, West Africa? And what -- how do you think about the risk adjusted margin in these geographies?

J
Jayanta Basu
executive

So when I say margin, that is, of course, after having considering the risk factor. So normally, we definitely take help of our parent wherever we go, the places where they are working or they have worked before. Otherwise, we engage some good consultant out of speak for somebody to study in detail. Because you know work is 50%. Another 50% is something else. So that needs to be understood properly if we will submit our bid.

U
Unknown Attendee

Yes. And does ITD have experience in Middle East or in West Africa?

J
Jayanta Basu
executive

Yes, yes. They have got experience in Middle East, East Africa and of course, Southeast Asia.

U
Unknown Attendee

Okay. Okay. And one final question from my side, Mr. Basu. So I will name one competitor. I didn't want to do it, but I don't know how else to frame the competition. So you can understand my underlying question and answer accordingly. So if I look at somebody like an Ahluwalia, they are doing similar kind of margins, but the balance sheet cash flow seems to be a little better. So they are mostly into building construction on land, whereas you guys are more experts in marine. So can you help us compare these 2 segments in terms of marine, is it like more onerous in terms of more interest to be paid, more BBs to be encashed? And is it more balance sheet heavy to work in marine compared to the buildings? And how are you thinking about this mix of marine versus building?

J
Jayanta Basu
executive

see, the whole thing depends upon the culture of the company. For the last 100 years, we have been mostly in the foundation engineering till 1990 or early -- after 1990. So we have a culture of doing heavy civil work, mostly foundation oriented. Last 20, 25 years, we have started going to airport, metro and now we have mastered them. And now even also, we are doing the building also. So I'll not be able to comment on that particular aspect. The balance sheet also depends upon what are jobs we had for last 20, 25 years or 15 years.

So we are coming out of some bad jobs. We have almost -- all the bad jobs are behind us. Hopefully, balance sheet also will improve. And you cannot compare directly to the building and marine because building work is done in a manner where you will require more manpower, more labor, less plant oriented job. But marine is different. So it depends upon the company's culture, what was the history, how they have built up, all these things. Yes.

Operator

We have a follow-up question from Sunil Kothari from Unique PMS.

S
Sunil Kothari
analyst

Sir, one thing just wanted to understand is, what is our core strength on a cost structure, which makes us competitive in international market? Because we have to buy raw material, so many local contractors. So cost structure for us and for Japanese or Korean will be similar. So where we are stronger in terms of cost?

J
Jayanta Basu
executive

Yes, you have rightly said the material cost is same for any company, either Indian or foreigner or whatever. It mostly depends upon the operation cost like temporary work, temporary structures, supporting structures where we can do it much cheaper price and there -- where we can be competitive as compared to international players. Yes.

S
Sunil Kothari
analyst

And sir, engineering part of the -- any project we must be doing in India, where we must be competitive, that is also one of the factors?

J
Jayanta Basu
executive

Yes, that's what I said. Engineering, there are 2 kinds. If you do EPC, you do engineering for permanent work. So there we are quite good in marine and we saved -- tried to save some money there. And some job, which is designed by the client, still there is opportunity to improve in the costing if you do temporary work design properly and we have got all the things available with us for many years. So those kind of things have helped to costing. Yes.

S
Sunil Kothari
analyst

Sir, last question to Mr. Patwardhan. Sir, any onetime expense or income in this quarter, which is not related to normal business of operation?

P
Prasad Patwardhan
executive

No, no. There's nothing like that in that quarterly results.

Operator

We have a follow-up question from Abhishek Dixit from [ Hem Securities. ]

U
Unknown Analyst

So sir, in the recent budget session, government has focused more on the expansion of the existing airports and development of new airports and metros and Namo Bharat. So on the ground level, are we seeing more opportunities in the aviation sector and -- despite the competition also in the sector?

J
Jayanta Basu
executive

Yes. Aviation, there are great opportunities. We are almost -- we are very much there. As you know Pune airport, Trichy and Pune are completed. Ahmedabad airport, we are doing. And there's a list of around 20 airports the tender will be out after election one by one. so there are opportunities, you're right.

U
Unknown Analyst

Okay. So -- but this will be after election?

J
Jayanta Basu
executive

Yes. I think code of conduct and all such things after election only they will we take off.

Operator

We have a follow-up question from Mehul Mehta from Nuvama Wealth.

M
Mehul Mehta
analyst

Can you please share in terms of contribution to revenue for quarter as well as 9 months from major projects like Ganga Expressway, Chennai Metro, Indian Navy kind of a thing?

P
Prasad Patwardhan
executive

We will be only able to share with you the project-wise numbers...

M
Mehul Mehta
analyst

Broadly. I think last quarter, it was disclosed. So maybe if you can, broad number.

J
Jayanta Basu
executive

Let me try. Let me try. See 20% of the jobs as I say, 10 projects, they have contributed 80% of the margin. So these 10 projects...

M
Mehul Mehta
analyst

Sorry, can you repeat? Sorry, I'm not getting, sorry.

J
Jayanta Basu
executive

There are 10 projects out of 50 which have contributed 80% of our revenue. And these 10 projects are Ganga Expressway, Chennai Metro, Bangalore Metro, Project Seabird Navy, Colombo, Shimla to Nagpur and 1 or 2 more, around 10 projects.

M
Mehul Mehta
analyst

So this is for the quarter as well as 9 months should be similar kind of.

J
Jayanta Basu
executive

Yes, almost same, same, same.

M
Mehul Mehta
analyst

Okay. And in terms of other income, there is substantial increase. Is there any nonrecurring income item for the quarter?

P
Prasad Patwardhan
executive

It is largely from income on fixed deposits or some tax refund that we were able to get. There is some interest that we got on the tax refunds as well.

M
Mehul Mehta
analyst

So there is nothing nonrecurring. You are saying like a fixed deposit income and sort of thing. Okay. Now sorry to bother Mr. Basu again, but there have been questions regarding peers. So I was looking at one of the peers where our margins are quite comparable like-to-like. But in terms of when I look at employee costs and other expenses as a percentage, which is on the higher level for us as a percentage of revenue. So is that, that we are provisioning for future growth? And to that extent, there can be operating leverage, which can help us going forward in terms of expanding margin?

J
Jayanta Basu
executive

So you are right, there are some expected credit loss sort of things there. But you see the manpower cost, if you check our previous quarter or previous year, it is coming down. Earlier it used to be around 11%. It has come down to 9.5% and going forward it will further come down. So it depends upon not only the delta cost, it depends upon what revenue you are getting out of that fixed manpower cost. So we are improving. That is for sure.

M
Mehul Mehta
analyst

So going forward, we can expect even further reducing this percentage of revenue.

Operator

That would be the last question for the day. Now I hand over the floor to management for closing comments.

P
Prasad Patwardhan
executive

Thank you, everyone for a very intense and deep discussion on our results for this quarter. We appreciate the interest that you have shown in our company. We look forward to interacting with you again next quarter. Thank you very much.

Operator

Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.

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