KEC International Ltd
NSE:KEC
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
567.5
1 050.75
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
KEC International Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the KEC International Limited Q2 FY '23 Results Conference Call.
We have with us today from the management, Mr. Vimal Kejriwal, Managing Director and CEO; and Mr. Rajeev Agarwal, CFO.
[Operator Instructions] I now hand the conference over to Mr. Vimal Kejriwal. Thank you, and over to you, Mr. Kejriwal.
Thank you, Rutuja. Good morning to everyone. I welcome you all to the Q2 earnings call of KEC.
Let me start with an update on the overall performance for the quarter and thereafter talk about each of the respective businesses and key strategic initiatives. We have achieved revenues of INR 4,064 crores for the quarter with a strong consolidated growth of 13% and stand-alone growth of 11% vis-a-vis Q2 last year. The growth was delivered by good performance across most of our businesses. The growth could have been higher but for extended monsoon in certain parts of India.
We have delivered an EBITDA margin of 6.2% at the stand-alone level and 4.4% at the consol level for the quarter. The margins continue to be impacted primarily due to elevated logistics costs, which are now coming down, execution of legacy projects with adverse commodity prices and also completion of the last EPC projects in SAE Brazil.
We have significantly reduced our commodity exposure in legacy projects to less than 5% of our order book. In Brazil, I'm pleased to share that we have largely completed the last EPC project as -- and expect it to be commissioned within this quarter. With this, our order book in SAE of almost INR 1,100 crores does not have any EPC project and comprises of orders for supply of towers, hardware and poles. We are confident of a revival in the performance of SAE from Q4 onwards.
Furthermore, with a strong order book in North America, the Mexico factory is well loaded for H2. Considering the performance of Brazil, we have adopted a prudent approach and made a provision for impairment of INR 76 crores during the quarter in the stand-alone financials. However, this has had no impact on the consolidated financials.
Excluding the impact of exceptional items, we have delivered a PBT margin of 3.1% and PAT margin of 2.7% at a stand-alone level. Our consol PBT margins are at 0.7% and PAT margins at 1.4%.
We continue to have good traction in orders. Our YTD order intake stands at INR 10,465 crores with a strong growth of 25%. The largest contributor in the order intake has been our T&D, civil and railway businesses, followed by cables and oil and gas. Most of these orders have been secured at elevated current commodity costs. This gives us a confidence of an improvement in the margin trajectory going ahead as these orders get into execution.
The traction in order intake has expanded our order book to an all-time high of INR 27,569 crores including the orders secured in Q3 till date. Additionally, we have a large L1 position of over INR 6,500 crores diversified across businesses. With this, our order book plus L1 stands at a record level of INR 34,000 crores. Our tenders under evaluation and in pipeline stand at over INR 110,000 crores.
On debt level, including acceptances, has started improving and has reached INR 5,919 crores as on 30th September, a reduction of more than INR 150 crores against Q1 FY '23. We expect improvement in working capital in the second half of the financial year and are committed to reduce the debt levels going forward.
Our interest cost stands at 3.1% for the quarter as a percentage of sales. The interest cost is slightly higher owing to the steep increase in the interest rates globally, especially in SAE Brazil and the elevated debt levels.
Now coming to the specific businesses. Our core T&D business has delivered a growth for the quarter despite the various headwinds. The growth has been delivered on the back of strong execution, especially in the international markets. The T&D business has significantly expanded its order book with strong order inflows of INR 3,775 crores across India, Middle East, Africa and the Americas.
In India, the business has secured its second prestigious order to construct a 400-kV digital substation for PGCIL, in addition to the first 765-kv digital substation in India secured last quarter. Moreover, the business has bagged two more large transmission line orders from PGCIL. The business has also diversified its clientele with an order to construct a large GIS substation from a reputed power-generating company in India.
The business has also secured multiple orders in the international markets, especially in Middle East. We have successfully leveraged our Dubai facility to significantly enhance business in the Middle East. Our order book and L1 position in the Middle East has now expanded to over INR 4,000 crores, a growth of approximately 2x vis-a-vis last year.
The overall tender pipeline in T&D continues to be strong both in domestic and international markets. Additionally, the business has a large L1 pipeline of over INR 3,000 crores contributed largely by international orders.
Our railway business has achieved a revenue of over INR 850 crores for the quarter. I'm pleased to share that the business has secured YTD order inflows of approximately INR 2,500 crores, a healthy growth of almost 2x vis-a-vis last year. These include orders in the conventional OHE and composite projects as well as orders in the new area of -- areas of speed upgradation and technologically enabled areas of metros. During the quarter, the business has also successfully expanded its presence with 2 prestigious orders in the emerging areas of TCAS, train collision avoidance system under Kavach, which aims to enhance safety of the Indian Railways with world-class technology.
We are witnessing an improved visibility of tendering activity across segments and are confident of securing a larger share of orders in the coming months. The railways tender pipeline continues to remain healthy across conventional, technologically enabled emerging areas as well as international opportunities. With a sustained focus on execution, strong tender pipeline and an order book plus L1 of over INR 7,500 crores, we are certain that railways will contribute significantly to our growth going forward.
Our civil business continues to be on a high-growth trajectory as it logged revenues of INR 740 crores for the quarter with an impressive growth of 65% vis-a-vis Q2 last year. The honorable Prime Minister, Shri. Modi has inaugurated the prestigious Phase 1 extension of Kochi Metro, KEC's first metro rail project wherein the viaduct and stations were delivered by our civil business and the ballasted tracks were laid by our railways business. This project is set to make local travel more convenient and ease lives of thousands of commuters. We're also working on Phase 2 of the Kochi Metro, which shall be completed in the near future.
Our civil business continues to deliver consistently on the order intake front, and has secured YTD orders of over INR 3,000 crores, a strong growth of 25% vis-a-vis last year. During the year, the business has strengthened its presence with significant orders in the water pipelines, public spaces, industrial and data center segments. The business is now executing 8 prestigious projects in the water pipeline segment aggregating to over INR 2,500 crores on the Jal Jeevan Mission of the government.
The uptick in order intake has significantly enhanced the order book plus L1 to INR 9,500 crores, comprising of turnkey EPC projects across segments from marquee clients. With an uptick in government spending across segments and a resurgence in the private CapEx in the industrial and realty sector, we are confident that this business will continue to be a key growth driver for us going forward.
We are pleased that our foray into data centers is doing well and we recently secured our third order in the segment.
In oil and gas pipelines, the business has demonstrated very good performance post acquisition of KEC Spur Infrastructure last year in October '21. The business delivered revenue of INR 81 crores and secured new orders of [ INR 280 crores ] for composite work of oil terminal station and laying of cross-country pipeline during the quarter. The business has a strong order book plus L1 of over INR 900 crores comprising government and private players. We are confident of scaling up -- significantly scaling up the business, both in India as well as overseas.
Our cables business achieved revenues of INR 390 crores and grew by 9% vis-a-vis Q2 last year. I'm happy to share that the business has achieved its highest ever revenues and profitability in H1. The business is also progressing well with the development of 5 new products. Of these, 3 products have been successfully commercialized.
Coming on to strategic initiatives, we remain committed on delivering profitable growth through focused diversification, expanding international reach in our non-T&D business and strengthening the balance sheet through sustained cash flow generation. Additionally, we are making good progress in our twofold transformational program on a world-class engineering and civil execution excellence in collaboration with a global consultant. The objective of this program is to expand our business horizons, improve engineering-led wins and enhance profitability. The key deliverables of the program include institutionalizing new engineering solutions for optimizing cost and resource consumption, reimagining processes to improve productivity and implementing digital solutions to crush the project cycle time.
We have already started witnessing benefits of this program, wherein we have expanded our footprint into diverse technology-intensive and engineering-led EPC projects in railways and civil. We continue to deploy several mechanization, automation and digitalization initiatives across projects, which have significantly helped us to improve productivity and quality of execution.
In ESG, we continue to take several measures to transform our operations in a sustainable manner. One of the key measures is installation of induction furnaces and usage of natural and LPG gas at our transmission power plants in India and Dubai to lower carbon emissions, resulting in a saving of 24,000 liters of fossil fuel every month.
I am also delighted to share that KEC has been recognized as one of India's best managed companies by Deloitte for the second time in a row. The unique distinction is a testament of our strong focus on sustainability and governance.
Overall, we are pleased with our consistent growth in revenues, traction in order intake and improving working capital scenario despite a challenging environment. We have significantly reduced our exposure to legacy projects and have commenced execution of projects which are secured based on current commodity prices and logistics costs. This augurs well for us and give us confidence of a sequential improvement in the margins in the quarters to come.
On a concluding note, I would like to convey that the outlook remains robust across most of our businesses based on our traction in order intake, a record order book plus L1 of over INR 34,000 crores and a strong tender pipeline. We are now increasing our revenue growth targets from earlier 15% to 20% for the whole year.
Thank you very much. I'm now open to your questions.
[Operator Instructions] The first question is from the line of Bhoomika Nair from DAM Capital.
Sir, just if you can give an update on how the working capital is panning out. I think we were looking at some easing of the working capital and release of funds from Afghanistan and also other areas of railways. If you can just give an update on what is the status of the same?
So Bhoomika, we are broadly in line with what we were talking about, seeing that improvement starting from Q3, and we should hopefully see a bump up or a significant improvement happening in Q4. So I think that's in line. We have reduced around INR 150 crores. We would have loved to reduce more. But I think that's where we are.
Afghanistan is somewhere where we have still not received cash, but we are in active dialogue with all the 3 multilaterals. We do expect that before the end of the year, I'll say at least 30% to 40% of the outstandings should get realized either from the multilaterals or from -- against our ECGC claims. So I think Afghanistan we will definitely see some light happening in the near future.
There's also a lot of pressure on restarting some of these projects, because some of them are of strategic importance to World Bank as well to some of the countries participating. So we'll keep our fingers crossed. Embassy has recently opened and visas are now getting issued. So I think in Q4, we will definitely see a positive movement in Afghanistan.
Right. Okay. Okay. So the other aspect is on order intake, right? In the first half, we've seen a fairly strong order intake of INR 10,000 crores. We will probably touch close to INR 20,000 crores in the current year. How is the outlook in terms of across segments looking at maintaining this momentum in the next few years? If you can just talk about the bid pipeline across T&D, railway, civil, the 3 key segments for us.
The bid pipeline in civil is obviously very strong, okay, across residential, and now we are seeing industrial and public spaces. Metros is slightly weak. We have not seen major announcements of new metro. So whatever is coming is from the existing projects of Chennai and Delhi and Mumbai, not [ on new ]. But overall, there's a huge pipeline of tenders in civil.
As far as T&D is concerned, international pipeline is very strong, especially from the Middle East, especially from Middle East, and also from Far East, we are seeing some tenders coming out in Thailand, Indonesia -- sorry, Malaysia, et cetera. So that is going on. Africa is also slightly coming up. Now last quarter, we had said we were very disappointing. But I think of late we started seeing some tenders coming out, particularly in East Africa, I will say.
India, I think T&D tenders are coming out consistently, especially from power grids and also the TBCB tenders. There has been some slowdown in award, because the GIB issue is still not resolved. I think there's a hearing on the end of November. So once that gets resolved, so all the tenders which are stuck in Rajasthan should start coming out.
Gujarat is already out and some tenders in Maharashtra and Karnataka should be awarded now. So I think India as we have a decent tender of pipeline, but we are lucky that we have already won 4 and maybe I think 5 or 6 projects already in this year, okay? And we are L1 in a couple of them more. So I think for us, both India and international will do very well.
And the last part is SAE, where we have a strong order book as well as a large L1 in SAE. So I think we will also see a good traction on the SAE order intake in the next half.
Sir, is it possible to quantify the bid pipeline within T&D, what is this looking like, both in India and international?
I don't have the numbers right now. Maybe you can talk to Abhishek later on, but it should be around INR 25,000 crores, INR 30,000 crores. Okay?
Sure, sure. Sir, lastly on SAE, I know this quarter, we'll complete the last project. What will be the level of loss that it will come off to versus the INR 60 crores, INR 70 crores that we've been making on a quarterly basis at EBITDA?
Unfortunately, I don't have the numbers. If we knew what we are losing, we would have provided for that and closed the accounts. We will commission the project this quarter, I think by November or December. So by that time, all our various claims and all that commercial issues, which are going on with the client, that should also get completed. Brazil, the advantage is that, normally they also complete all the commercial pieces. So this quarter, Bhoomika, we will complete the entire EPC, including the commercials and all that. So whatever is going to happen, I don't know what will happen. Those will get accounted for in this quarter. But I do presume that they will be reasonably lower than what has come in Q1 and Q2. I don't expect losses or anything up to that order. There will be some numbers depending upon how the claims pan out, okay? But we do expect that they'll be reasonably lower than what has hit us in Q1 and Q2.
The next question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a decent quarter, sir. My question is, if I see the business right now, so we are having the headwinds of high interest rates, which has started getting reflected on a higher debt level, valuated interest cost of almost INR 127 crores this quarter. And then second thing is, while we see some improvement happening from the SAE, and we expect to improve our margins, our standalone margins have -- actually maybe at all time lows now. Just wanted to understand from you, what's happening on the standalone business? Why have the margins come off during this quarter? And do you see some more pressure or headwinds in standalone business, given that we are out of the commodity cycle, where the prices have corrected, but our margins have now compressed?
Standalone, I think there are a couple of reasons for standalone being where they are. So one is while the prices have come off, even the impact of that will start coming in now, we have committed costs on raw materials. Bookings have been done, and we have legacy projects. So that is still continuing. What has also happened and why I'll say this quarter, it got a little bit, I'll say, aggressive in terms of numbers and all that is because prices started coming down. We also fast tracked the execution of some of our projects, which are normally we would have kept, let's do it [Foreign Language].
What happened was that, there are projects where we could have waited till Q4 and all that for execution and gradually spread over the losses. But since steel came down from INR 72,000 to INR 56,000 and INR 55,000, we did decide that it's better to cut our losses and execute those projects. Similarly, on international front also, when we were seeing that logistic costs, et cetera, were not coming down, steel is not coming down or it had come down to a certain level, we did, I'll say, fast track some of our legacy and loss-making projects, which we had earlier thought that we will spread it over maybe H2 or maybe going over Q1, okay? That's 1 thing which has sort of put a little bit of extra pressure on the standalone.
Secondly, I think in Q2, there was excessive rainfall, which sort of, I'll say, pushed down our revenues for the quarter in India, especially. Had that not happened, we would have probably done -- 11% growth in standalone is not enough. We could have done easily 20%, okay? So because of that, there was some leverage, which has come and hit us both on interest and also on the OpEx cost.
The third is that we have now got a large order intake at current and maybe sometimes at a better pricing also. So all those orders are now under design and execution, and we will start revenues accruing from them maybe at Q3 or maybe at least in Q4.
The fourth piece what I would like to add is that you have seen results of many of the cable and conductor companies and all that. Now with metal prices [ et cetera ] coming down, all of them are under tremendous pressure to supply. So we are also running in a supply constraint in some of the places where all the prices have come down, but we are not actually able to supply the material, because the factories of all the conductor manufacturers are full.
So I think these are a few reasons. And I think the last reason I would like to say is, you will also start seeing the numbers of stand-alone versus consol being different now, because we now have our Dubai factory. We also have our Dubai EPC LLC, where all our UAE and other jobs are now getting executed under that LLC, which will come under the consol, rather than standalone. So you may, going forward, also see some changes in the consol versus standalone especially on the T&D sector.
I hope I've answered all your questions, Parikshit.
Yes, yes. Second question is on the profitability. So between the SAE and the standalone, so how do you see the margins coming back to the high single digits? And by when do you expect [ your own sales ] given the current order book and the pace of commodity prices and the factors you mentioned just now? So how do we revert back to that high single digit margin, by when? So if you can give some sense and color on that?
So to me, Parikshit, Q4, we should start seeing at least a breakeven in SAE, okay? Q3, I'm not sure I don't want to commit a statement right now, but Q4, definitely, we should start seeing a breakeven in SAE. And by Q4, I'll say, largely except maybe 1 order or maybe 2 orders where we have an issue where we are not able to commence execution. Most of our legacy projects should get completed in terms of materials supply. There could be [ closer issue and ] all that.
So from, I think, Q1 onwards we should start seeing margins heading towards the high single digits.
What about standalone, sir?
I think the problem will continue to be on standalone also because, as I said, some of the orders which we have on TBCB and all that are in standalone. So we'll have to wait and see how it pans out. But maybe you may have -- Q1 could be again still single high digit even for standalone. Maybe Q2 onwards, we may see some changes.
Okay. Okay, sir. Just lastly, sir, if you can give us the segmental breakup of debt between T&D and non-T&D. So how much would be the distribution there?
The revenue was 49%. Or you're looking at what distribution?
Debt -- debt number between the T&D and non-T&D.
That I don't think we have and I don't think we give it in that fashion, but I don't even have it right now. Maybe you can talk to Abhishek later on, maybe [ he'll get you ] a better idea.
The next question is from the line of Ashish Shah from Centrum Broking.
First question is on the Afghanistan execution. So you did mention that there are some mitigations that you may start the work on some of the projects there. But now it's been some time that you had [ gone to Pradesh ]; a lot of things have happened in between. So is there any talk of renegotiating the value of the orders, so that your margins are protected? Because then we don't want that SAE kind of a situation again. So I'm just getting your thoughts on that.
Firstly, there is a clear -- I'll not use the word renegotiation, but there are clear discussions happening on the cost to complete happening and all the cost of maintenance. So let me put it this way, that we already have around, I don't have the number, but 30, 40 local employees, who are there at site maintaining the stores and maintaining the work, which has been done. So hopefully, there is no deterioration in the work, which has been done.
So all these costs, which we are incurring and also additional costs with the [ elapse of time ] are under discussion with the client. So definitely, when we restart, we will definitely have a better number available. And I think even if -- let me go to the extreme, even if there is nothing happening there in terms of cost negotiation and all that, most of these projects are high double-digit numbers and all that, 15%, 20%, 25% and all that. So we don't see -- in fact, as and when we start, in fact, I should have added that when I answered the previous question saying, why your standalone numbers are lower as compared to last quarter, because last time we had Afghanistan in the execution, where the margins were higher.
So that was one of reasons. The other piece is that, Ashish, most of the -- these projects, material has been supplied I think probably 90%, 95%. So all the costs which are now to be incurred are on the local execution cost, which in our view, considering the local scenario prevailing with the security, having significantly improved vis-a-vis the earlier era -- I will not say it is very good, but vis-a-vis the earlier era, we do expect that the execution costs may actually turn out to be beneficial rather than adverse.
But we are very clear that there will be a settlement arrived at on the cost incurred, to be incurred and all that before the projects restart. And that should take care of all our concerns.
So if I may ask, what is the outstanding backlog there in Afghanistan now at this point?
I think it's around INR 600 crores or INR 500 crores, roughly around INR 500 crores. I don't have the exact number, but it's in that ballpark, INR 500 crores to INR 600 crores.
That's fine. That's fine. Sir, the second question, and I think the last one is on the interest cost. So traditionally, we have been guiding interest as a certain percentage of the revenue. Obviously, 2% and all seems a little difficult now, but for this year, what would be your guidance for the interest cost? So would we expect the run rate to increase even further, because the rates are still increasing? Or this is the stable level that you will look at?
To me, Ashish, I'll probably stick my neck out here and say that we expect it to come down, okay, as a percentage of revenue, because what is also going to happen is that we just said that we will grow at 20%. If you look at our numbers for Q3 and Q4, if we are growing at 20%, our revenues will grow also significantly. So as a percentage of revenue, we expect them to come down by maybe by 20 basis points or something, maybe 2.8% or 2.9% or something like that.
We are targeting 2.75% but I don't know whether we'll reach. But I think 2.8% or something should be a safe number to assume for the year as a whole.
The next question is from the line of Sandip Sabharwal from asksandipsabharwal.com.
So I've been tracking the company, as you know, for many, many years. So I think this is the second cycle in which we are seeing that, because of interest cost, the profit pool for the shareholders actually has come down sharply and in a rising interest rate environment given the kind of debt you have, although you are guiding for a lower interest cost to revenue, that might become tougher and tougher to achieve. So are there any levers for you to actually be generating free cash flow and reducing this debt?
Because there was 1 cycle when debt went up, then you guys worked very hard, debt came down. And then again, now it's getting up.
Sandip, a very valid question, and thank you for your continued interest. There are a few things which are going to happen. One is Brazil: the interest rates went up significantly. We do expect that with a stable environment, which is coming in there -- and we have seen the commodity and other prices stabilizing in Brazil; other costs also. We think that the interest rates will start coming down there. We are also refinancing some of our debt in Brazil at a lower cost through some of the development banks. That's one part of it.
The second part of it is that with a lot of volatility in the supply chain, our inventories have gone up by almost INR 300 crores over March, okay? And we do expect that with all the supplies, especially of steel and other metals stabilizing, we will start getting back to our normal inventory. So maybe INR 200 crores INR 300 crores of cash would get released from our inventories.
Third piece is that last time we had discussed about GST, where on all our railway and civil contracts, now we are able to charge 18% GST, which is also the input GST except for cement. So we have started seeing a release of our GST locked up in a refund. Already, I think around INR 40 crores, INR 50 crores has come back to us. And we expect another INR 200 crores or INR 250 crores number to get released by the end of March.
So overall if you look at all these things, maybe INR 600 crores, INR 700 crores of numbers from the debt should come down, even if we continue to be in attrition on our DSO area, okay. We are working on the debt, on the receivables, et cetera. So I do presume that some numbers will come out. So when I said that interest costs will come down, there were, I'll say, 2 or 3 different facets to it.
One was that we expect the overall borrowings to come down. Second was that we expect our revenues to go up, so the [indiscernible] will come down. And third is, we do expect that we should be able to collect a lot of money, especially on the railways and some of the transmission projects, which are now nearing completion here and which have a higher retention value. So we should become more efficient in our debt.
Sure. That will be great. The second part was that, although diversification of the revenue like you've done, you've done it very well. Like you've got into railways, civil and other segments. So from a pure transmission company, you are a very diversified Indian company now. But has that impacted in some way the entire bidding process of projects? Your -- I believe [ you can ] actually predict what kind of margins you will make out of them and that has actually hurt the near-term performance? Or do you think that you are able to manage [ that debt? ]
I don't see any concern there. In fact, to me, that has been actually on the other side, they made us much more predictable. Sandip, the problem that we have been having is what has happened on the commodity prices basically on COVID account, okay? You know the commodity has hit the roof and all that. And because of COVID and by that point of time to protect revenues, we had taken a few orders. I'll say in the period of around August, September, August to December 2020 when our tender pipelines were very poor and those orders got delayed. So that is what has hit the numbers and all that.
I don't see any structural change. In fact, right now, the margins on my non-T&D business are significantly higher than T&D, because T&D has been hit by fixed price contracts, which are now getting over.
The next question is from the line of Priyankar Biswas from Nomura.
So my first question to you is, like last time, if you can give us some color on the non-T&D margins? So if I recall, last time you had probably highlighted that in railways and civil, probably you are already closer to 10% level. So what is the status now?
And as far as collections are concerned, so this railways, how much is owed to us right now? And when do we see those money starting flowing in, like possibly some time lines?
So Priyankar, our margins continue in the same manner. We are still not exactly double digit, but we are pretty close to that in both railways and civil, okay? As far as railways is concerned, I don't have the exact number of AR and all that, but I can tell you one thing that we have collected either equal to or more than our revenue for the half year, okay? So the AR numbers in terms of overall has come down in the railways. Not to the extent we wanted it to come down, but it has come down and some of the money that we have stuck in are in a couple of projects, which were on EPC mode and all that.
And I think those projects will get over in this quarter. So hopefully, by Q4, all the money on these 2 or 3 projects, which are large projects, will get released. So Q4 should see a significant improvement in the railway, AR and DSO performance.
Okay, sir. And since you have given increased revenue guidance. So similarly, your order inflows have been quite strong. So what is the expectation for order inflows now, because it has been trending quite strong? Also in FY '23, what would you suggest would be the order inflow growth that you would expect?
So Priyankar, we have been looking around INR 18,000 crores to INR 20,000 crores. Let's see where can we reach finally. We are already at 10,000-and-odd crores. We have INR 6,500 crores of L1. Hopefully, these L1s get converted, then we should be at INR 17,000 crores in any case. Plus, we have bid for a lot more projects. So I'll say the band of INR 18,000 crores to INR 20,000 crores is what we are targeting for.
Okay, sir. Sir, one more thing that I observed here is that the rise in debt for both the consol and the standalone seems to be almost similar. Almost like -- almost to the net debt increase of almost INR 1,000 crores each. So is it like that we are essentially borrowing at the standalone level and funding the SAE losses to avoid interest payments out there or some sort of mechanism like that being done?
I think I'll ask Rajeev later on -- to touch base with you later on to understand it exactly. There will obviously be some borrowing at the standalone level into -- and funded by way of equity. We've hardly given any loans to the subsidiaries, okay? Maybe, I don't know -- Rajeev, any loans to subsidiaries?
No.
We have not given any loans to subsidiaries. Whatever has been given has been by way of equity. But we do expect that the loans in the subsidiaries will now start going up, because the balance sheets will now start improving. So then they should be able to borrow on their own and there will be no need for us to raise money in the standalone and fund them.
But obviously, the standalone has got a better balance sheet. So the cost of raising funds in the standalone are obviously better. So if there is a mechanism and since they are 100% owned, we will see how to best optimize the interest cost. Right now, we are not giving loans to them. No.
An equity infusion. So in that sense, that corresponding rise in debt in standalone could probably be due to the equity infusions into the SAE. Would that be the right way to see it?
Absolutely. That is the right way of looking at it, and that is also the reason why we had taken an impairment, because we had given equity from our equity investments and the companies have gone up, okay.
And sir, the last question from my side. like at your absolute borrowing level, let's say, ex of SAE, so what is the rate of interest that you are getting on the debt? I mean, excluding SAE. And how would it compare, let's say, similarly last year? So I just want to understand the rate of increase of interest from the core business.
I think it's around 7%, okay? And I think it's gone up, Rajeev, by 50 basis points or 70 basis points?
From last year, we did 200 basis points.
200 basis points, Rajeev, is saying from last year.
Up 200 bps, effectively.
Whatever is the increase in the interest cost this year, roughly about INR 100 crores interest has been [ paid ] -- precisely INR 90 crores. 50% is on the account of the interest rate rise and 50% is on account of the additional volume of borrowing that has been raised during this period. So their debt, 200 basis point interest rates have risen, and that is across the board. If you look at the way the RBI has been -- increased the repo rate and all that. So that is exactly reflecting into the borrowings, because most of our borrowings are short term in nature. They are for working capital purposes. So it translates immediately into your borrowing numbers.
The next question is from the line of Amish Kanani from JM Financial Services.
Sir, I just wanted to understand with less than 5% of our order book slow moving and low margin, can we assume that the balance order book is more like high single digit, maybe EBITDA margin between 8% to 10%? And is it possible to give us the average execution of the order book, which is outstanding as of now?
Amish, I'm not very clear on your first part, but let me first answer the second part. Our average order book would range from 12 months to 18 months and some of them are 20, but civil would have longer, especially the water pipelines and metro projects and all that. But average T&D is now slowly coming down to between 12 to 18 months. Most of the T&D projects are actually now 15 months.
Civil, industrial would probably be less than 12 months. Residential would extend, because it's normally large, large townships, et cetera. So they'll start from 12 to 24 months. I'll say average, you can take around 18 months, okay, on the ballpark. And what was the first part? I think your voice was not clear.
Sir, barring the 5% order book which you mentioned, either slow moving and [indiscernible] and you also mentioned, you know that Brazil, there is no [ EPC products at our business. ] Can we assume that now our outstanding order book as we execute, will be more like 8% to 10% EBITDA margin, sir?
100%. Yes. Absolutely.
And sir, we have recently seen the headline of Brazil changing, there was an outcome of the election. The question is the losses that we have made, are we taking it as a part of normal business, or we are going to our clients and saying that we have incurred a loss, which we may go and say that there are some claims that they need to give? Given that power is very, very critical, you have seen always power utilities are always given some special treatment if you stop orders. Also the politicians also get affected.
In the context, are we going back to them and saying that you need to compensate us unless -- or else we will not work there or something like that?
So Amish, what has happened is that as far as the government is concerned, we don't deal with government directly. We are contractors to the developers there. We have gone back to our client. And whenever, whatever is possible, except for the last order, which we are right now completing, all the orders have been commercially negotiated and closed. Part of the losses have been reimbursed, part have not been reimbursed. Because unfortunately, Brazil did not declare COVID as a force majeure. So because of which your legal recourse was very, very poor, because your clients also did not get a legal recourse, which is where you got caught into what the President said that it is a flu and it's a sneeze and all that.
So you know we got caught very badly in that. I don't think we have any way of recouping that. But what we have been discussing with the local governments and Brazilian authorities is how do we bring the business back on track and all that. And so I think there are some talks happening. And I think we expect there will be some benefits, which will be passed on in terms of sales tax, et cetera, to the businesses. But that would be for the future business, it will not be on the past. Past whatever has been accounted, will be -- has been now accounted and will be closed, okay? We do not see any recourse from the government or anyone on the past losses.
The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.
My question is just on a little bit on the working capital cycle. You've taken a lot of pains to answer this question. So in terms of there have been -- if I understand, you said there have been certain one-offs that have come because of supply chain constraints. So you estimated [ INR 600 crores, ] which could come down because of that...
I'm sorry to interrupt you, Mr. Ramakrishnan, but you are not clearly audible, sir.
Okay. Let me just go to another point, sorry. Better now?
Yes.
Yes, it's better.
Yes. Okay. Sir, I'm just trying to understand -- to further nuance the working capital cycle. You said that there were certain one-offs which were due to supply chain constraints and certain one-offs, which are because of the way, let me say it, the railway order was tendered and that extended the working capital cycle. Now going forward, given that we are approaching some kind of normalcy in the world, do you expect these one-offs to come off and that's the INR 600 crores that you're guiding towards in terms of reduction in debt?
And the second question is, given the fact that you've seen this, how would you look at working capital cycle and the interest costs going forward in terms of the future contracts? Would they be more short tailed in nature? Or would we still have any contracts which are long tailed, like we have right now?
So Vivek, this is Rajeev. Basically, there are many reasons for the increase in the working capital over the last 1, 1.5 years. So obviously, if you look at the broader reasons, one is railways there is a change in the structure of some of the project, EPC projects, which required us to complete the milestones or achieve the milestones before we could have billed as against the BOT order that we were earlier getting. So on the BOT order generally, when you supply the material, you get paid immediately on that.
But in case -- as against that, in the EPC project, because these are design and build projects -- so you achieve a certain milestone, for example, 50 kilometer of complete, let's say, the overhead electrification you have completed, only then you can bill. So those type of orders actually require certain additional working capital and that is where the working capital in the railway business increased.
A few other reasons like GST, I mentioned in the previous call also, the GST in civil and railway business, which is a large business and they have grown very well over the last 2, 3 years. They were having an inverted duty structure wherein our entire input was coming at 18% GST, whereas the output GST was 12%. So that led to a huge accumulation of close to about INR 400 crores, INR 500 crores in the GST account. Luckily, the good sense prevailed and the GST has been reversed. It increased to 18% for these railway projects and railway and civil projects.
So now our accumulation has stopped and now we are able to recoup some of the GST balances. So now the GST balances have started going down. So already, let's say, last 2, 3 months since the new rates have been implemented, we have reduced close to about INR 50 crores against accumulation. And our expectation is that by year-end, we should be able to, let's say, reduce about INR 200 crores to INR 300 crores on the GST account.
The third piece was, as Vimal mentioned just a while ago, that because of the, let's say, a lot of supply chain bottlenecks, which we faced during the COVID period time and the price fluctuation, which was happening. So we accumulated some of the inventories at site, because our working sites should not get impacted with the nonavailability of the material. So that also led to some increase in the inventory levels, which is about INR 200 crores, INR 300 crores, that should normalize in the remaining H2 level. We expect another INR 200 crores to INR 300 crores, should go down.
The fourth item is Afghanistan, which again, Vimal has guided, and we are in active dialogue with the multilateral funding agencies. And we do expect that there will be some reduction. My sense is about INR 200-odd crores, we should be able to collect in -- by Q4. It could be, let's say, depending on whatever discussions are going on and they have accepted our position and they are in the process of settling. So we are quite confident that some reduction will happen- at least INR 150 crores, INR 200 crores should happen from Afghanistan outstanding.
So these -- there are various actually items on which we are currently working. And we are -- on an overall basis, we are quite hopeful that we should be able to reduce the overall debt level from the current level by at least INR 500 crores to INR 700 crores. So that should happen. And then remaining normalization should happen in the next financial year. So my sense is that we should, by next financial year, so FY '23, '24, we should come back to, let's say, 100 days or 110 days of NWC, which used to be there about 2 years back.
So that is how we are working very, very in a focused manner to reduce our borrowings on that. And that should be the normalized working capital, 100, 110 days of NWC.
The next question is from the line of Jayesh Shah from Ohm Portfolio Equity Research.
Kejriwal, first of all, big congratulations for the big transition that we have seen in KEC from a T&D company to a powerhouse of execution and projects across civil, rail, and adding other engines of growth in the domestic business. Whilst this is very impressive, and I think this alone leads the case for rerating, my worry is more on the international business. And when you look at the big picture, how do you look at controlling the risks on the international business?
For instance, we have seen the SAE example for the last 2 times. So based on this experience for write-offs, what are the lessons that we learned? How do we control the risks here and the amount of losses and working capital? And especially given the geopolitical situation where we don't know about country, currency risks, are we better off focusing more in India? So my question is, is there any informal cap that you would put on the order book business?
And over time, isn't it possible to grow the domestic business much more than focus on international business? And lastly, I would say that if you listen to all the calls, the focus from all the analysts and investors is more on controlling working capital and debt rather than growth for growth's sake. So I think these are the large big picture questions I have concerning your strategy, vision that I wanted to ask and get your view.
Jayesh bhai, first of all, thank you very much for your compliments. And secondly, it looks like you were sitting in my Board meeting, because these were the exact discussions which we were having in our Board yesterday, saying, [Foreign Language] should we control this, should we do that and all that. And we are seriously looking at all that has happened, okay?
SAE to me is like -- is a bit of an aberration, because we really got hit by like your [indiscernible], whatever has to go wrong, went wrong in that country for whatever reason. We don't have any excuses and all that. I can only say that it just deserves an apology that we were not able to control the losses. But let me tell you another thing, Jayesh, why is that -- we are running almost 290 projects, okay? And at any given point of time, 5, 6, 7, 8 projects will always, maybe more than that, can always go wrong.
Brazil, we learned our lesson saying we have analyzed -- saying what all has gone wrong and what you need to do to take care of such things going forward. Not just in Brazil, but overall. Your point on international is something which keeps on cropping up again and again, okay? We have an international, I think, order book of close to maybe INR 5,000 crores or something right now on the EPC side between -- basically and T&D, okay? And generally, if you look at our history, except for the last 2 COVID years, okay, international has always made more money than India. Always. I repeat that, okay?
And we do expect that if we put in our proper checks and balances, we will be able to go back to that point of time. On the other hand, if you look at India, basically, railway and civil is right now only India. T&D, if you look at it, probably I think 30% or maybe, 30%, 40% is India; rest of that is international. We always keep on sort of debating, weighing, looking at it, saying that should we expand here, should we not expand. We have a lot of risk metrics which we look at when we go to a new country and look at how is the credit rating of that country; what is, I'll say, exchange control there; what has been the performance; what is IMF rating for that country; what is the ECGC rating for that country, [indiscernible]. So all that work is done.
So typically, if you look at it, Brazil was more of an execution issue, I'll say, wrong tendering, wrong costs taken somewhere. But otherwise, we ensure that we have multilateral funding. Even in Brazil, in spite of all the losses, we've got paid all the money from the clients and all that. So the major issue is political stability, currency issue, legal system. So all that is looked into account and the way execution can be done. But your points are well taken, and we are seriously debating on some of those points which you have raised.
Yes. I think while you guys understand the business very well. We take an outsider view and a very short-term view. The only thought I would leave with you is that international business for KEC is supposed to have at least 1.5x the margins of the domestic business given the political and the currency risk. So I would actually look that as a filter rather than just be happy about international business having higher margins than domestic.
And of course, in any way if we can control the working capital and receivables, then that's a big, big plus from a risk management perspective. But I'm sure since you are debating, you would find appropriate solutions here.
So I'm happy you mentioned over 1.5x. My international head is on the call, and I hope he takes the clue.
Yes, I'm happy to pester him more if you need.
The next question is from the line of Bharat Sheth from Quest Investment Advisors.
Sir, just to get some flavor from say, 2, 3 years' perspective. So if you can bifurcate our T&D business, international and domestic as well as other business, railway and civil as well as cable. So how in all business, we see the visibility for next 3, 4 years pipeline -- in T&D, you gave INR 25,000 crores of pipeline. But -- between say, domestic and international. And last couple of years in domestic T&D were really going down. So now where the visibility looks to be a little better, so how do we see this thing playing out? And then the overall project cycle of all these different verticals, how many months, really? Like T&D, you said is a 16 -- 12 to 18 months. So different -- and working capital environment in all these 3, 4 verticals?
Bharat, that's a lot of questions, okay? So let me start with T&D. Sorry, cable is the easier one. Cable, our share is 4% to 5%, okay? So cable's market can grow depending upon our capacity to manufacture, okay? Right now, we are probably operating at 70%, 60%, 70%. We are trying to improve the capacity utilization. And we also put in some money for equipment. So cables will definitely grow by 10%, 15%. As I said, constrained by our manufacturing capabilities. And it will grow. It is doing well. We are happy with the performance. The ROCE are pretty high there, okay? Although the EBITDA is not very great, but we are doing well.
As far as T&D is concerned, I'll tell you that the Joker in the pack in T&D is your green hydrogen. If you look at what our honorable Prime Minister is talking about 5 million tonnes and all that. And even if you achieve 50%, 60% of that by 2030, we are talking about some 300 gigawatts of renewable capacity to be added in the next 6, 7 years. That's the requirement for meeting the requirement of the target of the green hydrogen for India. If that sort of numbers happen or like all the big [ daddies ] have jumped into green hydrogen. If they start putting in that sort of money, there will be a huge requirement for renewables and obviously then to transmit the power generated by these renewables.
So we have to keep our fingers crossed and wait and watch seeing how does this piece develop going forward. So one is the opportunity in doing a solar EPC or a wind EPC and all that, that is one part of it, okay? But the major part of it is that how will the power generated by these renewables get transmitted? Because it's easier to transmit power than then move ammonia or green hydrogen and all that. So power transmission is easier than any other transmission that way, okay?
So I do expect that the T&D piece out of green hydrogen would be very, very large if the government is really serious about achieving the targets which have been laid out by the government, okay? So that's one big Joker in the whole pack. If some part of that is happening, then T&D will really move to a next level.
And second part here is that we have never seen shortages of power in India except for the last 1 year, which means the power demand is somewhere going up, okay? So that is also leading to some incremental T&D orders, which are coming in. But I will still not say that's great. The major order will come in now from the green hydrogen. And also, if you look at the last few years, solar and all has not done very well. Now that we have capacities coming up in India for modular manufacturing and other things, we do expect that solar generation will go up, apart from the green hydrogen piece of it, okay? And which -- once the issues in Rajasthan and other places get cleared, we do expect that there will be some more orders coming out on the green energy corridor, which is what orders will come to us, okay?
So the T&D will depend upon how the renewables pan out, both for normal requirement of power to meet our COP27 or whatever requirements you want to say and also for the green hydrogen. So we are actually very bullish right now in the coming years -- not today, but maybe in a year or 2 on the India T&D piece and also probably on the solar EPC piece. Have I answered your question?
Yes, yes, largely. Of course, I mean, there are so many ifs and buts, so, but it's fair, I mean. And international?
International, right now, if you look at, there is basically, I can see 3 different markets which are there. One is clearly Middle East, which is really growing very fast, whether it is Abu Dhabi, whether it is Dubai, whether it is Oman or whether it is Saudi, okay? Very clearly -- or even Kuwait, sorry. So these are the 4 or 5 countries where we are seeing a lot of demand coming up and all the oil money seems to be getting invested in some good assets being built up in these countries.
The other area where we are seeing a large demand is North America, especially United States. We never had our Mexico factory down with so many orders. Mexico always used to operate at 50%, 60% in the last 2 or 3 years. Right now, we are looking at adding capacity there, because that -- because we have got so many orders coming from that -- what President Biden has talked about, build better -- build back better and all that. And also with the -- I think, a few cyclones and all which hit them and many of the large cities are without power. So America, especially United States, is becoming a big market for us to supply of towers. We don't do EPC there, but the supply of towers is becoming a big market.
And third, to a smaller extent, are markets like Thailand and Malaysia and, fourth will be Bangladesh. So to me, these are the 4 regions in international where we are seeing a lot of traction happening, and we are generally familiar with these markets. So we don't anticipate the problems which we had in other countries when we take projects here.
In fact, let me also add one thing, Bharat. This year, our international will grow by at least 30% to 40% as compared to the last year, okay? And we have an order book for next year also, it will grow reasonably well.
Relatively lower than the domestic side? I mean, margin is better.
Margin will now pick up, because now these orders are at newer prices. So last 2 years had been difficult for international, because we had many fixed price orders which were taken at lower metal prices. Now the order which we will start executing now are at a higher metal prices. So we will start getting back to better margins in international.
And working capital -- and the remaining 3 pieces, I mean, solar EPC also has this, railway and civil?
Railways, of late, we are seeing a lot of tenders coming up for building of new lines, doubling, tripling, probably an election impact of 2024. I do not know. But because we earlier had not seen so many orders for new lines, okay? So that is doing very well, plus all the civil works for CM Works, Chennai Metro and Mumbai now is getting over. So the electrical part is now coming and laying of tracks, power supply, OHE.
So I think railways -- and also the speed upgradation. Sorry, the ministry is very keen to upgrade the speed on all the trunk routes and all the major routes. So a lot of work is coming out in railways. We are also L1 in a couple of projects in railways in the international market. So I think railways will do well this year. And also coming years, we do see a decent growth in the railway piece.
Civil is doing very well in any case. So I don't think I need to talk much about it. We should cross INR 4,000 crores of revenue this year and maybe at least 30%, 40% increase next year back on the back of a INR 9,000 plus crore order book in civil.
And competitive landscape, if you can briefly touch upon.
So railways is becoming a little bit more competitive than before. [Foreign Language] I think I'll say a few months back, the competition was lower, but now we are seeing a little bit improvement, increase in the competitive intensity. Transmission, for the larger orders, we don't see too much of competition. There are 5, 6 players. But for substations, the number of players are relatively lower.
Civil, you can divide them, let's say, between INR 500 crores below and INR 500 crores plus. So below INR 500 crores, you'll have maybe 5 or 6 competitors in every tender or maybe even more sometimes. Above INR 500 crores, you will typically have 3, 4 or maybe 5 players in competition. So competition, I think, is okay. I don't think it's become very intensive -- very intense, sorry, but it is generally okay.
The next question is from the line of Vishal Biraia from Max Life.
What is the extent of subcontracting that we do?
Extent of subcontracting. See, basically, we hardly have people on our rolls, okay, except for the international market where visas and all are done by us. So sometimes some people work for us. Otherwise, largely, most of our projects are subcontracted, but there are various models of subcontracting which we follow. Sometimes it could be only a labor subcontracting, sometimes it could be with material, sometimes you could do a back-to-back subcontracting of a full unit and all that.
So depending upon the type of project, the discussion with the client and the capability of subcontractors, okay? It will follow a different model in each project. But most of our projects are typically subcontracted out in various forms.
Sure, sir, but if you consider it with material and turnkey subcontracting, so that proportion would be what proportion of the total in India and in international?
In India, generally, it will not be with materials. In India, it is generally a labor contract. I've hardly seen any contract where we have given in India with material. I don't think so. Sometimes in international market, when you're giving a piling contract, you may give them with cement and all saying, "We'll pay you per cubic meter of pile, et cetera." The major subcontracting happens in regions like Thailand, Malaysia, et cetera, where you have got large subcontractors who are capable of doing it. So to me, Vishal, it depends upon the capability of the subcontractors rather than our willingness.
I am happy to give it back to back, then I don't get into issues of material has been delayed or some other things happen or price increases, et cetera. So depending upon the capability of the subcontractor, we'll decide to subcontract it. But I don't think -- as material put, material and all that, it will hardly be more than -- not more than 10% or something where you're giving it with material, et cetera.
Okay. In Middle East, how would it be done -- subcontracting?
So Middle East, what happens is that, let's say, you take a piling contractor. He will come and do the drilling and everything for you. You will supply him the concrete, okay? Erection obviously is our tower, so they only do this. Stringing is generally done by our own people, because that's the most critical part for us. So we do it ourselves.
There are countries where, let's say, we look at a place like Dubai, where only approved subcontractors are allowed to do civil. So there, you will offload the entire work to him, sometimes including the supply and all that also.
And the other question is, it is -- I mean, if you are able to break it up as to the INR 27,000 crores, INR 28,000 crores worth of order book that we have, what proportion is fixed price [ too -- where ]?
I don't have a right answer, but a large part of, I'll say, international would be fixed price. So maybe around 20% or so. I'll say it's a wild guess. Maybe Abhishek can give you later on, but I think it should not be more than 20%, 20% or something, okay? Because -- why I'm saying that is, most of our civil and railways are always with PV, which is a large part of my order book. In T&D also international also, we have now had a lot of orders which are with PV. India, some parts are with PV. So I think max would be 20% or maybe even lower than that.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Vimal Kejriwal for closing comments.
Thank you, Rutuja, and thank you, everyone, for your interest, okay? We are very clear with the current order book and what we have. I think we will have a significant improvement in our revenue and performances. Margins have been under pressure, but we do expect that from next quarter onwards, the margins will start showing an upward trend and should start normalizing towards Q1 side.
Thank you very much.
On behalf of KEC International, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.