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KNR Constructions Ltd
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Ladies and gentlemen, good day, and welcome to the KNR Constructions Limited Q4 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. S. Vaikuntanathan, VP Finance, KNR Constructions Limited. Please go ahead, sir.
Good afternoon, everyone. Thank you for joining us today on the call to discuss the financial results for Q4 and financial year '22 -- 2022. Along with me, I have Mr. K. Jalandhar Reddy, Executive Director; and K. Venkatram Rao, General Manager, Finance and Accounts; and Strategic Growth Adviser, our Investor Relation advisers.
I would like to touch upon some of the important industry updates followed by a discussion on the company's financial and operational performance. The pace of awarding witnessed a robust uptick in the month of March 2022 after remaining subdued for almost 9 to 10 months. The awarding of road projects for the month of March 2022 stood at approximately 5,113 kilometers, almost 2x on a year-on-year basis and 6x compared to the previous months. For the entire fiscal 2022, the length of the road awarding stood at 12,731 kilometers, a robust growth of 22% year-on-year basis.
A similar momentum was witnessed for NHAI awarding activity. The NHAI awarded or open bids for projects of less 4,970 kilometers was approximately INR 1.4 lakh crores into FY 2022 as against the length of 4,818 kilometer was approximately INR 1.3 lakh crores year-on-year. The pace of annual construction of 4 and 6 and 8-lane national highways has increased by more than 300% during the past 7 years from 1,289 kilometers in 2015/'16 to 3,963 kilometers during 2021 and '22 as for the availment.
However, multiple challenges, such as multiple waves of COVID-19, intermittent lockdowns across multiple pockets of the country and prolonged rate affected the execution. This was coupled with the allocation of funds of the government towards welfare activities to contain the impacts of COVID-19, which delayed the payment activities, payment [ had decreased ]. Apart from these supply chain issues, higher fuel and commodity costs and the shortage of labor impacted the overall sector. As a result, the pace of road construction stood at 10,457 kilometers, a fall of 21% year-on-year basis.
The average daily construction also fell by 31% year-on-year to [ 48.6 ] kilometers. Similarly, the pace of construction of the national highways fell by approximately 21% year-on-year in FY '22 to 10,457 kilometers from 13,337 kilometers in FY '21. We expect facing such challenges, there was a silver lining in terms of toll collection. FASTag toll collection witnessed a robust growth of [ 67% ] year-on-year for FY '22 and reached to INR 38,084 crores. FASTag toll collection for April 2022 stood that INR 4,219 crores compared to INR 4,095 crores for March 2022.
For the first time, FASTag toll collections has crossed INR 4,000 crores mark in a single month in March 2022. [ April 2022 ] started the highest FASTag collection since the FASTag toll collection system was introduced in 2015. The growth in collections indicates a sharp recovery in the economic activities and return of passenger vehicle movement. Recently, the NHAI has increased its toll rates for 2023 as toll rates are linked up to the WPI.
Now coming to the key initiative state of development. The government has remained supportive to the entire infrastructure sector for the last 6 to 7 years and have come out with multiple initiatives to spur the growth and reduce the challenges while ensuring the quality. The government has extended relief measures to the highway contractors and construction has till 31st October 2022, which were implemented to improve the liquidity. Also as per the notification issued by the ministry on 11th April, all the HAM and EPC contractors will continue to get paid on a monthly basis for the work done for the period between April 1 and October 21. As for the earlier time line, these measures were set to end on 31st March 2022.
To give you some of the updates on asset monetization, the government has [indiscernible] INR 96,000 crores in FY 2022 under the National Monetization Pipeline. This is far more than the target of INR 80,000 crores set by the government. Of the INR 96,000 crores, the Ministry of Road Transport and Highways achieved an overall monetization value of about INR 23,000 crores. The government is planning to monetize INR 1.62 lakh crores in FY 2023.
Now coming to the key updates of the company. The percentage of physical progress as of March 31, 2022, for the HAM project is as follows: Trichy to Kallagam, 94%; Magadi to Somwarpet is 56%; Oddanchatram to Madathukulam is 56%; Ramanattukara to Valanchery is 3%; Valanchery to Kappirikkad is 2%. During the quarter, the execution was primarily driven by HAM and irrigation projects. Out of the INR 1,098 crores [indiscernible] equity requirements for all the 8 HAM projects, the company has already invested INR 521 crores as on March 31, 2022. The incremental equity requirement of INR 577 crores, we infused INR 300 crores, INR 150 crores and INR 170 crores for 2023, 2024 and 2025, respectively. You can refer to the Slide #28 and 29 of the investor presentation for detail on each HAM project.
I will now take you through the key highlights of the company in terms of [indiscernible] financial closure, et cetera. Now to give you some highlights on the financial closure, the company has achieved -- has a received financial closure for the projects, KNR Ramagiri Infra Pvt Ltd, in which we received the financial closure from NHAI on 30th of March 2022 for HAM project.
Now coming into updates on the appointed days for the project as follows. Received appointed date as on 31st January 2022 for fixed slating of starts -- Valanchery bypass under the Bharatmala HAM mode. Received appointed date as on 31st of January 2022 for [indiscernible] of the start of Valanchery bypass to Kappirikkad under the Bharatmala [indiscernible] on HAM mode. The company has transferred 49% stake each in the subsidiary companies of KNR Tirumala Infra Limited -- KNR Tirumala Infra Pvt. Ltd. and KNR Shankarampet Projects Pvt. Ltd. to Cube Highways, and the infrastructure -- Cube Highways' infrastructure on 31st December 2021.
Also, the company has subscribed to the 100% partnership interest in the 2 entities named in -- named Manjeri City Infrastructures and Developers LLP and Benedire Infrastructures and Developers LLP, which was a stone quarry which is useful for the road construction. The intent for this is to mitigate the implementation of highway construction projects in the state of Kerala by the company. The toll collection for the Bihar project that is start-up poll to Barauni, the toll collection in Q3 -- Q4 FY '22 and FY '22 has been INR 10.42 crores and INR 38.52 crores, respectively.
Now coming to the order book question. As on March 31, 2022, the company had an outstanding order book position of INR 9,001 crores. EPC road projects and HAM projects construed 75% of the total order book, while irrigation projects comes to the remaining 25%. Client-wise, 30% of the order book is from third-party clients and balance 45% is from captive HAM projects. The third-party order book on non-captive order book, which accounts for 55% of the total order book position, is skewed between the same government contracts with 41%, whereas 11% is from central government and balance 3% order book is from other private players.
The total order book position is INR 9,766 crores, including one new HAM project. With that, the irrigation construed 23%, road 28% and HAM 49%. Please refer to Page 34 of the investor presentation. The current order book position remains healthy and provides a clear visibility of execution over the period of next 2.5 years. The robust picture project pipeline and ready DPR, under the Bharatmala project, to accelerate the project awarding activity going forward. The company is targeting a further order book inflow of INR 4,000 crores to INR 5,000 crores for the year FY 2023.
Further, recently the income tax department has carried out as such operations at the company's various business [indiscernible] under Section 1382 of the Contract Act 1962, that is in March 2022. The company has extended full cooperation to the contract officials during such and provided all the information sought by them. The company has not received any formal communication from the income tax department. The management reserves the view that this will not have any impact on the company's financial position as at March 2022. And no provisions for any liability has been regulated on the financial results.
I'll now request Mr. K. Venkatram Rao, GM person, to present the results for the quarter and financial year ended March 31, 2022. Over to you, Mr. Rao.
Thank you, sir. Let me take you through the Q4 and FY '2022 stand-alone financial performance. I will start with the quarterly highlights first. The revenue for the quarter grew by 8% year-on-year to INR 1,011 crores. EBITDA for Q4 FY '22 witnessed a growth of 14% to INR 208 crores as compared to INR 182 crores in Q4 FY '21. EBITDA margin in Q4 FY '22 stood at 26%, an expansion of 111 bps. Net profit for the quarter was INR 112 crores as compared to INR 77 crores in Q4 FY '21, a growth of 46%. The revenue for FY 2022 grew by 21% year-on-year to [ INR 273 crores ]. EBITDA for FY 2022 witnessed a growth of 26% to INR 670 crores as compared to INR 536 crores in FY '21. EBITDA margin in FY '22 stood at 20.7%. Net profit for FY 2022 was INR 381 crores as compared to INR 244 crores in FY '21.
Let me quickly take you through consolidated performance. The company recorded an 11% year-on-year growth in total revenue from INR 991 crores in Q4 FY 2021 to INR 1,102 crores in Q4 FY 2022. EBITDA came in at INR 279 crores in Q4 FY '22 as compared to INR 222 crores in the same period last year. EBITDA margin in the current quarter stood at 25.3%. Profit after tax stood at INR 140 crores in Q4 FY 2022. The revenue for FY 2022 grew by 24% year-on-year to [ INR 3,606 crores ]. And EBITDA for FY '22 witnessed a growth of 14% to INR 799 crores as compared to INR 699 crores in FY '21. EBITDA margin in FY 2022 stood at 22.1%. Net profit for FY 2022 was INR 366 crores as compared to INR 383 crores in FY '21.
Now moving up to the stand-alone balance sheet. The company continues to remain a strong balance sheet and remain debt-free. The working capital days stood at 63 days compared to 82 days on the year-on-year basis. The consolidated debt as of 31st March 2022 is INR 1,410 crores as compared to INR 722 crores as of March 2020. The net debt to attributable on consolidated basis as of December 31, 2021, stand at 0.49 as compared to 0.29 as March 31, 2022.
With this, we can open the floor for question and answer.
[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.
And congratulations on the good quarter and a good year, and especially a good work on the margin side. Sir, my first question, how do you see FY '23 in terms of revenue growth and EBITDA margin? And what was the order inflow in FY '22?
Yes. The -- going forward, we have taken a -- because the percent trend of the price shooting up [indiscernible] we have taken helped break that risk. And then our turnover may go up to 10%. Maybe we may reach 3,500. And about the EBITDA margin and the other thing, I think this not the right time to project because the prices are going up. And then if you see the bitumen price over the last year to this year, that has suddenly increased approximately varying from 35% to 40%. And also steel has gone up about 20%, 25%. And similarly, cement also is going up.
So in this [indiscernible] at this stage, we feel that it is not right. But anyway, we will try to maintain at least a reasonable figure of the [indiscernible] maybe from [indiscernible]. We have already said that total INR 9,700 crores out of own hand is there. And the tenders, yes, we are hoping, [indiscernible] how the prices are moving. We don't want to take any hit on the bottom line. That is our main concern. That is why even in the last March, so many tenders though we have [indiscernible] with our anticipated EBITDA level and other things, we could not get it because of this reason only. But we don't want to take any hit on our bottom line. But that -- management is very clear on that.
Understood, sir. My second question is, sir, do we have the opportunity to build irrigation book over next few months on this fiscal, given that the order book from irrigation is dwindling down and a mix of irrigation helps us in posting a better EBITDA margin?
Yes. I think there was a query from -- about the mature turnover and -- so what we have said is that because of the present developments and other things, we have -- conservatively, we are placing that our turnover for the next year will be something like INR 3,500 crores. And the EBITDA level, we will try to maintain anywhere between 15% to 17%. And if the prices are under control, then definitely profitable [ delays ] and things will also go up.
And with regard to order book question, we already explained that we are adding [ INR 9,700 crores ] order on hand, which you'll see as true for the next 2.5 years. And we are also hoping to definitely get more orders to the extent of INR 4,000 crores. But not at the cost of sacrificing our bottom line. That is our main concern. The prices, which, in the last 1 year, the bitumen prices have shot up more than 30%, 40%. Steel prices also have gone up 30%, 35%, more than that. And cement is also [indiscernible]. So we want to take a very calculated risk of keeping our bottom line registries for us to float and for our future programs. So anyhow, we will try to -- the management will try to achieve that order book position, additional order book position of around [ INR 4,000 crores ]. If all the [ estimations ] are safe and then our bottom line is not affected.
My second question is given that the irrigation order book is depleting, do you see any large opportunity to build irrigation book over next few months and in this fiscal?
As far as irrigation is concerned, we are only concentrating -- the main -- the logic behind is the government should have funds to carry out the execution, so that we are very much careful in selecting irrigation projects. And we also look for that. If there is any such opportunities -- if opportunities are available, definitely management will drive for some irrigation projects.
So the pipeline, you say the pipeline irrigation looking better, that's the question.
Actually, [indiscernible]. Actually, the irrigation projects are now not much and the funds for the irrigation projects are a little bit problematic due to state governments being underperformed due to the [indiscernible]. Reasons are many, as you know, that the Ukraine war or more debt for the key state governments like Karnataka -- sorry, Telangana and Andhra Pradesh. Most of the areas where the irrigation projects were available, only these 2 areas. And however, we are focusing in other states where some better states are there like Tamil Nadu, where we are trying to put up our base.
Once there is a bid, definitely, we'll put our bid. And definitely, we'll try to take the projects.
What is state of the land acquisition of KNR between Chittoor to Thatchur?
Yes, sir. I believe, the acquisition position in this Chittoor-Thatchur is only almost 20%, 25% by now. But the situation has come that all the development [indiscernible] has been done. And now looking at [indiscernible] days. If that happens, I think we understand we can take the [ opportunity ]. Maximum, the estimation is like that. And even department yesterday, there was a meeting in Cochin for all -- the meeting was there along with the [ Chairperson ] on Sunday.
So they submitted that. Within the month, they will give us the appointed date by acquiring 80% land.
Next question is from the line of Shravan Shah from Dolat Capital.
Sir, this INR 4,000 crores, INR 5,000 crores order inflow that we are looking at. So out of that, how much we are looking for HAM projects? And is there any specific state EPC projects that are there in pipeline?
Actually, the orders coming now [indiscernible] not a big scope, our hope that can be seen from irrigation now. But we are still a bit downgrading the irrigation business because the certainty of payments have been reduced. So in order to avoid risk kind of thing, we are just trying to avoid -- or can't they avoid? But we feel if the state is richer and they are able to pay, definitely, we'll place our bids and we'll try to [indiscernible]. That is the [indiscernible].
So mostly, we were booking orders from [indiscernible] or prior projects in various states [indiscernible] maybe HAM. First is to [indiscernible] also, as you know that now the market is a little bit crowded. I will say [indiscernible] we believe is also happening. [indiscernible] is quite difficult [indiscernible]. I mean to say [indiscernible] in time we'll take orders, but we can definitely...
Sorry, sir, your line was -- voice was cracking. But what I understood, correct me if I'm wrong, you are saying irrigation, not much scope left up right now. So you will look at in the road space only particularly HAM and flyover projects. So coming to that, have we bidded any other projects where the result is yet to come?
There are [indiscernible] now. I think there is a little bit slowdown from NHAI side also. But [indiscernible].
Okay. Vaikuntanathan, sir, I need a couple of data points. First is on the outstanding data. So including data and unbilled revenue from the irrigation projects, and then if you can help me in terms of the project specific also there, it would be great. Because last time we said close to INR 590-odd crore there. So what's the status now?
As of now, other irrigation projects around funding receivables are there as of date, around INR 650 crores. Out of that, around INR 360 crores is from [indiscernible] side and INR 50 crores from Mallanna site, and around INR 75 crores from packet 4 and around INR 90 crores in packet 3. So around INR 650 crores is the pending, both receivable as well as unbilled as of date from the irrigation side. And you are asking some project-specific data also for...
No, no. Sir -- no, no, this is only I'm asking. So out of this INR 650-odd crores, have we received anything in April, May? Or this is the number as on May you are seeing?
This is number as of May, actually.
Okay, okay, okay. Got it. Other point is, what is the CapEx that we are looking at in FY '23 and the retention money, mobilization advance and unbilled revenue number as on March?
As far as CapEx is concerned, this year, actually, we are looking somewhere around INR 120 crores to INR 150 crores of CapEx because most of the CapEx, which is now recorded in the Kerala projects, we are going to [ retract ]. And definitely, any projects which we are going to take this year is -- CapEx requirement may not come in this year. So that's why you've seen last year, we have recorded almost INR 200 crores of the CapEx actually. And with advances, it is coming to around INR 250 crores, the CapEx we did in the last year. But due to this, this year's CapEx requirement may not be that much. It will be between INR 120 crores to INR 150 crores. And as far as mobilization advance is there, it is around INR 135 [indiscernible] as of 31st March.
Retention and unbilled revenue?
Retention receivables is around INR 181 crores and unbilled revenue is around INR 250 crores. INR 255 precisely.
Okay, okay, okay. Got it. And lastly, in terms of the Kerala new HAM projects, so how much we are expecting in terms of the execution for this year?
Jalandhar, sir, do you want to...
I think we can expect both EPCs put together, it is at [ INR 1,018 ] [indiscernible]. If you think about...
Sorry, sir, your voice is cracking.
So INR 1,500, around INR 1,500, we can expect this year, sir, from these 2 projects.
Okay, okay, okay. Got it. And then at lastly on the depreciation front. So the current run rate will continue, INR 39, INR 40-odd crores or it will start reducing?
It will be the same because this year we have acquired assets -- a lot of assets are acquired in this year in 2022, that's why this rate will be there, the same rate will be there for '23 also.
Next question is from the line of Jiten Rushi from Axis Capital.
Congratulations on a good set of numbers. Really coming back to the revenue numbers. So we -- on the opening remarks, around [indiscernible] for INR 3,500 crores of revenue for FY '23. But sir, if you see the order backlog, more than 90% is executable right now. So even if we do 40%, 45% execution this year, we can easily get INR 3,700 crores to INR 3,800 crores of revenue. So almost 15% growth you can guide. And plus, once we get the [ 80% ] for the balance sheet to project, we can easily reach a revenue of INR 3,800 crores, INR 3,900 crores. So this is -- don't you think this is too conservative in terms of guidance?
Actually, today, you look at the situation being in the thing. As you know, the Ukraine war and all, there has been -- [indiscernible] supplies are also start falling, we are unable to get the required materials [indiscernible]. There has been -- we have no other problems which we are facing like [indiscernible]. Irrigation, there is an uncertainty of payments are there. So most of the irrigation that [ on those ] projects is still pending to execute. Based on these [indiscernible] projects, at least the concern, it requires -- a lot of machinery part of it is concerned. So definitely, we will have to a little bit go cautious on that. So that's why [indiscernible] we are expecting to [ decide ]. So we would like to stick to that, whatever we said.
Maybe because you're saying that Kaleshwaram package 3, what is the problem there? [indiscernible] is the same like 2.2 kilometers out of 6 kilometers? Or it has improved? This Kaleshwaram package 3, the land was a big issue. So you said a pump house was getting delayed. So this land issue has been resolved? Or what is the current status as of now?
I'm not talking about that pump house project concern, I am more concerned about the funds that they [ need ] because, as you know, the central government has halted the [indiscernible] for all these because of the state government not being shown with [indiscernible] mix and all. So now I think state government is following up with central government to comply the situation. And once they do and they regularize, then only we can go solid on that. Otherwise, that can block over there.
Sir, we have been executing this irrigation project for last 1.5, 2 years. Would this issue only that payment, as always, be it as of now? Also in the opening remarks, we said INR 650 crores is still outstanding. So these debtors have always been high for the last couple of years. Irrigation projects always lagging in terms of payment, but we have been upfront in bringing [indiscernible].
Actually, every time we had -- whenever there was backlog, it is partial payment we need to get. But since the 4 months, we are not getting anything. So -- and the loans that are available for these projects have been halted. So a little bit we are going as cautious under these [indiscernible] and all these are really pending. Let's concentrate on that. Then again, [indiscernible] thing and it may interrupt our equity investment into the HAM projects also. We were [indiscernible] directly.
Basically, the state government loans has now halted, which you have a funding problem to your project. So we are going cautiously, right, cautiously?
Yes, we want to be a little bit cautious this time because we never know when they will solve these problems and...
But sir, but if you're just harping on it, if it all things normalize in a couple of months, then what could be the revenue which you can achieve in this year?
Actually. [indiscernible] guided one more thing, that this time we received deadly monsoons. The April third week onwards, the monsoons have started in the area of Mangalore and these Kerala projects. So this is -- both are -- almost 50% of our order book is in these 2 areas only. And that's a bit concerned -- the irrigation also we have order. And all other areas, it is only a little, at most, if you take out all these 20%, 25%, it's only a little bit without rainy problems.
So a little bit -- we expect a little bit problems this year as early monsoons month after month will create huge havoc for us because we have to -- even though these projects are new, so all the work needs to be done. And in an excess moisture condition, the works cannot be done and we will have issues here. As well, we were that much daring enough to come forward.
Okay. That's very clear from your side. And sir, last question, when are we expected to close the deal with Cube Highways and the balance, cash flows expected, sir?
Balance, sir?
Sir, the Cube deal, which is pending. So...
The Cube deal, 2 projects which we have highlighted, we already know the 49% of the cash has been transferred and the money has been received. And for the balance of [ 12% ] also, now we have got the energy approval. And maybe we expect in the next 1 or 2 months, that also will be closed. And the third project also is likely to close in next because that will go for 100%, and then that offer will be closed in the next 2 months. Overall, by June, July. July, again, I think it should be over.
So actually, what is happening [indiscernible] also 49% stake, we will most probably by June end actually, we should be able to close the deal put and other 51% for the other 3 projects because we also get the final COD that we are expecting in Q2 actually. So that's why by July or August and we should be able to complete that entire 3 projects for balance, 51%.
Okay. So basically, Q2, we should be through with this transaction.
Yes, yes, correct. Correct.
Next question is from the line of Parikshit Kandpal from HDFC Securities.
Congratulations on a good quarter. Sir, my first question is on irrigation projects. So how much was the revenue for FY '22 from the irrigation project?
It is 30% actually. For the entire year, it is around 30%.
So about INR 900 crores.
INR 970 crores, yes.
Of this INR 970 crores, you have INR 650 crores of outstanding sales on those sites. Very big, almost 240 days -- 240, 245 days, which just on the [ Vattem ] project, the balance, INR 2,200 crores of order backlog. So how do we intend to execute it? And how do we intend to recover the INR 650 crores unbilled and [indiscernible]?
Sure. Irrigation side is concerned, every time we used to have a gut feeling that the payment will be done and all. Because when compared with any other state, the Telangana state used to be proactive and they have a good HAM base also. This time as they have crossed more FRBM issues and they have entered into a big debt scale, which cannot [indiscernible] how would I say government cannot service the debt. But that -- right now, the scenario, like the government is having restrictions on such calls. So here, we are a little bit going safe, I think, to say.
But sir...
Parikshit, I just want to clarify. As of 31st March, pending receivables is around INR 560 crores. Whatever [ INR 650 ] we told as of March. So out of INR 975 crores, around INR 560 crores is outstanding.
But sir, even if I take the last year [indiscernible] INR 970 crores revenue, this year, FY '23, how much revenue we're expecting from the existing project?
[indiscernible] problematic answer [indiscernible] things here. But we'll try our best to deliver that.
I'm not too much worried on revenue. I mean, if the money is not coming in, it's fine, you don't do the project, that's fine. But my only concern is on the debtor and receivables of INR 650 crores as of May. So just wanted your understanding how are we -- what's the payment schedule there? So how do you intend to recover this? Because obviously, the bills would have not submitted. So when do -- when is the authority or the department telling you on the payment, too, and give us some sense there?
Yes, sir. Here, the bills have been submitted, all the efforts that we can do to do that. And even state government is saying that they will pay shortly from state government funds. Once they pay, definitely we can move [indiscernible].
Because I thought that this project was financially closed with NABARD, right? Funds are being arranged from NABARD for this project. So...
The thing was available for that time, [indiscernible]. Fund was available for the project. So that has given us a little bit gut feeling to go ahead also. But regarding the new -- nowadays, what are the new things that are [indiscernible], which is [indiscernible] around this.
Okay. No problem, sir. The second question is on the Kerala project. So how much has been the CapEx on acquiring this quarry? For using this [indiscernible], was the [indiscernible] onset of the CapEx last year. So how much is the total CapEx on acquiring the quarry already incurred? And how much spending, because I understand we were to invest about INR 100 crores in acquiring this quarry?
Yes. Out of INR 100 crores as of date, we are -- entire INR 100 crores has been spent. But as of March, we did around INR 70 crores in the quarry and balance, INR 30 crores, we did in this -- after March, actually. So as of date, the entire INR 100 crores we'll spend for the quarry.
Okay. And sir, the last question, sir, of late and in December, we had a project issue where NHAI-related issue has come and [indiscernible] investigating it and now we have this income tax search. So if you can touch upon the 2 things or 2 things related. Is that NHAI [indiscernible] this income tax thing? And why is this happening? If you can just elaborate what happened at the back end. I mean, is there anything on the system or processes side where -- which caught the attention of income tax? And potentially, you've not taken any provisions. You said that because you've not heard anything from income tax. But was there a discussion with income tax? How, if at all, we can quantify how much could be the provisioning, which could be potentially required on this?
Definitely. As far as NHAI regarding this case, I'll just clear actually that this is a case between NHAI and the respective state. But they made -- after the third party. So definitely, their case is mostly between NHAI and PD. And in that case, there is some contingency issue. As far as the concern is debt, definitely, what the contingency is projected is already built in the work order. So we're definitely not seeing anything great about these cases. As far as income tax is concerned, it's definitely...
Yes, with regard to income tax, see, [ INR 160 crores ], there used to be a survey as such. We got something somewhere in [ 2006/11 and '06/11 ] we got it. Now after 11 years, they have stopped. See, they have done as such. As what we know, they offered -- were inspecting the subcontractors and all. But we have provided all the information. Nothing in [indiscernible] that's been found. And so they have to prepare a report. And this report, they will send it to the asset fund department and the asset fund department will -- if there is any doubt and anything, anything clarification they require, the rates have notice on that. So we are awaiting for that. It may come maybe in the first or second quarter. So we are awaiting for that.
But there was nothing on the unaccounted income side. Nothing was found [indiscernible]...
That thing [indiscernible]. We have provided all the details, they are there. We have given the ledger accounts and other things and no incriminating document has been found there.
Okay. Because we expect that KNR, like we held a very high in terms of corporate governance. So I hope that all the things are transparent and this thing will just pass by. So It's more of a normal routine kind of thing.
The next question is from the line of Faisal Hawa from H.G. Hawa and Co.
Sir, what is our ROCE in the last Q4? And what is the ROCE for the entire year and the ROE of the company? Secondly, sir...
Company is around 17%. For entire year, ROE is around 17%.
And ROCE?
ROCE is -- that we will work out and give you, because we are not -- ROE has been worked out.
And second question is, sir, like with the minority government and more states and [indiscernible] ruling and the governance is much better, why are we not now looking at more northern states and even Central India state where the bulk of the orders are being won by other construction companies and you know where our order book is almost 0? So generally, we believe that the governance in these states has gone better. And lastly, what are your thinking between the Board? Are we driving this company to grow like 15% to 16% every year for the next 5 to 6 years and building up systems and all processes according to that? And is this -- that is where the conservative bidding also comes in because we are wanting to make good company growth of 15%, 16% CAGR for 5, 6, 7 years. Is that the top task of the Board and respective Mr. K.N. Reddy?
Yes. See, suppose if you see the -- our track record, we are a pan-India presence and we are having around -- we have done earlier and now also quarterly around 75 projects we have done across the country of [ INR 1,04,513 million ] order book position. And it is not that we are not going in other states and other cities, especially in our business case. In that particular problem, [indiscernible] if you want to go, you should have your own quarry. And we are sometimes feeling that while the quarry operations -- no, well, the quarry is very difficult to get in North India nowadays.
And the transportation, also the link and the quarry and transportation, they themselves provide. So this may take away our profit margin. It is not that we face to go there, but we don't want that our profit margin to be sacrificed. That is one of the main reasons we are taking a calculated risk. But if [indiscernible] are available, there will [indiscernible], they will take a call on that and then they will go in the northern side also in a very bigger way. As already we have done in Bihar, we have done -- as I told you, we have done in Madhya Pradesh, and we have done in [indiscernible]. So many places we have done it. And now our main concern is to grow with the bottom line so that we can also pay our -- the investors. So that's the main concern.
Sir, I'd like to add one more word in North Indian projects. It's not that we have been that big in North India and other part of India other than South. We are open and we are doing -- actually, as you rightly said that some quarry issues we are facing, maybe because of that we are becoming higher. And moreover, looking at current trend of tendering, I think Southern Indian is having a better sensible bidding that is happening when compared with the Northern India. You may even absorb the bid results at which the bids are sold at.
And sir, if you could answer the question on what the thinking of the Board is for this -- are we planning the company towards 15%, 16% growth? And that is going to be a way forward for us?
It's not that actually the Northern India, the major problem we face is that complete rainy season, we will not know how many months it will be there. Definitely, the equipment outturn and manpower outturn is almost becoming a little bit problematic when we were working out. Second thing, what we are facing is that the quarry issues, that I don't own a quarry there. And this...
Sir, my question was more about the Board. What is the thinking between the Board? Because, for example, which valuations that KNR enjoyed is purely due to the very high management standards. And so I would like to know what is the Board thinking between themselves? Are we priming this company for 15% to 16% growth for 5 to 6 years rather than trying to do some big thing in 1 or 2 years? So is that what the discussion was going on between the Board?
Vaikuntanathan, take it?
Pardon? Can you repeat, sir? Sir Faisal, can you repeat the question?
Yes. What I mean is that, generally, between the Board, do you want to grow like 15%, 16% conservatively rather than have a large growth in 1 year? And are we making this come that way? Because we would really like to know what the management is really thinking.
See, now the -- as we explained to you earlier, we are -- our main consideration will be that to keep the bottom line, number one. At any cost, we should -- unless otherwise you give the bottom line, you cannot flow. That is the main concern. So keeping that in view, the tenders are being bid. And then if [indiscernible] this year as [indiscernible] was telling, monsoons are somewhat [indiscernible] like, no, it has started earlier where our projects are now there. So we have to wait for that, otherwise, we cannot do in that monsoon -- in the heavy rain season and other things. So these things are all we take into account. So depending upon that, we give -- when the investors today ask, we have to say that, yes, we will definitely achieve this much, 10%. But if we can achieve more than that, definitely, we will not lose that. We will do that .
And sir, the Kerala quarry will ask us for how many more projects after these 2 projects?
In Kerala, 2 very big quarry has been acquired. Keeping in mind that the project requires around 40 lakh tons of quarry material. Now the main reason for taking this also that the earlier, some of the projects, even bigger both projects and all, was delayed due to the quarry is not available. So this quarry will definitely come for the entire life of the projects and also for the maintenance period and all. And depending upon the escalation and other things, utilization, it will withstand the entire project period, that we can say.
Next question is from the line of Prem Khurana from Anand Rathi.
Sir, just to continue on the irrigation part. I mean given the background, you've made us understand your thoughts and the way you want to approach irrigation because of the way you see state finances. So the thought was, I mean, when I look at the growth that we've seen, it was essentially for last year, it's been a combination of irrigation and roads. Irrigation again, was -- I mean because the base was low has been able to kind of come as a key contributor to the growth.
So now given the fact that we are planning to go a little slow on irrigation till the time you find comfort with state finances, would you start looking at any new segment to kind of develop a new segment for future growth so that, I mean, let's say if you get to some kind of situation in irrigation again, you have some other factors kind of look at to enough grow your top line? So any sectors that you are looking at other than, let's say, roads and irrigation to kind of deliver growth going forward?
So going forward, looking at other sectors, like we were even planning in railways and all. But as of now, the sufficient order book is there. Recent days, no doubt, the bidding has become a little bit competitive. Definitely, we hope coming 1, 2 years, we can go ahead with the order book, whatever you have. And in coming 1, 2, 3 months -- sorry, coming first and second, third quarter, if we don't get any orders, definitely, we will move out to railways and mining operation areas, even metros also we are planning. All that can be also explored, sir.
Sure. And given the fact that you've decided you've also developed irrigation, so how long does it take to kind of if you want to build scale in any new segment or -- and based on your experience with irrigation?
Pardon, sir? I really...
No. Sir, I mean, let's say, I mean if you want to scale some of these other segments as well, so given the fact that you would have experienced a similar kind of cycle with irrigation, right, when you started irrigation long back, so how long does it take to be able to kind of scale it to a level wherein it comes to do justice to our size and our kind of -- the kind of margins that we look at, the kind of capital that you would be willing to kind of come at? How long does it take to kind of scale a new segment? I mean, let's say, if you decide to get into metros tomorrow, how many years or -- would it take you to be able to kind of take it to a level wherein it does justice to the efforts that you put in?
Sir, actually, frankly speaking, with all these railways I spoke about or the metros I spoke about and all, we will be the partner, joint venture partner, wherein the joint venture partner, costs will also come into the place. So definitely, it is not like irrigation projects. Maybe we were expecting -- should be in line with the 12%, 13% EBITDA margin levels. For the instance, and say once we step in, it will be observe the data, technically we completely work on the data, then we'll come back to the right bidders.
Sure. And sir, last week, there was a media article suggesting some issue with the aluminum industries. Possible to share thoughts on that? I mean whether the land is with the company or is it the promoter in their personal capacity? And what exactly is the issue there?
Yes, sir. Actually, that concerned the land back about -- it's completely purely a personal thing, first thing I'd like to mention. But however, it is connected with the promoters of KNR Constructions Limited, I would like to give the explanation to it. There have been 103 acres, which has been bought by [ CISL ] during 1964, the time they were bought. And this whole certain part, about 45 acres were [indiscernible], which is aluminum in the [indiscernible]. So here, the 45 acres -- and still, 45 acres is sitting on, I must say, 70 acres or something, which we have intervened to -- that means we bought the property.
And he, yes, is not sitting right away. We were trying to fix the border where he hindered us. That means was objecting for us to put the border. Even the border was fixed not by me, it is fixed by the revenue authorities. MRO has come and he may himself fix the margin -- border. We approached the court for swapping that survey. Then the resurvey is also conducted at the instructions of the code. Even after that, we found to be correct. It's a completely fair transaction with us. We are not doing any sort of illicit things over there. As he was just -- he has been flagged in the media, so he's trying to give all the adverse statement on this. We were silent on it because we have already put the case into the relevant courts. So we would like to hear from the court and this is the situation, sir.
Sure. And just one last, if I may. Vaikuntanathan, I mean, possible to share the breakup for this irrigation revenue that you shared with the INR 970-odd crores in terms of various projects? And also, I mean, if you have any mobilization advances available with us for any of these projects.
Actually, mobilization is available not because in -- in irrigation projects, there is mobilization. For other project, it's around INR 145 crores mobilization advances there. As far as this INR 975 crores, the breakup is there. Out of that, Mallanna Sagar, we did actually INR 210 crores, and Vattem is INR 285 crores, and Kaleshwaram package 4 is around INR 400 crores. So this is a breakup -- and INR 60 crores from Kaleshwaram package 3. So these -- basically, these 4 projects has contributed to the extent of INR 975 crores.
Sure. So does it mean -- I mean, when I look at the unbilled revenue and receivable exposure that you shared with us, INR 360 crore is towards with -- so which essentially would mean -- I mean, it's -- a part of that is due for more than a year? Because the revenue is only INR 285 crore and our exposure is around INR 360 crore, so which is...
Part of it is we will receive in this quarter money actually. So this is a figure we are giving 31st March actually. In 31st March, finally, receivables are there, yes.
Okay. Okay. Okay. So Vattem is a key contributor if I were to understand this exposure correctly, because in Kaleshwaram against INR 400 crores, the exposure is only around 78%, so you are able to realize payments. In fact, I think Vattem would hold the key, I mean, whether we would be able...
Yes, Vattem is -- there is -- actually there in Vattem only, where payment is [ strategic ].
Sure. And in case of Vattem, we received the payments directly from the government authority or it comes through [indiscernible]?
It comes through now [indiscernible] only but there is no issue from receiving from [indiscernible], because we are not hitting even payment from government-only issued.
The next question is from the line of Ravi Naredi from Naredi Investments.
Sir, during the statute of income tax, any cash of KNR Constructions seized by IT authority?
No, sir. No, sir. No incremental [indiscernible] not cash as [indiscernible] rupee.
Not a single rupee?
Yes, yes. [indiscernible].
That is very nice, sir. You are very intelligent in the promoter and I knew how we are growing in your direction and investor. Sir, order book, which you had given INR 10,000 crore around, how much order we may receive this year?
In 2022, we have not received any orders actually. Out of INR 9,700 crore, that is all is pertaining to last year.
Yes, yes, I understand. But what is the -- any projects there?
We are expecting something like INR 4,000 crores. Because as we were telling, we are trying to build volume number of HAM projects and flyover projects across various states. And I hope that we will definitely try to get it.
The next question is from the line of [ Vijay Bharani ] from Spark Capital.
Sir, can you give the EBITDA margin segment-wise like roads and irrigation for FY '22?
Yes. EBITDA for irrigation is around 24% and HAM is around 18% and normal other roads are around 13%.
Okay. And what are the cost escalation clauses that are there in the irrigation contracts?
Irrigation contracts, what are the cost escalation is that, that is generally an irrigation contract major contributors diesel only and almost around 60% to 70% price variation clause is there, and it will cover in there. But as far as other projects is concerned, like basically a HAM or HAM/EPC project, they are fixed-price EPC projects. So there is no cost escalation there in that project.
So if I understand right, what you're dealing is 60% of the contract value in irrigation projects have cost escalations?
Yes, yes, correct.
Can you give the order book value for the Vattem project, Mallanna Sagar, Kaleshwaram package 3 and 4 as at March?
Yes, yes. We are -- for package 3, actually, it is INR 616 crores. Our Kaleshwaram package 4, it is INR 1,153 crores. For Vattem, it is INR 290 crores. And for our Mallanna Sagar, it is INR 56 crores.
Okay. And coming to your creditor days of 57 days, how do you calculate this, sir? If I see your balance sheet payables, trade payables, it's around INR 300 crores, so do you include some other number to calculate the creditor days of 57 days?
Creditor days is based on -- [ partially ] actually we'll calculate it. It is not based on turnover. So it is definitely based on partial calculation.
Okay. But the other 2, the inventory data is you calculate on...
Turnover, yes. That is on turnover, yes.
Okay, okay. And one final question on macro front. Now in 2022, we had a 6,300-odd kilometers of projects awarded by NHAI, much above the -- their target of about 4,800 kilometers. So what do you sense as the target from NHAI for FY '23 in kilometers?
Actually, that data needs to be checked in, sir. But as of now, no big hope that can be done because land acquisition, some slow pace. So the clarity may come up in 1, 2 months, actually. NHAI is targeting huge. They've been mandated by [ BMO ] for awarding many projects. And the land acquisition issues, they would go fast in allocating and they are targeting more than [indiscernible].
Sorry, your voice broke right when you said they were targeting -- so how many kilometers they are targeting?
The number of kilometer-wise, actually, they are targeting more than this year. But I'm a little bit doubtful because the land acquisition is on a slow pace. Now whatever they are planning to award in this year are more from greenfield highways. The greenfield highways, the entire land, they would need to be acquired because it is complete like bypass only, the all expressways and most of them are coming in former expressways or in the greenfield highways that are coming up. So at this point of time, it's definitely needed actually.
Understood. So what you're telling me is it will be -- I mean, they are targeting higher than FY '22 and mostly on greenfield expressway sites?
Unless they bought some -- really get the [ thing ].
Yes. But you're telling land acquisition would be the biggest challenge to achieve this target.
Yes, yes. That's what I'm thinking. Because all greenfield highways [indiscernible] it's almost 8 months now we were waiting for appointed date to happen. That's a complete greenfield [ highway ]?
Yes. So it looks like this 2022 [indiscernible], looks like similar to FY '18 where there was a big jump and then because of land acquisition problems, there was a cyclical downturn. I hope that doesn't happen in FY '23. But coming to one final question on your bidding behavior. So in 2022, especially in March, we didn't win any project, though we won one project recently. Can you just touch upon your views on competition? What would this mean for the entire industry? Is there going to be some unflavorful event because of this high competition down the lane?
Yes, sir. This -- we're expecting some sort of aggression to continue up to the another couple of, I can say, 5 months. First 2 quarters would be a little bit aggressive, which we are expecting. Because many projects have been completed under HAM, whatever they were taken under 2 years back, HAM projects were taken. They are being completed and now they are going for a new set of HAM projects. So complete aggression is there now. So once -- and the supply is very heavy. So the hope -- the good hope is there that market call can also reserve at a reasonable price.
Going forward, for all the projects which have been tightly bidded or high competitive bids, it is quite difficult to get the financial closure also which we were thinking. [indiscernible]
So one more silver lining is that NHAI is coming out with the new tendering norms as well as the outstanding is the company [indiscernible] bidding for 2, 3 projects. And whatever outstanding projects, the equity commitment will be deducted from that for the [ network ]. And that will affect a lot of the players. So that at least a company keeping more projects on hand will have a problem to bid more projects. So in a company like us who is monetizing the projects, will have always adequate equity available to bid more projects.
When is this regulation likely to be implemented?
The paper has already come [indiscernible].
Yes. Because this is similar to the earlier BOT regulation, if you have the non-clause financial closure [indiscernible], similar to that. Yes, if implemented, it would be better for us.
Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. S. Vaikuntanathan for closing remarks. Please go ahead.
Yes. Thank you for all -- thank you all for joining us on this call. Please reach to our IR, Strategic Growth Advisors, or us directly, should you have any further queries. Thank you.
Thank you.
Thank you. On behalf of KNR Constructions Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.