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Kalpataru Projects International Ltd
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Ladies and gentlemen, good day, and welcome to the Kalpataru Projects International Limited Q1 FY '24 Earnings Conference Call hosted by Emkay Global Financial Services. [Operator Instructions] please note that this conference is being recorded.
I would now like to hand the conference over to Mr. Abhineet Anand from Emkay Global Financial Services. Thank you, and over to you, sir.
Thanks, Carol. Good afternoon, everyone. I'd first like to thank the management for giving us this opportunity to host the call. Today, we have with us the management team represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. S.K. Tripathi, Deputy Managing Director; Mr. Amit Uplenchwar, Director, Group Strategy; and Mr. Ram Patodia, CFO and President, Finance. We'll start with a few minutes of opening remarks by Mr. Manish Mohnot, and then we can open the floor for Q&A.
Over to you, Manish, sir.
Thank you, Abhineet. Good evening, everyone. I thank you for your participation in today's earnings call. I will begin with key highlights of our performance for the quarter, and then we'll provide update on key strategic initiatives. Firstly, we are pleased to inform that our name has changed to Kalpataru Projects International Limited. The new name reflects our diverse EPC capabilities and global reach in over 70 countries. We kicked off the year on favorable note, with robust growth in our console revenue, EBITDA and PAT. Our console revenue grew by 15% to INR 4,241 crores on back of healthy project execution and healthy order backlog. We have put up a noteworthy performance on the EBITDA front. Our console EBITDA margin has improved by 40 basis points to reach at our guided level of 9%. Our EBITDA margin improvement in Q1 is led by strong project management progress and operational efficiencies. We continue to be mindful of the high input prices and increased competitive intensity. Accordingly, we are taking every action to sustain and improve our margins going forward.
The increase in interest costs in Q1 '24 is due to higher debt to meet working capital needs. However, finance cost as a percentage of revenue at consol level remains at 2.7%, which is similar to same quarter last year. We've been able to contain our finance cost as a percentage of sales despite increase in debt and rise in interest cost.
Our depreciation has increased in Q1 given higher CapEx incurred last year to support the execution of a large order book, which we have on our hands. Our consol PBT for Q1 24 grew by 30% to INR 165 crores. Our PBT margin stands at around 3.9% for the quarter. Similarly, our reported PAT has increased by 28% to INR 113 crores. At stand-alone level, our revenue grew by 15% to INR 3,622 crores for Q1 '24. Our EBITDA grew by 17% to INR 31 crores, with EBITDA margin improving by 20 basis points to 8.7%.
In Q1 last year, we have had other income given dividend of INR 46 crores from Linjemontage Sweden. Excluding the dividend income, PBT growth stands at 9% Y-o-Y and PAT growth is 8% Y-o-Y for Q1 '24 at stand-alone level.
Our stand-alone net debt stands at INR 2,216 crores as on 30 June '23, compared to INR 1,680 crores at the end of March '23. Our net debt pertaining to core EPC business stands at around INR 2,440 crores as on June '23. The increase in net debt is largely because of higher working capital, which is generally witnessed in the first few months of the start of every financial year.
Our net working capital base stands at 106 days. We expect net debt to normalize gradually as we continue to bring better efficiency in collection and expedite project closure. We are confident to maintain net working capital days below 100 days as we reach to the end of the financial year.
Our business outlook and tender pipeline remains strong across all our businesses. We have secured orders worth INR 7,383 crores to date in the current financial year. Our order bid, including LMG and Fasttel stands at INR 47,332 crores as of 30th June 2023. Additionally, we have a [indiscernible] position of INR 4,000-plus crores.
Moving on to performance across our individual business verticals. In the T&D business, we achieved revenue growth of 8% on back of good project progress and healthy order backlog. We have secured orders worth INR 2,814 crores till date in financial year '24. Our T&D order book, including our international [ sales ] subsidiaries stands at INR 15,800 crores as of 30 June '23. This gives good visibility for growth in coming quarters.
We have also strengthened our market position in the T&D business by entering new markets in Latin America and Europe during this quarter.
Our international subsidiaries Fasttel reported revenue of INR 164 crores with quantitive PBT for Q1 '24. Our order book for Fasttel is at INR 640 crores at the end of June '23. At Linjemontage Sweden, we have achieved revenue of INR 244 crores with an order book of INR 1,394 crores. Our Buildings & Factories business revenue grew by 10% Y-o-Y to reach INR 1,000 crores. We're confident to push the higher growth as we continue to scale up the execution in coming quarters. In our B&F business vertical, we continue to improve our capabilities by securing projects in areas like data centers, institutional buildings and manufacturing plants.
Additionally, we have also secured a second B&F project in the international market. We also gained success in adding new clients in the domestic B&F market.
Our Water business delivered robust revenue growth of 48% to INR 900 crores. We have secured orders of INR 708 crores and order book position stands at INR 12,386 crores as of 30th June. Our revenue growth was driven by strong project progress and timely execution. We are consistently working to strengthen our capabilities in newest -- newer areas in the Water business as looking at opportunities both at domestic and international markets.
In the Railways business, our revenue grew by 21% at INR 437 crores. Our strong growth was driven by the speedy and efficient execution of our -- of all our projects. We have secured orders of INR 754 crores, and the order book positions stands at INR 4,255 crores as of 30 June '23. We are also focused in expanding our business in areas like metro electrification, signaling, semi-high speed, and bullet trains. In Oil and Gas business, we have reported revenues of INR 215 crores. Our revenues were impacted due to lower opening order backlog.
We have order book position of INR 1,458 crores as of 30 June '23. We are confident to scale up our international oil and gas business as we are making focused efforts to make inroads in key markets on back of a strong global EPC capabilities.
In our Urban Infra business, we saw phenomenal growth of 100% Y-o-Y to INR 154 crores in Q1 '24. Given the enormous opportunity in the urban interest rate, we believe that the urban infra business has the potential to become a key growth driver in the future. However, we'll continue to adopt a prudent approach in bidding and are working to make a foray in select high-potential segments within the urban infra space.
Our road BOOT SPVs are experiencing notable growth, supported by increase in traffic improvements. Our per day revenue increased to INR 62 lakhs per day in Q1 24 compared to 56.8 lakhs per day in Q1 '23. We are relentlessly working to complete divestment of Vindhyachal Road asset and expect the transaction to get completed in Q3 '24. We are also targeting to complete majority of the sale of inventory in Indore real estate project in the current year.
These actions will help us to further strengthen the balance sheet position.
Let me now move on to our near-term outlook. On the operating environment front, clearly, situation remains volatile, and we are watchful of various variables related to commodity input price and competition. In this context, we will continue to manage our business with agility and take actions to ensure sustainable and profitable growth.
Our diversified business mix, strong order book position and robust financial profile gives us immense confidence to achieve a targeted growth of 30% in revenue, order inflow of around INR 26,000 crores and profitability before tax in the range of 4% to 5% for full financial year '24.
An additional piece of information, the income tax department has initiated a search at certain promises of the company and its group, and at the resilience of some of our directors and an executive on August 4 '23. The search is not concluded on the date of adoption of the financial results of 30 June '23. Pending completion of the [ third ] proceeding, the company is unable to ascertain the consequent impact, if any, on the financial results for the quarter ended 30 June '23. The companies have the view that such impact will not have any material adjustments to these results at this stage. Additionally, we want to inform you that all our sites, manufacturing plants and offices are fully operational and working as usual.
With this, I kindly request the moderator to open the lines for any questions. Thank you.
[Operator Instructions] The first question is from the line of Ashish from JM Financial.
Sir, my question is on the asset sale that we are planning for the roads business. You did touch upon that in the opening commentary. But we get a sense that it's got delayed a bit because in the last call, I think we were hoping to happen -- for it to happen within the first quarter or something. So if you can just dwell a little bit more on that.
Sure. Ashish, we had mentioned in our last call that we will be signing a nonbinding agreement, and that is what we have already signed. The due diligence has already started from the various parties and due diligence are at advanced stage, right? Post the non-binding agreement, the due diligence should get completed in the next 30 to 45 days, post which we believe we will be moving towards the binding agreement. As of today, it could happen in late, let's say, October, but it could even happen a few months here and there, but we're pretty confident of going forward or having full clarity in Q3.
Right, sir. Secondly, the domestic T&D pipeline, I mean, that from whatever we are reading and capturing, it seems to have increased substantially. So any outlook on that front? What is the kind of pipeline we have for the next, let's say, 12 months or so? And how much could be the target order wins in the India T&D business?
So no, Ashish, you're right. We're seeing huge traction in the domestic T&D environment. We have seen already tenders worth closer to INR 12 crores to INR 15,000 crores floated in the TBCB space where a lot of developers would be bidding. These tenders are across the entire country, but a lot of them are focused on Rajasthan and the neighboring states. We expect this traction to continue going forward because the plans of government in terms of the new transmission lines are very, very huge. So on an annualized basis, while the numbers could change, but I know in the next 3 months, we might have tended more than INR 10,000 crores to be bid only in the domestic T&D space. And that gives -- that is something, which would, again, help us refocus on growth in the domestic T&D space.
Right, sir. Just a last 1 from me. For the Water segment, what is the kind of experience that we are having? I mean, given the numbers on the revenue, et cetera, but in terms of the receivable cycle or the experience on payments and execution, how has that experience been for us?
Ashish. Tripathi, here. So Water business, most of the projects are with the government. And there is no issue of receivables, except in the allocation lag, which happens normally in the quarter 1. Otherwise, Orissa, MP, UP, where we have a large concentration, there's no payment issue. And outlook on the execution side remains good. We do not see any obstruction or lag going forward on this.
[Operator Instructions] The next question is from the line of Abhineet Anand from Emkay Global.
Yes, sir, I just wanted to know, I mean, the working capital, you did touch upon there was some higher debt that we have. You can -- if you can just slightly more dwell upon this interest cost 2.7%. Ideally where could we go for the year, some hardening of rates have happened, but 1Q is seasonally high as you have rightly highlighted. But going through the year, what could that number on the interest cost be? First is that. And second is that the large HVDC project that we have won some time back, what is the status of that, sir?
Okay. So I'll just take this point by point. Our net working capital days have slightly increased in Q1, which is typically a -- if you go back historically, it's always like that. It's gone up primarily because of -- if you compare with the same time last year because of the increased CapEx in the last 12 months and because of some corrections in terms of vendor advance -- in terms of advances from clients. But we are targeting less than 100 days by the year end, and pretty confident of achieving that.
As far as interest cost is concerned, on a standalone basis, our interest cost still continues to be at closer to 2% of sales, right? And we are targeting to get it below 2% on an annualized basis and pretty confident we'll be at below 2% on an annualized basis. On a consol basis, the interest costs have always been higher given that the interest on all the road BOOT assets coming there. But on a stand-alone basis, we're pretty confident of keeping it below 2% levels.
As far as our large HVDC project in Australia is concerned, we -- they have declared us as a winner along with a few of our JV partners. We expect the agreement to be signed sometime in the month of -- maybe in the last few weeks of August or in the first few weeks of September.
Okay. And on the road BOOT side, what is the expected support that we will be needing?
Yes. So we have forecasted last year, we infused about INR 70 crores. And this year also, we have kept a similar number. Majority of this payment is going towards the debt repayment of these SPVs.
Sir, the -- I suppose the growth in the traffic, et cetera, or the revenues for 1 day that you calculate, those things have increased, right? So will this not lead to a lower support this year and subsequently if the -- these traffics continue?
So your question is very right. But in next 3.5 years, there is a complete debt repayment, principal repayment of in all the SPVs, right? So there is a -- I mean, like last year, we paid about INR 120 crores principle. This year, we have an obligation to pay about INR 150 crores. We have an outstanding of about INR 570 crores. So in the next 3 years, there is a heavy repayment of the principles, and that is why the support will be still required.
So Abhineet, to answer your question, I'm just adding to what SKT said, yes, collections have improved to that extent cash flow has improved. But our debt profile is such where in the next 3 years, entire debt gets repaid, and the life of the asset is very high after that. So that's why we will still continue to support it just for repayment of debt. At an operational project level, they're all doing extremely well.
Okay. So last 1 from me, do you expect that there could be some impact of elections in 4Q of this year?
impact on what...
Ordering activities exhibition because some... Please go ahead.
I personally do not think it will have any impact because we've seen a lot of traction, which has come already in tender. All the vendors are already out are at advanced stages of getting floated in all the segments, which we are working on, plus our international focus is also very high, which has no impact from an Indian election perspective. So to me, both on order and revenue, I don't see any impact coming because of the planned elections in the next year.
The next question is from the line of Khadija from Sharekhan.
So my -- I have 1 bookkeeping question. So in standalone, the other income amount is higher than the other income amount in the consolidated numbers. So is there some netting off which is taking place? I just wanted to understand that?
Yes. So my financing team just collected, primarily, it's the interest income. We have a lot of debt, which is given to our group companies, which is imported in the balance sheet. So on consol it gets netted off. So typically, it's an interest and dividend, which gets netted off. This quarter, we have not got any dividend. Last year, we had got dividend from Linjemontage, which was a big number. But this quarter 1, we've not seen a dividend, it's primary interest.
[Operator Instructions] The next question is from the line of Amit Kumar from Determined Investment.
Just 1 question. I was hearing your answer on that Road asset that you have INR 570 crores of principal outstanding, and it needs to be repaid this year and over the next 3 years. And really, really surprising, why don't you refinance that? I mean interest rates obviously have moved up, but still not outlandish like we have seen in the past. I mean AAA rated and AA-rated entities would be interest rates would still be like 8%, 9%. I mean why would you sort of bear that liability on your balance sheet and not just refinance that debt?
No, I think that's a very, very valid point, right? And we have been trying to do that for some period of time for some of our assets. So let me divide this into 2. Are we paying very high interest rates? No, interest rates are aligned to the market for all the 3 assets. So it's not that the interest rates are extremely high. One of the assets, as I said earlier, we are planning to exit at an appropriate time during the current year. So we're not keen to look at any changes in the current environment because then the valuation and everything changes.
And third, any refinance would necessarily require us to go through a restructuring process, which is a very, very lengthy process. We tried earlier with -- for 1 of our assets, and given the number of bankers we have, it took us 2 years to reach there and then for some reason, it did not happen. So our intent right now is exit the largest, right, and make sure that you have enough capital to fund others. And at an appropriate time for the other 2 small assets, if we need to do it, we look at it at a later stage. Because once we exit VPL, these numbers would anyway reduce significantly, right?
Today, that is 70% of our debt pool profile. The other 2 assets are only INR 150 crores, the maximum is on VPL. So while -- we will think at it, but given that the lengthy process, given the process required in terms of getting all the banks as approval and all of that and then go to [indiscernible] for approval, it's just precise thing that it's only temporary nature. Let's just fund it, get out of it and hopefully getting into the next year, we should be cash positive on all of them.
[Operator Instructions] The next question is from the line of Nikhil Kanodia from HDFC Securities.
Sir, am i audible?
Yes, Nikhil.
Yes. So I I just wanted to know your guidance for FY '24 on the standout numbers for revenue margins and other inflows?
Guidance on which control, right?
Stand-alone.
So Nikhil, I think our stand-alone guidance also stands at similar level, 30% plus growth, order inflow in the range of INR 20,000 crores, INR 25,000 crores and PBT margin in the range of 4.5% to 5%. So I think we stick to that similar guidance as far as standard consol is concerned, of 30%-plus growth and margins in the range of 4.5% to 5%, PBT margins.
So 4% to 5% PBT?
4.5% to 5%.
Okay. And sir, what will be the EBITDA margins.
So EBITDA margin should be in the range to 8% and 8.5%, maybe plus/minus 50 basis points, depends upon the mix of the orders, but should be in the range of 8.5%.
[Operator Instructions] The next question is from the line of Shirom Kapur from Prabhudas Lilladher.
So actually opportunity. I just had a bookkeeping question.
I'm sorry to me, may I please request you to speak a bit louder, the audio is not clearly audible.
Okay. Is it better now?
Okay. Sir, you may please proceed.
So I just had a small bookkeeping question on whether you could give us the order books for your 2 international subsidiaries, LMG and Fasttel?
Sure. So from an order book perspective, our order book of LMG as of 30th June is around INR 1,400 crores, and the order book of Fastte is around INR 640 crores.
Okay. And sir, if you could just give us some color on where you see majority -- where you see a robust pipeline in your T&D business? And what's the -- just give us some more color on that outlook? Sorry, I'm learning -- just beginning to cover this company, so it would be helpful to get some of your color on this.
Sure. So I think on the T&D business, today, we are seeing opportunity in various parts of the world, right? India being a big market where we've seen traction, which has just started 3, 4 months ago. And as I had mentioned earlier, we have around INR 10,000 crores to INR 12,000 crores of tenders to be bid in the next 3 months. Parallelly, we are seeing a lot of traction coming up in Africa and Middle East and Latin America, right? All 3 continue to be a focus area. And as you can see in the first 3 months itself, we have got huge wins coming in the T&D international market. Given our presence across more than 70-plus countries, I think from a growth perspective, international also looks very, very attractive. On an overall basis, we believe that this business could easily grow at 20% plus at least for the next 3 years, if not more than that.
The next question is from the line of Bharat Sheth from Quest Investment.
Sir, in your opening remarks, you said that in -- we're building an infra side some new initiatives to strengthen our capability as well as oil and pipeline in international? And earlier also, we were talking on the railway side international. So can you give a little more color, actually where we are in this stage?
Sure Bharat. On the oil and gas side, international, right now, we are already prequalified in more than 6 geographies, primarily in the Middle East and Africa. We've already bid for more than 5 to 6 big tenders, and we expect results to come out in the next 4 to 6 weeks. We are [ definitely ] placed in 1 of the tenders. I might not be able to quantify now, but we're pretty confident that Q2, we should be getting into at least 1 international project in the oil and gas side, if not more than 1.
As far as railways concerned, we are right now not too much focused on the international markets, except for a few geographies in the Africa. Our focus continues to be on delivering on our existing order book and project closure because that's something very important in the railways business.
As far as urban infra is concerned, we are looking at all the segments, which is where there's opportunities in India, which includes underground metro, roads, flyover, but there's a lot of focus on metros, including underground metros. We see a huge pipeline of tenders in the next few months itself and trying to at least make sure that we have a couple of them to : one, build our competencies. And second, look at that space from a long-term perspective.
Okay. Sir, one of participant question you answered about this Australia opportunity where we are about to sign contract. So how big is that opportunity again, I mean in Australia going ahead?
So [indiscernible] we are among the first Indian EPC contractors to have won a large project in Australia, along with a few other local partners in transmission EPC. We believe that there's a huge opportunity in that space. But clearly, that space is where quality and delivery is very, very important. And after working hard for the last 5 to 7 years, we have qualified on a few projects.
We might not be able to today quantify the exact value of the project given the confidentiality, but I can only say that in a INR 4,000 crores of Eleven projects, we have also included this project. We should be signing the these projects in Q2. And at that time, we would be giving you the exact number of the total project size and our share of the project.
Okay. And how is the working capital as well as profitability in these geographies, Australia?
So I think it's -- typically, our international projects in terms of working capital are very, very less working capital required because of the huge advances and because of the payment style, and that would continue in Australia also. Our international projects typical working capital is around 45 to 50 days and not more than that. As far as profitability is concerned, it is being a developed economy, being an economy where the focus is more on delivery rather than being L1. It would be definitely better than our typical projects.
Okay. Okay. And any other new initiatives are we at this stage evaluating? and second, on the profitability of these Fasttel as well as LMG, if you can give for full year?
Bharat, as we declared earlier, Fasttel has already turned into a profitable zone. Q1 Fasttel is already profitable, right? Last 2 years, we have difficulties at Fasttel. And now we acquired 100% stake, so it is 100% owned subsidiary. Our Linjemontage businesses had similar margins of 4% to 5%, what it has been for the last 3, 4 years. We are not consciously growing that business for the current year because last 3 years, we have seen 100% plus growth in that business.
So consciously, our focus this year is building the team, focused again on processes and relooking at the opportunities from the next 3-year perspective. So while that business will grow at 10% to 15%, the margins will continue to be in the range of 4% to 5% for the Sweden business also.
The next question is from the line of Ashwani Sharma from ICICI Securities.
Yes. So my first question is again on the guidance. So when you say 30% growth, which segment should drive this growth? Because I'm asking this question that in the past, we have railway witnessing slow growth. So going ahead, where? Is it more from T&D or other -- or mix of other segment as well? If you could just put some light on this.
Ashwani. So from a growth perspective, I think our Water business would grow at 35% to 40% for the current year, given the kind of visibility of order book and revenue. So that would be our first biggest growth driver. Our Transmission International should be growing at 20% to 25%, given the huge order book visibility and the growth what -- and clarity on water getting delivered in the current year.
You will also see our B&F business growing at 25% plus, both in the Southern region as well as at the India level. So I think significant growth will come from these 3 businesses. You would see T&D, oil and gas and water -- T&D, Oil and Gas and Railways growing at 10% to 15% only as far as revenue is concerned. Also, our urban infra project will grow by 40% to 50% given the low base as well as the huge order book visibility, which we have today. So on an annualized basis, we believe that the top 3 growth in terms of actual numbers would be Water, B&F and Transmission International, and have good double-digit growth in the other 3 businesses, and Urban Infra would be that additional revenue numbers given the low base. So with the mix of all of this, we believe that we will easily achieve a number of 30% plus on an annualized basis.
Yes. thanks for that detailed answer. Sir, also if you can touch upon on your margins. I mean, if you can margin -- segment-wise margin, T&D, in Urban Infra, Water, some broad numbers, if you can give us?
Sure. So if you look at it from a T&D perspective, I think our margins continue to be in the range of -- and I would like to talk about this more at a PVT level because, for us, given our lower leverage, their EBITDA numbers sometimes get very wrongly looked at by the larger market. So at the PVT level, Transmission business continues to be at 5% plus. Our Water business is more in the range of 6% to 7%. Our B&F is more in the range of 8% to 9%. Our Railways business is more in the range of 3% to 4%. Oil and Gas continues to be also in the range of 3% to 4% only. Urban Infra, they are not contributing too much to margin right now. They might be closer to 0% to 1%.
Our international civil also is contributing more in the range of 5% to 6%. So at a PVT level, if you look at it, majority business into the range of 6.5%, 6.7%, except B&F, which is more in the range of 8% to 9%.
Yes, great. Sir, how big is our civil business as of today? And where do you see this panning out going ahead in the next 2 to 3 years?
When you say civil business, are you looking at international civil or are you looking at urban infra domestic business for us, civilian is averaging stable, right? B&F is also civil water is also civil, urban infra is also civil. Yes, civil only. So when you say civil means, are you talking about any specific sectors or...
Mainly in the urban infra side?
So I think urban infra side, today our order book domestic plus international should be in the range of INR 1,500-odd crores. If not, if I include this business, around INR 1,800-odd crores. But we see huge opportunity -- sorry, thanks for correcting it. Urban infra order book value is around INR 3,000 crores as of now. But we're seeing a lot of traction in it, right? Tenders are coming in. And so we expect this order book to at least go to INR 4,500 crores by the year-end. Yes, this improves both domestic and civil and international.
And sir, lastly, on the working capital, you see that working capital has a bit increased. But if I have to look at from a segment perspective, again, if you can just tell us where do you see -- there's an increase that you see as far as working capital is concerned.
I think working capital increase has been consistent with Q1, it has increased across all segments, okay? I wouldn't have any segment where I could say it has come down, except the Transmission International, where it's slightly reduced. But Q1 typically, always, we see working capital going up across all segments because there's a time when budgets are getting in place and approvals and all of that while work continues. So it's across the board. So except Transmission International, I think it has gone up across all segments.
The next question is from the line of Akshay Kothari from Envision Capital.
Sir, just 1 clarification on the search part. I just missed that part. On which entities has search been conducted?
Akshay, the search is on the entire Kalpataru Group, including KPIL. And as I said earlier, we are fully operational. We are fully working. We are all looking from office. So it's a process which will take it's own time.
Okay. And sir, what is the borrowing cost for our road assets?
It's different for all the 3 borrowings, but it's more in the range of 9% to 10%.
Okay. So just out of curiosity, I think in roads assets, there is something called as repo financing, which is available in which the rates are much lower than the market rates. So anyhow we can avail that?
So I have not specifically explored this with the finance team. Now that we've said that we'll look at it. But I know, historically, we did explore some of the other options of refinancing and restructuring, but the process took so long that had not happened But we'll explore this also and maybe come back to you in an appropriate time.
The next question is from the line of Ashish from JM Financial.
So my question is on the order book of Fasttel. So from the INR 1,140 crores level of March, it has come down to INR 640 crores. Our execution is only about 164. So has there been any exclusion of orders in this quarter?
Yes. So Ashish, there are some orders which got reduced in terms of value because the length of the project came down. And there were some orders which got canceled because there's no clarity and environment approvals for those projects. So it's a mix of reduction in value to be executed as well as cancellation of a few orders because there's no clarity at a project level.
Okay. So can 1 say that the INR 640 crores is now fully executable and is available for execution?
As of now, I think we're pretty confident that the INR 640 crores is fully executable.
All right. And sir, a related question is that this absolute level of order book has actually declined substantially if you look at the general levels we had last year. So now how do we look at adding more orders here and especially given that we are looking at a reasonably good outlook for international T&D as well. So what's the kind of pipeline of bidding here for the Fasttel business?
I think the Fasttel business, from a perspective of growth, I think we're still cautious, okay? This business has had difficult times over the last 2 years. We have just acquired the balance 49% stake a few months or last month itself. We are rebuilding the team. We've got in place a new CEO who's come in. The new finance CFO has come, Head of Operations has joined, Head of Tendering has joined. So we're not looking at growing faster at a very fast pace in the near future. I'll be happy for them to be growing at a low single-digit number, but our focus is a lot more on improving productivity and profitability, right?
So it's not that Fasttel we're planning to ramp to grow much faster. So our focus on Fasttel current year is only building the team, making sure that they have all the support system available for delivering on existing projects and also bidding for new projects with reasonably good margins given the competitive situation there. But there's no plan to grow that business at a very high speed at least in the current future.
Right. But all along this, while we are sort of reorienting the business, we will remain PBT positive, right, as we have been in the first quarter? There's not likely to be any sort of loss during this process?
So as of now, I believe that's what the budget and intent for the year is, but that country has its own set of challenges. As of today, on annualized basis, we definitely feel that Fasttel business will be PBT positive for '23, '24.
Right. And just 1 last data keeping question. What's the CapEx outlook for this financial year?
Approximately INR 275 crores to INR 300 crores.
The next question is from the line of Dhruv Agarwal from Niveshaay Investments.
Am I audible?
Yes, Dhruv.
Sir, in case of T&D segment, how do you see the demand from 5G roll out, Sir?
Demand from -- Sorry, i missed that. Demand from?
5G, roll out sir.
5G?
Yes, sir.
We've not seen much demand coming in from that -- specifically from 5G, where you see a lot of projects coming up in Rajasthan and Gujarat, but it is more driven by the entire renewable [ energy ] side but nothing might remain coming up in the T&D space in the 5G for the businesses where we are. We're not into the business of cables and conductors where there could be some demand, but we are not directly into that business.
And sir, like government has recently like increased that 500 gigawatts by 2020, do you see any demand from that coming around?
As of today, we're not seeing my demand coming from that also.
Okay. And sir, any plans for debt reduction?
So as we said, typically, that goes up in Q1, Q2. On an annualized basis, definitely, the debt would be higher than the previous year, given a growth plan. but we want to keep working capital below 100 days. And accordingly, the debt numbers would be in a range which is comparable to our -- which is along with increased revenue comparable to the previous year.
Okay. And sir, 1 last question. How do you see the future outlook for the top line, sir?
Which are on the first, Sorry ...
Future top line outlook.
Okay. Sorry, I don't know, you're not very clear. So -- No, I think we have already given our vision for 2025, and we had already given the vision at the beginning of the year itself. So we are today working on a INR 25,000 crores revenue by 2025 with ROC in excess of 20%, and an order book, which is in excess of INR 50,000 crores with PVT in the 4.5% to 5% margins. That's clearly articulated in our analyst presentation as well as in our balance sheet if we look at it.
Okay. And, sir in the coming years also, if you can throw some light on that?
You're not audible. I'm sorry, but I'm not able to listen to you clearly. Can you be slightly more audible?
Hello. I'm audible now.
Yes, slightly better.
Yes, sir. I was talking about, like, can you throw some light on the coming years like future outlook, '25, '26, '27?
No. I think beyond 25%, we've still not put down our business plan. But given the kind of opportunity a double-digit growth should not be a challenge. We've right now only thought of the current year and next year. Beyond '25, we're still preparing a business plan Hopefully, by the end of the year, we should have our vision of INR 2028 also ready.
the next question is from the line of Sai Siddhardha from Kotak Securities.
Am i audible sir?
Yes.
Yes, Sai. Congratulations on the results, sir. So firstly, I wanted to know the funding provided to road projects by the stand-alone entity?
Sai, I think Q1, we have provided closer to INR 30 crores. And as SKT mentioned earlier, it is primary to repay debt. And for the full year, the plan is to be around in the range of INR 70 crores, similar to the previous year. And majority of it is going to repay debt -- actually, all of that is going to repay debt.
Alright. And also before -- a few questions before you have mentioned the margin profile for each segment, if it's not an issue, can you just repeat that [indiscernible]?
I think I've already mentioned that twice in my call earlier. It would have helped if you could -- we would have this on our website. You could pick it up on the website.
I will look that up on [indiscernible].
The next question is from the line of Ashwani Sharma from ICICI Securities.
Just an update, I wanted on the pledge after the recent fund raise, what is the update as of now, sir?
So Ashwini, the promoters have continuously reduced pledge over the last 2 months. So after the share sale, they came down to the same levels of 48%, 47%. After that we saw further reduction, and today, they are at around 47% of pledge. They were as high as 51% on [ 3922 ], it came down to 48.8%, and today, it's around 47%. Every month, we are seeing pledge reduction, and that's the plan, which I think you'll see getting into the next quarter also pledge coming down only.
Okay. Sir, 1 little long-term question. So over the next 2 years, what will be your top priorities in the company?
I think it's a very good question. But I think if you ask me, my personal top priority would be 3: one, getting back to a profit margins where we were historically in the range of 9% to 10% over the next 2 to 3 years. Second, [ poring ] into international segments for some businesses where we are not so much international and further developing into international segments where we are already there. We are in 80-odd, 75-odd countries, why not go to 100. So looking at the international market in a big way. And third, I think our biggest challenge today is resources, right, whether it is the team at all levels, whether it is the subcontractors team, whether it is our own team at the site, whether it is a team for our various regions, regional and head offices. The third focus would be strengthening the team and making sure that we can provide them enough training to work with in a new environment.
So to me, this is the top 3 priorities added by using automation and mechanization across all our projects because our sectors is such where automation and mechanization has not moved up in the same speed as you see in some of the other sectors. So this would be our top 3 or 4 priorities from a 2- to 3-year perspective.
Sir, internationally, interacting with a lot of corporates, what we have been hearing that there has been slowdown in many geographies. Do you see that impacting our international presence, I mean on the especially in the T&D side? Will that impact the international T&D business? Do you see that coming up?
So from our perspective, the geographies that you're seeing slowdown, which is primarily some segments in Europe is where we are not too much present. Today, if you look at geographies like Middle East, all projects are coming back driven by Saudi, Kuwait, UAE, all of them. Africa, a lot of funding has come back. So whatever funding was held back during COVID stage by all the funding institutions are back in Africa. Latin America, a lot of growth happening, driven by their own requirements of building infrastructure across all segments where we are today.
Even when we go Southeast, whether it is Australia or the neighboring countries in Southeast Asia, we're seeing a lot of opportunities. So for us, except for some markets of U.S. and some markets of Europe, we've seen traction across the geo continents -- across all continents. So we do not see too much reduction in terms of spending on infrastructure projects from a 3- to 5-year perspective. And that is why our focus is a lot more international projects.
The next question is from the line of Khadija from Sharekhan.
So since we will be having our first EPC project in Australia, and since we are already -- have already bid for the tender, I just wanted to understand how is the execution and business environment over there as compared to the domestic market? Like how difficult or easy it is to deploy labor and execute projects? And whether there are more challenges or whether you need to be more technologically advance in execution? Just wanted to understand if there is any difference?
I think, Khadija, that was a very relevant question, and it's good that you asked that. Clearly, working in developed economies is very different than working in underdeveloped or developing economies, right? The challenges, they're very, very different, right? But the good part is, they are well defined. So you wouldn't start working until all environment and first approvals are already there. You cannot start working till the land acquisition or ROW is fully done, or if not fully, maybe 90% plus done. Labor needs to be trained in particular ways of doing things there, right? And we are aware of all of this because, in the Australian market, we've been present for 10 to 12 years on supply of towers. The last 12 years, we've been supplying towers. We have been 1 of the largest suppliers of towers in Australia over the last 1 decade. So continuously, we had a team there, which was studying all of this, and that's helped us to understand it. Bid along with 2 reliable partners who are very big in the Australian market and secure this project.
Now specific about the project, I might not be able to provide today given the confidentiality stage at which we are. But hopefully, once we're in the projects, I'll be able to answer further details about what are plans on productivity improvement, what are the labor requirements there? And how do we plan to grow that market from a long-term perspective. But today, we are just limited by some confidentiality agreements. But hopefully, by -- in the Q2 call, I'll be able to give you more details.
Okay, sir, I understand. And next question is about Railway. So we have 3% to 4% PBT margin. So I just wanted to understand why are the margins low? Is it because of -- only because of competition or there are some other reasons that we -- the margins are lower in this segment for civil players?
So I think it's a combination of 2, 3 things. One of them is a competitive pressure, which came in when the order book was built, but more than the competitive pressure, it is -- the working capital deployment, which is extremely high, right? And given the working capital deployment, there's always an interest hit, which hits into the margin. Our biggest problem there is making sure that closure of projects happen, which is very, very slow in Railway business. So with the closure getting delayed, it's always working capital intensive. So 1 is competitive intensity. Second is working capital intensive. And third is our current focus also has been making sure that execution and delivery is not necessarily building a big order book there. So with all of this, I think we will continue to be in that margin levels for railways for at least the next couple of years.
Okay. Going forward, after a couple of years, if we have a sizable order book in railways, then we could have better margins?
I think I'll have to take that question once we have clarity on our existing order book. But at an appropriate time, whenever the order book grows, I'll be able to answer that.
Okay.
Improving margin continues across all our segments. That is core to us. So it's not 1 segment. whichever is doing whatever margin, they have to focus on improving that.
We take the last question from the line of Thomas George an individual investor.
I have 2 questions. If you will not bear with me, they're both a little long, so I'll try and speak slowly so there's no loss in communication. First is on the North American market. I remember that in 1 of the calls, we had mentioned how we were supplying certain towers in North America for some time, but couldn't expand in the North American market per se. So what is our outlook on North America.
Can we enter that market because there's so many opportunities there potentially coming up over the next decade and more than that?
And secondly, and I'll finish after this, with our international expansion at, firing all cylinders going very, very fast, how do we manage liquidated damages, which may arise with, let's say, adverse weather conditions and other phenomena, which we cannot predict? So how do we manage that from a provisions point of view? And what's our policy on that? These are my 2 questions.
Sure, George. So let me first answer your question on the North American market. Yes, we have been looking at that market for maybe the last 8 to 10 years very, very closely, right? And we have a team which continuously looks at opportunities there. We are bullish on that market, but that market is also challenging in terms of getting in with a reliable player of a reasonable size. Because whenever we've looked at companies to acquire, they are so big in size that we've always said that let's revisit if there are other options.
So we continuously are exploring some options there, some on manufacturing, some on EPC, but as of today, there's no clarity on -- or there's nothing which we can say that we are focused on or we have reached a stage at which we should be signing something.
We are focused on that market. We believe it's a good opportunity from a 10- to 15-year perspective, and it is continuously on our radar. It's very difficult for me to give you a time line for that. But definitely, it's 1 of our priorities from a 3- to 5-year perspective, if not slightly larger.
As far as LD is concerned on international projects, I think all international projects typically have a [indiscernible] major clause, right? So if anything happens in terms of climate, in terms of or unrest, in terms of social issues, anything, it is typically all projects have a clause by which this time line is always excluded and LD is not applicable. So if you look at some of our projects where we were in Afghanistan or even Myanmar or neighboring countries, while there was working capital which got locked, but there was no issues of LD.
Also, we typically take ECGC for all our international projects, right? And I have said this in the past also. For all our international projects, typically, we take ECGC.That's an additional help we have in case there are things beyond our control.
The last important thing is we are focused on international markets in segments where we have built good credentials on EPC project delivery in India in neighboring zones. So we do not start with any segment and say let's go international. So you go back to history, transmission and domestic within India for 10, 12 years, built the entire value chain and then we went international 15 years ago. Oil and Gas last 10 years we have a leadership position in country, and now we are going international. Buildings and Factories, we've been 1 of the largest in Southern India for the last 15 years, and now we've gone international just 2, 3 years ago. Similarly, on roads. So a strategy is we first build a full capability and competency of executing projects at an India level with a relevant team, which can deliver in the international market and then only bid for projects. And that's how we have grown. And that's why you see that in international projects, we are cautious, but moving at a good speed wherever we build that expertise.
So looking at that, I think, on execution, we don't have a problem On force measure issues, even if they happen, they are excluded -- they are over in the contractual documents, so we don't have a risk of LD. And additionally, we have ECGC over and above that.
We take the last question from the line of Bharat Sheth from Quest Investment.
Sorry. I mean, on this Australia project, in JV partner, what will be our role and other partners, if you were not too confidential, is it possible to give some color?
Bharat. it might be difficult for us to give you those details at this stage. Once we sign the contract, we might be able to share all of them.
Ladies and gentlemen, that was the last question for today. On behalf of Emkay Global Financial Services, we conclude today's conference. Thank you for joining. You may now disconnect your lines.