Kalpataru Projects International Ltd

NSE:KPIL

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Kalpataru Project International Limited Q4 FY '24 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Bhoomika Nair from DAM Capital. Thank you, and over to you, ma'am.

[Bhoomika Nair, analyst]

Okay. Thanks. Good morning, everyone, and a warm welcome to the Q4 FY '24 earnings call of Kalpataru Projects International Limited. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO; Mr. S.K. Tripathi, Deputy Managing Director; Mr. Sanjay Dalmia, Executive Director; Mr. Amit Uplenchwar, Director of Strategy; and Mr. Ram Patodia, President, Finance and CFO.

At this point, I'll hand over the floor to Mr. Mohnot for his initial remarks. Post which, we'll open up the floor for Q&A. Over to you, sir.

[Manish Mohnot, executive]

Thank you, Bhoomika. Good morning, everyone, and thank you for joining us for our earnings call today. As always, it's a pleasure to interact with all of you.

Let me first start with major highlights of our performance for financial year '24. The last year has been a remarkable year as we achieved several important and strategic milestones. We have achieved highest ever annual consol revenue of INR 19,626 crores, EBITDA of INR 1,628 crores, an order book of INR 58,413 crores. Our inflows were at highest level of over INR 30,000 crores. Furthermore, we achieved major breakthrough in strategic order wins in India and overseas market like securing significant projects in the Middle East oil and gas sector; metro tunneling projects in Indore and Gopal; and substantial orders A&D business, both domestic and international; along with the largest project in Hyderabad. Our focus on project closures gained strong momentum as we achieved a record number of project closures with over 70 projects physically completed in financial year '24.

In regard to our market capitalization, we recently reached a milestone of INR 20,000 crores. More importantly, we continue to further have a balance sheet position with notable performance on the working capital and leverage trend despite delivering record revenue growth and incurring CapEx of over INR 450 crores in financial year '24. The net debt in our stand-alone business decreased by 29% compared to previous quarter, reaching INR 1,833 crores at the end of March '24. With net working capital of 99 days and finance cost as a percentage of revenue at 2%, we are in line with our guidance for full year FY '24.

FY '24 also marked our first year as a combined entity since the completion of merger with JMC. Since the closing of merger, we have merged, we have taken a number of important strategic initiatives, and I can definitely say that we are witnessing significant success on the synergies plan. I want to particularly emphasize on the [indiscernible].

First, that we made noteworthy strides with our ability to build and secure large-sized multi-faceted EPC projects as we have achieved a major breakthrough in oil and gas in the Middle East, underground metro tunneling using CBMs, design build projects in the [indiscernible], industrial plants, data centers and airports. These projects will help us significantly improve our capabilities and will distinguish us in the global EPC market in the coming years.

Secondly, we have got a lot of efficiencies and improved on the working capital and finance cost trend. The average finance cost as a percentage of sales of [indiscernible] JMC during the period '20 to '22 was around 3%, while similar KPI was around 1.9%. The most entity with a high-growth revenue base and despite a high interest cost environment has successfully delivered finance cost as a percentage of sales of 2% in its first year of operations. Similarly, on the net working capital days, we achieved a target below 100 days. The diversified business mix of the combined entity gives us a lot of advantage to prioritize and optimize our capital deployment.

Third, and the most important, the merged entity has now gained a muscle to invest in future capabilities and deploy additional resources to support and prepare us for the next leg of growth. We have significantly scaled up our ability in terms of the following: CapEx for plant and equipment, both in EPC and manufacturing; management bandwidth for improved seamless and timely project execution; design and engineering capability in civil, electrical and mechanical areas with focus on MEP integrated jobs also; adoption of digitization process across the position systems; and faster our commitment to sustainability and ESG.

Coming now to the details of our performance. We concluded the year with the highest ever annual consol revenue of INR 19,626 crores and stand-alone revenue of INR 16,760 crores. The 20% growth in consol revenue and 17% growth in [indiscernible] revenue for full year '24 was on account of robust project execution, healthy order book position and a diversified business mix.

Our annual consol EBITDA increased by 19% to reach INR 1,628 crores, while standalone EBITDA reached INR 1,366 crores, reflecting a growth of 18% for full year '24. Our consol EBITDA margin stood at 8.3%, and the stand-alone EBITDA margin was at 8.2% for FY '24. Our EBITDA margin for full year '24 has remained stable despite a rising cost environment and resource augmentation in future growth.

In Q4, PBT before exceptional items showed robust growth of 103% at consol level and 48% on a standalone basis. Similarly, annual consol PBT before exception items grew by 27% to INR 701 crores, while standalone PBT increased by 13% to reach INR 774 crores for FY '24. The stand-alone PBT margin before exceptional items stood at 4.8% in Q4 and 4.6% for the full year '24. The exceptional item of INR 35 crores in Q4 at stand-alone level pertains to impairment in value of investment in the Indore real estate project. Around 80% of the inventory has been sold, and we expect to complete the sale of balance inventory in this current financial year.

Excluding the impact of extraordinary items of console, PAT is up by 35% to [ INR 510 crores ] with EPS improving from INR 23.2 to INR 31.4 per share. Similarly, stand-alone EPS rose from 31.23% to 34.5% in FY '24, with the [indiscernible] the impact of extraordinary items.

Our order book, including LNG dividend and [indiscernible], stood at INR 58,415 crores as on 31st March '24. In FY '24, our growth grew by 19% Y-o-Y to INR 30,022 crores. The growth in order includes was primarily driven by T&D, B&F and oil and gas business.

In FY '25 till date, we have secured orders totaling around INR 850 crores. Additionally, we have an position of over INR 5,000 crores.

Moving to segmental performance for the financial year. Firstly, in the T&D business, the business outlook has significantly improved over the last 12 to 15 months due to increasing adoption of renewables and rising power demand resulting in the development and upgradation of grid infrastructure globally. The visibility of tenders in the domestic T&D market is estimated to be around INR 50,000 crores annually, at least for the next 2 to 3 years. Similarly, in our targeted international markets in Latin America, Middle East, Africa and Europe, we are possessing good traction in the T&D CapEx. Overall, we anticipate our T&D business will remain robust and achieved substantial growth in the coming years.

In the T&D business, we secured record order inflows of over INR 7,150 crores with order booking in domestic market up by 48% in FY '24. Our T&D order book has reached INR 20,678 crores at the end of March '24. Additionally, we have element position on order of INR 2,000 crores primarily in the domestic market.

In terms of revenue, the T&D business [indiscernible] 30% Y-o-Y growth, driven by strong project progress and a healthy order book. Our LNG business has renewed strong momentum with order inflows of INR 1,656 crores, a growth of over 150% compared to FY '23. LNG's order book stands at INR 2,000 crores. We expect LNG to continue to deliver strong growth driven by significant opportunities in Sweden and Nordic market.

In FY '24, our Brazil subsidiary, Fasttel, achieved a revenue growth of around 60%. Our order inflows have nearly doubled in FY '24 compared to last year, reaching a total of INR 1,400 crores, resulting in a closing order of around INR 1,500 crores.

In our B&F business, I'm pleased to announce that FY '24 was a pivotal year as we made significant progress and design-build EPC projects and secured several large and prestigious projects in residential buildings, airports, data centers and industrial plants. This advancement will greatly enhance our capabilities and provide us with good competitive going forward.

Our order inflow in the B&F business in FY '24 amounted to INR 6,528 with a year-end order book reaching INR 11,000 crores. Additionally, we have an element position of INR 1,900 crores. The business achieved a commendable growth of 16% for full year '24 driven by robust in house execution capabilities. We anticipate our B&F business to maintain a double-digit growth supported by a healthy order book and excellent business visibility in residential, commercial buildings, airports, industrial plants, data centers, et cetera.

In Oil & Gas business, our efforts over the past few years to establish a presence in the international headroom market [indiscernible] in FY '24 and the secured LOI for a large gas pipeline in Middle East. This project is a testament to our dedicated efforts to enhance our global reach and the recognition of our capabilities by global major clients. This project help us inventory to improve our competitive position and super our oil and gas business a strong growth trajectory moving forward. The Oil & Gas business reported order of INR 7,953 crores with revenue of INR 822 crores in FY '24.

In Urban Infra business, we are witnessing good traction in ordering and a record of opportunities in the Urban Mobility segment. Additionally, the focus of bond recently announced in the union budget to increase capital outlay for inside development to over INR 11 lakh crores, further provide impetus to the infra business and sustaining growth in the future. Our Urban Infra business witnessed a remarkable revenue growth of 75%. We have a key significant progress in our Infra business by securing 2 underground metro rail tunnel projects.

Our Water business revenue grew strongly by 34% Y-o-Y to INR 3,500 crores in FY '24. We secured orders for INR 1,600 crores, resulting in an order book of INR 10,667 crores in FY '24. Our current focus is on enhancing our execution capabilities and strengthening our competitive position to effectively handle large-size projects.

In the Railway business, we generated revenue of INR 1,425 crores, maintaining our focus on project closure and selective order bidding in response to increased competition. During FY '24, we secured order totaling INR 1,000 crores, resulting in a closer order book of INR 3,900 crores. We are increasingly prioritizing the enhancement of a business in key areas such as metro electrification, SMT, RFES and high-speed rail.

On our Roadworks projects, revenue per day increased to INR 58 lakhs per day for financial year '24 compared to INR 54 lakhs for FY '23. We have included around INR 84 [indiscernible] in FY '24, primarily towards repayment of [indiscernible].

Based on our performance for the year, the Board of Directors have proposed a dividend of INR 8 per share.

Before I move to outlook for FY '25, I want to particularly emphasize that in the last 4 years, especially post COVID, we have invested core INR 1,700 crores in CapEx in our core EPC business and the gross block in property, plant and equipment stands at around [ INR 3,400 crores ] at the end of March '24.

Simultaneously, we have delivered revenue growth of 14% CAGR with consistent profitability during the period '21 to '24. Our net working capital days, finance costs and debt levels have remained stable and are in line with the business growth. This very well reflects the underlying strength of our banks -- of our business model with large focus on profitable growth and maintaining a strong balance sheet.

Let me now address the outlook for '25. We will continue with this current growth momentum and aim to achieve historic high in terms of critical project execution, revenue and profit. Our robust financial profile, expertise endeavor EPC sector, extensive global presence and capacity to handle large-scale projects position us well to capitalize on the significant infrastructure investments, particularly in sectors like power transmission, urban mobility, oil and gas and water in India and international markets.

For FY '25, we are targeting a revenue growth in excess of 20% with PBT margin more closer to 5%, an improvement -- a minimum improvement of 25 to 50 basis points from what we have seen in the current year. Last year has been excessive in terms of ordering growth, and we will continue our [indiscernible] for healthy order inflows in the current year. Our prime priority in FY '25 will be further strengthening of our balance sheet through efficient working capital management and divestment of noncore assets. We aim to keep our net working capital days below 100 days and finance cost at 2% of sales in our core EPC business.

With this, I would request the moderator to open the line for Q&A. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Parikshit Kandpal from HDFC Securities.

[Parikshit Kandpal, analyst]

Congratulations on a decent quarter. So my first question is you -- so if you can help us with the prospect pipeline segment-wise. So I mean you did touch upon that. You're looking at next level of growth given the win -- large international order win. And so what does it do in terms of building scale, scope, qualification, et cetera. So that is my second question.

And my third question is on the margins. So now the international order book has gone up in the mix. So despite that, I think you are building in some expansion in margin of almost [ 150 ] basis points. So what gives you that confidence given some of the larger players as international mix has gone up in the order book? They have basically maintained this year's margin guidance. So there's some commentary on that.

[Manish Mohnot, executive]

Sure. So just to answer your first question in terms of where the priority is in terms of order book for the next year. Clearly, our focus would continue to be on our core businesses, which is T&D. Building a T&D domestic are seeing a lease traction coming up. Buildings and factories in areas like commercial, residential, data centers, airports and industrial plants, water and oil and gas international, not as much in the oil and gas domestic sector.

We are witnessing huge tenders coming up in all of them. Although the last few months has been slightly dull because of all the election going on right now. But otherwise, prior to March and the plans going forward, we see traction in all of them. Specifically, in the oil and gas business, with that huge presence in the international market in Middle East, our focus currently would be to make sure that building the team and delivering on whatever we have submitted becomes important.

As far as margins are concerned, we have been guiding primary margins at the PBT level. So if you look at our guidance, previous year was 4.5% to 5%, we ended the year at around 4.6%. We believe we should be able to give a minimum 25 basis points improvement in margins. I've guided for 25 to 50 basis points.

Given the size and scale, on the international front, our order book profile is very different than a lot of competitors in our Indian market. If you look at our international order book, on the transmission side, more than 50% comes from Latin America, with Chile, Guyana, Suriname, Brazil, all of them. It's not as much in Africa and Middle East where they are also focused markets. If you look at the oil and gas, it's completely driven by one large client, one of the best clients in the world in Middle East.

If you look at roads, there's only a few countries where we're working on, and we've been there for the last 7 to 8 years. So it's not that we are into this competitive market, like primary Middle East. Middle East is highly competitive as far as [indiscernible] is concerned. That's not a big focus. We are exploring new markets. We've been in those markets for the last 5 to 10 years. We've delivered a lot of those projects, and we're confident of delivery there. In all of this, we do not see any difficulty in delivering and then -- delivering on margins. What they predicted unless there's significant increase in any of the underlying costs, which we don't see happening soon.

[Parikshit Kandpal, analyst]

And what will be the EBITDA margin? So what does this 4.5% to 5% PBT translate in terms of stand-alone EBITDA margins?

[Manish Mohnot, executive]

For the current year, our EBITDA margin has been in the range of 8.1%, and EBITDA margin would be in the range of 8% to 8.5% only. But as I said earlier also, we guide people on PBT margin because our leverage ratios are very different than the larger industry. So for us, I think our guidance will always be on PBT margins, which we are seeing this prime [indiscernible] [ 25% ]

[Parikshit Kandpal, analyst]

But sir, as I make [indiscernible], we were in double-digit margins earlier. So how do we see this? This year also, we are saying we'll be at 8%, 8.5%. But do you think that now the margins have reset and will stabilize at the current levels? Or do you see the trajectory moving towards double digit over term? So what would be our guidance going to next few quarters? At what -- which quarter level exit we will catch maybe 9% and then move towards double digit?

[Manish Mohnot, executive]

We see double-digit margins are there pre-COVID levels in specific sectors only. If you look at the merged entity, we actually were never in the double-digit margin ever, and that's the industry norm for people who are diversified and of that large size and scale. We definitely believe margin improvements should come sooner than later. And we believe that next 2, 3 years, we should see at least a 50 to 75 basis point increment coming even in '25, '26 and hopefully after that also, primarily driven by the significant growth coming in T&D, B&F and the international business.

Now are we targeting at an organization level to reach double-digit margin in '25, '26 might be difficult. But yes, a definite improvement of closer to 50 to 75 basis points every year [indiscernible] next year is [indiscernible] at least on the current order book. Even in current quarter, visibility is there for the next 2.5 years. So that gives me that confidence that going forward, we should be reaching those levels, but double digit isn't happening soon.

[Parikshit Kandpal, analyst]

But in FY '26 as a blended as a whole year, I mean, will we cross 9%, I mean, 99% broadly in that band for FY '26 at least?

[Manish Mohnot, executive]

So we should be at 50 to 75 basis improvement even next year. As of now, we will be giving further guidance as we close the year for next year. But definitely, we should be targeting there, but not reaching double digits.

[Parikshit Kandpal, analyst]

Okay. And just lastly, sir, on the international entities, both LNG and Fasttel. So if you can help us with the revenue and PBT EBITDA, PBT numbers for this year? And how do you see the profitability panning out in FY '26 and '25 given you're expecting strong inflows there?

[Manish Mohnot, executive]

So at an [indiscernible] impact level, we did revenue of around INR 1,000 crores in the current year with EBITDA in the range of 3.5%. At a partial level, we did revenue of around INR 700 crores. And at an EBITDA level, they were negative INR 16 crores. Both the organizations have got both the -- have got very good orders in Q4, very good profitable orders in Q4. Should we expect [indiscernible] to grow by at least 25%, with EBITDA margins more in the range of 6%, 5% to 6%, and we expect Fasttel to grow again at 20% plus for the current year, and they will definitely be positive at both EBITDA and PBT level.

[Parikshit Kandpal, analyst]

Utility margins have also been similar on -- at 5% to 6% in Indian [indiscernible]?

[Manish Mohnot, executive]

Yes, [indiscernible] highly in the interest cost to EBITDA will be clean to PBT, maybe a difference of less than 50 basis points.

[Parikshit Kandpal, analyst]

Okay. And just lastly, sir, on this oil and gas pipeline this order. So what is the execution time pilot given there's a large order. So if you can help us on that?

[Manish Mohnot, executive]

So I think the execution time period is between 36 months to 42 months. But delivery in terms of actual [indiscernible], which starts from Q3 of the current year, and then I think over the next 3 years, you'll see significant delivered, but the time line is 36 to 42 months.

[Parikshit Kandpal, analyst]

Other than inflow growth, did you give that guidance? Sorry, I missed that. That was my last question.

[Manish Mohnot, executive]

So we have not given order book inflow growth, although we're very bullish on it, and we would like to wait for the post-selection clarity from -- in the sector in which there is a pre focus, and we will be giving that order book guidance growth maybe in Q1. As of today, we have already guided INR 50 crores, [indiscernible] INR 5,000 crores. We have already deferred tenders about INR 15,000 crores for which we are expecting results in the next maybe a month or 2 months. We are very bullish, but we will be coming out with a guidance closer to the end of Q1 once we have clarity on our governance CapEx plans.

[Operator]

[Operator Instructions] Next question is from the line of Amit Anwani from PL Capital.

[Amit Anwani, analyst]

Am I audible?

[Operator]

Yes.

[Manish Mohnot, executive]

Yes.

[Amit Anwani, analyst]

Yes. So I wanted to understand about the -- you did highlight that the margin ramp-up will start starting FY '26 by 50 to 70 basis points and obviously led by 2, 3 sectors which you highlighted. So just wanted to understand, across segments and then international and domestic, how has the margin profile fared this year? And what are the key segments where we are witnessing better margin orders in the near future and FY '25?

[Manish Mohnot, executive]

So I think particularly, we do not have guidance of margins or details on margins at the division level -- at an individual division level. But I can say that except railways, all other divisions, except railways and urban, to a certain extent, because urban's still small and in an investing stage. All the other divisions were in the range of EBITDA, which was more [indiscernible] 9% to 10%. Our highest EBITDA came from our B&F business followed by our international business. Going forward, we expect all our business segments, except Railways, to be in a similar range. It's only been railways where we have consciously scaled down and where we are focused more on closure of projects, and they're not growing so much in the near future where margins will be more in the range of 5% to 6% at EBITDA level. Otherwise, all businesses have been in a similar range of 9% to 10%.

[Amit Anwani, analyst]

Sure, Sir. Sorry if I might have missed the current order which we won from Middle East. Just wanted to understand, though we are not in a position to give guidance for domestic market, any guidance with respect to intake from the international market? And since you have guided for 20%, can we -- and we see other players also guiding pretty robust international intake opportunity under the CapEx happening in these 2 countries, just wanted to understand perspective with respect to international markets for the order intake? And also segment-wise color would be helpful. .

[Manish Mohnot, executive]

Yes. So we continue to be focused on the international markets, driven primarily by Latin America, Africa, Middle East and Southeast Asia. Our key order book into an international market for '24, '25 will still be on the transformation side, where the focus is much higher, followed by oil and gas and civil projects. We continue to be bullish in a lot of markets, but we're very cautious of not bidding in markets where retention is high that competition is very high. So our focus is revenue in markets where the payment terms are not so bad and margins and competition is limited. So we continue to be bullish, and growing that business at a 20% will not be challenged, not even for next year, but even for the next couple of years given the order book visibility today.

[Operator]

Next question is from the line of Deepak Krishnan from Kotak Institutional Equities.

[Deepak Krishnan, analyst]

Sir, can you hear me fine?

[Manish Mohnot, executive]

Yes.

[Deepak Krishnan, analyst]

I just wanted to talk on your revenue for this year. We were all guiding at stand-alone level of 20% plus. You were expecting some of the pickup in -- especially China projects, all of that to kind of come through. Any reason why you sort of slightly come out at the lower end do you explain that some of this sort of comes back in FY '25?

[Manish Mohnot, executive]

I think you're right. We guided at the beginning of the year of revenue growth in excess of 20%, but we had a setback in terms of a large Australian project, which did not [indiscernible] in Q2 because of some statutory reasons, which we had declared at the end of Q2. Based on that, we have revised the guidance to closer to 20%. We reached 17%, 18%. I think it's just that a few projects did not deliver in February, March due to election, supply constraints, all of that. It's not -- it's similar to what we had benchmarked or targeted internally. And with that visibility of order book, I think growing at 20% next year will not be a challenge at all.

[Deepak Krishnan, analyst]

And maybe just a follow-up. One, I wanted to understand any [indiscernible] sector divestment, we were not one of the projects. I just wanted to understand this inclusion in solution in the [indiscernible] What are you considering this [indiscernible] as well?

[Manish Mohnot, executive]

Yes. So as far as growth projects are concerned, as we had guided earlier also for one of our largest project VTL, we have already -- we have advisers working with that in terms of getting an office. We have bought some nonbinding offers, and we're working on those. The other 2 projects, we are still not in the market because the tail life is very less. It's around 6 to 8 years. But once we have clarity on this large project, we'll look at that also.

As far as Shubham is concerned, I think we are turning around the organization by a capital structuring perspective also, right, converting loan to equity. And going forward, I expect maybe this year could be [ 1 million ] of challenge. But '25, '26 onwards, they should be positive in terms of EBITDA and PBT both.

While we focus on enhancing the effectiveness and operational capabilities there, we also are clear that it's [indiscernible] to us. We will be looking at divestment there also maybe over a period of time, but definitely not in the current year. Our current year focus on divestment will be primarily on one of the large growth assets and making sure that our amount of indoor real estate, which is more than 2,170 crores gets fully released in the current year. Now that we have all the buildings ready and now so we will be selling off the balance and getting out of the project in the current year.

[Operator]

[Operator Instructions] Next question is from the line of Ramakrishnan from Equity Intelligence.

[Unknown Analyst]

Congratulations for the good set of numbers. I have a question on the T&D segment. You have been talking that every year, there is a INR 50,000 crore domestic opportunities. And there is a huge traction is happening there. And I think we have got our order book of around INR 20,678 crores. Sir, can you explain this -- this is 3 -- 3 -- as of now, I think there are 3 to 4 player market. And with this, some of these companies who have gone into NCLT now come back. So what is the competitive scenario can you enlighten?

[Manish Mohnot, executive]

Just so that we clear, our INR 20,000 crores plus order book is on overall T&D, not necessarily only on domestic. Our domestic T&D order book is close to INR 6,000 crores, excluding the L1.

On the traction front, yes, we are seeing an order [indiscernible] in tenders of closer to INR 50,000 crores, which are visible today, including the state delivery, both the private sector and Power Grid. As far as competition is concerned on the T&D space for orders exceeding INR 500 crores, we have not seen too much competition. It's limited to those 4, 5, 6 players only. But for projects which are less than INR 500 crores, we've seen some competition. But it's still not as intense as we see in the railway sector or as you see in some of the smaller urban infra projects.

So competition is still limited. For the newer players, I think it will take a lot of time for them to reach that size and scale to deliver on those large-scale projects because now the large scale projects come with a reduced time frame of delivery, right? So earlier, the same part that we used to do INR 200 crores, INR 300 crores used to give us 3 years for delivery. Now with INR 700 crores, INR 800 crores, they're asking for 18 to 24 months, right? So it's -- I think competition is still limited, and I don't see that increasing in the near future because it requires a very different delivery system.

[Operator]

Next question is from the line of Jonas Bhutta from Birla Mutual Fund.

[Unknown Analyst]

Congratulations to the team for a phenomenal so, both on the financial and even on things such as capacity building, et cetera. So just one quick question -- clarity. On the other expense line items, both on the consol and stand-alone, has seen a major spike. The consol has grown by almost 66% year-over-year versus a sales growth of 22%. Is there a reclassification from the gross margin or the cost of goods sold to other expense? Or there is some one-off miss in that? If you can just clarify.

[Manish Mohnot, executive]

Sure. Jonas, thank you for your [indiscernible] So on a consol basis, yes, the other expenses went up significantly, primarily because of specific areas of ECL and exchange loss. We had done some ECL provisioning on a couple of clients. And when the balance sheet comes, you look at that. The expected credit loss, there are a couple of private sector clients that we had to take that call based on the formula-based approach and exchange loss for the current year. So even on stand-alone, [indiscernible] one freight cost, which went up much higher compared to last year because of the 3 months of disruption which happened, which all of us are aware of. There was an ECL provision which came in, and that you'll see in the balance sheet, we have done an additional ECL provision of close to INR 70 crores in the current year. [ ECL ] is expected credit loss. And the exchange loss in the current year, on an overall profitability, does not have an impact, but exchange loss gets into other expenses, which was a small gain in the previous year.

So it looks like all one-offs. We don't expect the ECL to come in next year. I create a stabilized pack, so I don't see that impact coming. And with the hedging profile this year, hopefully, with minimal volatility, we shouldn't have any exchange loss. So this all looks like one-offs. As far as [indiscernible] is concerned, [indiscernible], there's nothing which has moved from there to a other expenses that are not accounting. But yes, a lot of them looks like one-off, which should get revised getting into the next year.

[Unknown Analyst]

Got it. Sir, INR 70 crores of ECL is in Q4 alone, not through the year, right?

[Manish Mohnot, executive]

So I think it was primarily done in Q4, if I'm not mistaken. Is it was done in Q4 only.

[Unknown Analyst]

And the FX loss, if you can quantify them?

[Manish Mohnot, executive]

FX for the current year, which has come in other expenses at a stand-alone level is around INR 52 crores in Q4, okay? And it's around INR 80 crores in consol. This is only Q4, okay?

[Operator]

Next question is from the line of Seth Sora from ICICI Credential AMC.

[Unknown Analyst]

So if you can help us with outlook for Linjemontage and Fasttel subsidiaries? And how has the performance been? And how do you expect the margins ramping up for those 2?

[Manish Mohnot, executive]

I think I have spoken about it, but I'll speak again. In terms of Linjemontage, we've seen very good traction coming in from October till March, winning some significant orders on the substation side, including orders on [ 450 ] substations, where we just got qualified in Sweden last year. The entire opportunity in Sweden has multiplied to 2x in the last 2 years, given the mindset of the Swedish -- Swedish as a country to move to fossil free by [ 2014 ]. So our order book is closer to double in the last 5 months. We have already bid for 3, 4 large contracts for which we will have clarity maybe by June.

With the current visibility, we expect that business to grow at 35% in the next year, 30% to 35% in the next year, and margins coming back to those levels of 5% to 6% at EBITDA level, where they were prior to '23.

As far as Fasttel is concerned, we had difficult years -- the last 2 years were very difficult to exit the existing projects, which we had and close all the old projects. We are nearly out of all the old project except for maybe a couple of them, and the new order book has had a healthy margin, with EBITDA in the range of 9% to 10% and PBT in the range of 67%. We definitely expect them to turn around in terms of profitability. All the growth there will not be significant in terms of top line. But on EBITDA and PBT, we see them completely turning around and being positive on both the metrics.

[Operator]

[Operator Instructions] Next question is from the line of Kaushik Poddar from KB Capital Markets Private Limited.

[Kaushik Poddar, analyst]

Yes. See, you spoke of PBT margin for [indiscernible] Is it at the consolidated level or is it from [indiscernible] level?

[Manish Mohnot, executive]

So [indiscernible] current level also, we expect to improve what is more as a stand-alone [indiscernible].

[Kaushik Poddar, analyst]

But actually, you're talking about PBT, right?

[Manish Mohnot, executive]

So we were around 3.6% at a consol level. We would [indiscernible] closer to 4%.

[Kaushik Poddar, analyst]

Okay. Okay. Okay. And your order guidance you'll be giving at the end of the first quarter, that's what you said, right?

[Manish Mohnot, executive]

Yes. While we're very bullish and we have a good L1 segment and we bid for a lot of projects, but we believe that we'll be able to have a better clarity once we have clarity, June on the CapEx outlay of the government and specific sector. For example, we are not so bullish on regulated in the current year. And if that outlays too big, it might not help us, but other sectors, we are very positive. So we'll just wait for June, July and then give a guidance on that.

[Kaushik Poddar, analyst]

What you told us -- what you directed is that water is one of your focus sector. Can you say something more on this issue?

[Manish Mohnot, executive]

No, I -- sorry, I'm not very clear what you're saying. Water continues to be a focus sector for the last 3, 4 years. Last 3 years, we have doubled revenue in that sector, if not more than that. Last year was a 35% growth in revenue. Year before that, we grew at around 50%. In the current year, we have consolidated that segment because the order book is already closer to INR 12,000 crores, and we've not taken much orders in water. With INR 12,000 crores order book visibility is for next 3 years of revenues already existed today. So our focus is a lot more on strengthening the team, making sure we focus on delivery, delivery, delivery, because the order book is already 3 years. We continue to be very bullish in this sector in the domestic side and also on the international front, where we're seeing a lot of traction. Although I do not believe, internationally, we'll be doing a lot in the current year. But as I said earlier, our process which takes a few years to [indiscernible]. But over the next couple of years, at least water is a lot happening in the international front also.

[Operator]

Next question is from the line of Bharat Sheth from Quest Investments.

[Bharat Sheth, analyst]

Sir, can you give a little more color on O&G pipeline? After winning this large order, how do we see over next 2 to 3 years? One is on the order side or opportunity side? And particularly, we are staying away from the domestic market. So what is the major intent for that? So if you can explain a little more?

[Manish Mohnot, executive]

Sure. Bharat, on the oil and gas front, over the last [ 10 ] years, our primary focus was on the domestic projects, right? We started looking at the international markets only maybe 3, 4 years ago, when we started building a team and we got a leader who joined us. We -- so the journey started 3 years ago, and now we've got a large project from one of the largest clients in Middle East, which needs to be delivered over the next 3 years.

Our focus in the next 12 months would be to strengthen our delivery capabilities in the international market, build a team and not necessarily look at ramping up the order book because the order book is already closer to INR 8,000 crores, which gives us visibility for at least the next 3 years. We will still be looking at opportunities. We'll still be making sure that we qualify with projects, but it will not be something which we'll be targeting as a focus area from an order book [indiscernible].

On the domestic oil and gas sector, we've not seen much orders coming up from any of the large CSPs. In the last 6 months, I don't think we bid for orders more than INR 1,000 crores in the oil and gas sector. And we have seen competition from some very small players, although it's only 6, 7 players, very small players where we're not able to compete and win.

Given that, visibility in international is good with limited competition, good margins. Our focus next couple of days is going to be more international than domestic. But as and when there's an opportunity, we'll be looking at the domestic market also because we are only among the large peers in the sector for the last 10 years working with all the large oil and gas [indiscernible]

[Bharat Sheth, analyst]

Okay. So overall, EBITDA side rather than PBT margin because your international EBITDA is not the PBT side. So if you can give some color on how vis-a-vis domestic and what was in part in -- particularly O&G, right?

[Manish Mohnot, executive]

So our oil and gas project started [indiscernible] very early for me to start looking at what margins eventually we will deliver. But definitely, at the tender stage, it's been a reasonably good margin with a high single-digit margin, similar to our order book on other sectors. Clearly, on ROP, this project would be very good because the payment terms are attractive with very minimal retention at the end of the project. But in terms of margins, it's similar to our other order book profile of a high single digit [indiscernible]

[Bharat Sheth, analyst]

And on power and T&D, can you give a little more color, particularly competitive in domestic and international market where we are present. And are we looking at any additional markets in this year?

[Manish Mohnot, executive]

The business, as I said earlier, the domestic T&D market is looking very, very bullish starting from October, November onwards. And while we speak, we have bid for tenders more than INR 6,000 crores, which are yet to be opened in the last month or so in the domestic market itself. So we see huge traction, and competition is limited because there are -- the 5 or 6 players who are there.

Please, again, I would like to reiterate, it's not easy to be winning this project and delivering an 18- to 24-month life cycle, right, right from design engineering to tower testing to manufacturing, to the entire mobilization of [indiscernible] and delivering that in the same way. I think this is a capability which only 3 or 4 players in this country have. So I believe that, that opportunity will continue to be good for the next 12 to 18 months at least. And it would help us build our order book and also keep the plants fully busy. Today, the plant is already [ working at 100%. ]

As far as international markets are concerned, we have -- it's been a long process for us. We've always explored and explored in terms of is export and explore and that's what we have done. We've gone to those countries and geographies after spending a lot of time, maybe 3 to 4 years at the business development level to take projects with reasonably good margins.

International transmission typically at a double-digit margin with ROCE in excess of 35%, 40%, at least in the Latin America and the African market. Our Middle East margins have been lower, not as good as the international, other geographies. And the Middle East, ROP is very low because the retention terms are very high there. So on an overall basis, I think international will continue to do well in terms of both margins as well as ROC. And domestic, we continue to be bullish at least for the next 12 to 18 months.

[Bharat Sheth, analyst]

And last question, sir. We have spent around INR 1,600 crores, INR 1,700 crores in the last [ year ]. And we were also evaluating some kind of manufacturing. So first of all, I mean, what are the benefits that are -- which are this CapEx in each area? And how do we see the benefit of that playing out in the coming year and current year CapEx guidance?

[Manish Mohnot, executive]

Sure. So a lot of our -- if I look at our major CapEx in the last 3 years, more than 50% would have gone in formwork and staging and shuttering primarily for the building and factory sector, whether it is for residential, commercial, data centers or airports, right? So significant portion has gone there. A good portion has also won an expansion of the plant operations both in Raipur and Gandhinagar, where we are not only doing transmission today. We are doing transmission, we're doing staging and shutting. We're doing railway girders. We are doing formwork, and we're doing a lot of other aspects of the business also.

So a lot of CapEx has gone there. We've also invested in CapEx in the international market, whether it is on the growth project, which we are doing in [indiscernible] when we have invested in good CapEx because we believe that profit looks positive. And also the international geographies where we have built up our ALM capability, right, [indiscernible] in terms of exhibitors or whatever else.

So over the last 3 years, it's been across businesses. In the current year, we are targeting a CapEx of closer to INR 500 crores with significant focus in [indiscernible], the current boring machines which should be coming in, in the current year and the [indiscernible]. So Urban Infra and B&F would be closer to 75% of CapEx for the current year, and we are targeting a minimum CapEx of INR 500 crores for the current year.

[Operator]

Next question is from the line of Ashwani from Emkay Global.

[Unknown Analyst]

Sir, first question is on the opportunity pipeline that you see in the metro. And also if you can touch upon T&D as well.

[Manish Mohnot, executive]

So on the metro side, we see a lot of projects coming up, both from a civil as well as [indiscernible] perspective. We are currently selective and bidding for metro projects, looking at the competitive intensity and looking at the CapEx commitment, which is required. We've already committed ourselves on 2 large projects in terms of CapEx on the underground metro. So for the current year, while we were bidding for selective metropolis, we see that as a huge opportunity going forward. But as far as KPI is concerned, we'll be selective in bidding and winning orders in metro for the current year. As far as T&D is concerned, I think we have already spoken about it in my call 2 times that we continue to stay very bullish both on the domestic and international side.

[Unknown Analyst]

Any supply chain issue you've seen -- we have been hearing about supply chain issues from other -- your competitors in the T&D? What's your sense on that? And till what time we continue to see this kind of supply chain issues?

[Manish Mohnot, executive]

So we think some supply chain issues coming up in February, March, and that also impacted revenue slightly. But it wasn't so significant, it wasn't so significant for us because there wasn't a lot of supplies plans for Q4 as far as CPI is concerned. We see some issues in a few specific areas like transformers and reactors and some of those. But otherwise, we believe that it's okay. It's something which we've already budgeted in our current year guidance.

So whatever -- earlier, what used to come in 2 months would now take 4 months, and that's been budgeted already in the current year guidance. And we assume that there shouldn't be any issues in the international freight corridor to create any further issues. And to us, it's not had a huge impact, and we believe that with whatever it exists today, we will be able to deliver what we have targeted.

[Unknown Analyst]

Sir, within our targeted segments, like all this B&F, which is a segment where you see a relatively a bit of slowdown. We have obviously strong visibility in a lot of segments, but any segment where you see a bit of slowdown compared to last couple of years?

[Manish Mohnot, executive]

So in terms of tendering, actually, there's no segment where we are seeing a slowdown, right? If you go back historically, at least last year same time, I was slightly very [indiscernible] domestic, which I'm not today. So in terms of tendering, we are seeing good opportunity in domestic T&D, international T&D, water, B&F and urban and even railways. We have decided not to be focusing a lot more on railways because of the intense competition. Otherwise, the visibility in terms of tenders is huge. But the competition is 20 to 25 players, it makes it very difficult for us to go and compete against smaller players.

On [indiscernible], till at least March, just preelection, we were seeing visibility for all segments, but we are conscious about where we want to grow and where we do not want to grow looking at our existing order book, looking at the CapEx commitment, which is required, I'm looking at the delivery time frame for [indiscernible].

[Unknown Analyst]

Lastly, sir, what was the equity infused in the BOT assets? And what will be -- what is your guidance for this year?

[Manish Mohnot, executive]

So I think we invested equity of closer to -- we invested INR 85 crores in the previous year, and we believe we should be doing a similar amount in the current year, primarily for repayment of debt and major maintenance of projects. So we should -- for the current year or so, we should be in a similar range.

[Operator]

Next question is from the line of Arafat Saiyed from Encore Research.

[Arafat Saiyed, analyst]

So my first question on the quantum of divestment, you are looking for FY '25, '26. Sir, any color on that?

[Manish Mohnot, executive]

Sure. I think on the divestment side, as I said, on the Indore real estate, we expect the entire INR 170 crores to come in, in the next 12 months, and that would be a good inflow for us. As far as the road asset is concerned, we've gotten some offers. We're evaluating that. Hopefully, by the end of Q1, we should be having some clarity on that. The only positive is that all the assets are not doing so well that they are self-sufficient on every aspect.

What we're now repaying is only the bank loans because the loans are all due in the next 3 years, where the tail life is 20 years after that. So while we are targeted to get out of the -- or to divest assets, but in the current environment, we are also very comfortable in terms of not much infusion to maintain or run any of those businesses.

So [indiscernible] definitely happening in the current year. We feel we've given -- we've got offers, we'll be reviewing that, and we'll be coming back to all of you by the end of Q1.

The other 2 assets, we've not started the process also right now because the tail life is very small. We will come back maybe in Q2, Q3, once we have clarity on [indiscernible] and what our strategy going forward would be.

As far as [indiscernible] is concerned, as I said earlier, definitely we have declared that as noncore, but we do not see any divestment plans in the current year. We will be reviewing it in '25, '26.

[Arafat Saiyed, analyst]

And my next question is, again, let's say, on the leasing. So although the pleasing as [indiscernible] in past couple of quarters. So what's the sense currently, sir? Anything to further reducing these parts? Or what's the current hedging status?

[Manish Mohnot, executive]

So I think over the last 20 years, the pledge has stayed in the -- except for the 3 years where it went up by 25% to 30%. It's already reentered levels of 31% today. We definitely believe that it will continue to go down. But from peak of 59%, it's come down to [ 31%. ] The promoters had guided to reach 30% by March '25. We're already at 31% today. So I believe it should go down from here, but there isn't a number which we have. We definitely believe that will not go up from here in any form.

[Operator]

Thank you. Ladies and gentlemen, that was the last question of the day. I now hand the conference over to Mr. Bhoomika Nair from DAM Capital for closing comments. Over to you, ma'am.

[Bhoomika Nair, analyst]

Yes. I would just like to thank the management for giving us the opportunity to host the call, and also all the participants for being there. Thank you very much, sir, and wish you all the very best. Any closing remarks from your side?

[Manish Mohnot, executive]

Thank you, Bhoomika, and thank you for the patience to all the investors on the call. Thank you very much.

[Operator]

Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.