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Mishra Dhatu Nigam Ltd
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Ladies and gentlemen, good day, and welcome to the Mishra Dhatu Nigam Limited Q4 FY '20 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities. Thank you, and over to you, sir.
Yes. Thanks, Niraj, and good afternoon to all the participants. So we have today with us Dr. Sanjay Kumar Jha, Chairman and Managing Director of Mishra Dhatu Limited to discuss Q4 and FY '20 results as well as discuss business in general. Without further ado, I would like to hand it over to Mr. Jha for his opening remarks. Over to you, Dr. Jha.
Yes. First of all, I'm thankful to Abhijit for handling this conference call, and I welcome all the participants for this conference call, and welcome from the MIDHANI.This year, when I'm -- we already have entered in the financial year 2021, and when we are talking to you, we have some points to make here that the way company was performing in -- for the FY '20 for quarter 1, quarter 2, quarter 3. And then as you all know that once the company has entered in the quarter 4, and we are in the verge of closing that quarter 4, this pandemic has come and that has affected not only this company, across the world, so is the MIDHANI also. In spite of that, because of our very good performance or excellent performance, I will say, in the quarter 1, 2 and 3, company could able to maintain the sales turnover of the previous year that is of '19/'20 -- sorry, '18/'19. And in '19/'20, also, we have come to the level of INR 712 crores, that is our turnover.And our other financial parameters also is already we have declared and also is coming to the -- almost it has improved in certain aspects from the previous year. Just I would like to mention few of the highlights of the financial results, and then I will go to the actual performance of the plant or for the operation. The financial part is -- the main highlight is that our value of production, which was -- last year, it was INR 814 crores. It has touched this year to INR 970 crores. So that is the one part, which was -- talks about the operational performance of the company. And it was already mentioned when our last -- when the quarter 3 results have come. And when previous Chairman was interviewed, and he has already mentioned about that the operational efficiency of the company has improved. So this VoP is a reflection of that. I would also like to mention here that our operating profit, which is at the level of INR 165 crores for this year, and PBT is INR 202 crores. And followed by this, our PAT is INR 159 crores. These are all combination of the financial results, has come with the dedicated efforts of entire MIDHANI team and company could maintain its position. And because of this pandemic, the company has maintained a reasonably good position. And we are -- and almost -- there is an increase of impact of around 22% from the previous year of INR 130 crores. So these are the main highlights of the financial performance of the company. Coming to the last year, means, on whatever we have done on operational performance has come -- our core area -- core area of our production is the forging operation. That forging operation and equipment was modernized over the last 2, 3 years. The results have come, is a reflection of that. That equipment has given almost -- as for the volume of products are concerned we have gone almost 60% to 70% growth in the tonnage of the production. All our melting furnaces, a core area of working operation has also given a very good performance and our -- and it has been reflected in terms of the VoP.Coming to the MIDHANI's area of operation, basically, we are a company, which is a technology-driven company. And unless you develop the new products, unless you make to the level of the requirement level of the satisfaction to the customer to meet to their level of satisfaction then only we can stand in the market and we can deliver our products. So maintaining that momentum of our technological excellence. Some of the products I would like to mention to the investors, which this company has made this year is first time in the country we have made a product called Titanium Casting. Titanium Casting usually is being imported in country and other than MIDHANI in this country, nobody is there to manufacture this type of product. So we have successfully developed a very precision quality of Titanium Casting. We also developed this year -- we have made the product, which has been used for diversification of MIDHANI's product portfolio because our excellence and our technological achievements in defense and aerospace has helped us in making the products required for oil and gas, and which has given us a small space in the international market. So we have exported this year the superalloys or nickel-based alloys to a country like Spain. We have also exported to Germany. We also exported to the Middle East. So that is a very small, but a very important beginning in international market. In addition to that, we have also made a unique product, which is already under processing, and which is going for application -- going to be used in steam generated tubing of further nuclear requirements. So these are the different products, which company has developed. And I will just add that -- and some of the other products, which have come to our application is the first time we have supplied the compressor disc which is used for making the aero engine components. In India, we have facility to make -- overhaul the aero engine components. We are not making aero engines, but we have the facility for overhauling. So overhauling also the type of component you have to replace, earlier it was getting imported. And for the first time, the company has developed this product and supplied for our Jaguar aircraft engine and that is called Adour engines. This company has supplied to them. And this is a recurring requirement. In the future, this has also given the confidence that we can make for the other aero engine component also. We are also very fortunate to have the technology, which has been developed for a grid fin component, which is being used for our Gaganyaan mission of ISRO. So these are some of the products, which has come, and we have supplied. In addition to that, the -- as investors are aware that MIDHANI is pursuing for a state-of-the-art armour facility. And there some of the products development for that facility is being taken in our Hyderabad unit itself. And in this process, we have developed the special armour products and which is used for the bulletproof jackets, having the protection of Level 4 protection. And in this endeavor of product development, we have also made some of the titanium components and some assemblies for strategic application or defense application for the country. So these are the different products on the development side. Coming to our operational performance. Again, if you see the consumption of energy -- MIDHANI is a energy-intensive unit, we have -- we are consuming a lot of electricity. Electrical requirement is very high because of our process. So whatever savings you do in that area is giving a lot of improvements in our financial performance. And in this process we have started -- we have modernized our -- some of our equipments and also optimized our operational efficiency, and it has given a net saving in our energy consumption also. And earlier, it was coming to -- 6% of our VoP was our energy requirement, now -- 7% -- now this year, we have got a 6% of on the VoP. And the further developments or further work in this area is going on. And this year also has seen a big change in our -- the utilization of our new facility or new equipments, which has been utilized. And as I told, and similar to electricity consumption, there is a reduction in our LPG consumption also, which is being used for the fitting of our -- reheating of our product during defense processing stages. So these are the different developments, which company has made in this area. Coming to that area of, I'd say, in the case of MIDHANI, the major challenges we have faced in the area of raw material, so that also we have optimized and we have made our procurement and our procurement efficiency or utilization of our internal generation, reverse or scrap, also we have converted to the product. This also has helped us in improving our operational efficiency.And on the project side, I would like to mention that -- in fact, the questions will be there from the investors, but just I want to make preamble of some of the points. Our joint venture with NALCO, which has been already -- we have told last year also. Now it has come to the stage where the project has to start to take off, that it will take off. And in that area that we have started using now that our Board has been fully operational. And with the approval of Board, company has set up a deadline for the different activities and progress. I will just brief you that on that we have -- we are in the verge of getting the -- I mean, hiring the environmental clearance consultant. Also, we are trying to make the contract, giving the contract for the execution of the projects. So these are some of the milestones this project has picked up, but still a long way to go at this stage. Our Rohtak plant also, the Phase I construction of the building is over. Now we are planning to go for the Phase 2. All of -- almost all equipments have been ordered now. And the delivery starts coming for the equipment in the next 2 to 3 months, and we'll have -- majority of equipments will be there even -- because of this COVID-19, there are some delays in that part, but we are trying to cut that, in fact, trying to reduce the gap, it is the time now for the further activities, which is on now. So these are the different areas in the project side. And coming to that, anything from -- I think from my side -- okay, I'll just touch upon some thought on the order book, which you have seen that last year, we have -- our order book was -- we have almost started with the -- last year, it was in the tune of INR 1,700 -- INR 1,660 was the order book position in '18/'19. And once we are coming to '19/'20 and we have slightly up INR 1,687 order book position was there. So order book position is good. And in the first quarter of this year, already, we have booked -- INR 150 crores of order we have booked. And almost this year also, we are expecting that there will be value addition of more than INR 700 crores -- INR 750 crores of order will be added. And -- but the major challenges which we are facing this year that we have to see that how quickly our projects, ongoing projects, which will be coming to the -- in operation so that we can realize our revenue from that and we are -- I can tell you that Wide Plate Mill facility, which is coming inside our Hyderabad factory. And of course, Rohtak, as I told, that also. And third one that -- some steel plant, which is a plan to serve the railway for LHB coaches.And we also see that now some of the other modernization of the facilities inside. And there, we expect that and whatever we have planned like augmenting our melting facility, where we're adding some big unique equipment that is 8 tonne vacuum induction melting. We are also setting up a higher capacity of Titanium Casting facility and replacement of our -- some of our old equipments that is heating furnaces further in the forge area and also trying to modernize or trying to do some addition in our facilities where we can move from raw material that is from Tier 1 to Tier 2 type of facilities like making the components and some of the assemblies inside, so that type of -- some of the equipments are there, which is expected to be commissioned. So these are the -- and in addition to that, whatever we have lost the production due to this COVID-19 in our -- as I told in the quarter 4 of last financial year and first quarter of this year, current financial year, so both we have to make up. And more than that in this pandemic how we can maintain our health of the employees in a very good condition so that the COVID-19 cases or employees should not get affected with this type of -- with this pandemic is a real challenge, like any other industry MIDHANI also is facing. So far, with a lot of cooperation, a lot of dedicated efforts of our team, we are able to control it. And we expect that in coming days and coming months to come to the lower level. And like any industry we'll be also -- we'll be also coming to the full level of operations. Today, also, we are having the full level of operations. But then there are certain restrictions because of this pandemic. There's a lot of scare, a lot of like safety aspects you have to look into. We have to see that how our employees should not get affected, should not get stressed. They should work in a very comfortable atmosphere, comfortable environment. So these are the challenges we are facing, and we are trying to resolve this with our infrastructure, with the support, with the good teamwork and the support from our stakeholders. So these are the big challenges. And opportunity also is enhanced because with Atmanirbhar Bharat that indigenization of the raw material, MIDHANI has the ample opportunity also to now pick up some of the unique products, which country is today depending on the import. And already, we have experienced or we are already working since long on indigenization of the different type of raw materials in the country. This will give us a better opportunity and higher volume and more and more products, let come into the fold of the company, depending on the company's capacity, depending on our strength, depending on our -- how quickly we can convert this challenge into the opportunities. So these are the different -- the future is there. So with this, now I leave it to all of you to join this forum and give your views on this. Thank you.
[Operator Instructions] First question is from the line of [ Bhagesh ] from HDFC Mutual Fund.
Sir, I would like to have some clarifications. Going forward, means, in terms of the Space program, the ISRO program, what is the outlook for next 2 years? And outside ISRO, in terms of the order book, some of the clients now, say, BDL, then ECIL they themselves are going to get orders. And the third parties, in case of Madhav -- the marine products, import substitution products that we place and the branches being developed. What is the progress on that? And even on the armor protection products that we have from Germany potentially?
Yes. Now, first of all, on the Space side, you're asking the outlook that how Space is going to progress.
Yes, next 2 years.
Space, as it has been also indicated, that Space may go slow for the time being. The launches that are planned earlier that much launches may not take place. But this period of -- that lull period is very less. Moment this effect of this pandemic is reduced, it will come down, they will again come back to the full level of operation. So whatever orders they are placed on us, we have to produce it. Maybe time span, instead of 2 years they can say that we can go for 2.5 or 3 years, that is a different issue. But that also we have not got a confirmation yet. But there can be a assumption and expectation it can happen. Coming to the defense sectors, as you have rightly read that BDL is working for different types of missile program and all. As you are aware that your company is already attached to the material development for the missile. Any missile which is being developed in the country, we have -- MIDHANI has a major role to play as far as the supply of material is concerned. So we'll be part of that, there's no doubt. Whatever the missile development from our indigenization will take place in country definitely, MIDHANI will be part of this.And other side is that HAL. HAL also, if they go for this indigenization program like LCA or even for, let's say, there is a plan to go for a dry engine, that is for GTRE -- developed by GTRE, so there also the -- we have some, like our share of business as far as the material is concerned in that area. So that way we have -- coming to the GRSE, plan, place, they're all of the very high-volume and very low-grade in the sense that no value of steel. So either they may approach for that type of requirement to Steel Authority of India or some other bigger steel makers in the country because they need it in a large quantity, large volume. But some of their specialized products, which is a small, small component on high-value material MIDHANI also may be party to that. So it all depends that what technology they are going to utilize for the country. If it is a Russian platform, we have lot of materials developed for that. If it is coming from the French and other regions, probably they'll go with the OEM supplied material.
In submarine platform, you mean to say, submarine platform?
Yes, yes. Submarine also, in the country of 2 types. One is from the Russian origin and the other is from the French origin. So depending on that, that's why I made it clear that if it is coming from the Russian origin, we have already indigenized lot of materials in that side.
Sir, on the armor protection side, the Rohtak facilities for the armor protection products for vehicles and tanks. So how much can the revenues be from Rohtak site -- Rohtak plant?
We cannot say that how much revenue, but last year, in fact, without this plant also, we are -- right now -- right now, we are trying to execute the order of around INR 25 crores worth of order for this armor business, this includes different types of supplies, includes that steel, some of the armor products like bulletproof jackets, some of this like armory of the vehicle, so -- up to that level. But once this project is in operation, our -- I expect this INR 24 crores, whatever I'm expecting today, it may go to INR 50 crores or more than that also. But we are -- I am trying to say that with the humble beginning that numbers will be there. But that figure is not sacrosanct at this time. It depends whether the market is very -- in this case, highly competitive and highly dynamic. But our main focus is that, in this case, to first establish our facility and start making the bulletproof jackets. That is our main purpose. Right now, we have around whatever product we have developed, around 150, 160 numbers of bulletproof jackets we have to supply. It's only I can say, it is on the sample basis, we are giving to the paramilitary forces. But definitely, with the type of products we are having, it is possible to get the bigger share in our -- once we establish our facility.
Sir, and one more question from my side. On the operating margin side, the raw material fluctuations and other things, what is the outlook now?
Raw material, you told that right now, I don't see it as an increase in the raw material condition because as a whole, consumption is less all around the globe. So raw material as on today is stabilized. It's not having very -- any spike is not there. But it can pick up as we start moving towards that higher growth. So some possibility will be there on that side. So we have to take that type of -- like we have to keep that our -- provision in our working operating system. So raw material substitution cost because we cannot stock, we cannot make the inventory of 1 year or 2 years like that. As you see, we also -- we -- today, because of that only at least 4 month, 5-month inventory, we keep in our system. But beyond that, we cannot keep because of the pressure on the working capital and all. But we are keeping some margin on that raw material side also. Sometimes it goes higher than our expectations, sometimes it will be lower also. So with that, company is able to operate from the last 7 years, and I see no problem in the future also.
And what is the CapEx for this year, sir?
This year, CapEx is INR 210 crores. INR 210 crores we have projected. In fact, previously it was INR 230 crores. So we have given a INR 210 crores prediction for this year.
Next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, I have a question on the asset utilization side. So the INR 500 crore gross block, which is capitalized today, what is the maximum revenue that it can generate and the capital work in progress that we have at the end of FY '20, which is about INR 405 crores. So what kind of assets are there and what can be the peak revenue potential of this INR 4.5 -- INR 405 crores? And what time would it take for you to fully utilize that block?
First of all, for this -- about working capital of...
No. So first, the existing gross block that you have, is about INR 500 crores.
Okay.
So I wanted to know what is the peak revenue possible on that INR 500 crore or what utilization do you have on that block of INR 500 crores.
I'll say that whatever I'm having this value, everything we have to convert to the product. Majority, I'll say, it is not going to stay with us. What is happening is, as you are aware, this company because our whatever products we supply to the customer it involves lot of testing, lot of qualification, witness at different stages, quality coverage. So all those things are -- requires a much -- the time requirement is very high on this, the plotting time. And this year, it has increased slightly on the bigger side because of this COVID-19. Otherwise, it has been maybe around 30%, 40% will be lesser than whatever you are seeing today. And at least by 20%, 25%, 30%. So it has come that level because of this COVID, but we are sure that everything will get converted. And you can say that you can make nil, then you can go for the next phase, it is not possible. So then in the process, we'll be creating also, and we'll be consuming this also. So I am sure that this will be converted to the products only. It is not going to stay with the company for the long time.
No, sir, actually, my question was the INR 500 crore fixed asset that you have that can generate what kind of revenue, and the additional INR 400 crores that you are constructing or which is there in your capital work in progress of these assets, they are expansion, what revenue can it generate? Maximum?
Around INR 1,000 crores plus, I will say, in the total -- if you see this, both the combination.
Both? So INR 500 crores, which is there on the ground today plus INR 400 crores that you have in capital work in progress?
Yes. Existing one.
Okay, existing one is INR 1,000 crores?
Yes.
Okay. And the expansion of INR 405 crores which you have, that will also have a similar asset turn of 2x?
Actually, out of that, if you see, it is coming to around 80%, is coming to that as of this call, work in progress, sir. Okay, okay. See what I'll say that whatever you are seeing now in this case, we are setting up a Wide Plate Mill facility of INR 500 crores, okay?
What facility? Why?
It is called Wide Plate Mill. That project we are setting up in our campus in Hyderabad. So because of that, it is showing -- is coming around INR 500 crores.
Out of INR 400 crores, 80% is Wide Plate.
Okay. Okay. Around 80%, what I'm saying is from that is coming from the Wide Plate Mill. Because we have combined both, so I'm not getting clarity on this. One part is that you say from the work in progress. WIP, I'm sure I'll be converting to the products only. It is not going to anywhere. Coming to the gross block mills, it is coming through our capital products -- projects. So in the gross block, our 80% part of that is coming for our unique mill, which is called Wide Plate Mill, which is a state-of-the-art equipment for the first time coming in the country, definitely utilized for making the special products. And the output will start flowing maybe from mid of '21, '22.
Mid of '21, '22?
Yes.
And this CapEx of INR 500 crore of Wide Plate Mill and INR 200 crore, which you mentioned, which will happen in FY '21, this INR 700 crores can also generate 2x revenue or less?
No, no, no. See, this INR 500 crores, what you will say, in that 80% is for Wide Plate Mill, that is coming to around INR 400 crores. So whatever I'm -- now I'm putting INR 210 crores, in that it will be around INR 100 crores will be for Wide Plate Mill. So Wide Plate Mill will be completing in the next year. So all my INR 500 crores worth of project will be clear in the next year only.
And what revenue can it generate maximum?
Yes, that -- we have not -- I'll say that this -- actually background of this mill is, this mill is used -- purely, it was made for strategic purpose. Strategic purpose means it was coming that certain products, which is not being made in the country like using for our strategic missiles and all. So for that program, this mill was funded. It is basically a customer-funded project. We are getting the funding from DRDO, we are getting funding from Ordinance Factory Board. So with this joint funding, this project is coming. And then commercial aspect, a business case for this mill we have not worked out, but we are definitely trying to maximize the revenue from this mill. And already for that, some activity we have started with the -- talking to the different customers so that right now we can have an alliance that different type of products, there again the import substitute and all can be made using this facility. So we are working on this. But right now, as you ask me the revenues from this mill, I am not able to give the right figures. They're not appropriate also to give this. So let this equipment will first get installed and commissioned, is a unique equipment. Nobody has tried to this. In fact, the company, which is supplying this equipment also they are giving the first time in the -- anywhere in the world, so it's unique mill we are getting, and we are trying to install this.
Next question is from the line of [ Rita Tahilramani ] from Invesco Asset Management.
I have few questions. Sir, how much is the MOU target for FY '21?
FY '21, we have INR 750 crores revenue target. And this figure, whatever I'm telling you is not finalized, it is indicative. So -- but definitely, we are trying to cross whatever we have done this year. But this figure has been still under debate, in the discussion, and not being finalized because of this COVID-19 crisis. But will be 3 plus from the previous year to this year, I will say.
And how much could be the revenue lower due to this COVID, if you could quantify?
I think COVID-19 revenue loss is very difficult to quantify. What I'll tell you that what has happened that it is not that the -- suppose some INR 200 crores material in pending and I am not able to supply, it does not happen like this. In all directions things have suffered, like my MSME partners, my other industries, even the customer, everywhere there was lot of -- it was totally stalled. So how much I could have done the business had it been not the case, that is very difficult to estimate. But is it -- like if you say compare with this our -- always the quarter 4 results if you see, the Q4 result itself is speaking that there is a huge gap between the Q4 of FY '19 and FY '20. And it is coming to almost 39% almost of that -- INR 100 crores almost, INR 100 crores plus. In our quarter loss, which you see, the FY '19 and FY '20, there is a gap of almost INR 130 crores order, sales revenue. I'm just comparing with FY '19, FY '20.
Okay, got it. Sir, order inflow for FY '20, if I see, if I back-calculate it, it is somewhere around INR 750 odd crores. If I can understand the breakup between defense and ISRO?
Our defense and ISRO breakup, if I give you around in terms of percentage, 70% is coming from Space with order book -- order book is there. And balance 30%, around 20% is from the defense and 10% from the other sectors. But this will be almost maybe 4%, 5% error will be there, plus/minus will be changing there. But today, we have in that range.
Sure. Secondly, you indicated to some of the participants that the next year order inflow could be to the same tune of INR 750 odd crores. And considering -- assuming that inflow could slow down, is it right to say this major portion of the INR 750 odd crores would come in from defense?
Yes. INR 750 crores, whatever I have indicated, we have major indications is coming from the defense. Defense will be almost I will say, 80% -- 70%, I would say. 70% will be from defense and the balance, again, some partly from the Space also. And major part there, that will be around 20% somewhere around from the Space.
Again, coming to the supply chain constraint, we see a lot of our raw materials be it cobalt, molybdenum, or even Titanium are imported. What are the current supply chain constraints in the system? And secondly, majorly because it is tied to China, could you see any impact for us due to that?
So if you see our major raw material, mainly we are depending on the Europe -- European countries mainly, coming from Russia, so some time coming from this -- even Norway. So we are not depending on the -- totally on this side of it. There are some raw materials that come from the Chinese source also. But there are European suppliers in that category also. It is possible to compensate that whatever is coming from China, we can get from the European countries also if there is a disruption in the supply chain from that side. So we are not depending only on the Chinese source as far as the raw material is concerned.
Okay. But currently, did you face any -- due to this COVID, did you face any supply chain constraint as on date?
Not so far because what happened that we had taken our action, as I told that we carry around 6 months inventory for the raw material. Since we have the -- order book is full for the next 2 years. So we had kept some 6-month stock for our raw materials, which can help us in overcoming this crisis, and we are not facing any problem so far.
Sure. And if conditions prevail, you'll have to -- if you have to shift your supplies from say China to Europe, will it obviously make an increase in the cost?
There will be some cost implications, but I don't think it's a much difference. It's a highly competitive market. There also, we have seen that when the Chinese will be supplying sometimes, we'll get from China, sometimes we're getting from the European source, seasonal material, and they are also competitive because our material is highly exclusive in nature. So we are -- I am not finding that problem with price, there isn't any issue in this case. It can be -- if it is a global supply chain effect is there, then we can get affected. Otherwise, if global chain supply is all right, then MIDHANI also will have no problem.
Sure, sir. And because incrementally if you see -- say FY '20 the order inflow comes majorly from defense. FY '22, would it be right to say these margins would be a little lower than the peak margins, which we saw in '19/'20? Surely because we understand right that defense orders are relatively more margin dilutive as compared to a Space order.
If you see our business, like we have to -- at least this year, also, if you see our business is almost 60%, we have supplied to the Space. And the balance, something has gone to 30% went to defense and all. But what I would like to mention here that this -- total -- if you see the margin part, combination of both. So this also will remain in that same level. There may be some reduction. I agree with you, some reduction may be there. But our margin is reasonably good. So we are not -- 1% and 2% variation will not affect much to the company.
Certainly and great. And if I can squeeze in one more question. Sir, in terms of our JV with NALCO, how much has been the equity investment till date? And how will that flow in for FY '21 and FY '22?
So for JV, in fact, if you see the JV, the fund requirement is not such in critical path today. The fund is -- because we are in the initial phase of the project where the land acquisition, compound wall formation, and then office, some key managerial position appointments are there. So we are now having an equity of INR 20 crores, company has made, and INR 20 crores is so placed by NALCO also. So this is the INR 40 crores equity is there with the company now. And we are sure that for this year, we don't see any requirement of money as such. But as we progress, we are growing from this, the project is producing, and the financial requirement, we have to approach different financial institutions, and the banks have -- we have talked with 2, 3 banks now. And they have also shown their interest at how they are going to invest their money. They have given the option of using different financial instruments. And as we finalize with our like advice of our consultants, our Board we'll be communicating that. But at present, finance is not the issue, and for next year, I -- equity part, we have decided that if there's a need, both the partners will give INR 10 crores, INR 10 crores equity there in parts.
Okay. So of this INR 210 crores, INR 230 -- INR 210 crores CapEx, which you guided for FY '21, only INR 100 crores is for the Wide Plate and remaining INR 100 crores will be purely MIDHANI usage, right?
No, out of INR 210 crores, Wide Plate will be around INR 150 crores -- it will be around I'll say -- around INR 150 crores you can say.
INR 150 crores will be Wide Plate and remaining INR 60 crores will be?
Only for our modernization of our internal that other equipments, and then we have our armor plants. So different, different projects will be there. But the majority will go to that customer funded project that is -- that one is the Wide Plate Mill.
Next question is from the line of [ Tejas Mehta ] from Old Bridge Capital.
My question was regarding the balance sheet expansion over the last 3 years. Balance sheet has basically gone up 2.2x from FY '17 level and versus that there has been very -- there has absolutely been no growth on the P&L side, both in terms of profitability as well in terms of the top line. And within balance sheet, if I see, your fixed asset growth has hardly happened, there is some amount there in capital work in progress this year. But other than that, fixed asset growth hasn't happened much. A large part of growth has happened in your current assets and current liabilities. So for example, your inventory has grown by INR 700 crores in the last 3 years, and your other liability has also kind of gone up by INR 900-odd crores outside trade tables, I'm talking about. I'm just trying to understand why is the current asset and liability expansion is so huge in the last 3 years, just trying to understand that is something which I am unable to figure out.
I'll do one thing. I'll just -- I'll take up this question. I can -- in -- broadly, I can just reply on the sense that whatever you are seeing the increase, it is mainly due to the project, which I have told that company has first time gone for such a big project of INR 500 crores, and which I've already explained earlier that this project is unique for the country. And it requires a lot of involvement of different agencies. So it has taken some time to get to the stage of completion. And unless you complete the project, you cannot generate the revenue out of this. So definitely, your question is valid that why your P&L account or your sales or turnover has not gone up in line with the investment or creation of the asset because this asset has been created, it is going in the step by step. So you will get the final result when this will come to the operation. And today, what -- another -- earlier to that, one investor was asking that how much revenue you can generate. So this facility is definitely going to have a good output. And we have to also say that this funding, it is not the company's own money. This we have got like a grant from the government. So this is a funding where I have no liability as such for this money. So anyway, I am not considering that any money is money only, but this is like a investment done with the company, where if we are able to meet this investment, we can get a good revenue generation and company will have a very good growth. So this is not going to be a liability for us. It is a good asset. And this asset, I'm sure that it will be utilized, and this will get a good revenue to the company in the future. But how much -- how this -- I'll come back to investors when we come to the stage of commissioning of this project.
Sir on the inventory side, we are seeing very significant jump in the inventories in FY '19 as well in FY '20. I don't know, in FY '20, how much is COVID led this entire expansion of INR 400 crores in inventory. But even if you normalize for COVID it seems like your inventory has jumped pretty substantially in the last 2 years. What would be the reason for that?
Let's discuss -- in fact, last year and this year, the both combinations, we are expecting that this year we will clear lot of inventories as our -- it will come in the revenue side, realization of the revenue. But of course, COVID, I will say that one part is there. It has affected for all of us. And our inventory, our product is not lying totally inside the factory. There are number of cases where our product has gone to some other place for processing. They are also affected. They are not able to process. We are not able to convert the products. So there are some places where we can convert. But then the reduction, you will see maybe in the next year, when they're coming to the next financial year, then only reduction will be there. But this year, definitely, it has gone up. We have also realized that and mainly because of not getting converted into the final product. So let's say that if there is a 80% value addition has been done, balance, 20% is left. But unless you go for the final product, you cannot realize the full potential on that. So the number of cases it was like that only.
[Operator Instructions] Next question is from the line of [ Sandeep Agarwal ] from Naredi Investments.
Sir my question is regarding net profit margin. Sir, currently, our net profit margin is 22% compared to 18.3% last year. Sir, we've seen various public sector enterprises receiving new contracts, some net profit margin contraction. Sir, have you seen any pressure in our margin side or any expectation?
Margin reduction you're telling?
Yes.
Any pressure on the margin?
Yes.
But this year, we have got a relief in the corporate tax. So with the new taxation system, we have got good, like almost saving of maybe around INR 20 crores, INR 25 crores, INR 20 crores -- almost around...
22%.
22%. So that is say around INR 30 crores of saving is there because of that. So I don't know whether you have seen other pressures on the margin -- there is a pressure on the margin, and what this is -- this has happened because with what we have done, in our case, we are seeing that around -- almost INR 30 crores we have saved because of the tax -- new tax system.
Okay. Sir, my next question is [indiscernible]. Sir, what is our targeted value of production during the year?
This year, it was 825. We plan to go for 825 that is in '19/'20 previous year. And that we could not achieve at the end because of this last-minute problem, but it was -- planned was 825. And we are targeting something plus only, 825 plus.
Okay. And sir, in Space sector, currently, government opening up the Space sector for the private players also.
Yes, yes.
Sir, have you seen any changes in our business? What's the impact have you seen?
See, first of all, MIDHANI is a sole supplier, is that we have a certain product which is already developed and almost you can say that certified for that application. So whether any private sector also is entering in this area, the design, the concept or even this operation -- well, everything is coming from the ISRO only. They cannot design their own satellite. They cannot design their own rocket. So this will be based on -- and that is where our material has been certified over the almost 25, 30 years. So we are confident that even the private sectors are entering in that, and the more business are, let's say, they are going for the bigger more and more launches. We have to -- we are there already in the market. Yes, question is that any new player, material developer or material processor, they will come into this field. Possibility is there. But they have to also prove their mantle in this area by doing development, doing some R&D, doing the process improvement and then certification of that. And you know this type of project, nobody will take the risk on utilizing a known material without it is getting fully certified [Technical Difficulty]
Ladies and gentlemen, thank you for your patience. We have line for Dr. Jha connected to the call. Sir, please go ahead.
Okay. I don't know where we got disconnected.
Next question is from the line of [ Dixit Doshi ] from Whitestone Financial.
Sir, couple of questions. How was booking in April, May and June? And whatever production we lost in April, May, June, can we make for it in the later part of this year?
Yes, it's a very good question on April, May and June. And first of all, Hyderabad, as you know, we are in the red zone. So during the lockdown, there was a very strict lockdown in this city. So month of April, we have not operated at all. Once we entered in the month of May, the May, there were some relaxation given but not for operating the industry. So we started with this beginning of that -- our -- just to take off our equipment conditioning and all. And we tried to call our engineers, front engineers and all. Slowly, slowly, we have started operating. And I'll say the last week of May only, we could start our operation, plant started because this plant is, we cannot -- this is not off and on plant where we can just simply come and next day you'll start operating. There's a lot of preparations are required, and you know that pressure line is there, compression setting, so lot of checking and all we have done systematically so that no unsafe thing should happen in the company.In the last week of May we started operating. And the May, we could do some business that what has happened that whatever material we had in some semi-scale because of lockdown in the March we have tried to process it with -- we have called the inspectors and a lot of -- we have got a relatively good dispatch in the month of May, and the results will be communicated maybe after closing our first quarter. So -- and June also -- June we started operating. But after June, also, there is some restriction here. Because Hyderabad is still in the red zone only. So with a lot of safety precautions and all we started working, and we have given flexible timing to our staff and they can come in the span of 1 hours, 2 hours, flexi timings we have done. So that they should come with the comfort, no crowding should be there, social distancing. There's a lot of -- our focus was mainly on that how safety can be taken care, and operational is secondary part. First safety was given the prime importance. With that, whatever is possible, but the company has started performing well I can say. May -- in June, we have done reasonably good production. But not to the level of our satisfaction because we had lot of -- lot more things to do. So we could operate. But then this quarter 1 will be definitely get affected. And shortly, we'll see our financial results also, we are trying, will be out there. So I would say that today, as on today, we are operating with the full manpower. But then there are some restrictions in the different areas because of, again, there is some night curfew and some cases are appearing. Some people are getting -- even a small doubt of fever also, you have to -- you have to take them and ask them to stay back. So it's a good teamwork and our people they have done really well in controlling this effect of this pandemic. But I can say that there is some good -- like effect is there, but not so big impact on the performance of the company in the quarter 1.
Okay. That's good. Secondly, sir, in terms of order book, so you mentioned in FY '21, we are seeing some slowdown in order book from the Space sector. And this year, we might get -- most of the orders will come from the defense sector. Now looking at the history, usually, in last couple of years, we used to get INR 500 crores, INR 600 crore kind of order from ISRO. So let's say, even if this year is low, and once they come back to normal, can we expect in FY '22, both the segments that defense and the ISRO, both should have a very good order book because ISRO should come back to normal next year and defense, we are seeing a lot of orders are flowing to BDL and HAL and everyone. So can we see in FY '21 -- can we expect that in FY '22, we may see order book flowing from both the segments?
Definitely. I'll say that this -- I cannot say today that which sector will give how much. But as the defense requirement in the country is going up, not only in terms of our own security, we are also targeting export in defense areas. You know this already, there's a lot of emphasis that India should reach to the level of $5 billion export by the year '25. So Ministry is working on this, MIDHANI is the integral part of the system. And with the export going to that level, definitely, material also will have some share in that. And Ministry has also now started giving a lot of emphasis on going for the indigenization of defense materials. So in the indigenization program also MIDHANI is doing -- working -- already we are doing indigenization from the beginning, but now there is more and more emphasis on this. So we are -- we expect that in these sectors things are going to pick up, not only for this company, for all companies in the defense, and MIDHANI also will have a good business in the coming days. But then how much income -- and as I told my projects are coming, these projects that also I have to start taking the revenue from that projects.
And how much is...
So we are looking from that angle, that how much you can capture from that side.
And how much is our current exports in FY '20, let's say how much we did export?
Exports, we have done around 10 crores. INR 10 crores we have done the exports, and it was very -- but the main key highlight of this year was that we have done our titanium and nickel-based alloys. Mainly the superalloys we have done and one product we call Ferrotitanium. So 2, 3 unique products we have developed, and we have done the export. And it's like a -- I'd say a small beginning in that side, because of this COVID as we're also -- because we are doing export to the Spain, so they are also getting there affected. We have done some export with our -- this -- some U.A.E. -- some...
Germany.
Germany. So there also -- all are affected in that, but I am seeing that moment this effect will come down, it will pick up. So we are targeting in that sectors for export.
Okay. And one last question, sir. In some of the earlier interactions with the previous MD, he used to mention that we have, as a company, working on some technology where we can use our scrap and give the product. So usually, ISRO do not take this product made from scrap. But we were working on some technology. So is there any progress or anything you can share?
I think you are talking about our scrap -- recovery of some metal from the scrap?
Yes, yes.
One way is that utilization of the scrap. So we are utilizing the scrap within our system, that was the first thing. And second, that for recovery of this precious metal from the scrap, so for that, it is a technology, which is having a lot of like generation of chemicals and acids and all. So recently, because of these environmental norms and all, you cannot go for a technology where lot of chemical has been generated and then effluent handling is a big task. So we have asked our technology partner that go for a technology where the chemicals generation or liquids or the effluent generation is very less. So they have come out with the technology. Now I have sent one -- RFQ also, we have floated for getting a proper partner in this, where either they can take my technology for getting this scrap process for the recovery of the cobalt, or else, they can also get their input material from other source. And then develop this or produce these metals in the country only, in the country. So we are working on this. But they are all long-term process and all. I cannot tell you that how much tonnage I can recover this year. Because the company's core -- our core business is making the alloy, producing it, processing it and selling it. If we go to our total technology in the downstream side, then we'll be diluting our business area. So we are not -- we are giving -- we are funding to some labs, they developed the technology. And that technology I'm giving to somebody else outside, then they can utilize, process my scrap and give it back.
[Operator Instructions] Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Dr. Sanjay Kumar Jha for closing comments.
Yes. Okay. So finally, it was a first experience for me. And frankly, I believe I was quite comfortable with interacting with all of you. And this also made me to probe into lot of operational aspect of my company. And not only my company, in other sectors also. MIDHANI has a wonderful team where our people are working right from scratch of the technology and delivering the products. It has been the main essence of the company not from today, but from beginning. And I feel that today, the opportunity has come to this company and for the country as a whole, to demonstrate that, how best we can do in making our country Atmanirbhar and developing different type of products for self-reliance. With this mission, with this motto, we are working and we are also very fortunate to have good response from the market. So one very important part that understanding this strategic company by the investor is also very important. You can understand we can probe, we can go to the steel, we can make the aluminum. So many sectors, we can go to the very deep. But MIDHANI is the one company where I cannot even tell you that which product I'm supply to whom. So with that also, the investor has given so much confidence to this company. We are extremely thankful. And definitely, we will be doing much more than this. And at the end, I can say that our ICICI friends who have organized this platform and given me the opportunity to interact. So thank you, and I wish that next time when we meet, we'll come with a much better result, and we'll be out from this pandemic. Thank you very much.
Thank you very much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.