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Skipper Ltd
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Ladies and gentlemen, good day, and welcome to Skipper Limited Q4 FY '24 Earnings Conference Call hosted by Ambit Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prakhar Porwal from Ambit Capital. Thank you, and over to you, sir.
Thank you. Hello, everyone. Welcome to Skipper Limited 4Q FY '24 Earnings Call. On the management side, today, we have with us Mr. Sharan Bansal, Director of the company; Mr. Shiv Shankar Gupta, Chief Financial Officer; and Mr. Aditya Dujari, General Manager of Finance and Investor Relations. Thank you, and over to you, sir, for the opening remarks.
Thank you, Prakhar. Good evening, everyone, and thank you for your continued interest in Skipper. Before we delve into our operational and financial highlights, I would like to emphasize that any forward-looking statements made during the call should be viewed in light of the risks facing our industry and company.
Now let's review some key operational and financial highlights compared to previous year's quarter. I am delighted to report that Skipper achieved its best ever revenue quarter reaching INR 1,153 crores compared to INR 657 crores in the previous year's quarter, representing a remarkable growth of 76%. This exceptional performance was driven by strong results across our Engineering and Infrastructure segment, while maintaining a healthy operating EBITDA margin of 9.4%. Segmental revenue breakup revealed significant achievement. Engineering revenue reached an all-time high of INR 701 crores, up by 41% from the previous year quarter, while Polymer revenue stood at INR 103 crores and Infrastructure segment revenue [ toed ] to INR 349 crores, marking a remarkable growth of 3034%.
Our quarter 4 Engineering export phase reached INR 198.7 crores, constituting 28% of overall Engineering segment revenue, with year-to-date export sales totaling INR 635.6 crores, contributing significantly to our revenue growth. In the Infrastructure segment, we achieved our best ever quarterly revenue, fueled by robust execution in BSNL and other T&D projects. We anticipate this momentum to continue into the next quarter.
Now moving on to our quarterly financial performance. Reported consolidated EBITDA increased to INR 108.6 crores with operating margin standing at 9.4% for the quarter. Engineering segment EBITDA margin reached 11.6%, reflecting our focus on executing better quality contracts and expanding our international business. Going forward, we expect to maintain consistent margin performance in the Engineering segment, supported by our strategic initiatives. While the Polymer and Infrastructure segments will continue to benefit from rationalizing fixed costs over a larger revenue base.
Our management remains focused on bottom line improvement with consolidated PBT increasing to INR 47.6 crores and PAT reaching INR 25.2 crores for the current quarter. Our 12-month annual period performance highlights were as follows: Revenue for FY '24 surged to INR 3,282 crores, exceeding our guidance of 25%, while maintaining margins at 9.7%. Engineering business segment revenue grew by a remarkable 46%, while Polymer business revenue increased by 11%. Polymer sales volume witnessed a substantial increase reaching approximately 32,000 tonnes compared to approximately 25,000 tonnes in the previous year period, registering a growth of 30%. Consolidated PBT and PAT saw a significant improvement with PBT reaching INR 128.5 crores and PAT reaching INR 81.7 crores, reflecting a growth of 157% and 129%, respectively, compared to previous year period.
Our commitment to financial discipline is evident with finance cost as a percentage of sales improving to 4.7% compared to 5.2% in the previous year period. And net working capital cycle improving to 88 days against 131 days in March '23. Order book and inflow. During the quarter, company secured significant sized domestic contract from PGCIL and international T&D projects, contributing to a total inflow of INR 1,141 crores. Year-to-date, the company secured orders exceeding INR 4,286 crores marking the highest in company history for a given year. Our current order book stands at an all-time high of INR 6,215 crores, well diversified across sectors and segments.
With an order book to Engineering and Infra segment sales ratio of 2.2x FY '24 sales, we have revenue visibility for the next 2 to 3 years. The vibrant domestic T&D environment aligned with Skipper's commitment to leverage India's transmission sector growth, while the government focused on scaling renewable grid infrastructure and improving electrification, Skipper is poised to support this growth. Our diversification into telecom, railway electrification, water EPC and drip irrigation, further strengthens our revenue stream. The tender pipeline remains deep with the current bidding pipeline at an all-time high of INR 16,730 crores, reflecting strong opportunities in both domestic and international markets.
We are in advanced stages of negotiation to secure sizable international and domestic contracts. In conclusion, Skipper Limited continues to deliver strong operational and financial performance, driven by our focus on execution excellence, strategic initiatives and prudent financial management. We remain optimistic about the future and are confident in our ability to create long-term value for our stakeholders.
Thank you, and I'm happy to take your questions now.
[Operator Instructions] The first question is from the line of Dhruv Agarwal, an individual investor.
Congratulations on the best ever quarter. Sir, my first question is, sir, there has been a huge fall in the gross level margins over year-on-year and over quarter-on-quarter, sir. That is -- it has been fallen to 21% in quarter 4 FY '24 from 36% in quarter 3 FY '24. So can you please explain me the reason for the same? That is, is there any one-off items in the cost of goods sold or something else, sir?
Actually, our margins over on a -- our margins need to be seen on a 12-month basis, and we have delivered consistent EBITDA margins. Last year for a 12-month period, our EBITDA was 9.7%. And it is the same 9.7% for this 12-month period also. The quarter-on-quarter margins can be misleading, depending on the quality of the contract being executed. So honestly, on an annual basis, I believe, we have delivered consistent EBITDA margins on a much higher revenue base.
Sir, if I compare on the annualized basis, I'm just basically talking about the gross profit margin, sir, which is just EBITDA margins. If I compare the 12 months also there, it has been falling from 36% to 24%. So what was the reason, sir?
I'm not very sure where you are getting this number of 36% and 24%, sir.
Sir, if I deduct cost of goods sold from the sales, then we will get the gross profit, so that's what the calculation I'm basically able to...
That's not a correct measure to see the company's performance, because the cost of goods sold may be varying because of various factors. It may be due to project sales. And also, you have to look at the labor stores and other project expenses. So that is not the correct measure to see the gross profit of the company.
So sir, what was the reason in this quarter, sir, can you please highlight?
What was the -- sorry, once again?
What was the reason for the increase in cost of goods sold in this quarter, sir, particularly?
Particularly, cost of goods sold, look, like I said, you have to look at both the amounts together, which is cost of material consumed, the change in inventory of finished goods and as well as the labor stores and other project expenses. So if you look at all 3 of them combined, previous year average was about 72%. This year is about 76%. But then maybe on the -- maybe it is getting compensated on the other expense side, where the other expenses were 14.1% previously on the previous year, and it is about 10% in this year. So which is why the EBITDA margins are the correct margins to see and more for the PBT margin for really seeing what the actual profitability of the company is.
Okay. Fair enough. Sir, the net working capital rate has been brought down to 88 days from 131 days. So can you expect going forward this kind of working capital base to remain on this level only?
Between a net working capital of 90 to 100 days, we believe that this is -- should be consistently maintained. And obviously, the effort will be to improve upon that.
Okay. So sir, there has been increase in the long-term borrowing. Is it for the purpose of this capital expansion -- the capacity expansion that you are doing? Is my understanding correct? And further, we will not be requiring any further borrowing for the said capacity expansion?
No, there will -- company will take a combination of -- company will use a combination of internal accruals and further long-term borrowing to fund our CapEx plan. The previous long-term debt, which has been taken has been towards debottlenecking and optimization CapEx. For this year CapEx, we are yet to -- we have not yet planned about how much debt to raise.
Okay. So sir, when do you -- by what time this capacity to live in? And after that, what kind of order the company will be able to capture? And what would be the peak revenue post this expansion, sir, can you please highlight on that, sir?
In terms of revenue, as I said, as we have mentioned in the investor presentation that even on the -- earlier in the beginning of the year, we had guided for a 25% CAGR growth. However, this year, we have delivered close to about 66% against our guidance of 25%. Now even on this enhanced revenue base of approximately INR 3,300 crores, we are maintaining our revenue guidance or revenue growth guidance of 25% for the next 2 years at least. So in terms of capacity, currently, we are at about 3 lakh tonnes of capacity. And with this year, the CapEx that we will do, we will end the year with a capacity of 375,000 tonnes.
So sir, it would be live by quarter 4 or quarter 3, sir?
Some part of it will come alive by quarter -- maybe towards end of quarter 3 or quarter 4. And the full capacity will be available from next year onwards.
Okay. By FY '26, we can expect to fully go on.
Yes. But also looking at the opportunity, we will have -- we are looking at further capacity expansion next year also.
Okay. Seeing the demand outlook, right? So just on the question on that, sir, as I can see in the presentation that you have mentioned the order bidding pipeline. In the order bidding pipeline, there has been almost 65% reduce from exports. So going forward, do you see a huge opportunity in the export only or like you can see from the domestic as well as you can see the government has been spending a lot on the infrastructure space. So what would be your focus areas or whether it could be on domestic markets or it would be on the international trends?
Yes, it's a good question. See, this year, also looking at the strong focus of the government on Infra spending and the good number of projects under the TBCB mechanism being bidded in transmission field, we do expect a very, very robust order inflows on the domestic side. However, the domestic pipeline looks shorter because the domestic tenders tend to be more short term and they get decided faster. But international projects, they have a long lead time from bidding to finalization, which is why the international pipeline always appears a little larger. Our focus continues to be on both areas, domestic and international. But yes, we do expect that majority of the orders this year also will be coming from domestic.
But sir, as you can see the -- just on the same question, the last one this question. So sir, as you can see, there has been almost 65% of the bidding pipeline from exports. So we can expect like going forward, there will be an order inflow from the export orders, and you will be exhibiting the export orders more than the domestic orders. So is that correct? Or like is there something else as well?
No, like I said, the international order bidding pipeline always appears larger because their timeliness for finalization is longer. Domestic tends to get finalized faster which is why the pipeline appears smaller. However, we do expect that the overall order inflow of this year, we expect close to about 75%, 25% mix, where 75% will come from domestic and 25% of the orders will come from exports.
Next question is from the line of Deepak Purswani from Svan Investments.
Congratulations for pretty strong execution during this quarter and for the year. Sir, firstly, in terms of the BSNL orders, how much was the revenue booked during FY '24 year as a whole? And how should we see trajectory going ahead in FY '25?
For BSNL order, we have executed close to about INR 1,000 crores in this financial year that just ended. And in the coming year, we expect a revenue of close to about INR 700 crores from BSNL project.
Okay. And secondly, sir, in terms of the engineering -- I mean, in terms of the overall guidance, since we have mentioned we would be looking out for the CAGR of 25% over the next 2 years. Could you please break up in terms of the segment, why especially in the engineering product, we are, I think, from the capacity point of view, we are running at a high capacity level. What is the CAGR we are looking at out? And also, second is the Polymer business. If you can throw some light on this business as well because year as a whole, we -- our growth has been 11%. And in Q4, actually it has come down by 30%. So if you can throw some light on both of these segments that would be really helpful?
I don't have the guidance segment-wise readily available with me. We may share that at a later time with you. Aditya Dujari, if you can get in touch with, he would be able to share that with you. And in terms of capacity utilization, we are still at about roughly a 70% capacity utilization. So there is some opportunity to drive more revenue from the existing capacity in the current financial year itself. And towards the end of the year, we should be getting the benefit of our enhanced capacity, which we are now going to be taking up the CapEx for.
Okay. And sir, in terms of the margin as a whole from the FY '25 perspective, how should we look on the consolidated level margin? Should we expect margin to expand from here at the current level? Or it will remain at the similar level to the FY '24?
Go 10% plus in the current financial year. However, any margin between 9.5% to 10%, we are quite comfortable as a company. And we believe that more and more that PBT margin will be driven better because of the higher revenue base, leading to lower finance costs and depreciation costs.
Okay. So sir, actually, coming to the interest expenses, I mean, how should we look from the FY '25 perspective? Because this year, I think, especially in the second half, interest expenses tend to be -- seems to be a little on the higher side. I mean going ahead, how should we look into as a percentage of revenue for the FY '25 year as well?
I believe right now, we have done very well this year in bringing down the interest costs from earlier 5.2%, I believe -- 5.25% to 4.7% approximately. So certainly, I think in the coming year, anywhere between 4.4% to 4.5% would be our target to take the finance cost as a percentage of revenue.
Okay. And also, sir, could you please throw some light in terms of the fund base limit and nonfund base limit and how much is currently utilized?
In terms of fund and nonfund, about INR 2,100 crores is nonfund. Nonfund limit is about INR 2,155 crores and fund base is about INR 525 crores. Capacity utilization is about 60-odd percent.
Fund and nonfund, both?
Nonfund is more. Nonfund is close to about 80% to 90% and fund base is generally 60%.
Okay. So sir, from the strategy point of view going ahead, I mean, how should we look at it because our nonfund base is currently at 80% to 90%.
How should you -- I didn't understand the question.
I mean in terms of the announcement of the nonfund limit in future?
That will be based on the company's requirement and the kind of projects we expect to get. So I believe that, that will be really based on the company's working and requirements from time to time.
[Operator Instructions] Next question is from the line of Balasubramanian from Arihant Capital.
Sir, one of tower infra provider have surpassed more than around 2 lakh towers. And we are seeing strongest tower additions based on increase in 5G rollouts and rural expansions. And what's your thought process on the telecom side for tower additions and what kind of demand you are experiencing?
Yes. On the telecom side, certainly, telecom makes up close to about 30% of our overall order book. And we are seeing quite a lot of vibrancy in this sector. We believe that operators which were not so active earlier, for example, BSNL and Vodafone, both will be quite active in the coming years because their network expansion has probably been -- they haven't invested so much in their network over the last 4 or 5 years, compared to other operators like Jio and Bharti -- Jio and Airtel. So certainly, there is a good opportunity. Vodafone FPO success is also a big positive for the sector.
So I believe that with the upcoming expansion of both BSNL and Vodafone as well as the ongoing expansion of Jio, we should look at a good demand growth in the telecom tower space.
Okay. Sir out of INR 6,215 crores order book, what would be the breakup in terms of engineering and other breakups like Polymer, Infra and Engineering breakup?
No. So we don't have any order book on the Polymer side because that is sold through our retail network. And in terms of the overall order book breakup, we have -- export is 13%, and total domestic is 87%, out of which, T&D is 53% and non-T&D is about 34%.
Next question is from the line of Darshil Jhaveri from Crown Capital.
A lot of my questions have been answered. So I just wanted to ask that with our order book of like around INR 6,200 crores, what would be our execution timeline for that?
Normally, the execution timeline there is between 2 to 2.5 years.
Okay, sir. And sir, we have a great pipeline for us. So what kind of like win rate are we seeing for that, sir?
See, it differs from market to market. As the bidding pipeline is growing, the win rate is also changing quite frequently. Very hard to put a win rate. In certain markets, I can tell you, our win rate is 50% plus. And in certain markets, it is as low as 10% to 15% also. So on a blended basis, I think roughly, we can assume that we do enjoy a 25% to 30% win rate among the bidding pipeline, but that's a very broad generalization. It really differs from market to market.
Okay, sir. Why I was asking this question is basically, we've given our 25% growth rate target, but with our order influence pipeline, it can be -- is it a fair assessment that we can again outperform our stated guidance because that's the way it's looking with every -- all the macro factors also, sir?
Yes, it will certainly be our target to outperform our given guidance.
Perfect. Perfect, sir. And sir, just like with the rates of our margin, you think on the bottom line, we expect a better rate. So could we just think of our EBITDA as a gross margin and everything else that slows down, PBT will be -- we'll be able to get maybe in FY '26, very higher profit margin totally because after our CapEx? Or how would that work out?
I believe that company is looking at continuous improvement in all margins, whether it's EBITDA margin, PBT margin or PAT. We don't want to give any particular guidance beyond what I have said earlier right now. However, obviously, with growing revenue and better and better quality contracts, more export markets, I believe there is a lot of scope for margin expansion in the coming years.
Perfect, sir. Just one final question, sir. Any kind of risk like in terms of regulatory risk or something that could hamper our growth prospects, maybe telecom sector or something that you see as a risk that something that can hamper us?
No. We have absolutely negligible bad debt in our company. So we don't see any kind of receivable on that side. Regulatory, I'm sorry, you were asking about regulatory?
Yes. Any kind of maybe an industry norm change or something on that out of place that can hamper us maybe?
Not really. No. We -- I think all the -- there are -- No, no. Our business, I don't see any sort of regulatory risk at all.
Next question is from the line of Rishi Kothari from PI Square Investments.
Congratulations on the numbers. It was actually a very stellar performance. On the question front, I would like to ask that I saw a point in PBT that the [indiscernible] to broader market -- developed markets, that is North America, Asia Pacific and West African. So it has generally been order coming from the Chinese market and Turkish market. So what exactly made the shift to replace from the China market to the Indian market? And specifically, is it because of the product specifications that we generally provide? Or is it because the market -- is it because geopolitical reasons that we see around the world?
It's a good question. I think overall, what we are seeing that, like in most industries, buyers around the world are adopting a China Plus One strategy. And more and more customers are trying to move their supply chain away from China. So certainly, there is a very strong opportunity for good Indian manufacturing companies to take that space being vacated by Chinese companies. And I think that's something which we are also benefiting from around the world. So I feel that this trend will continue. Of course, the change will happen gradually. It will not happen very suddenly. But there certainly is a gradual change on the positive side. So we can expect that, yes, more and more of these markets, which were earlier dominated by Chinese and Turkish companies, will move towards the Indian suppliers.
And also any products, especially U.S. that we generally provide them that makes us differentiate from our competitors generally domestically speaking for an Indian base?
I think engineering strength is certainly something which is a big advantage for us. We -- in our company, Skipper, we certainly have very strong engineering capabilities of design, load testing and R&D, which our customers really find the big value add in working with us.
Okay. And also, are we seeing any specific demands from different sectors apart from telecom distribution and then non-T&D, like, for example, railways or any sort of different demand from other sectors, apart from renewable also, any order book size that we see in the different sectors?
As of now, we are focused on our sectors of power transmission and telecom, and we are working on enhancing our products and services within these sectors itself, company remains open to enter in other areas as well as the opportunity arises. But as of now, we see enough opportunities in our 2 focus areas.
Next question is from the line of [ Saket Kapoor ] from Kapoor Co.
Firstly, sir, congratulations for a very good set of numbers and also a very detailed set of investor presentation. It covers all the major points in input, and we look forward for the continuity of this setup in terms of the investor presentation. So thank you, the team has worked really hard for that. And it's now for the EPC part, if you could give some more color, what kind of -- in this segment, do we see the bid pipeline getting stronger? And how would the margin profile look like? Are these fixed price contracts? Or do we have [indiscernible]? Some more color on the EPC project and that's it.
In the EPC side, because of the large amount of opportunities available because of a very good number of bids and projects that are up for bidding. We believe that there is sufficient opportunity to take adequate buffer for fixed price contracts. And certainly, that will be the theme going forward.
So we will be -- we have booked orders for the water scheme also, I think with the [indiscernible] scheme, those are the fixed price contracts generally?
Yes. But those -- we have only 1 or 2 small projects in that area right now. We don't have large projects. Our major projects are -- continue to be in power T&D only. Power T&D and telecom also.
Yes. Sir, what would be our CapEx and how much money we need to do the CapEx for the augmentation of the capacity? And how are you going to fund it?
This year, we are expecting a CapEx of approximately INR 200 crores, and it will be funded through a mix of internal accruals and long-term debt.
Okay. And sir, our cost of fund currently, what is the blended cost of fund?
Blended basis, it's approximately 9%.
Okay. And what steps are we taking to lower this in the interest rate part? I think we are in a high interest rate scenario. And we are also pursuing CapEx in order to take advantage of the growth in the system. So how are we going to manage the high -- the impact of higher interest rates on the finance cost because the absolute number and -- yes, please.
Yes, I think -- it's a good question. So I think as you would have seen that finance cost has come down from earlier 5% plus to now 4.6%, 4.7%. We see further opportunity for this to reduce as our company's performance gets better. You would have also seen that our net working capital days has gone down. Our inventory cycle has improved significantly this year. So I think operational efficiency will play a certain role in lowering our finance cost. And also on the -- as the company's performance improved, we are certainly quite hopeful of credit rating upgrade from the credit rating agencies in the coming months. So that will certainly also have a positive impact on the reduction of finance costs.
Sir, last point is on -- as you have mentioned that our focus is on the tower and the telecom segment in terms of the core business vertical. So in terms of BharatNet rollout, does that also envisage the creation of the tower part or is it only the laying of the OFC that generally will be in the first phase...
You're right, BharatNet is largely linked to cabling and OFC only. There is not much opportunity for towers there. However, as I was telling the previous gentlemen, that there is certainly a lot of opportunity in new telecom tower rollout as we see with the revival of Vodafone India and also BSNL.
Okay. So that will be leading to the replacement one or the new ones to improve the connectivity?
New towers, new towers.
Okay. And what kind of CapEx can we envisage going ahead?
So I have been hearing numbers of anything between INR 1 lakh to 2 lakh towers each for BSNL and Vodafone, but I don't have confirmed information, please.
Once again, congratulations to the team, sir.
Next question is from the line of [ Pratik Bhandari from Art Adventures ].
Yes. So just wanted to understand as to what would be the tower testing in terms of a business size? And how much of it would be in-house and third party?
Our tower testing as a business size actually is not a separate vertical, that is not a separate profit center that we track. The revenue -- our tower testing and R&D capabilities basically go towards our overall Engineering revenue. And we do not do any testing outside 100% of the testing requirement is being taken care by in-house test only.
No, sir, I wanted to understand the business size of tower testing? That was my question. And how much of it would be in-house and third-party?
You're asking about the requirement of...
As the business size, how do you see the tower testing as a business? What would be the scale quantum?
It's about INR 40 crores to INR 50 crores.
INR 40 crores to INR 50 crores?
Yes.
And how much of it would be in-house and third party?
It's 100% in-house.
Next question is from the line of [ Ashish Ajit Golechha from Growth Spire Ventures LLP ].
Congratulations, sir, for fabulous numbers. Sir, my 2 questions there. First question was how the translation business pipeline looks like for the developed markets, considering U.S. and also with respect to Middle East countries where our focus has been, as you mentioned in the last con call? And the second question is with respect to PVC pipe business, are we in future basically working towards double-digit margins? And what would be the impact of high metal costs, sir?
Okay. So you have 3 questions. The first one is about T&D markets globally. So recently, there was an interesting statement by Mr. Sultan Al Jaber, who is the President of COP28. And he had given an indication that by 2030 itself, the investments in either outdated or nonexisting transmission grade will need to be about $6 trillion globally. So that is just till 2030. And we expect that this investment cycle will continue till, at least, 2045 before the world move towards significant addition in renewable generation. So I see that definitely, from the present global investment of about $250 billion odd.
First, it will move to about $500 billion and maybe eventually to $1 trillion annually also. So that is the T&D opportunity globally. In terms of PVC margins, we believe that our volumes have grown quite significantly this year by about 30-odd percent. It has not translated fully to value growth because of the fall in commodity prices. And in the coming years, certainly, we do expect good growth in both top line as well as bottom line in the PVC business. And yes, we do target that we should achieve double-digit margins in this business in the coming years.
In terms of the high metal costs, we believe that commodity prices have been stable for the last 1 or 2 years. And looking at the global scenario, we do not expect much changes in the global metal prices. We expect them to be largely stable.
Next question is from the line of [ Rich ] Patel from FinTrust Capital.
So actually, my question has been answered, but great set of numbers.
Next question is from the line of [ Vignesh Iyer ] from Sequent Investments.
Congratulations on a great set of number. My question is, could you throw some color on your bid book when it comes to what is the proportion between the T&D and non-T&D or if there is a sector concentration like most of the bid book is from the telecom, anything like this? If you could just share some numbers on -- from your side.
Our bidding pipeline largely constitutes of T&D opportunities only. In telecom, the bidding tends to be for very short term or tend to be for more rate contract-based orders. So we don't really carry a large order book -- sorry, we don't carry a large bidding pipeline in the telecom segment, except for BSNL type contracts.
And sorry your second question was?
Yes, that only -- I mean I just wanted to understand if something like, let's say, BSNL has decided to put up x number of towers, and that is quite large, considering they have not done much in the past few years. So what would that order bid book -- what would that telecom orders reflect in your bid book? Would it be around 20%, 30% of the total bid book that you have today in domestic?
So in telecom, our total bid book for non-T&D would be less than 10%. [indiscernible] for T&D only.
Okay. All right. Got it. Got it. Also if I could understand on the tax rate side of it, we are around 33%, 34%, if I'm not wrong, it is due to impact of the large credits. Are we moving towards a 25% tax rate from next year? Or would it be on the similar lines only?
Yes, we are going to move from the current finance -- from the new financial year, we are moving to the lower tax rate.
Next question is from the line of [ Prathamesh Salunke ] from PL Capital.
So my question is in the telecom segment. So given the 2 year visibility in this segment, I just wanted to know what is our current market share? And what could be our peak market share in the coming 2 years?
You're asking specifically in the telecom segment?
Yes, sir. Telecom towers, yes.
In telecom towers, I believe that we are a market leader, and we would have minimum 15% to 20% market share presently.
Okay. And is it really possible to give the market share for other segments as well?
In T&D also in India, you can expect a similar -- about a 15% market share.
Okay. And PVC Polymer piping?
So that is much smaller. There -- we would be not more than 1% or 2% perhaps.
Congratulations on the quarter.
Next question is from the line of Gunjan Kabra from Niveshaay.
Congratulations for a good set of numbers. First question is that you just mentioned that -- so your order win rate in certain regions is around 50%, whereas in certain regions, it's pretty less. So what are the industry dynamics that actually determine that order win percentage? Why in certain region it's high and certain regions, it's low? If you can explain how the bidding tender works? And secondly, if that only, I wanted to understand, how many -- typically, how many players are there when we actually bid for some orders? So how many players are there in the -- when we are bidding it?
Right. So as I was mentioning, there's no debt ratio of the winnability because it really depends on market to market and within the same market also certain projects could see a higher participation from bidders, like, for example, in the TBCB projects in the high-voltage category, we typically see competition from 5 or 6 other serious players in India. So -- and in -- when we are talking about global markets where we are bidding as a tower supplier, there we see competition from about against similar number, about 5 or 6 players. So the win ratio, it can really vary as I answered earlier between 15% to 50%, and there's no real set formula.
It will be a combination of the competition as well as the buyers inclination, whether in certain foreign markets, there could be certain tax advantages that certain other foreign countries have. It could be or maybe about product approvals, et cetera, and just maybe about the engineering and design testing also, maybe the other bidders would have participated in the engineering activities for previous projects. So then -- so it really is a combination of various factors, ma'am.
So it is not just the cost measure that determine because I think if we are vertically integrated and we have certain cost advantages or we don't have any advantages as such?
Well, we do certainly have cost advantages. Skipper is the most integrated T&D player in the world because we are the only company to have full end-to-end integration for transmission towers and poles. We certainly have cost advantages, but then cost may not be the only criteria for decision making in a lot of markets.
Okay. And secondly, I wanted to understand that if some -- if an EPC project is for -- the project size is suppose INR 2,000 crores in the transmission segment then how much cost is incurred on towers in that INR 2,000 crores if you can give a rough idea on how much is spent on towers?
In our typical transmission line project, about 30-odd percent is transmission towers and about 30% to 35% would be conductors and the rest is other bought-out and services.
Okay. And in the substation?
I would not have the exact breakup of substation, ma'am, we are not a very large player in the substation field. We do substation projects, but those are smaller in nature.
Next question is from the line of [ Vignesh Iyer ] from Sequent Investments.
My question is more on the balancing side. I see we're carrying a big inventory of almost INR 1,200 crores in the balance sheet, which is among probably the highest in recent years. I just want to understand, is there any spillover from the execution of Q4 that is resulting in such a big inventory? Or is it a general norm of [indiscernible] is the average inventory size that we would be carrying considering the 30% -- 25% growth we have in mind?
Yes. So on our top line of about INR 3,300 crores, inventory of INR 1,200 crores is really not excessive. And if you look at the inventory number of days, in the previous financial year, we were at 170 inventory days. But this year, we have brought it down to 135. So there has been improvement. There is a further opportunity with the optimization in working capital to bring the inventory number of days further, and we look forward to that in the coming years.
Next question is from the line of Ankit Babel from Subhkam Ventures.
Yes, I just wanted to confirm on the interest cost part, you mentioned that you are targeting some 4%, 4.5% interest cost as a percentage of sales. So once you do a INR 5,000 crore revenue maybe in a couple of years, your interest cost would be in the range of somewhere around INR 220 crores. So would the interest cost be that high once you do a INR 5,000 crores, INR 5,200 crores of revenue, maybe in FY '26?
4% to 4.5% just for this financial year. In the next year, by the time we hit INR 5,000 crores, certainly, as a percentage, it could be lower.
How much could it be? Because it's a substantial portion of your expenditure and because the major improvement which you are expecting in your PBT margin is because of interest cost improvement. So could you just...
No. So EBITDA growth will certainly also be a part of our bottom line improvement. And our finance cost, we will see improvement as I was mentioning earlier, firstly because of higher revenue, secondly because of better working capital optimization, and thirdly, because of better external credit rating due to better performance. So I'd say all of those will lead to improvement in finance cost as a percentage of sales. I don't have ready guidance right now, what it could be possibly in the next financial year. Currently, for the current financial year, you may expect anywhere between 4% to 4.5%.
Okay. And at INR 5,000 crore revenue, what could be our EBITDA margins? What you are targeting for the company as a whole, including the Polymer and the EPC and this Tower business?
I would say that about 10.5%.
Next question is from the line of Dhruv Agarwal, an individual investor.
So sir, what is the capacity utilization in the Polymer division stands right now? And what can be the peak utilization that you can achieve?
The utilization is about 55% in the Polymer business. And at the peak, certainly, we can possibly go up to 90%.
And like how many times you can -- by what quarter or by which financial year, you can be able to achieve this 90% capital utilization, sir?
No. So I'm correcting that to 75%, please, maximum utilization possible. And I think looking at the market growth opportunity, we should be close to that by this year-end.
Okay. And after that, are we planning for the capacity addition as well, sir?
Yes. If we are able to achieve growth to about 75% utilization, we will be targeting our capacity growth in that division also.
Okay, right. So sir, my second question is, sir, do you expect any kind of slowdown in the coming quarters due to elections, whether in the order execution or in the order inflow?
It is possible that, yes, order inflows might be a bit slow in quarter 1, quarter 2 due to election season, but that would definitely be temporary because the bidding pipeline continues to remain very, very robust.
So any guideline that you can give, like how much revenue would be hit due to this election?
No. It's very difficult for me to put a number on that. Overall, in the year, we are quite bullish on a very good order inflow. And I'd like to maintain that only. How much quarter 1, quarter 2 is going to be affected, I don't want to really put a number on that.
Okay. Right, sir. So the last one question. Sir, like we can see your infrastructure division has done very well going like from the quarter 4 financial year '23 to the quarter 4 financial year '25, there has been almost like 2800x jump. So how big can you see this opportunity would be going forward? And do you like to see any opportunity in this segment?
I think with the growth of overall Infra spending by the government and particularly the vibrancy in the T&D and telecom sector, overall, look, we maintain our guidance growth of 25% CAGR for this division also. So it's the same growth guidance that we have for the company, and we will maintain that for both Engineering and Infra division.
Okay. So sir, any -- like do you have any plans to make this business as big as you can say, for the Engineering product or something like that? Like now it is just for 5% to 10% of your total revenue. Are you looking forward to have a revenue mix of around 20% to 25% in this division, sir?
I'm sorry, I'm not able to understand your question.
So currently, right now, from the Infrastructure project, the revenue mix is around 10% to 15%, around 10% in overall revenue. So are you looking to expand this division to say, 20% or 25% of the total revenues going forward? Any plans on that? Because I think it is very fixed type of price contracts. So I think we would be able to get margins leverage on that.
No, we don't have any particular plans like that to grow the revenue percentage of Infra projects. We do Infra projects on an opportunistic basis. And I believe that long term, this will remain about 15% to 20% of the company's top line.
Ladies and gentlemen, that was the last question of the day. I now hand the conference over to management for closing comments.
Yes. Thank you, everyone. We anticipate revenue growth in excess of 25% CAGR for the next 2 financial years, driven by pending engineering contracts and strong performance in the Polymer segment, our focus will remain on improving bottom line profitability, stabilizing operating cash flows and reducing debt to enhance the company's margin profile and strengthen its balance sheet position and capital return ratio. Skipper's commitment to sustainable business practices will continue to contribute meaningfully to national and global infrastructure goals. We appreciate your continued support and look forward to delivering value to our stakeholders. Thank you.
Thank you. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.