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Techno Electric & Engineering Company Ltd
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Ladies and gentlemen, good day, and welcome to the Techno Electric & Engineering Company Limited Q3 FY '20 Earnings Conference Call hosted by Asian Market Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Amber Singhania from Asian Market Securities Private Limited. Thank you, and over to you, sir.
Thank you, Faizan. Good afternoon, everyone. On behalf of Asian Market Securities, I welcome everyone for the 3Q FY '20 Earnings Conference Call of Techno Electric & Engineering Company Limited. We have with us today Mr. P.P. Gupta, Chairman and Managing Director from the company; Mr. Ankit Saraiya, Director of the company, along with their finance and Investor Relations team. We shall start with the opening remarks from the management about the quarter and the outlook, and then we shall proceed to the Q&A session. Over to you, sir.
Yes. Thank you, Amber. Very good afternoon to all, everybody. And I welcome each one of you personally and together to discuss our financial results for the quarter ending -- third quarter ending 31st December 2019. Anything said in this call which reflects our outlook for the future or that could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces.Let me quickly highlight our performance for the Q3. The total revenue in this Q3 is at INR 261 crore. The revenue from EPC is at INR 258 crore. And Wind in this quarter has been low. And no regulatory new orders, so no additional revenue.Revenue from Wind segment is at INR 2.47 crore in this quarter. EBITDA for the company is at INR 55 crore. The operating profit for the EPC in this quarter is at INR 44 crore-plus compared to INR 42 crore last year. The operating profit margin has improved to 17.07% as compared to 16.29% last year.The other income is at the same level at around INR 12 crore. The profit before tax is at 22 -- INR 42.6 crore, and after tax is at INR 32.04 crore compared to INR 30.5 crore last year. The EPS for this quarter stands at INR 2.92 crore -- INR 2.92.Coming to 9 months results, our revenue is INR 762 crore compared to INR 800 crore last year. The EPC is at INR 665 crore. The revenue from Wind segment is INR 96.5 crore compared to INR 94 crore last year, better by 2 year -- INR 2 crore.The REC prices continue to rise on the back of great, robust demand and limited availability. The last trading was done at INR 2,100 to INR 2,200 against a floor price of INR 1,000 only. That is almost double the floor price. We are confident to realize better value out of REC, which is yet to be received and sold by the company.EBITDA for the company stands at INR 245 crore. The operating profit in EPC segment is at INR 125 crore. The operating profit margin is at 18.83% compared to 18.66% last year. The operating profit for Wind segment is at INR 84.39 crore versus INR 83.68 crore.The profit before tax is at INR 210 crores, that is same like last year. The profit after tax is at INR 173 crores, that is up by 15% due to lower tax rates.EPS is at INR 15.75. The current value of investment is at INR 600 crore, out of which INR 300 crore is in the form of cash as of today.The order intake in last 9 months is about INR 2,000 crore inclusive of GST and without GST at INR 1,600 crores and unexecuted value is at INR 2,500 crore without GST, and we are participating in number of tenders with Power Grid and in FGD as well as in smart metering, and we are confident to book an additional business of INR 1,000 crores in the remaining period of this quarter.We repeat that during the year, as anticipated, we are confident to utilize the order booking of INR 2,500 crore-plus. The outlook for the power sector is very positive and robust in our perspective. With every passing quarter, it is improving. We were expecting more in the budget, but still, I think, separate policy announcement will happen. We are expecting the new tariff policy, which will ensure subsidy disbursement or cross-subsidy disbursement through the DBT route done as a part of the tariff. This will be a, what should I say, a very, very significant change in the policy, and it will be a milestone in itself.The power suppliers will soon be in place whereas Discoms may continue with the monopoly of wire. The government will create transmission infrastructure, matching with the 175 gigawatt of renewable power target by 2022. A 5-year power vision program as prepared and approved by government can be seen -- is available on CEA website. So this definitely, going forward, the next 2, 3 years, seems very promising.The Finance Minister has announced INR 220 billion allocation for the power and renewable power in the -- in this budget. As for the notification, all thermal plants have to comply with the sulfur emission norms. And definitely, we expect that business of FGD for 50 gigawatt to be finalized shortly.And the government will definitely be implementing FGD for 125 gigawatt for 2024. Otherwise, many captive power plants, particularly in private sector, will stand closed if the above emission norms are not met with. With the implementation of power sector reforms, many new opportunities will emerge, one among them of which we are already a part of is a smart metering under Smart Meter National Program, which aims to replace conventional meters.The government's scheme is to install 250 million smart meters by 2024 and the beginning has already been made in the third quarter.And government is banking heavily on this initiative in curtailing the losses and metering of the power supplied to the consumers.The -- for the new power generation companies, the corporate tax rate has been brought down to 15%, like any other manufacturing company as for the amended income tax rules.In coming years, we see strong power sector reforms, we'll focus on efficiency and liquidity management. The emphasis will be more on stable and reliable power supply and cost of power, and improvement overall financial health of this sector should be getting better. The focus will continue on the renewable power with the related infrastructure as green corridor, the transmission infrastructure is required for 500 gigawatt over the next 7 years.We'll continue to focus on our EPC and BBB business in T&D segment and the opportunities available in the related sectors in power and power visioning industries.Our first on overseas market is also bearing fruits. We are hopeful of bagging further orders from the markets of Afghanistan and Africa.With this, I now leave the discussion to the open house. Anybody is welcome to seek more clarification on our processes or achievements. You are welcome.
[Operator Instructions] The first question is from the line of Renjith Sivaram from ICICI Securities.
Yes. Sir, just a couple of things like this order intake for the 9 month and this quarter, is there -- what's the number? And the last call, you were guiding for around INR 2,500 crore to INR 3,000 crores of order intake. So where do we stand as of now?
You see, I mentioned that we -- inclusive of GST, we have booked business of INR 2,000 crore in last 9 months, which is around INR 1,600-plus crores without GST. We expect to book another INR 1,000 crore in this quarter. So our target of INR 2,500-plus crores stands as of now. And we are confident to achieve it.
Okay. And this quarter was how much in terms of order intake?
INR 250 crore -- INR 270 crores, you can say, without GST.
Okay. So the number which we should be looking at is without GST or with GST?
Without GST, definitely, because that is how we construct our books.
So INR 1,600 crore without GST. So for the full year, you are still confident of INR 2,500 crores...
INR 2,500-plus crores. Plus, absolutely.
Okay. And with this -- that in recent NTPC tenders, what we get to know is that we haven't won any major orders or we are not in a L1 position. So is there any reason for that because the pricing was better compared to the previous lots of NTPC?
You see, first of all, all these projects of NTPC were 1 gigawatt-plus by and large and mostly in 1.5 to 2 gigawatt category. We have always been shy of a large value order, single large value order or putting all our eggs in one basket. But seeing the urgency and market trend, and we have been [ sounded ] by NTPC that many of the projects now getting into the tender because the prices achieved by them is not acceptable to them. It ranges from as high as INR 60 lakhs to INR 1 crore-plus per megawatt. So we'll be definitely participating in the retender opportunity of NTPC. But at the moment, we are pursuing this opportunity strongly with state and DBT.
Sir, but then what we come across is that this Lot 4 and 5, which is already tendered, you mean to say that will get retendered because of the high prices?
Part of it, absolutely. Part of it.
Okay. We had participated, right? But...
No. We have not participated.
Okay. Okay. So basically...
This time...
Yes, because there were all large-value tenders, each around INR 700 crores, INR 800 crores to INR 1,500 crores, so we were not part of it. But now we have made up our mind that in select -- in retendering situations in certain selected tenders, about 3, 4, we may participate.
Okay. And in the private sector, which are the companies where you are seeing some traction in terms of FGD orders? Is there any utility in the private sector who is coming forward for ordering? Or is that still some time away? And in terms of SEBs, which are all the SEBs where you are seeing some movement in terms of they started to talk regarding tenders for FGDs?
Yes, like Rajasthan is very proactive. MP is active now. Punjab is active. Bengal is active. See -- in private, Tata is active; Jojobera, a captive power plant of Tata Steel. CSC is talking on this issue. But private is still more in a study mode than execution mode. But we see more opportunities with -- immediately with state and supplemented by NTPC.
And sir, in terms of state where -- who will be funding the CC through REC PFC or through some multilateral? And how -- do you see any risk in terms of collections given the bad data finances, the state electricity boards are?
You see, most of this initiative is a funded initiative by multilateral or funded by ADB we have seen in one of the cases. So we will definitely stay with either CPSU, like NTPC or DVC; or funded projects of the ICBs, by multilateral, like REC or PFC or one of the multilateral entities, like World Bank or ADB. We will not like to be part of the project funded by their own resources.
Okay. And all these states which you have mentioned have kind of funding arrangement with REC PFCs, so you don't -- so is it -- try to assume that you don't see any risk in terms of collections from these?
Right, absolutely. Absolutely.
Okay. And in terms of another big opportunity was this green energy corridor.
Right.
So why is it getting delayed? And where do you see that? And how big this can be? Because we have been talking about in the last couple of quarters, but in terms of order intake, we are not seeing much of things happening?
No, but we have booked a significant business from Adani, Power Grid as well as Sterlite. All put together about business were INR 750 crore out of INR 1,600 crore is -- for the first lot of 50 gigawatt. Green corridor finalized by September/October through competitive bidding. And another 50 gigawatt is in the pipeline. We are hopeful that this process should be over by May/June. But RFQs selectively have started already on the next batch of 50 gigawatt in this.Yes, apparently, due to budget and a lot more happening on CAA or NRC, a lot of attention is diverted here and there and less is being talked about reforms. And even media is full of news, but things are happening. REC PFC are busy with the next lot of 50 gigawatt now. By March, I'm sure all RFQs and RFP will be in the market.
Okay. But in terms of the opportunity, we were looking at a much larger number, so is that because we have lost market share or is that opportunity size got strong?
No, no, no. I think we got more than required. The total opportunity is -- for a 50 gigawatt, the total CapEx is INR 15,000 crores, in which the station CapEx is about INR 3,000 crores. So out of INR 3,000 crore, we have received about 25% shares at 765 kV level. So we are decently pleased. And we were aiming only 15%, but we ultimately got a 40%-plus in substation business because we don't do the line. Rest INR 12,000 crore belongs to the line category in this business.
Okay. And we were also -- is there any STATCOM packages in...
Now they are in planning. About 3 number STATCOM packages are in planning. And I'm hopeful that they should be finalized by September. One will come in TBCB and 2 will be executed by Power Grid as we are informed.
How big will be that?
Each one will be around INR 500 crores, you can take it. Each package will be around INR 500 crores.
Okay. And sir, lastly, is there any impact of this coronavirus because we do a lot of imports from China?
No, no. Actually, it's a very localized issue within China. But yes, certain embargoes do create free movement of people between the 2 countries. But these -- the companies with whom we are working now, they have more or less station, they have regular teams in India now under Make in India program, they have their manufacturing setups, they have their people posted here permanently. So it has a very marginal impact, if at all any, and it is very short time. I'm sure this all should be over by March end or April end. It should not go beyond that.
Yes, because the reason I'm asking is that a lot of these FGD subsystems are fabricated in China.
No. We have not engaged any vendor from China in FGD. I know many companies are depending on them, but we have not engaged any one of them. We are trying to work more with Japanese, Korean and Indian vendors mostly, and they are good.
The next question is from the line of Sandeep Tulsiyan from JM Financial.
Sir, my first question is, when you mentioned INR 1,000 crore of additional order inflow that is what you're factoring in for the fourth quarter, if you could highlight which are these orders, where we are in L1 stages?
You see, prices are yet to be opened. Because even if you are L1, again, RA happens these days, we call it, reverse auction. So even taking comfort out of L1 is not the end of the story. So -- but I'm sure we'll achieve this number with the participation of the tenders we have done. We expect one FGD order at least out of this and one order from Power Grid in the pipeline.
This is conventional or the green energy-related, sir?
Green. Largely, works are now happening around green energy only with Power Grid also. And we do see one order in smart metering, one more.
Okay. Okay. Sir, smart metering, the quantum of order now will increase from whatever 100 to 200 ranges that you were in? Or is it similar range kind of order that we are targeting?
Yes. Each order generally ranges from 2-lakh meter to 3-lakh meter. They make lots like that. So we'd pick up one more order, like, presently, we are doing 2-lakh meter order of INR 200 crores. So we should expect another business of INR 250 crore, INR 300 crore in meters by end of March. Yes.
Second question was on the Bokaro project with FGD that we're doing, if you could share how is it expected to ramp up? I know it's about a 13-month kind of a deadline to finish that project. But if you could guide us how much revenues by which quarter it would start accruing? And how much would you book in FY '21 and subsequent in FY '22?
You see, firstly, there is no revenue being booked in this year out of these orders. It is presently in the level of engineering. Conceptual engineering is over, mass balancing is over, now detailed engineering is going on. We should be through with absorber and related facility engineering more or less by April. In the meantime, site is made ready and soil data is under testing. So we will basically start booking revenue from second quarter of next year, 2021. Because even otherwise the varied terms of payment dictates revenue towards the tail end of the package. So we have planned program in a manner that our working capital involvement in the package is no more than INR 50 crores and we are able to achieve progress and billing in a very coherent manner. So far, all is good, that's what I can share with you. We are ahead of all entities who awarded by DVC at the same time.
How much will you book in the next year, sir? When you will start in 2Q, so how much percentage of the project will be booked in FY '21?
You can take it to roughly INR 150 crore out of INR 350 crore.
Okay. And then it will be completed by FY '22?
In -- for the '22.
Okay. Okay. And sir, this -- on the international order side, if -- you mentioned that there are some orders that you were expecting from Afghanistan and some other countries, if you could just highlight us in which stage are they right now? What is the quantum? By when should we expect some news on that?
No, we got one order from Togo already. We are hopeful of getting another order from Bangladesh now that is emerging as a good opportunity. This is another business of -- business worth about $60 million. And last quarter, we booked Togo order, which already we announced. Afghanistan is going a bit uncertain at the moment politically that unless the new government happens, more decision-making may not happen. So another 2, 3 months may be a dull period there. So -- but by and large, we don't look on global business at the moment more than 15%, 20% in totality of our top line. So -- and that will keep happening from one place or the other. When Power Grid is coming out with -- there is a nuclear power plant happening in Bangladesh, in which Exim Bank has funded $4 billion for power evacuation program. So we are hopeful of getting some share out of it, being very strategically placed in Calcutta to Bangladesh.So Nepal also should achieve more programs along with Power Grid as a consultant in India. So SAARC countries and Afghanistan may be more active down 3 months to my mind, and we'll continue to explore opportunities in Africa, of course.
Understood. And sir, we -- can you just highlight which order had we booked in this quarter, which you mentioned INR 270 crore, which area did it come from?
It -- the largest contribution is from our Kohima project, that is about INR 100 crores in this quarter. And along with this, revenue has come out of many other projects of Power Grid. And Bihar, we are doing a package in Bihar. We are also executing a project in Rajasthan. We are implementing a project for -- there are many projects which are mostly now coming to a close, this quarter -- in last 2 quarters, we have addressed at least 20 projects coming to a close, giving a revenue ranging from INR 10 crore to INR 20 crore each. But major revenue is from Kohima, you can say.
No, sir. Sorry to interrupt there. Actually, my question was pertaining to the inflows, that INR 270 crores, if you could highlight, was it more the Green Energy Corridor or the conventional EPC that you have got, is what I was trying to understand.
It's more conventional, you can say. And somewhat leftover of the Green Corridor of the previous orders we got 1 year or 2 back, like in Bikaner or -- no, you are talking of order book or you are talking of execution?
Sir, new -- you mentioned the third quarter, new orders you got [indiscernible] INR 70 crores...
That is in UP, we got from -- that we got from Power Grid. I thought you were talking about top line. And we will give -- sorry, sorry, I'm sorry, please, I took you somewhere else. It is a order of Power Grid for executing a GIS Substations in UP at Rampur, Sambhal. And that is a order of INR 260 crores and without GST.
Okay, without GST. So out of this total 150 gigawatts...
[Operator Instructions] The next question is from the line of [ Subhasish Biyani ] from ICICI Bank.
My question is, there was recently a news that this Tamil Nadu, the wind power tariff has got reduced from some around INR 3 to around INR 2.15 per unit, so like are you bidding on those tariffs because it is quite low? And secondly, what are the debtors' position from TANGEDCO now because what I believe the debtors are quite high, so what is the current position?
Firstly, as I told you, post our last investment in '11, '12, we have no program to invest anything more than that. And we have not done in last 7 years, rather we are looking for exit out of this business as I shared with you. So you are right, the tariff in Tamil Nadu is being -- is -- has become more political rationale than economic rationale. But anyway, this tariff is also under stay in APTEL. It has been appealed and is in stay there. So definitely, no new investment has happened from any other person either. But definitely, we are not keen to invest, number one. Number two, the payments are as bad in Tamil Nadu, we have got no payment for the last 1 year. So our outstanding is as high as INR 100 crore-plus as of today.
The next question is from the line of Vivek Ganguly from Nine Rivers Capital.
Sir, generally, we have been hearing that the credit situation vis-à-vis the state governments and any other government wherever they are the purchaser is pretty tight. So what is the overall feel that you're all getting? Apart from Tamil Nadu, are you all -- the outstanding that is there, are you all feeling any such strains or pressures in your receivables from any government or quasi-government entities?
No. We are not facing any strain from anywhere because, firstly, our customers are either CPSU, like NTPC, Power Grid, or our multi or bilaterally funded projects by REC, PFC. So in the EPC business, we are not experiencing any strain in payments, by and large. But as a generator, in Tamil Nadu, yes, there is a difficulty for discounts to pay.
So how do you think the Tamil Nadu issue will get sorted out? And what is the state of -- if I may use the term, what is the state of conciliation or arbitration that is -- or judicial review that is underway?
You see, firstly, we have -- we are not under more legal dispute with them. So we are hopefully pushing the center government for power sector reforms. The first reforms are like pushing data bank with the CEA. There is a portal created where we login our outstandings, where they regularly know how much generators are due for. Minister also keep raising these issues in different forums with the regulators as well as with the state governments. And I'm sure either state government will come out -- center government, sorry, will come out with a new scheme like UDAY, which is hard like Atal power scheme. If that Atal scheme comes again, these discounts will be funded.But I think they have a long-term plan now than short term. They want to make these discounts, by and large, stress-free, so that generators are paid well in time through LC or as per the PPA terms. So we are awaiting that announcement of the total policy reforms, which will address this payment issue on a sustainable basis.But I am very confident this issue is short-lived now. The worst is behind us.
The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.
One question. On the wind side, could you help us, what was the reason where the revenue was down 70% in this quarter? I understand this is a low season, but drop in the revenue, if you can help us explain?
No. In last year, the wind was better in this quarter. October was a good generating month, which has not happened this year, number one.And number two, we had bought a regulatory relief on the tariff numbers, which was accounted in this quarter. But when you see the 9-month results, you will not find any problem. It is more or less the same like INR 95 crore, INR 96 crore. And year-end will also happen like-to-like. But there is an upside this year, that is on account of the REC certificate price. We have been pricing our certificates at the floor price because we are yet to get it. They got delayed because of the change in name of the company from Simran to Techno, which is yet to be taken on record by NLDC and accredit our certificates. And the market is already going for about INR 2,000-plus crores, which is double of the floor price. So we are hopeful to show a better top line this year over last year because of the REC prices, ultimately. So wind won't be a losing proposition in that regard.
Understood. And the question that one of the participants asked about the change in the tariffs in Tamil Nadu, our projects are not part of those change in tariff, is that correct understanding?
No. Our projects are part of it because we are under APPC regime, which also gets influenced by the very tariff they set otherwise those regime. But tariff is a ongoing matter in this business. This tariff is already stayed by APTEL in the appeal. So probably some better numbers should emerge ultimately as a mutual agreement. But definitely, it has impacted us. But we are -- we'll be able to make it more than that by our other benefits like REC and GBI.
Sure. And last question, any update on the investments in various bonds of that INR 300-plus crores?
Yes. Now it has come down to no more than INR 250 crore as of now, which we further -- further, it will come down to INR 150 crore by March end. And we should be -- we are now already at cash level of INR 300 crores, which is 50% of our investment in this category of operations. Definitely, this has been a good lessons to us. I never knew financial markets are more challenging than power market. So when we invested, they were good document, good instruments, but soon they become bad, so we want to be no more part of these bonds, unless bonds and ratings again achieve the credibility and the acceptability. So for time being, our aim is to liquidate all these bonds and hold on to cash in the company. So we can assure you that we are not going to be greedy on return, but more on the safety of the investments.
Sure. Sir, we will also get cash once our Kohima project is transferred. What would be thought process on utilization of the cash?
Yes. Largely, you see this, on a -- we see this business moving from CapEx to OpEx in days to come. How long government will keep funding and funding agencies will keep lending. So gradually, we see as a part of the policy change at central government level also where a lot of CapEx will become CapEx plus OpEx model. And your cash will always be king and enable you achieve a lot of economy in operation, participate in more stronger tenders with this concept of CapEx plus OpEX. So we will -- or if any policy reform comes in segregation of carrier and content, obviously, the market will become very different then in the upgradation of the very feeders as well as the technology levels in the feeders. It will be a huge business like transmission. So we are very -- I think we are on a crossroads, sir. We have waited patiently for last 2 years, and we are very, very hopeful coming next 2 years are going to be very promising and will give us opportunities for cash deployment in very business we are in as EPC and will be very rewarding.
Yes, but we don't plan to pay back the cash to the shareholders because we...
We will definitely -- that goes without saying, sir, that at least whatever cash we are generating, 50% of that will be paid out -- in 40% to 50% in the form of dividend or buyback, that will continue. You can expect a dividend of around INR 100 crore in the month of April post new policy is in place, so that more money goes to mutual funds. And we don't want to pay anything in the present regime because you have -- you will pay more tax upfront and less to distribute. We want to distribute more and let the recipient handle the tax liability at their end, which, I believe, is low in case of mutual funds.
Yes, but no plans of buyback like you did last year?
No. Now we'd like to go for dividend, unlike buyback because buyback is also [indiscernible] at source. So again you have little money. And buying 30 lakh, 50 lakh shares will no way helps, ultimately. But we'll leave it to the -- our investor community. If their feedback is that buyback is more rewarding to them, we are open for their suggestion. Please write to us, dividend or buyback, which one you prefer.
Next question is from the line of Venkat Subramanian from Organic Capital.
In the context of broad reforms that we have been waiting for and we are beginning to witness, can you kind of guide us and tell us what will be the impact on power producers? And how do distribution companies benefit and how do generators benefit, people like NTPC and then Tata on the one hand and distribution companies on other?
Venkat, we are -- let me not sound very aggressive and negative to the very sector I am in, we are so far practiced this sector in a very stupid way.
Right. You always have been saying that.
Thank you. Whatever we created on the latest technology and in most efficient process, those assets are underutilized or not utilized and whatever are inefficient and rigid, like 15, 20 years, they are over-utilized in our system as captive power plants. The tariff policy with the cross subsidy, one element, has made this sector so stupid that nobody wants to buy power on the grid when it comes to industrial or consumer. Although we call it a cross subsidy, but somewhere we forget it is not a transaction C2C, it is any intermittent manufacturer or commercial is not a consumer, he is a intermediary. We make them also inefficient in the process. So they lose more money on their own business also, integrally.So a power plant which can produce power at 0.7 kg coal is not being used in this country or underutilized. Whereas a boiler, which uses 2 kg coal to produce the same unit of power in captive power like cement or chemical or textile 30- to 50-megawatt capacities each or may be 10 to 50 megawatt, they are over-utilized because despite inefficient, is still able to produce power at INR 5. So 90,000 megawatts, sir, is in captive mode in this country -- 90 gigawatts, which -- that amounts to no less than 90 to 100 gigawatt of load.If by change of reforms and policy measure, this 100 gigawatt is transfers to the grid, you imagine the benefits. Each plant of NTPC or supercritical technology, will back -- will be back with vengeance to 80% PLF or plus. That is where we will be backed, sir. Otherwise, we are at 50%, 55% or some of them are not used at all. They are stressed asset, like in [indiscernible].
The next question is from the line of Riya Mehta from Anand Rathi.
Sir, actually, I was just wanted...
Ma'am, your voice -- we are not able to hear you, please increase the volume of your phone.
Hello?
Yes. Now it's audible.
Yes. Actually, I just wanted some guidance over what do we look at top line and the margins how sustainable they are for FY '21 and '22, like in the near term, next 2 years, what is your guidance that you would like to give us?
Yes. They are all sustainable and achievable, ma'am. Generally, in our business, first half is 40% and next half is 60%. But in this year, since business in new intake was late, so you can say that out of the 60% generally, our division used to be like 25% and 35%, which in this time, it will be 20%, 40%. So last quarter, we could do -- could not do much in third quarter. But we have done lot of work, which will be reflected in the fourth quarter. We are hopeful of achieving the top line on no less than INR 500 crores in the fourth quarter.
Sir, sorry, sir, I couldn't hear the number.
Yes. So next yearly target will be more or less what we have been talking around INR 1,100 crores, INR 1,200 crores same way. And the same next year, it will be INR 1,500 crores, INR 1,600 crores because all the business actually are picked up or going to pick up, it is going to be executed time bound. That is a part of Techno Electric.Actually, in our business, quarter-on-quarter comparison is very difficult in our type of business. So you prepare so much in advance and billing is a last mode transaction, always. That is a last-mile journey, which indirectly becomes 100% for the investors.
Right. And sir, will you see 15% to 16% margins as sustainable margins?
Absolutely. Why work for a so risky business when you cannot make 15%?
The next question is from the line of Gautam Gupta from Nine Rivers Capital.
Sir, my question is regarding the Kohima and Jhajjar projects that we've got the sale transaction through on both of them. Just want to understand what is the status. And what are the cash flow time lines on those? As in when will we realize the cash? Kohima, I'm sure, will be after COD. So if you could just give us some rough timeline on Jhajjar, Kohima both?
Jhajjar should happen by March end and Kohima will, obviously, may go up to December because why is the period of COD that another 3 months to bring the project into CTU range, further POC mechanism charge another 2, 3 months. So by December, that money may flow in. And Jhajjar, by March.
Okay. Okay. We have some requirement to hold a brief 26% in these projects, right? But do we get the payment in advance? And maybe just the equity transfer happens in 2 tranches? Is that how it works?
Yes, yes, yes. Payment is 100% upfront.
The next question is from the line of Ashok Shah from LFC Securities.
Sir, we have outstanding from the Tamil Nadu of more than INR 100 crore and nothing from -- for last 1 year. Are there any other states or government or state government or central government, anything outstanding?
No, not at all, sir, because rest all our business is EPC. So that's -- where progress happens with payment only.
Okay. Sir, we are planning to give only dividend from next year when it will be taxable in the hands of the recipient and no tax will be paid by the FIIs. So is it...
It will be paid by the company in upfront.
But the company -- but I'm talking about the recipient. No tax will be paid by the recipient FIIs. So is it not fair to give dividend before March as it's tax-free and also go only for the buyback as it's only 20% tax is invited? Or in other case, whatever tax is paid directly to the government, so they are not paying back us in time. So is it fair to give tax-free or reduce the tax for the investors, so they benefit more rather than government benefits more, and they do not pay us in time?
You see, firstly, there is no -- mostly as far as I know, there is no FII, which is a investee in our company. It is largely mutual funds, like State Bank or Kotak and others, DSP. So we have been informed the tax on mutual fund is only 10% on dividend. So as against my paying 21% to the government, if the CPN pays 10%, I think is benefited both. And instead of INR 80, I can pay INR 100 as a dividend.
Sir, in that case, they will be paying 10% TDS, but the big investor will be paying 40% of tax. It will be much higher compared to the company paying only 21%. And after all everything belongs to the investors only, so why to discriminate and let the investor pay 19% more or 20% more tax unnecessarily and to the government, who are not paying us in time, also?
Please write to us. I'm not fully educated on this issue. I will hand over to my taxation people. Write a note to us. If you think the recipient of a mutual fund dividend will be further taxed by 30%, 40%, then definitely it's a concern. But my information is mutual fund dividend continues to be tax-free.
No, no. It's not like that.
I have no idea, small or large investors.
The next question is from the line of Rohit Balakrishnan from VRDDHI Capital.
Sir, most of my questions have been answered. Just a couple of questions. So sir, you mentioned that this -- as you mentioned that this time, Q4 would be much more lopsided for us because we couldn't execute March, but you are still holding on to the guidance of about INR 1,100 crores to INR 1,200 crores in EPC, and this top line of INR 500 crores, you are talking about the combined top line or this is only EPC you were mentioning?
EPC, because wind is mostly 0 in this quarter, so it is EPC only.
And sir, other income is also not -- you're taking there?
That is as usual. It come -- happens in the normal course, which we -- which only mitigates our tax liability obligation.
Correct. And just on this, so FY '21, you are holding on to this -- to your original guidance of about INR 1,500 crores to INR 1,600 crores in EPC that you...
Right. Yes.
Okay. Okay. And sir, I couldn't understand, so in the transmission projects that we have in Jhajjar and Kohima, you've finalized the transaction to sell them, but has there been any cash flows that we have received from there yet on sales, that has not yet been -- I couldn't understand, somebody had asked this question earlier.
No. We have not received the cash flow as yet. Jhajjar cash should be happening by March end. They are under the due diligence at the moment on exclusivity basis. So -- and Kohima will be by December only post COD because COD itself happens in July. But these transactions are run by Kalpataru. We are only partner in this with them. The majority of the partnership belongs to them.
So sir, in Jhajjar, what would be the amount that you'd be expecting by March? Do we have that? Or...
It should be -- I think the total of the price value will be about INR 300 crores to INR 320 crores, and equity value will be about INR 160 crore to INR 165 crore, and we should get 50% of it.
Okay. Got it. And sir, just 2 more questions...
Mr. Rohit, may we request that you return to the question queue for follow up?
Just one question, if I can just squeeze in just one small question, and then I'll return back. Sir, on this -- so on the investment, sir, you mentioned that you've already reduced it to about INR 250 crores and it will further come down, so has there been any demolition in value that you've taken? Or if you can just explain that as well?
No, no, no. There is no diminishing value in it because we generally carry out this as a BMS exercise, portfolio management services we avail from large and reputed houses in Bombay. And any profit/loss belongs to them. So there is no diminishing value happening to the company. And we have been very clear, there will be 0 diminishing value in this. 100% money will be realized by the company, and promoters are fully committed to it.
The next question is from the line of Renjith Sivaram from ICICI Securities.
Sir, most of my questions have been answered. Lastly, this margins -- we have seen this quarter the margins in, under EPC segment, a bit muted for the full year, how do you see that? And given so much of metering, FGD and all are coming going forward, so what kind of margin should we assume going forward under EPC?
So I've always stated, it will be 15%-plus only because we -- the way we book business or efficiently execute business or achieve the benefit out of the timely payments to the vendors and feed productivity we are able to achieve, it will be 15%-plus only, which I've always maintained. And this business makes no sense to us unless we achieve this level of margins -- operating margin. So we are confident that whatever business we have got or will get, 15%-plus will be the growing margin in EPC business.
Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Amber Singhania for closing comments.
Hello? Faizan, can you hear me?
Yes, we can hear you, sir. Go ahead.
Yes. Thank you, Faizan. We thank you, everyone, for participating in this call, and special thanks to the management for giving us the opportunity to host this call. Sir, would you like to add any closing remarks?
Yes. I'd like to thank Amber for hosting such a beautiful call with so many participants. And I want to thank each one of the participant for joining the conference call. In case, still you have any query related to our performance, please drop a mail to us. And do visit us when you are this side of the country. With this, I will like to say -- thank everybody for joining once again and close the conference. Thank you.
Thank you. On behalf of Asian Market Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.