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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 Q4 FY'23 Earnings Conference Call hosted by Asian Market Securities Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kamlesh Kotak from Asian Market Securities Limited. Thank you. And over to you, sir.
Thanks, Ryan. Good afternoon, everyone. On behalf of Asian Markets, we welcome you all to the 4Q FY'23 Earnings Conference Call of Techno Electric & Engineering Company Limited. We have with us today Mr. P. P. Gupta ji, Chairman and Managing Director; and Mr. Ankit Saraiya, Director representing the company. I request Shri. P.P. Gupta Ji to take us through an overview of the quarterly and the yearly results, and then we shall begin the Q&A session. Over to you, Gupta ji. Thank you.
Yes, and thank you always for your good words. I hope my voice is clear sir?
If you can see a bit louder?
Is it okay now?
Yes.
Thank you. Very good afternoon to all of you. I will say a very good morning. And welcome everyone to because our financial results for the quarter and full year ended 31st March 2023. Anything said on 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 this industry or sector faces as much reflects on our company.
Let me highlight our performance. Firstly, I would like to seek your apology as this year results are not very -- as simple as they have been in the past because basically, these results comprise 3 segments now; one is where EPC, second is Wind, discontinued business in the State of Tamil Nadu and the thirdly the upcoming subs or subsidiaries in form of data center and AMI works we are doing now.
As all of you know, and we have been waiting for the last 3 to 4 years, we are happy to now acknowledge and bring to your knowledge the wind assets in Tamil Nadu stands sold, and we have parted with 105-megawatt capacity and accounted further out of 112-megawatt, the balance to another 4.2 megawatts and sold or 3.6 already stands sold in April and balance 4.2 is remaining due to land title challenges, we are trying to sort out fast.
Total revenue for the company from the EPC segment stands at around INR 450 crores plus, which includes the execution of the works on data center as well as the AMI sub at cost. We expect a similar level of forthcoming outputs in quarter -- in forthcoming quarters, but maybe be with a plus/minus of another 10%. The EBITDA for the company stands at INR 38.78 crores. EBIT for the EPC segment stands at INR 39 crores. We have taken, as required by accounting codes the work done in data center as well as the AMI at cost due to which the EBITDA margin, may apparently seems to be a little low or misguided but if you compare with the third party billing, which is INR 312 crores in the consolidated accounts, you will find the EBITDA margin to be at 12.5% plus.
The other income is at INR 22.14 Crores compared to INR 7 crore. The profit before tax from continued operations is at INR 52.75 crores and VAT from continued operations is at INR 36 crores. The VAT was lower from the last year basically because of higher tax outflow expenses. And also due to the increased deferred tax incidence. The profit from the discontinued business including capital gain on sale of wind assets is at INR 56 crores. The total profit for the quarter is at INR 92 crores, and EPS for this quarter alone is around INR 8.55.
Now taking at the full year results, the revenue for the full year is at [ INR 66 crores ] excluding almost INR 80 crores for discontinued operations. Otherwise, we it would have been around [ INR 1050 ] crores. Revenue from EPC is at INR 959 crores. EBITDA for the company stands at INR 118 crores. EBIT for the EPC segment is at INR 113 crores. EBIT margin for the EPC segment is at INR 13.78% on third-party business, excluding our in-house subsidiaries which includes data center and AMI.
Other income for the year is at INR 74.30 crores compared to INR 150 crores last year as you all know we took exit of our one subsidiary developed jointly with KPTL at Kohima and that gave us other income of almost around INR 100 crores plus/minus. That is under INR 10 crores is the profit of a Kohima as it partitioned last year. So the profit before tax for the year is at INR 175 crores, the PAT for this year standalone is at INR 128 crores and profit from discontinued operations is at INR 90 crores. The total profit for the company is at INR 218 crores. The EPS is INR 20 plus.
The current investment values in all cash and cash equivalent is all-time high in the company at over INR 1500 crores, that implies INR 140 per share. This is after company has done a buyback of INR 70 crores and have paid a dividend of INR 22 crores of last year. And we have declared a dividend this year of INR 6 per share to compensate for the buyback amount not utilized.
For current financial year we have taken order intake of INR 3,300 crores and our closing order book is at the INR 3,800 crores, which is all-time high. We are L1 in INR 1,250 crores business in transmission and AMI orders and we are also in active negotiation in FGD business with private segments, so private players, whose numbers we cannot quantify at the moment. But we are of hopeful of bagging at least no less than INR 4,000 crores business during this year also on an ongoing basis or more. The outlook, I will say, is extremely promising. The past legacy or the bad patch of last 3 years, COVID impact, is all behind us, I will say 4 years rather, the election year and year thereafter. And we are in altogether new segments of business which are very, very promising.
And not only this, we believe that going forward there is a significant growth for the company. So whatever we have lost out and I have been promising for the last 4 years. We will have to -- we will be rightly placed to make-up in next 3 years.
We believe the growth momentum had just begun. Good morning in the company has happened and it will continue for the financial year '24, '25, and '26. We expect larger business out in our FGD segments, AMI segment and data centers. And in transmission also, we see more of technological high-end solution provisions going forward.
In the coming years, we see strong power sector reforms as power and energy converge. Additionally, there is a focus on stress on availability and reliability of power supply. And additionally, our grid has to be prepared to accept the renewable power injection up to 30% in next 5 years, from existing 14%, 15% on these. While the focus will remain on the renewable power and related -- it's related infrastructure, but when I say, related infrastructure of the renewable power, the grid has to be strengthened strongly by backing up with pumping storage solutions or by voltage source converter solution, VSC solution as we call. These are all digital and ICD based.
There will continue to be a strong distribution segment based reforms, the transmission infrastructure is required for 500 gigawatt by 2030 will continue to be in place. FGD segment is going very strongly, and we are hopeful of bagging at least INR 1,000 crores business every year from this segment. And we already have business worth INR 1450 crores in hand, which will see execution during the current year.
And in our perspective, almost 100 gigawatt of thermal capacity is yet to be ordered out by SCBs and private sector mainly, which implies a business scope of no less than INR 100,000 crores.
On the transmission sector, the TBCB bidding for 50 gigawatt of renewable power out of 175 gigawatt is in progress, and we are hopeful of our share of business, whether it is backed by power grid on private players, the inter-state transmission, ISTS of 13 gigawatt in Ladakh has been proposed with an investment of INR 207 billion, and we expect major share here. We are already L1 in one package, which we are talking in this region and one is in execution.
The total bids for transmission is expected to be around INR 40,000 crores, out of which Techno expects to book orders worth, I will say, about INR 3,000 crores spread over 4 to 5 years. So we are not seeing very major growth for Techno in this segment.
The distribution side, we see a huge growth with [indiscernible] Package B in execution, along with AMI being integral part of these solutions and government has also allocated INR 300,000 crore to be spent over the next 5 years, we see a major business growth in this segment going forward. AMI, we are already part of and this business is being done in a TOTEX model, and we are parking it in a subsidiary to be hiked off to some strong investors going forward as we did in case of transmission assets.
We expect to get orders worth almost no less than INR 1,000 crores to INR 1,500 crores per year on next 4, 5 years. So in total, we would like to do about INR 1,000 crores -- INR 10,000 crores business in this segment.
And we are already L1 in one package in this and one is in execution in the State of J&K about 2.5 lakh meters. The Electricity Amendment Bill is already in place, and gives consumers multiple type of empowerments. And we believe the government will [ walk ] the lateral edge spirit imbibed in these amendments. It should provide nondiscriminatory open-nesses to the power generators as well as to the consumers. It should also facilitate the choice of power supplier to the consumers. And it should also bring competition to bring down the tariffs going forward so that the gap between the cost of very generated power versus cost of the new add power is adjusted. We are hopeful of good days ahead in this sector as it is at a very critical juncture, and going forward, something good on this should happen.
As a generator, we have taken a total exit in the State of Tamil Nadu. Out of this, we have sold off 108.9 megawatts out of 111.90 megawatt, which has left only 2 machines with us of 1.5 megawatt each. This has added around INR 425 crores cash to our balance sheet. In data center, the COVID, as I have already stated, COVID has impacted our life in multiple ways, but the positive outcome is the digitization. It is growing multiply in the country. With the growth in digital space backed by trust on data protection, it is expected that the third-party data center industry will grow significantly from the current level of 500 megawatt to 2 gigawatts in next 3 years. There I ask Ankit to take up these all data center development, market and prospects for Techno.
Yes, sure. So, till date the most data centers have been located in Mumbai and Chennai. We selected for ourselves to be part of the Chennai market. And we selected the location in Chennai as Siruseri. We were one of the first movers to capture the market of Siruseri at Chennai. While there were only 2 data centers before us, that was from Airtel and Adani And over the -- post our acquisition, post our development, we've seen entry of Equinix, Sify, [indiscernible], to name a few. So this has further validated our choice of location and location is extremely important and key when it comes to data centers because they have to be located [Technical Difficulty] infrastructure so that they are well connected to the cable landing stations or the fiber network that is laid down domestically in the country.
Having so many data centers around us has us connect to the ecosystem and has further validated our choice. -- [Technical Difficulty] the data center of 24 megawatt IT load because we have control over cost, quality and the timeline of the project having our [ OPPC ] capabilities; almost 60% to 70% of the CapEx in the data center is towards electromechanical works and with Techno's inhouse capabilities to deliver high-quality electromechanical works, we are able to have greater control over the time of the -- schedule of the project, the quality and the costs, and that itself would be extremely advantageous for us. And industry has started recognizing slowly and steadily the advantages that Techno brings to the industry.
We have almost completed, one can say, 50% of our long-need equipment ordering, expect deliveries of equipment starting from the month of July. As far as civil works are concerned, ordering has been 100% completed, and we have completed casting up to the third floor of the building. The total building is 4 floors and only 1 floor is less, and we are hopeful we should be able to complete the casting of the last floor also by the month of July. So we will start the mechanical work from the month of July onwards. And in 3 months down the line, we should have the complete project or the project almost ready for testing, commissioning and operations.
Ideally we are looking to develop a couple of more data centers across the country. We have shortlisted a couple of more cities for similar sized projects, one of these is in Kolkata, while the other is still under discussion and -- but in advanced stages, so we shall be able to speak about it during the [Technical Difficulty] still in active discussions with a few potential strategic partners. But in meanwhile, there have been significantly positive developments, where we have [Technical Difficulty] we have started indirectly and directly engaging with the end customers. And we might just be in a position to be able to lease the space in the data centers directly, but continue to scout for strategic [Technical Difficulty] -- we continue to engage with them. And at the right time, we shall be able to bring someone on board to reduce our exposure.
CapEx for the Chennai project is at approximately INR 1,400 crores, that is about INR 45 crores per megawatt. And we are still hopeful that we should be able to complete the project in the [Technical Difficulty].
Ankit, are you through?
Yes.
Thank you.
Yes. Thank you. And I'll only add to this that the national payment centers of India catering to UPI and other applications is very close to our data center that has also added -- adding more value to the very location or pocket we are in. With this background, I'll now seek participation from the members to further clarify our any of the details or prospects.
[Operator Instructions]
Our first question comes from the line of Gunjan Kabra with Nuvashare.
Sir, I'm little new to the company and I have few queries regarding the business model. So firstly, resultwise, there is difference between consolidated and standalone numbers because standalone is higher than consolidated. So is it because of the data center EPC or how is revenue recognition? And going forward, how are we planning to recognize this revenue, because there is some loss and [ unallocable cost ] with segment also. So I wanted to understand why is there such discrepancy with the standalone and consolidated?
Mam, I think all of you know, this is a requirement to consolidate the accounts as per the Accounting Standards and SEBI norms. And work done for your own wholly-owned subsidiaries like data center or AMI, the cost incurred on those projects, we have to account for it in the stand-alone accounts. But they are taken largely at cost till a significant stage is achieved. In the very project, we can add profit margin thereafter, but it does not make larger sense as a business to pay out more taxes to show only -- and we will like to capitalize this work done in our subsidiaries when the OpEx or operating revenue visibility is close by. So this is a better way to manage your -- efficient way to manage your cash and consolidation is a requirement.
So actually, I was wondering because the stand-alone sales are higher than consol sales, that is why I was wondering, Okay.
They will always be, mam, because as long as you are working, carrying out some assignments of the subsidiaries, the output generated by work done there will be part of stand-alone but not in consolidated. They will be a part of the -- separately in the subsidiary accounts prepared for each company.
Okay. Sir, also, how are we placed in the data center industry, though it is a very emerging and growing industry right now. So in terms of competitiveness, how were we placed, because there are quite a few competitors also who are building -- who are also in the same model. So how are we placed in terms of firming of what cost? What is it for us? And how is the rental model work going forward? And have the -- I mean going forward, then are we planning, how this model will work going forward is what I wanted to understand in terms of revenue and profits?
Well, Ankit. Will you like to answer this?
Yes. Yes, I'll take it. So as you rightly mentioned, the data center industry is still very, very nascent and still maturing. The -- there are very few companies that we can consider to be mature companies in data center industry, but they have also been in existence for only last 10 to 15 years, and they can be counted as 2 or 3 at best.
Market will always be competitive when there is -- we'll keep getting more and more competitive, obviously, because there is a demand-supply gap. Today, where just to give on broad numbers, where the supply would be at about 650-odd megawatts, the expected demand in the industry is close to around 1,100 to 1,200 megawatts. So there's almost 100% gap over here. And till the time this gap remains, we'll keep hearing more and more players jump into the industry. But being a very high CapEx industry and requiring specialized skillsets to be an operator of data center [Technical Difficulty] as much as we see around the industry, we won't be seeing deliveries happen on the ground.
And for a company like Techno Electric, we are not trying to compete with established data center operators. We don't need to compete with them until and unless we are able to build those operational skillset, which we are parallelly working on. But till that time, we will be ones who will be able to address the challenges that the industry at large is facing such as sourcing of power, finding quality EPC contractors. And also delivering quality project to the end consumers because even today, it is only lately that high-quality projects have started getting delivered. Until today, the kind of [ skillset ] required to deliver high-quality projects were not available. But slowly and steadily, industry is maturing towards it and customers have started pushing the operators towards delivering better and more reliable solutions.
So that's the way industry is. And we understand that today, Techno may not directly want to take any kind of business risk out of data center that is going into the market to lease the space. We would like to first attempt to find a strategic partner and investor who can help us in achieving those relationship with the customers that will ultimately lease out the sale and kind of derisk Techno out of those business risks. And Techno would like to play on its strength, which is EPC and power, because power is the raw material for any data center at least today.
So we'll continue to play on our strengths whilst find a partner who can derisk us off the business; risks, which come along. And that's the strategy we would like to adopt till the time we develop our own operational model, which might take another couple of years.
Okay. Sir, when is the -- when is it expected to operational -- I mean, commence the operation, I mean, when will the rental and the income start from the data centers; is it in FY '25 that you will see the revenue coming in from that?
Absolutely.
Okay. And sir, you also mentioned the INR 3,800 crores of order book, we closed it on March 31. So I wanted to understand how much will we be able to execute it this year? I mean to -- like FGD takes down 2 to 3 years to execute. So the total order book, at which stage are we in terms of execution, if you can tell like how -- if you can tell that. And for the smart meter also, if you can explain what's the order execution cycle?
Mam, I will say that the first visit our office, #1. But coming to your question specifically..
Sir, i would love to visit your office...
Yes. You are welcome, and we'll be happy to host you. So firstly, the business of order of FGD is nearly a year old, and now it is right to execute. Last year, we have not booked any output of this work, although we got this order sometime around June, July of last year. Now this year, it is ready, and we hope that at least 50% of work will be completed this year and another 50% next year. You are perfectly right, it is a work of no less than 2 to 3 years.
As far as AMI is concerned, it is a very fast-track job. The present 2.5 lakh meter job we are doing is only at 12 months execution cycle, which has already started. Out of 2.5 lakh, we have already supplied 1 lakh meters. We have installed about 15,000, 16,000 meters by now, and we have to complete this work by no later than December this year. So this entire work will be completed of the present AMI order in hand by this year.
Okay, got. I will come back in the queue and good luck.
Thank you.
Our next question comes from the line of Sandeep Tulsiyan with JM Financial.
[indiscernible] I hope you are doing well.
Now is the future, sir. Now it has started. We have boarded the bus.
Sir, I have a couple of questions. Firstly, the way this entire reporting is done, the margins in EPC are booked at INR 39 crores. And on top of that, we have booked other income of INR 23 crores. But because of some loss, the overall EBIT, that we have shown in just about INR 24 crores. So I'm not able to understand this math, if you can explain that, it will be great, sir.
You are asking a wrong [ man ] , Sandeep. I think we have boarded a grand [indiscernible] on board, as per your requirements. We want to be best of the best in accounting. And just 1 quarter results do not -- will always be a little juggle here and there because discontinued business, sub business, third-party business, they all classify differently.
But when you look overall as annually, so a lot of mud is out in the company now. And we are now the good -- I always say in the company now my message is a good morning has happened, and we must see the bright sun ahead, and company must grow at no less than 30%, 40% a year now. So that in the next 3 years, we have doubled top line and at least doubled PAT. So that is the mission we are on, sir. And for any specific details, you are welcome to my office, sit with my accountants. They will take care of it. No issue.
I can say overall, let me complete Sandeep. My accounting start with cash, ends with cash. But, my accountant tells me Gupta Ji's accounting do not happen in cash, it happens on mercantile system.
There is a huge disconnect between their way of looking on accounting and my way of looking on this business. I still trust EPC business should be purely based on cash, at cash flows; what I have earned in cash and what I have spent in cash and what I have paid out in cash. So that is my way of life, and I've done it successfully. And I think I'm no worse than others. I leave that judgment to you, we have won cash in this business. We are sitting on a cash of INR 1,500 crores. We have paid out all taxes. We have paid out all buybacks and dividends of INR 1,000 crores in the last 10 years. So we are cash positive and cash generative company. That's all I know as a business, rest is accounting numbers.
Sir, just because should we just add these numbers, it seems some INR 35-odd crores...
Discontinued business tend to account for and then secondly, tax outgoing more, because of the wind assets, the capital gain tax itself has taken away INR 55 crores. We have paid out a tax of this year, INR 110 crores, all-time high which I think was never more than...
So I understand the discontinued part. My question was more on the EBIT prior to the entire tax outgo and continued itself because our corporate segment shows a loss -- EBIT loss of INR 14 crores on income of this INR 22 crores that we have got. So it seems that the INR 36 crores is something like write-off we have taken on an account?
They may have offset some deferred tax here and there -- that is how it goes -- you are welcome to come to office and...
Yes. I think we'll connect separately on that one...
Overall, we are positively INR 218 crores net of taxes. That is more vital to us and it is all in cash.
Sir, second question was on the data center part. We have booked this INR 150 crores of top line in this quarter. And I think the initial guidance that you had given was roughly about 60% of this INR 45 crores should be EPC work. So if you could quantify what will be the total EPC order execution that we'll do over the next 2 quarters, where we expect to finish this. What would be that size about -- should it be INR 800 crores, INR 850 crores or will it be larger than that?
But Phase 1 order on us is about for INR 540 crores if I am not wrong. That is Phase 1 order out of this. And so far, we have invoiced, spent rather not invoiced, about INR 120 crores and the balance, you can say, about another INR 200 crores or INR 250 crores will be in next 2 quarters and balance will be in third quarter, another INR 150 crores.
Got it. I understand. Then balance part of cost, Phase 2 will be after that, which will form part of the total INR 45 crore project, right?
That is -- we are only at the moment working on Phase 1, which is Ankit referring to be ready by October.
Understood. And sir, one question is on these sticky receivables of Afghanistan project, Bengal from execution done [indiscernible] INR 80 crores receivable. Sir, what is your entire outlook on this? How soon can you realize this total INR 150 crore, INR 160 crores of receivables which are sticky. Over what time period can this be realized by the company?
I trust it should not take us more than 1 year maximum because now we are in a closeout mood and we will put all possible resources and influences. Dealing with Discoms has always been a pain. Had it been what our Central Government makes us believe, there was no concern to exit here. The very pain to exit lies there that we don't implement what we say. We don't mean what we do. That is [Technical Difficulty] in my life. So -- but you take it 1 year, the perfect answer to your question is 1 year, it will all be liquidated. Rather we have to get much more, Sir. We don't want to put it in [indiscernible]. We'll count on cash basis as and when received.
Understood. And sir, on this -- next question is on this AMI business. In the past calls, you had highlighted that when you come closer to execution, you'll be able to give more color on the business model. If you could explain that briefly to us how the revenue bookings and what will be the typical cost margins in that segment? Exactly how the P&L of this entity Techno AMI will look. If you could give a broader sense of the business model that will be helpful?
Sandeep, I think I'll be better placed to explain you in June quarter results because if the -- as I explained, they are like to have some accounting process called [ HAM ] which was used in [ I-base ] which will be a similar model of accounting here -- but we are a little more -- will be innovative because of our comfort with the lending bodies. Going forward, we'll examine how we can, apart these receivables, win some of them.
Okay. So fair enough. I understand that. So we'll probably connect on that in the quarter after that. And lastly, just for reconfirming the wind assets, which are in hand. So now we have some 6 megawatts in Andhra Pradesh and around 3 megawatt, 3.5 megawatts in Tamil Nadu. So 9.5 megawatts will be left after this entire transaction is completed, is that right?
No, sir. 18 megawatts in Karnataka we are left with and another 3.3 megawatts left in Tamil Nadu. We never had any asset in Andhra.
So 21 megawatt is presently with us, 3 megawatt we had a volume we could not execute because of the lag issues. Digitization sometimes can be a blessing and [indiscernible] both. You can see that. So all that data are digitized now and multiple people have registered the same land parcel, on which our windmills are lying, although we have assurance [indiscernible] the ultimate challenge that it belongs to them. But we'll be able to unlock it, sir. There was a company in Chandigarh called [indiscernible], they did some kind of teak farming claims and collected a lot of money from investors. SEBI knocked down on them. There was a Lodha committee and whatnot. It was a mixed up of all type of scam you may be knowing it. So we have to go through all the processes to unlock that land parcel from there, sir. But we'll be able to do it.
21-megawatt entirely will be sold and -- or we will retain something for in-house consumption [indiscernible].
No, we are not retaining anything for consumption now, sir, because a lot of policy changes have come. With the very amendment to the Electricity Act, where renewable power enjoys open assets now already over conventional power. So buying power in open assets with, ISTS charges being not there, makes this power more competitive in buying out than generating yourselves.
So these regimes are changing every month, Sandeep, and we have to catch up with that regulatory side. It's highly regulated business. Government is keen to promote this business in India, decarbonize India. So all these kind of facilitations will continue. Like yesterday, only notification has come from CRC that our next 25 years ISTS charges waived for generators.
All right, sir. All the best to you.
Thank you -- our next question comes from the line of Sarvesh Gupta with Maximal Capital.
Sir, first is on the revenue guidance for this current fiscal year. So I think this year, despite having almost INR 3,000 crores, INR 4,000 crores order book, the overall EPC execution ex of data center has only been like INR 830 crores. So it has been much lesser than last year also. But going forward, if you can just help us understand how the execution can be on the INR 4,000 crore order book that we have, excluding data center, sir, that would be helpful.
Minimal. We're talking very conservatively, you can take it almost around INR 300 crores plus/minus third party business other than our own works to be carried out for data center and AMI.
Okay. So that is INR 1,300 crores. And then as you were mentioning, out of the INR 540 crores of data center, I think INR 130 crores, we have already done INR 140 crores, we have already done. So INR 400 more will come from data center?
Right. It should come INR 350 crores further.
Okay. And on this INR 1,300 crores, sir, how do we see the margins playing out for this financial year?
I will continue to maintain guidance at 12% plus for this year also, but I'm very hopeful it should be a little better, may be not quarter-on-quarter, but prices are softening at the moment because of China backlog. Even steel prices have softened by INR 3, INR 4 in the last 1 month. That's very positive. So if commodity prices are softening, inflation is going down, we are very hopeful that it should be something better than 12% only.
So the last call, we had mentioned around 14.5% for the EPC side. So are we guiding for a lower sort of margin this year?
I'm not saying lower or higher, sir. You see it depends on very, very job-specific interactive part. Ultimately 12% may become 14% because last year, when we guided 14% we had that kind of [ the ] provisos in our contracts additionally available.
Now under TBCB model, the order becomes by and large future price with the developers. So if commodity cycle remains softened, it will be better only. But I must give you something which I cannot breach, like you can see last year also, we are nearly 14%, which I told you on an average for the year. But quarter-on-quarter, we have been coming down a bit, like last quarter is now 12% or 12.5%. So similarly, you take 12.5%; 12.5% to 13% will be safe enough.
Understood. And on this INR 400 crore, rather this INR 540 crore data center project, now this quarter, we have not booked any margin, so that is 0. So going forward, as the milestone comes, what is the strategy to sort of book profits here?
It will be guided by the accounting norm, sir. We cannot apply our own mindset on this. I'm not sure how margins are taken care of. If eligible, it will be taken. Otherwise, it will be zero only, it will be cost-to-cost.
So even after the completion of the Phase I, there is a...
You see once you have completed, COD has happened, as it is capitalized in the subsidiary and it is no more work-in-progress, then it is a final billing, then it is a close-up. COD has happened. Once you have executed the whole contract, margin flows in. I have no doubt. But progressively, at what stage that is eligible for margin, I'll have to see guidance from my accountants.
Understood, sir. And sir, finally, on the order book side. So currently, we are at INR 4,000, INR 3,800-odd crores. And did I hear it correctly that you said that as against INR 3,300 crores of order flow in FY '23, you are expecting around INR 4,000 crores of order flow in FY '24. And what will be the breakup of that, sir, in terms of various segments and especially if you can highlight the L1 also INR 1,250 crores, where is that?
One is, as I said, [indiscernible] we are L1 we founded in transmission asset business, and another in AMI business. These are the 2 businesses where we are L1, and we are also seriously engaged in FGD business with a private developer, whose name I cannot disclose at the moment. So definitely, we are looking for a year-end order close of no less than 6 projects a year by the year end of '24.
Okay. So INR 3,800 crores and INR 4,000 crores more this year and lessened by maybe INR 1,300 crores of this year?
INR 1,800 crores including data center and AMI and third-party business. So INR 1,800 crores, you can minus out of [indiscernible].
Our next question comes from the line of Mohit Kumar with ICICI Securities.
My first question is on the inquiry pipeline for the transmission side. Are you seeing any -- I understand there is a -- the bidding pipeline is very large. So can you please comment on that?
See, I will say that pipeline is [indiscernible], but not the value in transmission assets because these are largely limited to 2 states as of now, which is Rajasthan and Gujarat. That is where most projects are happening as of today. And it is already densely populated with transmission assets, but we still see a lot of scope in intrastate business in augmenting their own capabilities, capacities. And also grid need technological improvements in injecting more renewable power vis-a-vis conventional power. We are already at around 12%, 15%, which need to improve to 25% to 30% in the coming 4, 5 years. So that will give a lot of challenged to the grid which has to be backed by many new technology solutions as well as pumping storage backups or gas-based stations. [indiscernible] ongoing technological innovation, but we, at the time, are taking this sector a bit conservatively at least for this year.
My second question is for intrastate. Are you seeing -- are you reasonably hopeful of intrastate transmission activity picking up in medium term? And does that create an opportunity set for us?
Yes, if there is opportunity, it is for us, sir. Whether it is [indiscernible] or private, that's not an issue. The question is the very opportunity happening in a right manner and right time, and government is time and again postponing the biddings, number one. The ground reality is little different than what you see is the media or what minister talks about, that is my takeaway. Because still they are not able to sign is they are counter party [indiscernible] are mounting with every day. So challenges are also growing within these sectors, sir, because I've always mentioned to you, this sector need market reforms, not regulatory reforms.
And regulatory reforms are not going to take us anywhere in this sector. 20 years of electricity act, what has happened to consumer where you produce electricity at INR 3, you tell me. And at your house, it comes at INR 10, and you are still in loss, sir. And that DISCOM is in loss. How do you define the balance sheet of DISCOMs by reforms in this sector at the end of the day. So these are all the cosmetic progresses, I will say. So we are all going along with it happily. But if they leave this sector like aviation, telecom, [indiscernible] to the market forces, you see what kind of changes happens. It will be entirely different, sir.
Sir, my third question on the data center, of course, we are building up our data center. Is there a faster way that we can participate or build data center for third party?
Yes, absolutely.
What are our capabilities, sir? [indiscernible] let's say [indiscernible] on our -- what is our scope?
Ankit, will you like to address this issue?
[indiscernible] data center cost between the various parts and the [ latest ] of the scope, which -- where you can work?
Yes, we will be largely having the scope in electromechanical and multilayered power supply solutions, sir, that will belong to Techno. Data center is defined in terms of megawatt, number one. So -- and it need to have a reliability of power supply. So it has a multilayered power supply solutions around it. Two grids and 2 backups then N+1 in backups then you need a lot of renewable power storage solution, if you can afford going forward, that will be a way of life, then all kind of electromechanical solutions from medium voltage to Dishy voltage, they will be digitally part of the solution. So then safety solutions around it. Security surveillance around it.
So these are highly secured, reliable 99.99% available installations. They're not like power stations, which are configured around availability only. They should not have latencies, that's a very big thing. You have to have an internet exchange very close by to your data center to avoid latency, which we often experience in our line. So OTT is growing, apps are growing, e-commerce is growing. So this has quality demand of data center and cloud services are growing. So all this will mean a lot more use on data centers.
Sir, my last question is, sir, have you tied up -- sorry, I missed out, but have you tied up with the client for the renting out our data center? And what is the kind of utilization level you expect to achieve in, let's say, 2 to 3 years?
Ankit, will you like to answer this?
Yes. So as I started the call -- we started the call, we explained the progress at that point of time. We are still in discussions with a few [indiscernible] that we are looking to tie up with customers or client directly for this project because we do not have those kind of skill sets which are required for operating a project to the satisfaction of a client. But rather have a partner on board that can help us operating these projects, and who can help us tie the facility or the space available in the data center by leasing it to those specific end customers. So we are trying to derisk ourselves from those aspects of the business, which we are not fully conversant with or yet comfortable with. So the whole customer time part shall be taken care by the partner that we finally shortlist for the project. As far as Techno is concerned, we'll continue to work on what we are very strong at, which is ensuring that the project gets reliable power and the project is built to the best specifications possible for the end customers.
Understood. Is it fair to assume that you'll have -- you'll be tying up in the next couple of months?
I wouldn't want to put a time line because [indiscernible] not added for last 2 years and -- or, let's say, last 1.5 years. But as the project is progressing, we are seeing better quality of interest and better terms as well. So maybe once we are more closer to commencing the project, I'm more hopeful that we have a [indiscernible] position on the table that we'll finally be able to accept and go ahead with.
Our next question comes from the line of Chirag Shah with ICICI Direct.
So just one clarification. When you mentioned that you're looking guiding for INR 1,800 crores of stand-alone revenues. So the margins that you mentioned, 12% includes the margin on the revenues book on both the subsidiaries of AMI and data center, right?
No. No margin. It's at cost.
But, sir, as you mentioned, whatever I understood that if you book out the whole order in FY '24, at the end of the order, you'll book some margins, right? So that...
Yes, absolutely. That will be a part of the bottom line. Absolutely, for the year end of '24. You're right.
Okay. So in that case, sir, what will be our margins look like, if I just look at the stand-alone piece per se?
Sir, then I will not say margin, overall, will remain same 12.5% to 13%. I'm not going to make a profit-eating out of my subsidiary. But our top line eligible for margin will become larger. That's all I'm saying. Everyone have [indiscernible]. Presently, the margin which I'm saying is on the third-party business as an accounting norm. Consolidated will speak better in that case. But once my own sub business becomes eligible for profit booking in the top line, then margin percentage will remain same, but the top line eligible for margin grows.
Because I was coming from the point that tomorrow, if in future, if you take a third-party data center execution project, so what kind of margins one can [indiscernible]. So I was just trying to understand that.
You can expect around 15%, sir, easily, if not 20%.
And, sir, my second question is more on the FGD side of the business because you mentioned that -- your commentary suggest that you are quite [indiscernible] on that segment. But if you look at the market personally, few of your competitors are mentioning that FGD market is slowing down. And if you look at NTPC, it is almost done with its FGD ordering. So where is the scope or where is the opportunity that you are looking at?
Sir, government has fixed a date by which everybody is to do the business, you are very right, NTPC is more or less completed its assignment. But states and private players are still lagging. They are usually backlog with them. Almost 100 gigawatt is yet to be fitted with solution on NOx and SOx solutions. You're right. So it is a time to address market emerging out of the captive power, private players and [ BSV ] State Electricity Boards. And something to do with the ICBs also, CPSU also like DVC. They have just now come out with the tender in one of their units now. Now they are further expanding the capacity in thermal world which government has recently approved to the extent of about 25 gigawatts. Those projects will also be retrofitted with these solutions additionally. So the market for next 4, 5 years exist. Yes, there is a bit of a slow start because government has already granted them time extension up to '27.
Our next question comes from the line Dhavan Shah with AlfAccurate Advisors.
So I would like to understand more from the order book side. So we ended up roughly INR 3,800 crores of order book. Can you break it up between the generation transmission distribution, what is your end order book for these 3 segments -- subsegments?
Yes. INR 1,500 crores in generation, taking FGD as a part of the generation and another about INR 1,000 CR is in transmission, and about INR 300 CR is in AMI, and further our data center order is about INR 400 CR or INR 425 CR. And AMI business for our own TOTEX market is about, you can say, INR 250 CR.
Okay. Okay. And normally, you mentioned that roughly 50% of the FGD contract work is already completed. And the -- I think the 50% execution would be completed this year and the rest would be next year. So in the -- transmission wise, I think the execution cycle would be 4 to 5 years, right? So including all these things, you mentioned that we will end up the revenue of roughly INR 1,300-odd crores for this fiscal, that is what we have mentioned, right, excluding data center?
What we've -- I never mentioned that. Today, renewable power generation starts within a year, sir. The days of 3, 4 years or 4, 5 years are over. Transmission system has to be in place by 1 year, number one. Number two, I mentioned that FGD do take 2 to 3 years, but the order is 1 year old where we have not booked any revenue so far. So this year, second year will be the first year for the revenue booing ending within next year, third year -- that will be the third year of the order and '24, '25 of the company. That is what I was explaining.
And I also said that the metering order we have with us today is only to be completed within 12 months. But as per the government scheme now, they are generally giving us about 27 months in [indiscernible] for schemes in new metering solutions. The old work which I am doing for 2.5 lakh meters is to be completed in 12 months, that is by March '24. So all of this will get executed in this year.
Okay. And the margin-wise, can you share the subsegmental margins, how are the margins between this FGD transmission and data center, should we assume the average 12% or is there any difference between these 3, 4 subsegments?
On average you can take 12% to 12.5% easily, but they are differentially distributed. Transmission is 10%, FGD is 15%, AMI is another 13%, 14%. So average out is about 13% plus/minus, you can say.
Our next question comes from the line of [ Shreyansh Gattani ] with SG Securities.
I had a question on the data center, basically. So I wanted to know, are the -- is the partner just waiting for Techno to demonstrate like certain capabilities in terms of construction of the data center, which is why it is getting delayed and terms are, like you said, getting better or like why would the contract signing not happen today and would happen at a later stage, like -- and also like if the clients that you're talking to like you mentioned, like, I think since the last 2 or 3 con calls that there is a term sheet and back and forth. So are they the same people you are talking to? Or is there different people in terms of the partners that you are considering.
Ankit, will you like to articulate the answer?
Yes, I'll address it. So basically, what we are trying to say is that every project goes through its own cycle. And today, it's at a place where most of the development risk is behind us. When you look for a partner at the very concept stage where it's a barren line, it's very, very blank. It's like both the developers coming together and setting up a project and taking on the development risk equally. [indiscernible] by that much more development risk is getting behind us. And therefore, the expectation of rewards are constantly changing and how the market perceives the project also changes. Second, the industry timelines, it helps you sometimes because [indiscernible].
Sir, your voice is breaking. Hello?
Are you able to hear me?
Yes, yes.
I'm saying that with time, obviously, industry dynamics also changes. And today, we are at a position wherein -- you see for the year 2024, there will hardly be any space in data centers available in the Chennai market. This probably will be the only project that will be available with this kind of a space. So most customers should prefer this project. And the competitive advantage that we would have in compared to the industry would be much better. Many projects which were planned to get executed or completed in 2024 for obvious reasons have got delayed to 2025, which gives Techno better edge in the industry. Third is that sourcing power is always a very big challenge, especially in a state like Tamil Nadu.
And somehow Techno's experience has helped us in securing the required amount of power for the project, which is significantly unique to other projects. While some are struggling to even secure power, we have that security available. So as we are progressing, we are unlocking certain challenges. And that is improving the prospects of the project and the -- one can say the valuations one can command with the partner. And the quality of partner also changes because at the time when you discussed for the first time, they also see that the project is at a very decent stage.
There's still time for capital deployment or the availability of the project in the market. So those discussions take time to mature out, but now that we are coming close to completing civil works and coming close to commissioning and these development risks are behind us, there are more serious conversations that have started taking place. And it's just a matter of time when we decide that, okay, this is the terms and valuation at which we are comfortable now closing at it.
Got it. So you had mentioned like around an 18% IRR for this. So that was, I think, in the September con call last year. So like should we assume that we should do better than that given that you're looking for better terms now or does that remain the same?
You see ultimately, IRRs are obviously about the amount of risk which we want to keep on our table. If -- till the amount of revenue risk that we are willing to take on the table, that much more the returns obviously improve for us. But that much businesses also Techno goes through. So the final call we will take on the basis of what kind of revenue risk is Techno willing to take on the table. So the IRRs are ultimately dependent on what kind of a -- if we don't want to take leasing risk of the project and we wanted to be 100% borne by the strategic partner, obviously, IRRs would be much different than in case if we are willing to take the lease risk on our table.
Got it. And are we still talking to the same partners? Or have we got additional partners or some of them have changed or...
We're in discussion with 3 partners.
Let me add here, sir, for all of you, whatever assets we developed 10 years back or 5 years back or we are developing now, we have always [indiscernible] had a huge gain and never had hair cut, whether it was transmission assets or it is wind power or going forward our own AMI assets. We are very sure, we understand quality and life cycle of an asset in performance in this business. That is the biggest [ photo ] we have. We are not commercially scaling up or building up some issues to be party [indiscernible] to third-party at some margin. If market supports me, I make a gain, if does not, I take a hair cut, that is not the business of Techno, sir. My business is to excel, first technically and then financially. So I have always -- finance has followed me -- my excellence in technical application of the solutions more than other way around. So finance is not a criteria when we work on a project. But it is important and we have always been positive on it, benefited with it.
As there are no further questions, I would now like to hand the conference over to the management for closing remarks.
I will like to thank all of you for joining our investor conference and asking very, very simulating questions, and you are welcome to visit our office. I will only say that with the lapse of 4 years and stagnating work all years is behind us. The sunrise in the company has happened now. And we are on a strong footing to grow in next 3 years. And you will find our top line and bottom line doubling out in next 3 to 4 years. And we'll be building more modern day technology-based solutions, both in data center, transmission, AMI and whatnot all we like. We are very excited for our tomorrow today, I will say. With this, I will like to thank all of you for joining the conference and if you are still left with any query related to our future technology journey, our performances, please drop a mail to us. If you happen to be on this side of the city or in Delhi, we have now large-size office added by Ankit in Delhi in [indiscernible], you are welcome to drop in and call on us. We'll be delighted to host you. Thank you very much, once again.
Thank you. On behalf of Asian Market Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.