Texmaco Rail & Engineering Ltd

NSE:TEXRAIL

Earnings Call Transcript 2023-Q2

[Operator]

Good day, ladies and gentlemen. Welcome to the Texmaco Rail Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agarwal, Head Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.

[Navin Agarwal, analyst]

Good afternoon, ladies and gentlemen. Apologies for the delayed start. It's my pleasure to welcome you to this earnings conference call on behalf of Texmaco Rail and SKP Securities. We have with us Mr. Indrajit Mookerjee, Executive Vice Chairman; along with his colleagues, Mr. A.K. Vijay, Executive Director; Mr. Hemant Bhuwania, VP, Corporate Finance; and Mr. Ravi Varma, VP, Corporate Affairs and Company Secretary. We'll have the opening remarks from Mr. Mookerjee followed by a Q&A session. Thank you, and over to you, sir.

[Indrajit Mookerjee, executive]

Good afternoon to all of you. And at the very outset, let me congratulate you for your patience and being present for this call. I also apologize for the delay, which happened because of technical reasons from the communications side. I also would like to issue all the best because we are talking after the [indiscernible] celebration in India, which includes both [indiscernible] So my one greetings to all of you. Just to give a little bit of overview of what's happening. You all are aware that the sector once again has come back to a very promising one with orders being already been awarded to [indiscernible] manufacturers. Also, there are lots of demands from the private customers, including exports. There seems to be a worldwide shortage, but there seems to be also many challenges because in order to gear up to higher volume, which requires lots of other inputs like components and people, et cetera, et cetera, which take time to gear up. So while it's a good problem to have, it also has its own challenges.

As far as Texmaco is concerned, I'm happy to say that it took almost a quarter and a few months to really to overcome the initial challenges of availability of key materials, key components, et cetera. But at the same time, we see that apart from the variance, as we call ourselves, we are a real solution provider. So all the other connected areas or affiliated areas also are showing good signs of recovery. So our current focus is very much on to keep our focus into our production, improve the productivity, quality, efficiency and debottleneck our existing 2 plants to the highest possible level to meet the demand. The demands are pretty high, and our productions are ramping up. In fact, the run rates are pretty up now, and we hope to achieve much more.

I don't think we are there where we want to be but I think I'm very hopeful that by next month, we should be in an optimum position or a maximized position on our production of baggage. As the rating production goes up, it also puts lots of pressure on to foundry because most of the key components come from our Home foundry. And they're also we are very highly focused to improve efficiencies and productivity. So having said this, I think it's the time to talk about some specific covers and to see what we are doing. We are just in the path of recovery. I think it is the beginning of a good run so we can't expect anything to come in 1 month, but I think we see a bright future. And I would request my colleague, Mr. Vijay, our Executive Director Finance to explain to you the numbers in a nutshell. Vijay.

[Ashok Vijay, executive]

Thank you, sir. I must say you summed it up so well in such brief covering the entire garmet of the operations also and also how the outlook and things are there. In brief, I'd like to just share with the shareholders that the company, as explained by Mr. Mookerjee also is now turning the corner, which is very vital and important. And as Mr. Mookerjee pointed out, we are no more only a wagon company it is basically a rail sourcing provider. And fortunately, for us, in all segments of railway, there is a robust demand coming both from a rail segment and also from non-rail segment, which is a very good thing to happen. And we have been talking about this for quite some time and all the vision documents of government of India, these were focused upon. But somehow it was not acted upon by the government. This is the first time we are noticing that, yes, the government is working the top and also ensuring this thing that whatever is required to be done for this segment should be done not only expeditiously, but if possible, why big within a very short span of time.

Now with this, basically, I'd like to clarify for academic purpose, the gross revenue of the company for quarter 2 is INR 497 as compared to INR 379 in the corresponding quarter of the previous year and INR 305 in the previous quarter of quarter 1. The EBITDA and net profit after tax for the quarter are INR 55.21 and INR 13.51 respectively, as against INR 44.04 and INR 5.85, respectively, of the corresponding quarter and negative of INR 3.62 and a negative that is a loss of INR 22.5 in the quarter 1. The gross revenue for the half year ended this September is INR 802 compared to INR 76 in the corresponding quarter of the previous year. The EBITDA and net profit loss after tax for the quarter are INR 51.594 and negative INR 8.99 against INR 45.61 and INR 10.5, respectively, in the H1 of the previous year. These are the financial numbers, which are there in front of you and certainly, you can take cognac of that accordingly.

We would also like to inform along with this that, yes, we are getting a very good robust demand scenario whereby we are not only getting orders from the railway, which one of the largest order we received also getting a large number of orders from the private segment on non-ransegment and also no to our delight, we are getting a lot of export inquiries also, which is a very, very heartening and all we are gearing about selves to make sure that we reach to the level of production whereby meet all the requirements, which are coming our way and in cash upon the opportunity, which is being thrown open in the present booming rail segment. Total order book as on date is close to BDT 9,300 and basically, post approval of the prototype that was sometime in the end July, we started the production activities from August whereby initially 10, 15 days were required for the purpose of buildup of the WIP.

And thereafter, we are going full swing. We already reached a level of close to 300 bankers a month, and we expect to reach much higher levels in the coming months as was explained by Mr. Mookerjee that our aim is to go much higher, and we are working toward that direction. Our other divisions like Steel Foundry also has to gear up, and we are accordingly getting it up. And we basically had a lot of inventory because in the previous months, suction was not there from wagon plant for the region that [indiscernible] approvals. Since that happened, now we are gearing up the foundry production and hope to expand the foundry production also substantially in line with the requirement from a variant division. Similarly, by other divisions, including rail electricity, they have seen now the traction. Recently, we have won an order for we have not won sorry. We are the L1 in an order for INR 252, which is basically called blaster for metro indoor metro.

And that's how basically we expect earlier also the aim of LPC now to go for smaller duration contracts and also contracts where we are not stuck because of activities relating to land, civil all governmental actions. Fortunately, these things are not there in the metro segment. We have primarily and basically existing only in the rail track segment and that's how the company is now focusing not on the rail track segment, but on the Balasore signaling and other allied area where the court enter company is there. With these statements, I submitted to the investors to have a copper evaluation of the company's performance. And in case they have some queries and questions we are open to answer them. Thank you.

[Operator]

[Operator Instructions] First question is from the line of Shambhu Rathod from Aamara Capital.

[Shambhu Rathod;Aamara Capital;Analyst, analyst]

Yes, I wanted to know the status of Kalindee. So is it profitable now? Hello?

[Ashok Vijay, executive]

Yes, I would like to answer to you in affirmative. In the previous quarter, Kalindee is on positive side.

[Shambhu Rathod;Aamara Capital;Analyst, analyst]

Okay. So not a really pacing only the Kalindee segment?

[Ashok Vijay, executive]

Yes. Really, you see we have 2 divisions one is Kalindee and other one is bank power. Bank power all along has been very positive, and that business is always growing fast. As far as [indiscernible] is concerned, we had certain setbacks and we there's a reason why we have not earned money during the previous 2 quarters. But this quarter, we are on positive side.

[Operator]

The next question is from the line of Kaustav Bubna from BMSPL Capital.

[Kaustav Bubna;BMSPL;Analyst, analyst]

Hello. Hey can you hear me?

[Operator]

Yes.

[Kaustav Bubna;BMSPL;Analyst, analyst]

Great. So I had a few questions. Firstly, you've hired a new professional. So could you just speak a little bit about his qualifications? And very honestly, I wanted to ask how much role does the professional play in terms of decision making versus the core promoters? Could you speak a little bit about the culture of the company as to how much follow would the promoter give the professional to run the company and make decision. And then the second question is, could you state your current sales order and just some ambitions and internal targets on where you would like to take that order book given the opportunities and actually in the railway space right now we haven't captured any of that growth in our Railway EPC order book, right now. I understand we've got one small order recently, but obviously, internally, our ambition has been much higher. So could you speak a little bit about some internal targets on where you'd like to take this order book, those 2 questions.

[Ashok Vijay, executive]

Yes, I would like to answer the second question first regarding your rail EPC order book and where we would like to check it. Now the precision EPC order is about INR 1,325. Now as far as our negation that where you would like to see it over here, we explained the last investor conference also and even in this conference I mentioned weakly, our focus is only in areas where our #1, our core strength is there, #2, where we are relatively certain that the project will not be delayed beyond a limit because we have seen in the past that projects relating to the track work laying and all, they normally get delayed beyond limits. And ultimately, the companies have to lodge a large claim on the customer and which settlement in Indian condition is really very long. And by the time the settlement actually comes in force, the company always pays a cash price and liquidity prices. So we have decided consciously that, yes, our focus will remain in the core trend, which is signaling, ballasts track, rail electric overhead and also the auto fair collection systems.

So these are the things that it is the financials remain under control. The projects are done expeditiously. And we actually come in place much later than Manga Silver and other related on the ground is completed. So that's how basically we are focused. We are moving very cautiously. We are only looking at those orders, which are basically the mobile profitable; #2, which are going to be completed within the reasonable time spend; and #3, which basically relate to the core strength which we had. We are also now exploring possibilities to get into the export market of it in a very small way, but at case market where a lot of options are available to us, and that is what we are exploring.

And we are very hopeful before the year-end, we will be able to book some orders for exports from African continent. So this is how the company's focus for railway issues remain. As far as the target for order book are all concerned, we will be going cautious, but then I can assure you, our target is to at least maintain the level of turnover, which we have been achieving over the [indiscernible] INR 500, INR 600 and then going forward, our order book also commensurate to meet our achievement requirement. This is as far as the question #1 is concerned, I would request Mr. Mookerjee to respond to you.

[Indrajit Mookerjee, executive]

Thank you, Vijay. Just give me a second. Yes the question #1 if I got it correctly, is about how professionally the organization how professional the organization is. Now I have to say that our organization has always been very professional. And it's always been run by the professional managers. If you look at the organization, it partly there is any the promoters, which are the majority shareholders are always hands off from the operations of the company unless it's at the strategic level. But at the operating level, I think it just totally hands off. And all our company is run highly professionally, we have the professional managers. We have the provisional Managing Directors, in fact, all of us, including me and Mr. Vijay and all Hammond and everyone's pain there, all of us are professionals, and we try to bring in whatever best we can do in the organization.

So I don't know whether I have addressed to all the concerns at all the points which was raised, but I can only tell you that we are a very professional company. We are also trying to bring in fresh blood but in places where it's required, so as to modernize our sales revenue our sales as much as possible with the experience and also the competencies of people from outside. So we are constantly looking at where the gaps are, and we are trying to fill that in. In addition to that, we have a pretty robust performance appraisal as well as personal development program. So under we see high potential candidates have been seen and we see their future parts, successions. So these are all part of the inch is ongoing. I don't think I have anything more to add.

[Kaustav Bubna;BMSPL;Analyst, analyst]

Okay. I'd just like to end by saying that as you know our industry space, and I hope this would actually cover into and in your P&L, which has all been able to be until now. But I hope you do a good job and we can see the industry opportunity in P&L eventually.

[Indrajit Mookerjee, executive]

Yes. Thank you very much for your good wishes. And I think we have aligned thoughts and our actions are in that direction.

[Operator]

Our next question is from the line of [ Vansh Jain from NVS Wealth Managers. ]

[Nalin Shah;NVS Brokerage;Analyst, analyst]

Congratulations to the management. This is Mr. Nalin Shah, Director of NVS Brokerage and NVS Wealth Managers for the excellent set of reports as well as the very, very encouraging, I think, to note after many, many years. Now my questions are very 2 very simple questions. One, sir, you mentioned about that both the plants you are in the process of debottlenecking and trying to take the maximum out of it. So I just want to ask you now that what is the full level of 100% capacity utilization level, what is the maximum top line, which can be generated by the company because of these 2 plants without having much fresh CapEx. That was first. And second, you had some, I think order book of around INR 9,300 or so. This will be implementable on what period of time. These 2 questions, if you can just throw some light, it will be very good.

[Ashok Vijay, executive]

Yes, I would like to take your questions and try to give an answer which can be satisfactory to you basically. Now the full level of production, basically for our land size and all this thing, depending upon what the batch mix of production is there, what kind of types of bag we have been producing. But in the orders we are booking always step it up from the present level to the level of 8,000 to 9,000 batons, in fact, as of the capacity which we have assessed capacity Radio is in excess of 7,800 numbers. That is the capacity of our plant in respect of the wagons. A plant which is foundry the capacity is 40, 42,000 tonnes per annum. So these are the capacities and giving the opportunity to us, which is we have been getting tested for the first time, our efforts of the management is all the way to reach closer to those levels because now we have the opportunity to scale up the production to those levels.

Of course, they are at times or bottlenecks like for wagon production, ability of VS always remains a challenge. And if there is a break-in production naturally it affects in our situation of capacity similarly, in the foundry area also, there are certain specific bottlenecks which we face in this like in case we have to produce different various types of castings because we are also doing a large number of export casting business. that even as we change the fix and all this thing, the production is bound to get a little down at that point in time, but of course, we can figure out. So we are really hopeful that the capacity of the company, which is there already recorded in system, we are closer to achieving that when now since we have the full run of this thing. The second question, which you asked this 9,000 chemical order book, what is the time line. The real order book basically is 39 months and accordingly, we target to achieve within that period. So it is 3 years, 3 months, and then we got the target line we have got achieving this order book.

[Nalin Shah;NVS Brokerage;Analyst, analyst]

So I just want to extend the question that what is the value of the top line from the 2 plants which we can generate, as you explained to me about the physical production in terms of value, what will be this and 39 months, you count from when.

[Ashok Vijay, executive]

39 months, we count from the date of the order, which was in the month of May 2022 accordingly it goes up to next 3 years. This is this year and then further 2.5 years, that's how the order book is basically for and in total top line, the average price for Aragon on what is prevailing today in the market on today's basis, 35 lakhs on an average and economy, the capacity I explained to you. So the top line relates to for the balance, the top line is multiplied by the capacity. And for the foundry, is 40,000 tonne capacity. And average relation price for foundry product is including without the component is in excess of 150,000 and the component can be closer to 200,000. So accordingly, the number of foundry we can be used. So basically, the capacity-wise, we can certainly achieve that, but then achieving the 100% capacity. I explained to you what are the issues, which [indiscernible].

[Operator]

Our next question is from the line of [ Dhaval Sheth from Dhaval Sheth Financials. ]

[Unknown Analyst]

Yes a couple of questions. One is the inclusion of Bhuwania 3-party as they are directors. So what will be the role of him going forward? And any update on regarding 6,500 barrels of Indian railway. And what is the working process, how much elegance we have produce steel rate? And the third one is clarity for the future business and the revenue guideline.

[Ashok Vijay, executive]

I'll cover the point number second first. The number of agents produced in the first quarter was nearly 120 numbers. The reason being testing that we didn't have any orders from the railways and whatever order from privates were there, we have never been able to get the wheel sets from railway factory, which we are giving priority only for railway orders and not for any private owners. So that was a big suffering which we had in the first quarter. Second quarter, once we had our photo approved in the month of July, we started the production in right anes from the month of August only. And from roughly about from mid of August, and we were getting into the full cycle.

So accordingly, in the second quarter, we produced about 477 number of barrels. This is what we have been able to produce during the first half of the year. And as far as your next question is concerned regarding what is the top line all I think I already answered to Mr. [indiscernible] when I replying to questions of Mr. Shah that how the order book is today and what is our execution plan for that and what is the time line for it? And as far as your question for the MD dissipate is concerned, I'll request Mr. Mookerjee to highlight that. Thank you.

[Indrajit Mookerjee, executive]

No, Mr. [indiscernible] part is joining as the Managing Director of the company. So the entire company's operations, including profitability and all other aspects, which are required to be managed and governed, will be under the leadership of Mr. [indiscernible] So he is going to be the Managing Director of the company. Is there any other clarification on that that's required I will be most happy to give it.

[Operator]

[Operator Instructions] We have the next question from the line of Balasubramanian from Arihant Capital Markets.

[Unknown]

Sir, the order book mentioned around INR 9,300. Could you please give the breakup for that in terms of heavy engineering, steel foundry and dry water division Sir, could you give the order breakup for heavy engineering stillwater division.

[Ashok Vijay, executive]

Any other question you have?

[Unknown]

And sir, last call, you have mentioned these resets are expected to come from November onwards, what is status right now from China, these are the 2 questions, sir.

[Ashok Vijay, executive]

Yes, you wanted to know the order book question. I mentioned about INR 9,000. It comprises like INR 7,500 for conveniency reasons. Steel Foundry division is INR 260 of course, the order book of Steel foundry will further well once the supply to the for the wagon is start making because this baton includes a large number of orders for the Secondary division. As far as the railways division is concerned, I earlier also mentioned our order book is INR 1,325 and others are roughly about INR 200 . So this is how the complete order book of 930 comprises of. The VSImport we mentioned last time that yes, no Normally, it is not coming because of some China problem of COVID and also that as a result of the lockdown sorry, shutdown because of the COVID impact, the inspection in all they have put on hold. Finally, it has now been done.

And we are glad to share with the people that, yes, the first consignment has left the fact sheet to the port for shipment to India. So now we expect that it will be coming sometime in the month of August and December only, but not in November. But yes, now the pipeline has started. And from the summer and what we'll be getting a regular consignment for import from China and which will be used primarily for our private agent production for which we have a sizable bulk order.

[Unknown]

Yes. Sir, I have one more question. Like sir, like is there any changes in guidance for delivering in Regent 3,300 vegan next 6 months and INR 6,000 even in next financial year. Is there any changes pr are you funding the same guidance?

[Ashok Vijay, executive]

There's no change. We are targeting to what we have advised you, and we are working toward that direction, given buying certain untoward situation or some critical your political situation, all this thing, we think that we'll remain on track.

[Unknown]

Sir, would it be throw some light on CapEx part, so what kind of plan?

[Ashok Vijay, executive]

We are very conservative as far as the CapEx plan is concerned. Our target was to invest in excess of INR 100 to augment the balancing capacity and also improve on the production capacity. But our right now endeavor is we invest only in the balancing equipment so that we have that first opportunity to test our existing infrastructure and asset and allow them to set to full and thereafter then invest on the further major expansion all this thing. So we are following this principle and going accordingly. Roughly, our estimation is the thing that, yes, we should be in a function to control the expenditure on capital account to something around INR 50 to INR 70 in this financial year.

[Operator]

Our next question is from the line of Sarvesh Gupta from Maximal Capital.

[Sarvesh Gupta;Maximal Capital;Analyst, analyst]

So sir, for this year's target of 3,300 [indiscernible] again since we have just turned around 600-odd wagons in the first half. So we are targeting around 25,000 to 2,700 [indiscernible] for the remaining 6 months?

[Ashok Vijay, executive]

Any other question?

[Sarvesh Gupta;Maximal Capital;Analyst, analyst]

Yes. Second is on the debt side. So what are our plans in terms of debt reduction or interest cost reduction or any other plans on reduction of the debt that we are planning to pursue because we have a relatively high debt on the balance sheet.

[Ashok Vijay, executive]

These are the 2 questions, should I answer that?

[Sarvesh Gupta;Maximal Capital;Analyst, analyst]

Yes. And my last question is, sir, this quarter, so if we do the math out of around INR 240-odd in the heavy engineering division, around INR 160, INR 170 is through the wagon. So if you can explain the split of the remaining revenue in the heavy engineering division and how much of foundry dividend revenues is accounted in the heavy engineering rein?

[Ashok Vijay, executive]

Right. I'll go in [indiscernible] #1, that you asked that are targeting 500 tonnes 25,000 number of wagons in the remnant part of the year that is quarter 3 and quarter 4. I explained in my opening remarks also that post approval of the prototype, we have geared up the production lines, and we have been able to achieve close to 300 number of barrels in the month of September. Going forward, we'll be only improve on this. So even by that standard of what we have achieved in the month of September, which is 300 numbers, you can always understand that '18 numbers are anyway this in that regions. And since we are going forward, we are going to improve on the production and as Mr. Mookerjee also explained in his opening remarks, steps taken by our company to allow company to produce much at a greater production levels by improving the efficiency and also the mine structure.

So all these things are certainly going to contribute in a significant way and in a positive manner. So accordingly, achieving closer to INR 3,300, which we are indicating about this thing is certainly feasible. Of course, there have been some delay in the initial start-up production because of the reason we need to went into the protesting. So we have of course, we would have on pointed to be in a better situation than what we are today. But yes, we will be closer to that. Your question #2 debt interest and your question #3 debt recovery of this thing. I'll request my colleague, Hemant Bhuwania to throw some light on this extent it's feasible in this.

[Hemant Bhuwania, executive]

So working capital, at if you see our balance sheet. As of September, we have a debt of around INR 600, INR 70. I think this will continue to be at same level since we are executing this bulk orders from railways. In fact, if you go on a realistic, it will move upward only. It will not go down for this bulk order of railways. And your third question was on interest rate. So interest rate with the current increase in interest rate across country, we do not see any foresee that interest would come down, although we are at a constant touch with our institutional bankers and others to bring it down. But I doubt that within this year, unless there is a certain radical change by the government, there would be certain reduction in finance cost as that.

[Ashok Vijay, executive]

I'd like to add what my colleague Hemant has just shared with you that although we have a large debt, but if you see my debt, the maximum debt is regarding working aptly, the long-term debt in our books is very small. It is if I'm correct, Hemant, correct me, it is nearly INR 200?

[Hemant Bhuwania, executive]

Correct.

[Ashok Vijay, executive]

So the long-term debt is nearly at INR 200 so that you can say the company is not highly leveraged as far as the long-term debts are concerned. And there is opportunity for a company also in case some required for major expansion and all this thing to look forward to go for a long-term debt also, which will enable the company do this thing. Policy wise, we are generally relying upon the promoters also who are basically very generous to support us and have been putting in the money in the company by way of preferential issue as well as for the rights issue. So that way, a company is fortunate enough to bank upon the promoter group who are basically bullish on the company and are providing required funds as and when the company needs that. So that is basically that a story is concerned, as far as the last question of the breakup of turnover. The breakover turnover, Hemant would you like to just add to it.

[Hemant Bhuwania, executive]

So we had from heavy engineering, we had around INR 50 of turnover from our hydro mechanical and gas division. And the remaining part, what you see is from rolling stock.

[Ashok Vijay, executive]

Foundry.

[Hemant Bhuwania, executive]

And the foundry turnover is there in the results. So foundry if you see. We had a turnover of around of about [indiscernible] so foundry, we had a turnover of INR 191 crores in September.

[Operator]

The next question is from the line of Pranav from Omkara Capital.

[Pranav Gala;Omkara Capital;Analyst, analyst]

Hello, am I audible?

[Operator]

Yes, you're audible.

[Pranav Gala;Omkara Capital;Analyst, analyst]

Sir, I just wanted to understand based on your opening remarks, you were saying that you want to shift your focus on building of railway tracks towards signaling and other products. Why are you wanting to shift right now from the EPC side of it of railway tracks to signaling? And what is the opportunity size there that you're seeing? And second is like you said for FR '23, you're targeting INR 2,300 heard. What is the target for FY '24 and beyond.

[Ashok Vijay, executive]

What we mentioned is very clear. In fact, rather, let me again clarify you. We are not moving from one to other, signaling is the core of this company, the rail EPC company, which we are operating. The core business of that is signaling. So that will be more focused now. We are only trying not to get into a long-term track leading project, which are basically, as I explained in my statement also, #1 long time taking, #2 there are a number of local situation, which influences the project completion, including the land acquisition, the budget construction, the land development and for one other litigation if we are stuck, then our money remains slack. And invariably, we need to go for lodging claims and then settling claims which is again a very time-consuming process.

And it affects my liquidity and cash flow. I don't want to get into a situation where my liquid and [indiscernible] for long. As you see in the calendar balance sheet today, we are heavily blocked on the liquidity and cash flow because of these reasons. Of course, will relive me much larger sums of money, but then yes, that will take time and by that time. I need liquidity today, and I can't wait for that. So that's why the focus today is now to getting into a smaller kind of contracts in there where the end-to-end is tied up or otherwise our full strength, signaling ballastless track and autocat collection as well as the oral electrification. The future of this segment is also considerable right for the reason that, yes, railway is looking for opportunities to open the maintenance segment also, where we have a good strength and what it opens up, definitely, that is the area where we'll be focusing more on this thing, which will be giving us a little better liquidity and our turnover attention will be faster.

[Pranav Gala;Omkara Capital;Analyst, analyst]

Okay. So just on the railway side, like you mentioned, for 3,300 is what we will produce for FY '23. What are targets for 24 and 25.

[Ashok Vijay, executive]

I think our requirement is to produce 6600 and we'll try to achieve that level.

[Pranav Gala;Omkara Capital;Analyst, analyst]

Okay. And just, sir, one last question. Like you said, the maintenance side is another opportunity that will open up, right. So the maintenance side will be on which segment I mean, where will the maintenance from will it only be on the signaling side or will it also be a number of segments as well?

[Ashok Vijay, executive]

It can be possible for the segment also. What I was referring to was basically in respect of the Rail EPC segment, which is signaling or electrification or for that gene the repairing of the metro tracks and all. So all those basically related to the EPC segment only. [indiscernible] will be opening up. If they open up in this segment, they will be opening on other segment also.

[Operator]

The next question is from the line of Anurag Patil from Roha Asset Managers.

[Anurag Patil, analyst]

Heavy Engineering division, once our utilization such as the option level, what kind of EBIT margins we can expect on a conservative basis.

[Ashok Vijay, executive]

I would refrain from this answer because this is a very forward looking statement, and I hope you will understand and appreciate my situation in this respect.

[Anurag Patil, analyst]

Okay. Sir, just from another perspective. So current margins, can you say further improvement is still possible across all 3 divisions?

[Ashok Vijay, executive]

Normally, yes, because the reason this thing that's very standard, if you go for improving our production and all this thing, your overhead cost doesn't go commensurate to that and automatically reflecting your bottom line. So the answer is affirmative.

[Operator]

The next question is from the line of [ Hari Kumar, industrial investor. ]

[Unknown Attendee]

Yes, good afternoon. My question, sir, regarding this other current assets. Can you throw some light in detail because nearly are not mistaken, INR 1,000 are blocked. And when will they be released it sir. And second thing is rational for continuing rise in spite of the poor return on capital with the current interest rates. And also, there are a large number of new players like constructors are entering. Is there any long-term rationale, sir?

[Ashok Vijay, executive]

Sorry, your second question is not very clear to us. Will you kindly repeat it?

[Unknown Attendee]

Yes, yes, rationale for continuing this reality feel like in spite of very poor return on capital ROC. And also, there are a large number of new players are entering this field. And the current interest rate scenario is rational for continuing this segment, sir. Hello.

[Ashok Vijay, executive]

Sorry. I'll start by answering your question #2 first. It's for continuing with the rail business being the largest of it's true that a large number of people are coming in all this thing. But if your strength also counts a lot, and fortunately for us, our both card division and breakforward division have core strength in signaling and telecommunication and also in the back power, on the rail over electrification. So this core strength certainly is critical for us, and we'd like to capitalize maximum to the next on possible on this thing.

As we explained earlier also, we don't want to get involved into long-term, very long-term contracts, where mainly relating to where certainty is not there like tracking and not and then how basically the structuring of the company is being done. [indiscernible] evolving as the rail EPC business is very involving business and the kind of focus that the government is presently putting on rail infrastructure is the business to be there for next 10, 15, 20 years. So this certainly gives us a lot of hope. And with this opening of a segment of maintenance, it will open a grander opportunities for this segment. So we'd like to remain in this segment and also expand. But of course, our interest is very focused that we don't want to get our working cap involved in a very large manner in this business. So accordingly, we are becoming choosy in acceptance of the order and also in doing of the jobs.

So as far as the second question, this is my answer. Your first question was why other current assets? It also led to answer the second question, which is basically my major money is in other current lock into the unbid revenue, which is related to the rail EPC business, where my I have done the job, but I cannot fill because the milestone cannot be cheap and mystore cannot be achieved possible reason of this thing that some other agencies have not completed that task or railway has not been able to provide that particular area free from all other encumbrances. So accordingly, although have proceeded for certain steps, but then I cannot proceed the final step. So that's how basically we are finding. And that is why we have changed our gear to make sure that this start coming down and in future, our money rotation is much faster, which will also help me in managing my interest burger. So this is the wide reason for this thing. Apart from that, about INR 200 in the GST, which is certainly realizable. But since earlier there in that segment, the rates by 5%, increased to 12% and now to 18%. So accordingly, the things are changing also and realization will be much faster. We expect that within a matter of 1 year or 1.5 year this money will certainly be realized by the company and that will also give additional resource for liquidity to the company.

[Unknown Attendee]

Maybe is the old money becoming with interest legacy business money?

[Ashok Vijay, executive]

It doesn't come with interest. I explained that in the case of the Rail EPC business, it is all basically depends on the success of the claims, which we keep launching with the vendors, but it takes a very long time for settlement of those games.

[Operator]

[Operator Instructions] The next question is from the line of Sarvesh Gupta from Maximal Capital.

[Sarvesh Gupta;Maximal Capital;Analyst, analyst]

So sir, my question was on the margins only. So if you can indicate some the major order that we have received from the railways, what kind of gross margins and EBITDA margins are we expecting from this project?

[Ashok Vijay, executive]

I think Sarvesh, you were there earlier also, and you have already raised certain questions. And as to your some of the other shareholders' question, I have also said that I refrain from coming across on the margin levels and all this thing. And since this is a very forward-looking statement to the company, the policy don't want me. So I certainly think you have to basically draw your own conclusion based on the results, which have been published and forwarded to you.

[Operator]

Our last question from the line of Balasubramanian of Arihant Capital Markets.

[Unknown]

Sir, I want to understand what the payment cycle for general as well specifically for EPC projects. Is there any challenges betas new budget allocation in railways in this quarter?

[Ashok Vijay, executive]

To answer your question in one line is that fortunately for us, was that we achieved the milestones, which are billable milestones. The payments in railway is normally fast because budget location has been done on a priority basis for this segment. The challenge remains where basically the payment terms are defined in a manner whereby utilize 70% on completion of the job, first stage, then also the 10% realized on the preliminary ectatage, the 10% real in the final acceptance release and the 10% realized after completion of certain duration that is a warranty period. So that is how the money remain locked for long until the project is completed.

And if a project is not completed within a span of 3 years, which basically is being allotted to and it goes beyond 5, 6, 7 years, money remains blocked for that reason. And that is the biggest hurdle we are facing in the rail EPC segment. And primarily in the railway track lane business, and that's the focus of the company's management, how to manage it in a manner whereby we are into the business where the money is rotating much faster compared to what in these kind of businesses are there. So that's the focus on agent, we explained in quite details in our opening statement also. We also explained during question our session also and that become management very conscious about it. And going forward, efforts are there not to allow our other current asset, waters and inventory to rise beyond certain levels in this level. It will certainly start coming down, which will be providing additional liquidity coordination, thank you.

[Unknown]

Sir, my last question about what kind of ramp-up you may expect in Steel Foundry division for next 2 years?

[Ashok Vijay, executive]

We have never been allowed to test our capacity that is why we were basically producing very early that whatever is required to produce we're producing. But now the scenario is changed, where a are required to produce much more than what today we can produce. So accordingly, we are gearing up, and as I mentioned in my statement that, yes, we are adding certain balancing equipment, making sure that we are able to achieve and meet the requirement in respect of #1 bagance; and #2, the committed export orders. So that's how we are going about this thing. And this will certainly give a traction, and we can see much improved performance for the steel foundry divisions in the coming days.

[Unknown]

Sir, it would be anywhere 40,000 tonnes per annum?

[Ashok Vijay, executive]

Has the capacity, but then achieve that capacity. You understand [indiscernible] make one type of produce production day in day out, it is achievable. But in practical life, it is not possible. I have to do a lot of combination so the combination, certainly, we can impact in the production. In normal standard speaking that the target is that if you're achieving 80%, you are doing very good.

[Unknown]

That is 30,000 tonnes in that range.

[Ashok Vijay, executive]

That's the company's endeavor and the company's effort to that direction and also that why not we go beyond that also.

[Operator]

Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Indrajit Mookerjee for closing remarks. Thank you, and over to you, sir.

[Indrajit Mookerjee, executive]

To thank all our well-wishers as well as the investors for asking a very constructive question. As you know that and I think it has come up very clearly that we have a very sharp cut out strategy for the future. We know the market is very big, like we discussed of EPC many questions came up but we don't want to go all over the business and spare outset like [indiscernible] we want to be very strategic, we have defined, we have done exercises to find out where our competencies like, where we have credentials, which are don't have. And we only take those projects, where we don't have the problems of getting stuck. This is what I think has been framed by Mr. Vijay.

Similarly, we could always go and invest, but we would not like to do that. We want to do the best resources, utilization of our own assets. And that's the reason why we are trying to debottleneck through automation, through listening the rework, improving the quality, et cetera, et cetera, all the management tool that's available, the lean manufacturing so as to get the highest numbers of production out of the values. And of course, the same is true for foundry. So I can only we need your good wishes, so that we the march that we have started, we can take it forward to a different height and high for which all of us will be happy and we will do rejoice. So thank you very much for your interest in the company.

[Ashok Vijay, executive]

Thank you, everyone.

[Indrajit Mookerjee, executive]

[indiscernible]

[Operator]

Ladies and gentlemen, on behalf of SKP Securities Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.