Welspun Enterprises Ltd

NSE:WELENT

Earnings Call Analysis

Strong Performance and Promising Outlook

Welspun Enterprises reported a robust start to fiscal 2025 with a 28% year-over-year revenue growth, achieving INR 960 crores. The company anticipates reaching its annual revenue guidance of INR 4,000 crores, with an EBITDA range of INR 700-750 crores. Welspun Michigan's performance was particularly strong, with a revenue increase of 64%. The consolidated order book stands at INR 13,000 crores, excluding L1 bids worth INR 2,000 crores. Future opportunities, particularly in the water sector, are vast, with a pipeline worth INR 60,000 crores. Oil and gas projects are progressing towards monetization by FY '26/'27.

Strong Financial Performance in Q1 FY '25

Welspun Enterprises Limited (WEL) kicked off fiscal year 2025 with impressive financial results, reporting a consolidated income of INR 960 crores for Q1 FY '25. This marks a significant year-on-year growth of 28%, compared to INR 750 crores in the same quarter last year. This strong performance sets the tone for WEL's guidance of achieving a consolidated revenue target of approximately INR 4,000 crores by the end of FY '25. The company expects to have an EBITDA in the range of INR 700 crores to INR 750 crores for the fiscal year.

Welspun Michigan's Remarkable Growth

Welspun Michigan Enterprise Limited (WMEL), a subsidiary of WEL, showed strong quarterly performance as well, recording revenue of INR 144 crores in Q1 FY '25. This represents a robust year-over-year increase of around 64%, surpassing the previous revenue figure of INR 141 crores from Q4 FY '24. The EBITDA margin for WMEL stands at an impressive 25%, reinforced by a solid order book of approximately INR 1,500 crores and a commitment to maintaining these healthy margin levels moving forward.

Healthy Order Book and Growth Pipeline

WEL currently holds a consolidated order book valued at INR 13,000 crores, which includes both its stand-alone and subsidiary operations. The order book is anticipated to provide strong revenue visibility and includes an additional INR 2,000 crores in EPC bids where WEL has secured L1 status. With plans to add another INR 4,000 crores to INR 5,000 crores in new orders across various verticals within the current financial year, the company is well-positioned for sustained growth.

Strategic Focus on Water and Infrastructure Projects

Approximately 70% of WEL's EPC order book is attributed to water projects, reflecting the company's strategic move into this vertical. Notably, WEL is currently involved in high-profile projects such as the Bhandup Water Treatment plant and the Dharavi sewage treatment plant, which are critical for Mumbai's infrastructure. The Bhandup project specifically is significant, with a total estimated value of INR 4,200 crores and is set to enhance freshwater supply reliability in the region.

Outlook for Oil and Gas Investments

As WEL advances in its oil and gas ventures with a joint venture established with Adani, it anticipates starting cash production by FY '26/'27, contingent upon regulatory approval of the field development plan. The investment in this sector currently stands at approximately INR 450 crores, with future capital commitments to be determined post-approval from the regulatory authorities.

Balancing Investments and Shareholder Returns

WEL has maintained a healthy balance sheet, demonstrated by a net worth of INR 2,600 crores and cash reserves totaling INR 763 crores. While WEL has historically returned value to shareholders through dividends and buybacks, the management emphasizes a focus on reinvesting this capital to foster business growth. The capital allocation strategy aims for mid-teen returns at the project level, especially in new ventures such as oil and gas.

Industry Recognition and Employee Environment

In addition to solid financials and growth potential, WEL has recently been recognized as a Great Place to Work and ranked among the Top 100 Great Mid-size Workplaces in India. This positive culture is vital for attracting and retaining talent, particularly as WEL navigates an ambitious growth agenda in the infrastructure and water treatment sectors.

Forecasting Future Opportunities

Looking ahead, WEL is optimistic about the government’s strong focus on infrastructure development, particularly in water treatment and urban infrastructure projects, with a projected market size in water-related projects estimated to be around INR 60,000 crores. The anticipated awarding of contracts from projects valued at INR 50,000 crores in the road sector also bodes well for WEL as it aligns with the company’s strategic growth plans.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Welspun Enterprises Limited Q1 FY '25 Earnings Conference Call, hosted by JM Financials. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vaibhav Shah from JM Financial. Thank you, and over to you, Mr. Shah.

[Vaibhav Shah, analyst]

Yes. Thank you, Manav. On behalf of JM Financial, I welcome everybody to Q1 FY '25 Earnings Conference Call of Welspun Enterprises Limited.

I will now hand over the call to Mr. Salil Bawa, Group Head, Investor Relations of Welspun World. Over to you, sir.

[Salil Bawa, executive]

Thank you, Vaibhav. Good afternoon to all of you. On behalf of Welspun Enterprises Limited, I welcome all of you to the company's Q1 FY 2025 earnings call. Along with me, I have with us today Mr. Sandeep Garg, Managing Director, Welspun Enterprise Limited; Mr. Saurin Patel, Managing Director, Welspun Michigan Engineers Limited; I also have the CFO, Mr. Lalit Jain; and Siddharth Bharadwaj, who heads Investor Relations for Welspun Enterprises.

We hope you have had a chance to review the investor presentation that we filed with the exchanges yesterday. The same is also available on the company's website. During today's discussion, we may be making references to this presentation. I request you all to do take a moment to review the safe harbor statement in our presentation. As usual, we'll start the forum with the opening remarks by our leadership team. And then later on, we'll open the floor for your questions.

Once the call gets over, should you have any further queries that remain unanswered post the earnings call, please feel free to reach out to any one of us.

With that, I would now like to hand over the floor to Mr. Sandeep Garg.

[Sandeep Garg, executive]

Thank you, Salil, and good afternoon, everyone. I welcome you all to the Welspun Enterprises Q1 FY '25 Results conference call. I thank you all for being present today. I'm happy to share that we have made steady progress in the execution across all our projects and our subsidiary, Welspun Michigan, in the concluding first quarter of fiscal 2025.

This progress has led to growth of 28% on a year-on-year basis in our consolidated income to INR 960 crores against INR 750 crores in Q1 of last year. That said, the momentum achieved in the first quarter gives me reasonable confidence that we will remain on track to our guided performance for the full year 2025 of INR 4,000 crores on a consolidated basis. We expect the EBITDA for the consolidated basis for the year FY '25 will be in the ranges of INR 700 crores to INR 750 crores.

Our subsidiary, Welspun Michigan Enterprise Limited, WMEL has commenced FY '25 on a strong note with revenue of INR 144 crores, which is a jump of approximately 64% year-on-year. Saurin will share further details in his opening comments.

Our stand-alone order book right now stands at INR 11,600 crores, which includes INR 3,700 crores of O&M. This healthy order book gives us the visibility for the future revenue.

Our subsidiary, Welspun Michigan has an opening order book of approximately INR 1,500 crores, thus making our consolidated order book to about INR 13,000 crores.

Please note that the order book of INR 13,000 crores excludes EPC bids of about INR 2,000 crores across Welspun Enterprises and Welspun Michigan, where we have been shortlisted at L1 bidders. These orders -- these L1 bids have not been included in the order book. We are hopeful that these will get awarded in the current quarter.

To sum up, we have a healthy order book, which you will all will appreciate, offers clear revenue visibility over medium term. We are working to add around INR 4,000 crores to INR 5,000 crores of new orders in the current financial year over and above the -- converting these L1 bids into order. These potential new orders will be across all verticals. We have created Water vertical approximately 6 years back. And as on June 30, 2024, close to 70% of our EPC order book is from Water projects.

This achievement is a testament to the vision of the company. The size and scale of our Water portfolio as well as the global collaborations and partnerships we are working with give me immense confidence of what the future entails for this vertical.

My confidence in the Water sector is further enhanced by the honorable Finance Minister's announcement at the central government, along with the states and multilateral development banks who will jointly promote water supply, sewage treatment plant and solid waste management projects in 100 large cities through bankable projects.

Within our Transport vertical, in the Road segment, we remain positive on potential opportunities through the new BOT toll structure. I'm happy to note that the government is currently considering 8 road projects of INR 50,000 crores on bid basis. We will explore these bids, but at an overall level, this augurs well for strong balance sheet developers like us.

On EPC and HAM, we will continue to be very selective with the projects that we bid for both at NHAI and state government levels. It is close to 1 year of our acquisition of majority stake in WMEL. We have worked out joint strategies to target opportunities in tunneling that combined WEL and WMEL's capabilities to grow in this niche area.

I feel immense pride in sharing that not only Welspun Enterprise has been recognized and certified as a Great Place to Work by GPTW, but we have been recognized as the Best in Industry for Construction & Infrastructure. And also, we have been ranked at #37 amongst India's Top 100 Great Mid-size Workplaces.

All the projects, namely Dharavi STP, UPJJM, Har Ghar Nal Se Jal scheme in Water vertical. And Aunta-Simaria, Sattanathapuram-Nagapattinam and Varanasi-Aurangabad road projects are running as per currently agreed schedules over the clients.

I would like to take a moment to brief that we have recently started Bhandup Water Treatment project. The project is to be designed and constructed within a period of 48 months from the notice to commence, which took place on 22nd July 2024.

I would like to share that this project is unique in many ways. It is one of the largest water treatment plant currently being built around the world with a capacity of 2,000 MLD. This project is spread over a footprint of 16 acres approximately, which is the most efficient use of land area. I would also like to say that this project is critical for fresh water reliability for Mumbai region.

We are happy to be associated with the project of this importance and also to be associated with towards most prominent water treatment company that is really a technology provider. Happy to share that our preconstruction activities are progressing at a good pace.

During the quarter, we continued with our efforts for development of oil and gas field blocks housed in the joint venture, Adani Welspun Exploration Limited, and we had few meetings with the regulator for approval of our field development plan. Subject to the approval of the field development plan by government, our endeavor is to commence cash production by FY '26, '27.

With this, I now hand over the call to Mr. Saurin Patel, MD of Welspun Michigan Enterprise Limited.

[Saurin Patel, executive]

Thank you, Sandeep, and good afternoon, everyone. I'm happy to share that we started FY '25 with revenue of INR 144 crores, a year-over-year growth of 64%. This is the highest quarterly revenue ever, beating the INR 141 crores of Q4 FY '24. I am confident we will continue the momentum into the financial year. This performance has been consistent from a margin perspective. We have achieved a reporting EBITDA of INR 35 crores, translating to margin of 25%. Both our current projects as well as the potential new wins gives me immense confidence of sustaining these margin levels.

We have 17 projects, which are spread across micro and segment tunneling, marine, pumping stations, rehabilitation of sewer lines and bridge construction. These combined projects give us an outstanding order book of approximately INR 1,500 crores, with another INR 170 crores of operations and maintenance. This order book is largely executable over the next 36 months. I must add here that I'm not including an order of INR 160 crores from MCGM to rehabilitate underground sewers using glass reinforced polymer liners, where Welspun Michigan is L1.

We have been an engineering solution provider for urban infrastructure needs, which is a niche area, and we wish to operate in the specialized niche areas of tunneling and water rehabilitation projects on a larger scale. Our year-old association with Welspun Enterprises Limited, has resulted in the opening of new avenues of EPC projects, and thus, we see vastly larger opportunities ahead. These opportunities are both from new geographies due to Welspun Enterprises wide reach as well as new initiatives that we are evaluating such as working with new technologies.

I would like to share that our discussions with Smart Ops on introduction of a new technology partnership in the water space is proceeding well. We will brief you as the relationship matures.

Our order pipeline is healthy. And with the rollout of the new technologies that I mentioned, we retain our sights on projects worth INR 50,000 crores in the medium term. These projects will be bid on a selective basis, either directly by WMEL or through WEL.

With this, I will close my remarks and hand the call to Lalit Jain, CFO of Welspun Enterprises Limited for updates on the financials. Thank you. Over to you, Lalit.

[Lalit Jain, executive]

Good afternoon to everyone, and many thanks for being part of this call. As our MD shared on the contracts basis, we have delivered INR 960 crores of total income against INR 750 crores in Q1 FY '24. This is a growth of 28% year-on-year. This marks the highest revenue for any fiscal first quarter. Our consolidated EBITDA is INR 193 crores against INR 157 crores in Q1 FY '24, thus making 23% growth year-over-year. This EBITDA works to margin of 20.1%.

Our consolidated profit after tax for the quarter is INR 110 crores against INR 93 crores in Q1 FY '24, which is a growth of 18% year-over-year. On a stand-alone basis for Q1 FY '25, total income is INR 776 crores and EBITDA is INR 129 crores. We have a strong balance sheet, as demonstrated by a net worth of INR 2,600 crores. Also, we have a cash reserve Of iNR 763 crores, which will allow us to grow the business to the next level.

With this, we can open the forum for question and answer. Thank you.

[Operator]

[Operator Instructions] We have our first question from the line of Parth Thakkar from JM Financial.

[Parth Thakkar, analyst]

Hi, team. So, my first question is...

[Sandeep Garg, executive]

Can you speak a bit louder, please?

[Parth Thakkar, analyst]

So my first question is on the guidance of CapEx on Oil & Gas segment.

[Sandeep Garg, executive]

Sorry. Can you please speak a little louder?

[Parth Thakkar, analyst]

Hello. Can you hear me now?

[Sandeep Garg, executive]

Yes.

[Parth Thakkar, analyst]

So yes, my first question is regarding the CapEx investment in the Oil & Gas segment. And also when can we start to see the revenue coming from it?

[Sandeep Garg, executive]

So as I -- Parth, thank you. As I have mentioned in my opening statement, currently, the field development plan is under consideration at the regulators end. The CapEx involved in the development will be decided when the field development plan is approved and which we will share with you post the approval by the regulator. Also that -- hoping that the regulator approves this field development plan within a quarter, we expect the gas production to start in the FY '26/'27. Exact period will be known dependent upon when the field development plan is approved.

[Parth Thakkar, analyst]

Okay. And also one more question. Previous year or else later in FY '24, we saw almost 48% spike in working capital days. So can you -- in later days, so can you guide us -- throw some light on that as well?

[Sandeep Garg, executive]

Can you repeat the question once again, please?

[Parth Thakkar, analyst]

Sir, can you guide us on the working capital number of days? Is it going to be same in that same range? Or is it going to fluctuate?

[Sandeep Garg, executive]

Yes. Our working capital requirements would not change. They will be in the same ranges.

[Operator]

We have our next question from the line of Amit Shah from Nuvama.

[Amit Shah, analyst]

Congratulations on good set of numbers. So in extension, I also wanted to get some light on the Oil & Gas section. So I was just going through the investors presentation where we have mentioned we are looking for an early monetization. So I just wanted to know early means how far early? I mean, do we wait properly for the gas to be commercially produced, run it for a reasonable amount of time until the size grows and then look for the monetization? Or at what stage are we one, looking at the monetization of the oil and gas thing, one. Also, I wanted to know what is the already investments made from the share of the Welspun exploration? I mean, only the Welspun's part and not the Adani part. What is the kind of investment that we have already made?

[Sandeep Garg, executive]

Okay. So to answer the first question, if I understand correctly, your question is whether we are going to monetize it by way of producing the gas or before that. The answer to that question is that we will be in a position to assimilate this information or decide about it once the FDP is approved, so that there are reserves are stand by the regulator and those are not in question. And then at that point in time, we will see whether any strategic investor would be interested in this stake -- this participating along with us.

Failing which, we will produce the gas and the gas is likely to be produced somewhere in the FY '26/'27 range. So we will be open to both the ways of dealing with the business opportunity. However, the actual situation will emerge only post the FDP approval and the interest of the strategic players may have in that capacity. Coming to the question of what is our current investment, it is approximately on the books in the range of INR 450-odd crores.

[Amit Shah, analyst]

That is only the Adani -- sorry, that's only the Welspun part, right, and not the total AWEL?

[Sandeep Garg, executive]

That is correct. It is the Welspun Enterprises Investment into Adani-Welspun.

[Amit Shah, analyst]

I get that. And just, sir, one more question. The Bhandup and the Dharavi projects that we have won from the BMC. Do we see any threat to the upcoming BMC elections? Could there be any shakeup there possibly if at all there is any change in the BMC thing?

[Sandeep Garg, executive]

See, I can't predict the election outcomes and their impacts. However, I can only assure you that these projects are well underway right now, and they are critical for the well-being of the Mumbai as a city. The sewage treatment plant is being monitored at the Supreme Court level. So there I don't see any challenges taking place. And as I said in my opening statement, the Bhandup plant is critical for a water -- freshwater supply reliability for the Mumbai as an overall city. So I do not expect any changes to impact any of these projects.

[Amit Shah, analyst]

Great. That's great to hear and I wish Welspun Enterprise great, great runup ahead.

[Operator]

[Operator Instructions] We have our next question from the line of Pawan Katariya from Bullseye Investment.

[Pawan Katariya, analyst]

Congratulations on the good set of the number. My question was in the opening note, you guided a revenue of INR 4,000 crores for FY '25, and the EBITDA guidance of INR 750 crores, right? That puts up to the margin -- operating margin of 18.5%, right? Is this right?

[Sandeep Garg, executive]

So let me reiterate. First of all, you're right on the numbers, but these are on a consolidated basis is all that I will clarify. And this is the reported EBITDA margin at a consol level.

[Operator]

[Operator Instructions] We have a next question from the line of Nirav Shah from GeeCee Holdings.

[Nirav Shah, analyst]

And decent revenue growth that we have seen. So just one question. In early June, sir, there was a media article regarding the settling a claim with IOC of close to INR 23 crores, INR 24 crores. So some reversals, which we already provided for. So any update on that event, whether the booking has been done or the cash flow impact of that, if you can just share on that, please?

[Sandeep Garg, executive]

So the -- yes, that has been accounted for as of now. And the revenue has also come in -- I mean, the cash flow has also come in. The money has been paid by IOC already to the company.

[Nirav Shah, analyst]

Okay. So the INR 747 crores of top line includes this amount or this INR 24 crores is part of the INR 30 crores of other income?

[Sandeep Garg, executive]

So part of it is the other income. And the original value is part of the -- these are total revenue. Let Lalit explain it further.

[Lalit Jain, executive]

INR 15 crores is in the operating revenue and INR 8 crores other income. So total we have received INR 23.7 crores.

[Nirav Shah, analyst]

I missed that number up. So you said, how much is the revenue?

[Lalit Jain, executive]

Revenue is INR 15.95 crore in the revenue and INR 7.72 crores in the other income. Put together is INR 23.7 crores.

[Nirav Shah, analyst]

Got it. Great, sir. And on Michigan front, I mean, we maintain revenue growth guidance of in excess of 30%?

[Sandeep Garg, executive]

Yes, indeed. We can confirm that.

[Operator]

We have our next question from the line of Vishal Periwal from Antique Stock Broking.

[Vishal Periwal, analyst]

So MSRDC order -- wherein you're L1, can you share some status on it in terms of like when exactly the LOA could be received?

[Sandeep Garg, executive]

So we expect to convert this L1 status to order within this quarter. We will keep you posted as soon as this get converts into an order.

[Vishal Periwal, analyst]

Okay. So probably like just before the election, I mean, we are expecting the firm order would be there in activity. That was the guidance or probably that's what you're hearing from even the ministry. Is that fair to understand?

[Sandeep Garg, executive]

That is what we are hearing as an update. But their intention is to award it within this quarter.

[Vishal Periwal, analyst]

Okay. Okay. And second, on the oil and gas investment, is there any internal policy or threshold that we have that this is what we are looking at the maximum investment in this particular field and sector for us?

[Sandeep Garg, executive]

I think, the guidance that we have for capital allocation is at least at a project level, some mid-teen returns. And this is what we -- any capital allocation guideline is, and which will equally apply to the oil and gas, possibly a bit harsher than that. So this is what is the guideline. In terms of capital allocation, it's a Board's prerogative. So at this point in time, until the time we can finalize the numbers per se as to what the investments will be. Can't be specified right now.

[Vishal Periwal, analyst]

Okay, okay. And maybe just a continuation. I think the earlier the last quarter slide mentioned revenue recognition from '25, '26 for oil and gas, like we are seeing there's a slight change. So will it be possible to share like what exactly has moved this revenue recognition to, maybe like, the next year or...

[Sandeep Garg, executive]

So the critical step in monetizing this is the approval of the field development plan. Since it has not been done until now, it is prudent for us to move it. The -- as I said, specific number -- specific timelines can be specified once the field development plan has been approved, and we know exactly what we will need to do to produce it.

[Operator]

[Operator Instructions] We have our next question from the line of Prateek Bhandari from Art Ventures.

[Prateek Bhandari, analyst]

Just a couple of questions from my end. What would be the order inflow for FY '25?

[Sandeep Garg, executive]

So as I stated in my opening statement, we expect to convert these orders of INR 2,000 crores where we have declared L1 between Welspun Enterprises and WMEL within this quarter. In addition to this, we expected the orders to be booked across all verticals of between INR 4,000 crores to INR 5,000 crores.

[Prateek Bhandari, analyst]

All right. And as we have been inching margins -- higher margins in the Michigan, so where do we see the sustainable margins to be, because we are already quite progressive in Michigan in terms of margins? And what would be the top line by year-end in Michigan and the margins?

[Saurin Patel, executive]

So I -- as you -- we have given guidance that there will be a 30% top line growth already on an earlier question and answer. So considering that, we expect our top line to end up anywhere between INR 550 crores and INR 650 crores. And the EBITDA margins will be retained at a healthy level of between 21% and 23%.

[Prateek Bhandari, analyst]

And one more question. So I wanted to understand as to what is the project size of this Bhandup project?

[Sandeep Garg, executive]

In terms of design and build, it is somewhere close to INR 2,250 crores. And in the -- if we add the O&M, it is another INR 1,800 crores.

[Prateek Bhandari, analyst]

So approximately INR 4,200 crores?

[Sandeep Garg, executive]

Approximately, yes.

[Operator]

[Operator Instructions] We have another question from the line of Sarvesh Gupta from Maximal Capital.

[Sarvesh Gupta, analyst]

Most of the questions have been answered. But just one bit, I think recently, there has been this tax change for buyback. And some of the companies are expediting to meet the timeline. So given that we also carry a significant amount of cash in our balance sheet. Are we thinking on those lines as well?

[Sandeep Garg, executive]

Not at this point in time, I can assure you. And we have a very good use for this capital. So we would want to grow the business. We do not think that we have come to a stage or that we need to return the capital. And as to clarify the point further, you would notice that we have already returned in last 7 years odd something like about INR 55 per share in -- by way of buyback and dividend. So we have been respectful to the needs of the investors already, but I think there is a very good use of the capital that we have on our balance sheet.

[Sarvesh Gupta, analyst]

Okay. And this -- you also mentioned some INR 50,000 crores, if I'm not wrong, in BOT. And I think for on WMEL some INR 15,000 crores or INR 50,000 crores. What was the pipeline numbers? I missed it.

[Sandeep Garg, executive]

So you got it right, that currently today, if you want to see the today's newspaper article, you would see that the center is considering today at the cabinet level 8 projects of about INR 50,000 crores value for BOT toll. And the number that we set between -- as a synergistic play that is available for us to play between us and Welspun Michigan is in the range of INR 50,000 crores. The stand-alone play as well as a collective play is what is the pipeline is. We will -- and I would want to add to this clarity that we will not -- we are not going to bid for all of them, we will selectively bid. This is just the addressable market.

[Sarvesh Gupta, analyst]

And what was that number for WMEL? They also mentioned the pipeline number, which...

[Sandeep Garg, executive]

So on a stand-alone basis -- on a stand-alone basis, if the synergies are not to be considered, then...

[Saurin Patel, executive]

Yes, it will be closer to the INR 20,000 crore mark, INR 15,000 crores to INR 20,000 crores as an addressable market.

[Sandeep Garg, executive]

Stand-alone on Welspun Michigan, it will be about INR 15,000 crores to INR 20,000 crores. Collectively, it will be above INR 50,000 crores.

[Sarvesh Gupta, analyst]

Apart from these two segments, so on the core segment of Water, are we seeing any order bookings to happen or potential for this year order booking? There, we were getting very large sort of ticket sizes in the last two deals that we have won. So are we seeing something there?

[Sandeep Garg, executive]

Yes. We surely have seen. As I said in my opening statement, I see a lot of traction on Water. In Water, the guidance or the order pipeline is humongously big, but I see in a medium term, anything between addressable market to be close to INR 60,000 crores. And we will chase large ticket item projects in the Water segment. And we are very confident that we should be able to win a few of them.

[Sarvesh Gupta, analyst]

Understood, sir. And just for clarification, the INR 750 crore EBITDA guidance for FY '25, that would be including around INR 100 crores of other income, right?

[Sandeep Garg, executive]

Yes. everything included.

[Operator]

We have our next question from the line of Vaibhav Shah from JM Financials.

[Vaibhav Shah, analyst]

I had a couple of questions. Sir, you mentioned the pipeline for BOT project, and you mentioned that we are looking selectively for HAM and EPC as well. So what would be the current pipeline for those two, for HAM and EPC?

[Sandeep Garg, executive]

That's -- if the public domain information is correct, then it's approximately about INR 1 lakh crores for the medium term. The guidance of the ministry is more than INR 2 lakh crores.

[Vaibhav Shah, analyst]

So there should be over and above the BOT pipeline you mentioned of INR 50,000 crores.

[Sandeep Garg, executive]

That is correct.

[Vaibhav Shah, analyst]

Okay. And sir, when do you expect the awarding to begin?

[Sandeep Garg, executive]

I would think that it will start awarding -- the NHAI would start awarding within this quarter or latest in the Q3.

[Vaibhav Shah, analyst]

Okay. And sir, we were hearing that they are going to launch a new program under Vision 2047, and they will be -- they might scrap the Bharatmala Pariyojana program. So any update on that? Have you heard something on that front?

[Sandeep Garg, executive]

Only from public domain, which is available to you, as well as to me.

[Vaibhav Shah, analyst]

Okay. And sir, secondly, on the MSRDC award. So we received an order of around INR 1,930-odd crores. So did we do any renegotiations with the MSRDC or they approached us for anything?

[Sandeep Garg, executive]

They did approach us, and I would want to correct that the original information was INR 1,864 crores, but I have reduced it to INR 1,850 crores because of the negotiations that we have had with MSRDC.

[Vaibhav Shah, analyst]

So, our bid now stands at INR 1,850 crores?

[Sandeep Garg, executive]

That is correct.

[Vaibhav Shah, analyst]

Okay. And sir, since you've done the -- we have lowered the price. So does it impact the margins or some scope also as -- scope remains the same?

[Sandeep Garg, executive]

So I do not think that it will impact our margins at all.

[Vaibhav Shah, analyst]

Okay. And what kind of margins we are targeting for this project?

[Sandeep Garg, executive]

As I always maintained, we work on mid-teen returns. So this project is also expected to return the similar numbers.

[Vaibhav Shah, analyst]

Okay. And lastly, sir, so they have accepted our -- so they are fine with this number, INR 1,850 crores and the LOA should come now?

[Sandeep Garg, executive]

We expect the -- as I said, we expect it to convert this into an order dividend this quarter. So we are working towards that.

[Operator]

[Operator Instructions] We have our next question from the line of Amit Shah from Nuvama.

[Amit Shah, analyst]

I'm back again for one of the questions. So I just wanted to check as we have net cash on the books, and the size, especially on the Water segment continues to remain robust. If we have multiple wins, say, for example, are we ready to take a large amount of debts maybe for -- to grow several folds, maybe a few years from now? What are we targeting at? Are we looking something like INR 30,000 crores, INR 40,000 crores, INR 50,000 crores of size of order books? Are we even geared for that? What is the outlook for a little longer term?

[Sandeep Garg, executive]

So on the longer term, I think, we are -- as I said, we are not -- we are not in a haste to -- for anything. So whilst we will be open to opportunities, we would want to maintain a healthy balance sheet rather than a stretched balance sheet. So our decision-making will be on the order book will depend upon the -- our ability to grow the organization, we want to be ready to deal with the opportunities in-house rather than just book the orders. Secondly, make sure that our balance sheet stays healthy, and that the growth is sustainable. So these three principles we will apply to -- before we decide how much to grow.

[Amit Shah, analyst]

So are we saying that we would look to grow only through the available cash and not take much of debt, even if there are opportunities. Is that the way forward?

[Sandeep Garg, executive]

So we are not averse to debt totally, but we are -- we want to see that it is -- there is no mismatch between the timings of the debt maturity versus the realization of revenue. So we -- this is more of a strategic question. And I think this is -- it will depend upon the opportunity to opportunity that how we will deal with it. Difficult to answer at this point in time.

[Operator]

Ladies and gentlemen, that would be the last question for today. And I would now like to hand the conference over to Mr. Vaibhav Shah for closing comments.

[Vaibhav Shah, analyst]

Thank you, sir, for giving us the opportunity to close the call. Any closing remarks from your end?

[Sandeep Garg, executive]

Thank you, Vaibhav. I want to thank all participants for joining us on this call today, and I hope we have been able to address all your queries. We remain committed to creating value for our shareholders, and our focus is on delivering improved returns on equity and return on capital employed. I look forward to speaking to you once again in the near future. Meanwhile, please feel free to reach out to our CFO or Investor Relations team for any questions or feedback. Thank you, and good day.

[Operator]

Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.