What went wrong in Q4 — we expected order book Rs 20,000 crores. On margin front do you foresee further one-time adjustments? How will you execute given the current capacity with Bhopal coming next year?
We ended the year with the order book of 15,896 crores. There was a good executable order spillover to April because of certain reasons. One was an export order, the other from MOD. In fact, one of the order which we have got was signed on 27th of March. Then there were some projects in the heavy earth moving machinery. There the ordering got delayed. Although we became L1 in some projects in the month of February and March. Those orders are sƟll to be finalized. Third, the high speed train orders, 16 more, which was definitely tendered out in March, end of February, March. Already everything is completed. So now final formaliƟes are going on. So these were the three major reasons. We expected to reach 20,000, but we fell short by almost 4,000 crores. As far as the top line is concerned, mining verƟcal which is the heavy moving machinery, generally what happens is the order comes in third quarter, fourth quarter. Last year was extremely difficult because of the unusually long and shiŌed monsoons because of which Coal India ordering did not happen. There was a direct impact of around Rs. 250 crores on account of the one Ɵme correcƟon in two projects plus there was a one Ɵme impact of provision which had to be created for the gratuity because of the new labor codes and all.
Despite of your saying margins will impact because of prominent prices. Can you give the break up in each of these segments?
It is very difficult to give. Depends on the product mix. I'll give you a sense of that. Exports will be the best for us and we can only hope that the US dollar will grow further stronger. Number two is the sustenance. And don't ask me how much margin, okay? I cannot tell you. Then it is followed by the high-end heavy earth moving machinery and the commuter rail. So these three are the margin drivers.
How much is the difference in exports and domesƟc in terms of EBITDA? In terms of revenue, what will be the mix of exports in the next 2 years?
To be honest, we have not done a specific analysis. But again, at the Ɵme of bidding, generally we have an EBITDA in higher double digits. In exports, we definitely ensure that adequate margins are there. I cannot give a number because it's a part of the strategy.
How are you going to execute? Last time we discussed our current capacity for rolling coaches was around 250...
With Aditya being commissioned, if it is high speed train only, we can do 6 to 8 coaches per month for high speed. If it is metro, we can do more. We can do probably 12 coaches per month. So it adds to our capacity by at least 100. BRAHMA facility: once the plant is fully operaƟonal there the capacity will be further 300-350 coaches per annum, but that is going to take Ɵme. another two and a half years, three years it may take. So we will have ample Ɵme. For example, the MRVC project, it will take another six months for it to be finalized. That is a very opƟmisƟc Ɵmeline I'm giving. AŌer that, it has a Ɵme cycle of around two and a half years to three years for the proto, and then the bulk producƟon.
Sir is the revenue mix will undergo change this year because the order mix has changed?
revenue mix has already undergone a change last year. If you see, mining has come down to 40-41%. Defence and Rail and Metro have contributed around to 59%. So my guess is this tyear, defence and Rail and Metro should again be in that range, 57-58%. In M&C this year, is expected to do phenomenally well as compared to last year. If we look at the medium to long term perspecƟve, rail metro and defense put together, would say rail metro should account for very shortly 40%, 45%. Once we start firing all cylinders. And rail metro and defense put together should do somewhere around 65 to 70%. It should contribute. Mining, obviously, it will provide us a baseline maybe 30-35%.
Sir when will the mining orders start coming? Sir what is the orderbook now?
Order book is 16700 crores currently. Mining this year fortunately we have already a visibility. Pipeline also is there, visibility is also there. It should pick up from the second quarter itself rather than going to the last quarter. But that cannot be guaranteed every year. So we have to focus more and more on exports.
Can you give some colour on the provisions? That we made in last 2 quarters? Are they going to recur in future?
No, the three major points that I have explained that I have communicated, they are one Ɵme. Apart from that, there may be some provisions being created for regular accruals on account of the gratuity. regular provision will always be there. will not be one Ɵme. It will be recurring. Not which comes to my mind, at this moment we will need to see but it should not have that big impact.
As company has projecƟon of 5000 crore revenue in maritime cranes and ship to building crane, so at what Ɵme it will contribute to your topline?
As I menƟoned, we are at a very nascent stage of the product development. It will be at least 5 years before a tunnel boring machine and STS crane, it starts giving revenue. Because that is the development period. Once the capacity is ramped up, it should because the tunnel boring machine requirement is huge. We are currently going only with a 6.5 meter. The shiŌ to shore crane, manufactures in the country. So once it stabilizes, the port operators, we are banking on the mariƟme vision as per the mariƟme vision of India, 12 mega ports and 200 minor ports.
Going forward what kind of sustainable margins we can expect given that our mix is also being changed and how sensiƟve is your margin because of raw material prices?
RM prices, we will feel the pinch maybe in some Ɵme because the effects of this conflict yet to sync in totally. If you look at the sustainable margins, in my opinion, anything around 16 % of EBITDA should be sustainable. We should be able to sustain. Because what happens is that we have a certain threshold number. Any sales revenue we do above that number, it results in exponenƟal contribuƟon to the boƩom line. Break even now it's somewhere near Rs. 4000 crores.
Also can you please speak on the working capital as it has been impacted in last 2 quarters. What is the sustainable working capital that we can expect. How to improve Q4-skewed revenue delivery?
We are looking at reducƟon in working capital by at least 20 % this year . That is what we are trying. And for that, inventory is one part. Second is the debtor and collecƟon and followed by cash flow. And if we are able to deliver in every quarter, then definitely the cash flow will improve. Rather than skewing it up in the last two quarters. With the order book, executable order book of a certain number at the beginning of the year, we stand a beƩer chance to improve it. So maybe instead of only 15-20 percent in the first half, if you're able to ramp it up to 30-35 percent in the first half.
Out of this 15000cr orderbook, you menƟoned that 65% is from R&M. So last year we executed around 1000cr. So how are we looking at execuƟon this year?
This year we are expecƟng an execuƟon from Rail Metro of at least 2000 crores and as I said if you look at order inflow of around 15,000 crore in 26-27 Rail and Metro should be around 70 % of that so it should be roughly again 10,000 crore.
In terms of exports, Africa, historically we have seen that country is exposed to payment delays, execuƟon challenges, poliƟcal challenges. How do you see that?
There is always a risk in internaƟonal market, in internaƟonal business. Whether it is Africa, whether it is Far East, whether it is CIS, Middle East, everywhere it's a risk. You see, before February of this year, who would have never thought that the GCC region will be exposed to so much risk? No one could have imagined, right? We had just executed a contract in Oman, and I was expecƟng a repeat order from Oman, but that is on hold now, right?
Sustainable number for R &D spend is % of sales and also FY expenses. Employee expense commentary?
Sustainable number for R &D spend should be around 7%., we already reached 6.25 % of the revenue in last year. Even if the revenue goes up, we'll keep it at around 7%. We have already some 40 odd products lined up in coming year. Employee expense has gone down as a percentage of revenue this year, slightly. The target is to maintain the absolute number in the expenditure. Then the employee cost as a percentage of revenue should come down to around 17% which is again not an easy task.
Out of the total orderbook, how much Ɵme is fixed order book? How much is PVC?
Every mining project is a fixed cost contract. And the sustenance part which is a 9 year or 12 year there again there is a escalaƟon and every year basically what happens is Coal India and we sit together and we decide on the escalaƟon in the spare parts prices right for the cost cap contracts. Only the sustenance is part there is a escalaƟon but not in the product part.