KNR Constructions Limited (532942) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the KNR Constructions Limited Q2 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the 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. S. Vaikuntanathan, VP, Finance, KNR Constructions Limited. Thank you, and over to you, sir.

Good afternoon, friends. I welcome you all on our earnings call for the quarter ended and half year ended September 30, 2020. Along with me, I have Mr. K. Jalandhar Reddy, Executive Director; Mr. K. Venkatram Rao, General Manager, Finance and accounts; and Strategic Growth Advisors, our Investor Relation advisers. I hope you and your loved ones are safe and healthy during this pandemic time and would also ask you to keep following health advisories issued by the government of authorities on hygiene and social distances. Let me begin by giving you all a brief on the key industry updates, and then we will discuss the company's performance. In the first half year of this fiscal year, the key headwind faced by the road construction sector due to COVID-19-induced disruptions has been availability of manpower. However, the road sector is finally witnessing recovery with workforce strength near to pre-COVID levels and will gather further pace on account of the end of the monsoon season. With COVID-19 pandemic casting shadow on overall economy, government is striving to boost public spending by investing heavily in infrastructure and has encouraged NHAI to build roads with full vigor and make it best year of highway construction. NHAI has awarded sizable orders in year-to-date to providing strong support to road construction companies. So far in H1 FY 2'21, NHAI has awarded road contracts for building 1,330 kilometers of highways, worth INR 47,289 crore, which is 1.6x higher than 880 -- 828 kilometers awarded in financial year 2020 and 3.5x higher than 373 kilometers awarded in the FY '19 during the same period. For the awarded projects, the NHAI has already completed at least 80% to 90% of the land acquisition, utilities shifting, designs are pending required forest and environment clearances. The NHAI has set a target of awarding 4,500 kilometers of projects during FY '21. NHAI has plans to award contracts worth INR 2 lakh crores in the second half year. NHAI has also proactively used digital banking and used this channel to disburse about INR 10,000 crores to contractors. Importantly, NHAI has also set up a Dispute Resolution Board to encourage resolution while the projects are still in progress. In the overall projects awarded by NHAI, the share of HAM projects has fallen to 28% in financial year '20 from the peak of 55% in financial year '17, primarily on account of delays achieving financial approaches, which have often led to delays in project execution till now. Despite the rejection in repo rate by RBI from 6.5% to 4%, interest to project SPVs continue to remain high, compromising the viability of HAM projects. The HAM developers are paying much higher interest on their outstanding loans than their project completion, the earnings from the government. However, to address these issues faced by HAM developers, the government has recently proposed to tweak their business model. The tweaked norms comprises a few changes as follows: interest rates due and payable on the reducing balance of completion costs has been linked to the average 1 year MCLR of top 5 due to commercial bank, plus 1.5%. Earlier, it was linked to RBI rate plus 300 basis points. This will vastly improve the viability of HAM projects. The government pumps in 40% of the project costs as equity to developers during the construction period of HAM projects. The government has now proposed to release the funds to the developers and higher frequency of 10 tranches against the current 5 tranches. This will lead to a better liquidity and reduction in working capital requirements and developer spend. The developers may need to furnish bank guarantee every year against anticipated government payments for that year. Presently, the norm is to furnish bank guarantee for the entire duration of the project, the change to animal guarantees would de-risk the financiers. These changes if quickly implemented will increase the attractiveness of the HAM model to developers resulting in an increased participation. NHAI and MORTH has been making timely payments as and when bills are raised. The recent initiatives of the government to extend the loan prepayment period for 6 months, partial bank guarantee, reduction in repo rates, et cetera, shall boost the sentiment for the industry. Toll collection. After a dismal toll collection in the first quarter of this year due to COVID-19-led lockdown, the road traffic has recovered, and the toll collection has picked up sharply in the second quarter. The toll revenue recorded in September is the highest that was recorded in this calendar year. According to electronic toll collection data, across national highways, complied by results from a rating of agency of CRISIL, more than 100 million vehicles hit the highways in September with collections of INR 1,000 -- INR 1,941 crore. In November, so far, the traffic movement of national highway across the country has passed the pre-COVID levels, and the toll collection has reached 114% of the pre-pandemic period. This is despite reduced recovery in passenger traffic movement. The recovery in toll collection will boost project awarding activity further and also help companies to monetize the road assets. The government's direction to move towards 100% digital transaction for payments at the toll plazas has provided the required impetus to fast track adoption. The government has made the use of FASTag mandatory across at least 75% of the lanes of toll plazas and has limited use of cash mode payment to maximum 25% lanes of toll plazas. NHAI recently disclosed that number of FASTag users in the country have crossed 2 crore landmark, registering a robust 400% growth in the year. This has helped [Audio Gap] revenue leakages substantially and daily toll income has increased from INR 70 crore per day to INR 92 crore per day. Currently, revenue from FASTag constitutes about 78% of the toll collection. Company update. Now on -- now coming to the key updates to the company. The project execution has gathered pace, post the greater easing of lockdown in Q2 financial year '21. Our average operational effectiveness this quarter stood at 80%. We have about 80% of our manpower requirement, and we expect our workforce strength to reach the pre-COVID levels post the festive season. The percentage physical progress as on September 30, 2020, for our 4 HAM projects is as follows: Chittoor to Mallavaram is at 64%, Ramsanpalle to Mangalore is at 56%, Trichy to Kallagam is at 50%, Magadi to Somwarpet at 14%. On October 5, 2020, we have also received a date for our 5th HAM project that is Oddanchatram to Madathukulam, KNR Palani HAM project, which is worth INR 920 crore BPC. During the quarter, the execution was primarily driven by Trichy-Kallagam, Chittoor-Mallavaram, Ramsanpalle-Mangalore road projects and Mallanna Sagar and Vettam irrigational projects. Our deal to divest these 3 HAM projects are on track, and we plan to completely sell these 3 HAM projects after COD plus 2 years, which will help us to free up our equity for new projects. Out of the INR 624.28 crore equity requirements for all the HAM -- 5 HAM project, we have already invested INR 226.7 crore as of September 30, 2020. Our incremental equity requirement stands at INR 240 crore, INR 108 crore and INR 50 crores for the year, financial year '21, financial year '22 and financial year '23, respectively. You can refer Slide 26 of our investor presentation for detail on each HAM projects. The toll collection for our Bihar project that is Muzaffarpur Barauni, the collection in Q2 financial year '21 has been INR 12 crore. We have invoked force majeure clause as well as the construction agreement and are under an discussion with NHAI for eligible compensation. Order book position. Coming to an order book position. During the quarter, we have received an order for construction of elevated highway along Avinashi Road in Coimbatore City worth INR 1,157 crore from the Government of Tamil Nadu, which is to be completed within a period of 48 months from the appointed day. As on September 30, 2020, we have an outstanding order book position of INR 8,555 crore. EPC Road projects and HAM projects constitute 55% of our total order book, while irrigation projects constitute remaining 45%. Client wise, 69% of our order book is from third-party clients and balance 31% is from captive HAM projects. Our third-party order book or noncaptive order book, which accounts 69% of the total order book position, is skewed between State Government contracts with 49%, whereas 4% is from Central Government and balance 16% order book is from other private players. Our current order book position is robust and provides visibility of execution over the next 3 years. Robust Project award pipeline and ready DPR, detailed project report, under the Bharatmala project should accelerate the project awarding activity in the second half of this year. The process of submitting 10 to 15 bps for the road projects are currently underway. The average ticket size of the tender is about -- each project is about INR 100,000 crores. Based on our short-listed projects, the bidding pipeline for the current financial year, we are targeting a further order inflow of INR 2,000 crores to INR 2,500 crores in the second half of this fiscal year. We are pleased to have received a top challenger award and the 18th Construction World Annual Rewards in October 2020. Irrigation projects. There has been delay in collection of dues for the irrigation projects from the Telangana Government as government has to divert its funding towards other essential sectors and services to prioritize COVID-19 relief measures. The total exposure for the Telangana Government projects as on September 30, 2020, amounts to INR 740 crore. This includes billed, unbilled and work in progress. Now we are in receipt of the first tranche of payment of INR 300 crores approximately from -- we expect the set of fast tranche payments of INR 300 crores approximately from Telangana Government by the end of November '20 and balance will be in the fourth quarter. And already, the government has initiated certain move to release the payments at an early date, which we have now -- we'll be coming to know by the next 10 days. We are also planning to start our operations at the new irrigation projects also. Monetization of Walayar and Vadakkencherry, BOT project. In September 2020, we have completed the sale of 100% stake in Walayar-Vadakkencherry BOT project, that is KNR Walayar Tollways Private Limited to Cube Highways and Infrastructure III Private Ltd. at an enterprise value of INR 512 crore. Debt on the project stands at INR 127 crore and the deal's equity value stands at INR 385 crore. Out of the total equity value of INR 385 crores, we have realized payments of INR 308 crore in the month of September 2020, while the remaining INR 77 crore with whole swap to be released on achieving various milestone over the next 2 years. In addition to equity value, any clients receivable from NHAI and other governmental instrumentalities would be passed through to KNRCL as and when realized. The SPV has also received arbitration award of INR 170 crores from NHAI, which will be passed on to the company as and when realized by SPV. Out of the withhold receivables, the company has received INR 6.01 crore received in the month of October 2020. The provision has been made for an amount of INR 5.2 crore in the current quarter. From the process of the deal, the company has fully repaid its unsecured line of promoters. The deal has further strengthened our balance sheet, enabling us to bid for more HAM projects going forward. Also on completion of the deal, there has been an exceptional income of INR 85 crores that we have booked in Q2 FY '21 in our consolidated financials, as the equity value is higher than the networks of the SPV. Now I request Mr. K. Venkatram Rao, our GM, to present the results for the quarter and half year ended September 30, 2020. Over to Venkatram.

Thank you, sir. Let me take you through the Q2 and H1 FY '21 stand-alone financial performance. We have recorded a 10% year-on-year growth in our total revenue from INR 546 crores in Q2 FY '20 to INR 601 crores in Q2 FY '21. EBITDA came in at INR 124 crores in Q2 FY '21 as compared to INR 126 crores in the same period last year. EBITDA margin in the current quarter stood at 20.6%. Profit after tax post-exceptional items stood at INR 50 crores in Q2 FY '20 at against INR 17 crores in the same quarter last year. And there is an increase in financial -- finance cost by INR 5.9 crore for Q2 FY '21, which is due to a recognition of fair value interest on long-term receivables from KWTPL, that is Walayar project, which is onetime expenses to the finance cost. And the corresponding finance income will be accounted over the period of 2 years. Now coming to our stand-alone performance for H1 FY '21. Revenue from operation in H1 FY '21 was up by 7% to INR 1,081 crores from INR 1,011 crores in H1 FY '20. EBITDA witnessed a marginal growth of 1% from INR 216 crores in H1 FY '20 to INR 218 crores in H1 FY '21. Our EBITDA margin in H1 FY '21 stood at 20.2%, and PAT for H1 FY '21 recorded at INR 90 crores as compared to INR 118 crores in H1 FY '20. Acute summary for the consolidated performance is as follows: the consolidated revenue for the quarter grew by 12% to INR 656 crores in Q1 FY '21 from INR 587 crores in Q2 FY '20. EBITDA for Q2 FY '21 witnessed a growth of 8% to INR 171 crores as compared to INR 150 crores in Q2 FY '20. EBITDA margin in Q2 FY '21 stood at 26.1%. Net profit for the quarter post-exceptional item was INR 154 crores as compared to INR 83 crores in Q2 FY '20. Now coming to our consolidated performance for H1 FY '21. Revenue from operational in H1 FY '21 stood at INR 1,178 crores, up by 5% as compared to INR 1,118 crores in H1 FY '20. EBITDA witnessed a growth of 10% from INR 274 crores in H1 FY '20 to INR 301 crores in H1 FY '21. Our EBITDA margin expanded by 104 basis points to 26.6% -- 25.6% from 24.5% in H1 FY '20. PAT for H1 FY '21, post-exceptional item, witnessed a jump of 53% to INR 196 crores from INR 128 crores in H1 FY '20. Please note that the consolidated financial includes the profit on sale of Walayar SPVs amounting to INR 85 crores, which is accounted as exceptional item in Q1 -- Q2 FY '21. Now moving on stand-alone balance sheet. We'll continue to maintain a strong balance sheet. During the quarter, we have been able to repay fully the loan from the promoters through the proceeds received from the sale of our 100 -- sale of our Walayar projects. The total debt outstanding as on September 30, 2020 is INR 64 crores as compared to INR 230 crores as on March 31, 2020. The debt-to-equity as on September 30 is 0.01x as compared to 0.12x as on March 31, 2020. On our working capital front, we have seen improvement in first 6 months of financial year, which improved by 9 days from 53 days at March 31, 2022, to 44 days as on September 30, 2020. The improvement has been largely driven by improvement in receivables. The consolidated balance sheet has undergone a change due to deconsolidation of Walayar project on account of sale to Cube Highways. A total of INR 127 crore of debt has been deconsolidated from our balance sheet as of September 30, 2020. The consolidated debt as on September 30, 2020, is INR 800 crores as compared to INR 845 crores as on March 31, 2020. The reduction is not visible, as we have also drawn down debt from our under-construction HAM project. The net debt-to-equity as on September 30, 2020, stand at 0.42x as compared to 0.48x as on March 31, 2020. With this, we open the floor for questions and answers.

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

And congratulations on good set of numbers. Sir, my first question is on the guidance. Are we giving any guidance for FY '21 now? And given-- and sir, on the irrigation projects, we -- the Q-on-Q, we don't see any -- we don't see much movement. Do we expect H2 to -- the work to start on the -- especially in INR 23 billion, INR 2,300 crore project which you won in Q1? I know that recently you won INR 11 billion project in Coimbatore, has the work started? And what is the kind of run rate you are expecting on that on a quarterly basis?

Reddy, sir.

Sir, Reddy sir?

Yes, yes. Hello?

Yes, yes.

Yes, sir. I -- sir, actually, what was the first question?

The question is on the guidance.

Guidance.

Guidance.

Guidance. And also if you comment on the project wise.

Yes. Yes. The third quarter, we end up having 1 month rains also in this. So definitely -- and the Tamil Nadu is also covered with the rainy season for third quarter. We are similarly expecting plus/minus 5% like second quarter itself. About INR 700 crores -- INR 600 crores kind of turnover, we are looking at. And fourth quarter is concerned, it could be a bit better because the rainy season and COVID effects also could come down and we'll have a full pledged execution. So definitely about INR 700-and-odd crores kind of things we are expecting, sir. The other question, sir?

And has some work started on the irrigation projects of which you're working?

Yes, yes. Irrigation projects, the new set of irrigation projects, I think, likely to start in coming 2 months. In the third quarter -- fourth quarter, we can see some results out of that projects. And ongoing projects, we have not stopped. And thank God that we have been now started to release with the payment. So definitely, by month end, we'll be more comfortable position, like, we may get at least 70% of our outstanding payments from the irrigation. So it will be a win-win situation for us.

And what about Coimbatore projects, sir? Coimbatore, what is the kind of run rate we're...

Coimbatore, sir, actually, the agreement is done. And appointed date is expected, I think there is an inaugural function, which is being planned by the CM Tamil Nadu. So I think his dates are -- I think they will do their own formality thing, then they'll give the appointed date for us. So I think in a couple of weeks, it should happen, sir.

And sir last -- secondly on the trade receivables, of course, a large part quantum is linked to Telangana. What is the kind of run rate we're expecting by Q4? Do we expect the entire INR 740 crore of billed plus unbilled revenue to be extinguished by Q4?

Hello? Sir, pardon me. Actually, I couldn't get the questions.

Sir, on the receivable issue -- receivables from Telangana, the number which you quoted is INR 740-odd crore. Out of which, some part is billed, some part is unbilled. Can we expect this complete extinguishment of this entire INR 740-odd crore by Q4?

Of course, of course.

Sir, majority of payment, we will receive. Definitely, as we told you, so we are expecting largely payment actually in this month, and we are expecting -- definitely by Q4, we will able to receive entire payment actually, sir.

The next question is from Vijayakumar from Spark Capital.

Sorry. I'm sorry. I was on mute. I'm sorry. So my first question is on the receivables from Telangana, sir. So if I remember last time when we spoke, the overall dues were about INR 680 crores from the Telangana projects, including Mallanna Sagar, KP Sagar, et cetera. So that has come to INR 740 crores now. Am I right?

Yes, yes, correct, sir.

Okay, okay. And we were expecting about INR 480 crores to come in by September. So that has been delayed to November now? Am I right, sir?

Yes. Yes. No. Actually, sir, most of the payment we are expecting actually. By this month -- we have told around INR 300 crores, we are expecting by this month. And by March, entire payment will come through.

Sir, already, just so we have received information in around 60 -- in 1 project, we have received INR 67 crore and another project approximately around INR 99 crore our share, has been received by JV also. So now the order -- the payment receipt is in the pipeline. So we hope that as we -- Reddy was telling, the entire payment we will receive before this month end. And if anything is there, there will be -- spillover will be there maybe in the fourth quarter of that, sir.

Sir, generally, it is -- now I think because of this NABARD loans and all in place, so there should not be any problem? And whatever these predictions that this will be paid this month or this quarter or whatever we are saying, it is all based on the reports we are getting from the RET department. So mainly, the delay is there because the COVID situation didn't -- they didn't overcome and now things are normalizing. So there should not be any problem. Even earlier experience was also there. But since the COVID was not there during those days, we were regularly paying. So it should be regular only, sir, in the coming future.

No problem. Actually, my next question was regarding this Kaleshwaram project, where we were waiting for funds to be tied up by the state with NABARD, et cetera. So you are telling that is done now?

Sorry. Done? No, we started receiving payments.

Yes. Yes. Yes. Our Senior Technical VP, Mr. Ramana, is just confirming that they have already tied up the funding. And now they will be the process of receiving the payments as and when the bills are submitted.

We started already.

Yes.

Okay. Okay. And final question on this Palamuru-Rangareddy lift irrigation project with Navayuga. So how is the progress there, sir?

That's almost, say, 30% progress is there, and there also, we received some money today.

Today. Today, the bank has confirmed they have received the funds. So -- see, now the funds inflow is -- now is happening, and that's a good news. And then I think it will continue to happen.

The next question is from Vibhor Singhal from PhillipCapital.

Sir, just continuing on the irrigation project. Recently, there was some objection raised by NGT on the Kaleshwaram lift project. I know it was a very small technicality that the clearance was earlier taken as a water project and not an irrigation project, because of which they had announced some fault on all the construction activities. So how has -- is that issue being resolved? Or is it, you believe, could impact execution on the project going forward?

There is no impact at all on the execution, and department has clearly said that there is no issue in this. We can proceed with the execution. In fact, we are proceeding with the new project also.

Actually, sir, when we spoke to the department, the questions raised by the Central Government, we have already given an answer for them and as the reply concerned, we are quite confident that there should not be any issue. That's what has been confirmed by the Secretary of the Country.

The approval of the NABARD loan itself is a, what you call...

Yes, one of the positive sign.

A huge issue in this.

Right, sir. Right. In fact, I was coming to that, that since NABARD has already given the money, so at least the issue can be considered to be closed.

NABARD has given and disbursement has started.

Sure, sir. That's really great to hear. Also, sir, just wanted to understand on the sale of this Walayar project, so we have already received INR 308 crores from Cube Highways, right, sir?

Yes, yes, that we have received in the month of September itself, sir.

Right. And sir, that money, is the -- how has that money been used? How much of it has gone to pay back the promoter loan? How much has...

Around INR 210 crores actually, sir. We have to the promoter -- whatever the outstanding promoters there had on that date, around INR 210 crores has paid to the promoter and balance towards working capital.

So balance, we have used for the working capital.

Working capital actually.

Right, sir. Great, sir. Sir, just one last question from my side. Just wanted to get this clarity on this, is the INR 11 crores of exceptional item at a stand alone level. So why have detail -- why has this exceptional item being taken for the Walayar project?

Yes. Sir, actually, what, sir, Walayar project, initially, actually, we agreed around INR 385 crores of the equity value actually, initially. But in this project, we put around INR 396 crores. So total actually write-off will be around INR 12 crores. So out of INR 12 crores, already INR 6 crores, if you remember, we already provided in the last quarter of the last year, by March '20. And balance around INR 6 crores that we have provided in this quarter. And other than this, we have withhold of around INR 77 crores. Out of this, this withhold -- because some of it links to the toll collection in next to -- milestone payment based on the toll collection. So against that, actually, we expect that around INR 5 crores provision required to be made. And we made that provision. So total around INR 6 crores plus INR 5 crores, INR 11 crores has been provision made during this quarter.

Okay. Sure. So INR 6 crores is for the higher equity that we had invested and INR 6 crores -- INR 5 crores for the withhold that for -- against which we expect for future maybe provision, right?

Yes, yes, yes. Correct.

Great, sir. Sir, just lastly, if I could squeeze in one more question on the margins front. Sir, our margins again were very strong in this quarter at the EBITDA level at around 20%. So just wanted to get a little bit more clarity on this, that where do you see the margins going forward? Do you believe that with the irrigation now for 45% of the order book, we could probably have more like 18%, 19% margin? Or do you believe this would be the sustainable range?

Sir, margin prospective actually, definitely, our industry, our -- we told that our margin is between 17% to 18% is on a sustainable basis. But when definitely given this irrigation projects and HAM project will start contributing the turnover, our margin has slightly improved. So we can say our sustainable margin is between 17% to 18%. But definitely, we can go up to [Technical Difficulty]

Excuse me, this is the operator. Sorry to interrupt. A little disturbance on your line. There's a mic that's close to the speaker, you could maybe move it a little further. Okay. It's fine now. You may go ahead, sir.

Now. It's okay?

No, sir. It's still.

Still not? Is it okay now?

Yes, sir.

Yes. Please go ahead.

Yes, yes, yes. So that's why we already is our sustainable margin is around 17% to 18%. But based on our contribution from the HAM and irrigation project, it is around 20%. But as we have guided, our sustainable margin is between 17% to 18% only.

Sure, sir. And just one more, if I may. Sir, we have taken these irrigation projects. There are also a lot of projects coming in the water segment. In the PM, the Jal Vikas scheme, a lot of those projects were also awarded in the UP recently. Are we interested in that segment? Are we looking to bid for those projects, either in North India or if they come to South India? What is the stands of those projects?

It is...

Sir, water...

Actually, the present order book position is -- there is a visibility of 2 years to 2.5 years. And then we are also bidding for a number of HAM projects and hope to gather from 1 or 2 bids, HAM projects.

So because of that, I think we will be first concentrating on this. And then As and when we require further orders, then we will think of it, but not immediately.

Actually, sir, according to this order book concern, I have one more point to add. As we are already nearing to complete the 3 HAM projects, which are now in progress like, Chittoor-Mallavaram, which has crossed 70% and given that Ramsanpalle-Mangalore, which is also 60% and the Trichy-Kallagam is also at 59%. So all these have come to a 60%, 70% range. So by the time we commence on a new projects, it is anyhow HAM bidding, after bidding, and it is taking 6 months for FC and all that, it's 7 months gap is anyhow there. So definitely, we will have to have 3 more ticket size jobs, which we are now bidding also. Hopefully, we'll add INR 3,000 crore order nearby.

The next question is from the line of Ravi Naredi from Naredi Investment. There seems to be no response from the line of Nardi. We'll move to the next question. The next question is from the line of Priyankar Biswas from Nomura.

Sir, wishing you a Happy Diwali, sir. And...

Same to you.

Congrats for good results. So sir, my first question is, like what I see from your slides that except for the Oddanchatram project, which is recent, all the other projects have, like, crossed 50% execution, in the HAM projects. So has Cube already [Technical Difficulty] Hello?

Yes. Yes.

Yes. So what I was asking was, other than your Oddanchatram project, all the other HAM projects have more or less greater than 50% execution. So has Cube started putting in its money? I mean the equity funds flow that are expected to come from Cube?

Sir, actually, as we already told in our last investor call also, so we already informed that actually. Because what we have seen there -- because due to this COVID pandemic and other measurement what government has taken, so the whatever the money received from the Cube has become too costly actually for us. And that's why we have taken that call that let we will bring that money, and that money is definitely less than their cost. So now we have taken that call we are not going to get money from the Cube. But on the sale is already there, once we complete the project, then COD plus COD plus 2 years, we will sell to them actually.

Okay. And regarding this Oddanchatram HAM. So since this has also got appointed date, so what are your progress regarding this being sold to Cube as well? So that was the plan as well, right?

The plan is there, sir. But right now, it is in very early stages to tell something, but plan will be there.

Okay. And one more, if I may. So like for this HAM, the rules have changed to MCLR plus 125 basis points, right, sir, I mean, 1 year. So in that case, what is the effective interest rate coming out based on the MCLRs of the banks? And vis-à-vis, how does it compare with your borrowing costs?

That's it, sir, it has come very recently. We are working out, but we expect that it may be between the end of 1% to 1.5% will be definitely increasing the current bank rate. So as of date, current bank rate is coming to around 7.25%. So definitely, there will be improvement by 1% to 1.5% being -- in the revenue side, what we want to say.

So more or less, like, something like 9% is what we can work on, right?

It may be, sir, that's why we are working out actually. So it will be on that range only, sir.

And sir, last question from my side. What I understand from this irrigation projects, that's what there, there were some disputes between Telangana and Andhra Pradesh, I mean political disputes regarding the water sharing. So despite that, NABARD went ahead and did the loans. So is there any overhang from this political dispute still remaining on the execution of this irrigation projects?

There is no impact and there is overhang. The work is going on, and government is very clear that it will compete the work.

So moreover, you should understand, these projects are funded by nearly 20 financial institutions. And almost all are in the brim of closure of the project. So that's why there won't be any much -- there won't be any impact on this.

Okay. Okay. And sir, just can you give me the number for the pending -- I mean, the order book number from Hooghly, Hospet?

Hooghly, Yes. Just a minute. It is still INR 188 crore, sir.

INR 186 crores?

Yes, INR 188 crores.

Oh, INR 188 crores. Okay.

The next question is from Jiten Rushi from Axis Capital.

Congratulation on good set of numbers. Sir, the question related to the irrigation, again, sorry to harp on it. So sir, so far, how much work we have done combined on the 2 litigation projects if you can give us a breakup separately for 2?

Sir, actually, in this Mallanna Sagar, we did around 60% of work and Vettam, as our Senior VP told, it is around 30%, we did actually.

And sir, we had received some money in FY '20 also, almost INR 150 crores for this work.

For, Mallanna Sagar, we have received, sir. First bill we have received, and other bills are, we are expecting very shortly.

So sir, out of the INR 740 crores, which is remaining, almost, we have received INR 150 crores for far, right? Sir, so now only INR 630 crores...

That INR 740 crores is excluding that INR 150 crores actually. It is already booked and payment received. So I am telling that receivables -- pending receivable as of September is INR 740 crores.

Okay. And sir, what is the target now to complete this project internally now? When can you expect the completion of these 2 products?

Target completion.

Target completion.

Mallanna, Vettam.

Mallanna, Vettam.

Mallanna Sagar, we will complete by another, say, 6 to 8 months.

6 to 8 months. And the next one?

Vettam will be -- it will take another 1 year. More than 1 year because there is some land issue and all that, and they resolved recently. They paid land acquisition costs also recently. So they're getting distributed. So once the payment is distributed to the farmers, we can comfortably, what you call, continue execution in the balance basis also. And we will target completion in mostly 1 year for now.

Okay. Because there was some 4, 5 kilometers of land issue, right, that is being solved now.

Yes, yes. It is getting sorted out. They already were to release the payment, and that is to be distributed the farmers now.

Right, sir. And sir, on the labor situation and the operating efficiency, so what is the level now? As you said, in the Q2, we had almost -- in the fag end of Q2, 80%. So now what is the labor levels and the efficiency levels in terms of execution?

Sir, execution efficiencies are almost at 80% of the capacities what we are able to rightly do. Maybe a little bit more because of funding issues in the irrigation, that has also -- actually, we could have done a bit good there, but because of funding issues and all, it is also clocking at 80%. So overall, we are running at 80% efficiency, I think, as of now.

Labor also at similar levels available right now, sir?

Yes, sir. The main problem is with the labor. Actually, equipment is and everything, we have already equipped 100%. Only the labor availability or the operators or whatever the staff part, that is only at 80%. Because some places, people are getting COVID and they are just going away. And someone because of the doubts and all, they kept under quarantine. All that's something not as much comfort as we used to have earlier.

But Sir, because of this COVID rules, like maintain social distancing. Is this also -- even though if you have labor strength to full, but with the social norm -- social distancing norms, the execution can get impacted, if I'm -- if my understanding is right?

Yes. That's what the problem is, sir. So we have to maintain the social distancing and everything. People tend to violate and then land into those diseases. But we are trying our best to provide every aspects and try to follow the guidelines given.

Right, sir. So sir, on the irrigation side, of about INR 99 crore and INR 67 crores, will that disburse soon? That is the breakup. For Mallanna Sagar, you said INR 99 crore and other one you said INR 67 crore, which will come probably this month or probably, right, sir?

Yes, yes. Very soon, yes.

And sir, on the HAM project, sir, you said 3 projects, Chittoor, Ramsanpalle and Trichy. So do we expect any completion by end of this year? Any out of the 3?

Some projects we are targeting by January, March.

February, we may expect 1 or 2 completions.

Chittoor and Ramsanpalle, probably by Feb?

No. Yes. Actually, Ramsanpalle could be around in the March because, again, depends on the COVID situation only, but targeting to deliver by March. Chittoor, we are planning by February. Maybe April or May, we come up with the Tamil Nadu.

The Tamil Nadu.

Because actually, sir, the scheduled completions, more or less, plus or minus 2 months, 3 months, we'll be achieving it, sir.

So land is available completely at all these 3 places?

No, no, no. That's what the Chittoor -- that Trichy is because -- the delay is because of the land only. Now looking at the...

Now, what is the land situation?

Yes, sir. Actually, that -- if you take that -- the worst in that Trichy project. The Trichy project is about, say, 5 kilometers, we have not given still now.

Okay. 5 kilometers.

And because of which -- the 5-kilometer stretch because of that, the entire bypass cannot be opened. Around 14-kilometer bypass is not being opened. So most -- more than 50% of the carriageway is not accessible. Even we have done the work, it is not accessible because in between portions are not complete. So because of that, it is quite difficult for us to have a nodi situation. That's why it is extending beyond the...

Expected time line.

Maybe 2 months to 3 months delay, we are expecting here. And second, because of the COVID and heavy rains, also we are expecting this delay. It's not only on 1 point, it is all. Cumulatively, we are expecting 3, 6 -- 90 days delay in this.

And sir...

Maybe -- Chittoor, we will achieve on time. Maybe we will even have 5, 6 months ahead also, we will complete. Ramsanpalle also, another 2 months, at least 2 months bonus, we gain in this. Only the Trichy has gone a little bit out of control.

Okay. So basically on Ramsanpalle, you can expect some bonus, not Chittoor on time basically. And sir, the equity requirement of almost INR 400 crores is remaining. Can you just give it a -- give us a breakup on it how much are you investing first -- second half and balance? How much...

It's around INR 240 crores, sir, we will invest in this year, around INR 240 crores and around INR 100 crores in next year and balance INR 50 crores is FY '23.

Sir, out of this INR 240 crores, anything invested so far?

This quarter, we have invested around -- actually around INR 50 crores, we've invested.

In Q2?

In Q3, I am talking. After September, I told.

INR 240 crores is in H1?

Yes.

And sir, CapEx plan. Our CapEx plan now, because now the irrigation project will also start. So...

The CapEx from this -- so far, 6 months, we did around INR 35 crores of the CapEx. And this year, actually, we expected that it may touch around INR 100 crores to INR 120 crores only because all the projects is under very initial stage, even for our -- this new irrigation project and our Tamil Nadu flyover project. So it could be in the range of between INR 100 crores to INR 120 crores, sir.

And sir, one last question from my side. So in the cash flow, we have shown some proceeds from sale of investments. So the adjustment is how, like, [indiscernible] the number is a bit higher and [indiscernible] is a bit lower? So what is the actual proceeds? We have received some INR 308 crores, right, sir?

INR 308 crores, sir. This is the net proceeds we received from Walayar project. So INR 308 crores, actually.

So there is no profit in this, right? So there is no profit, right? This has been...

No. There are no profit because we have retain of INR 11 crores. It is because we invested INR 396 crores, and we -- cash received is INR 308 crores and balance around INR 77 crores is withhold, that we will receive on [ other ] milestone. Out of this INR 77 crore, INR 6 crores also we received actually after September. And based on other milestone, other -- this money will come.

And sir, big pipeline ordered outstanding limits as on date, how much of this is in HAM and which region you have bidded, like can you just highlight that because you're expecting some INR 2 crores, INR 2.5 crores of inflow from roads. So just on the big pipeline, specific project, if you can highlight?

Actually we are targeting around 10 to 15, sir, actually projects in the -- basically in the HAM. Out of that, around 4 projects in Kerala, 3 in Tamiladu, 3 in Telangana, like that we are targeting. So some are the projects actually has to be bid within the last week, but it could not have been postponed. But so as of now, we have bidded 1 project in Telangana, for that results is awaited actually.

Totally 15, we are targeting.

But totally, we are planning around 10 to 15, and we are expecting INR 2,000 crores to INR 2,500 crores.

The next question is from Ashish Shah from Centrum Broking.

Yes. Sir, just wanted to check on Palamuru. I mean we did -- we know that Mallanna Sagar and Kaleshwaram, subsequent projects are all going to be funded by banks. But how much comfort do we have on Palamuru because we've already started the work and we are about 30% through?

Sir, this Palamuru project is definitely through budgeted support as of now, but government is also trying to get funding for that project also. So today also, around INR 66 crores, actually, we received...

They were released.