Pennar Industries Limited (513228) Earnings Call Transcript
February 9, 2023
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to Pennar Industries Q3 FY '23 Earnings Conference Call hosted by PhillipCapital (India) Private Limited. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not a guarantee 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. Vikram from PhillipCapital (India) Private Limited. Thank you, and over to you, sir.
Thank you, Seema. Good morning, and very warm welcome to everyone. Thank you for being on the call of Pennar Industries Limited. We are happy to have with us the management of Pennar Industries for question-and-answer session with the investment community. The management is represented by Mr. Aditya Rao, Vice Chairman and Managing Director; Mr. Shrikant Bhakkad, Vice President, Finance; Mr. J. Krishna Prasad, Chief Financial Officer; Mr. Manoj, Head Corporate Affair; and Mr. K.M. Sunil. Before we start with the question-and-answer session, we'll have opening comments from the management. Now I hand over the call to Mr. Aditya for opening comments. Over to you, sir.
Thank you, Vikram. Moderators, thank you again. A warm welcome to all our stakeholders. Thank you for your presence today on Pennar Industries Quarter 3 FY 2023 Financial Results. The conference call will follow our usual structure. First, I will start with my commentary on our financial results, covering our profitability, our liquidity and our growth. Following this, our CFO, Mr. Shrikant Bhakkad; and Mr. Krishna Prasad will present their overview. And after this, we'll open up the call for questions. So an overview for the third quarter. We recorded net sales of INR 692 crores. Our PBT was INR 27.54 crores. This represents growth of 97% over the comparable quarter the previous year. We saw some moderation in our revenue on a sequential quarter basis, Q2 to Q3. This was due to low margin revenue being remotely placed by higher-margin revenue streams. We are confident we'll achieve our financial year targets and scale our PBT further in the fourth quarter. We will close the year strongly with our best-ever operational PBT. Our Q3 PBT of INR 27.54 crores with a margin of 3.98%. We expect further improvements in our PBT as we scale our higher-margin deals at the expense of our lower-margin business units. We generated a cash PAT of INR 37.41 crores, which was at a margin of 5.4%, and we're continuing to work on scaling our margins and our PBT value. That covers our profitability. Liquidity and capital efficiency, so we cover our working capital days and our ROCE. We're currently at 77 days working capital and expect to reach 75 days by the end of this financial year. Our annualized growth for Q2 -- or Q3, I'm sorry, was 19%, and we expect to reach 20% ROCE by the end of this financial year on an annualized quarter basis. It will not be 20% for the year, but 20% in the quarter -- annualized quarter, fourth quarter. That completes our liquidity and capital efficiency discussion. On our growth drivers. For the next few quarters, we expect a Body in White business, our Pre-Engineered Building business, both in India and the U.S. and our Engineering Services business to grow. We're also working on our expansion of our module project, which will be commissioned in the next financial year and will substantially grow our revenue and PBT. I'm thankful to all of you for your time and attention today. We will continue to focus on profitability, growth, liquidity and capital efficiency. I would like to hand over the call to our CFOs for their comments. Shrikant?
Welcome to the shareholders for the third quarter financial results, for the quarter and the 9 months ended FY '23. The key metrics I would like to just inform you. In terms of revenue, we have increased from INR 532.97 crores to INR 692.22 crores with a growth of about 30%. EBITDA has increased INR 46.9 crore to INR 66 crores, about 40% increase in terms of percentage. It has increased from 9.53% to 8.81%. The PBT has increased from 14.13% to INR 27.54 crores. And in terms of PAT, it has increased from 10.71 to 21.11. The increase predominantly in terms of revenue if you compare the Q3 versus the Q3, it's predominantly on account of the geographical expansion, which we have done in U.S., so a chunk of the revenue is coming from that; and also in India, the increase in the BI business and the expansion in the higher profit-making businesses in terms of steel BUs. We are happy to inform the shareholders that we have crossed last year's annual PAT of INR 42 crores, what we have. And currently, we have for the 9 months ended, we are at INR 52 crores, which has helped us up by more than 20% if we compare year with a 9 months basis also. With this, we'll like to hand over the call to the moderator.
[Operator Instructions] We take our first question from the line of Anika Mittal from Nvest Research.
Sir, my first question, can you please spend a few minutes on competitive landscape for the industry you are operating in, along with your competitive advantage which shall enable you to take the maximum order from the upcoming opportunities, which is coming from the recent budget announced by FM ?
So the competitive landscape in many of our businesses is that they are dominated by mature large players. Very few of our businesses consist of competition -- competitive intensity where it's very fragmented. So it would be difficult for me to answer the question across the entirety of our revenue streams because we have, as you may be aware, about 9 business units within the company. But I can say for the larger revenue streams, our competition are all -- I mean, in India, we compete with Kirby, we compete with Thermax, we compete with Tube Investments. And in the U.S., we compete with Cornerstone, which is a multibillion dollar firm, and we compete with Whirlwind and others. It's a complex relationship. A lot of our competitors are also our customers because we supply to Thermax. We have good relationships with them as well. So typically, we tend to get into industries which are mature, which can scale, and which have presence of large, well-structured corporates. So the competitive intensity doesn't rise to the level where you have to compromise on margins to good revenue. I will try to get a better answer to you later, but in the interest of time, I think does that broadly answer your question?
Okay. And sir, second thing is for FY '22 end, as per our annual report, your capital employed is INR 915 crore. That is basically the total of equity and your noncurrent liability. And earlier, you have guided for 20% ROCE, right? So would that to be true, you must generate EBIT of INR 185 crore kind of EBIT and EBITDA of around INR 250 crore, right? And for 9 months, EBITDA, it is INR 150 crore. So do you think we will achieve INR 100 crore EBITDA in quarter 4 to that guidance to be hold true?
So if you look at the capital employed right now, that number is...
Close to INR 900 crores.
It is INR 900 crores. So if you take our EBIT for the year, I think right now, we would end up at -- I mean, the 19%, 20% was on a quarter basis. For the year, we may be slightly below that because of Q1 and Q2 we were not at 19% or 20%. But we will not be giving an EBIT projection for the financial year, but you can assume improvements on Q3. So I'm quite confident that even if we don't touch 19%, 20%, we'll be close to it for the whole year. For the quarter, as I mentioned in my initial comments, we will be about 20% divided by 4, so we will be about 5% return on capital employed. Shrikant if you...
Yes. For 9 months ended FY '23, we've already reached EBITDA of INR 183.86 crores.
Depreciation...
And then -- depreciation if you add, it is close to around INR 47 crores. So we -- more or less, we should be that, is our view.
Previously, but it will not be a substantial difference what we will have.
Can we achieve the level of the 17%, 18% kind of more 20% on an overall year basis?
17%, 18%, EBITDA level, we'll have close to around 9 -- presently we're at 9.5.
No, no. He is asking about ROCE.
ROCE, 19%. We'll reach to 20%. Our target is to reach 20%, but...
To reach to 20%, you have to [Indiscernible] INR 100 crore in quarter 4, so that's why I'm asking. That's really a surprising number.
INR 900 crores, you added INR 180 crores in EBIT, right? So our EBIT right now is not INR 90 crores. I'm confused why you would say we need to do INR 100 crores in...
No. Actually, I was talking in terms of EBITDA.
EBITDA is already INR 180 crores.
Yes, I think you may be looking at the wrong number. EBITDA for the year -- for 9 months is not what you're saying.
I think quarter number or for the 9 months ended. 9 months ended number is already at INR 183.
That's what we're trying to say. It's already at INR 183 crores. So...
Actually, I think there is some confusion. See, your EBITDA is -- your capital employed is INR 920 crores kind of, right? And to do an ROCE of 20%, you must do the EBIT of INR 184 crores -- EBIT of INR 184 crores, right?
Yes.
Right. And what is your 9-month EBIT?
100 and -- let me tell you....
EBIT, if you remove EBITDA and depreciation. 140 is the EBIT.
That's what I'm asking. Will you do that kind of remaining EBITDA, INR 184 crore?
Yeah, yeah. That is only 46, no? It's not INR 100 crores. Where is the INR 100 crore number coming from?
That was the EBITDA thing. If you add back the depreciation to EBIT...
I would assure you we will hit 20% ROCE for the year. Okay, let's move forward okay. Any further questions, sir?
Yes, sir. Your revenues from outside India rose from INR 44 crore in 2021 to [INR 72 crore in] 2022. So my question is what is this number in the first 9 months, basically your outside India business number in the terms of top line for first 9 months?
Outside India -- in India versus outside India, the difference between the standalone and the consolidated. So INR 160 crores is the difference for the quarter-on-quarter, if you take. That's predominantly INR 536 crores versus INR 692 crores, so INR 536 crores is the India business and INR 692 crores is including the U.S. business. So close to INR 160 crores is the entire difference that comes from that.
And second thing is, sir, what is driving this growth? I mean, how sustainable this is? Because I'm asking this because considering the macro headwinds going on in Europe and U.S. base, I'm not getting how we are able to deliver this fantastic numbers. So kindly give some color on that.
At this point, our U.S. revenue -- I mean, our international revenue seems to be quite robust. The reason why we are saying that these are order books are growing. There is, as you -- I think you mentioned, there is talk of recession, but we are not seeing any sign of that in the markets that we are present in. Maybe in the tech sector, but at least outside the tech sector, we have not seen -- at least for our addressable markets, we've not seen any decrease. In fact, our order books have gone up in January. And I am not hearing any talk of a decline in our revenue from our international businesses or a decline in the margins.
And sir, on the capacity front, what is our total capacity and capacity utilization across the different verticals? And are we considering any further capacity expansion or CapEx plans going forward?
So capacity utilization, again, we are a little diversified. So we -- I can give you an overall number, which may not make much -- I would not -- I would ask you not to scale that number across the company. It's around 60%, 65%. But in several of our businesses, we are at capacity and we are adding capacity that would include our PEB, it will include India, it will include PEB in the U.S., it will include our module plant. And in some, we are under capacity, specifically in our steel BU and our older revenue streams, so yes.
Any CapEx expansion plans, sir? Expansion plans in any of the verticals you are considering?
Yes, we will be scaling our Body in White capacity over the next quarter, our Pre-Engineered Building capacity in India and in the U.S. as well. And we will also be increasing our module capacity. Those are -- from our Engineering Services business, yes, we are building a larger delivery team in India as well. So we will need to...
What kind of the CapEx amount you will...
[Operator Instructions] We take the next question from the line of Deepak Poddar from Sapphire Capital.
Sir, first I just wanted to understand on the demand scenario, the demand environment both in India as well as the international division. I mean, how do you see the traction in that demand or any kind of slowdown that you're seeing because of the global scenario? Some flavor -- or because of the inflation scenario, some flavor on that would be very helpful, sir.
Thank you. So we are primarily present in the automotive sector, the building and infrastructure sector, railways and aerospace and in the energy sectors. Taken together, that's a big chunk of the gross fixed capital formation in India, and quite frankly in any country. As I mentioned on my call, we don't see any problems in the U.S. We don't see any problems in Europe. I think while there has been talk of recessions and soft landings, from what I am seeing from an order book point of view, I'm not seeing a reduction in demand as of right now, which means we will be -- in our view, we will be able to sustain our revenue and profitability for the near term. We don't see any problem there. In India also with the exception of some sectors, such as railways, for example, a lot of -- we are hearing a lot about railway budget, but I am not seeing much traction on the ground as far as orders to us are concerned. So in that we are seeing some moderation in railways. It doesn't comprise -- from a profitability point of view, it's comprised of less than 5%. So it's not a big deal, so to say. But I don't have clarity on the railway business units revenue and profitability in the near term. Hopefully, that changes. Our order books are quite strong, but that's not translating into revenue in railways. In India, the Pre-Engineered Building sector is now at its record peak in terms of order book. In fact, we're adding capacity as quickly as we can. And as you may be aware, Pre-Engineered Buildings captures basically any process industry, any warehousing, logistics, any manufacturing industries, the end use of this. Any nonresidential construction uses pre-engineered building. So we are not seeing a reduction there. Large order books here in India and in the U.S. So from a demand side, I'm not seeing a reduction in that business unit. Solar also is doing reasonably well for us. Profitability is increasing and improving. And we believe that -- this is not only us, I think all solar players are expanding their capacity. In fact, we would be a medium-sized player in this field. We would not be one of the larger players in this field. But not across our major verticals, whether that be automotive or infrastructure or building construction, railways, we are not seeing -- I'm not seeing a reduction. Was I audible? Or...
Yes, yes, I understood. Sir, second question is in terms of the profitability. You mentioned that our second half profit of [Indiscernible] in the first half. Sir, we are holding on to it?
Could you repeat that, the second part? The second half, sorry, I couldn't make out what you said.
Our second half PAT would be double of first half PAT. So are we holding on to that?
I'm not sure I said exactly that, but let me do the math, give me a few seconds. Our PAT in the first half was?
Around INR 30 crores, PAT was what we reported in the first half. And I think be aware of the view that second half it will be 2x of what we have reported in the first half.
Yes. For the 9 months, it is INR 51.58 in terms of PAT. And the quarter that we reported earlier quarter was 16.
What is the first and second, Q1 and Q2?
Q1 and Q2, INR 35 crores.
[Indiscernible] round about INR 30 crores, first half.
Yes, INR 30 crores or something. So I think we'll be close to that, if not entirely that. But I would really not like to give guidance on this. What I would prefer to say is that we will -- Q4 will be stronger than Q3, that we have picture of. So we have done the prices and profitable. [Indiscernible] those are just numbers. I don't think we should...
Fair enough. I understand. And sir, anything on FY '24, any flavors that you can provide? I mean, in terms of even the top line thing and how do we see the margins now we have a coming to year-end?
Again, I will not give guidance, but I can say FY '24 will be better than FY '23, that much I can say. And we are hard at work to improve our profitability and our capital efficiency. And we will report to you quarter-on-quarter exactly what goes on. But as of right now, I would like to only comment that Q4 -- FY '24 will be better than FY '23.
We take the next question from the line of Mr. Dev from Astute Investments.
So most of my questions are around your pre-engineered building division. So before I move on to fundamental question, I just had one bookkeeping question. So I just wanted to check with you that. So in your segmental data, you report 2 divisions. One is diversified engineering and second is custom design building. So my understanding is this custom design building is entirely your Pre-Engineered Business. Am I correct?
Yes, it is. But it may also include engineering services a little bit, or no?
Yes. very small part of it.
Broadly speaking, yes, you're 90%, 95% right.
90% of that -- not entirely 100%, 90% of that.
Okay, sure, sir. So sir, now I move on to the fundamental questions. So my first question is, I mean, if I look at your revenue growth, the margins which you have been doing in the pre-engineered building is much better as compared to the 9 months of FY '22. So if you can give a broad understanding, and this has been written across the industry, all the players are reporting very good numbers. So what is changing in the industry and what is leading to your this kind of growth in revenues and improvement in margins, if you can elaborate on that? .
You're speaking specifically to the pre-engineered building business, sir?
Yes.
Yes. So I think there's -- I mean, I think the gross fixed capital formation story is increasing. I think the Indian government, if you see in the budget, government CapEx is increasing, which means -- we don't deal with the government directly, but it filters down to private sector CapEx ultimately. So whether it's warehousing, whether it's manufacturing plants, whether it's airports, there's a tremendous amount of new orders that are coming on, the new capacity that is coming on. I can't name names, but the quarter has been characterized by, I would say, 3 or 4 very large orders. Currently, in our order book, 40%, 50% is only 2 or 3 players in PEB. That's both a risk and also a good thing in terms of it gives you tremendous ability to cater and make sure revenue goes to those players. And on the other side, of course, the risk of having if not majority, a big chunk of your order book coming from only a few players. But in my opinion, all pre-engineered building companies are doing well right now because a lot of people in the process industries, warehousing and manufacturing are expanding capacity. I think that's the reason why everyone-s order books are right now full.
Okay, sir. And sir, in the past, this industry has faced an issue of raw material price volatility. So I think FY '18, you had done almost 14% EBIT and then it has come down to almost 6% margins. So how are you plan -- trying to change this volatility in margins? And do you think in the future, the margins will be much more stable? Or this kind of volatility will continue because of the volatile raw material prices?
I think we had a pass-through, and we've learned the way to manage these -- for these risks now. So obviously, with our risk management every quarter, there's 4 risks we cover. One of the risks is raw material price escalations, which can be dangerous for our margins. But effectively, the combination of us booking raw material in advance, quarterly rate contracts, which allow us some time to see a cost increase and then have them to pass that on to our customers and ultimately price escalation contracts terms for raw material price escalation terms in our contracts, we'll make sure that we don't have an issue. Worst case scenario, we will have to go back to our customers and renegotiate if that happens, but that's extremely rare. So the combination is 4 or 5 things. I don't believe we will have an issue as far as raw material price variability potentially impacting margins is concerned. And that has been the case for the last 8 quarters, I think, in my opinion. So I think we understood how to deal with it, very, very precipitous rises and falls, obviously, changes the equation a little bit, but I don't think that's what we're expecting right now.
So sir, 2 related questions to this again. So one, if you can share a number that how much of the order book currently is the contracts which you have signed, the recent one on what percentage of those have contract for price pass-ons to the customers. If you can share that number. And second, also based on your explanation, do you think that this 9% margin, which you have done on a 9-month basis, do you think you will be at least able to sustain this margin, if not improve? So these are the 2 related questions.
No, no. So what is 9%.
So based on the segmental [Indiscernible], 9% is your [Indiscernible] for the pre-engineered building divisions on a 9-month basis. .
Okay, okay. Yes, that is also our U.S. business, is higher margin. I think we can safely say that will persist. I don't see an issue there. As to your question on what percentage of our order book we have price escalation for, I don't have -- it's a good question. I don't exactly have the answer right now. I'll get back to you on this.
Okay. And sir, one last question from my [Indiscernible]. So you have said that you have almost INR 800 crores of order book now for your pre-engineered building business. What kind of....
Your audio is breaking, sir.
I assume you have INR 800 crores of order book for your pre-engineered building division. So if you can share what kind of time lines are usually there for order book to get converted to revenue.
Typically, they convert to about 6 to 8 months. I don't think it's much more than that. Now again, this is a blend, some convert in 3 months itself. But the vast majority of it, I think, converts quickly. Was that your question, sir?
Sure, sir. That answers my question.
We take the next question from the line of Mr. Vikram from Niveshaay Investment Advisors.
Sir, what is current order book from Solar business?
Sorry, could you repeat that question?
What is current order book from solar business?
Current order book of solar. It's about INR 800 crores.
And was this -- what was contribution in last quarter revenue?
Revenue from solar last quarter would have been about -- it would be about -- we don't have an exact breakup for that because it shifts in the huge part of our BU. But say, around INR 70 crores, INR 75 crores.
INR 70 crores to INR 75 crores. And what was the margin?
Margin, we don't report segmental PBT. But we have a base where less than a certain percentage of operating profit. We don't -- each business is a different number. So specifically to that business, we will not be able to give you margins.
We take our next question from the line of Mr. Dilip Sao, an individual investor.
Congratulations. Very good set of numbers all round. You just talked about solar business pending INR 800 crores. Where does it sit? Does it sit in pre-engineered building projects? Or is it somewhere else?
It doesn't sit in PEB. We don't -- as I said, for PEB, we do provide a segmental breakup. Solar, [Indiscernible] main company revenue is part of that. It's INR 800 crore order book, not revenue.
Yes. So I was just wondering if you have pre-engineered building India, U.S. together is INR 1,200 crores, and you have a solar business of INR 800 crores and your run rate order booking in products is about INR 350 crores, INR 400 crores, they are regular businesses. So as we speak, starting 1st of January, we are talking about INR 2,400-odd crores of pending orders for the quarter. Some of them will not get billed in this quarter, but..
Yes. So your question, sir, is?
Sir, my question is, is it -- am I getting the numbers correct, that solar business is INR 800 crores.
Broadly.
Engineering business, U.S. and India is INR 1,200 crores, plus regular business in the Components and Products business, which are just run rate businesses.
So yes. [Indiscernible] 40 million to 45 million in terms of an order book.
INR 440 crores in expense, INR 760 crores in India pre-engineered.
Yes. PEB is about, as we said, about INR 800 crores. Railways is about INR 156 crores, and Solar is about INR 800 crores. So yes, so the math is approximately right, yes.
So around INR 2,000 crores. So the solar business that we picked up in September, we discussed that it will get built in 6 months from September, which is basically March end. That is not happening, right? Because we are just hardly build anything INR 700 crores, maybe out of INR 1,100 crores.
No, we haven't built that. Partly, the reason is because there are delays from our customers on execution on that. I will not name the customer, but they are a large PSU and they have not -- I think the land acquisition...
The press release you have come up with, which say that INR 1,100 crores will get billed in 6 months, that will get delayed to Q1 next year, right?
At this point, I can't give you a lot of clarity on exactly when those specific orders will pass out, but I do have every confidence that those will pass out.
And even not partly because it's a turnkey project. So you won't even build partially or you won't recognize the revenue at least?
I'm not saying we won't, but at this point, I can't commit to exact value is what I'm saying.
Understood, understood. The second question -- so this INR 1,150 crores is most likely will be a carryforward for next financial year, partially at least -- majority partially?
Are you talking about our pre-engineered building order book?
The PSU energy company, which we picked up that INR 1,150 crores.
Yes, yes, I would -- my expectation right now is that it's for next financial year and not really this financial year. And that's okay because we never really factored in...
No, I'm just trying to get a clarification. I was assuming that Q4 will be INR 1,000 crores quarter for us because I'm assuming that a lot of it will billed out.
Yes. I don't believe that. As of this now, I don't have that clarity to tell you whether we will execute in the fourth quarter or not. But I can tell you fourth quarter will be quite healthy.
No problem. The stand-alone and consolidated revenue in 9 months is the difference of INR 500-odd crores. Can I assume that it's mostly U.S. out of the INR 500 crores, INR 450-odd crores in the U.S.?
Yes, 90% of the consolidated numbers vis-a-vis the stand-alone numbers, if you see, comes from the foreign subsidiaries. We don't have any big Indian subsidiaries here.
Understood. So I can safely assume that around INR 400 crores will be pre-engineered buildings and INR 100 crores will be your components, like hydraulics and tubes and stuff like that? Is that fair?
International revenue, no, that revenue gets recorded in the main entity itself, standalone entity.
We'll take the next question from the line of Mr. Hari Kumar, an individual investor.
My specific question is regarding this water treatment business. Like -- is there no focus on the management side on this business because other companies are making huge turnovers in this water treatment.
I will say that at this point, we have an order book in water EPC. Specifically our capabilities are in industrial water treatment, desalination, ETP, affluent treatment recycling systems. We are executing our order book out. Yes, we are working -- we are not looking at this business as a business unit we want to grow. And there are others, our competitors who are doing quite well.
And the second question is regarding this stand-alone. Like most of the property is coming from a subsidiary company, like why is the stand-alone profitability not improving, sir?
You will -- I think there are improvements in standalone profitability and consolidated profitability. And going forward, that will continue to be the case.
[Indiscernible] also increased from INR 11 crores to INR 15 crores, if you see on a PBT basis from December '21 to December '22, and that's roughly is approximately 40%. There's a growth in stand-alone as well.
Yes, sir, but compared to the turnover, it seems to be really less.
That's a good point. I think margin expansion in the standalone entity is something that's important, and we are focusing on that. And as we add new revenue, I've spoken of BIW, I've spoken of -- whatever we are adding is higher margin. So I'm sure we will continue to see sustained margin improvements. As we have for the last 8 quarters, as you see, I think, there has been sustained margin improvement. We will continue to work on that for the standard equity also.
The next question from the line of Riddhesh Gandhi from Discovery Capital.
How much is your like gross debt and exceeded net debt right now in the business?
Could you say that again? How much is our?
And I don't see -- there has been not a substantial increase in terms of the asset positions that we have. And through working capital measures, we are able to increase. The net debt position is close to INR 628 crores what we have, gross debt. The net debt, if you add up the cash and bank balances, it goes to around INR 120 crores that we have. The net debt will be INR 500 crores.
Got it. And just so I understand, in terms of -- you'll have a plan of reducing this debt and is the free cash flow, given the overall EBITDA is increasing, your profitability is increasing, would we be seeing the internal free cash flow being used to pay down excluded debt? Or will the debt be -- remain flattish given the expansion we're doing and incremental low positive capital growth?
I think the vast majority of our debt over, I would say, close to 18% above is working capital debt, some of it cash, some of it noncash. So I don't see any way we are going to escape that. They're going to continue to need these instruments. You can see our debt increase in proportion to our revenue. And what we mark it out as is, we make sure interest cost is 33% of our overall revenue. That's what we try to make sure it happens. But what we do also is, as Shrikant has mentioned, set cash aside. So you will see a lot of positive cash flow after operations for this year and already 9 months, I think you have seen into balance sheet quarter.
Yes, but close to INR 100 crores as well.
Yes. You can say INR 100 crores cash, cost of cash generation this year.
Got it. For sure. Got it. Understood. And the other question is with regards to -- you indicated there's some amount of excess land, et cetera, you guys are in the process of considering sort of the monetizing. Is there any update on the that? Is that actually being actively pursued? Or is that sort of actually a longer-term aspiration?
As of right now, we have no -- nothing to share with you. But as I've mentioned in my last call, this is something that the Board takes up and is reviewing. We've already affected a sale of 1 small portion of our land assets. But we don't see ourselves as a real estate company. So as the Board takes decisions, we will liquidate. But we have no interest in expanding or anything for that land bank. It's an asset that's there. It's good. So we are better off having our assets and manufacturing equipment and other kinds of assets. So we're not actively looking to grow it. What is there, the Board will take a decision. And when we have some initial we will definitely communicate it.
We'll take the next question from the line of Ankur Agarwal from RC Wealth Solutions Private Limited.
Sir, total order book [Foreign Language], all verticals?
So we have covered that, sir. I think we don't mention -- combining all the order books, I think, is an extreme picture. But as our previous investor had suggested, it's about INR 1,500 crores, everything included.
Sir, in this financial projection with the turnover, revenue [Foreign Language] can you comment?
[Foreign Language] Projection, sir, next quarter [Foreign Language]?
This financial year, financial year [Foreign Language] revenue?
Sir, revenue projection [Foreign Language], both revenue and profitability basis per.
Any CapEx plan for next year?
Yes. We are expanding our PEB in India, PEB in U.S., our module plant and our Body in White business CapEx.
How much fund required?
We have not finalized our next year CapEx budget, but we'll get back to you by the next quarter on the exact amount. But we don't anticipate raising debt or anything to finance it.
We'll take the next question from the line of Patanjali Shah, individual investor.
Extremely delighted at your results and listening to you for the prospect of the company, not only in the next quarter also subsequently, really proud of you and the management and the way you have handled the situation in the past. I have a very limited one question. In the past, you did so well with the ICF. Do you have any plans to go back because there's so much of CapEx happening there, and it's a prestigious project with a decent margin, just your take on that.
So firstly, thank you for your words. Regarding ICF, your question, we currently have an order book that's not translating into revenue. If the integral coach factory, model coach factory and other manufacturers want to expand their order -- I mean, they give us more orders that translates to revenue, we absolutely retain and have those capabilities. We have very substantial assets. As of right now, I have no clarity on that business unit. And yes, as you said, it's a prestigious project. But what's important for us is sustainability of our -- reliability of our revenue streams. At this point, I don't have that clarity in terms of -- on paper, it looks good, but we don't -- we can't depend on that. Ultimately, we have a job to do. So I have no sunlight on that, sir, right now to give you.
Okay. And one more area we just wanted some ideas on these opportunities, they are in many places. So any chances of us expanding our footprint in the railway opportunity or we stay focused on what we were doing in the past cycle?
No, sir, we...
[Indiscernible] defense area.
Yes. So our current value proposition for railways is end wall fabricated structural assemblies for coaches and wagons, effectively end wall, sidewalls, roof, underframe assemblies, front parts. So it will continue to be that even for newer trains like Train 18, Vande Bharat as it's called in the media, we have strong capabilities. We will continue to sit on that. There is some revenue happening, but it's about -- this year, I doubt it will cross INR 200 crores, for example. But our expectations are higher. Hopefully, it translates. But as of right now, I have -- I don't have any confidence that, that's going to happen.
Anything you share on the defense front?
I've explicitly been told by my customers not to discuss it.
We take the next question from the line of from [Indiscernible].
Sir, I have one more question. I was [Indiscernible] almost INR 1,000 crores in FY '22. So if you can share the breakup of how much out of the INR 1,000 crores is for your pre-engineered building division, and subsequently if you can also share what kind of working capital you have for your steel building division?
So for pre-engineered buildings, in India, we have about -- INR 172 crores is the grass block for the entirety of our pre-engineered building business, both combined. What was the other question, sir, sorry?
Working capital for this division.
Working capital for the business. It's about 2 months of working capital.
The next question from the line of Deepak Poddar from Sapphire Capital.
Sir, I just wanted to understand on the railways front, do we take direct orders? Or we do, I mean, subcontract? I mean, in terms of capabilities, you mentioned, we have strong capabilities, right? So are we making effort to kind of -- because railway is one area where we see a lot of potential, right, in terms of the order inflows that can come in, right? So how do we look at it?
So orders are there. As I mentioned, we potentially have orders for the next 1 year also already. But as I suggested, for whatever reason, it's not converting to revenue. And our orders are directly from PSU such as Integral Coach Factory, Modern Coach Factory for coaches. For variance, it's denominated by the private sector. So our customers are Titagarh, Texmaco, [Indiscernible].
Okay, okay, okay. But do you see that traction can build over the next maybe, what, 1 to 2 years? Or will it be difficult for you to see?
I think I want to be careful that I say what's important. What's important, sir, I think, is that there's a lot of clarity in how they want to roll out their own rolling stock plans. I think if -- their execution on the planning, there's no problem. I think that's all hard at work, but it's also the privatization versus nonprivatization. So I think once there's clarity on what they want to do, I'm certain that it will come. But as I mentioned, for us, we can't wait for that. We can't wait for that for growth. So I think we have to ensure that our -- that we scale irrespective with whatever happens with railways. And that's our plan. We're not counting on railways to grow our revenue.
Okay. Fair enough. I understood. And sir, my second question, I think earlier in the previous calls as well, I think we were -- we had an aspiration of 5% PAT margin, right? Maybe -- so what sort of time line we might be looking at to achieve those kinds of margins?
So I think over the -- if we continue on the path we are on for the quarter-on-quarter improvement, quarter-on-quarter sustainability, replacing bad revenue with good revenue, I'm not seeing -- I'm seeing our ability to reach that is actually quite strong. But it may take -- I would say, a year, 1.5 years would be when we would be able to reach that. And it's not like 5% is a very high margin, but it doesn't end at 5%. We should look beyond that as well because...
Yes. But currently, I think we're at about 3%, right? I mean -- so next stepping stone would be at least a 5%, maybe then we might beyond, right?
Yes, yes. Exactly right.
And that is -- 1 to 1.5 years is what we envisage.
Yes, we can -- I can assure you we're working on it on a quarter-on-quarter basis. We have -- margin expansion is very important for us. So we will continue to work on it. But we haven't said the time, that 1.5 years, we will definitely do it. But I'm certain that you will see quarter-quarter improvements, and I don't see a reason why 5% and beyond is not achievable based on our current product profile and...
We take the next question from the line of Mr. [Dileep Sahu].
Two questions. One is a clarification. The pending order book that you are showing, I just want to read this one. The PSU is around INR 1,100 crores, which [Indiscernible] so I'd say, INR 1,100 crores. And India PEB is on INR 760 crore and accent is INR 40 crores. The total comes to around INR 2,500 crores, only the 3 of them. So am I correct or am I making some mistake here?
No, you're right. You're not making a mistake I think I missed...
With these 3 only, the PEB and the PSU business itself is INR 2,500 crores of pending orders as we speak, plus there will be some normal year component. Okay, so that's good. Yes. My question is regarding steel tubes in the expansion. There is a huge tailwind including TI industry, as you know, they've announced an INR 115 crore expansion of the steel tubes. And pretty much everybody I've talked to are talking about expansion investment, CapEx and all. We have very miniscule capacity in steel tubes. I understand well, we had got a small pilot plant or something. So any idea in terms of -- tubes itself has been quite stagnant for 3, 4 years for us when everybody is talking about 40%, 50%, 60% of growth. So, one, commentary on the steel tube business and expansion in the Velchal factory and tubes business in general will be appreciated.
Okay. First, clarity on the order book question. So you're right. I misspoke. It is -- what I said when I said 1,500, I didn't include the PSU order book. If you include that, then yes, it goes to the number that you mentioned. Now as far as our plans for tubes are concerned, we believe tubes is one of our good growth verticals. And you are right regarding TI's recently announced project to expand the large diameter plant, which is in [Indiscernible]. And they're spending about INR 180 crores of that. We will also be expanding into large diameter tube in the next financial year. As of right now, we have not finalized the project, so I have no details in terms of the CapEx or capacity which we are, but we do believe this is a good market for us to be in. Our tube manufacturing currently will encompass CDW only and not ERW. In CDW in India, we would be #2 behind Tube Investment, I'm sorry. So -- but yes, obviously, if you look at the entirety of the tube market and you combine ERW and CDW, then we are a very minor player. But the value addition, the more precise products, the higher-margin products are all in CDW. Even TI, the majority of their sale is CDW and not ERW. So that's the path we're on. We're at about 20% of what TI is at right now. We will scale up. There's plenty of market size for us to grow into. We will be working on implementing a large diameter tube project very soon.
So next financial year, we will see some investment going to steel tubes.
We will give you clarity on that the moment we finalize our plan, sir. But at this point, I will definitely say the large diameter tube capacity is definitely something we'll expand into.
We take the next question from the line of Mr. Gaurav Agarwal, an individual investor.
Sir, my question was with regard to other income. So if you -- there is a substantial jump on a 9-month basis. So how do you see -- what are the components of this other income? And is it sustainable? And if not, then what is the trajectory going forward?
See the various streams of other income, where it comes, predominantly was on account of the amount that we are sitting on treasury and the cash and bank balances. That's where the amount comes from. And also the other income that we have as on account of foreign exchange fluctuations that we had volatile. Last couple of quarters, there was volatility. So we had some exchange gains. But this may not be the scenario which will repeat in the future.
Of the 9 months other income of INR 35 crore, how much would be on account of foreign exchange?
Foreign exchange fluctuation is close to around INR 15 crore there.
Okay. And sir, when you gave your PAT guidance, and for FY '24, you want to perform better than FY '23. So you would obviously take into account all these things, right? Like other income, which was unsustainable like Forex income, it won't be a part of next year. So you take all those things in account and then you give your -- not guidance, per se, but your aspiration for FY '24.
We generally do not give...
No, I think the question is regarding the reliability of other income. We are quite sure it will be. I think we -- when we do our pricing, we are quite clear what margin we want to sell our products at. Our margins will be sustainable, sir. And whether other income comes or not, these are components of the entire margin that come in. We will ensure margin protection if that's your question.
Okay. And sir, of the INR 35 crore, just harping on it a bit more. Is there any write-back component also like there are some provisions that you keep making on a quarterly basis. So would some write-backs also be a part of this? And if yes, how much would that number be for 9 months FY '23?
Yes. The write-backs are a certain part of it. But both write-backs and this foreign exchange fluctuation will not repeat, per se, is what I'm saying. What you would repeat is basically the treasury income that we are setting, which is in terms of bank deposits and other income, what we have. The foreign exchange fluctuation, if the fluctuation happens, it is. But both this gets factored when we sell to the customers and what we receive. That's the difference. And we -- at the quarter end, whatever the recognition we have, we have that difference. But it has more to do with the exchange fluctuation rather than repeating every time. Does that answer your question?
Yes, sir. It does. And just one last question on the monetization front. Do you have near-term goals in terms of monetizing some noncore assets or land assets? And if yes, how much could be the quantum? And in case you don't want to monetize them, what could be the quantum otherwise for these noncore land or noncore assets?
I think we -- I'd answered this question previously, sir. We currently have -- don't have a plan to commit to you on liquidation of our land assets. But we don't see it as a core asset for the company. So as we have plans, we already liquidated some portion. As we have an idea of what they're going to do with it, we will communicate it to you. But the Board is discussing this issue. And once we understand it better, we'll get back to.
And sir, just the quantum, if you could share that number?
I mean, there's substantial land assets in the company. The valuation of that is market-determined. But within the company, there are in excess of 300, 400 acres. So...
Okay. Weather it is INR 300 crore, INR 400 crore is what I can take.
I would not be able to comment on the exact valuation of our land assets.
We'll take the next question from the line of Mr. [Gaurav Sachdeva] from [Indiscernible].
Sir, could you throw some light on the acquisition you did in France?
Sorry?
Acquisition in France.
Acquisition in France. Cadnum in the aerospace field. We are hard at work trying to scale that business up. I think last quarter, I mentioned that we will give you a little more clarity. So they have now achieved profitability, but the numbers are very small. For us, it's about building Europe out into a bigger market. So both our engineering services revenue and our aerospace machining revenue is growing quite well. Cadnum also gives us a lot of capabilities in the automotive tooling space, which they also specialize in. So it's work in progress. But over the course of the next year, I'm certain we can make this into a big driver of our revenue and profitability in Europe. But right now, it's early days, but it's profitable. We are -- it has -- we have met our expectations from the acquisition.
What kind of revenue [Indiscernible] from this acquisition?
It's -- I would not be able to give you the exact breakup right now, sir, but it is low. I mean, the entirety of our Europe revenue would be close to about INR 60 crores or INR 70 crores for the year. It's low.
Okay. And sir, just [Indiscernible] but exactly we'll do in the solar vertical of our company?
Solar vertical, what exactly?
So solar, we provide module mounting systems, tracker solutions and module manufacturing.
Okay. So we are into manufacturing also, right?
Yes, yes.
We take the next question from the line of [Indiscernible] individual investor.
I have been an investor in your company since a very long time. So far, I have not received any dividends, any rewards for my investment. Is there any proposal of giving any dividend in the near future?
Sir, dividends and any other corporate actions are decided by the Board, and the Board takes decision if it feels appropriate from time to time. I'm thankful for you for being a long-term investor of the company. And once the Board has something to share, I will convey that to you, sir, once a decision has been made. I will say that we have completed a buyback -- a substantial buyback in the last financial year. And we continue to debate these at the Board level. But thank you again for your support. I do mean that, sir.
Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Thank you for your presence and for your questions. We will continue to do the work we have set out for us, and hope to close the year out strongly from a revenue and PBT point of view as well. Thank you so much for your questions.
Thank you. Ladies and gentlemen, on behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
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