Afcons Infrastructure (NSE:AFCONS) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Afcons Infrastructure Limited Q2 and H1 FY 'twenty seven Earnings Conference Call hosted by Anand Rathi, Shared and Stock Brokers Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavin Modi from Anandrati Institutional Equities. Thank you, and over to you, Mr. Modi. Yes. Thank you. This is from institutional equities.

0:46 Good morning, everyone, and welcome to the q two and h one FY twenty seven earnings calls of Infrastructure Limited. To discuss the results today, we have the management with us, which is represented by Mr. Srinivasan Paramashivam, the managing director Mr. Ramesh Janna, CFO and Mr. Satish Sri, the Corporate Strategy Head. Now at this point, I will hand over the floor to the management for the initial remarks and post which we can open the floor for the question and answer session. With that, over to you, sir. Thank you, Bhavin. Good morning, ladies and gentlemen. Our financial results and investor presentation for the quarter and half year ended September 26 have been uploaded on the stock exchanges, and I'm sure you had the opportunity to review them.

1:42 Let me begin with a brief overview of our performance. For Q2 FY 'twenty seven, Afcons reported a revenue of INR 2,906 crores, EBITDA of INR $3.16 crores with an EBITDA margin of 10.9% and profit after tax of INR 41 crores. For the first half year, revenue stood at INR 5,633 crores, EBITDA at INR $5.78 crores with an EBITDA margin of 10.3%, while profit after tax stood at INR71 crores. At the same time, our order booking continued to strengthen. During H1, we secured orders worth close to INR16000 crores, taking our total order book to INR 43,836 crores.

2:28 This excludes L1 orders. As on date for the year, our intake is close to INR 19,500 crores, excluding L1 orders, with an identified project pipeline of around INR 80,000 crores for financial year 2027, bids under evaluation and several opportunities at different stages of tendering, we remain on track towards our full year order inflow guidance of INR30000 crores. These wins have strengthened our order book and provide healthy revenue visibility for the coming years. Let me now address the operating performance. Our Q2 performance was lower than the corresponding period last year. The constraints that we discussed in our Q1 call have evolved differently across projects.

3:19 Land handovers are progressing at affected sites and certain approvals and clearance also move forward. These are important developments because they should enable higher activity at these projects during the second half. While these developments are encouraging, our endeavor is to deliver higher level of execution. We remain focused on translating the improving project environment into stronger operating performance in the periods ahead. Not everything has moved at the same pace. Liquidity and collection remained challenging and execution of the genuine mission project in UP continues to remain gradual. Let me assure you, we are managing the issue project by project with particular attention to execution readiness, client interfaces, collections and cash flow. Our objective is to address the issues within our control and be ready to accelerate execution as the remaining constraints are resolved.

4:18 Against this background, our Q2 performance was broadly in line with our expectations. On the positive side, both tunnel boring missions at the Mumbai Ahmedabad high speed rail project are progressing in line with the schedule, and our teams remain focused on achieving the planned execution progress. We have also achieved significant progress at our Greater Male Connectivity Project. The final segment of Pilamale Bridge connecting Vili Male Island to the capital Mali was completed during the quarter, marking a significant step forward to the project. It is the largest infrastructure project funded by India outside the country. It will upon completion stand as an engineering marvel and serve as an important catalyst for connectivity and economic development across Greater Mali region.

5:08 Beyond the execution progress discussed, we also achieved project milestone. Phase two of Mitapur Sipara Elevated Caridar was inaugurated with the Honorable Chief Minister of Bihar during the quarter. The Caridar is expected to reduce travel time between Mitapur, Mahuli and Punpun for approximately one hour to around fifteen minutes. The engineering capabilities, execution discipline and safety systems that underpin these achievements also continue to receive recognition from leading industry institutions during the period. Afcons was named Construction Contractor of the Year at the sixteenth Construction Week Awards, while several of our projects received safety awards and recognitions from domestic and international institutions.

5:53 Turning briefly to the business environment. The infrastructure opportunity in Doctor remains healthy, although the pace of project awards remains uneven and competition is intense in certain segments. Internationally, geopolitical tensions in West Asia continue to affect logistics and the cost of certain inputs on some of our projects. We are addressing this through advanced procurement, alternate sourcing and close coordination with clients, suppliers and logistics partners. As they look to the second half of the year, I see clear priorities for us, accelerating execution, while the necessary fronts are and approvals are available, improving collections and cash generation and mobilizing new projects faster to make us ready for growth in the next financial year.

6:39 Our execution visibility for our H2 is better today than what was at the beginning of the financial year. Based on the visibility, we expect execution of the second half to be stronger than in the first half. Let me conclude with one point. Are very confident of achieving the provided order book guidance of INR30000 crore and beyond. Our H1 performance was largely on expected lines and we remain focused on translating the improved visibility into enhanced execution and execution into collections and cash flow. The strength of our order book, diversified project portfolio and healthy pipeline continues to provide confidence in our long term growth outlook, while our immediate priority remains driving execution and cash flow delivery. I would like to thank our clients, employees, partners, investors and all other stakeholders for their continued trust and support.

7:30 I now invite our Chief Financial Officer, Mr. Ramesh Jha, to take you through the financial performance in greater detail. Thank you. Thank you, sir. Good morning, everyone. Before talking on the numbers, let me reiterate, company is into business of construction. The margin in quarterly quarter varies based on the nature, type and quantum of work we executed. So quarterly results may vary in different quarter and may not be indicative of annual results or trend. Now let me begin with the revenue number. For the half year ended, we have done INR 5,633 crores of top line against last year's H1 top line of INR 6,520 crores, showing a degrowth of 13.6% year on year basis.

8:22 Whereas in Q2, we have achieved top line of INR 2,906 crores versus INR 3,101 crores in the previous year Q2. This is 6.3% degrowth in top line over the previous year Q2. Both H1 and Q2 execution is on the expected line. As we have already explained that in many projects, there were lack of work front availability and second quarter was a monsoon quarter, which remains to be relatively soft quarter. Pace of the execution is also a manifestation of stress payment across few projects where certification and payments are not happening. We had explained in Q1 earnings call that generally, Q1 remains a little bit slow in terms of collection, but then things pick up from Q2 onwards.

9:08 But this year, we are feeling that the customers are continuing with the strict liquidity, and we strongly feel liquidity across the market needs significant improvement. Payment related issues in UP, Gelgi one Mission is still continuing. We are receiving small payment based on certain threshold of percentage, which they have defined of the overall work once that is completed. We reiterate that across the spectrum, payments are being stressed for some of the other reasons because the executing agencies, the government, the various state governments or the executing agencies do not want to borrow from banks. We are aware that banks are influx with liquidity, but these entities, they do not want to borrow. But they want to stretch the contractor payment as they may be getting reflected as creditors in their respective balance sheet.

10:01 So we do not want to go overboard in terms of funding any project, and we want to maintain a healthy balance between execution and the liquidity. We are maintaining a very healthy liquidity situation as far as company's treasury is concerned. Now moving to the guidance we have talked about in FY 2027, we have booked order amounting to INR 19,437 crores till now, taking the pending order book in excess of INR 47,000 crores. In FY 2027, we are targeting to significantly improve the order booking and improve the balance sheet by collecting some of the stock receivables. Uncertainty around the economic activity because of war, geopolitical and related stuff continues. So we have held back any guidance in terms of growth for the time being.

10:51 We'll reinstate the guidance once we see a broader uncertainty around this when it goes away. In terms of EBITDA, for the quarter, Q2, we have done INR $3.16 crore, which works out to be 10.9%. As against, we had done INR $40.01 crore in the Q2 of twenty six the last year, where we had done 12.9%. And on the half yearly basis, we have done INR $5.78 crore, which works out to be 10.3%. In our EBITDA calculation, we considered we have considered DG commission as part of our operating expenditure. So EBITDA, what we are talking about is after removal of BG commission as an expenditure. Also, we have included other income.

11:38 The other we have explained earlier also that the arbitration interest, foreign currency exchange gains and miscellaneous income are recurring and very integral to our business. Also, there are corresponding expenditure to earn these other income, which has been factored in operating expenditure. Hence, these are these incomes needs to be factored as part of the operating income to consider the EBITDA margin. So far, we have in H1, we have INR $3.26 crores of total operating income, which we have factored. In terms of profitability, the profit before tax in the quarter, we have INR 82 crores, which works out to be 2.8% as compared to previous year Q2, wherein we had done INR 149 crores at 4.8%.

12:26 And for the half year, we have done INR 133 crore, which is 2.4% of the total top line, whereas last year, we had done INR $3.33 crore at 5.1% of the PPT. Profit after tax during the quarter, it is INR 41 crore for the quarter and INR 71 crore in the H1 FY 'twenty seven. Correspondingly, last year, we had INR 105 crore in last year Q2 and INR $2.42 crore of profit after tax in the H1 last year. Now profits got impacted because of lower turnover on the overall basis. Margins in our individual projects continue to be robust because but because of lower turnover overall, they could not generate sufficient overall contribution to cover the overhead cost or the fixed cost and still leave sufficient profit.

13:20 What traditionally the company used to generate profit, I'm talking about. We have put a lot of efforts towards reducing costs on the possible revenue and that you will see that some of the other costs like manpower costs and other costs has gone down. But that has been partially offset by increase in energy, transport and logistics, finance and provisioning costs. Now I would just like to clarify here that in other costs, you might have noticed that there is a significant increase in other costs, which is largely towards the ECL provisioning we have done. And because of that, during this quarter, the other cost has gone up. We have put in place a new ECL metric. There is an automatic provisioning if the period of outstanding receivable or the contract asset changes from one bucket to another, and we need to provide ECL on that.

14:16 We have certain arbitration receivables, which we are negotiating for settlement. We have provided for some discount negotiation possibility because we are looking at if we can realize those arbitration award by giving some discounts. So towards that, we have made a provision. Third, in Middle East, we have certain outstanding in one of the subsidiaries. And we had been like for this financial year, we have set up a task force, which is following up with all the customers. And in our interaction in Middle East with the customers, with banks, we have got very negative feedback around one of the locations where we have got outstanding. So in order in future, we are not giving you any surprise.

15:06 We thought that it will be prudent to make a provision. But when we realize and not that we'll be leaving that receiver, we'll be following up. Once we realize, then a lot of these receivers may needs to be reversed. So we need to see how things progress and then basis that we'll take the call. But at the moment, we have we thought that it will be prudent to make such conservative provisioning. Now talking on the specific finance cost. The finance cost has also increased for the quarter as well as for the half year. We have seen higher average borrowing during the half year. Because of this, the interest cost has gone up. Coupled with this interest bearing advances, more than 40% of our overall advance is interest bearing. So because of that, also the interest cost towards client advances has gone up.

15:56 Currently, of the total advance, currently around 59% of the advances are interest free and 41% of the advances are interest bearing. This year, we have booked substantial order, but the corresponding advances of those new orders have not come yet for the till the Q2 financials we have prepared. We have big amount of advances lined up for collection, and that will change the working capital scenario significantly. Interest fee advances will help us in reduction in the finance cost as we move forward. Because of the advances we are looking at collecting for the new project, 60% of the advances are interest free. Depreciation during the quarter, we had INR 181.51 crore, which works out to be 3.22% of the turnover.

16:47 Tax also this period, it was higher, which is almost 46 percent of the PBT. This is primarily because an Afcon's profit, we are paying 25% tax. However, in consolidated profit has increased has in the consolidation, the profit has decreased due to provisioning, as just explained in one of the overseas subsidiary. That was done primarily based on the local market feedback and the geopolitical scenario in that market. So and also in some of the closed projects, which are in joint venture, we are required to make ECL provisioning, and that also takes the consolidated profit down.

17:34 As a result, consolidated profit has reduced, but 25 tax on Afcons profit, which is far higher than the consolidated number, has works out to be the higher tax percentage on the consolidated profit. Other factors contributing in some of the JVs, we pay tax in the range of, say, 35% to 36% in some JVs. And in overseas locations like Bangladesh, the tax is charged on turnover. And in such situation and if we are not making profit in, say, in a place like Bangladesh, the tax, they do not have any provision of refunds. So that needs to be charged off as an expenditure impact. So because of all this, there is an increase in tax. ROCE, I'm not talking about because we'll see this number. At the moment, it is around 8.280.3%.

18:23 We'll talk about when we see the number annually. In terms of net working capital, the net working capital number is for the half year, one forty seven days. Net working capital is at elevated level because of funding to the projects and less than collection of blocked up assets. We are witnessing delays in certification of the work done and release of payments in projects. This has led to increase in uncertified work done leading to jump in working capital requirement. Generally, this remains the trend in H1. We have seen that last, say, four years, the working capital requirement in H1 is in anywhere between INR 800 crores to 1,000 crores. And this year also remains to be the similar situation. So this is not no different from the previous year.

19:11 As we have booked significant order this year and corresponding advances will come in next six months, we are also working towards the license of some of the stock receiver. Hence, we are confident that there'll be significant improvement in net working capital or other metrics going forward. In terms of debt in H1, payment issues has continued and operations have been funded. Also, we have done sizable CapEx payment during this period. So debt has moved to INR 4,765 crores on a gross basis. And on net basis, it is INR 4,050 crores. On net basis, it is around the debt equity works out to be around 0.74x of the network. We are maintaining a very healthy liquidity in terms of funds and also in terms of bank guarantee limit availability.

20:02 If I talk about the cash flow from operations. Cash flow from operations is negative in the first half, which remains to be the trend every year. As I told that, say, we have seen that last four years also, there was a similar negative cash flow in the range of, say INR 800 to 1,000 crore. However, this year, we can inform you that in next six months, we are likely to receive substantial amount of advances on the already secured job. Also, we are likely to receive stock receivables, which we have targeted this year. So in an overall probability, we will see a significant improvement in cash flow from operations in H2, leading to an overall annual number correction for the cash flow from operations, debt reduction, net working capital number reduction. So this is what from my side on behalf of Afcons. I thank everyone for attending this call. Now I request the moderator to open the floor for question and answers.

20:55 Thank you very much. We will now begin with the question and answer session. The first question is from the line of Aditya Bhartya from Investec. So you spoke about execution pace picking up in second half. So just wanted to kind of clarify, are we looking at it on a year on year basis that revenue decline would be lesser? Or are we speaking about in absolute terms that, let's say, we have done around INR5500 odd crore of revenues in first half, second half should be materially higher than that?

21:58 Second half would be definitely higher than the first half. That much we can say for certainty. Sure, sir. Also, if you could give us some indication about high speed rail project, how is the execution going on that? What kind of revenue attrition should we be looking at it in second half as well as next year? And if we are given that we've already gotten decent amount of orders in first half, plus we are L1 for a few contracts as well, How would you look at revenue growth from the perspective of next year? Next year as we conveyed to you earlier also, we do expect about 20% to 25% growth from that of current year, number one. Number two, with respect to high speed railway project, as in the earnings call we mentioned earlier in the previous quarter, both the tunnel boring machines have come And that has been put into operation.

23:07 And as we call initial drive with respect to one tunnel boring machine is completed, regular working has started. With respect to second tunnel boring machine, initial drive is likely to get completed in the month of November. We are on track to achieve the budgeted number in high speed railway project for the current year. Understood, sir. So my second question is on the ECL provisioning that we've done. No, I could not understand what is really the change that we had put in because from my understanding, easy provisioning always is based on buckets. And as soon as a contractor fit or a receivable moves from one bucket to another, there is provisioning that is required. So what was the change that was being done this particular quarter?

23:59 No. So what earlier the practice we were following was based on the previous experience of different buckets, whatever provision we had done in past or we had experience of any receivables going bad, basis that the provisioning used to happen. From March 2026 onwards, what we have done, we have now rather than looking at the past trend, what we have done, we have defined that any receivable which moves from, say, a six month to six more than six months and more than one year, more than two years. Likewise, we have bifurcated. And the basis that there'll be automatic provisioning rather than looking at the previous. So this has called for an enhanced provisioning now going forward. If you compare our ECL provisioning, what is appearing, we have looked at that number with other industry players, you will find that our provisioning is far higher than the others.

24:59 Now so this is one change. And as I explained to you that we have formed a task force in the company. We are looking at some 15 odd projects where some amounts are stuck and that task force is on a continuous basis interacting the customer. There are many projects, which is in overseas location. People are visiting, they are meeting the concerned team and they are taking feedback how it is going to get materialized. Now in that endeavor, in The Middle East, the feedback we got from the bankers and overall geopolitical situation, it was not very encouraging. So then we thought that let's make the provision at this point in time. And as things materialize, then we will see how to go about on the ECL provisioning. So there will not be any surprise going forward. Rather, it could be a positive surprise.

25:54 And two, we are also we have received some three, four arbitration award, which we are on a constant basis in the same exercise we are discussing with the customer. On a slow mo to basis, we have made this provision towards this. We'll be it will give us some headroom for negotiation so that we can realize the cash quickly. At the moment, we are not seeing that anybody has asked for any discount. But then from our end, we thought that it would be better we keep it so that it gives us flexibility, we can quickly conclude the deal. So that's where we have made the provision. If we realize all that amount, there could be a reversal. Sure. Understood, And and what had really warranted this change of kind of increasing the way we are creating provisions?

26:49 Because we had a one off kind of provisioning in fourth quarter as well. Now if we are fairly confident that we should be receiving these amounts, then why change the rate at which provisioning gets created? Because, see, the amounts are outstanding for, you know, the the period of outstanding is higher. And once that outstanding receivable moves to a certain bucket, basis that bucket, we are making provision. The rate, whatever is defined for that particular bucket. Sure, sure. Understood, sir. One just one last question on Pune Ring Road, has there been any progress? Are we anticipating that project award in the near term?

27:37 One? Onering Road, we expect maybe Q4, it could get awarded because tender has already been floated with forty five days deadline for submission. And after the submission, then it will take about a month for them to evaluate and give. So we do expect the award of Pune Rinngrodja in Q4. Sure. Thank you so much. As this thing has this fresh bid, depending on who is the L1, that will get awarded. And we are quite confident. Understood, sir. Thank you so much. Thank you. Thank you, Alicia. Thank you.

28:44 The next question is from the line of Dollar Capital Private Limited. Please go ahead. Hi, sir. A couple of questions. Sir, just wanted to get a clarification that for next year, FY 'twenty eight, when we are saying that we are looking at 20, 25% kind of a revenue growth, and even for the second half of of... We are saying confident that the things will will improve on the on the execution front and obviously on on the entire working capital payment, everything, and and also the mobilization. So then why not to give a guidance for the second half or maybe for the full year of FY '27? So what stops the ask us to give a guidance on the revenue and the margin for second half or maybe for full year of FY 'twenty seven?

29:39 See, what we have explained is the guidance, which was held back because of the geopolitical situation, there were challenges related to energy availability at many projects tied. Because of that, we had held back. See, even when we speak today, we are experiencing in place like, say, Bangladesh, there is a challenge of ability of energy, and we are facing challenges in terms of the logistic for sending material to places in overseas location. So considering that we do not want to get into a situation where we factor something and then things go haywire. As we are now expecting that situation should improve in terms of geopolitical situation.

30:28 And once we see that the uncertainty around that is done away with, we'll be reinstating back the guidance. But then, sir, if when we are saying FY 'twenty eight, we will look at 20%, 25%. But if we don't know the base, then also that also contracts that we are confident for FY 'twenty eight, but we are not confident for the second half of FY, which is very immediate and one month is already past work this quarter. So some sense in terms of where we can look at the 5,300 crore revenue that we did in 1H? Could it be a INR 6,000 crores, 6,500 crores, 7,000 less than, higher than, some idea on that front?

31:15 This is 20%, 25% number we are talking about. We are talking about that number from the full year of March 26. Okay. From March 26, we are looking at a 20%, 25% growth in FY 'twenty eight. Okay. Yes. Okay. Got it. And second, sir, on the margin front. So two, three things to to get a clarification. What was the ECL provision for for q two? Second, so my understanding is it it would be around 86 or kind of a number would be there. So even if we remove that also, then also the margin for what the second half, not as per you, but as per the reported is is close to a kind of a 6.7%, which is given the similar revenue one q and q two.

32:07 It is it is significantly lower versus the 9.4% as per the reported. So so still not able to understand what is impacted the the margin in in this second quarter. And related is now how we can look at the arbitration. So whatever till now we have got... In third and fourth quarter, how are we looking at the arbitration amount because that will change significantly in terms of the margin for us? No, see, what I mean, the way we'll have to look at it is in terms of top line, when we do, say, around INR 2,400 crores, INR 2,500 crores kind of a top line, at that number, we'll not be that gives you a kind of breakeven kind of a situation because the fixed cost, whatever you are incurring, that will remain fixed. Now incrementally, what I know of those numbers, say around 2,400, 2,500 number, we start generating margin.

33:13 If we look at the gross margin we are generating is around 35%, maybe, say, 10, 20 basis points here and there. So we generate that 35% margin on the gross profit basis. Incrementally, every 100 crores, we'll be generating another INR 35 crores, and that adds to the your EBITDA margin to your profitability. Now what we are trying to say that H2, we will have a better number than what we have done in H1, and that's where we are trying to give you a confidence that in for the full year, we are looking at correcting the situation as far as the margins are concerned.

33:58 Now specifically, you are talking about the H1 number you are talking about, maybe the difference we are having, we have explained that we include other income also as part of our operating income, and that's where we are having difference. Maybe you are looking at the number excluding the other income. If you look at the stand alone Afcons profitability, that will give you a sense that we are generating the projects are generating sufficient margin because as I explained that in one of the overseas entity, we have to make ECL provision and that has pulled the overall profitability down. So sir, total ECL provision in Q2 in Kamsol is how much, INR 86 crore? No, in Q2, it is higher than that.

34:45 Can you specify the number? I'll give you that number. Maybe I'll give you that number offline. Okay. And two, three data points on the CapEx front, we have already done INR700 crores. So previously, we were looking at INR700 INR800 crores for this year and INR600 crores, INR650 crores for next year. So how one can look at now? And in terms of the gross debt level, we were looking at kind of a INR 3,500 crores similar number of... See, the CapEx number we have talked about for the FY 'twenty seven and 'twenty eight, that number remains to be the same. It is not going to change. We are looking at for FY 'twenty seven CapEx in the range of INR 700 crores. And in FY 'twenty eight is around INR $6.50 crores. That number remains to be the same.

35:39 And in terms of debt, we had talked about that FY 'twenty seven will be on gross debt basis, we will be around INR 3,500 crores. On net debt basis, it will be around INR 2,700, 2,800 crore. That number will remain. I think important point in debt, one needs to understand is we will have of the March 27 debt, a significant portion will be a term debt towards the CapEx. The working capital debt will come down. Mister Bandari, do you have any follow-up questions? Mister Bandari, we're not able to hear you.

36:30 As there is no response, we move on to the next participant. The next question is from the line of from Jefferies. Please go ahead. Hi, Thanks for the opportunity. A couple of questions. You mentioned your order book is excluding L1 orders. So would you be able to quantify and give us some detail on what these L1 orders are that you currently have? There are a couple of orders in Europe aggregating to around four five hundred around INR 4,200 crores, two projects via L1. Got it. And by when do you expect conversion of this?

37:21 More or less, when you look at it on the 30,000 guidance, Europe, it takes a little longer time to convert into order as compared to other markets. Therefore, we have not considered this in FY 'twenty seven. We do expect it in FY 'twenty eight. Got it, sir. And secondly, in your last quarter, you mentioned a couple of big ticket projects coming up, such as the Brahmaputra Tunnel and Dorera connectivity in Ahmedabad, about INR 18,000 crores, 19,000 crores worth of projects. So any update on these tenders? How we are positioned in these? See, it won't be appropriate to discuss individual tenders, but as MD sir mentioned, we are fully confident that we'll achieve our guidance of INR 30,000 crores. Pune Ring Road is already being discussed in the previous question.

38:16 Pramputra, also the tenders are out. So if everything goes fine, the award for that project should also happen this year as well, considering we will be there. And for other projects, there are certain big ticket projects which are in the pipeline, and we are fairly confident considering our strike rate and various considerations, we will achieve that target. Got it, sir. Just if I could ask, you've maintained your INR30000 crore order flow guidance for this year. But we're almost seven months in and looking ahead to FY 2028, directionally, maybe you don't have to quantify the guidance, directionally, do you see that this INR30000 crores is largely a function of a lot of bunching up of orders from last year? Maybe next year, the quantum could come down? Or do you expect this to continue growing in terms of order flow in FY 2028, 2029?

39:12 From last year, only one job we got, 7,500 crores of Croatia and all others are fresh jobs. Okay? So it may not be appropriate to look at bunching up of orders from the previous year. And as opposed to INR 7,500 crores of Croatia, we already have about INR 4,200 crores of other European jobs in the pipeline, which is marginally less, I would put it. So for the next year order book guidance, we would say it will be too early to say. And for the year, we will achieve first, and then we will come back to you with guidance for next However, we'll keep in mind our book to bill ratio and other risk factors. Even if there is a large availability, we'll make sure that we'll take the projects which we can deliver. So all those factors will prevail.

40:02 Got it, sir. And just lastly, you usually give a two year prospect pipeline, you split it between your businesses and between domestic export, if you could just share those numbers? Sure, we'll do that. So for the remaining H2, our pending pipeline, which we see is around INR 80,000 crores and which is spread across segments. Hydro is around 35%, marine also 35%, surface, which is road and rail is relatively less, around 10% and urban infrastructure is 20%. For the next year, that is FY 'twenty eight and plus this quarter, which means around six quarters, the total pipeline, the total TAM for us is INR 3.6 lakh crores, again, equally spread across segments, 20% in Hydro and Underground, 27% in Marine and Industrial, 20% in Surface and Surface Transport and around 32% in urban infrastructure.

41:06 And in terms of geography, 65% of this pipeline is domestic and 35% is outside India. Got it. Thank you, sir. Thank you. The next question is from the line of Bhavik Shah from Invexa Capital LLP. Please go ahead. Yes. Hello, sir. Can you hear me? Yes, you are audible. Yes, you are audible. My first question is regarding the provisioning. So sir, is it fair to say, like, in the coming quarters of the day, we will increase provisioning? No. K. So this is a one off which which will get corrected in the coming quarters. Right? So as I explained that even these provisioning what we have done, we have explained that we are at a very advanced stage of certain arbitration award realization.

42:01 And we thought that let's have something in hand so that we can if there is a requirement to offer some discount, we'll be able to offer and we can get the amounts realized. So we don't foresee going forward, there will be any requirement. And even if we are able to realize this amount, there will not be maybe we can look at a correction in the provisioning. And two, in one of the overseas subsidiary, we had to based on the market feedback, we had done the provisioning, but then we'll be following up with the customer for realization of that. And this is the progress, we will take call how to go about on the provisioning. Third, newer arbitrations also when we get arbitration award, we'll keep some cushion for negotiation. So what is the receivables outstanding from these debtors like which have been provisioned or which have been provided for in this round, the additional ones? So what is the total amount of the receivable outstanding we have?

43:15 Ladies and gentlemen, we've lost the connection to the management. Give me a moment while I have them back in the conference. Thank you for your patience. We have the management line back again in the conference.

44:09 Mister Shah, please go ahead with your question. Yes. So so what is the receivables outstanding from these subsidiaries or projects which have been provided for in this round, like of the total receivables? See, the total receivable, it would not be appropriate to give the number, but we have made sufficient provision, and we don't foresee that there'll be any further requirement of any provisioning. Sir. Sir, in our say order book, how much what is the proportion of say now the JGM order book and the JGM receivables, which are outstanding? So in JJM, we have explained in past that in JJM, we are doing project at two, three locations, but the difficulty we are facing is in UP only.

44:59 The pending order book in UP is around INR $4.74 crores now, which the discussion what we had with the customer, they are expecting us to complete 75%. And then after that, they will release that payment. So we going forward, we are going to execute. We will take the whatever percentage we have completed to 75%, we'll get the realization. And then with that money, we'll try to complete. As far as outstanding is concerned, we have got INR $3.72 crores in UP outstanding. We have realized some amount of payment in last two, three months, but the amount realization is small. But I think going forward, the way forward we are looking at, it will not be a significant chunk getting released. We'll have to progressively complete 75% and I guess that will get the realization of payment.

45:52 So outstanding is INR $3.72 crores or we have realized INR $3.72 crores still now? So outstanding amount is INR $3.72 crores. This amount we had talked about in past, it used to be in excess of INR 400 crores, but then gradually, they have released some payment. And now going forward, we have got a plan we have discussed with the customer. They are looking at completing certain segments, which progressively we will complete, will cross the threshold of 75%. And once we complete, they will release the payment. Right. And sir, you told us some projects are seeing slowdown from the customer's end. So which are these projects and which you see will pick up execution in H2? No, sir. See, slowdown in the sense what we have talked about. One, we have talked about that the payments are getting stretched.

46:40 So that we are seeing that it is across the spectrum that kind of a trend we are seeing. In second half, the execution pace picking up, we have talked about in past that in some of the Maharashtra project, there were certain land acquisition related issues. There were certain design related aspects, which had to be changed. So those has already been completed. And going forward, we will be looking at Q3, Q4 faster pace of execution. Also some of the projects which is into offshore marine related projects, which generally slows down in monsoon season, we'll see a pickup there. You. The next question is from the line of Mohit Bhandari from IIFL Capital Limited. Please go ahead.

47:32 Yes. You. Sir, over the last few quarters, we have seen this in terms of various projects like either change in scopes like you recently mentioned in terms of either design related or any other issues or pending clearances, either in terms of land acquisition or any other clearances. So as we speak till now whether the work has actually started or the projects that we are talking about since it's been some time that aggregation is yet to start? No, the work was happening in those projects, work was happening. Please understand that the project we are talking about are long stretch projects, it runs into kilometers. So the customer had given certain land with which we had commenced the work.

48:20 Certain land, they had to acquire, and there were certain challenges in the acquisition or maybe during the course on some aspects of the project, there is a change in design. So as I explained that those aspects, have already crossed. And going forward, we'll be looking at a faster execution in the entire stage of the project. So we were already working in those projects. Got it, sir. And when we say in terms of delays in receivables due to uncertified bills and so how that has turned out since if you look at September numbers that is still feels elevated. So any progress till late? Can you just explain once again...

49:11 So when we say that there would be improvement in collection in the second half, so till now, if you have seen any major collection being realized post September till now or any other in terms of interactions that you are seeing that in terms of visibility of improvement of collection? See, one... See, there are three aspects to it. One, what we are saying is the work done we are doing, the customers are taking time in certifying and releasing the payment. I'm not saying that they are not releasing. What I'm saying is they are stretching the payment. That is one. So whatever work done we are doing, we are getting it. And going forward also, we'll get. So when we are talking about any number for the March, we have factored in this kind of a stretched payment.

50:01 Two, what we are talking about is we have got certain stock receivable, which we have to receive. So say we have completed the project, some places, the retention is to be released likewise. So those collections, we had set a target for this financial year. We had set the target for first half also. We have seen a substantial movement in first half, and we are in the close interaction with the customer, we are quite confident that the number, the target we have set for this financial year, we are going to achieve that number. So that will give us a big boost in terms of fund getting into the company from the stock receivable. So that will bring down the, say, receivables or contract asset, and that will also help in reduction of debt, net working capital, and that will aid to the cash flow from operation. The third aspect we are talking about is the new projects we have won now. For those projects, there is an eligibility of mobilization advance.

50:58 So till we have finalized the September accounts, we have not realized those advances. Those advances are going to get rectified in, say, Q3 and Q4. So that is also going to aid the fundability for the company. And that's how we are saying that we'll see an improvement in cash flow from operations. Got it, sir. And lastly, when you said that our other cost has three other things, including ECL provision, arbitration receivable provision and overseas subsidiaries provision. So is it possible to quantify this amount to get the correct run rate of other cost? As I explained that ECL provision, have done because we have moved to a new ECL provisioning metric basis that we have done the ECL provisioning.

51:47 And they'll not be as such, you'll be able to extrapolate that ECL provisioning for the remaining period because that was some on certain specific aspects, have made that provisioning. Now going forward, I don't think that there'll be a similar ECL provisioning in, say, Q3, Q4 or maybe future period. Even on this provisioning aspect, what we have done, if we see the collection is happening, then maybe we can see we'll see how do we take the CCL provisioning. Okay. Okay. Got it. Anyway, was asking in terms of correct other calls, but that's fine. Thank you.

52:33 Next question is from the line of Balas Udhamanian from Aryehab Capital. Please go ahead. Good afternoon, sir. Thank you so much for the opportunity. Sir, actually, tunneling turnover technically starts in this number onwards. If you look at our depreciation anywhere between INR 85 crores, 90 crores range. But historically, nearly INR120 crores to INR130 crores range. I think once that DPM related tunneling activities will ramp up, whether the depreciation run rate will hit nearly 120 crores, INR $1.30 crores per quarter range, sir? So you are right, the depreciation will go up.

53:18 And as the PBM starts operating, you will have uptick in the turnover and also the contribution because the TVM related turning, we have explained in past that it generates a higher contribution margin. So you are right, it will the depreciation will go up, but at the same time, it will also take the top line up and it will also contribute more margin. Okay. Sir, is there any risk on that Vatuan court execution side because the Vatuan is restricted to geotechnical investigation and designed due to land reclamation and over delays and public agitations.

54:04 So what are the risks we have? Are we protected in terms of contractual escalation clauses or equipment compensation in route size? In Wazwan Port, there are three aspects. One is our own execution, two is approach. The approach, one project is being handled by NHG. The project is handled by Wazwan Port only. Both are already delayed. And with respect to our work, we have already started geotechnical investigation. We have not faced any local issues so far. And on we have kind of engaged with locals also wherever needed, all that. And but the issue would remain without the approach being handed over to us, which is contractually to be handed over to us, there is going to be a challenge for a full scale working.

55:03 So clients are in discussion with us for alternative methods of doing the work, which is something currently under discussion as this is forms part of follow-up of projects in the Pragati portal. There could be specific discussion around that. The alternatives are being discussed as to how to get the work going, not confining ourselves only to geotechnical and design. And in terms of the extension of time and other areas, we don't find any issues. But the issue could come up on the execution side till the alternatives are frozen and cost related to the additional work is frozen.

55:55 So to that extent, the turnover could be less till that time. But we are working on the geotechnical based on which designs and all we'll complete. Yes, sir. Sir. Sir, my last question on that closure, Arabia project side, If you look at on the international market, supply chain related challenges and material availabilities are still there. Once what is that expected peak revenue contribution from this project, whether it will start from FY 2028 or FY twenty twenty nine? And how the supply chain has been localized to protect the margin side? If you look at on the export side, generally 200 basis to 300 basis points higher margin compared to domestic projects.

56:51 Still we are in that same side to get higher margins compared to domestic projects? But on this project, typically, international projects don't have a pass through mechanism. But fortunately, in this project, beyond 10%, the escalation is compensable. And the 10%, have already taken appropriate provisions. So we don't foresee any issue on profitability. Revenue will start in FY 2028. Got it, sir. Thank you. Thank you.

57:41 Ladies and gentlemen, before we take the next question, a reminder to all the participants to ask a question, please press star and 1. Next question is from the line of from Duluth Capital. Please go ahead. Hi, sir. Just two, three things to clarify. Sir, we are looking at a mobilization advance to be received in the second half where we are... We have received recently the INR 19,500 crore order inflow. So how much are we looking at broadly in terms of the mobilization advance for in the second half? See, it would not be appropriate to give you a specific number. But then I can tell you that generally, in our project, we are eligible for 10%.

58:31 In some projects, there is a 15% advance possibility also. But at the same time, the entire amount is not disbursed at in all projects in one go. In some projects, it is given at one go. In some projects, it is given initially, they'll give 5%. And then subsequently, they'll give another once you utilize the 5%, then they'll give you the subsequent 5%. I can tell you with certainty that we are looking at a very sizable number of advance in the next half. Got it. Second, sir, this contract assets, so particularly the unbilled revenues of 6,200 crore part of current assets and 2,000 kind of a part of noncurrent assets. So this 8,200 all crore, so have we seen any any kind of a certification post September till now in last thirty five odd days?

59:25 Have this number came off or maybe because of the ongoing acquisition, this number is broadly the similar? The old one is getting certified, but the new one is also getting added. Yes. So you are right. It remains to be the trend, but then our endeavor is to bring it down. And maybe we'll see this number at the year end. There is a full effort that we should bring it down. Okay. Got it. And on arbitration and the other income part, so till now, whatever we have received in terms of arbitration, do we expect... Is there any any arbitration claim the way we have one eighty three or current in q two in third quarter or a fourth quarter? Any likely given until now, whatever the situation we have?

1:00:18 See, I mean, these are all semi judicial process, and we'll not be able to pinpoint that we're receiving or not receiving. There are various cases we are fighting, and the company is putting its best foot forward not to defend its position in the arbitration. So there are many cases, which is there. Whether that is going to get rectified in Q3, Q4, it will be difficult to give answer. If we let's say, if we exclude that, then how one can look at the other income in the second half, the run rate that we have normally $60.70 odd per road, that run rate is is to to be continued in in the second half? It will be. Yes.

1:01:07 Okay. Okay. And the... Yeah. Yeah. And on on on the finance cost, so given the, obviously, the data's increased, so excluding the bank charges, the current INR 136 crore kind of quarterly run rate, will it be higher in second half? Or given the way we are looking at the reduction in the working capital leading to a reduction in the gross rate, but will that impact will be in the end of Q4 onwards or maybe 1Q onwards, but this run rate or maybe it would be increasing the finance cost at least in the second half? See, this finance cost, what we are looking at, I don't think that from this kind of a run rate, it is going to go up.

1:02:00 Only thing is incrementally, if we bank projects and if we are required to if the bank guarantee utilization goes up, there'll be increase in the bank guarantee cost. But as far as the borrowing cost is concerned, I don't think that this is going to we are going to cross the kind of run rate we have clocked, say, in H1. Okay. Okay. Got it, sir. And then last, just a clarification, the L1 order that what we have mentioned, 4,200 crore. So that is not part of INR 19,500 odd crore the YTD order received. That is where we have received the LOA and this is the separate one, 4,000 odd. Yes. So INR 19,400, we have got the confirmed order. This L1 order we have talked about this INR 4,200 odd is not counted in that.

1:02:48 Okay. Okay. Got it, sir. Thank you and happy day one. Thank you. Thank you very much. Thank you. Next question is from the line of Yogesh Doshi, an individual investor. Please go ahead. Afternoon, sir. Yes. Good afternoon. Sir, as a layman investor, would love to know from you that we are in two extreme engineering businesses. So can we not help payment schedule in a extreme way? See, how many cases we are fighting? We are very competitive to European companies in terms of our margin.

1:03:41 We are one of the best engineering company in India. So for every good project, we have some arbitration or legal issues. Can't we have a board with a legal strong point so that our payment schedule is not delayed? And if it is delayed, then compensated with interest because as as we are paying interest for our borrowing for that particular project. Can you please guide me whether this extreme engineering is supposed to have extreme measures of collections?

1:04:27 Thank you so much. Thank you. The point what you are making is well made. There are some projects, some overseas projects where delays in payments are compensated with interest. Domestic projects, barring exceptions, generally, there is no interest loss. And it is not that for a complex project, there are separate contract terms. It is not so in India as of now. Currently, it is all on pure L1 basis. First of the jobs had come in India with 60% technical, 40% commercial, first time it has come under QCBS now. So going forward, if that comes in, then technical will get a weighted.

1:05:16 So even if somebody is not the L1 in terms of price, they would get us the lowest evaluated bidder. But in terms of payment terms, that is something which is more or less fixed under the Government of India procurement guidelines in most of the times. Therefore, their changes in the payment terms may be difficult. And another difficulty in these things in arbitration barring some, I would say, employers or some states, other place... I can hear you, sir. On on payment terms, it remains uniform or mostly guided by the government of India procurement guidelines.

1:06:04 And in terms of QCBS, first of the projects, one or two projects have started coming. We need to see how it is taking shape. And therefore, just because we do complex project, we don't get a premium in the domestic market. In the international market, many places, it is QCBS and where technical proposal gets significant weightage and based on which you are not necessarily required to be l one and in terms of pricing. But if you are a lowest evaluated bidder based on technical and commercial score, you will get it. There also payment terms, whatever is the stand... Standard payment terms, that remains.

1:06:51 Therefore, the... For a complex project, there are separate payment terms. For other projects, it's a normal payment term. That kind of a differentiation is not there. Both domestic and indirect. Sir, how how can we, I mean, make ourselves unique or how an investor can get a premium or pay premium to our company's market cap if it is equal to everyone. I mean, the payment cycle or projects.

1:07:36 See, just to make my point, if I am buying AFCONS Infrastructure and so many other infrastructure EPC companies, why should one pay premium to AFCONS Infrastructure despite of this much of arbitration, legal issues, and net margin or gross margin is very much similar. No, So, we let me complete, sir. Please, please. Sapulji Group and Afcons are known as the best EPC companies overall in the world.

1:08:33 But if we can't insist the payment schedule with Indian government, we should be little choosy about taking all the projects where you feel that payment can be an issue. We should be only concentrating and focusing on projects where we see the payment cycle and the promise of facilities are good enough. Instead of having 50,000 crores of orders, we can have 25,000 crores of orders for next two years. Anyway, we are doing only $1,012,000 crore orders.

1:09:19 We can choose among the projects. No? Traditionally Yeah. If you look at the... Why AFCONS is held at a premium? One, corporate governance. Second, if you look at profitability in the infrastructure segment, in a normal circumstances, we have always been at the higher end of the profit spectrum. An EBITDA margin in excess of 11, 12%, I don't think most of the construction companies are cheap. You you are aware of yourself. As you are an investor, you know these things. And third, there is a huge international recognition which adds to the intrinsic value even though it may not necessarily convert into transactional value.

1:10:17 So at some stage, if some stocks have moved like stocks, some of the other stocks have moved to a like a portfolio stock. At some stage, Afcons could also move into your portfolio stock. That is what we expect. So therefore, taking that into consideration, I taking that into consideration, I think in our assessment, Afcons would continue to be a premium segment. As you know, Afcons is the eighth largest player in marine in the world. Twelfth largest player of bridges in the world. These are all not my statistics. These are engineering news record USA statistics. Okay. Fine. And we are the one... We are the only company for eleven years in succession.

1:11:08 We have been judged as the most admired or most innovative knowledge enterprise at India level, the Asia Pacific level, and global level. And taking all that into consideration, it is for the individual investors or the group of investors to decide what kind of premium one can avail or all that. I cannot comment on that. Thank you so much. Thank you, sir. Thank you for enlightening individual shareholders with this confidence. Thank you very much. Thank you. Thank you very much. Yeah. Happy Diwali to you all. Thank you. Happy Diwali and a very happy and prosperous New Year. Thank you.

1:11:58 Thank you, sir. Ladies and gentlemen, as there are no further questions from the participants, I would now like to hand the conference back to management for closing comments. Thank you very much. Happy Deepavali and happy New Year to you all. As conveyed to you, we are looking at a 20 to 25% growth in FY twenty eight, and the second half will be better than first half. We stand by our guidance of 30,000 crore of order book, and we we are looking forward to exciting times back. Thank you. Thank you very much. On behalf of shares and stock brokers limited, that concludes this conference.

1:12:43 Thank you all for joining us today, and you may now disconnect your lines.