Edited Transcript of KECL.NS earnings conference call or presentation 29-May-20 11:30am GMT

Coming to the Q4 financial performance, our revenue is at INR 3,671 crores for the quarter have marginally de-grown by 4{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} on account of COVID-19. EBITDA margin for Q4 stand at 10.1{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. Our interest cost as a percentage to sales for the quarter has seen a vast improvement and stands at 1.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} vis-à-vis 2.2{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} last year. Our PBT and PAT margins stand at 7.3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} and 5.3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, respectively.

On the business front, our core T&D business crossed revenues of INR 8,000 crores with a growth of 12{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, backed by a robust execution in the international T&D, especially in the SAARC region, Americas and UAE. In line with our diversification and derisking strategy, we have expanded our footprint to 3 new countries in Africa this year. The overall tender pipeline largely continues to remain strong despite the postponement of a few bid submissions. We are witnessing a significant uptick in tendering activity in the MENA region, especially in the UAE, Oman and Saudi Arabia, despite the crude prices going down.

PGCIL tenders under TBCB route worth over INR 14,000 crores on growing energy Phase 2 have largely been bid in the last 2 weeks, and a couple of them have to bid in the next 1 week.

We are looking to leverage our recently acquired transmission tower manufacturing facility in Dubai to secure additional business in the MENA region on account of local price preferences, historic fiscal benefits.

The railway business continues to be on a high-growth trajectory as it crosses INR 2,500 crores of revenue for the first time with a robust growth of 33{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. This year, the business has diversified its portfolio to include RRTS and Road Over Bridges projects in addition to our existing offerings of Rural Electrification and composite projects.

Our diversified and robust order book of INR 6,000 crore-plus in the railways will enable us to sustain leadership in this sector and drive growth for us this year as well. Our civil business continued with its diversification strategy and secured entry into the strategic defense sector with 2 orders, including 1 for the construction of our data center. The business faced headwinds on account of muted industrial CapEx cycle in India and challenges faced by the reality sector. However, the robust order book of INR 2,700 crores, backed by the 3 metro projects for DMRC and Kochi Metro, give us the confidence of this business being one of the key growth drivers for us this year.

Cables business has witnessed revenue slowdown due to lower order intake, impact of commodity prices and loss of production to have dispatches due to COVID-19. In solar, we continue to focus on select large tenders in India as the domestic sector continues to face uncertainties. We have started execution of a recently secured order of 20 megawatts solar carport for a reputed automobile manufacturer, which is the largest carport project in India. We have also put in select bids in the international market, especially in Africa.

Execution of the existing projects in smart infra are on track in a significant development the business has become L1 in a defense project. We continue to have a focused approach in managing our working capital and cash flows, which is reflected in the improved borrowing numbers and interest costs, absolute cost as well as the percentage to sales.

Our borrowings as on March 31, 2020, stand at INR 2,380 crores. We have been able to bring down the average borrowing level from INR 3,100 crores last year to INR 2,600 crores this year, largely in line with our guidance of average borrowing levels of INR 2,500 crores for the full year. Our foreign currency borrowing mix has improved in line with the increase in our international revenue. This has resulted in improvement of interest cost as a percentage to sales to 2.6{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} vis-à-vis 2.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} last year. Our robust order book and L1 of over INR 24,000 crores gives us the confidence of delivering a strong performance in FY ’21.

Thank you very much. I’m happy to take your questions now.

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions)

The first question is from the line of Ravi Swaminathan from Spark Capital.

——————————————————————————–

Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division – Assistant VP [2]

——————————————————————————–

Congrats on a decent set of numbers, given the situation. Yes, my first question is, you had mentioned that Middle East ordering has been, I mean, still going on well. In spite of the fall in oil prices, I mean, what is the reason behind that? I mean all those countries, focusing still on power, T&D instead of the (inaudible)?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [3]

——————————————————————————–

I think Ravi most of these projects had been planned for some time, and the tendering has just got bunched up. A couple of them have got, I’ll say, slightly postponed, but a few of them have already been tendered. And in our L1, there’s a very large tender where we are L1 of almost I think close to INR 900 crores in one of the Middle East countries. Apart from that, we have bid for a few large projects. And there are a few large projects, which I think got extended because of Ramadan, and I think we should be bidding for them in the next 2 weeks or so.

——————————————————————————–

Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division – Assistant VP [4]

——————————————————————————–

Okay, sir. I mean what will be the total value of all these projects you have put together in Middle East?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [5]

——————————————————————————–

In Middle East, roughly, it could be around, I’ll say, INR 5,000 crores or so.

It is mainly between Oman, Saudi and UAE, which includes Abu Dhabi as well as Dubai.

——————————————————————————–

Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division – Assistant VP [6]

——————————————————————————–

Got it, sir. Got it. And within India, so basically, how is the scenario currently in terms of ordering, so given the fact that — so government finances are stretched. So basically, do we see power changing trends in general to remain flattish in net — FY ’21 net sales or and can you even see a decline?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [7]

——————————————————————————–

So my view is that last year was a flattish year, where we had roughly around INR 2,000 crores of intake in India, in power T&D. So this year, I think we are clearly seeing a much higher number. As I mentioned, we have already bid for, I think, around roughly around 25 projects, in transmission, another 10, 12 projects in substations for power grid, which are under TBCB, where the TBCB bids are being put, I think, in the last week of June. So those are large numbers, and then there are also some of the SEBs in the South which have come out with bids. In fact, if you saw our order intake announcement, we also already got one large project in the south substation already.

So I think this year, my view is that the India T&D number would be higher than last year, notwithstanding the issues which government may face. But I think if you look at the government, government policies also has a very clear announcement saying that they want to have T&D more in the — on the TBCB route. So I think that would continue. We have not seen any postponement happening and how good has taken the bids in spite of the lockdown being there.

——————————————————————————–

Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division – Assistant VP [8]

——————————————————————————–

Got it, sir. Got it. And in terms of — my last question. In terms of working capital, so how is the scenario currently? I mean the past 2 to 3 months, many of the companies have faced a stretch in working capital, how is it for KEC? And how is it likely to be going forward also?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [9]

——————————————————————————–

So in March, because of lockdown, we did not collect, I’ll say, roughly INR 300 crores to INR 400 crores of money, okay? Which — had the lockdown not being there, I think we would have collected that, and our closing borrowing figure would have been probably been significantly lower than what it is right now, okay, that’s one part. But fortunately, all that monies were collected in April. In fact, in April, we collect — in fact, in April 2020, we collected more than what we collected in April ’19, okay?

So fortunately, for us, it’s good for us that we have more government exposure than private exposure and also exposure in sectors where government is pushing, so power, T&D, railways. So clearly, as of now, we have not seen any stress in the system in terms of working capital. And in fact, in the — since March 31, we have received almost INR 100 crores from Saudi also in addition to what we received otherwise. So I think we are pretty happy with what is happening on the working capital, at least as of today.

——————————————————————————–

Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division – Assistant VP [10]

——————————————————————————–

Okay. Got it. And you don’t foresee any challenges next few months or something of the sort because government agency is steadily trying to postpone things, right? So I mean the — from that point of view…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [11]

——————————————————————————–

So as of now, I don’t see that. What we have also done is a contingency is that sometime back, we have increased our working capital limits. And in terms of the recent push of government towards liquidity, we have also tied up some additional finances as a backup in case there are some payment delays and all that from the client. If we need to fund it ourselves, we have enough limits apart from our normal working capital limit. In fact, in the month of April, we had already repaid some INR 200-odd crores of NCDs.

——————————————————————————–

Operator [12]

——————————————————————————–

The next question is from the line of Renjith Sivaram from ICIC Securities.

——————————————————————————–

Renjith Sivaram, ICICI Securities Limited, Research Division – Assistant VP [13]

——————————————————————————–

Congrats on good set of numbers despite the overall challenges. Sir, if you can let us know what’s the kind of growth we should look at this year because of all these challenges which you are having soon.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [14]

——————————————————————————–

So to me, it’s a difficult question to answer right now. I’m not sure whether I can give you an answer. Had it been a pre-COVID situation, I think we had already said that we’ll grow from 15{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 20{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} or at least 15{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} we would have grown, okay? Right now, it’s a difficult answer to give because we do not know what will happen with the lockdown, whether it will be lifted or it will continue or we’ll have a second lockdown or not. If everything goes well, I don’t see anything impacting 15{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} or something. But as I said, right now, it’s — your guess is as good as mine. I think we’ll have to wait for maybe another 2, 3 weeks just to understand how the situation pans out. But otherwise, with an order book and with 85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of our projects already operational, I think we feel generally good about it.

——————————————————————————–

Renjith Sivaram, ICICI Securities Limited, Research Division – Assistant VP [15]

——————————————————————————–

Okay. And in terms of order intake, what should be the target for us for this year because there have been some slippages last year?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [16]

——————————————————————————–

So order intake has been a matter of concern. Last year, we got orders which are, let’s say, close to our revenue. So we have not been able to increase our order book. But notwithstanding that order book right now is INR 20,000-plus crores and another INR 4,000 crores of L1. And as I said, we have quoted a large number of tenders. So hopefully, if those tenders get awarded, then we should be happy. I think the concern, which I have on the order book is, except for this power grid and a few state tenders, most of the tenders right now have been postponed, and they are supposed to be due in first week of June, second week of June, somewhere like the people have just been postponing because of the lockdown. I only hope that these tenders happen and get awarded very quickly. Otherwise, what would happen is your Q2 and all that would be sort of blank in terms of order intake from these people. Railways also has more or less postponed their tendering, but they have large tenders, which are there, okay? So — and they have all told us that the day lockdown is lifted, we will go ahead with the tenders. So I think the only question is, when do these tenders get awarded, if they get awarded very fast, then even I’ll say by August, September, you’ll see a lot of tender — a lot of awards happening. If they don’t get awarded now, then you may see them coming in Q3. But on the international front, I think a lot of tenders have been quoted, and they are being opened. We are receiving clarifications and all that. So I do feel that initially for this quarter and maybe early part of next quarter, most of the ordering may happen from — on the international front. But otherwise, I think we are pretty comfortable with the pipelines. We are seeing almost, I think, close to INR 35,000 crores, INR 40,000 crores pipeline also, which includes T&D and railway and civil tenders to be quoted. So I don’t think we are, right now, worried about order intake or tender pipelines. And we have not yet seen tenders getting canceled in, I think, any area, okay? Some of the private investments on the industrial side, yes, we have been seeing some deferment happening. But on the infra front, be it railways, be it T&D or be it civil, we have not seen any cancellations happening.

——————————————————————————–

Renjith Sivaram, ICICI Securities Limited, Research Division – Assistant VP [17]

——————————————————————————–

Okay. And lastly, sir, on the receivables, compared to December, the receivables has increased by close to INR 400 crores — INR 300 crores to INR 400 crores. So what was the reason for that? And how is it now?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [18]

——————————————————————————–

Yes. I think the basic reason is, as I said that because of COVID, suddenly with a shutdown over the last 8, 10 days, which is a maximum period when you get all your collections, et cetera, you are neither able to build because it was suddenly shut down, and you are neither able to collect, okay? So I think that is the basic reason why you see a distortion in the AR. Otherwise, I think our AR has generally been — AR position has generally been pretty decent. I think we’ve been pretty happy and that you can see in the interest cost coming down also. I don’t think there’s anything to worry on the AR position.

——————————————————————————–

Renjith Sivaram, ICICI Securities Limited, Research Division – Assistant VP [19]

——————————————————————————–

What will be the targeted bid for this year, FY ’21?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [20]

——————————————————————————–

Rajeev, you want to answer this?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [21]

——————————————————————————–

So basically, what we are targeting, it is, again, very difficult question really to answer that. That actually, it will depend on how the year will pan out in terms of the execution, in terms of other things. But we are — our efforts are to continue to focus on the working capital right now and to keep the borrowings level under check, which, as Vimal rightly mentioned that we — even post 2 months of lockdown, we are very much in control of our working capital borrowing, and we are — it’s in a good shape.

——————————————————————————–

Operator [22]

——————————————————————————–

(Operator Instructions)

The next question is from the line of Renu Baid from IIFL.

——————————————————————————–

Renu Baid, IIFL Research – VP [23]

——————————————————————————–

First, few things. A, first, if you could help us understand given the fact that we have seen this mass exodus of migrant labor back to their home space, and you mentioned that nearly 85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of the sites are operational, what is the kind of activity level currently at the site? And do you believe that this labor availability could pose a challenge for execution in the current financial year? And simultaneously, what could be the likely implication on cost? Are customers willing to take on this extra labor inflation on the price variation process, which were in place?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [24]

——————————————————————————–

So most of the contracts have a price variation clause. The government contracts, whether it is railways or utilities, et cetera, have a contract clause — have a variation clause. Some cases link directly to labor indices, most cases link to WTI, et cetera. So I do feel that we should not have any issue on that. And as of now, we have not seen labor costs going up. I think my worry is not labor cost because it’s not a large chunk in any case.

The second part is that we — now we have seen a flattening of the labor migration. So if you look at the last 7, 10 days, we have hardly seen any — there are some migration happening. There are new people coming in and all that. So the numbers are close to flat.

The third piece, what will also happen is that I think we will have to live with, let’s say, 20{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 30{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} reduction in labor force across projects and maybe even across factories. I think the target is very clear that how do we increase our mechanization, automation and digitalization to replace this lost labor and also compensate for additional costs, which will be there on account of social dispensing and all that, instead of having 6 workers in 1 room, we may now have 2 orders in 1 room. So your cost and all will go up. Whether the clients will directly compensate? I don’t see that as a thing. Whatever comes out of a price variation. There is a talk that some of this can form part of change of law clause because you are doing all this as part of a change of law, okay? So we’ll have to wait and watch what happens. It’s very difficult right now to say.

But to me, I think what we should also keep in mind is that the commodity prices have come down, the diesel prices are coming down. So I don’t think if you ask me a question, I don’t think I’m worried about my margins because even if it was up on labor, I will definitely save them across my material cost, my logistic cost and all that. So I think my margin would be more dependent on whether I’m able to ramp up productivity and get revenue rather than looking at whether labor will increase my cost or anything? No, I don’t think I’m worried about that.

——————————————————————————–

Renu Baid, IIFL Research – VP [25]

——————————————————————————–

Right. So as of now, the current phases of labor availability versus pre-COVID would be like 70{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} or it would have been lower?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [26]

——————————————————————————–

50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. We have around 30,000 people, we now have around 15,000 people with us. The problem is that a lot of local people and all are coming for jobs. Our concern is that we do not know whether all of them are COVID free or not COVID free and some of them are local, so they are not trained. So we are now working on training modules to train people. See, ultimately, we have to live with the fact that migrant labor may go away and you have to — if I’m doing a project in UP, why should I hire somebody from Bihar, if I can get people in UP. So I think that’s the way we are looking at it and saying, how do I train my local labor? Okay? Who is currently not used in this, okay? So I think that’s what is going to happen.

——————————————————————————–

Renu Baid, IIFL Research – VP [27]

——————————————————————————–

Sure. Sir, second would be on the sewerage piece of the business because that was 1 piece where, led by large metro orders, you were sitting about almost INR 2,500 crores of book. And these projects were also in and around the cities. So what would be the road map in terms of looking at the potential scale-up of execution of these orders? And would you be able to give any broad indicative numbers at least for railway and civil in terms of likely range of revenue growth for next year, if there is no second lockdown? Assuming that…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [28]

——————————————————————————–

Okay. So civil, I think we should at least INR 1,500 crores of revenue, okay? Because I have to do the 2 DMRC job that we have to do at Kochi Metro. I already have, I think, 5 or I think, 6 residential projects, 4 of them from one large very reputed developer, okay? Where the work has started during the COVID. Our jobs were awarded and started during the COVID, okay? So there are good people. And I’ll say what will classify as A grade, okay? So I think — and with the 2 defense jobs where I do not see any problem. I don’t see civil revenues being a concern for me as of now. The concern in civil is that most of the residential projects apart from the big ones are getting shelved. So there could be some issue on whatever we had planned from residential. Although I’m happy with what we have. The concern mainly is on the industrial part, okay? I think the private industrial CapEx is something which will not happen for the next 6, 8 months, very clearly. So whatever revenue we had thought we’ll get from that, okay? I don’t see that happening too very fast. Okay. So private industrial CapEx is going to take a beating. But fortunately, since I have these 3 large orders of DMRC and Kochi and the 2 defense orders and I think 6 or 7 residential orders already from good people. I’m pretty okay with my — this.

As far as railways is concerned, we did a 33{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} growth this year. And I see no reason why we cannot do a similar or higher growth than that because I have a INR 6,000 crores order book, okay? The second piece is that the railway order execution has ramped up pretty fast. So if you look at the ramping up speed, I think railways were the fastest to ramp up. Okay? Because you are working on tracks and other things.

And the other thing, what government had done was they authorized railways to start their own project without waiting for the DM or the collector permission. So in that way, railways actually started projects earlier than all other industries. So I think railways, we are pretty confident. I don’t see why we cannot do 30{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 40{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in growth in railways, assuming that there’s no second lockdown. Okay?

——————————————————————————–

Operator [29]

——————————————————————————–

The next question is from the line of Bhoomika Nair IDFC.

——————————————————————————–

Bhoomika Nair, IDFC Securities Limited, Research Division – Security Analyst [30]

——————————————————————————–

Yes sir, just wanted to understand a little bit on railways, while obviously, the order backlog is very strong and even the execution as you mentioned should be quite decent. But how will inflows pan out for the current year? If you can throw some light on the railway side?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [31]

——————————————————————————–

So I think we have — I don’t have the exact number, but roughly around INR 9000 crores to INR 10,000 crores of tenders to be quoted, probably in June itself, okay? So there are a large number of tenders and railways have very clearly told us that they are not cutting anything on their CapEx budget, okay? Very clearly, all our clients have told us, the other piece is that last year, we started bidding for a lot of the metro railway projects. When I say metro railway, there is still the ballast less tracks and OHEs and power supply. So apart from civil. Civil is being handled by the civil team. So the railway team is quoting for all others. We already quoted for some projects in Bangalore, we are quoting for other projects also. So we are very clear that we will also get some revenue — some orders from this. So I think as far as railways are concerned, we are pretty confident that we will have a pretty decent order intake.

——————————————————————————–

Bhoomika Nair, IDFC Securities Limited, Research Division – Security Analyst [32]

——————————————————————————–

Okay, okay. And the other aspect was on SAE because it’s been a good year for us in terms of execution and strong execution that we’ve seen on the project on hand. But there were some projects which were in pipeline. So any status on that because we have also INR 1,000 crore backlog now? So from a revenue perspective of next year, would it be fair to say that SAE would not see growth and may perhaps see a decline next year?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [33]

——————————————————————————–

I think it will be that situation, okay? Because Brazil being where it is today, okay, I honestly do not see a revenue growth happening in SAE. We will be lucky if it is flat, it may have some degrowth. Also on the fact that Brazilian currency has devalued by almost 25{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. So even if they do the same job, okay? The revenue translated into Indian rupee, unless Indian rupee depreciates against the dollar, we may have some impact of the Brazilian Reals deposition itself, forget the part that we may get, we may not get orders. The other piece is that we have got 2 Sterlite orders there, L1 position, which have to be converted into orders, which Sterlite has been talking to us saying we will do it anytime, okay? So if those 2 orders get converted a little bit early, then maybe we may be able to maintain our revenues, okay? But I think it is fair to assume that there could be a marginal de-growth or at best flat.

——————————————————————————–

Bhoomika Nair, IDFC Securities Limited, Research Division – Security Analyst [34]

——————————————————————————–

And how large are these Sterlite orders for SAE?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [35]

——————————————————————————–

I don’t have the exact number, but maybe you can talk to Abhishek later on, but it’s I think roughly around INR 500 crores. But I’m — please don’t hold me, just talk to Abhishek later on. But I think roughly around in that range, yes?

——————————————————————————–

Bhoomika Nair, IDFC Securities Limited, Research Division – Security Analyst [36]

——————————————————————————–

Yes, right. Sir, the other thing was on the working capital, clearly, the interest cost has declined because of high amount of ForEx loans that we’ve taken. So how should we look at this now going ahead in terms of FY ’21 with both interest as well as working capital in the current environment, are you seeing a stretched receivable day given the lockdown and COVID et cetera?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [37]

——————————————————————————–

As of now, we have no reason to believe or say that there is a stretched working capital. In fact, what has happened is that both power grid, (inaudible) and all have been told to release monies as fast as they can. So they are releasing retentions, which are not due. They are not adjusting advances, okay? So I honestly do not see anything happening on the working capital based on what is happening today, okay? Today, we are receiving cash. In fact, in April, whatever we had budgeted for cash inflow, we got more than that, okay? May also has been decent until now. So if this continues in a similar manner, I honestly do not see any reason for my working capital to get stretched.

——————————————————————————–

Bhoomika Nair, IDFC Securities Limited, Research Division – Security Analyst [38]

——————————————————————————–

Okay. And on the payable side, on the vendor payment, I mean, are we having to — has the payable number of days come down or anything because you’re paying faster?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [39]

——————————————————————————–

It has come down slightly, although we are trying to extend it because the banks are not lending to MSMEs and smaller players, okay? So we have to support them if you want to run your supply chain. So that’s happening. But larger players are agreeing to extend so we did not succeed in extending the overall DPO days, although some of the large items in railways, we were able to push. I think that effort will continue, okay? But there is no major push, also a pull, from the payable side that we need to pay too much in advance.

I think what we have been doing is that some places where we are getting our leverage on interest cost and where payments are essential, where I cannot defer them or I have to pay them in any case in a month or so, if the gentleman is giving me, let’s say, a logistic player. Logistic player means, cash very fast. So at some places, we have been leveraging that and paying faster also actually than what is warranted because you can make some interest arbitrage there.

So I think the working capital will continue in the manner it is in. It will definitely improve by a few days or something like that. But I see no reason why it will get stretched in any manner? No.

——————————————————————————–

Bhoomika Nair, IDFC Securities Limited, Research Division – Security Analyst [40]

——————————————————————————–

Okay. And sir, just lastly, if I can have the — what has been the ForEx gain in the quarter and for the year?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [41]

——————————————————————————–

I think Abhishek can tell you later on, but it is much lower than last year. Because what we have done is we have borrowed a lot of money, a lot of — Indian foreign currency, okay? Which acts as a natural hedge. So to that extent, my capability — capacity to sell forward is going down. So in a way, some part of my ForEx gain, which used to come above the line is now getting reflected into my interest cost reduction, not significantly, but there will be, let’s say, 10, 20 basis points of interest savings, which could have happened and which would result in my [KN]. Plus, I think what we have done is since we are resorted to hedge accounting, et cetera. So the entire ForEx gain and all that have become much less volatile than before, okay? So maybe you can have a chat with Abhishek later on, and he can tell you exactly what has happened. But I don’t have the number, but it is much lower than last year, I can tell you that much.

——————————————————————————–

Operator [42]

——————————————————————————–

(Operator Instructions)

The next question is from the line of Priyankar Biswas from Nomura Securities.

——————————————————————————–

Priyankar Biswas, Nomura Securities Co. Ltd., Research Division – VP [43]

——————————————————————————–

So I have a couple of questions. So one is, like, can you elaborate on the tender prospects, so I think you have elaborated on India and Middle East. But can you shed — throw some light on Africa and the SAARC region?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [44]

——————————————————————————–

So SAARC has got a large amount of tenders to be quoted, especially in Bangladesh and in Nepal, okay? So there are 2 countries where there are large number of tenders is to be quoted, okay? Africa, there are quite a few tenders in Mozambique, in Tanzania and in Ivory Coast, Guinea, et cetera. So I think Africa and SAARC, I don’t think we have seen such sort of numbers earlier, okay? So pretty decent numbers, I’ll say.

——————————————————————————–

Priyankar Biswas, Nomura Securities Co. Ltd., Research Division – VP [45]

——————————————————————————–

So like if I compare, let’s say, year-on-year basis, so have the prospects materially increased over there. I mean, this region?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [46]

——————————————————————————–

So as compared to last year, definitely, okay? If you want to compare with a year before and all, it’s very difficult. Because last year, SAARC was a little bit dry, okay? But this year, SAARC is much, much, much better than before, okay? So if I was looking at the SAARC numbers, right now, we have got around INR 6,000 crores of tenders to be quoted in SAARC just now, okay?

——————————————————————————–

Priyankar Biswas, Nomura Securities Co. Ltd., Research Division – VP [47]

——————————————————————————–

Okay. And sir, if you can — so can you provide that — say, what can be the possible CapEx that you will be doing in FY ’21? The possible CapEx level?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [48]

——————————————————————————–

So we earlier had a good CapEx level planned for us for this year, okay? But now with COVID-19 happening, I think we are really relooking at our entire CapEx plan to see what all we should not do it, okay? But clearly, there will be some because we will have to mechanize more with migrant labor going away and potentially, with the labor strength coming down. Clearly, we have to improve the productivity by means of higher mechanization, okay? So there will be some CapEx happening at the site level, both in Railways and T&D and also in Civil, I honestly don’t have a number which we’ll finally do, but maybe INR 100 crores or so against the earlier planned INR 200 crores, INR 250 crores.

——————————————————————————–

Priyankar Biswas, Nomura Securities Co. Ltd., Research Division – VP [49]

——————————————————————————–

And sir, the last question from my side. So in your total debt, so what will be the amount, which is ForEx denominated? And if you can give a broad idea is — what is the interest differential between, let’s say, ForEx debt and the INR debt?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [50]

——————————————————————————–

Rajeev, do you want to take this question, please?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [51]

——————————————————————————–

Yes, Vimal. So basically, right now, we are hedging close to about 55{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of our total debt is a ForEx debt, and which we keep on changing depending on the mix of international revenue in our total revenue book. And as far as the cost is concerned, the cost arbitrage between the foreign currency and the rupee borrowing is basically your premium amount, which is roughly between 3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 3.5{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. So we keep on — while taking the ForEx borrowing, we always keep on doing a conscious — we take a conscious call whether we should go for the ForEx borrowing or whether we get more money by selling forward. So that is always an arbitrage that we take into account before taking any action on that Forex borrowing or selling.

——————————————————————————–

Operator [52]

——————————————————————————–

The next question is from the line of Swarnim Maheshwari from Edelweiss Securities.

——————————————————————————–

Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division – Research Analyst [53]

——————————————————————————–

Vimal sir and Rajeev sir, so 2 sort of questions. First on, you did mention in an elaborate manner about the labor issues and all. Sorry to hop on that. If you can just give us some color on, if you see our fixed margin business, what impact could we have since we won’t be able to ramp up our revenues or our projects. So what could be the possible headwinds to those margins, considering we have about 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of our business has fixed margin business, which is nonnegotiable?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [54]

——————————————————————————–

So Swarnim, what will happen is that there is definitely some impact of the fixed cost, okay? Nonabsorption in April and now in May also. But as I was replying to the earlier question, we also see a lot of cost savings happening going forward, okay? Especially in the fixed-price contract, if you look at, zinc has come down by, probably, $500, steel is now coming down, aluminum has come down. So in a way, a lot of commodity cost will go down, the logistics costs are going down. So as far as the fixed-price contracts are concerned, our view today is that whatever extra costs, which we are going to incur will get absorbed by the other cost savings, plus, we have drawn out a very elaborate business continuity plan by which we are saying that a lot of cost would be reduced, our interest would be reduced.

I’ll give you an example, we have a travel cost, I think, of around INR 10 crores, INR 12 crores per month. Okay? Last 2 months, it has been INR 0, okay? So INR 20 crores straight goes to my bottom line because it’s INR 0, okay?

So I think in that manner, what will happen is this work from home and all other issues which are happening, there is also a significant reduction in cost in other places, okay? So while the cost may go up in labor or they may have gone up in terms of hiring between 15,000 workers without work, okay? That is there. But on the other hand, there are — there will be significant reduction.

The third piece is that, as I was saying that we are really working on how to improve productivity on a long-term basis. So what we are clearly seeing that there may be long-term impacts on our entire cost structure, okay? Which would be very good for everyone in the long term, where if I’m able to do the same work instead of 10 people with 5 people and 2 equipments, in the long run, we always know that equipment is going to be cheaper than having a paid bill. So I think, very clearly, we are seeing that many of the costs will go down significantly. And honestly, I will not be surprised if margins actually go up rather than going down.

——————————————————————————–

Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division – Research Analyst [55]

——————————————————————————–

That will be a big surprise surely because we were under the impression that at least for the commodity cost, at least, we hedge it as soon as we get the contract. So for that part to — for that benefit to flow through, that might not happen, but yes, your point #2 and point #3 that, that could be a significant reduction.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [56]

——————————————————————————–

Swarnim, what is going to happen is there are many tenders which we have quoted earlier. So that is one part. Second is you don’t hedge steel, okay? Third is diesel — plus so many other costs which we are not hedging, okay?

——————————————————————————–

Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division – Research Analyst [57]

——————————————————————————–

Got it, sir. Got it.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [58]

——————————————————————————–

We will hedge aluminum and copper and all that, but there are others which you don’t hedge, okay?

——————————————————————————–

Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division – Research Analyst [59]

——————————————————————————–

Got it, sir. Got it. Sir, second question is actually for Rajeev sir. So there was one thing, I mean, on a sequential basis, our debt profile is broadly stable at about INR 3,300 crores and yet there is a 20{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} decline in interest cost essentially. So what has actually led to that? I just wanted to understand that part.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [60]

——————————————————————————–

No. So Swarnim, what happened actually, if you look at the previous quarter, our borrowing more or less has remained static. But what has happened is that our shift to the ForEx borrowing started in (inaudible), so the full impact of the ForEx borrowing when we have increased the proportion from almost, we were operating at about 40{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 55{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in Q3, late Q3, so that impact has come in Q4. So that has led to the benefit.

Second, also what has happened that in this quarter, we actually were — received a lot of money. So my average borrowing level for Q4 has actually come down, except for the last 10 days, when we were planning to receive another INR 350 crores to INR 400 crores, which could not be collected. Otherwise, my borrowing actually on the balance sheet date would have been less than INR 2,000 crores.

——————————————————————————–

Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division – Research Analyst [61]

——————————————————————————–

Got it, sir. Sir, does that suggest that the mix — because of the change in the mix of the borrowing, the reduction in the interest cost is sustainable at about 2.7{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 2.6{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} level even?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [62]

——————————————————————————–

In fact, we are targeting further improvement on that. So — and that is further helped by reduction in the repo rate, which the army has announced 2 times. So apart from that, we’ll definitely have a lower interest cost compared to this year, at least by 20, 25 basis points is what I can expect.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [63]

——————————————————————————–

Swarnim, let me add to what Rajeev is saying, that for the first time, we are — or it’s after a long time, we are not — we have been able — Rajeev has now been able to borrow at sub 7{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} for our AA rating, okay, which is not happening for a long, long time. People only giving money to AAA. But we just finally came to know that we will be able to — now people are coming and saying, boss (foreign language).

So I think apart from what Rajeev said, I think the costs are going down. And as I mentioned earlier, fortunately, I don’t know what else government has done, but at least on the payment front, they have been able to push some of the PSUs. And luckily, we were there with those PSUs, like (inaudible) and all that. So a lot — so what is happening is a lot of money is coming in which we have not thought we will — it will come so fast, okay? So I think we are overall happy with the number, and I was a little bit concerned with your numbers. I think, Rajeev, our interest cost is 2.3{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} this year, right?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [64]

——————————————————————————–

No. Our interest cost last year, Vimal, for FY ’20 was 2.57{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, to be precise.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [65]

——————————————————————————–

Oh, okay, okay.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [66]

——————————————————————————–

So we should be getting at least 25, 30 basis points off — in FY ’21.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [67]

——————————————————————————–

So Swarnim, the (inaudible) 2.8{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} for this year.

——————————————————————————–

Operator [68]

——————————————————————————–

The next question is from the line of Sagar Naik from Equentis Wealth Advisory.

——————————————————————————–

Sagar Naik;Equentis Wealth Advisory;Analyst, [69]

——————————————————————————–

So I had a couple of questions. So first one is, how much of the labor will be local for us?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [70]

——————————————————————————–

I don’t think we have the number like that way. Because except for states like Bihar and Jharkhand and Bengal, the 3 states where you hire. They’re also not local in that sense, like for West Bengal, most of the labor comes from Malda. And so many of them have gone. So I don’t think we can talk about labor, local, but the factories would have roughly, I’ll say, 60{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 70{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} local people, okay? So all the 5 factories put together would have, let’s say, 2,000, 3,000 people. Out of that, maybe around 2,000 — and these are ballpark numbers, would be locals staying around the factory, okay? There would be — the people who come to the contractors are normally migrant workers, okay? All the people who are permanent on the roles of the company, like technicians, operators, et cetera, would normally be locals of the region.

——————————————————————————–

Sagar Naik;Equentis Wealth Advisory;Analyst, [71]

——————————————————————————–

Right, right. The next one would be, if you look at the balance sheet, so the capital work in progress has increased from INR 8 crores to INR 80 crores. So may I know the reason for this?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [72]

——————————————————————————–

Rajeev, I think it is the Dubai factory.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [73]

——————————————————————————–

Yes. It’s our Dubai facility, Vimal.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [74]

——————————————————————————–

Yes. We had acquired…

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [75]

——————————————————————————–

Largely (inaudible).

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [76]

——————————————————————————–

It’s not yet operational, so it’s in capital work in progress.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [77]

——————————————————————————–

Yes.

——————————————————————————–

Sagar Naik;Equentis Wealth Advisory;Analyst, [78]

——————————————————————————–

Okay, okay. And you gave the update about the current situation that our factories are operational at 85{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} level. But what about preliminary? I mean, how much was the loss due to the lockdown? And what were the operations like at the site as well as factories?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [79]

——————————————————————————–

No, no. So when I say 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} now, may have generally been — the factories have been operating, I think we started the factories in a phased manner. The first we started was 12th of April in Duty Free where they gave us permission to start dispatching, okay? So it’s difficult to quantify because what you should also understand one thing in the factories is they manufacture towers which we can outsource also. There’s enough capacity available in the country. So as far as the factory output loss is concerned, I’m not too much worried about it. If I’m not able to make up from my own factories and from my Dubai factory, I can easily outsource it to other people. There are enough players with empty factories in tower manufacturing in India and Saudi, okay? So for the quarter year, but if you had asked me for the annual year, for the whole year, I’d say we’ll have 0 loss on the power manufacturing side in terms of volumes and revenue.

——————————————————————————–

Sagar Naik;Equentis Wealth Advisory;Analyst, [80]

——————————————————————————–

Okay, okay, okay. Yes. And just last one. If you look at the international orders, so historically, we’ve been around — the inflows have been around 40{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. And for FY ’20, it has dropped down to 22{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}. So can you give the reason? I mean, why have the international orders dried up? And what would be going forward in FY ’21?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [81]

——————————————————————————–

So last year was a bad year in terms of international orders. Year before was much better than that, which is why this year, we had almost a 20{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} rise in the international turnover, okay? But as I said, the international order pipeline is very good. And a large number of the L1 orders which we have, I don’t have the exact number, but I think close to INR 2,000 crores or whatever is number, you can take from Abhishek later on, is in international T&D, okay? So I’m very confident that this year, we will see a significant spike happening in the international order intake.

——————————————————————————–

Operator [82]

——————————————————————————–

The next question is from the line of Amber Singhania from Asian Market Securities.

——————————————————————————–

Amber Singhania, Asian Markets Securities Private Limited, Research Division – Senior Analyst [83]

——————————————————————————–

I hope that everyone is safe and fine in the entire KEC family. Sir, just one question. You mentioned about the order pipeline of INR 35,000 crores to INR 45,000 crores. If you can just elaborate about the large tenders in that? And also TBCB, how much is there on the transmission and how much is on distribution side? Just some color on the entire pipeline, sir.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [84]

——————————————————————————–

I don’t have the exact breakup. But what is happening is that right now, there are around — if I’m not saying around 12 or 13 schemes which have been tendered out, okay? Most of them are in Rajasthan, 3 or 4 of them are in South and 1 is in MP, okay? So all these schemes have been tendered out. And they are, I think, the big due date for them is 22nd June for REC, okay? So based on that, Power Grid has already tendered out and we have — I think in the last 10 days, we would have put in close to 30 bid, 35 bids in Power Grid, okay, in the long time, okay? So I think overall, the existing value would probably be around INR 20,000 crores, INR 25,000 crores. I don’t have the exact number, but it is, I think, definitely in excess of — or maybe at least INR 20,000 crores, okay? More lines and substations put together. Apart from that, there are tenders which are there right now in (inaudible), in Tamilnadu, in Gujrat, in Asaam, Rajasthan is coming out with large tenders. So I think India is looking much better than — to me in the — than last 2 years.

——————————————————————————–

Amber Singhania, Asian Markets Securities Private Limited, Research Division – Senior Analyst [85]

——————————————————————————–

Okay. And sir, do you sell 30 leads of TBCB bids will take at least 6, 8 months to come to you as a contractor, if it all comes or lesser than that submission?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [86]

——————————————————————————–

So Amber, this scheme (inaudible) for 12 to 15 months completion by the vendor, by the TBCB owner, developer. So my view is that especially some of the wins, I think by July, middle of July, end of July, we’ll have all the orders, okay?. So if RAC does not postpone — RAC tendering, date right now is 22nd June. The target they have given is within 7, 10 days, they will give the award. That’s the (inaudible) scheme, okay? If they give the award in Power Grid, we’re already L1 or you’re not L1, you know that, okay? So you will get the award immediately because these are all 12 to 15 month schemes.

——————————————————————————–

Amber Singhania, Asian Markets Securities Private Limited, Research Division – Senior Analyst [87]

——————————————————————————–

Sir, what is your status of the previous lot which has been awarded? I believe there was also the time line was 18, 20 months. So are those projects running on time, as such?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [88]

——————————————————————————–

I don’t know. We’ve got a couple of them from Power Grid, so they are under execution. I think they are on — most of them are on time, okay? I don’t have a track of physically what is happening on all the lines. But wherever we are working, I think they are okay. We have got the project of power (inaudible) 2 or 3 projects with Power Grid, 1 with Adani. I think they are working well.

——————————————————————————–

Operator [89]

——————————————————————————–

(Operator Instructions) The next question is from the line of Aditya Singh from Axis Bank.

——————————————————————————–

Aditya Singh;Axis Bank;Analyst, [90]

——————————————————————————–

So I was just going through the results. So I’d seen that there was a recovery of 178 (inaudible) mentioned, some (inaudible)

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [91]

——————————————————————————–

Sorry, I didn’t get your question, Aditya.

——————————————————————————–

Aditya Singh;Axis Bank;Analyst, [92]

——————————————————————————–

Sir, I think — yes, I was going through the (inaudible)

——————————————————————————–

Operator [93]

——————————————————————————–

Sorry to interrupt you, Aditya, your voice is breaking up, sir. Your voice is breaking. Can you move to a better network area?

——————————————————————————–

Aditya Singh;Axis Bank;Analyst, [94]

——————————————————————————–

Yes. Is this better?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [95]

——————————————————————————–

Yes, go ahead.

——————————————————————————–

Aditya Singh;Axis Bank;Analyst, [96]

——————————————————————————–

Yes. Sir, actually, I was mentioning, in going through the results, I saw in emphasis of matter, Note #8, where we mentioned about regarding the delays in recovery of receivables of 148 from a customer, it was mentioned. So could you elaborate on that? I think it was in — I think you had — asking, you had mentioned about the SL.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [97]

——————————————————————————–

So this is the same project. That continues as an emphasis of matter for the last 2, I think, 2 quarters or 3 quarters, it has been continuing. There’s nothing new about it. But I think that, as I said earlier, there have been pretty positive developments happening. Unfortunately, because of COVID, some of the regulatory hearings which were to happen for getting into a new owner have got postponed by some time. But those should happen. So if you keep a track of the CRC website, you can see the developments happening in this project, okay?

So I think we are — let me put this way, since the last call, I think we have moved definitely a few long sets, okay? We are now pretty close to our resolution of this.

——————————————————————————–

Aditya Singh;Axis Bank;Analyst, [98]

——————————————————————————–

And so the — another thing, sir, that indiscernible] order book is INR 1,000 crores and Saudi from the INR 200 crores that — what we — I mean you were monitoring. So I think you mentioned that due to the oil commodity fall, you were not actually expecting it — (inaudible) of the orders to follow up. So can we still say that…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [99]

——————————————————————————–

Aditya, I’m not very clear on the question. You’re talking about what orders or what are you talking about?

——————————————————————————–

Aditya Singh;Axis Bank;Analyst, [100]

——————————————————————————–

I was talking about the orders, sir. I was talking about the orders.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [101]

——————————————————————————–

Orders from?

——————————————————————————–

Aditya Singh;Axis Bank;Analyst, [102]

——————————————————————————–

Sir, Saudi orders that you’ve mentioned, I think, it was around INR 200 crores last time. And the…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [103]

——————————————————————————–

So those orders are still there. I think one of them, we already received, one of them is an L1 position. So as and when it comes, it’s okay, they are not very material orders for us. INR 200 crores are not a large amount.

——————————————————————————–

Operator [104]

——————————————————————————–

The next question is from the line of Varun Ginodia from AMBIT Capital.

——————————————————————————–

Varun Ginodia, AMBIT Capital Private Limited, Research Division – Research Analyst [105]

——————————————————————————–

So most of them have been answered already. I just have one follow-up on the prior portion on the (inaudible). Do you…

——————————————————————————–

Operator [106]

——————————————————————————–

Sorry to interrupt you, Varun, your voice is breaking as well. Can you please move to a better network area?

——————————————————————————–

Varun Ginodia, AMBIT Capital Private Limited, Research Division – Research Analyst [107]

——————————————————————————–

Fine now?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [108]

——————————————————————————–

Yes, better. Go ahead, Varun.

——————————————————————————–

Varun Ginodia, AMBIT Capital Private Limited, Research Division – Research Analyst [109]

——————————————————————————–

Yes. Okay. So my question is a follow-up on the last one on the acceleration side. Do you think you will need to take any provisions on that because I understand last year (inaudible) end of 4Q, then you might be compelled to take some provisions on that particular project?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [110]

——————————————————————————–

So I think, Varun, as of now with the developments which have happened, I think we are comfortable and our auditors, price orders have also been very comfortable that we don’t need to take a provision on this, okay? So we will wait for at least one more quarter. I don’t think we’ll, again, have a provisioning requirement in next quarter also if nothing happens. But I think we are right now. It’s in a comfortable position. It is moving ahead in the right directions on the expected lines. Unfortunately, had COVID not happened, probably we would have got the regulatory approvals in place, okay? So there are some regulatory delays which have happened. And I do hope that they’ll come through.

——————————————————————————–

Varun Ginodia, AMBIT Capital Private Limited, Research Division – Research Analyst [111]

——————————————————————————–

Got it. And just one quick question, the last question. With the order breakdown that you mentioned of INR 20,000 crores to INR 25,000 crores for various clients and substations, I believe those are part of Green Energy Corridor packages, right? That’s the last question there.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [112]

——————————————————————————–

Yes, yes, yes.

——————————————————————————–

Operator [113]

——————————————————————————–

The next question is from the line of Saket Kapoor from Kapoor and Company.

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [114]

——————————————————————————–

Sir, firstly sir, how — sir, SAE contributed — even lumpy was better for the third quarter. So what was the performance from SAE? And going forward, also, sir (foreign language)?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [115]

——————————————————————————–

So I think this was on expected line. We have said earlier that 3 EPC projects which they are doing had got delayed earlier and will come up for execution in the second half of the year. That is what is happening. So this performance will continue at least for the next 2 quarters till we complete these projects. And by that time, we think the new projects where we are L1 and we have an order book there, should also come into play.

But as I said earlier, I do not see any significant growth or even — maybe there may be a slight degrowth in the SAE revenues in FY ’21, also contributed by the depreciation of the Brazilian currency, okay?

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [116]

——————————————————————————–

Okay. Sir, on a rate of 1 5 3 9, we will exit on a (foreign language)

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [117]

——————————————————————————–

(foreign language) So there could be some degrowth, yes.

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [118]

——————————————————————————–

But margins will improve, sir, or gross margin will…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [119]

——————————————————————————–

Very difficult to say at the moment, okay? Margins will definitely — should improve from what they are today. They were pretty low this year. So I do expect that they will improve next year, yes.

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [120]

——————————————————————————–

Sir, in the consolidated part, sir, when we consolidate the numbers, what are the pieces that goes into consolidation? And where is this standalone, if you could show the light?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [121]

——————————————————————————–

I think it is only SAE. Rajeev?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [122]

——————————————————————————–

Yes. Largely, it is SAE, Vimal, only which goes into the CFS. Otherwise, our joint venture in Saudi and everything comes in the standalone number.

——————————————————————————–

Operator [123]

——————————————————————————–

The next question is from the line of Rakesh Roy from Indsec.

——————————————————————————–

Rakesh Roy, Indsec Securities & Finance Ltd., Research Division – Research Analyst [124]

——————————————————————————–

Sir, my first question, in terms of African business, sir. But can you highlight on our Africa business, the nature of business there and this type of project you are taking from there, that is — we are funded — government-funded or a private-funded or what type of project?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [125]

——————————————————————————–

So all my Africa projects are either funded by multilaterals, like African Development Bank or World Bank or something similar to that or are funded by government of India, okay? We do not do any private project for EPC project in Africa. We do have a couple of tower supply orders which are against confirmed LCs, okay.

——————————————————————————–

Rakesh Roy, Indsec Securities & Finance Ltd., Research Division – Research Analyst [126]

——————————————————————————–

Right, sir. Sir, my next question is for mainly straits where finance success now in domestic market, sir. Sir, this — the tender will come, definitely no (inaudible) tender will come, sir. Can we see in some steps on deferral or the delay in the civil from the state side in (inaudible)

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [127]

——————————————————————————–

So Rakesh, wherever the straits are stressed or where we don’t think we can complete projects, we don’t bid. We are very clear. That’s why if you see — and the other thing what you have to see is that straits may be stressed and all that. But for transmission projects, they have been getting funding either from multilaterals or from REC, BFC. So normally, what happens is, before we bid, we see who is going to finance the project. And if only we are comfortable with the financier, we take up that project. So I don’t see any significant thing happening on the state issues.

——————————————————————————–

Operator [128]

——————————————————————————–

The next question is from the line of Jonas Bhutta from PhillipCapital.

——————————————————————————–

Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division – Research Analyst [129]

——————————————————————————–

Am I audible?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [130]

——————————————————————————–

Yes, you are audible, Jonas.

——————————————————————————–

Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division – Research Analyst [131]

——————————————————————————–

Yes. Sir, firstly, congratulations on a decent set of numbers. But I have 2 questions. Firstly, if you can help understand the sharp jump that we’ve seen in the employee cost and the other expenses. Because even if I were to add up the INR 500 crores to INR 600 crores kind of revenue slippage, and I’m assuming that you have made expenses assuming that revenue was to come in, that still looks very high, both have increased by INR 100 crores on year-on-year basis.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [132]

——————————————————————————–

Yes. So Jonas,, the reason is in SAE towers. So what happened for the SAE, unfortunately, there is no system of employing subcontractors. So on all the 3 EPC projects which we are executing, we have to take all the workers on our roles and execute. So the — I’d say almost everything which you see in the employee cost increase is on account of SAE employee cost increase. There is nothing else which is unusual in the employee cost, 0.

——————————————————————————–

Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division – Research Analyst [133]

——————————————————————————–

So when — and this is just a follow-up. So when you expect fee revenues to stay flat or decline next year, should we take a proportionate change in the employee cost or should we use this as a run rate going forward?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [134]

——————————————————————————–

100{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 100{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, it will come down.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [135]

——————————————————————————–

No question about it.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [136]

——————————————————————————–

No question about it, yes.

——————————————————————————–

Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division – Research Analyst [137]

——————————————————————————–

And my second question, sir, was, sir, what we understand now, and please correct me if the understanding is wrong, is urban centers are still leading to — the execution of projects in urban centers, is still very slow despite on paper sites being opened, and while the rural sites are still sort of moving. So in that context, sir, shouldn’t your T&D and railway piece do much better than the civil piece? And this is in context to your comment earlier in the call that you said you expect almost a INR 1,500 crores top line in stable this year, given that lockdowns are still pretty much prevalent at least in the urban centers. I just wanted to get…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [138]

——————————————————————————–

So I say you are partly right. But what has happened is, if you look at the urban centers, we have got, I’ll say, 4 metro projects in the urban centers, okay? And our 4 — the Kochi Metro got permission much before the lockdown was lifted, okay? And the good part of it is that because roads were empty, we could do work faster. Delhi, the DMRC and RRTDS project got the last approvals because of the prevailing COVID situation in Delhi. But right now, we have all the approvals. We are doing filing. In fact, we have — I think, someone from my office had taken some pictures also of the project going ahead, okay? So definitely, there was a problem in the month of April, and I’ll say at least 2 or maybe 3 weeks of May, okay? But after that, the work has started and is doing well. So I don’t think it’s too much of — in fact, what happens in T&D railways is because we are doing DDF projects, you never know 100 kilometers basically which kilometer will get into a containment zone. So I have our cases in a project where I have not been allowed to work on one end of the project, but I can work on the other end of the project. We have got approvals in projects also section-wise. So this part is in the containment, this part is not in containment, so we can work here, okay? So it’s very difficult to say what would happen. But as I said earlier, my railway ramp up happened much faster, okay? So clearly, the railway revenues this year or this quarter and all that should see a much higher growth than other businesses. But international T&D continues. So we’ll have revenues coming from international T&D.

——————————————————————————–

Operator [139]

——————————————————————————–

The next question is from the line of Sandeep Verma from Axis Bank.

——————————————————————————–

Sandeep Verma;Axis Bank;Analyst, [140]

——————————————————————————–

Sir, in terms of like current operational level what would be the — pre-COVID and post-COVID, what would be the operational level, sir?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [141]

——————————————————————————–

So I think we are right now operating at around 80{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of our capacity.

——————————————————————————–

Sandeep Verma;Axis Bank;Analyst, [142]

——————————————————————————–

Okay. And in terms of GST payments, you were — I mean, there were some delays in GST payments from the government. So how is the situation right now, sir?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [143]

——————————————————————————–

I thought it was quite comfortable. Rajeev, you want to answer this?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [144]

——————————————————————————–

Yes. So basically, Sandeep, last year, we have received a — quite a good amount from the GST receivable, particularly the amount which was stuck up on account of the exports that we had done and on the inputs we had paid the GST amount. So all those have been collected. And you will see in my balance sheet, there is a significant reduction on account of GST receivable from the government of India.

——————————————————————————–

Sandeep Verma;Axis Bank;Analyst, [145]

——————————————————————————–

Okay, okay. And in terms of your receivables position from Afghanistan figure, how is the situation right now, sir?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [146]

——————————————————————————–

Rajeev, you want to answer?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [147]

——————————————————————————–

What’s the question, Sandeep?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [148]

——————————————————————————–

Okay. Rajeev, let me answer. So Sandeep, I think our Afghanistan solution is pretty decent. In fact, the amount of money which we have got in the last 7, 8 months from Afghanistan has been much, much more than what we got before. However, the AR levels remain at the same position because we had also done a lot of revenue there. So if you take a global view, our exposure to Afghanistan has come down significantly because our unexited order book has come down significantly, okay? But to the extent of revenue, we have been able to get a lot of collections, and some of them are old retentions and all that. So to me, the quality of receivables has also improved significantly in Afghanistan, with most of the receivers being for the current projects, old projects being closed commercially and money is coming in.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [149]

——————————————————————————–

And Vimal, Afghanistan, despite the good revenue that we have done during the year, we have still reduced the exposure by almost INR 200 crores in terms of the bank guarantees and the collection of receivable.

——————————————————————————–

Sandeep Verma;Axis Bank;Analyst, [150]

——————————————————————————–

Okay, okay. And sir, in terms of liquidity position, how is the current cash position and your unavailed fund-based working capital numbers?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [151]

——————————————————————————–

So Sandeep, I don’t think we would like to talk on it on the — this. But I can only say this much that we have a very comfortable position, okay? I am saying very comfortable position on my existing limits and my new limits, which many banks have been talking to us. We are pretty happy. In fact, right now, we are in negotiation with at least one lender to prepay some of the loans and all that to leverage interest, okay? So I think we are very happy with our conditions on liquidity.

——————————————————————————–

Operator [152]

——————————————————————————–

The next question is from the line of Saket Kapoor from Kapoor and Company.

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [153]

——————————————————————————–

Sir, the South African JV part, the reversion of order, could you explain, sir, what is the impact and…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [154]

——————————————————————————–

Saket, we had a problem, a legal case going on, I think, the last 4 or 5 years in South Africa. So that has been continuing, the exposure has been coming down. So in one court, we are winning, then the appeal, they’re asking that they win and all that. So now it’s finally reached the Supreme Court of South Africa, okay? So there is some INR 50 crores, INR 55 crores outstanding there. So (foreign language). And it will contain low, okay? To me, it is a money which is due. It’s an arbitration award. There was a dispute, there was arbitration award awarded in our favor, okay? So whatever was the award in our favor is this amount which we are carrying, okay? So we are very comfortable that this is an arbitration award and which even when they go to Supreme Court, we will get this money. In fact the amount of money has been provided. So actually, we should be getting more than what we have in the books. That is our expectation.

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [155]

——————————————————————————–

Okay, sir. Sir, (inaudible) cable, the business and the order book there?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [156]

——————————————————————————–

(foreign language) So I don’t have the number (foreign language). Because it’s a product business, unless you have some EHV cabling orders (foreign language). But otherwise, I think we are okay. March was a problem. Because, again, March is a month where a lot of cabling orders come and a lot of cables get supplied, okay? Unfortunately (foreign language) we had a problem in the cable business, okay? But otherwise, we are doing well. We have also spent some money, so we have done backward integration. So you will see a lot of product mix change, especially on the railway side happening from our cable business, okay?

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [157]

——————————————————————————–

So this decline will be recompensated in the first quarter, sir?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [158]

——————————————————————————–

No, not in the first quarter because all the CapEx is now also were delayed because of the COVID. All the equipments have now come in. So I think that the recompensation should happen from maybe August or September. September onward (foreign language).

——————————————————————————–

Saket Kapoor;Kapoor and Company;Analyst, [159]

——————————————————————————–

(foreign language)

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [160]

——————————————————————————–

(foreign language) We are doing up to [INR 220 crores] cable supplies and cabling also. So I don’t have the number, but I think our total EHV — EHC and EHV put together will be at least INR 300 crores, INR 350 crores. Rajeev?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [161]

——————————————————————————–

Absolutely, Vimal, you are right.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [162]

——————————————————————————–

Okay, okay. Good.

——————————————————————————–

Operator [163]

——————————————————————————–

We’ll take the last question from the line of Bhavin Vithlani from SBI Mutual Fund.

——————————————————————————–

Bhavin B. Vithlani, SBI Funds Management Private Limited – Senior Analyst [164]

——————————————————————————–

I just want to take your views on the repo situation. There was a call by the large EPC company and it mentioned that over the last 10 days, the workers at site have reduced from 70{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 10{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, and especially the work in the urban centers have come to a grinding halt. So I just want to actually take your view and how would you divide your projects in India on the urban/rural? And are you actually also facing similar challenges like (inaudible)?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [165]

——————————————————————————–

So I do not know what has happened. Because Bhavin if you look at our numbers, we had lost around 40{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} people around the lockdown time, after the lockdown happened and all that. In the market so that happened, okay? After that, once the (inaudible) train halts started, we started losing some 200, 300 people every day. That’s 1{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} of our labor force.

In the last 3 or 4 days, I’m not seeing too much happening. There were some exodus because of Eid. People wanted to go and celebrate Eid. They are coming back and all that. And whatever numbers we are losing now in the last 7, 8 days have ended, we are able to hire local people, okay. So I will say that right now, we have reached a plateau where we are not seeing people going. So I’m quite surprised if someone is saying from 70{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} to 10{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} in the last 1 week or 10 days, okay? (foreign language).

And as far as your question about urban/rural, I don’t have the answer right directly for you. But basically, the urban, we have got 4 metro projects. We have got a few residential projects where we have not seen too much of issue. All my network projects are going on well. My residential projects have — in fact, during the lockdown, we have started 2 new residential projects. We have commenced 2. And both of them are in — one in Bangalore, one in Pune, which are high COVID areas, okay, where we have got approvals to start new projects, okay? And we’ve been able to get workers for those projects. So I think it’s a matter of time that the worker issues get stabilized in 1 day.

The second is that I think we have to get used to the fact that we will have to work with lesser number of workers. And how do we increase productivity by replanning the work as with reskilling people and as well as hiring local people and training them to do all this work. To me, that’s the answer. And the next answer is obviously more mechanization and automation. That’s the way we have to live with this. I don’t think there’s any escape saying that (foreign language). But I don’t think we are so much worried. I think there was too much of, I’d say, inefficiency in the system people (foreign language) if I want to use a batching plant in some of the government contracts, I have to go and take specific permission for that. (foreign language). That is a position, okay? Now people are coming back and realizing that (foreign language). So I think that there are a lot of areas where there mechanization can happen, which was not happening either because, I didn’t want to spend money or the client was not willing to do it, okay? So I think this is where what is happening on migration.

——————————————————————————–

Bhavin B. Vithlani, SBI Funds Management Private Limited – Senior Analyst [166]

——————————————————————————–

Understood. The second question is on the extra cost, given that the productivity has got impacted. So are you actually clients in agreement that they may give you increased compensation because of the standstill cost? And some of your competitors are talking about that there is a policy change expected that where earlier you could bill after the milestone received, now they are saying that they are relaxing the milestone midway in the contract and there could be WIP-related billings, which can ease working capital, and that can compensate the cost, if not directly, through the cash flow. Are you also seeing some…

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [167]

——————————————————————————–

So Bhavin, there are various things which are happening by — with various clients, okay? I have not seen any clients coming back and saying, you can build WIT. I’ve not seen it, number one. But what — I’ll tell you what is happening. Like some of the clients have said that, let’s say, somebody has given me a 10{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} advance, that advance is supposed to be adjusted from every invoice of mine. So some clients have come back and said that we will not adjust your advance, okay? So you bill full and you take full money. So that is what we are giving the extra cash.

Many of the clients have come back and said that whatever retention we are holding contractually, if you give us a bank guarantee, we will pay you all your retention monies. This is not contractually payable, okay? So a lot of relaxations like that has happened on payment terms, et cetera. People have released retention, people have released advances, okay? People are doing e-payments. So the time taken for the base to be approved, transit and all that, that is going down. Costs are going down. Stationary costs have come down significantly because of e-billing, okay?

So coming back to your basic question on reimbursement of labor costs, it’s a million-dollar question, okay? I don’t have a single letter today which says that I will reimburse the cost, okay? And I got 215 contracts right now ongoing in India, okay? But what has happened is that there are many people who have come back and said that you take care of the labor because they are also aware with the migrant labor goes back, go, they may not come back and all that.

So in some cases, people have given us money for the entire extra costs which we have incurred, okay, with an understanding that as and when you raise rates, for the shutdown or for force measure and all that (foreign language). Others have given a formal letter saying that you please take care of them, we will come and talk to you, okay? There are some times they have actually given us money saying that you pay — you give incentive to the worker not to go away. If they don’t go away, we’ll pay you a bonus for the workers not going away, okay?

So what will happen, Bhavin, is as of today, we are not sure what will happen (foreign language). But there are all the clients have been behaving differently. But one thing I’d say, most of the clients have been pretty benevolent about cash flows on the workers. So whatever amount we are incurring on the fooding, housing, bills that and all that, most of the clients have come back and told us that if you need extra money for that, we will pay you that money over and above your base, which we’ll define on adjusting at the end of the contract. (foreign language) to me, it is a million-dollar question, okay?

But as I said earlier in an earlier question to answer to someone, that under the force measure, we may not get it. But under change of law, there is a significant chance of getting this money. Because what you’re doing is because of change of law issued by the (inaudible). So there are very different views, and I’m very clear that CII — everyone is talking to the government on that and something would come out from the environment on this piece.

——————————————————————————–

Bhavin B. Vithlani, SBI Funds Management Private Limited – Senior Analyst [168]

——————————————————————————–

Understood. And just lastly, a housekeeping question. What is the interest-bearing advances received? And what is the rate of interest on those?

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [169]

——————————————————————————–

I don’t know. Maybe, Rajeev, you have an answer to this?

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [170]

——————————————————————————–

So I don’t have the exact number, Bhavin. But normally, it is about 40{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49}, 50{09c3c849cf64d23af04bfef51e68a1f749678453f0f72e4bb3c75fcb14e04d49} level of the total advances remains to the extent of INR 1,200 crores to INR 1,400 crores. So maybe INR 600 crores, INR 700 crores advances interest-bearing.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [171]

——————————————————————————–

I think, Bhavin, I would like to add one thing to Rajeev is, now most of the advances like PGCIL, PGCIL has now start giving advances like HBI and CLA. So in many cases, we are finding that the advanced rates have been coming down. We are — honestly, if you ask me, I would have taken INR 0 advance from the customers who are charging me interest. But what happens is that we normally take it because it is in a way a commitment of the client. So maybe (foreign language), like what has happened in Andhra Pradesh (foreign language). So if the client has already cut a check. So although in many cases, advanced rate may be higher, slightly 10, 20 basis points also, but still, we take it and more from the angle of committing the client, okay, then from the interest cost or cash flow angle.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [172]

——————————————————————————–

Absolutely.

——————————————————————————–

Operator [173]

——————————————————————————–

As there are no further questions from the participants, I now hand the conference over to Mr. Vimal Kejriwal for closing comments.

——————————————————————————–

Vimal Kejriwal, KEC International Limited – CEO, MD & Director [174]

——————————————————————————–

So as usual, a big thank you to all of you for continued interest in KEC. Thank you so much.

——————————————————————————–

Rajeev Aggarwal, KEC International Limited – CFO [175]

——————————————————————————–

Thank you.

——————————————————————————–

Operator [176]

——————————————————————————–

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