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Edited Transcript of KEC.NSE earnings conference call or presentation 8-May-19 11:30am GMT

Q4 2019 KEC International Ltd Earnings Call

May 23, 2019 (Thomson StreetEvents) -- Edited Transcript of KEC International Ltd earnings conference call or presentation Wednesday, May 8, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Rajeev Aggarwal

KEC International Limited - CFO

* Vimal Kejriwal

KEC International Limited - CEO, MD & Director

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Conference Call Participants

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* Abhineet Anand

SBICAP Securities Ltd., Research Division - Analyst

* Ankit Soni

* Bhalchandra Shinde

Anand Rathi Financial Services Limited, Research Division - Research Analyst

* Bhoomika Nair

IDFC Securities Limited, Research Division - Security Analyst

* Deepak Narnolia

* Girish Raj Sankunny

Quest Investment Advisors Pvt Ltd. - Research Analyst

* Harshit Patel

Equirus Securities Private Limited, Research Division - Associate

* Inderjeet Singh Bhatia

Macquarie Research - Head of Research

* Jonas Hemant Bhutta

PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst

* Kunal Sheth

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

* Ravi Swaminathan

Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP

* Renjith Sivaram

ICICI Securities Limited, Research Division - Assistant VP

* Renu Baid

IIFL Research - VP

* Rita Tahilramani

* Saket Kapoor

* Sandeep Baid

* Swarnim Maheshwari

Edelweiss Securities Ltd., Research Division - Research Analyst

* Umesh Patel

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the KEC International Limited Q4 FY '19 Results Conference Call. We have with us today from the management, Mr. Vimal Kejriwal, Managing Director and CEO; and Mr. Rajeev Aggarwal, CFO.

(Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Vimal Kejriwal. Thank you and over to you, sir.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [2]

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Good evening to all, and welcome to the Q4 FY '19 earnings call. Our full year FY '19 revenues have crossed the INR 11,000 crore mark for the first time with a Y-on-Y revenue growth of 9%. EBITDA margins have grown to 10.5% from 10%. PGCIL band has grown by 9.7% and 7.7%, respectively, with the PAT close to almost INR 500 crores. Interest, as a percentage of sales, stands at 2.8% for the full year. Higher interest rates in India and globally partly contributed to the increase in interest expenses. Today, new order release of INR 1,233 crores. Our total order inflow for FY '19 has now touched INR 14,084 crores. We have a strong order book of at least INR 20,307 crores with a minimum of INR 3,000 crores plus. Coming to the Q4 financial performance.

We have achieved revenue growth of 5% year-on-year for Q4 FY '19. The growth would have been higher, but for some delays in environmental approvals in Brazil [industry] projects and execution headwinds in some domestic private projects. We were expecting to start work on 3 KEC projects in Brazil in Q4 FY '19 of which we still have approval for only one project. Execution of second project has just commenced, and we expect the approval of third project any day.

EBITDA margins for Q4 have increased from 10.1% last year to 10.4% this quarter. Our interest as a percentage of sales for the quarter stands at 2.2% against 1.7% in Q4 last year. PBT and PAT margin stand at 7.9% and 5.2%, respectively.

On the business front, our non-T&D business continued its growth trajectory with railway doubling its revenue for third consecutive year and reaching close to the INR 2,000 crore mark, while Civil achieved revenues of approximately INR 500 crores almost double of last year. Despite the larger controversial non-T&D revenues for the overall revenues, the improvement in our EBITDA margins from 10% in FY '18 to 10.5% in FY '19 mirrors the improvement in non-T&D margins.

Railways continued its growth with order inflows for the year crossing INR 3,000 crores and a large order backlog of at least INR 5,000 crores. We are focusing on International [BFCC] (inaudible) and metros for expanding the business profile going forward. Civil vertical has expanded its clients base to 17 clients in FY '19 with almost 10 in FY '18 as well as subsegments with addition of FMCG and select residential projects. We have started adding new [offices] such as government, commercial and industrial projects, airports, metros, et cetera.

Cables business has actually a good performance with revenue growth of 17% on account of higher share of EHV and exports. Our smart infra business has taken off well in its first year of operations with 2 orders from Maharashtra as master integrators. Where we faced some trials for the related delays in T&D in FY '19, we have closed the year with revenues of INR 7,306 crores and robust margins. We have a T&D order book of INR 15,000 crores plus, which gives us a confidence of achieving strong execution in FY '20.

The order book for international markets including [SAE chart] has grown by 25% in FY '19 over last year on account of uptick in inflows from Bangladesh, Africa and UAE. We're announcing on a pipeline of nearly INR 25,000 crores in domestic T&D and Railways including a bid submitted -- and could be submitted in the near future, which have been deferred due to the elections. We anticipate a stronger FY '20 in terms of domestic order intake. As we've been discussing earlier, the order intake and initiatives will reduce working capital such as collections on Saudi, sale of BOT assets, changes in vendor forms and expediting commercial closing of projects. We are happy to inform that the borrowing level stands at INR 1,845 crores as of 31 March 2019. As a result of our initiatives and also receipt of advances from some large international projects against the international T&D orders received in FY '19. This is a positive outcome for time and liquidity is an issue across the country. Together with an order book and L1 of around -- and a total figure of INR 24,000 crores and approval of our pipeline in T&D, Railways and Civil as mentioned earlier, we expect our revenue growth of 15% to 20% in FY '20.

Thank you very much. Happy to take questions now.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Renu Baid from IIFL.

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Renu Baid, IIFL Research - VP [2]

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A few questions. First if you look at the overall in terms of execution mix, again, growth clearly driven by Railways, Civil segment and T&D has remained pretty soft as it was indicated. So again, given that we have some city projects inside with TBCB regarding somewhat softer in the domestic market, what is your comfort level for next year in terms of growing by about 15% also in the domestic business? And Railways -- even Railways revenues this year have done higher than what we have targeted. So does that taper off the growth that we were expecting next year or the target of INR 2,300 crores, INR 2,400 crores of revenue impact. So how do we look at the growth numbers in terms of revenue for next financial year? And what could be the degree of confidence that we have of this series of numbers?

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

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So one thing, Renu, overall, we've indicated 15% to 20% growth. So I think next year, our confidence is higher on the numbers. If you look at our order book, INR 30,000 crores and another INR 3,500 crores of L1. I think it's pretty comfortable and clearly by itself it's INR 13,000 crores plus. Coming to the Railways, this really had been slightly more than what we had wanted to do or indicated earlier without the push on execution. And I think we still stick to our, let's say, 20%, 25% growth in Railways, by which we should be around INR 2,300 crores, INR 2,400 crores in Railways. Regarding sticky accounts, we have one client, which is a problem for us right now. But it's a national important project for me. So I think on numbers, there's around INR 400-odd crores of order book. I don't see too much an issue. It's a matter of does it get resolved in 1 quarter or 2 quarters. Hopefully, with whatever the lender other than they've been telling us, we are pretty hopeful that this should get resolved very quickly. One thing for me, which is the second line for the [tower center connector] and there's a lot of (inaudible) Q1 including [next year], et cetera. We got this project going very quickly. So coming back, I don't think I am worried about our overall growth numbers. 15% come from domestic. That I do not know. I don't have an answer for that directly. But I think overall T&D especially [group on interest] -- order intake of INR 1,300 crores to INR 2,000 crores this year. I think overall, T&D as a business should definitely grow by 15%.

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Renu Baid, IIFL Research - VP [4]

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Okay. And then because essentially, the [Civil center] growth has slowed down, our expectation next year we should be definitely towards the 20%. So the fact that you're guiding 15% to 20%, are you seeing some pockets of softness or you think there is a high likelihood that a 20% kind of growth should be reasonably achievable?

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

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(foreign language) essentially indication of the confidence. I don't -- [15% listed] there.

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Renu Baid, IIFL Research - VP [6]

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(foreign language). Sir, but we were expecting that towards the end of the year, we would see reduction in the overall debt plus expenses though that number still continues to be a bit sticky as INR 3,000 crores. So do we expect this improvement to come through given that the liquidity environment and the situation within BSE side continue to remain sticky. So as in, what would be the road map in terms of -- and given the fact that we are expecting 15%, 20% growth in the coming year. So how should we look at the debt levels for the company as a whole?

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

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So I thought you would be happy with the numbers, which you hear because, again, 3,000 we have said that we should be doing INR 2,400 crores, INR 2,500 crores gross debt. Against that, we are at INR 1,800 crores. We actually been able to bring down our debt by almost INR 1,200 crores in Q4, okay? That's on the debt number. Acceptance has not changed significantly. I'm not saying that, that has changed. As far as investors concerned, I think we are talking about or doing around 2.5% next year as against 2.9% this year -- against 2.8% of this year where -- we do expect [to reach 2.5%] and hopefully RBI and what have you said reduces the rate and maybe we can do better than that. But as of today, this one's today's numbers. We've been talking about this number, yes?

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Renu Baid, IIFL Research - VP [8]

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Right. And overall as you mentioned, the L1 pipeline and the orders that we have submitted [to be further increasing] TBCB and all the regular projects. So on the ordering flow side except for Railways where we have gone a bit soft, the domestic momentum should be strong. But how should we look at the exposure of the portfolio for Railways and Solar, where you are looking to expand our presence in non-Indian markets?

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

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For Railways, I will not say we have overall gone soft. We ended the year with around INR 4,100 crores of orders. Okay. We -- initially, which is why we are lower than last year but we are still comfortable. International, I think we have seen a lot more traction on Africa. Middle East has started bouncing back. So I think we're quite comfortable with what should happen in T&D, plus Brazil also, there are a lot of orders yet to be finalized on the projects, which has been running the last 2 or 3 auctions. So we do expect that something more will also come out of our deal.

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Operator [10]

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(Operator Instructions) The next question is from the line of Renjith Sivaram from ICICI Securities.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [11]

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Just wanted to get some idea on the order intaking FY '20 what can be the kind of order, because last quarter, you mentioned there are lot of renewable-related projects which are progressing. So what is the status of that and what kind of order intake overall we can expect in FY '20?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [12]

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Renewables if I'm not wrong, the total around INR 13,000 crores, INR 14,000 crores which -- as the projects have been approved by CAA, of which some are on a cost plus basis awarded to power and the rest are on a TBCB mode. So the cost plus ones, I don't have the exact amount. I think roughly around INR 1,500 crores, INR 2,000 crores have already been quoted and not been open because of the election issue. So I think they should get opened in the near future. But TBCB projects, the balance, I'll say, INR 11,000 crores, INR 12,000 crores have also been floated. RSQs have been done, parties have been qualified. RFP dates are, I think, in a week or 2. I'm not sure whether it will happen that time or they may get postponed until the election results are over. But our view is that within the month of May, all the standards should be lifted, okay? That's on the list. Apart from that, there has been a large bunching of tenders in the states, especially Tamil Nadu where the elections are there, where they have postponed all the tenders because of elections. And I mentioned a figure of around INR 25,000 crores of tenders, which have been quoted or under quoting. So to me, let's say, from the tender issue quoted in March until May or middle of June, almost INR 25,000 crores of tenders would be there in the system.

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

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Okay. So what kind of order intake can we expect in FY '20?

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

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Order intake, I presume we should be doing around INR 17,000, INR 18,000 crores or something. We are estimating INR 14,000 crores. Roughly if I take 20%, it will be around INR 3,000. So INR 17,000 should be an ideal number.

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

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And of that, how much will be from Railways?

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

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I don't have exact number, but how many we do is -- transmission should be around 70% of that, okay? That should be divided within Railways, Civil, et cetera. But assuming that we do around INR 2,400 crores in Railways, another maybe INR 3,000 [and odd] should be from Railways. INR 3,000 or maybe INR 3,500 depending upon what happens because right now, there are around, I think, 15 or 17 tenders around the Railways. But we'll also have to wait and see with the new government coming in what -- who become the railway minister, what is their priority and et cetera. So I'm a little bit cautious today until we start hearing from the new minister to what they want to do. But I think 17 is a number, which you can easily go with.

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Operator [17]

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

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [18]

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Sir, a couple of questions. The first one on the domestic execution. You have been kind of mentioning it for the last couple of quarters that there have been some sticky private sector projects in the domestic side. But I believe, sir, that is only to be account of about INR 400 crores when you look at our overall T&D domestic order backlog of about INR 7,500 crores. So are there any other projects where we are facing some delays or some execution challenges if you can spell it out?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [19]

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So basically, we had 2 other projects from one more developer -- larger volumes. That's why we never discussed them before. So we were expecting that they will get clear, but they did not get clear in Q1. But they have been cleared now and we'll get started on that, okay? So right now, we just have 1 project, which is I'll say sticky.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [20]

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Okay. And on the other government projects, sir, what is going specifically there?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [21]

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So government project, I'm not seeing any major issues happening. Obviously, what has happened in the month of March and April is also with elections being announced and all that -- with all the -- I'll say the police are all being busy with the election, et cetera. At cases where you were using help of district administration [out of the blue still] et cetera, there could have been a marginal impact. I don't see any other major issue. I think the only other point, which I don't know if it's very relevant or not, is that [government] has been without full-time for some time, okay? So -- which has sort of impacted some pieces of power grid ordering as well as execution with now the new [CM bidding] at least shortlisted. I think that's what we overheard.

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Operator [22]

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(Operator Instructions) The next question is from the line of Ravi Swaminathan from Spark Capital.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [23]

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Just wanted to know quickly -- so just wanted to know, this INR 25,000 crores of grid pipeline that we have bid today in the domestic market, what would have been the quantum, say, roughly last year? I mean just wanted to know whether the opportunity size is the same or kind of -- has it grown....

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

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Obviously, I don't have the numbers to compare it. But it's a little bit more than normal. Because I have not seen INR 15,000 crores of TBCB or renewables coming at one shot. Similarly, INR 5,000 crores, INR 6,000 crores from 1 or 2 SEBs at one point of time. It's a little bit more of bunching because of the elections.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [25]

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Got it, sir. And this renewable ordering of say around INR 12,000 crores, INR 13,000 crores (inaudible), 2 to 3 year period. I mean can we expect similar numbers of magnitude of what should have been or cannot go up? Because why I'm asking is currently solar, some execution of solar projects have altered because of their challenges with the developers who were there. That's what I'm hearing. So can it have an impact on transmission capacity addition related to that?

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

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I don't think I have an answer for it. But what I -- last -- when we had heard the [energy] secretary talking about (inaudible) irrespective of what is happening whether there are delays in solar plants. They would like to go ahead and implement the transmission systems. That's what I heard last around 2 or 3 weeks back. To me, these projects will come because they have -- we set a stage where pulling back is difficult. And most of them are very tight schedules of 15 months, 18 months. In fact, the other big debate in the government whether they should be given TBCB or nomination to power grid. I think a lot of people are very skeptical whether the private sector can actually do a financial closure and complete the projects within a period of 15 months, which power can do. So to me, these are critical projects. Most of them are originating from -- basically from [Benad], Rajasthan where a lot of solar projects have already been awarded. So I don't think these projects will get delayed on account of delaying the solar plants.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [27]

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Got it, sir. Got it. And in international markets, we have seen very good growth. I mean Bangladesh, et cetera. Any other geography which seems to be emerging as a growth driver going forward? I mean you mentioned Brazil has one. But are there any other regions, which are coming up in terms of transmission spend?

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

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The other area started seeing traction is Middle East, especially UAE. In fact, in the last one year, we have got almost INR 1,000 crores of orders in UAE. And we have seen some more. But the difference is that most of them are related to oil fields. So they're not orders which are as such a normal power plant, power line orders. Most of them are. So I think with the oil prices going up, our orders have risen. I think they're spending money on oil fields. We are also started slowly seeing orders coming -- tenders coming in from Saudi. Although we are not winning them because we're pretty conservative on what has happened in Saudi. The other place where we have seen some orders coming in is in Far East, especially Malaysia and Thailand. There are quite a few other tenders, which are in the pipeline. Some of them have been aroused to be bid in the next month or so. Africa has always been a good hunting ground for us. And we are seeing continuous tenders coming in, especially from West Africa.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [29]

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Got it, sir. And my last question is on the cost of funds. So how much would it have increased, say, this year compared to last year? And is there any chance of it going down? You had mentioned external factors, but internally, in terms of rating upgrade or say something of that sort, can we bring it down in the [mix change], et cetera?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [30]

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Interest rates from the last year has gone up by almost 50 to 70 basis points, both on the LIBOR side and on the ancillary expense.

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Operator [31]

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(Operator Instructions) The next question is from the line of Jonas Bhutta from PhillipCapital.

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [32]

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Great to see the improvement in working capital. Sir, 2 questions. Firstly, sir, if you can elaborate on how should we look at margins for next year given that you've achieved a decent 10.5% this year. And from where would that coming in? I would presume that as execution in SAE picks up, should we build in a higher margin there? So if you can throw some light on the margins then firstly.

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

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I think margin right now, we expect the margins to improve significantly. We have been at 10.5%. We're happy we are able to maintain 10.5%. We have been putting more [equity in pipeline]. Quite honestly, there we'll end up. But I think what we could also look at is we have guided for an improvement in the interest cost. So we have at least 2.9 to 2.5 [potentially come in] interest cost, which would impact our [equity in the past].

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [34]

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Sure. And okay. Sir, just a bookkeeping question. Wanted to understand this new line item in our balance sheet for contract assets and contract liabilities. What is this pertaining to and how should one analyze this?

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

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That [combines] 2 numbers. One is basically the unbuilt; the second is (inaudible) impact. This was earlier [coming] on the financial assets (inaudible) coming on the financial assets together [number], okay? So if you want more, just call me, but it is basically a part of the data, which has been -- so there is also -- there is a corresponding liability, which has been created for (inaudible) somewhere below the liability side.

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [36]

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Sort of net of this amount and add it to receivables to make it a more like-to-like comparison or that would be the wrong way of seeing it?

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

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This is the right way.

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Rajeev Aggarwal, KEC International Limited - CFO [38]

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I think it's the right way of doing it because it's actually the receivables, okay?

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Operator [39]

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Next question is from the line of Inderjeet Bhatia from Macquarie.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [40]

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My first question is on the revenue side. You are talking about 15% to 20% kind of growth. Is the dependence much more on international or domestic to kind of get us to this number? So if you could just try to kind of breakup in terms of which geography could drive the bulk of the growth, that would be helpful.

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

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So in T&D, it would be international, okay? So -- but for the other businesses, obviously, Railways and Civil starting for it -- its [debentures] are in the growth. Clearly would be -- and if you look at the regions, it would be one word, definitely the SAARC, primarily I'd say Bangladesh and Afghanistan. These are 2 countries, which will strive. Brazil, we do expect to have a significant increase, almost 30% to 40% in our revenues from what we have done this year. And then the third region would be Africa, because we have a large number of orders in Africa this year. Execution has started. Some of the projects which had been stuck on account of lender issues and all that, those have been cleared largely. And then we have -- I had mentioned about 2 projects. One was in Nicaragua and one in Papua New Guinea, which we had won last year. So there -- this has started. So these will contribute. But primarily, I would say SAARC should be one big contributor to revenue this year.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [42]

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Okay. Now coming to order inflows, you're kind of talking about close to 20% kind of growth. If I look at on the T&D side, again, they refuse -- a lot of dependence on all the solar kind of orders coming through. And we have seen that for various reasons the sector has remained kind of troubled in the last, I would say, 12 months or so. So what gives us confidence that we should be able to kind of get strong growth on the T&D side? And another thing is on the Railways you are not building too much. But how much is left in terms of the electrification order?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [43]

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So let me answer electrification. That's the easier answer. So we're around 30,000 kilometers yet to be done, okay? And the next year started, which I think -- the railway ministry has told us there's 10,700 kilometers and [not official on what they've] announced. But in our review meeting, they have told us that they want to do 10,700. That's the number we have. And for the next 2 years, they want to do another equally [10,000] or [30,000] when they want to finish this.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [44]

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How much they were able to award in FY '19?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [45]

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Sorry.

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Inderjeet Singh Bhatia, Macquarie Research - Head of Research [46]

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How much they were able to award in FY '19?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [47]

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I don't know the award figure, but they have done that close to [5 and up] actual electrification, okay? Obviously, don't have the figure how much they awarded. I can check and let you know later on. But completion [is higher than 1,000], okay? Against the target of -- initially, it was 8,000, but then they have scaled it down to 6,000. So again, [5.5], okay? Coming to your question on T&D. I think what I've mentioned about solar was when we talked about what is the current order of tender pipeline. So that's where it is today. I think all we need to keep in mind is that whatever has happened on power overall, whatever is happening on EV charging, et cetera, apart from the normal growth, these are the factors which will lead to significant growth. And if you look at last year, we've hardly seen any projects coming on the state side. Amount of investment are orders which we used to get from state. Last year for whatever reason, we did not see too much [ordering] by states, which we have now started seeing, okay, whether it is Tamil Nadu, whether it is Karnataka, whether it was -- we still have a lot of tenders and other (inaudible) postponed. [Charter may arise] with [Rajasthan] coming on with very large tenders. So suddenly, we are seeing that whatever should have been done last year from the states is getting bunched in. All that will come -- the [CRM]. None of them has to do anything with Solar, okay? So that is basically what is coming out today on the TBCB side and part of our rate.

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Operator [48]

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Next question is from the line of Bhoomika Nair from IDFC Securities.

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Bhoomika Nair, IDFC Securities Limited, Research Division - Security Analyst [49]

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Sir, on the renewal side, we've definitely seen good traction in terms of execution as well as our order backlogs and we're looking at some significant growth going forward as well. But I just wanted to check on how the working capital cycle is dealing with moving, considering that they have fairly weak financials and operating ratios have risen quite sharply. So are you worried on receivables and the working capital side? So basically, can you just comment on that aspect?

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

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So Bhoomika, working capital continues to be a worry, but not account of receivables, okay? We have not had any delay in payments on the payables. I don't know what is happening on the operating ratio and all that, but I think they have allocation for capital. So CapEx and all that, we hardly seen any delay happening in Railways. In fact, we're aware of collection on Railways this year also, okay? So I don't see any major issue on that side. But the problem in the Railways has always been on the payable side where there were a large number of small players, so we ended up paying them in cash. So the situation is getting sorted out. Many of the larger players have started coming in this industry seeing the volumes. So we are slowly seeing an improvement in the payable days, okay? In any case overall, the net working capital of Railways is pretty decent. I think it's certainly better than T&D. I don't know the exact number. But it's better than the T&D net working capital, okay?

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Bhoomika Nair, IDFC Securities Limited, Research Division - Security Analyst [51]

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Okay. And Railway margins have now been similar to T&D or would there still be a gap between...

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [52]

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There is still a gap because we have not yet reached the T&D margin. But I think it's improving. It's -- we are pretty close to that number, but I think what has happened [publicly] it's been slightly better. So the gap we are still not able to fill it.

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Bhoomika Nair, IDFC Securities Limited, Research Division - Security Analyst [53]

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Understood. Understood. Sir, my second question is on the working capital. We've seen an improvement on a Q-o-Q basis. If you could just quantify what was the -- what we received from Saudi and what is the outstanding amount? And the second part is that we seem to have restated the payable numbers of last year. So is that understanding correct? I mean on a Y-o-Y basis, the advances numbers has been restated. Acceptances, sorry. Acceptances from [earlier it was] 2004 which have been pretty delayed saying about INR 1,300-odd crores.

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

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On the orders (inaudible), et cetera. So similarly, there has been a restatement in the liability side also, okay? So probably add the 2 figures together to arrive at that number, okay? And you asked about (inaudible).

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Bhoomika Nair, IDFC Securities Limited, Research Division - Security Analyst [55]

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On the Saudi acceptance, the seasons.

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

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Saudi, I think for the year earlier, we got around INR 1,000 crores. I think Q4 roughly, INR 400 crores. So INR 450 crores was what we got in Q4, okay? And we've been getting some money even now also we've got some money post Q4 also. So I think we are now pretty comfortable with our situation in Saudi. And what has also happened is that many of our other bills and all that have completed. I have been advancing in the system, significantly. So I think that in the next couple of months, we should get at least another INR 200 crores, INR 300 crores from Saudi.

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Operator [57]

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The next question is from the line of Abhineet Anand from SBICAP Securities.

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Abhineet Anand, SBICAP Securities Ltd., Research Division - Analyst [58]

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Firstly, really did mention about some delay in execution because of the clearances. Can you just grow some model on the tendering part there?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [59]

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The tendering, what I had said on tendering was that on the last 2 or 3 auctions, some projects are still not going to hold by the developers. And we are in discussion. So that's what I said that there was a good chance of improving the order intake from Brazil. The next auction in Brazil is now due in December. So we'll have to wait and watch what happens in December with the new vendors. Existing ones are under execution. So we prefer that Brazil will show us significant growth. I was telling earlier that we should have a 13% to 14% growth in Brazil this year.

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Abhineet Anand, SBICAP Securities Ltd., Research Division - Analyst [60]

--------------------------------------------------------------------------------

That is -- you are saying from the [in true] perspective?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [61]

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I'm saying from [a real] perspective.

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Abhineet Anand, SBICAP Securities Ltd., Research Division - Analyst [62]

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Okay. Secondly, similar than (inaudible) as a new business that we have started and INR 500 crore growth of this year. So how do you see that playing out over the next 2, 3 years?

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

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Abhineet, the way we are looking at Civil is the way we were looking at Railways earlier. So for us similar, let's say, maybe 2 years behind Railways in terms of revenue. So when we're looking at INR 500 this year, we want to make it INR 1,000 this year FY '20 and maybe FY '21. And maybe INR 4,000 after that. That's the way we're looking at that for growth panning out.

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Operator [64]

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The next question is a follow-up from the line of Renjith Sivaram from ICICI Securities.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [65]

--------------------------------------------------------------------------------

Just if you can help us like there were some changes in the balance sheet. So like-to-like basis, how will be debt plus acceptances stacking up? It will be helpful for us in understanding the basis.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [66]

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[That was in] investor presentation, okay? That was acceptance we have given in the address. But it's more or less similar. I'd say roughly around INR 3,000 crores.

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [67]

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No. But you told that there has been some changes from -- because of [recent] to...

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [68]

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That's a different issue. That is the way that is presented in the accounts. But in the investor presentation, for the sake of understanding, we've taken out the number and all the interest numbers and all that, given I think this was just an acceptance. So like-to-like numbers have been given there, yes?

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [69]

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Okay. And what will be the total receivables and the receivable days currently? Is that the one which is given in the balance sheet? Is that the one or will there be an addition to that?

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

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(inaudible) from the balance sheet will have to read through the interval and the contract assets. So the total number of receivable and that includes the (inaudible) number also so we will have to exclude close to...

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Renjith Sivaram, ICICI Securities Limited, Research Division - Assistant VP [71]

--------------------------------------------------------------------------------

So if you can help us with the trade receivables and the receivables in contract, what would be the total number?

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Rajeev Aggarwal, KEC International Limited - CFO [72]

--------------------------------------------------------------------------------

Roughly about 7,000.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [73]

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Renjith, my position would be speak to [Mittal] later on. Get on the details, but probably -- roughly we are saying the number is around INR 7,000 crores, yes?

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Operator [74]

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The next question is from the line of Saket Kapoor from Kapoor & Companies.

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Saket Kapoor, [75]

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Sir, firstly, as I heard you correctly, whatever the changes will get in terms of the rating upgrade, that will add to the bottom line in terms of the -- our interest to sale going down by 40 basis points. So...

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

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(inaudible) what I've said today was that if RBI I've said is favorable to us, okay? And it was (inaudible) then we may have some benefit. And the second point (foreign language) that was the actual for this year versus the budget what we're seeing for next year. We're talking about achieving 2.5 next year versus 2.9 of this year. (inaudible) interest cost (foreign language)

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Saket Kapoor, [77]

--------------------------------------------------------------------------------

Okay. That is on terms with RBI cut rates.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [78]

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(inaudible)

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Saket Kapoor, [79]

--------------------------------------------------------------------------------

Okay. We are working with 2.5 as per today's environment.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [80]

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In that sense, yes, you can say (inaudible). They're at 2.5. We did look at what would be the possible interest scenario and all and based on that, although we're not priced at rate cut, et cetera. But normally (inaudible).

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Saket Kapoor, [81]

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So sir, if I understand, margins to 5% at base rate next year for the minimum.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [82]

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This year. EBITDA [whole year], common interest whole year .

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Saket Kapoor, [83]

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(foreign language) the cable business, how are you looking for the cable business performing moving forward and if you could give some more color on it?

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

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Cable has done well this year. We had a 17% rise in turnover and among our best profitabilities ever achieved by cable business. We're also seeing a lot of order inflows happening, especially from the export market and on the EHV front. (inaudible) the states are now realizing that at least in all the coastal districts they would like to convert all their distribution lines into cables, et cetera. Clearly, [under budget when looking at it] (inaudible) talking about it. So (inaudible) so I think we are pretty positive. So when we talk about last year, we had moved our Silvassa factory into Vadodara and now that factory has fully settled, started giving -- that moment is giving us more production and more, I think, cost efficiency because it's operating from one plant. So I think we are a pretty positive about the way cable business is behaving.

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Saket Kapoor, [85]

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What kind of growth can you see...

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Operator [86]

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Sorry to interrupt Mr. Kapoor, but may we please request you to return...

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Saket Kapoor, [87]

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(inaudible)

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

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Let me answer you, Saket. I don't think we are expecting too much growth. There was ultimately a production-based revenue (inaudible) put in more money into capital expenditure and expand the capacity. Whatever change will happen will only happen with a better product mix. [Maybe this is] more copper [installed than aluminum cable]. Then the values can go up. But otherwise, cable, I'm not saying too much of increase in the revenues. What we have been talking is how do we improve our profitability, okay?

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Saket Kapoor, [89]

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(inaudible)

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [90]

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Yes.

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Operator [91]

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Next question is a follow-up from the line of Swarnim Maheshwari from Edelweiss Securities.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [92]

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Sir, looking at the notes to account, point #10, where there is this old little dispute in South Africa. I just wanted to understand what is our -- the share in the JV.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [93]

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Our share is 50%.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [94]

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It's about 50%.

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

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It is 50%.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [96]

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Okay. Okay. Sir, secondly, in this quarter, any ForEx gain or loss?

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

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(foreign language) So we have a ForEx gain I think from (inaudible)...

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [98]

--------------------------------------------------------------------------------

You said (inaudible).

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

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Exact number but broadly, it is around INR 50 crores, INR 60 crores in -- for the 9 months, INR 40 crores. But I think we should be at a net (inaudible) INR 60 crores, INR 70 crores would be the gain for the whole year.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [100]

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INR 60 crores, INR 70 crores for the whole year.

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

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Yes, yes, yes.

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Operator [102]

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The next question is a follow-up from the line of Jonas Bhutta from PhillipCapital.

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [103]

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Just following up on Swarnim's question, sir. So the implied ForEx gain in Q4 is INR 30 crores. As you said in 9 months ago, it was INR 40 crores, and now it's now about INR 60 crores, so roughly INR 20 crores.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [104]

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Roughly (inaudible) yes.

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [105]

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Right, sir. The second question was a bulk of our improvement in working capital also came from payables, which sort of you'd gone into vendor financing mode in the first half and that partly sort of you recouped. So now we're back at the Q4 to '18 levels. Sir, the following years, do you expect that given that liquidity constraints may sustain for some more time you would have to again resort to sort of funding your vendors if you're targeting around 15%, 20% growth next year -- sorry, in FY '20 sales? That's my first question.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [106]

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So one thing you should keep in mind is that [securing the] improvement of working capital has happened because of receivables from [accounting] as well as gains on sale, okay? [And I think we disclosed around] projects commercially. [A lot of retention of money have not come in] so -- but that's one thing, which is, I'll say, permanent improvement. [Vendor] financing, you think about what happens in the market. We may -- we now have stabilized everything. So I'm not seeing that we will be doing additional vendor financing. A particular level has been achieved, so I think that's where we will be. Other thing that is happening is that one of these vendors [have developed]. That thing happens regularly. We are also seeing banks [lending] directly, okay, because banks are also looking for good [credit to offset the working capital]. So we are also seeing that some of our vendors [were given] financing at my -- our orders and all that. We have now started getting direct financing because our target also is that -- to take some of our larger vendors to do some sort of financing from [banking channels].

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [107]

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Then quickly on the maintenance question, sir. The order book that you have put out in the presentation of INR 20,300-odd crores, so is that as of March 31 or it includes the INR 1,200 crore orders that you announced today?

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

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It includes, so there is...

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [109]

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Can we get that as of March 1 just from a bookkeeping perspective?

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

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This is as of March 31, this final number.

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Jonas Hemant Bhutta, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [111]

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And so the INR 1,200 crore orders and that you declared today, you've accounted for in Q4 [time].

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

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Yes. Those are orders, but now it is -- this was high [NPL going on] and all that. (inaudible) so these are for FY '19 only. Yes.

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Operator [113]

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The next question is from the line of Girish Raj from Quest Investments.

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Girish Raj Sankunny, Quest Investment Advisors Pvt Ltd. - Research Analyst [114]

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The ForEx gain of INR 60 crores to INR 70 crores, what was this number previous year, sir? Was it a loss?

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

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Loss of (inaudible)...

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Rajeev Aggarwal, KEC International Limited - CFO [116]

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Previous year, it was slightly negative.

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

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(inaudible) negative.

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Girish Raj Sankunny, Quest Investment Advisors Pvt Ltd. - Research Analyst [118]

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Okay. So in the slides, sir, also you said that railway margin are inching up. And we are keeping our overall margin at 10% to 10.5%. Can you give some more color as to why?

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

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Sorry, what?

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Girish Raj Sankunny, Quest Investment Advisors Pvt Ltd. - Research Analyst [120]

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So the margin guidance, you have maintained 10% to 10.5% for FY '20. You also said that railway margin is inching up and T&D margin is better -- getting better. So in this scenario, we have already achieved 10.5%. Can you give more color as to why we are maintaining that 10.5%.

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

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[These are according to] (inaudible) because the order intake, if you look at, is not as great as we would love to take it. So there is some pressure somewhere on the overall risk. Other thing is a as of today, we have seen commodity prices doing very, very well [all right]. Every day aluminum and copper has been moving up and downstream. We do not know. So I think some way or the other, we are not very comfortable, but we will be right now, based on today's order book and our margins, we should be [able to know if we're] able to improve it or not. It looks a bit dicey today. Maybe when we talk after Q1 or Q2, we should be able to give you a better number. Okay?

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Girish Raj Sankunny, Quest Investment Advisors Pvt Ltd. - Research Analyst [122]

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One more question on the green transmission cable, the norm that was called by the Power Ministry, I read your view. But if this has to come, what will be impact on our overall?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [123]

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(inaudible) we make both level (inaudible). So for us, it doesn't make a difference whether if ministry mandates cable (foreign language). Okay? (foreign language) that is also is okay with us. Okay?

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Girish Raj Sankunny, Quest Investment Advisors Pvt Ltd. - Research Analyst [124]

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So sir, looking completely advantage terms, how are we placed compared to the strongest player?

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

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(foreign language) (inaudible) it is also based on [that]. You cannot just take a [general -- assume] and say (foreign language). That's not the way things work out, no.

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Operator [126]

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The next question is from the line of Deepak Narnolia from Birla Sun Life Insurance.

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Deepak Narnolia, [127]

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(foreign language) and give a sense for maybe good [settlement miles] just the working capital front. Sir, I had a couple of questions. (inaudible) the growth guidance which you have given of 15% to 20% but at the same time, you have said that you really would grow by 20% to 25%. And T&D, you have said that 15% kind of growth. And in Brazil, you are saying 30%, 40% growth. So you are -- in that context your guidance looks very conservative.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [128]

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The lower percent gain T&D that included (inaudible) also. (inaudible) T&D

15%, that included the [sales] part of T&D also.

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Deepak Narnolia, [129]

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Okay, Okay. So (inaudible) statistical growth of (inaudible) 15 to 20 with -- other upper side of guidance looks more reasonable.

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

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The upper side (inaudible).

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Deepak Narnolia, [131]

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Okay. And sir, second thing is, the interest cost guidance you have given is 2.5% of the sales.

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

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Yes.

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Deepak Narnolia, [133]

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So which is a reduction from your 2.8%, I think this year.

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

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2.9% -- it's 2.8%, sorry. Yes, 2.8%

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Deepak Narnolia, [135]

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2.8%, sir, so yes. So from where this rate actually you are thinking?

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

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(foreign language) so that my entire interest is not working capital only, number one.

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Deepak Narnolia, [137]

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Okay. Okay. (foreign language)

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

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(foreign language) where we don't have too much of fresh exposure right now to start FY. So there will be -- a part of it will from collections. Part of it is coming from borrowing mix, which is improving towards -- we are consciously (inaudible) international order book increasing. ForEx borrowing is going up. So the interest cost that way will also come down. (foreign language) Yes. Yes.

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Deepak Narnolia, [139]

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Okay. Sir, and if you allow one more thing relating to debt only. This debt reduction, there's a lot of confusion I see because of the reclassification, although I've got my answers from Renjith's question. But I wanted to ensure that [balance recovery] reduction, this is a reduction due to cash only and not due to reclassification.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [140]

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This was cash reduction. You're right.

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Deepak Narnolia, [141]

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Okay. This is cash reduction. And...

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Operator [142]

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Sorry to interrupt, sir, but may we please request you to return to the queue for your follow-up?

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

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(inaudible) after that. Follow-up.

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Deepak Narnolia, [144]

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(foreign language)

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [145]

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(foreign language) apart from the loan transfer [over here] or equity value (inaudible) which has gone to the loan repayment. So total debt [INR 227 crores] if we're moving ahead. Okay?

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Deepak Narnolia, [146]

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For consolidated level pay.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [147]

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[Consolidated level pay], on consolidated level, [debt was lying interest]. Okay? (inaudible) [Saudi] was around INR 1,000 crores of collection. So (inaudible) debt reduction on repayment (foreign language), which I have said and I'll again repeat it, we had a lot of orders in the international market, which have interest-free advances. So a lot of advances did come in March. So all this got bundled together. March, we're talking about now, debt reduction moving ahead.

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Deepak Narnolia, [148]

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Major reduction of the Saudi collections here, INR 1,000 crore in 1 quarter.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [149]

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(foreign language)

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Deepak Narnolia, [150]

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(foreign language)

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

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(foreign language)

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Deepak Narnolia, [152]

--------------------------------------------------------------------------------

Huh?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [153]

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(foreign language)

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Deepak Narnolia, [154]

--------------------------------------------------------------------------------

(foreign language)

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [155]

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(foreign language)

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Operator [156]

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Next question is from the line of Kunal Sheth from Batlivala & Karani Securities.

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Kunal Sheth, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [157]

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I just wanted to check with you, sir, this debt plus acceptances number. Where do we see at the end of next year? What are the targets for this year, sir?

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

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For me, with the 25% or [EBITDA] 20% growth that happens, that is the way we are looking at it. Okay? And today [debt operating] is slightly suppressed. We got a lot of money, which more than what we were budgeting for. So I think the debt number should probably be closer to INR 2,500 or so for the -- at the end of next year. Average INR 2,500 [we have for] next year.

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Kunal Sheth, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [159]

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Which is at INR 1,800 crores currently, right?

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

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(inaudible) number here, I think we are around INR 2,500 on average. That's a little bit of (inaudible). I don't see any major change in acceptance level, should remain at the same level.

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Operator [161]

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Next question is from the line of Harshit Patel from Equirus Securities.

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Harshit Patel, Equirus Securities Private Limited, Research Division - Associate [162]

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I had just one question. Sir, if you can give us the breakup of PGCIL, the SEBs and private players in our domestic T&D order book, then that would be very helpful.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [163]

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(inaudible) PGCIL is roughly around INR 1,000 crores. I don't have the exact number right now. But maybe if you speak to me in person, we'll get it to you.

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Operator [164]

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Next question is from line of Umesh Patel from TCG Asset Management.

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Umesh Patel, [165]

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So just a follow-up question on interest rate expenses. As you mentioned that the next year, the -- your interest expense as a percentage of sales will come down to 2.5% versus 2.9% in current year. But if I calculate, assuming that 15% growth rate on your top line, then your interest expense in absolute term will remain same around INR 320 crores for the next year. So just -- I'm just wondering, I mean, whether the absolute interest expense will come down or it will remain around current level.

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Rajeev Aggarwal, KEC International Limited - CFO [166]

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(inaudible) so absolute number -- but because our turnover increase is what we are guiding at 15% to 20%, our (inaudible) interest amount remains at the same level. And (inaudible) just guided for an average borrowing level of close to INR 2,500 crore. So our interest cost will come down to 2.5% based on that. So what we are guiding for the investor on 2.5% interest cost to sale, we are considering our borrowing level at about INR 2,500 crore average for the year.

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Umesh Patel, [167]

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Okay. Okay. So on INR 2,500 crore, your cost of debt comes at around 13.2 something, right?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [168]

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(inaudible) acceptance (inaudible) interest of acceptance is also there. (inaudible) some of the advances are also interest bearing (inaudible)

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Umesh Patel, [169]

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Yes. But in this year, your cost of debt has increased by 50 to 70 bps both in [LIBOR] as well as domestic.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [170]

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Yes, yes, more or less, yes. (inaudible)

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Rajeev Aggarwal, KEC International Limited - CFO [171]

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(inaudible)

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [172]

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(inaudible)

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Umesh Patel, [173]

--------------------------------------------------------------------------------

Yes. So hedging cost is how much?

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Rajeev Aggarwal, KEC International Limited - CFO [174]

--------------------------------------------------------------------------------

This is not hedging cost. This is net (inaudible) during the year.

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Umesh Patel, [175]

--------------------------------------------------------------------------------

Sorry, can you comment again?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [176]

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What happens is that we do our hedging on a net basis, okay? Payables, the borrowings are netted off against that. Okay?

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Umesh Patel, [177]

--------------------------------------------------------------------------------

Okay, okay.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [178]

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We don't pay premium on payables. We normally -- we see it on the net receivables, okay? But [on your side,] you are a little bit on the -- when you look at the ForEx numbers of gains and all that, just from that angle that if I increase my dollar borrowing, et cetera, debt cost will go down, but then my net premium income will come down, okay? Some of my interest increase of this year should actually be attributed and adjusted from the INR 60 crores, INR 70 crores of ForEx, which we talked about.

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Operator [179]

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The next question is from the line of Ankit Soni from Karvy Stock Broking.

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Ankit Soni, [180]

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One thing I would like to know is what is the balance Saudi is able to [chart] over there and segregating in the current and retained (inaudible) levels.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [181]

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So the total outstanding is roughly around INR 700-and-odd crores. Okay?

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Ankit Soni, [182]

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Okay. And segregating it into retention, what it would be?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [183]

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.

I don't have the number, but most of the retentions have got paid now. Maybe INR 100 crores, INR 200 crores or (inaudible) -- INR 300 crores, sorry.

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Ankit Soni, [184]

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Okay, INR 300 crores. And the second question is on the line of your sticky projects, which is that. So can you just give me an exposure number to them like in terms of order book, pending order book and receivables?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [185]

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Order book will be roughly around INR 450 crores, receivables around INR 145 crores.

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Ankit Soni, [186]

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Okay, INR 450 crores. And we are not looking any for write-off or something like this?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [187]

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No, no, it is too early for write-off and also I don't know if this -- I mean what I said is that it's national importance project. We have done 85% of the development work on it. So I am not at all seeing anywhere any possibility of a write-off.

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Operator [188]

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Next question is from the line of Rita Tahilramani from Invesco Mutual Fund.

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Rita Tahilramani, [189]

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Most of my questions have been answered. Just an extension to Ravi's question. Since we are looking at debt performance [INR 2,500 crores] going forward, what could be the [broad] cost of debt and most of your fixed payment debt [they're getting into] repayment mode.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [190]

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Rita, our average cost is around 7%, okay? Based on today's mix, if we decide to change it then the mix (inaudible) ForEx funding (inaudible).

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Rita Tahilramani, [191]

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Okay. We see that inching downwards in next year?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [192]

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Not, not in today's scenario unless, as I said, RBI reduces the rates or the Fed rates go down. Okay? So we have [35%, 40%] of our borrowings, which are in foreign currency. So if the LIBOR rate goes down, we will definitely have a benefit of it.

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Operator [193]

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Next question is from the line of Sandeep Baid from Quest Investments.

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Sandeep Baid, [194]

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Just wanted a further clarification on the ForEx gain of INR 60 crores, INR 70 crores. So like you said that the dollar inflows are more than our dollar outflows, right? Dollar outflows will be primarily on account of debt that we have, while the dollar inflow [will be depend upon] receivables.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [195]

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(inaudible) Sandeep, we have huge dollar outflows on account of supplies also. (inaudible) from some that we normally buy from outside.

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Sandeep Baid, [196]

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No, I agree with you, sir. But the overall net we receive dollars, [not on net basis].

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [197]

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Yes, completely agree. Yes.

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Sandeep Baid, [198]

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So the ForEx gain that we are talking of is the forward premium on the hedging that we will be doing. Is that the ForEx gain? Or is it something else?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [199]

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It's -- one part is that, okay? So there is -- there will be -- I don't -- I can't tell you right now, but there are 3 or 4 different items, which contribute to it. One is obviously the premium whenever we sell forward for a particular period depending upon when we expect to receive. It's definitely a ForEx premium.

Second is whenever [maybe some] unhedged portion is there, which comes in then because rates are different from what is there in the books, that could be there. That would mean that there could be probably 3 or 4 other items in which -- if you want some detail, speak to me in person. Broadly, premium would be a large part of it. Okay?

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Sandeep Baid, [200]

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Right. So if premium is a large part of it, then this ForEx income should be a sustainable income. If it normally -- you will be selling dollars at a premium only. The premium rate may vary, but normally, you'll be selling dollars at premium only, right?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [201]

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Depending on how the international business does.

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Sandeep Baid, [202]

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Right. So if your net -- if your inflow is therefore dollars, you will be making some money there, right?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [203]

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I'm not even sure Rajeev was just telling me it's the MTM impact also, okay? Because we have large receivables also. So the -- we have an MTM impact every quarter. So that also goes into this, okay?

So -- and the third part is to answer, on translation losses or gains. So let's take my Brazil. From Brazil (inaudible) but there is more net inflow happening there. If the Brazilian currency has depreciated or appreciated, it impacts my rupee balance sheet. Okay? So that was another item which goes into this number. So that's why we have 4 or 5 items, which go into this number.

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Operator [204]

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Next question is from the line of Bhalchandra Shinde from Anand Rathi.

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Bhalchandra Shinde, Anand Rathi Financial Services Limited, Research Division - Research Analyst [205]

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Sorry, I'll -- joined in late. If you can give me the guidance on order inflows and what kind of order book you are targeting for FY '20.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [206]

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Order inflow, we have said that we should be having order inflow around [INR 70,000 crores] this year. Okay?

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Bhalchandra Shinde, Anand Rathi Financial Services Limited, Research Division - Research Analyst [207]

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So basically for -- from there, we are seeing physical domestic order inflows. We are seeing an uptick or international order inflows?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [208]

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Domestic (inaudible) actually because, last year, our -- especially [HCVs] were pretty subdued, okay? So my view is that HCVs we should have a lot more order [into happening]. Plus, if you see power also last year is hardly order limiting. And with our new Chairman (inaudible), I hope that they will also pick up ordering. But it's largely more on the HCVs than any other (inaudible).

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Bhalchandra Shinde, Anand Rathi Financial Services Limited, Research Division - Research Analyst [209]

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And sir, in green corridor, do we see a traction to gain [bills] of -- because, there, a lot of potentials have been talked about, but nothing is happening as such. So do we see there any opportunity-wise for us?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [210]

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We actually (inaudible) if we look at it, almost INR 15,000 crores of tenders, which are I think floating out, okay? A part of them has already been built. Part of them are getting built this month. If we have not postponed further, then within this month, you will have at least INR 14,000 crores to INR 15,000 crores of tenders. And it is being decided. Some of them are direct power bids, so they will get awarded directly. Large part of it is under EPC rework, so the developer will be awarded. And since these are within 15 to 18 months of completion, our presumption is that they will have to award the EPC also within a month, otherwise (foreign language) Okay? So my reading on the situation is that within the month of, let's say, June, maybe July, the entire INR 13,000 crores, INR 14,000 crores should be awarded.

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Bhalchandra Shinde, Anand Rathi Financial Services Limited, Research Division - Research Analyst [211]

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So are we considering all -- anything from that in current order inflows target or it's excluding that (inaudible)?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [212]

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Certainly, that is part of the [INR 70,000 crores] we're talking about.

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Operator [213]

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Next question is a follow-up from the line of Saket Kapoor from Kapoor & Companies.

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Saket Kapoor, [214]

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How will you explain this lower profit in terms of consolidation of account and the tax going up if we take the current tax figure? Sir, I did the number [PBT] for the consol is 295; wherein for the standalone, it is 298. And the tax is INR 70 crore in the standalone and it INR 81 crore for current. So how will you explain this, sir, the higher tax payment on lower profit?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [215]

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It is not a higher tax payment. What happens is that when we are consolidating the accounts, so on the -- we have still some acquisition loan, which is outstanding, and that loan is auctioning in the holding company in the U.S. So that interest becomes nontax deductible and that increases our effective tax rate for our overseas operations. So that's where it is. Otherwise for India, tax rate is 34.5%.

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Saket Kapoor, [216]

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So what will you attribute with that -- this sluggish performance in consolidated level? Why is it so that becomes -- the turnover -- the incremental turnover, which is created on consolidation is not adding to the bottom line?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [217]

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I think we'll have to check the numbers how you're calculating that.

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Saket Kapoor, [218]

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Sir, I am talking about just from the revenue from operations side.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [219]

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U.S. operations, which goes into the consol. Rest of the bookings are coming in the stand-alone numbers.

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Saket Kapoor, [220]

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Yes. So what steps are we taking to make the U.S. operations more profitable? And why are they not contributing? That was my question.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [221]

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Saket, I think (inaudible) other questions around that. But [there is] one thing is [there our] U.S. operations are not -- today are not as profitable as the India operations. We have been talking about Mexico in the last call, saying that Mexico has not been doing well. And now the orders are coming in. So we do expect that Mexico will also pick up, okay?

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Saket Kapoor, [222]

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Right. So in case, the currencies appreciate, so that would be translating into, sir, then ForEx losses for the next year supposed our currency appreciate from here. A bigger part of ForEx profit has been accounted for this year in an environment of currency declining.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [223]

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So Saket, [potentially] that large portion of our receivables -- future receivables also, which we have hedged. So effectively, there will be no loss on that account. The currency appreciation, there will be a cost saving on a lot of people's accounts because we are a corresponding liability for our vendors, which are there in the books of account. So if the currency appreciates, there will be corresponding gain on the liability side, whereas on the receivable side, there will be some loss. But receivable side, largely for the next 1 year, we have hedged except when we start building the new orders for that. As and when we receive the order, we will hedge those accounts. So -- and that was the situation precisely in first half of the last year. So we have been getting those ForEx gains.

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Saket Kapoor, [224]

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Lastly, sir, for this year, sir, how is the execution plan? We will have the first half to be linear one and the second to be earlier as the trend has been? Or do we see the execution because of the -- some [hedging] not taking place -- not being built for the March quarter that will percolate to the June quarter?

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [225]

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(foreign language) I have not seen too much happening in terms of increase in revenue in Q1. Normally (foreign language) this industry has always been that way, that H2 -- and not only H2. It's actually Q4, which is (inaudible) 35% revenue has come from Q4. It has been historically coming that way only. I'm not seeing a significant change happening in that.

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Saket Kapoor, [226]

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Okay. But sir, traditionally, we're -- election year -- current year, June also (inaudible).

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [227]

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(foreign language)

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Saket Kapoor, [228]

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So growth [may be] largely to June due to election part.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [229]

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(foreign language) come for the year. (foreign language) but it will definitely grow (inaudible) 20% growth.

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Saket Kapoor, [230]

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Okay. (inaudible) factoring (inaudible)

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [231]

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[You need to have hedging].

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Operator [232]

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As there are no further questions, I now hand the conference over to Mr. Kejriwal for closing remarks. Over to you, sir.

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Vimal Kejriwal, KEC International Limited - CEO, MD & Director [233]

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Thank you very much for your continued interest in KEC. Thank you.

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Operator [234]

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Thank you. Ladies and gentlemen, on behalf of KEC International, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.