TITAGARH — earnings call
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Prepared remarks
Moderator · Conference Operator
Good evening, ladies and gentlemen, I am Vidya, moderator for the conference call.
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Questions and answers
Moderator · Conference Operator
Ladies and gentlemen, we will now begin the question-and-answer session.
If you have a question, please press “*” and “1” on your telephone keypad and wait for your turn to ask the question.
If you would like to withdraw your request, you may do so by pressing “*” and “1” again.
The first question comes from Kaushik Mohan from Ashika Stock Broking, please go ahead.
Kaushik Mohan Hi Sir, congratulations for great set of numbers.
Sir, I have a couple of questions.
Can you just give some light on Vande Bharat for us.
You have 80 trains order, what is the total value of this order and how much is your share?
And in your share how much is for construction and how much is for maintenance?
Management Team Thank you very much Mr. Mohan.
So, for the Vande Bharat contract, there are two portions to the contract.
Supply portion and the maintenance.
The contract value is about 9600 crores and plus PVC which will accumulate over the period of time and the maintenance is about 1.4-1.5 times of Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call that.
So, the total contract value including maintenance is about 24,000 crores plus the PVC as I said.
Our share on the overall basis is about 51-52% and BHEL is there.
Kaushik Mohan Between 51 -52% for us and 48% is BHEL sir?
Management Team So, it's between 51 and 52%.
So, it's around 51-52% is for us and balance is for BHEL.
This is applicable both for the supply as well as the service.
Kaushik Mohan Got it Sir and my second question is on this RK Forging part.
With RK Forging, what is your share between both of us and what is the total order value and how many years will this go for?
Management Team So, the initial contract value which we have received is 15,60,000 wheels which has to be supplied over 20 years.
The value of the contract is close to 13,000 crores and the participation of both the companies is almost equal.
Kaushik Mohan Sir, is this inflation adjusted or is the number has been exactly calculated current price?
Management Team This is not inflation adjust.
This is plus PVC.
The exact quantity is 15,40,000 wheels, and not 15,60,000 and the total exact value is close to approximately 30,000.
Kaushik Mohan Sir there is one recent bidding which happened for 50,000 wagons.
When can we expect the results for this?
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Management Team There is no bidding that has happened till now.
It was in the media that there is a tender likely to come out, but the tender has not yet come out.
Kaushik Mohan Got it.
Thank you, sir and congratulations, for the numbers.
Management Team Thank you very much sir.
Thank you, sir.
The next question comes from Sunil G, an individual investor.
Please go ahead, sir.
Sunil G Yes, my first question is regarding this decrease in their borrowing, which if I considered this current and non-current borrowing is approximately INR 600 crores which is fantastic, but there is an increase of INR 200 crores in that contract borrowing sorry, yes in the Contract Purchase, what does it mean?
Does it also get some interest or is it purely like vendor caterer.
Management Team Sir, are you talking about the contract liabilities on the standalone financial?
Sunil G Yes, consolidated yes.
Management Team Yes, so these contract liabilities are the advance from customers that has been received against various contracts.
So, this has been disclosed separately in line with the requirements of the scheduled thing.
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Sunil G So, if you can use the term in advance received from customer that will be much better.
Because it's too confusing and too misleading what this is, contract’s liabilities.
Contract can quote so many things, contract can quote about vendors and other things.
Contract could include so many things, so better everyone write as advance from customers.
Management Team We take your suggestion sir, very valuable.
We will examine this the accounting standards and I have requested my team to examine, this is a very valuable suggestion.
Sunil G Yes, and number two, I mean, I have seen all your press release.
There is also some sort of incompleteness and misleading portion is there.
Because you are writing okay at 80 Vande Bharat train we have received under the consortium.
But there is no mentioning there what is your share of the JV or the consortium in that particular press release.
So, we as an investor, we just keep thinking, okay, maybe it's 90%, maybe it's 10%, maybe 20%, maybe 50%.
So, today only you clarified.
So going forward, whenever a press release has given, kindly mention like any other company mentions to give the complete information otherwise, it may also tend to move to like, you can say violation of required order for example.
Management Team Again, thank you for your suggestion, but to the best of our knowledge, the press releases that have been issued by us and we cannot talk about press coverages, but press releases, we always give all the necessary facts that are to be given.
If there are some that you have come across which do not give the necessary details, we would request you to share this with our investor team and we should certainly look into it.
But as a company we are very conscious about press releases.
Of course, we cannot control all press coverages.
Sunil G No sorry sir, I am not talking about press release, I'm talking about the corporate announcement which you are given to the stock exchange.
We don't rely on this media or a paper.
So whatever corporate announcements you have given in the form of press release to the stock exchange there only be we have seen that nowhere you have mentioned, or your team has mentioned regarding that, what is the share of Titagarh Wagon or Titagarh Railway System in that particular JV of consortium.
So going forward kindly mention.
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Management Team Thank you very much.
We will definitely check this up inadequacy of information and we shall definitely make sure that it is correct.
Sunil G Thank you.
So, nice of you sir.
Thank you, sir.
The next question comes from Balasubramanian from Arihant Capital, please go ahead.
Balasubramanian Good evening, sir.
Congratulations for good set of numbers.
My first question like what would be the status for trial and propulsion systems for railways and after propulsion systems like it's the kind of indigenization so what kind of margin improvement we may expect?
Because right now in the metro in the cost side around 20 to 30% share of value comes from propulsion systems only.
So, after this indigenization, what kind of margin improvement we may expect?
Management Team Thank you, sir.
In terms of the process of approval of the propulsion system that is underway, some of the components we have already supplied, and they are under the trial period, there is a very detailed step by step approval process for the propulsion system, which is actually quite time taking.
We are pursuing that and over the year, we should be able to receive some of the approvals and start bulk supplies, some of the approvals will get spilled over to the next year.
So overall, I would say we are, by and large as per our plan on the propulsion system.
And in terms of your second part of your question, that is about margin improvements, once we have our own propulsion system, definitely it is going to impact the margins favorably once we start making our own indigenous propulsion system.
But in order to reach that stage, where we will be fully independent, and we'll be able to do our own propulsion systems entirely by ourselves, it is going to be a process of at least 2-3 years.
Thereafter, there is definitely going to be a quantum jump in the overall margins of the PRS that is the passenger rail system business.
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Having said that, I would also like to clarify that the passenger rail system, even without the propulsion, is a business where we are expecting to get the same 8 to 10% EBITDA margins.
The current low level of EBITDA is on account of the no top line in our business, the top line is what drives the bottom line.
So, since the business is at a nascent stage till the business comes to a certain base level, the EBITDA margins are lower, but you would see that it has improved over the quarters.
And going forward once we have been able to reach a certain base level, we will be able to get an 8 to 10% EBITDA margin on the PRS also.
Balasubramanian Okay got it sir.
Sir, and my second question under traction motor side, what would be the volume on that monthly run rate and what kind of target we have going forward?
Management Team We have installed capacities between 150 to 200 traction motors per year that 1800 to 2400 traction motors per year but as I mentioned a little while ago, the entire process of approval is a time taking one we have already supplied traction motors, some of them have already undergone trials have been successful.
And it is a process which is ongoing.
And we will continue to travel this journey.
Balasubramanian Okay sir, we are manufacturing around 50-60 motors per month or like what will be the numbers?
Management Team Sir, now, as I mentioned that we have only made the trial production, the trials have to go on and there is a process I'm not able to elaborate the entire process because it's the entire specifications of the railways.
But to be able to get to the rated capacity of 150 to 200 traction motors a month is going to be a 2-2.5 year journey.
Balasubramanian Okay got it sir.
Sir on the Metro side is there any pipeline and what would be the status on Surat and Ahmedabad metros, if you could throw some lights on future opportunities, that would be really helpful.
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Management Team The Metro business is a very attractive business, there are many metros that are coming up and that have been announced to come up, I will not be able to speak about specific opportunities as we can only speak about them when we are successful in winning a bid.
But all I can say is that you know being the latest entrant in this field, and competing with large companies, we have been able to establish ourselves in a very significant manner as the only Indian fully Atmanirbhar Metro coach manufacturer and using this advantage of being established as a good manufacturer of Metro coaches, we will definitely be a significant player in this segment in years to come.
Balasubramanian Thank you so much sir.
I'll come back in the que.
Thank you, sir.
The next question comes from Vinay Chaudhry an individual investor.
Please go ahead.
Vinay Chaudhry Hello, thank you for the opportunity and congrats on the great numbers.
So, on the wagons how much would be the private sector wagons which have been produced in FY23 and what are the planned production for the coming FY24?
Management Team Thank you, sir.
Sir, as a strategy we do not give the breakup between the private sector and RSP wagons.
We do not announce those numbers all I can say is that we are a leader in both the segments.
We have order book which are probably equal to the largest or even the largest in the private sector wagon market also and of course, we are by far the leaders in the railway wagon market.
So, in both the segments we are quite actively present and are playing a very important significant role.
Vinay Chaudhry Sure, and when can we expect the coaches manufacture for CRRC start?
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Management Team The coaches are for Bangalore Metro on behalf of CRRC and production is likely to start in the Q3 of the current financial year.
Vinay Chaudhry Okay and if I got the information right the current capacity for Metro coaches is around 1.5 to 2 lakhs.
Management Team I did not get you I am Sorry.
Vinay Chaudhry Sir, can you throw some light on the current capacity for the Metro coaches with the commencement of the stainless-steel coaches set to begin production?
Management Team Okay so, for the Metros we will have a capacity of about 30-35 coaches per month and then we will have similar capacity for the Vande Bharat.
So, overall, we are planning to build a capacity of about 70 cars per month.
Vinay Chaudhry Okay.
Thank you very much.
Thank you, sir.
So, the next question comes from Premal Shah, an individual investor, please go ahead.
Premal Shah Yes, hi good afternoon, sir thank you for the opportunity.
What is the wagon production for this current quarter?
Total wagon production?
Hello, am I audible?
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Management Team Yes, you're very much audible.
Good afternoon, sir.
So, we have been able to get to approximately an average rate of around 8000 wagons, that is about 2000 wagons with a quarter.
But we would not be able to disclose the exact numbers that we won’t put that in our presentation, and we do not generally disclose the exact numbers.
But we are now I mean we have been able to achieve close to 2000 wagons per quarter and our target is the current financial year to grow it further to reach close to 3000 wagons per quarter.
Premal Shah Okay, thank you.
And in this quarter's results, the freight rail system shows a top line of about 808 crores and you've already merged the shipping business into that.
So, could we get a basic idea about what is the freight rail top line and a shipping top line because both are included.
So, we don't have an idea on that.
Management Team So, it is primarily the freight rail and shipping is not very significant part, that is why the segment has been merged.
So, breakup of the merged entity at this point may not be possible or appropriate.
The overall size of the company and overall scheme of things, it would be extremely small, shipbuilding would be extremely small at this point of time.
As I mentioned in my opening comments, that is true for this at this point of time, and by no means we are planning to kind of downplay the shipbuilding for the long term, we believe that it does offer good prospects but or being able to concentrate both our capital allocation and management resource and time allocation, this organization is considered appropriate and implemented.
Premal Shah Okay and this Pune Metro what percentage of the total contract is still pending to be executed?
And by when will it be complete?
Management Team As I mentioned, about 50% of the contract has been completed till the last financial year the balance will be completed within the current year.
Premal Shah Okay, thank you.
That's it from my side.
Thank you.
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Management Team Thank you so much.
Thank you, sir.
The next question comes from Ankur Agarwal from RC WEALTH SOLUTIONS Private Limited please go ahead.
Ankur Agarwal Congrats on the excellent performance.
Please provide visibility on the Passenger Rail segment.
Management Team Thank You.
We intend to build a capacity of 700-800 coaches per year for the Passenger Rail segment.
Selling price of each coach is around Rs 9-10 crores.
In case of Vande Bharat, selling price will be lower due to consortium arrangement.
This is a very big opportunity and the Passenger Rail segment opportunity itself is much larger than the size of our company.
We are building a capacity of 30 metro coaches and 30 Vande Bharat per month.
Currently, we are at a nascent stage in the metro division and doing 5 coaches which will gradually increase to 12-15 and eventually to 20.
Final target is 30 coaches per month in the metro.
Line for Vande Bharat will start fully in next 2 years.
Initially the production will be low and we will make 30-35 coaches per month as per contractual delivery schedule.
Ankur Agarwal What is the order book status of our associate in Italy?
Management Team Last time we had announced around Eur 450-500 million order book.
They have also bid few orders which is in pipeline which will be disclosed in due course of time when appropriate.
Thank you, sir.
So, the next question comes from Karthikeyan from Suyash Advisors.
Please go- ahead sir.
Karthikeyan Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Sir, Good afternoon.
Management Team Good afternoon, sir.
Karthikeyan Yes, thank you.
So, couple of things, sir on these two contracts, one in consortium with RK Forging and other with BHEL, given the long tenures of these contracts, and specifically on the RK project, where you're also creating extra capacity, a couple of things, can you tell us how protected are you in terms of downsides, on the profitability side in these in these contracts?
And given that you are creating 60% extra capacity, spare capacity on the wheel strength site?
How soon do you believe you will be able to absorb this entire capacity sir?
Management Team Thank you very much.
In terms of the downside protection, you see, there are two ways of downside protection, one is the price protection for the contracts on account of inflationary tendencies trends.
So, all the contracts, the large contracts that we have got, whether it is Vande Bharat, or the wheels are both with price variation, adequate price variation clause, which kind of protects the companies, whether it's our consortium with BHEL, or our consortium with Ramakrishna Forging from the inflationary trend.
Karthikeyan I'm very sorry to be interrupting, but when you say inflation, would that be only on the input side or would that include fuel and other components as well sir.
Management Team It is a very comprehensive price variation formula, I mean, of course, I would not be able to go into each element of that, but when the price variation formulas are worked out, they are worked out on the basis of the actual cost of production.
So, suffice to say that, based on the experience of the company over the last 25 years, which is a very long period of time to be able to judge the efficacy of such price variation clauses, barring a couple of quarters here or there, where the price movements could be very steep and sudden the price variation flaws does compensate for the inflationary cost pressures.
Karthikeyan Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Right.
Management Team In terms of utilization of the capacity is concerned, if any venture is set up, where 40% capacity is underwritten by a single customer for a long period of 20 years, that itself gives you a very large, huge head start.
So, that is what we are looking at, we are looking at the glass half full and not the glass half empty, the 60% capacity that we are building up is something which will be not a big challenge to kind of absorb or to be able to sell as we ourselves as a wagon manufacturer are always in shortage of wheel sets.
Then after that, we would also have the Vande Bharat and then the maintenance of the Vande Bharat.
So, there's 35 years of the maintenance of the Vande Bharat which would also require wheel sets and there is the export market wheels and with the China plus one strategy, which the world is following.
Today, most of the wheels are being produced in China.
So, we do believe that there is a very good export potential and we will be focusing on export markets as well for the reasons that we will produce.
Karthikeyan Right sir one clarification sir would there be a meaningful import content in terms of raw materials still available locally for the wheels?
Or would you have specific grade requirements which you have to import at this point in time?
Management Team Wheel is available locally, but I'm not able to give details about the kind of import versus domestic content.
These tenders are under Make in India clause of the government which means substantial local content is a must.
But having said that, these are operational decisions, and we are talking about a contract which lasts for 20 years.
So, obviously there are strategies that cannot be kind of decided upfront.
Karthikeyan Right, but there is no constraint in terms of local availability, my question, I get that you, you retain your option of course.
Management Team That’s right.
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Karthikeyan And one last question, if I may say I don't mind my delivering the point, but with just the 40% utilization 77,000 per annum effectively the wheel sets, would you at least break even at an EBITDA level, with just this number that is to say.
Management Team It will be going into too much of financial details, we will definitely, disclose, because this is a consortium of two listed companies, whatever is possible to be disclosed, but, once again, I will say that, as investors you would have seen many companies and as industrialists, whatever, we have seen, if a business is started, a greenfield project is started, where in 40% of the capacities underwritten for the next 20 years by a single customer, then the head start it's like starting at a 50 meter or a 40 meter kind of handicap advantage in a 100-meter race.
Karthikeyan Of course, though I appreciate the advantage of course, just clarifying whether, there is a longer gestation than what is available, immediately that is the only point behind the question, but thanks very much for indulging me and very best wishes sir.
Management Team Thank you.
Thank you, sir, we have a follow up question from Kaushik Mohan from Ashika Stock Broking please go ahead.
Kaushik Mohan Hi sir, this is a question on I just wanted to understand on your current Pune orders sir how many total what is the contract value for Pune and how many you told 50% has been delivered that means another 50% how long do you have the time?
Management Team Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call So, the total contract for Pune was 34 trains.
The value of the contract was about 1000-1100 crores .50% has been executed the balance will be over within this financial year.
Kaushik Mohan Sir for one train how many coaches that comes out to be.
Management Team See 34 train, 3 coaches each 102 coaches.
Kaushik Mohan 102 coaches.
So, that means that half of that is 51 you have been already supplied and 51 is still more pending.
Management Team That’s right Kaushik Mohan Sir in this duration of 1 year or 2 years over the 2 years or 1 year.
Management Team This one is completed within this financial year.
Kaushik Mohan You will complete this in this financial year.
Okay.
Sir, how about the Bangalore order?
Management Team As I mentioned a little while ago, we will start production in Q3 of the current financial year.
And that would take about 6 quarters or 7 quarters as per the schedule.
Kaushik Mohan Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Okay.
Sir what is the margins only in the metro segment?
Management Team Sorry, I didn't get your question.
Kaushik Mohan What is the EBITDA margins in Pune Metro segment?
Management Team We will not be able to disclose contract by contract margins for competitive reasons, but segment margin have already been disclosed in the results that have been published.
Kaushik Mohan So, because in this financial report, which have gone through, I'm just seeing that margin is 4.1% Is my reading right or is there is any mistake on this.
Management Team There is no mistake in reading sir.
Kaushik Mohan The reading is correct than what I did.
Management Team Yes, as I said a little while ago that we have not been able to attain till now the base level of capacity utilization and therefore the fixed costs of the business get amortized over a smaller volume, which results in lesser margins.
Apart from that there are some learning curve costs that are incurred in a new business.
But going forward, we expect that once things are more stable over the next maybe 3-4 quarters, 5 quarters at the most we would be able to also target 8 to 10% which is projected forecasted EBITDA margin in the PRS as well.
Kaushik Mohan Sir, the last and final question, what can be the Capex for the next four years plan?
Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Management Team We had already announced the Capex that we are likely to incur including the ones that we have done in the last two three years is about 1000 crores.
So, what we have done in the last two, three years is around 250-300 crores, the rest will be spent over the next four or five-years’ time, which would also include our equity portion to the week project.
Kaushik Mohan Got it sir another question is on the Wagons part on freight wagons.
Sir this year, how many wagons have you produced?
If any near number works out for me?
Management Team It’s already disclosed in the investor presentation that the dispatch for the current year is 5298 Wagons.
Kaushik Mohan Okay sir, thank you.
I didn’t get that.
Management Team Thank you.
Thank you, sir.
The next question comes from Abdulkadira Raja from Ratnabali Investments, please go ahead.
Abdulkadira Raja Good evening, sir.
And thank you for giving me the opportunity and congratulations on such a great set of numbers.
So, just wanted to understand the demand for the private sector in the wagons.
And if you could just, throw us a ballpark number like of how much wagons were like you would have delivered during the previous quarter.
Management Team Sir, we already mentioned that delivery or quarter by quarter basis is something that we are not disclosing but approximately we have been able to achieve about 2000 run rate of 2000 wagons Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call close to 2000 wagons per quarter.
I didn't get your first question the first part of your question if you could repeat it.
Abdulkadira Raja Yeah, we just wanted to understand the sales number which we have shown in the freight rail segment.
So, like I just want you to understand like how has the private demand, or shipped up in the last quarter?
Management Team The private demand break up while in the last year I would say we are not giving the breakup, but I did mention in the during the call that in terms of our company, we are a leading player one of the leading players in the private rail wagons businesses as well, we would have one of the highest order books and in both the private sector and in the Indian railway business.
So, the private business or private wagon business is also very buoyant business.
But when you look at the wagon business per se, we have to see the overall demand because you know the demand of the railways is there as a set number and purchasing is done either via the railways own funds, or under the PPT mode which is done by the railways sorry by the private sector wagons.
Abdulkhadari Raja Okay got it sir.
That's it for my side.
Thank you so much sir.
Thank you, sir.
The next question comes from Akash Bohra from Dalal and Brocha stock broking, please go ahead.
Akash Bohra Yeah, thank you for the opportunity and congrats for the good set of numbers.
So, my question is more from the point of view of so regarding the Capex that we're going to do, is it going to be from our internal accruals?
Or are we going to take more debt and what is the broader strategy on date as to how are we planning to, how much data are we trying to keep in our books, how, much are we planning to repay in the short and medium term?
Management Team Sir, our strategy as far as debt is concerned is quite evident from our actions over the last years.
While on one side, we have incurred capex and enhanced capacities, if you compare on a Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call standalone basis, which is excluding the erstwhile subsidiary, over the last five years, we have reduced our debt quite significantly.
So, we are conservative, very conservative as far as our debt policies are concerned.
On the funding of the Capex, we are generating cash and we have good cash flow.
Having said that, we also have a large growth trajectory as you are aware, and you can see from the numbers in 2018 which is 5-6 years ago, we were at 300 Crore top line and now we are at a 970 Crore quarterly line.
So, which on an annualized basis is 10-12 times of that.
So obviously, the cash requirement goes up.
So as far as the funding of the capex judicious mix will be worked out it is still work in progress, we will be using part of it through our internal accruals maybe part of it through debt etc. So, this is something which we do not see or envisage this as a challenge, but we will be working on this and making sure that it is done in the best interest and sustainability of the growth trajectory that we have embarked upon.
Akash Bohra Okay sir.
So, basically, we are not planning to raise any proceeds from equity rights.
Management Team There is nothing that has been planned so far.
But I will not, again, like to speculate on any future issues, but no, we have not yet planned any equity raising so far.
Akash Bohra Okay sir and if you could give any guidance for FY24 and FY25, for revenue and EBITDA levels.
Management Team We do not give guidance in terms of the business for the future.
But what we have always maintained is that our business is top line leading the bottom line, the kind of business in terms of the EBITDA, we continue to maintain that we would be able to do our businesses, a business, which gives about 8 to 10% of EBITDA, some quarters can be slightly better, some quarters can be slightly worse, some contracts can be slightly better, some contracts can be slightly worse, but on a blended basis, when we do our bidding, when we do our strategies, we ensure that we are at about 8 to 10% EBITDA and we have already disclosed to you the order book that we have and the ramp up that we have been able to achieve over the last six eight quarters, where we have been very consistent in our delivery whatever we have kind of promised.
So, we hope we are sure we'll be able to maintain that kind of kind of performance.
Akash Bohra Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Okay sir and just last question from my side.
So, this was regarding the large orders that we received.
So namely the wagons order from Indian railways, the Vande Bharat orders and Metro order these three.
What is the broad execution timeline and what is the broad revenue booking like when it will start reflecting in our books so what is the broad name for these two things for these orders?
Management Team Sir, the execution timelines of different orders are different.
There's not a standard execution timeline, the wagon order is already under production and revenue has been booked over the last 11-12 months.
I would say for the Vande Bharat the first train will be supplied in two years from now.
And thereafter the train supply would happen in about four and a half years.
The revenue recognition will start when we start building the train in the POCM method.
And Metro as I mentioned a little while ago the Pune Metro may have already executed 50% the balance will be executed during this financial year.
Akash Bohra Sir so for Vande Bharat when you're recording on a POCM basis so, like will the revenue booking start from FY 24 and FY 25 itself because we would have already started building the train right.
Management Team Sir, I will not be able to comment upon that that is an accounting treatment which has to be dependent on the physical progress of the work.
So, as it is the percentage of completion so as the project gets started getting completed, the revenue recognition would happen accordingly.
But of course, we have to deliver which we will deliver the train in 24 months the production activities will have to be started much before Akash Bohra And the Wagons will complete by the wagons order 24,000 order when completing.
Management Team This is scheduled to be completed by August 25.
Akash Bohra Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Okay sir, thank you sir.
Management Team Thank you.
Thank you, sir.
So, the next question comes from Akshay Kothari from Envision.
Please go ahead.
Akshay Kothari Yeah, thanks for the opportunity, sir am I audible?
Management Team Yes, absolutely sir.
Akshay Kothari Sir, just one clarification the 9600 and the remaining maintenance order so the workshare is equal for both BHEL and us.
Management Team Sir I've already clarified a little while ago, about 51-52% for us and the balance for the BHEL.
Akshay Kothari Yes, but also on the maintenance price?
Management Team Yes, for both supply and maintenance both are approximately the same percentages now.
Akshay Kothari Okay sir so now on the Vande Bharat trains is there any stipulation of certain level of indigenization, which needs to be there which is embedded in the contract?
Management Team Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call I'm sorry, I didn't get your question.
Akshay Kothari So just, you did mention that rail wheel sets will also be a supplement to the 35 years of maintenance, which we will do for Vande Bharat, I'm just asking whether there will be any stipulation of, Atmanirbharta indigenization content, which is there in existing Vande Bharat contract?
Management Team Yes, absolutely all these contracts are under the making India clause Vande Bharat clause.
Akshay Kothari Yes, so there is a stipulation of around 80%, local procurement or something like that, right?
Management Team Different tenders have different stipulations of local content.
So, I'm not able to comment on individual contracts, but yes, they do have the appropriate local content which is stipulated by law.
Akshay Kothari Okay sir, lastly what risks do you perceive in these contracts?
Because I have of-lately seen some of them, whenever there is this jointly and severally liable clauses, because the other party does not perform, and under him the whole project falters.
So, what are the risks which you perceive in these contracts when we are working with the counterparty?
Management Team There are risks in every contract in every sphere of business, what we absolutely do, and the risks exist for both sides, I mean, there is a perceived risk, and there is an actual risk.
So, both parties work together to mitigate those risks.
And that is exactly what we are doing also, in both the cases in both the partnerships that we have built in, we don't see a huge rates as such, which is unmanageable, because both the cases we have very strong partners, and both the partners bring in immense value on the table in terms of their knowhow expertise and management bandwidth, so we really do not see this as a risk but we see this as an opportunity.
Akshay Kothari Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call That’s great sir.
Lastly do we have the capability to win aluminum coaches as well?
Management Team In Pune Metro we are the first aluminum coach manufacturer in the country.
Akshay Kothari Vande Bharat as well.
Management Team If we can make one, we can make anyone, but Vande Bharat current project is on stainless steel.
Akshay Kothari Yes, understood But I think there are talks of our getting into aluminum coaches for Vande Bharat as well.
Management Team We will cross the bridge when we come to it.
Whenever there is an opportunity, we will definitely evaluate the opportunity on its merits.
Akshay Kothari Thanks a lot, and all the best Sir.
Management Team Thank you, sir.
Thank you, sir.
The next question comes from Sonia Varnekar from Dalal and Brocha please go ahead.
Sonia Varnekar Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call Hello, sir.
Thank you for the opportunity.
I have two questions on Vande Bharat.
Earlier you mentioned that margins on Vande Bharat order would be higher in maintenance versus manufacturing.
So, initially when the majority of business would come from manufacturing part of Vande Bharat, it will impact blended margins, right?
Management Team No, it will not impact blended margins mam.
Because, as I mentioned that our business for sustainable level of EBITDA margins 8 to 10% and that is what we are expecting to receive from the supply of Vande Bharat as well.
Sonia Varnekar Okay, and sir regarding propulsion system it will be sourced from home for Vande Bharat?
Management Team Our partners BHEL is responsible for the propulsion supplies.
Sonia Varnekar Okay, so sir in terms of quality or technology, how is it placed against the competitors?
Management Team The very fact that the results have technically evaluated qualified and awarded the contract to us is testimony enough that the partners both us and BHEL are fully competent to produce a quality train as per the required standards.
Both BHEL and us have qualified on the basis of our credentials which is past performances, so in a nutshell, both of us have already kind of been in the respective businesses that we are in and have been able to supply the right quality product in the right manner.
That's what has led us to be able to be the successful bidder for this tender.
Sonia Varnekar Okay sir last question, if I can ask.
Recently, there was an announcement that railways will be procuring 238 Vande Bharat Rack’s for replacing Mumbai local, Vande Bharat Metro Rack's.
So, will Titagarh bid for this order?
Management Team Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call We also read the announcement mam.
As I mentioned, we evaluate each opportunity on its own merits, we are significant and leading player in the business both in the Vande Bharat now and in the metro segment.
So definitely when there is an opportunity, we definitely would evaluate that to give a definitive answer of a yes or no at this point of time would be premature, because we've also read this from media reports.
The tender is not being floated as yet.
Sonia Varnekar Okay, and sir in terms of capacity for passenger coaches, like if such orders come then how well we are placed to increase capacity.
Management Team I already mentioned, we are increasing capacity significantly.
And our targeted capacity is to get to about 70 coaches per month, in the next say three years or so.
Sonia Varnekar Okay, thank you.
So that's it from my side.
Thank you.
That will be the last question for the day.
Now, I hand over the floor to the management team for the closing comments.
Management Team Thank you very much.
And thank you to all of you for the very insightful questions and suggestions, we have taken note of the same and my team here has taken note on each one of them.
Thank you for the support and confidence that has been bestowed upon us in the past, and we do look forward to be able to live up to those expectations in times to come.
As I mentioned that, India is going through a transformative journey under the current regime in terms of the railway, the Atmanirbhar Bharat Abhiyan, infrastructure spent, the Make in India program and I have always believed that the Make in India program and the Atmanirbhar Bharat is probably the most significant development in independent India in terms of supporting and encouraging local industry.
So, we have just been able to ensure that we are able to ride this wave and be a part of this journey that the government, the honorable Prime Minister has been able to kind of define for the country.
So, we believe that this growth in the railway space in the infrastructure space is here to stay.
And it shall be continuously our endeavor to be able to upgrade ourselves on an ongoing Transcript – Titagarh Rail Systems Ltd - Q4 FY23 earnings call basis to be significant contributor to this process of I would say reconstructing Indian infrastructure.
So, thank you very much and wish you all a very good evening.
Thank you.
Thank you, sir.
Ladies and gentlemen, this concludes your conference for today.
Thank you for your participation and for using Door Sabha’s conference call service.
You may disconnect your lines now.
Thank you and have a pleasant evening. ______________________________________________________
Note
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Blanks in this transcript represent inaudible or incomprehensible words.