As a percentage of sales. Sanjeev Singhal: As a percentage of sales in case the sales are going up, this percentage would come down because we do not intend to increase the manpower in a substantial manner. Jyoti Gupta: Okay. So, are we seeing any reduction in the count as well? Sanjeev Singhal: No, there is no layoff, whatever happens in an organic manner, natural separation that would continue. Jyoti Gupta: Okay. Thank you, sir. Moderator: Thank you. We have another follow-up question from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Gagan Thareja: Yes. Thanks. So there is a very sizable capacity expansion plan that you have sort of earmarked for the next 4-5 years. 5000 crores compared to what your gross profit today is while it may be a depreciated gross profit. So, in terms of incremental capacity, can you give us some idea of what in percentage terms of your current capacity, how much more incremental capacity gets added from this capex? Biju George: Currently, we have like an installed capacity for handling 10 warships, capital warships and 11 submarines. Now, the facility which we are augmenting, infrastructure augmentation in two places. One is adjacent to our existing facility here in Dockyard as well as in Nhava yard. We are planning for bigger dry docks where we will be able to build as well as repair. Capacity will get augmented because primarily it is a graving dock that is coming. So, in terms of building capacity if we can minimize the dock occupancy period, more vessels can churn out. And if it is a repair refit so there also depending on the time of refits we can accommodate larger ships which is drawing the capacity of these ships as well, but to put a specific number in terms of number of ships at this point in time, it is slightly premature. We will be appointing a consultant, and the consultant will study and optimize the infrastructure and come out with the correct numbers. Gagan Thareja: Is it possible to give a fixed asset turnover ratio on this investment a minimum fixed asset turnover ratio? Sanjeev Singhal: We expect that a similar ratio we would be maintaining with the additional investment also. With respect to the number, I would like to clarify. Right now, if I can handle 10 ships they are of a certain size. With the increased infrastructure tomorrow also if I handle 10 ships they would be of a much larger dimension. It opens up new markets for us. We have a master ship repair agreement with the US Navy. However, majority of their vessels, we are not in a position to take because of the infrastructure constraints. So we expect with the augmentation of infrastructure, such constraints would be removed. Much larger and better markets would be available and open to MDL. So the number, if you are looking the capacity increase in terms of number that would not be possible to assign. Asset turnover ratio, we expect going ahead. We continue to maintain a similar kind of asset turnover ratio, what we are maintaining now. Gagan Thareja: Assume that ship repair as a proportion of sales over the next 4-5 years can increase very sizably for you? Sanjeev Singhal: Not very sizably. That is not our target area. Gagan Thareja: Okay. Alright. In terms of working capital, how should we think of inventory in receivable days on a sustainable basis going ahead? And is it also subject to how order inflow happens? So in day sales, you could give some idea of what should be sustainable working capital for you? Sanjeev Singhal: Definitely dependent on the order profile and the customer profile and the payment terms. So as of now, I can only say with respect to the orders which are available in hand. We don't see any change in the next 3 years. Gagan Thareja: Alright. And, you have been indicating that when you bid for a project, you budget for certain costs. And over a period of time, with efficiencies, you manage to improve your margins. But I think this is I get your point. My question is that this is something that the MOD is also well aware of. Do they not ask for their pound of flesh from you? Because they realize that when you are reasonably conservative and over a period of time, you build your efficiencies. So, I mean, once they have seen that, would they not come back and say that you need to come down on your bids for certain other projects in the pipeline which follow up? Sanjeev Singhal: For future contracts, definitely yes. Because our numbers are available with them also. But at the same time, we are also not static. We are also learning each day. So it's not that the learning is complete or beyond this the efficiencies are not feasible. Moving ahead, in case I perform my job more efficiently tomorrow, again, there would be opportunities and possibility of better margins. Gagan Thareja: Right. And in terms of the margin profile of submarines versus ships, is there any notable difference? Sanjeev Singhal: That would depend upon the order structure. Somehow, it still continues to remain a sort of nomination. So it would depend upon the order structure. Finally, what is the order structure? What is the variable cost component? What is the fixed cost component? Gagan Thareja: I am also looking at it from the point of view that submarines might have a lesser indigenous content and perhaps a higher degree of imported components. Does that in any case impact margins? Sanjeev Singhal: Definitely yes. Gagan Thareja: Right. And even there, between P75 and 75I, 75, this will be your second project. You've learned from the first one. It's also something you're doing completely by yourself. So would margin structures or profitability be different between 75 and 75I?
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Jyoti Gupta
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