Questions across 3 calls

Sanjeev Singhal

Firm not listed in source transcripts

Mazagon Dock Shipbuilders Limited

Mazagon Dock Shipbuilders Limited CC-Mar24.pdf ·

The total LD approximately deducted against these 2 boats, which is pending, would be around approximately INR300 crores. What would be the refund? It would depend upon the decision finally taken by the Indian Navy with respect to the delay attributable to MDL and what is not attributable to MDL. Rohit: My second question is more to do with the P-75 add-on submarines, where you were at the cost benchmarking stage last time when we had the discussion. What is the stage at which they are now? Sanjeev Singhal: The cost discussions are still going on, not yet finalized. It would take some more time. But I think it is likely to be finalized soon. Rohit: Further, any update on 75I technical completion? Sanjeev Singhal: 75I, as far as the field evaluation trials are concerned, corresponding to the bid submitted by MDL in collaboration with TKMS, we understand that the field evaluation trials have been successful. With respect to the other bid submitted by L&T along with Navantia, we are not aware with respect to the status of the field evaluation trials as of now. Rohit: Thank you, sir. I will get back in the queue. Moderator: Thank you. The next question is from the line of Sagar Gandhi from Invesco Mutual Fund. Please go ahead. Sagar Gandhi: Sir, my question is a follow-up question on the three add-on submarines with AIP.Sir, possibly, will it close in FY25? Sanjeev Singhal: Yes, we very much believe so. Sagar Gandhi: And the P75 I project will be FY’26 or FY’27? Sanjeev Singhal: FY’26. In the normal course, it should be in FY’26. If it goes beyond, then we feel it is delayed. Sagar Gandhi: And sir, our pending execution of the Destroyer project is close to INR32,000 crores. Sanjeev Singhal: No, pending execution is INR11,216 crores. The order value was INR32,081 crores. We have already delivered three. Sagar Gandhi: Yes, I am sorry. INR11,216 crores. So, because this is likely to get delivered in FY’25, a substantial portion of this will be booked in this year only. Is that understanding correct or wrong? Biju George: It will move to the next year also, partly, because at delivery, our warranty obligations are not getting fully liquidated. And B&D spares, that is, base and depot spares also need to be procured and handed over to the Navy. So, there are various kinds of expenditure which go beyond delivery period also. So, the entire thing will not get liquidated at delivery.

Without assigning any figures, I can only say that by 2022, 2023, 2024, our revenues have been increasing every year. And we believe that the same trend is likely to continue for FY’25. But right now, we have not made a deeper analysis with respect to the concrete figures. So, I would not be assigning any numbers right now. Yash: And so, in FY’25, what would be the order book at the end of this year, given the execution that you are, planning and the new order bids that you have submitted? So, broadly, you think we will have about INR40,000 crores, INR50,000 crores of order book by the end of this year or the number can be much higher? Sanjeev Singhal: It depends upon the materialization of the orders. Smaller orders, we do seek, but they don't make much of a difference. Additional submarine is one order, one big order, which we are eyeing at and believing that if this gets finalized during this financial year, the order book should see a substantial increase. Post execution, of course, some liquidation would be there during the year, but there should be a big addition. Yash: Could you, sir, quantify, like, how much, when you say big, you think 25%-30% jump on the existing order book broadly? Sanjeev Singhal: We have submitted our price, which is currently under discussion. So, I will not be able to elaborate it further on this. Yash: Okay. Got it, sir.Thank you. Moderator: Thank you. The next question is from the line ofSwechha Jain from Whitestone Financial Advisors. Please go ahead. Swechha Jain: Hi, sir. Thanks for giving this opportunity. So, I just had a follow-up.I just wanted to understand on the current order book. You know, first of all, the current order book, if we execute, you know, over the next two or three years. And so, I wanted to understand, you know, which year is it likely for us to reach, like, a peak revenue, you know, because some of the deliveries will, you know, coincide in the same year, right, for frigate and for destroyer. So, you know, having that, if you could just give a broad sense as to, will FY25 will be the year where we are going to reach the peak revenue on the current order book or FY26, or you think it can be FY27 also? Sanjeev Singhal: As far as the current order book is concerned, FY25, clearly we are poised for the, maybe the highest revenue.Yeah, we will be delivering one frigate and one destroyer.Because we are targeting three deliveries during this year, one destroyer, one frigate, as well as one submarine.With the addition of the fresh orders, in future also higher revenues can be very much there. Swechha Jain: Right, right, right. But on the current order book, FY25 will likely be our peak revenue, right? Okay.And so, just another follow up was this additional submarine order that we are, you know, trying to get. Could you quantify the order book size for it and how many submarines, sir? I think I may have missed that number somewhere.

Mazagon Dock Shipbuilders Limited CC-Sep24.pdf ·

INR 300 crores is the max depending upon what is considered attributable to MDL. Minus that would be the reversal. Amit Dixit: Okay, got it, sir. Got it. The second question is, is it possible to just outline the delivery schedule of destroyers, frigates, and submarines for FY '25, '26, and '27 may be? Sanjeev Singhal: Right now, three projects are being executed. That is P-75 Scorpène submarines. We have already delivered five. The sixth one is on the final stages of delivery. We were targeting October. Certain issues have cropped up. So, we are addressing those issues. We expect the delivery any time before 31st December. Similarly, for Project-15 Bravo, out of four destroyers, we have delivered three. The fourth destroyer again was targeted for second quarter, but some last-minute issues are being addressed. So, this also, we are targeting delivery before 31st December. And first ship of 17 Alpha, again, we are trying to deliver it by 31st December this year. So, next, we will be left with three large vessels, that is 17 Alpha three frigates, which would be successfully delivered in 2025-26 and 2026-27. Amit Dixit: Thank you so much, sir. That's it from my side and all the best. Moderator: Thank you very much. The next question is from the line of Atul Tiwari from JP Morgan. Please go ahead. Atul Tiwari: Yes, thanks a lot for this opportunity and congratulations on good set of numbers. So, my question is on that, now that we are very close to finishing the delivery of the submarines and the destroyer, could you outline for us the potential order pipeline over next two to three years? I mean, which are in the pipeline and what is the rough quantum where you know, we are in the fray? Sanjeev Singhal: I would request my Director Shipbuilding to outline with respect to the shipbuilding projects and Director Corporate Planning with respect to the submarine projects. So, over to Director Shipbuilding, Mr. Biju George. Biju George: So, we have quoted for certain projects like the next generation Corvette. And Navy is also right now looking at the next generation destroyers, which will take time, even it has not gone to the AON. So, these are the two projects which are there. Then, there are small naval auxiliaries. 17 Bravo is also a possibility, but it is not yet crystallized. That is a repeat order of Project-17A we are right now building. So, next generation destroyers, 17 Bravo would be the big-ticket items, which we are looking forward, may be in the next two to three years as you see, that is in the horizon, which is there. But right now, as far as the yard is concerned, we have not got any firm commitment from the Navy that is going to come to us. But Navy is considering this and they will be processing it at the naval headquarters. Atul Tiwari: I just wanted some idea about the size also, if you could share, I know the size can change, you know, but roughly, I mean, what is the quantum we are talking about here? Sanjeev Singhal: What we can discuss is as far as the destroyer order is concerned, the destroyer order which we are executing currently of four destroyers, this is 2011 order, this was INR 34,000 crores. So, based on this, you can estimate what would be the size of the order for next generation destroyers, which are bound to be larger and after a period of almost 15 years. Similarly, 17 Alpha project, as far as MDL portion is concerned, four number of frigates in 2015, this was INR 27,000 crores. So, a similar or more advanced frigates, similar number today, what would be the value? This is we leave it to your estimate. Atul Tiwari: Okay, that's helpful. Sanjeev Singhal: With regard to the submarines, Commander Puranik would intervene. Vasudev Puranik: We have two, three things that are happening. One is the project for additional submarines, wherein we are likely to get an order for three submarines as follow on of this program. We are nominated for this follow on Scorpene submarine. Then we have the 75I, which is in a competition. We have collaborated with the German designer TKMS, and we have submitted our bid. We have been declared as qualified for the tender, but we are awaiting the government direction on that. And then after that, we have got couple of other things which are in the pipeline. We have also submitted our quote, and we will get an order for constructing the air-independent propulsion plugs, which are to be retrofitted on the Scorpene Submarine. And one likely, which is just in thought process as of now, is the refits of the Scorpene program. These are the things which can happen. Atul Tiwari: Okay, sir. And sir, if I could check for these three additional Scorpene submarines for which you are nominated, what is the rough quantum of order size that we are looking at? Sanjeev Singhal: The AON value for this is 27,000, but this AON was obtained in 2018. So this would definitely have an element of escalation by the time the -- and depending upon if there is, what is the gap between the specifications as per RFP and finally frozen, and what the specifications were at the time of AON. Atul Tiwari: Okay. And sir, my last one on this is that, you know, obviously these are very large and complicated orders. So they could take may be a few quarters to come to us. So in the meantime, do you foresee a period where the current large projects kind of run over and we have a slightly lesser quantum of order book to work with for two, three, four quarters? Is that a possibility or do you see a smooth handover from current set of projects to the new set of projects so that our revenue keeps on growing without any kind of fall in between? Biju George: Yes. So that's a good question. So between these two large programs, we have already taken three orders from the Indian Coast Guard and also one export order. Put this together, we are executing 31 ships. Sanjeev Singhal: So this is basically a filler for the time during which a large order may take some time to mature, for which production has already commenced. And in addition, we are also having the offshore projects from ONGC. Approximately INR 7,000 crores-INR8,000 crores worth of projects have already been approved and orders placed on us. So these are some of the initiatives which are going on parallelly.

We had indicated -- we are looking at a growth of around 10% to 12% over last year as far as the top line is concerned. And as far as the cash is concerned, we are having our own cash around INR 4,000 crores. Shivam Parag: And sir, the advances from the Indian Navy? Sanjeev Singhal: Balance whatever is reflected in the accounts is pertaining to Indian Navy. Shivam Parag: Okay. So, sir, around INR 4,000 crores of free cash is with the company. So, the company has a profitable business. So, the free cash will be generated year-over-year. So, does the company foresee any special dividend or any bonus in future? Sanjeev Singhal: Capex plans. We propose to invest around INR 5,000 crores over next couple of years we have already placed the orders for the consultancy for these large capex plans. We are gainfully utilizing this cash balance for capacity enhancement. Shivam Parag: Thank you, sir. Thanks for addressing my queries. Moderator: Thank you very much. The next question is from the line of Sachin Maniar from 3P Investment Managers. Sachin Maniar: Hi, sir. Good evening. So, just one clarification I need on this ONGC order of INR 6,000 crores to INR7,000 crores you referred to. What will be the timeline for this order for execution? Vasudev Puranik : Two years. Sachin Maniar: So, you will be booking almost INR 3,000 crores over the next two years for 2025-2026? Vasudev Puranik: Yes. Sachin Maniar: Okay. And how will be the margins on this product? You said 12% to 15%. Will it be similar to that or will it be lower in this account? Sanjeev Singhal: It will also depend upon the mix because these are three different projects. Each one of them has a different margin. But definitely, yes, something around 10% to 12%. Sachin Maniar: Okay. 10% to 12%. Thanks, sir. That's it from me side. Moderator: Thank you very much. Sanjeev Singhal: Yes. I think we are done. Moderator: The next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.. Gagan Thareja: Thanks Sir, I just want to confirm when you indicated on schedule and delays, were you referring to Destroyer is ahead of schedule in deliveries currently and frigates are delayed or is it the reverse? I am sorry, I didn't follow that.

Mazagon Dock Shipbuilders Limited CC-Dec24.pdf ·

No, this is, we have earlier also indicated that this is based on the orders, which were legacy orders continuing for quite some time. The order profile is changing, and a normal margin for this kind of industry would be in the range of 12% to 15%. So we have always given this kind of a projection that a sustainable margin would be something around 12% to 15%. Atul Tiwari: And sir this 12 to 15% will be at PBT level or EBITDA level? Sanjeev Singhal: Yes, this is at PBT level. Atul Tiwari: PBT level. So including other income and everything, the 12 to 15% of revenue? Sanjeev Singhal: Yes. Atul Tiwari: Okay, sir. And sir, if you could comment on the media reports regarding P-75(I) order, where we are in the process and how long these negotiations could go on and when we could expect some kind of conclusion of these negotiations and award of the order? Sanjeev Singhal: The price bids have been opened, so a decision has already been taken that only one bid is technically suitable, that is the one submitted by Mazagon Dock Shipbuilders Limited. Price bids have been opened. We expect that anytime soon the negotiations or the discussions should start. I would not say negotiations because there would be discussions with respect to commercial also. We are quite hopeful that if the process goes as per the normal pace, next financial year the order should be in place. Atul Tiwari: Okay, sir. And sir, my last question is on any other large orders that are in the pipeline over next 1 to 2 years, if you could highlight? Sanjeev Singhal: Additional submarines, we are quite hopeful that we are confident that it can be done before 31st March this year. Atul Tiwari: So these are the three additional P-75 submarines? Sanjeev Singhal: Yes. Atul Tiwari: Okay, and within this financial year, you are hopeful that it should be fructified? Sanjeev Singhal: We are quite confident about it, because from our side, everything has been done. So now it is only the final approvals which is pending with the MOD and government. There is sufficient time is there. We are quite hopeful that before 31st March, the order should be in place. Atul Tiwari: Okay sir, thank you. Thanks a lot. Moderator: Thank you. Next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead.

Depending upon what exactly is the expenditure for liquidation of D-448 liability. If the expenditure is less than that created for that, there would be a reversal. Gagan Thareja: And also you have some provisions created for these Scorpene deliveries which you have done in the past during the COVID period and you indicated that Rs. 140 to Rs. 150 crores, two such reversals are possibly there to be done. Sanjeev Singhal: Rs. 142 crores for submarine 5 already in this quarter which has also contributed to the profit. The fourth submarine, I mean submarine one, is still under discussion. There the provision is in the range of Rs. 100 crores because the LD applicability for the first submarine was at the rate of 2.5%. On others, it was applicable at the rate of 5%. This is still under discussion. We are pursuing that. And with regard to the sixth submarine, again we have now delivered it in the month of January. So this again we will be taking up for waiver of LD. So this will take time, but as and when the waiver is received, these provisions will also be reversed. Gagan Thareja: So, sorry, just to get the number, this was Rs. 42 crores or Rs. 142 crores? You are not very clearly audible to me. Sanjeev Singhal: SM5, we have reversed around Rs. 142 crores. Gagan Thareja: 142, okay. Alright sir. And what are the deliveries due in the fourth quarter? You indicated Scorpene, you delivered one in January, so that will come into the fourth quarter? Any other deliveries pending for large platforms in Q4? Sanjeev Singhal: In this financial year, no deliveries are expected. We are not expecting any further delivery in this financial year. Next financial year, one is definite, could be two. Gagan Thareja: Alright, sir. And Next Generation Corvette, also, the order finalization, I think is due and fairly close to completion. Any updates there that you can provide and when do you see this being materializing? Biju George: We have participated in the bid. The price bid is yet to be opened. Sanjeev Singhal: Mr. Biju has replied that price bids have not yet been opened. Gagan Thareja: Okay. Alright. And you mentioned a fairly comprehensive CAPEX program. Can you give us how you will be spending it? I think you indicated Rs. 5,000 crore over the next 4 or 5 years. How will be the CAPEX budgeted on an annual basis starting next financial year? Biju George: We have two CAPEX programs. One for the adjacent land which we need to be developed with a graving dry dock. And also near Nhava Sheva, we call it as the Nhava Yard, that also has to be developed as a full-fledged shipyard with a graving dry dock. The marine consultants, their reports would be ready by, the DPR should be ready by mid of this year. And then we will be tendering out the EPC contract. There is the uncertainty of environmental clearance which are there. So it's a slightly long process for coming to fruition. Gagan Thareja: So from a financial standpoint, in terms of magnitude, what will the CAPEX budget be for 26? Sanjeev Singhal: 25- 26, as far as these projects are concerned, there may not be a major CAPEX, but yes, our floating dry dock would be ready. Biju George: It is around Rs. 500 crores CAPEX is there, approximately. So that balance will get realized completely in the next financial year. Rs. 350 crores will get realized at that time. Gagan Thareja: Right. And apart from P(75), P-75(I) and NGC, what all orders are there in the pipeline for which you might have bid, which you see coming up for bidding in the next 12 to 18 months? Sanjeev Singhal: Large order is not there, but discussion is there with regard to 17, follow on of 17 Alpha, that is 17 Bravo, and with respect to next generation destroyers. So a firming up at the Naval end has not taken place, but we expect between 2 to 3 years from now, these two projects should be fructifying. Gagan Thareja: Right sir. And the P75 and P75(I), is it possible to understand from the point where you receive the order, how will deliveries be scheduled? I mean, first delivery will be how far away from having received the order for 75 and for 75(I) and thereafter how will the submarines be delivered? Sanjeev Singhal: Six years from the date of placement or receipt of order and then subsequent submarines each one year, additional one year for each submarine. Gagan Thareja: And for the existing Scorpene-Kalvari class, I think you also indicated on the mid life upgrade there will also be an AIP which will be installed. When is the order disbursal for that due? And thereafter, for the mid life upgrades, further orders are placed over what time schedule? Sanjeev Singhal: AIP order for approximately Rs. 1768 crores we have already received in the month of December. As far as the refit order is concerned, it is still with Navy to decide. So we expect next financial year, there should be a decision. Gagan Thareja: Thanks, sir. Thanks for taking my questions. I'll get back in the queue. Thank you. Moderator: Thank you. Before we move to the next question, a reminder to the participants to ask a question, you may press ‘*’ and ‘1’. Next question is from the line of Rohit Natarajan from Aditya Birla Sun Life Insurance. Please go ahead. Rohit Natarajan: Thank you for this opportunity. Congratulations on your strong set of numbers. My first question is what will be the normalization of margin for FY26? Can you color on what will be that number look like?