Ladies and gentlemen, good day, and welcome to the Larsen & Toubro Limited Q1 FY 2022 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. P. Ramakrishnan, Head Investor Relations, Larsen & Toubro Limited. Thank you, and over to you, sir. Thank you, [audio distortion] Good day, ladies and gentlemen. A very warm welcome to all of you into the L&T Q1 FY 2022 earnings call. The analyst presentation was uploaded on the stock exchange and our website today around 6:40 P.M. Hope you must have had a quick look at the numbers. Instead of taking you through the entire presentation, I will give you a brief overview of the performance of the company in the first 15, 20 minutes or so, post which we will get into Q&A. Before I begin with the overview, a brief disclaimer. The presentation which we have uploaded on the stock exchange and our website today, including our call discussions that will happen now, contains or may have certain forward-looking statements concerning our business prospects and profitability, which are subject to several risks and uncertainties, and the actual results could materially differ from those in such forward-looking statements. Coming to the overview. In the first quarter of the current financial year, India remained in the throes of a severe second COVID wave. The proliferation of infections was much faster than the first one, and with significantly higher fatalities recorded. The fast pace of transmission put pressure on the healthcare systems across various states in the country. Unlike the national lockdown being announced last year, which resulted with sufficiently higher economic cost, this time around, we have witnessed regional local lockdowns in order to curtail the rising infections. Furthermore, several states imposed restrictions on discretionary services in order to limit the spread of the virus. Fortunately, India's second wave abated faster than initially feared, though concerns remain around the risk of future waves. Since vaccination programs have commenced in full swing, we hope the economic impact in the coming quarters will be insignificant. Coming to the company performance, Q1 FY 2022 was all about navigating against the COVID tide in difficult times. Our order inflows for Q1 of FY 2022 at INR 266 billion registered a growth of 13% over the corresponding quarter of the previous year. The international orders constituted 34% of the total order inflow. Excluding of services and concessions, our order inflows in Q1 FY 2022 are INR 151 billion, registering a growth of 10% over the quarter of the previous year. The order wins, again excluding services and concessions, are fairly well-spread across infrastructure, hydrocarbon, power, heavy engineering, and industrial machinery businesses. Having said that, let me mention here that the ordering momentum in Q1 was impacted by a subdued tendering and award activity. On a sequential basis, the project tenders and awards in Q1 FY 2022 were down 40% and 60%, respectively. On a Y- on- Y basis, the same was 20% and 25% with respect to tenders and awards. On a positive note, our prospects pipeline for the remaining nine months of the current financial year is pegged at INR 8.96 trillion as against INR 9.06 trillion at the beginning of the current financial year. The order book at INR 3.23 trillion is at near record-high levels. A large and a diversified order book provides us multi-year revenue visibility, currently having an average execution cycle of around 27 months. Currently, 80% of our order book is domestic and 20% is international. Within international, around 60% of the order book comes from Middle East, and the remaining 40% from Africa and Southeast Asia. 89% of our total order book comprises of infrastructure and hydrocarbon, infrastructure having 76% and hydrocarbon having 13% share. Within the infrastructure, our order book is well spread out across the various businesses like heavy civil, water, buildings and factories, power transmission distribution, transportation infrastructure, and minerals and material handling. The composition of the domestic order book, which today comprises 80% of the order book, is comprising of central government share at 9%, state government at 31%, public sector corporations at 43%, and private sector at 16%. Coming to revenues, our revenues for Q1 FY 2022 has INR 293 billion, registered a growth of 38% over a low base of Q1 FY 2021. International revenues constituted 38% of the revenues during the quarter. Despite the project progress in Q1 FY 2022 being impacted by, as I said earlier, by regional lockdowns, there were intermittent supply chain disruptions, below-optimum labor force, and shortage of industrial oxygen. Some of that impacted manufacturing and site execution. Our revenues, excluding the services and concessions business at INR 179 billion for Q1 FY 2022, has registered a growth of 57% over the quarter of the previous year. Let me also mention here that in Q1 FY 2022, we have caught up to the revenues of Q1 FY 2020, thanks to the healthy portfolio mix of EPC projects, manufacturing, and service businesses. The group level EBITDA margins at 10.8% for Q1 FY 2022 is 320 basis points higher than Q1 FY 2021, primarily due to improved overhead recovery. EBITDA margin, excluding the services and concessions business, has improved from 6.5% in Q1 FY 2021 to 8.9% in Q1 FY 2022, attributed to higher overhead recoveries despite input cost headwinds. The details on EBITDA margin are given in the annexures to the analyst presentation. As guided in our previous call that we had on 15th of May, we will endeavor to maintain our core business margins at the same level that we printed for FY 2021. Our current composition of variable price contracts, jobs that are expected to cross margin recognition threshold in the current year, cost contingency releases for jobs that may near completion, overhead optimization initiatives, enhanced productivity through various digitization programs, value engineering and wastage control initiatives, negotiation with some of our key vendors, and discussions with clients on use of alternate varieties of inputs should hopefully see us through in terms of managing cost headwinds during the current year. Coming to PAT, our overall PAT for Q1 FY 2022 is at INR 12 billion as compared to INR 3 billion in Q1 of FY 2021. This is largely due to the stabilization of operations in the current year as compared to the corresponding quarter of the previous year. Q1 FY 2021 would not be a right reference point for comparison as because a major part of the Q1 of the previous year was affected due to the national lockdown. However, if we compare our PAT with the Q1 of FY 2020, that is the year prior to FY 2021, you would notice that our overall PAT in Q1 FY 2020 was INR 15 billion vis-à-vis INR 12 billion in the current quarter. Both metro operations and the financial services business have been disproportionately impacted by COVID. Had this not happened for these one-offs, our Q1 PAT should have been higher. Coming to working capital, our net working capital to sales ratio has improved from 26.8% in Q1 FY 2021 to 22.9% in Q1 FY 2022. One of the reasons for improvement in NWC to sales is due to the denominator, that is the revenues moving higher. Let me mention here that our customer collections have improved in the current quarter over the quarter of the previous year. Our group level collections in Q1 FY 2022 were at approximately INR 276 billion vis-à-vis INR 252 billion of Q1 FY 2021. Let me also mention here that on a sequential basis, our NWC to sales ratio has marginally worsened from 22.3% in March 2021 to the current level of 22.9% in June 2021. This is primarily due to release of supply chain payments that fell due in the current quarter. If you could glance through our cash flow statement given again as part of the annexures to the analyst presentation, our net cash from operations is a minor negative at INR 7.9 billion. In summary, we have been able to preserve our cash levels in a predicted and a seasonally weaker quarter. As mentioned in the previous earnings call, we will again endeavor to maintain our NWC to sales ratio for the full-year at around the March 2021 levels, which was around 22.3%. Pursuant to the repayment of liabilities in our financial services business, power development business, and to some limited extent at the L&T parent entity during the current quarter, our group level gross debt to equity and net debt to equity levels have improved in the current quarter as compared to the quarter of the previous year. The details are mentioned in the part of the balance sheet that is attached as part of the annexures to the analyst presentation. Finally, our trailing 12 month ROE is at 17.2% in Q1 FY 2022, vis-à-vis 12.7% in Q1 FY 2021. The trailing 12 month ROE for Q1 FY 2022 also includes the gain on the divestment of the E&A business that happened in August 2020. Suffice to say, the return ratios internally are being pursued very rigorously. A robust business portfolio focus on cash generation and distribution and the progressive divestments of some parts of our business portfolio should hopefully get us there. The group performance P&L stack is available in the analyst presentation, and the major variations have been explained. You may kindly go through the same. Very briefly, I will comment on the performance of each of the segments before we conclude on the environment and outlook. Coming to infrastructure, order inflows at INR 110 billion in Q1 FY 2022 is well spread out across the various sub-segments. Let me mention here that during Q1 we did witness pandemic-induced delay in tendering and award activities. Our order prospects pipeline for the remaining nine months of the year for the infrastructure segment remains very healthy at INR 6.4 trillion, up by 33% as compared to June 2020. Order booked in this segment at INR 2.45 trillion as on June 30, 2021, is quite healthy. Revenues for the current quarter at INR 104.1 billion registered a strong growth over the corresponding quarter of the previous year, despite the COVID second wave challenges. Consequent to a better job mix, and as I said earlier, a higher recovery of overheads, our EBITDA margins in this segment improved from 6.3% in Q1 FY 2021 to 7.1% in the current quarter, despite commodity price inflation affecting input costs. Next to going to power. The receipt of a flue-gas desulfurization order in Q1 FY 2022 boosted the existing large order book in this segment. Revenues for Q1 FY 2022 at INR 7.6 billion is up more than 100%, with various projects in the order book gaining execution momentum. Better execution progress drives the margin recovery in the current quarter. As you may be aware, the profits of the manufacturing part of the EPC power business, that is the boiler turbine and the other power joint venture companies are consolidated at a PAT level under the equity method of accounting. After that, I come to heavy engineering. In this quarter, this segment had multiple order wins in the refinery oil and gas verticals. Revenues for the quarter at INR 5.5 billion registered a growth of 45% over Q1 of the previous financial year. On account of improved execution across multiple jobs, their margins also consequently improved in the current quarter. Coming to defense, we believe the policy pronouncement and the recent indigenization drive of the government will drive order inflows in this segment in the medium to long term. Revenues for Q1 FY 2022 at INR 6.9 billion is up 46% on better job progress. EBITDA Q1 margins for this segment was contributed by cost savings and contingency releases in certain jobs. At this stage, I would like to reiterate that this defense engineering business does not manufacture any explosives nor ammunition of any kind, including cluster ammunitions or anti-personnel landmines or nuclear weapons, or components for such munitions. This business also does not customize any delivery systems for such munitions. We come to hydrocarbon segment. This segment had subdued order inflows in Q1 FY 2022, as we did face elevated levels of competitive intensity. Having said that, I wish to mention here that due to lower levels of ordering witnessed in the business since the second half of FY 2020, the prospects pipeline has significantly improved, largely due to the recent pickup in oil prices. Our prospects pipeline in this segment for the balance nine months of the current year is at INR 1.82 trillion, which is significantly higher than INR 668 billion at the end of Q1 of last year. Revenues for the current quarter at INR 41.9 billion is up by 37% over Q1 of FY 2021. The strong execution activity drive revenues in the current quarter. Secondly, Q1 EBITDA margin improvement is aided by cost savings and a one-time gain. Moving to development projects. This segment includes the power development business portfolio of two operating assets, a 1,400 MW coal-based power plant in the state of Punjab, and a 99 MW hydel-based plant operating in Uttaranchal. Besides these two assets, we also operate the, and report under this segment, the Hyderabad Metro. The roads and the transmission line concession part of L&T Infrastructure Development Projects, L&T IDPL, is consolidated at a PAT level under the equity method of accounting. The revenues for this segment at INR 11.3 billion this quarter registered a growth of more than 100% over the quarter of the previous year, largely due to the power development business. It is because of the strong power demand, the Nabha Power Plant, the coal-based power plant in Punjab, was operating at a PLF of 90% in the current quarter. Coming to Hyderabad Metro. Unlike in the previous year when the metro services were completely shut, in the current quarter, the services did remain partially operational with restrictive timings due to the localized lockdown. This, in turn, affected the ridership. The Q1 FY 2021 ridership was averaging around 55,000 passengers per day. Having said that, as we see now in the month of July, it is now improved to almost 120,000-130,000 passengers per day. The segment margin in this segment is affected by OpEx under recovery in Metro and the non-recognition of Nabha margin. We have impaired the carrying value of Nabha in our books in Q2 of FY 2021 and are looking out for prospective buyers, we do not consolidate Nabha at the margin level. Coming to Metro at a PAT level, the consolidated loss was around INR 472 crores during Q1 FY 2022. Operating and amortization cost of INR 0.75 billion each, and the interest cost of INR 3.7 billion were incurred for the quarter with respect to Hyderabad Metro. At this juncture, let me give you a quick status update on divestments of our concessions portfolio. For our power development assets comprising of Nabha and Uttaranchal, we are looking to divest our entire stake in both these projects. Coming to IDPL, we are exploring to divest our remaining 51% stake in favor of other third-party investors. Discussions are on currently with prospective buyers. Premature to comment on the timelines at this stage. As far as Hyderabad Metro is concerned, we are looking for new investors to put in new equity into the project. Discussions are on with the state government for assistance, and we are also exploring the possibility of refinancing the current debt with a new debt having an extended tenure. I come to the IT and technology services segment. The revenues for Q1 FY 2022 at INR 72.2 billion is up 7% on quarter-on-quarter basis and 20% on Y-on-Y basis, reflecting a substantive demand for technology-led offerings in the sector. The export billings constituted 93% of the total customer revenues. The EBITDA margin improvement in the quarter is led by improved utilization, a more favorable onshore-offshore ratio, and operational efficiency. All the three companies in this segment are listed entities, and the detailed earnings details are already available in the public domain. Coming to other segments that comprises of Realty, Construction Mining Equipment, Rubber Processing Machinery, Industrial Valves, and Smart World & Communication. In Q1 FY 2022, there was a broad-based revenue and margin growth across all the businesses as compared to the quarter of the previous year. Lastly, financial services. This segment was one of the segments besides Hyderabad Metro, which was also affected due to COVID. Financial services again, L&T Finance Holdings is a listed entity. The detailed results are available in the public domain. Over the Q1 revolved around pickup in rural and infra disbursements, robust collections, improved net interest margins, and fees, and maintenance of adequate liquidity on the balance sheet. The business continues to pursue the strategy of higher utilization of its loan book, diversification of liabilities, maintaining a more prudent ALM, and targeting sustainable net interest margins. Sufficient growth capital is available post the rights issue that happened in January 2021. Now I come to the final portion of my overview, which is the environmental and outlook. We believe that the road ahead is looking a little more optimistic and constructive. With the waning of the second wave and lockdown restrictions being progressively eased, there are definitely the good signs of a pickup in economic activity. The government with its fiscal stimulus and RBI with its accommodative monetary policy, remain committed to support this growth revival. It is a matter of time before the business and consumer confidence comes back. No doubt, the household balance sheets have undergone through immense stress in the recent past. However, with the envisaged increased investment spend, the employment indicators also should look up in the near future. Despite the weakness in the first quarter, we do believe that the Indian economy in the current year should be growing between 9%-10% in nominal GDP terms. Over the first half will be led by low base effect, and the second half will see a sharper recovery. The vaccination efforts have been stepped up and hopefully the third wave will not disproportionately impact the economy. Having said this, I would say that the risk of the third wave and its consequent fallout thus can be a potentially adverse risk factor. Some of the key determinants for us at the group level revolve around an enabling environment for better execution going ahead, sustained CapEx ordering from the government, and better private investment spend, if not in the current year, hopefully in the following financial year. Last but not the least, liquidity conditions to be continued to remain favorable. Internationally, the order prospects also look far better than what we witnessed in June 2020. We remain committed to our guidance of up to a low- to mid-teens growth in the ordering flow and revenues for the current financial year. As we said earlier, excluding the services and the concessions business, we are talking about the main EPC and the manufacturing business. As we mentioned earlier, we will endeavor to maintain the business margins around the same levels that we printed for FY 2021. NWC revenues at a group level will continue to maintain the guidance of in and around the March 2021 levels of 22.3. As a group, we believe we are positioned well with a healthy order book, a strong balance sheet, proven ability to execute large projects, and a growing IT and TS portfolio. In the medium term, our focus areas will revolve around cash generation, improved return ratios, exploring newer business areas and sustainability. We remain committed to sustainable business growth in the foreseeable future. Our integrated report for FY 2021 should be released latest by middle of August 2021. Before I close, our five year strategic plan is under preparation and should be completed latest by the end of this calendar year 2021. We will articulate our goals around the business portfolio, newer businesses, and our sustainability roadmap in detail once we are ready. Thank you for the very patient listening. We'll now get into Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue is sent. The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead. Sir, thanks for the opportunity and congratulations on good set of numbers. My first question is, are we staying with the order inflow and revenues outlook of 12%-15% growth and a stable core EBITDA margin as our guidance? Mohit. Yes. Are you done or should I answer to this? No, no. That's the first question. Yeah, sure. Yeah. As I said, Mohit, when we communicated this around 14th of May, we also knew about the status of affairs of the first quarter because of the COVID situation. We have factored this while we gave the guidance. We don't want to put a number to it, but what we have stated is that we expect considering the current economic environment, number one, and number two, the COVID crisis stabilizing by the end of June, and normalcy returning from the start of July. With the government now focusing to bring back the economy by way of higher investment spend and improved international prospects, given the rise in oil prices, that gives us a reasonable confidence that we should be in a position to maintain a guidance of up to a low to mid-teens in the order inflow. Given the fact that we have upwards of INR 3 trillion of order book, assuming that we come back to near normalcy from the start of Q2 onwards, gives us that confidence that we should be in a position to maintain around the same levels in the revenue side as well. Coming to margins, the margins that what we have given as a guidance is for businesses which is comprising of our traditional business of EPC projects manufacturing. It excluding the services part, excluding the concessions. Whatever we reported for FY 2021 at around 10.3%, we do expect that given the fact that the revenue momentum, the way it will continue for the balance nine months, we are reasonably confident to see that whether we'll be able to achieve the number after factoring into account the recent increases in their commodity prices. Understood, sir. Second question, sir, on the Middle East. You did speak about the OPEC+ agreement, imminent recovery gives you confidence on the hydrocarbon will see traction. Do you see any larger improvement also in the power T&D and the other order segment from Middle East and Africa, which gives you a confidence that somewhere around 20%-30% of our order inflow will comprise from Middle East and Africa. Is that possible? Do you have anything? Mohit, in the order prospects that I just now talked about aggregating to INR 8.96 trillion as we see in June, the share of hydrocarbons is almost around INR 1.8 trillion. Against that, roughly around 70% of that prospects is coming out of India, which is largely, I would say Middle East. Similarly, coming to power transmission and distribution, again, the prospects are roughly around INR 1.07 trillion-INR 1.08 trillion as at June. Out of that, again, almost 60% of those prospects are outside of India, from having a combination largely of Middle East and some part in Africa as well. Understood, sir. Thank you and all the best, sir. Thank you. Thank you. The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead. Hi, [audio distortion]. Congratulations on a decent quarter. My first question is on asset monetization. First one is on Hyderabad Metro. We have been engaging with the government to get some relief. Every quarter we have been going to them and asking for some relief. Do you think any tangible movement have happened from the government side and likely to materialize in the near future? Secondly, if that doesn't happen, you did list out that you're trying to get some investor and also looking at refinancing. Whether refinancing will happen first and then investor will come in, or the investor comes in and then maybe refinancing may not happen at all. That's my first question. Parikshit, you've asked a very right question, and whatever questions you have asked on various measures, all are at parallel. Okay. It's not sequential. Whereas our discussions with the Telangana Government is going on quite favorable, but as you're aware, it will take some time for the Government to take a final, I would say, decision on that. I would like to reiterate here that the discussions have been quite positive, and we have been asking. It's very easy for us to get extended the concessions period. Anyway, it is for 60 years. Citing the COVID situation as force majeure, that anyway could be possible. That doesn't really help us out. We are talking to them for financial assistance. They have heard us positively. We do believe we will see some amount of conclusion on this. Yes, the talks are on also with investors to bring in equity because at this juncture, the priority for us is to reduce the overall level of debt. Now, the debt reduction can happen in any of the scenarios like a new investor coming in with equity or the government giving some sort of funds. Last but not the least, we are also looking at monetizing the TOD rights, the Transit-Oriented Development rights that we have almost of 18 million square feet. There are discussions happening. Really, it is difficult for me to stage the sequence part of it. Parallelly, we are also looking at trying to refinance the existing loan because this loan, what we have, the Hyderabad Metro currently has, was a loan that was taken at the time of construction. That the project is done, we are looking forward to refinance the loan with a slightly extended tenure. That we are able to at least bring down the cash support requirements in the near term. All of this is, again, work in progress. Very difficult to put timelines on all of these. We do believe that by March 2022, we should be in a far more better position from what we are today. As it stands now, during the last call, we did talk about that we have set aside around INR 2,000 odd crore for the next four quarters, out of which we have given cash support of almost INR 500 crore in the current Q1 of FY 2022. Hopefully with the balance INR 1,500 crore, that should suffice, and before that, we should be able to get through whatever things I just now spoke about. Okay. You preempted my second question. You think the INR 2,000 should be sufficient enough before there's some resolution on the funding side? Yeah. You may not require further funding support to the projects beyond this. That's the plan, Parikshit, we have today. We do believe that with the easing of COVID situation, as I said during my overview, that today the traffic has inched up to 120, 130, 140 average per day. As the economy opens up, as all the restrictions go away, we should be in a position to see higher ridership. Also, some of the points that I spoke about, we should get a near visibility of closure by the end of this financial year. Okay. This financial assistance is basically concessional kind of loan, kind of assistance which you are seeking from the government? There are many parts to it, Parikshit. It would not be inappropriate for us to really comment on it. Okay. We are talking about financial assistance in many forms. How the government finally gives it, how much they give is a question of time, but we'll keep you posted. Sir, just last question on third quarter FY 2021 call. You had highlighted that about INR 1,800 crores of AP receivables net exposure was there, and you had done INR 100 crores of ECL provisioning against that. Any improvement in that status now? Has the government paid you something over the last two quarters? What will be the- Sorry, can you repeat that question, please? Sir, in the third quarter FY 2021, you had mentioned that about INR 1,800 crore of net exposure into stuck AP projects- were stuck, canceled. There was INR 100 crore retail provisioning done against those projects. Any updates on what will be the status now? Has that reduced, and what could be the retail provisioning done against those receivables? See, okay. Roughly speaking, we do have an exposure of almost INR 1,200 crores on the AP projects. I wish to tell you that discussions are on with the various state agencies who have awarded these contracts. Our first objective is to get some of these amounts realized and possibly, I don't know whether we'll be able to kickstart the project. Some part of the AP projects also is actually funded by multilaterals. To that extent, we should expect a revival. As it stands now, our exposure to these projects stands at a net INR 1,200 level. INR 600 is the recovery which has happened in the last two quarters. Partially recovery and partially attributed to higher provisions. Okay. Thank you, sir. That's all from my side. Thank you. The next question is from the line of Sumit Kishore from Axis Capital. Please go ahead. Hi. Good evening, PR. I have two questions. My first question is that you seem to have added order prospects to your March 2021 tally, because your order prospects seem to have reduced by about INR 100 billion while you have got core inflows of over INR 150 billion in the first quarter. Where have these additional prospects come from? Can you please elaborate? I think, Sumit, while I covered that, as of March, our order prospects was aggregating at INR 9.08 trillion. Okay. Today as we look at it is around INR 8.96 trillion. Just a marginal drop. The drop obviously includes the orders that we have already backed during the current quarter. I would like to mention two parts to it, that the hydrocarbon prospects, which was INR 1.44 trillion as at March end, that has jumped to INR 1.81 trillion as of June. That is one of the very important thing which we are looking at, which has attributed to, I would say, almost the same levels of order prospects as at June end. These are mainly overseas prospects? The incremental ones? Yeah. In the hydrocarbon, I guess INR 1.81, almost 71% seems to be coming outside of India. Coming to the other part of where, in terms of the order prospects, where we have seen a reduction because of the passage of time and orders having got awarded, is in total infra, where we reported INR 6.97 as an overall subset of INR 9.08. That has partially dropped to INR 6.40 as of June for infrastructure. Got it. Very clear. My second question is, you commented that the impact of COVID in coming quarters will be insignificant. You've partly covered that, what gives you that confidence. How much below normal levels was the average workforce availability during Q1 FY 2022, and where are we right now? Is there any execution issue overseas as mobility from India may have been impacted because of COVID? Okay. Sumit, it is like this. During the first quarter, in fact, I remember clearly that in the call we said that in the month of April and May, we were averaging at around 170,000 workforce. Partially because anyway during the first two months, summer months, we do see a drop, but partially attributed to COVID, there was almost 30,000-40,000. Normally it should have dropped down to 210,000, we actually witnessed 170,000 in April and May. By the end of June, we are almost at 235,000-240,000 of labor force. For peak execution during, as per the requirements in Q2, which is again, not the best of a quarter in terms of seasonality because of monsoon, what we need is typically 250,000 to meet our planned targets. We are today at almost 235,000 or so. Maybe running at a shortfall of INR 10,000 or so. That is not much of a challenge. When I spoke on COVID is obviously I did communicate that our assumption for the revenue momentum or operations momentum to become normalized is on one assumption that we would not witness lockdowns that will impact the economy from a business perspective, that is either manufacturing or site execution. Despite a more severe second wave, I don't think manufacturing or site execution got impacted as much as what we witnessed in the Q1 of the previous year. That's one of the reasons that we have been able to demonstrate growth in our businesses outside of services and concessions. We do believe with near normalcy, as we are witnessing now, we do believe that this should become hopefully normal. Again, that's an assumption that the third wave, even if it were to happen, should not impact the economic activity on the business side. Sure. I had also asked that, have there been any execution issues overseas? Yeah. No. International execution, I would say, has been near normal as a pre-COVID level, I would believe. We don't have evidence to say about lack of workforce availability. The only one thing which keeps lingering once in a while, and that I did mention, is intermittent supply side constraints, especially when it is importing into Middle East or into India, coming from outside of other continents. There are some delays that are being witnessed, but nothing material. Okay. Given that air travel is a bit difficult right now to Middle East, does mobility of workforce from India to Middle East impact execution? Actually speaking, no. Middle East actually came back to normalcy even before the onset of what we witnessed as second wave. Middle East execution went into normalcy from August, September onwards itself. We have not had a situation like in India. No, we had labor moving back to their native place or hometowns, and we had a challenge of bringing them back. In the Middle East, it was not that kind of a situation. They moved back to the site well before the end of the last calendar year itself. Got it. Thank you and wish you all the best. Next is from Centrum Broking. Please go ahead. Yeah. Hi, sir. First question is on the HSR projects. Where are we in terms of the on-ground mobilization, on-ground execution of these projects? By when do you think some significant amount of revenue should start hitting the P&L for us from the HSR packages? Ashish, let me tell you that the work has commenced sometime in February 2021. Okay. Actually, the deadline for us, that is the four years deadline, starts from, I think, January 2021 and ends at exactly 48 months later. The work is progressing as per the schedule of activities that are done. I would believe that a meaningful increase into top line, that is a substantial increase where we will have to articulate the increase in revenue in the segment is attributed to sufficient progress or major progress, will happen or will be witnessed in the next financial year, not in the current financial year. I would like to state here that some of the important things as a contractor that we need to do, because along the parcel right from the entire Gujarat stretch, we are supposed to have places where we can do the concreting and all the batch mix plants and all that. For which we need to take land. I think around 15 or 16 land parcels have to be taken to facilitate the construction, that is all in the scope of L&T. All those enablements have been done, and the progress of work has started in full swing. Okay. In terms of major accretion to revenue, could possibly we could witness maybe in Q4 of current financial year, but a large part would get into FY 2023. Got it, sir. Right. When I look at the debt breakup in the presentation, the developmental projects debt has gone down from about INR 20,600- INR 18,700. This reduction of about INR 9,100 crores, is that in the metro or in the power plant? In the power plant, the debt levels, we reduced it by around INR 1,200 odd crores, INR 1,250 odd crores, because of a favorable settlement that happened of a case that was under dispute. That enabled us to recover a lot of money that was stuck up from the client. That money got released, and that enabled us to reduce the overall debt level. The balance INR 600 odd crores was a reduction in the debt level at Hyderabad Metro. Actually speaking, that debt level came down because that was third-party debt. Obviously, it went into part of our L&T cash support that I just now referred to 10 minutes back. Got it. Fair enough. Thank you, sir. Thank you. The next question is from the line of Renu Baid from IIFL Securities. Please go ahead. Yeah. Hi, good evening, sir. Right. Two, three questions from my end. First question is on Coastal Road projects which were significantly delayed. Can you give a broad heads-up in terms of where are we in terms of execution phase? Are we through with the margin recognition, or that should be expected sometime in 2Q? Coastal Road project, Renu, is almost covered one third now. We are 32% covered at this juncture. Obviously, usually we recognize margins upwards of 25%. It has come into margin recognition stage. We do believe that it's going on its normal way. 32% is the completion what we have witnessed today. Sure. In the hydrocarbon segment, while we have seen a strong jump sequentially in terms of perspective, clearly after 18, 24 months since orders have come, global players are also very aggressive in terms of pricing. We have lost two orders in the last two quarters. What is our perspective in terms of the strike rate in this segment and what is the expected perspective on the competitive scenario in the international hydrocarbon orders which are coming? Renu, you're right in terms of having said that of late, we have been witnessing a lot of competitive intensity. Let me tell you that we are as much very clearly focused to ensure that we don't want to be seen to win orders and at compromising big time on margins. Competitive intensity is there and obviously we will be a little more careful while bidding for projects, but that doesn't mean we compromise on profitability. There has been some slip-ups, but we are fairly bullish on a combination of what our domestic opportunities are there and international opportunities. We stand a good chance to secure some of them in the balance nine months. Sure. Would it be possible for you to quantify approximately what was the one-time impact in hydrocarbon margin? The impact of a one-time claim was in the range of INR 90 odd crores. At the end of the day, all these things running in a project business, you will have settlements and claims and everything happening. I just wanted to say that, yes, margins have gone up because of one-time claim, but doesn't mean one-time claim is one time. You can have claims across each of the segments in every quarter. Yes, it's a recurring activity, so it's not a very alarming number that one should be worried about there. Correct. Broadly, if you observe the core ROCE on a TTM basis has actually now inched up to almost 21%. This is after two years now back to FY 2019 levels. Can you repeat the question? I didn't get your first part. Sorry. The core ROCE for the L&T Technology Services business. After two years is now back to 21% levels. It was hovering between 19%. As in, last year it was depressed, but even in FY 2020, it was around 20%. As in the 1Q numbers, if you look on a trailing 12-month basis, ROCEs are at 21%+, which is similar to FY 2019 levels. With this as an improvement in the capital employed return that we're seeing through, should we expect that in subsequent quarters, if payment collection remains true, the gross debt on books should taper off relatively faster than what we had expected? Renu, I think you must have heard me. I've stopped using the word core, okay? L&T Ex Services. Okay. We are talking about excluding services and concessions. If I have to talk about what we used to call traditionally the core, which is nothing but EPC manufacturing. Right. EPC projects and manufacturing. Whereas I don't want to comment on the numbers that you spoke, but I wish to tell you that for the current year, when we speak about that we are endeavoring to maintain the margins of this part of the business at around 10.3%, the same things that we printed for FY 2021. The working capital of course, the overall working capital is what we spoke about, 22.3%, but at core level, it could be slightly higher. If we can manage that, I'm sure our ROC also should improve. That's the target. In fact, all the projects which are going under bids and the way we are executing projects, some of the projects are sometimes kept on a slower pace because collections not coming in the same way. We restrict ourselves. We do believe that we will focus on margins stability and also controlling working capital to the best of our capability. Broadly, the gross debt, which has been almost flattish on a sequential basis at INR 25,000 crore, one can expect a substantial reduction in that towards the end of the year. Debt deleveraging or I would say debt reduction should be one of the objectives of improvement in cash flows? Yes. 100%. Of course, in the first quarter of last year, as a preemptive COVID to preserve liquidity, because we did not expect that the collections, the momentum which actually happened, we went ahead and did almost INR 12,000 crore borrowing. At that same time, the fact of the E&A divestment also was not very clear. Definitely at the group level, at the parent L&T level, the objective is to reduce the debt level sequentially, and that has been happening. We will ensure, as I said earlier, that liquidity will be maintained to the extent what is required in terms of the next, I would say based on the overall investment requirements and managing the overall working capital situation. The rest of that will be used to repay all the debts that is falling due. Sure. If I can ask one more question. In Nabha Power you mentioned that since the project is up for sale, we are consolidating the profits at the margin level. Do we have any internal timelines or targets that we are targeting this in the next six months, nine months, or within the current financial year, or it is still open-ended? I don't want to comment on the timelines, Renu, but I would tell you that talks are on with prospective investors. Okay? At least it is now known to the market, I would say that both these two assets are for sale. Hopefully we should see some developments happening. Very difficult to comment on timelines unless and until we get into a sort of what you call as a typical binding agreement or settlement. Got it. Thank you and all the best, sir. Good afternoon. Thank you. The next question is on the line of Renjith Sivaram from ICICI Securities. Please go ahead. Yeah. Hi, sir. Congrats on good set of numbers. Sir, this infra margins have been healthy. Is there any kind of a provision write- back? What is the sense you are getting on the infra margin? Infra margin, I think I did communicate that current quarter was 8.1% as against 6.3%. Sorry, 7.1% against 6.3% for the Q1 of the previous year. That has been largely on the back of an improved execution. Despite the COVID second wave. It has also factored some amount of steel price increase that has come because of impact on the input cost materials. Renjith, we are working on multiple things to mitigate the steel price or the cement price increase in this part of the business. Major part of the infrastructure segment orders, I would say a substantial part, they are actually variable price contracts. To that extent, that will partly mitigate this particular, I would say, cost increases. More important is that this year, as per our plan, we do have some decent amount of jobs getting into margin recognition threshold. If volume recovery, that is site execution stabilizes with no kind of COVID restrictions or any lockdown protocols, then that itself will enable us to cover those thresholds, recover a major part of our overheads. Touch wood, as it stands now, the job mix that we are witnessing in the infrastructure side are a mix of orders that are all as per schedule, not getting into major cost overruns. Whereas in some jobs you could have, but those kind of jobs also have the prospective of some claim releases and settlements. Overall, we do believe that we should be in a position to maintain the infrastructure segment margins at these levels as what it had printed for FY 2021. Okay. That was helpful. Just wanted to recheck with this Coastal Road getting into margin recognition. Was that a factor which had led to this improvement? Renjith, let me tell you, I was responding to a particular project progress. Okay. In infrastructure segment, we operate around 800 sites are there. Which means roughly around 700-600 projects are there under execution. It is not necessary that one project went into margin recognition threshold enabled us to have this higher margin. It's a combination of various factors. Let me tell you, it's not that each and every project gets into a complete profitable execution. We do have negative surprises. As I said earlier, our ability to execute in terms of volumes by which I can absorb a major part of overheads and also successfully complete the project on time, including some claims that we put on the client, adjust for claims of the client on us. I think with all these things into taken at a holistic level, we do believe that if volume uptick happens, we should be in a position to improve or sustain the margins that we reported last year. After factoring the input cost increase, which will have an impact on the fixed price contracts. Okay. There was some news flow regarding the submarine order. Some parties are likely, some of the technologies they are most likely to go with. How are we placed? There is expression of interest has been placed. Do you see a light at the end of the tunnel this year or anything that we should be happy about in the submarine contracts which have been long overdue? Renjith, okay, I will put it like this because obviously this is sort of classified. To the extent it is available in the domain, I can definitely comment on that. Yes, the Defence Acquisition Council has cleared that the P75I, which is India-based indigenous supply of submarines, it's been cleared. The RFP was issued last week, if I remember, I think it was on 20th of July. We are supposed to submit our response within four months unless the government extends it or the customer extends it. At this juncture, I can say that we have got the RFP. We are supposed to submit the RFP response within four months, which is again maybe 20th of November, unless extended by the client. Okay. Our technology is in line with what they want. There is no negative surprises for us. We have to, obviously, I think, as part of the requirement, we are supposed to also have a technology partner to it. This is all at this juncture, Renjith, I can say. We do believe that that should not be a problem for L&T per se. The only thing is we have to submit our response on or before by the end of four months. Okay. Okay, sir. All the best for that, let's hope good numbers come. Thank you. Thank you. Thank you. The next question is on the line of Sujit Jain from ASK Investment. Please go ahead. Sir, compliment on a good set of numbers. In NWC, and correct me if I'm wrong, that it was at around INR 21,000 for your, you don't want to call it core, so E&C and manufacturing, and INR 27,000 crore overall consolidated. What those numbers stood as on June? The core, which was 21, okay, as of June has become almost an increase of INR 1,000 crores to 22. Okay. At a consol level, that INR 27,000 crore order has become around INR 29,500 crore. This, I would say, primarily is because of almost our current liabilities, that is vendor payouts, have actually gone up substantially by almost, I would say, INR 3,000 odd crores that we have paid as per schedule. At the same side, because of higher activity levels, obviously the invoicing on the clients also happened big time in the current quarter, and some of that will get into collections more in the next quarter or subsequent quarters, depending on the terms of payment. Got that. Let me tell you, Sujit, at this juncture, if you have observed the movement of what we call the L&T, the projects business part of the working capital. Normally, the way it happens is that because of the enhanced Q4 at that Q1, when the customers also ensure a faster pace of certifications, and they also release a lot of money as part of their overall budgets that gets completed. Typically, you will find that the working capital situation improves a maximum during the Q4, and then from Q1, Q2, Q3, slowly improve. I mean, it worsens in Q1 and then slowly improves. Today, as we speak, the number which I talked about at overall group level of INR 22.9 is as expected. It is not that it is not expected. In fact, it is slightly better than our own internal estimate. Which gives us that at a group level, when we close FY 2022, obviously the caveats of all the third wave and other things are becoming to normalcy, we do believe that we should be in a position to maintain the working capital in and around the 22.4 levels of FY 2021. I've got that. For the core, what this NWC number would have stood? The consol is 22.9. Core would have stood at what level? 25%. 25%. The ROE of the one-time gain of E&A would have been what? Around 11%, 11.2%. Okay. For Hyderabad Metro, what is the absolute debt and equity as on June? Our absolute debt is around INR 13,500 or so, INR 13,600. Equity, what we have put is around INR 2,541, and cash support will be another INR 5,000 odd crores. Right. last we infused INR 1,000 crores, and you're saying- No. When cash support did include equity, our total exposure in Hyderabad Metro would be in the range of INR 5,000 odd crores, and INR 13,600 is the debt. I get that. You have guided that this year, we may have to support by around INR 2,000 crores. INR 500 crores you've already given a support in Q1. I believe that last year we've infused about INR 1,000 crores, right? Yes. Last year from Q2 onwards, we infused up to INR 1,000 until March, and we have set aside another INR 2,000 in the current financial year, out of which INR 500 has gone in the first quarter. Right. One last question is that, how much is the absolute number contribution of PAT from realty and IT services business? I would request you to kindly go into the segment result, which shows the PBIT of those businesses. It would not be right for us to calculate and report the PAT for those segments per se. As far as ITTS companies are concerned, their respective PAT, whatever they have reported, you just take with respect to LTTS and LTI 75% and Mindtree would be 61%. That I can get. Realty, how much it should have contributed in June quarter? The margin was not. I would put it like this. In the other segment, the total revenues that we have posted, realty would be in the range of INR 330 odd crores. Okay. PAT would be around INR 100 odd crores, PAT. That would be a basis number. Okay. Right. Sure. Thank you so much. Thank you. The next question is on the line of Ankur Sharma from HDFC Life. Please go ahead. Yeah. Hi, sir. Good evening. Just two questions from my side. One, given that labor is largely kind of back to normal, fair to assume that, and that's again without a third wave coming in, fair to assume that we at least go back to the sales we saw in Q2 FY 2020 for this quarter? If not more, that is. See, let me put it like this, that I would only maintain what I said earlier, that when we gave the guidance on revenue, up to a low to mid-teen, we factored that Q1 would be a little subdued because we gave those guidance in the middle of the second COVID wave. We knew where we are actually taking Q1 looking like. We also communicated that we should be able to demonstrate this revenue growth on the back of that we won't have restrictions coming in to affect from Q2 onwards. If those things are normalized, hopefully you should see a better set of numbers that finally aggregate to what I spoke on, guidance of low to mid-teens in revenue. Okay, fair. It's just a question of labor normalizing and things being over, and not about any significant heads into execution on the order book side, right? In terms of right of way or environment, et cetera. Okay. That way, I will tell you that whatever our internal estimates are there, they are all on the basis of whatever active order book that we are having. Basis that, with the assumption that there is no COVID third wave, everything comes to normalcy, gives us the confidence or capability, or confidence rather, to see a mid-teen up to a low to mid-teen kind of a growth. Hopefully, I think by the end of Q2, maybe we will be in a better position to finally put out a number. The issue is that, we can say the assumption, but we don't know how the whole thing span out because of course, this time around, let me tell you, at least not only L&T, at more like an economy level, at least people now know how to face the third wave. With all these improved vaccination efforts, gives us the confidence that we should be a far more better position to manage the execution. Fair. Okay. Just one quick one. While you did mention about a INR 90 crore kind of a claim in hydrocarbon, there also seems to be some kind of a contingency release in defense business. Could you quantify that, please? No, that is not material. I'm saying it is at the end of the day, the margins for the defense mission is around 20% odd. It's a combination of various jobs that went into closure. Usually, the last bit of contingencies that get released. That's a mix out there, I will put it that way. Okay, great. Okay, sir. Thank you so much. All the best. Thank you. The next question is from the line of Aditya Bhartia from Investec. Please go ahead. Hi, good evening, sir. Sir, you spoke about non-recognition of Nabha Power margin. Just want to understand where exactly is it getting recorded now? Okay. Like for example, what we did, in Q2 of FY 2021, the group decided that this asset will be put up for a divestment. Consequently, we have capped the carrying value of that asset in our books at what we believe should be our realizable value. Since then, we only take Nabha's revenues and costs, but we don't factor those margins. Those margins get impaired in one of the schedules in our financials, so that we keep the carrying costs at the same level unless and until we are able to seeing a higher realization or maybe even a lower realization, either which way. Understood. Secondly, you spoke about margin improvement happening on account of better overhead absorption. This is fairly interesting because Q1 itself has been a bit of a disrupted quarter. Does that mean that had there been no second wave, we have managed to cut our overhead costs to an extent that our margins would have looked better than what we are seeing today? Also, is overhead reduction being that material that we are able to offset complete RM cost increase and still able to show some improvement in margin? Actually speaking, I will tell you that in absolute terms, no, the overheads might have gone up. The thing is that if you see when you are in the projects business, it is not necessary that your revenue is only a combination of whatever we report in manufacturing, construction, and operating expenses. Part of the direct project-related spend also gets factored into staff costs and in the other operating expenses schedule that we have on the advertisement. A higher recovery, because some of these costs, like staff costs and part of operating expenses could be largely fixed. The more amount of high productivity output that we manifest, obviously means that we are able to factor that in our billable costs and get into recovery more. Consequently, as a share of revenues, if you see in staff costs and also manufacturing, construction, operating expense, that has come down, that is essentially the margin recovery that is visible. Obviously, there can be other reasons, as I said in the earlier part of the call, claims, counterclaims, ECL provisions, reversal of ECL provisions because of collections. All of that is part of the overall, I would say, margin stack-up. Understood, sir. That's helpful. Thanks. Thank you. The next question is from the line of Subhadip Mitra from JM Financial. Please go ahead. Good evening, sir. You did mention that a significant portion of the infrastructure order book has variable price contracts. Is it possible to quantify in terms of a percentage? I will tell you that at a global level, okay, when we are talking of a INR 3.23 trillion order book that we have covering the entire project segment, roughly around 40% is fixed price contracts and 60% is variable price contracts. Okay. Understood. From infra hydrocarbon, it's not going to be possible to give those split ups, I presume? At this juncture, for some reasons, we will keep it at the overall segment level, Subhadip. Okay, understood. I think in the early part of your commentary, you had given this break-up of the 80% domestic order book between government PSU, et cetera. I missed those numbers, if it is possible to just repeat that. 9% the central government. Okay? 31% is state. Public sector enterprise is 43%, and the last 16% is private. Got it. Okay. Thank you so much. Thank you. Ladies and gentlemen, due to time constraints, this was the last question for today. I would now like to hand over the conference over to Mr. P. Ramakrishnan for closing comments. Thank you, Rutuja, and thanks to all of you for participating in this call at this late hour. I wish you all the good luck and all the best. In case if any one of you have specific questions, please reach out to me or my colleague, Harish. To the extent possible, we'll try to clarify that. Thanks for your time. Thank you. Thank you. On behalf of Larsen & Toubro Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.