Ladies and gentlemen, good day and welcome to the Mazagon Dock Shipbuilders Limited Q3 FY 2025 earnings conference call hosted by Nirmal Bang Institutional Equities Private Limited. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Jyoti Gupta from Nirmal Bang Institutional Equities. Thank you, and over to you, ma'am. Thank you, Yusuf. Good evening, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you to the Q3 FY 2025 earnings conference call with the management of Mazagon Dock Shipbuilders Limited. We have with us Shri Sanjeev Singh, Chairman and Managing Director (Additional Charge) and Director of Finance. Shri Biju George, Director of Shipbuilding. Commander Vasudev Puranik (Retd.), Director of Corporate Planning and Personnel, and Director of Submarine and Heavy Engineering (Additional Charge). Without further ado, I request Mr. Sanjeev Singh to start with his opening comments, after which we can open the floor for questions and answers. Thank you, and over to you, sir. Yeah, good afternoon, everybody. Happy to welcome you all to this conference call. We have posted a good set of numbers. The company is consistently doing well, as you must have gone through the numbers. Whatever queries would be there, we would be happy to address those queries. We can start with the conference, please. So, should we start with the Q&A? Yeah. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. First question is from the line of Atul Tiwari from J.P. Morgan. Please go ahead. Yes, thanks a lot, sir, and congratulations on a good set of numbers. Sir, my first question is on the medium-term margin profile that the company can have. And sir, the context is that over the past three to four years, your margins have expanded quite a bit. So, are the current margins sustainable at about 20% to 21%? So, could you share your thoughts on that? 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 an 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%. Sir, this 12% to 15% will be at EBIT level or at EBITDA level? Yeah, this is at EBIT level. EBIT level. So, including other income and everything, the 12%-15% of revenue? Yes. Okay, sir. And sir, if you could comment on the media reports regarding P75I 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? 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. 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. Okay, sir, and sir, my last question is on any other large orders that are in the pipeline over the next one to two years, if you could highlight. Additional submarines, we are quite hopeful that we are confident that it can be done before 31st March this year. Oh, so these are the three additional P75 submarines? Yes. Okay, and within this financial year, you are hopeful that it should rectify? 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 there. So we are quite hopeful that before 31st March, the order should be in place. Okay, sir. Thank you. Thanks a lot. Thank you. Next question is from the line of Gagan Thareja from ASK Investment Managers. Please go ahead. Yeah, good evening. I hope I am audible clearly. Yes, please. Yes, sir. Sir, the first question is on the other expenses for the quarter. I mean, there's a host of expense items or line items which cumulatively add up to that, and that has gone up substantially. So provisions, project-related expenses, so on and so forth. I think if I cumulate all of this into other expenses, it's up. From your side, your voice is there, but simultaneously, something is there in the background also. Okay. Your question is not understood clearly. Yeah. Better now? Hello? Yeah. Please repeat. Yeah. Okay, I'll repeat my question. My question is, the other expenditure for the quarter Q3 results reported, which includes provisions and project-related expenses, has gone up substantially. Can you elaborate on that? Yes. Certain provisions have been created with respect to the inventories which are lying with us and where the warranty period of the ship is complete, so considering that, there is no clear visibility with respect to their utilization. Although the items are good, and we expect that going ahead in the future, these items may be required on the ships which have already been commissioned or on other projects, but then when they are utilized, the provision would be reversed, but for the time being, provisions have been created with regard to the excess inventory. Okay. Here is this. With regard to the offshore project of ONGC, the first one which we had received the order in the month of December, although the timeline has been extended up to 31st of March, for the time being, the timelines have been extended without waiving the LD. The LD issue remains open. So we have provided the liquidated damages for the project. As and when the time extension is received with the waiver of liquidated damages, this provision may be written back. Right. And sir, you also indicated that if you are able to deliver the orders ahead of schedule, there will be a reversal of the D448 liabilities, and you will be able to save on costs. Has that manifested itself in this quarter? And is it possible to give some idea of what benefit could have come from that in the quarter? Yeah, we have completed the Project 15 Bravo. All the deliveries are done. D448 liabilities for the second ship will be concluded very shortly. D448 liability for the first one is done. D448 of the second ship is expected soon. So as far as this quarter profit is concerned, a substantial contribution is from Project 15 Bravo. Right. So if I understood it correctly, the subsequent quarter, which is Q4, will possibly also have some element of reversal of D448 liabilities? Depending upon what exactly is the expenditure for liquidation of D448 liability. Okay. All right. If the expenditure is less than the provision created for that, there would be a reversal. Right. And also, you have some provisions created for these 14 deliveries which you have done in the past during the COVID period. And you indicated that I think INR 140 to INR 150 crores to such reversals are possibly there to be done. Was any? INR 142 for Submarine 5 already in this quarter, which has also contributed to the profit. Okay. More submarine, that is Submarine 1, is still under discussion. There, the provision is in the range of INR 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'll be taking up for waiver of LD. So this would take time, but as and when the waiver is received, this provision will also be reversed. So sorry, just to get the number, this was INR 42 or INR 142 crores? You were not very clearly audible to me. SM 5, we have reversed INR 142 crores. Okay. All right, sir. And what are the deliveries due in the fourth quarter? You indicated 14. You delivered one in January. So that will come into the fourth quarter. Any other delivery pending for large platforms in Q4? In this financial year, no deliveries are pending. We are not expecting any further delivery in this financial year. Next financial year, one is definite. Could be two. All right, 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? We have participated in the bid. The bid is they are not opened at times. Hello? Hello? Yeah. Yes, sir. Yeah. Okay. Yes, sir, so you guys replied that price bids have not yet been opened. Okay. All right, sir. And you mentioned a fairly comprehensive CAPEX program. Can you give us how you'll be spending it? I think you indicated 5,000 crores over the next four, five years. How will the CAPEX budgeted on an annual basis starting next financial year? We have two CapEx programs. One for the adjacent land, which we need to be developed with a graving dock. 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 dock. For the marine consultant, their reports would be ready. 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 longer cycle for coming to fruition. From a financial standpoint, in terms of magnitude, what will the CAPEX budget be for 2026? 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. Floating dry dock, it is around INR 500 crores CapEx is there, approximately. So that will get realized completely in the current next financial year. Right. And apart from. Of course, INR 350 crores will get realized that time. Okay. And apart from P75, P75I, and NGC, what all orders are there in the pipeline for which you might have bid on, which you see coming up for bidding in the next 12-18 months? Large order is not there, but the 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. We expect between two to three years from now, these two projects should be certified. Right, sir. The P75 and P75I, 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 P75 and P75I? And thereafter, how will the submarines be delivered? This year, the date of placement or receipt of order, and then subsequent submarines, each one year. Additional one year for each submarine. Okay. 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 upgrade, further orders are placed over what time schedule? AIP order for approximately INR 1,768 crores, we have already received in the month of December. As for repeat orders concerned, it is still with Navy to decide, so we expect next financial year, there should be a decision. Right. Thanks, sir. Thanks for taking my questions. I'll get back in the queue. Thank you. Thank you. Before we move to the next question, a reminder to the participants to ask a question. You may press star and one. Next question is from the line of Rohit Natarajan from Aditya Birla Sun Life Insurance. Please go ahead. Hi. Thank you for this opportunity. Congratulations on a strong set of numbers. My first question is more to do with the normalization of margin for FY 20 26. Any color on what will that number look like? Mr. Rohit, your audio is not clear. There is a lot of background disturbance. I was asking what is the normalized EBITDA margin assumption for FY 20 26? I said the activity level, it will be around 12% to 15%. Just on the first question, we have indicated that normalized PBT for this industry, anything between 12% to 15% is quite okay. My second question is more to do with, let's assume hypothetically, if we conclude this year with INR 12,000 crore execution, will it be fair to say because we haven't concluded the submarine order, the next year could possibly see some sort of a decline in execution, and then probably we'll see a jump? No, we are not anticipating a decline next year. That means from the existing order backlog, we should be in a position to grow at least 10%. Is that the fair assumption to be made? Right now, we have not taken an assessment with respect to the growth, but yes, there will not be a decline. Got it, sir. Thank you. That's it from my side. Thank you. Next question is from the line of Sagar Gandhi from Invesco Mutual Fund. Please proceed. Mr. Sagar, your line is unmuted. Please go ahead with your question. Mr. Gandhi, may we please request you to unmute yourself from your side? As there is no response from the current questioner, we will move to the next question from the line of Bhavesh, an individual investor. Please go ahead. Good evening, sir. Congratulations on a great set of numbers. My first question is with respect to your order book. So as I can see in the investor presentation, the order book as of 31st December 2024 stands at INR 34,787 crore rupees. So if I had to discard the three deliveries done in the month of January 2025, what will be the current order book stand at? Will it be between INR 26,000 to INR 27,000 crores? First of all, I'll correct you. The three deliveries were not in January. Two deliveries were in December. So these have been taken into consideration by working out the order book. And with regard to the third delivery also, this was in the first week of January. So it doesn't have any material impact on my order book. Whatever numbers are there as of 31st December, they by and large consider all the three deliveries. Okay. Thank you for that. And secondly, sir, Prime Minister Modi is traveling to France next week. So there are rumors that there might be a contract signed for the Rafale and the three Scorpene submarines. So can we see this getting materialized by next week, or it will happen by 31st March? No comments from our side. Okay, sir. That's it from my side. Thank you. Thank you and all the best. Thank you. Next question is from the line of Sagar Gandhi from Invesco Mutual Fund. Please go ahead. Mr. Gandhi, please go ahead with the question. You are not audible. Please unmute yourself from your end. As there is no response from the current questioner, we'll move to the next question from the line of Aniruddh Murarka from Continental Securities. Please go ahead. Good evening, everybody. Am I audible? Yeah. Good evening. Please continue. Congratulations, sir, for a great set of numbers. My question is regarding your subsidiary, Goa Shipyard. Any plans to list the same in the future? And how much stake do we hold in this company? Goa Shipyard is not our subsidiary. They are our associate company. We are holding 47.21%. Currently, there is no management control. It is just an investment in Goa Shipyard. We don't participate in their production programs or any kind of decision-making. They are an independent company. Okay, sir. Thank you. Thank you. Next question is from the line of Atul Tiwari from J.P. Morgan. Please proceed. Yeah, sir. Thanks a lot for taking my question again. Sir, if I could ask, I mean, you did mention PBT margin of 12-15% for this industry. For next year, FY 20 26, will this margin emerge, or will we continue to operate at much higher margin given the kind of work we have right now going on? Next financial year is primarily the existing orders, where the margins are comparatively higher, better. So next financial year would be not 12% to 15%, but at the same time, difficult to assign any kind of a number. But we expect healthy margins next financial year. Okay. And sir, at the end of the nine months, our order book is down year on year. And I understand that we will likely get very large orders very soon. But will it take some time to ramp up the execution of those orders? And hence, consequently, say for one year, our revenue growth could be slow, like say 5% or 10% only. Is that a possibility, or will we continue to grow at like 20% even next year? We are not saying that next year growth is not projected at 20%. We are saying that there would not be a decline in next year revenues. Growth numbers have not been worked out. There could be a marginal growth. Okay. Okay, sir. Okay. Thank you, sir. Thanks a lot for taking my question, Mr. Thank you. Next question is from the line of Ms. Jyoti Gupta from Nirmal Bang Institutional Equities. Please go ahead. Good evening, sir. If we close this year with a 12,000 crore execution, do we see with the current projects upcoming which we'll have by March, do we order book intake of something like 17,000 and then 19,000 crores in the next two years? And when you say that your PBT margins are going to decline to 12% to 15%, will that be after FY 20 26? 20 26? Because you're saying FY 20 26 would be better than FY 20 25, then your margins should actually start seeing a decline after FY 20 27, or we should start seeing it after FY 20 26? None of these statements which you have made can be ascribed to me. I have never said INR 12,000 crores we are expecting this year. We have never said with respect to next year margins or there would be a margin decline. I have only replied that a normalized margin for our industry could be in the range of 12% to 15%. And can we see that kind of normalized margin? From which year can we start expecting those kinds of normalized margins? We are executing the existing orders. So where the margin should be somewhat similar levels to what we are experiencing today, except for the exceptional items like reversal of LDs, etc., and depending upon the D448 execution. So we don't see much change for the existing orders. Okay. And this existing order that we have, these are executable over the period of two years or three years? Approximately two and a half years. Two to two and a half years, so which means, and these are on nomination list, obviously, after two and a half years, you may see, I mean, we could see some sort of changes in the margins, right? This industry, it all depends, and when these orders, large value orders, are materializing on us sitting today, I will not be able to predict what is going to happen after two and a half years. If the orders with respect to additional submarines with respect to 75I are materializing, the normal repeat of Scorpene submarines is coming to us, then I don't see a reason for decline in the revenues or profits. Sir, how much are we progressed in terms of indigenization, and how much would that impact have on the overall margins? Indigenization is not likely to have an impact on the overall margins because initially, there is an investment required. Some of the changes would be there. So we expect to counter both the factors with each other. So we don't see any significant impact neither on the negative side nor on the positive side with regard to indigenization because these would be the first projects where the indigenization would be taking shape. And depending upon at what value or what cost we are able to get these equipment, the future trajectory would be decided for future projects. Okay. Thank you. Thank you. Participants, to ask a question, you may press star and one. Next question is from the line of Prerak Gandhi, an individual investor. Please go ahead. Yes. Hello, sir, and congratulations on a good result. So, sir, a couple of questions. First was that in the last phone call, you mentioned about expanding your current yard capacity. So where do we stand with respect to that? And secondly, how much do we stand to gain in case of fresh orders from the Government of India with respect to submarines and the big ships, P-75s? We have just replied to both these queries. Okay, sir. Sure, I'll take a look at that. And secondly, sir, the thing is that with respect to defense allocation, this budget, it has seen a flattish or probably a flattish approach. So do we see a more push towards Indian Navy considering a long gestation period in the shipbuilding industry? As far as the budgetary allocation is concerned, for the CapEx, there is an increase of around 5% on an overall basis considering all the three wings. But our experience states that whatever is the requirement, whatever proposals are formed up, there is no dearth of funding, or none of the proposals have been stalled by the government. So as and when the proposals get formed up, we are quite confident that they will be converted into orders. We don't see budgetary constraints as such. Okay. Perfect. Thank you so much and all the best. Thank you. Next follow-up question is from the line of Gagan Thareja. From ASK Investment Managers, please proceed. Yeah, thanks for taking the follow-up. Sir, two questions on P-75 and P-75I. Are there three P-75 submarines that you will be getting the order for? Will they be inclusive of AIPs or without AIPs? Without AIP. Without AIP. Sorry? Without AIP. Submarine is without AIP. Okay. P-75I is with AIP. Yeah. Yeah. I'm just wondering if you are upgrading your P-75 existing submarines, the five or six that you have delivered with DRDO AIP, would it not be a natural progression to build the next three with an AIP inclusive in it? I'm just curious to understand why are they not with an AIP? Yeah. Because the first one is yet to be approved. You You see, after making the AIP, it has to be integrated with the submarine and then tested. Eventually, all line will have this AIP. But as of now, since the AIP is not integrated, they are not considered it for the moment. It is kept as an additional item, add-on item. No, but I mean, the delivery for the first one would be far out, right? Three, four, five years out. So by that. Yeah. I mean, that's what they didn't want to introduce everybody. Let the first one get proven, and then they will. It's a matter of only time. If it is available, it will be integrated. All right. And on P-75I, there were questions raised that while ThyssenKrupp Submarine has demonstrated a sea-proven AIP, the submarine on which the AIP was installed and demonstrated was a relatively smaller one compared to the specifications of the Navy. Does that mean that ThyssenKrupp will have to go back to the drawing board for a complete redesign for the Navy's requirements? And therefore, the design and delivery phase could be a reasonably lengthy one? So you see, P75I submarines are of larger dimension, both in terms of diameter and the length. So the AIP that is required on board will be of a higher capacity. And it's a matter of only upscaling what has already been developed and available with the Germans. Now, when you upscale it, obviously, you have to test it for balance also, right? Isn't it? Because the center of gravity and the center of hydrostatic pressure will shift around, right? All that gets catered in the design. I'm asking this because the Spanish company Navantia had a terribly difficult time managing weight around design extensions. I think Navantia does not have an AIP as of now. So that is why they have. Yeah. No, but even if you look at the Greeks, the Greeks purchased ThyssenKrupp's 212 submarines, and I think even they had these issues, teething issues with the first one and some redesign. The submarine design has already been made, and it is available. That is the problem for P75I program. All right. And the deliveries for these submarines to receive the order could be how far out for the P75I? Seven years on signing of the contract for the first one and one year subsequent for the remaining submarines. But 75 should be done at a quicker pace because you've already done it? I can't. Those, what do you call, efficiencies will improve the speed, but it's kind of time because this is a general timeline for constructing submarines worldwide. All right. Thank you, sir. I'll get back in the queue. Thanks for taking my questions. Thank you. Next question is from the line of Aniruddh Murarka from Continental Securities. Please go ahead. Thank you for giving an opportunity once again. Sir, my question is from your official handout. We have seen many pictures of foreign delegations visiting your shipyard. So there's any progress or potential for exports of submarines or our products to these delegations, like from Brazil, from Indonesia? Okay. These visits by the foreign nationals are steps towards converting them into exports. They don't happen overnight because there are a lot of issues involved when it comes to export and bilateral issues, basically. So at the moment, we have already started some amount of export to Malaysia, but that's at a very small scale. We are supporting their submarines. So as and when things get crystallized, they will convert into some export orders. But it doesn't happen in a hurry. I mean, you need some time. There are a lot of things involved in it. So yeah, but we are consistently at it. The important thing is once you get a lead, you need to pursue it. Thank you, sir. Thanks a lot. Thank you. Participants, to ask a question, you may press star and one. Next question is from the line of Alok Shah from CPMS. Please go ahead. Hello, sir. Thanks for taking my question. I just want to understand the next gen Corvette, approximately 36,000 crore order. When the tender will going to open? When is it going to open the Corvette? Corvette right now, Navy has not indicated. So we don't see anything happening financially. They will take time for it to be technically evaluated. Then all the deficiency documents will be collected, and then later on, the price will be opened. Then the negotiations. Nothing will be opened. Then we don't know. Expecting next financial. Next financial Next financial only 2025. Okay, sir. Thank you. Thanks a lot. Thank you. Next follow-up question is from the line of Gagan Thareja. From ASK Investment Managers, please go ahead. Yeah. Can you also give some update on the status of the P-76 project? Is it still in a very preliminary design phase, or do you see this also sort of reaching some sort of motion in terms of ordering, perhaps a couple of years down the line? We don't have anything to share right now. Okay. Thank you. Thank you. Participants, to ask a question, you may press star and one. Participant, if you wish to ask a question, you may press star and one on your touch-tone telephone. As there are no further questions from the participants, I would now like to hand the conference over to the management for the closing comments. Thank you for giving us this opportunity to interact with the industry, and our primary focus is to execute the order which is already in hand, both for the Indian Navy and ICG. At the same time, we will be looking for more orders, also exports, as CMD mentioned, and we look forward for fairly good growth, both at the revenue as well as the bottom line in the future, I think. Thank you very much. Thank you. On behalf of Nirmal Bang Institutional Equities, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.