RITES Limited (RITES) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Corporate Access Post Results Conference Call of RITES Limited to discuss the Q4 and FY '20 results hosted by Reliance Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Arafat Saiyed from Reliance Securities. Thank you, and over to you, sir.

Thanks, Tyzaan. Good afternoon, everyone. First and foremost, I hope you all are keeping safe and healthy. On behalf of Reliance Securities, I welcome you all for the conference call of RITES Limited to discuss 4Q FY '20 results. From the management, we have Mr. Rajeev Mehrotra, Chairman and Managing Director; Mr. Parmod Narang, CFO; Mr. BP Nayak, Director of Finance; and Mr. VG Suresh, Director of Projects. Good afternoon, gentlemen. First of all, thank you for giving us the opportunity to hosting this call. Without any further ado, I will hand over the call to Mr. Rajeev Mehrotra for initial comments, post which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Mr. Arafat. Good afternoon to all of you. I'm Rajeev Mehrotra, Chairman and MD of RITES Limited. I'm happy to welcome you all to the investors conference call on RITES Limited financials of FY '20 and the fourth quarter of FY '20. Hope all of you and your families are keeping well during these tough times. I have with me our Director of Projects, Mr. VG Suresh; Director of Finance, Mr. BP Nayak; and CFO, Mr. Parmod Narang. As you know, RITES is a Miniratna Category-I Schedule A Public Sector Enterprise and a leading player in the transport consultancy and engineering sector in India, having diversified services and geographical reach. RITES Limited is the only export arm of Indian Railways for providing rolling stock overseas other than to Thailand, Malaysia and Indonesia. Now I'm going to talk about the highlights of company's results of FY '20 and Q4 FY '20, and then we will open the forum for questions and answers. I hope you all had success in accessing the presentation we have uploaded on our website for investor information as well as the press release we made yesterday and the financial results submitted to stock exchanges. In case any help is required, feel free to contact my team on these issues. After having a strong growth of 37% in FY '19, financial year 2020 has also been a very successful year for the company, and it has achieved its highest ever consolidated revenue and profits, with a revenue and profit growth of 22% and 29%, respectively. And thus, comfortably, we have beaten the initial outlook given of growth of 17% for this year. Company achieved operational profit margins of 23.25% against the target of 23.2%. So we have been able to rather better the margins this year. I'll now summarize the results on a consolidated basis. And as you know, almost 97% of the business stand-alone becomes a part of the -- sorry, the consolidated has almost 97% coming from stand-alone. So whatever I'm talking is relevant for the stand-alone also. I would not repeat the numbers of stand-alone which you have been able to access through the detailed presentations and submissions made yesterday. On consolidated basis, the company's total revenue has grown to INR 2,735 crore as against INR 2,240 crores in FY '19, registering a growth of 22.1% Y-o-Y basis. Company's revenue from operations has grown by 20.9% to INR 2,474 crores from INR 2,047 crore in FY '19. EBITDA and PAT have grown by 9.6% -- I'm sorry, 19.6% and 29.3%, respectively, and now it stands at INR 929 crore, that is EBITDA is INR 929 crore, and PAT is INR 633 crore consolidated. EBITDA and PAT margins sustained at 34% and 23.2%, respectively. These margins are the result of a strategic focus on order execution and increased human resource productivity. The earnings per share stands at INR 24.64 as compared to last year's INR 18.78, up by 13.2%. And please note that this is on the increased capital INR 25 crore shares post bonus issue done in '19/'20. Performance of our subsidiary, REMCL, has remained almost flat with revenue of INR 81 crores against INR 83 crores in the previous financial year. Revenue from this subsidiary has got impacted in Q4 FY '20 due to low demand from railways during lockdown period, especially the March end part of it, and certain maintenance work required in the windmills in the previous season of generation that is April to October '19. Our wagon manufacturing joint venture, SRBWIPL, has achieved a profit of INR 16 crore, with revenue of INR 265 crore during FY '20. The wagon manufacturing joint venture, this is with SAIL, has produced and rehabilitated 1,066 wagons during the last financial year. One or two more comments which are relevant to stand-alone portion driven by exports and leasing and turnkey construction business. Our operating revenue has grown by 21.9% to INR 2,401 crore from INR 1,969 crore in FY '19. I will now talk about the Q4 stand-alone results. The Q4 FY '20 total revenue on stand-alone basis stands at INR 596 crore against INR 765 crore in Q4 FY '19. The export and turnkey segments have shown a very good growth till Q3 FY '20 and we have been able to exceed our yearly targets as a result. The revenue of turnkey is moderated due to lockdown and the last month targets could not be completed. The targeted export shipments were mainly completed till Q3 FY '20, and therefore, less exports were scheduled for Q4 FY '20. Operating revenue, excluding other income, stands at INR 553 crore as against INR 714 crore in Q4 FY '19. EBITDA and PAT margins stand at 31.9% and 22%, respectively, which have been improved from the last year on account of better margins from consultancy. I will also highlight 1 or 2 more points in Q4. If you see the PAT of Q4, it is INR 131 crore as compared to INR 133 crore in Q4. So although there is a fall -- I mean a visible fall in revenue, almost INR 169 crore, but the profit has not impacted because of 2 reasons. One is the main -- fall mainly came because of turnkey reduction by about INR 91 crore. And as you know, the turnkey is the lowest margin business. And we more than offset this in our key businesses of consultancy and turnkey -- and leasing, et cetera, and exports, of course. So the PAT numbers look stable comparable to FY '19. I'll give an overview of the segmental analysis. Consultancy is our key segment. Company generated a revenue of INR 1,066 crore against INR 1,091 crore in FY '19. Consultancy has given a gross margin of 44.9%, which is better than 43.9% of FY '19. Consultancy remained almost flat due to various reasons, including disruptions in March '20 and also certain projects -- foreign projects suffered due to lockdown. Some projects we have overseas, they also had a lockdown impact. Q4 has remained flat, but has seen better margins from consultancy despite less revenue due to restrictions in March '20. I now come to leasing. Company's leasing business on account of increased client base and additional loco requirements by existing clients have shown a steady growth of 16.5% over FY '19 and recorded income of INR 121 crore in FY '20. Leasing business margin has remained healthy at 38.6% during the year. Q4 FY '20 has shown a growth of 6.3% as compared to Q4 FY '19. This year, we have added 62nd locomotive to our leasing fleet, up by 6 from last year. I now come to exports. Exports revenue during the year FY has increased significantly, that is by 161.6% over INR 541 crore done in FY '19. I'm sorry, I'm sorry, I will repeat this. Exports revenue during the year FY increased significantly by 161.6%, and it stands at INR 541 crore as against FY '19 exports of INR 207 crore. Export margins have been at 22.7%. In exports, we did 2 major, I will say, achievements. We completed the supply of 6 diesel multiple units, DMU, we call it, train sets to Sri Lanka. And as a result of good quality, they liked, they placed repeat orders on us for 2 more, which are under manufacturing now. Also, we completed supply of 10 locomotives during last year. Another important development in exports is that we have forayed into cape gauge market with INR 706 crore export contract of DMU train sets and locos to Mozambique. This we became successful sometime in January, end of February beginning, and we concluded negotiations on video calls and signed the agreement in June. This is a significant transaction because this is first such contract from India for cape gauge, and it opens up about 16 countries for exploring the export business now, which are only cape gauge. Cape gauge is 1,067 mm, which is not used in India. During the last quarter, exports have been -- have decreased against Q4 FY '19 due to major shipments completed till Q3 FY '20, as stated earlier. And in any case, very less exports were remaining for Q4 of FY '20. There's some impact on the export margins in Q4 because of provision of one item, INR 5.45 crore, against a recoverable from a client which he has agreed to pay. I mean this could not be settled in time earlier. So we have provided, but I'm sure it's likely to be settled in FY '21. So we still provided for it because it was more than 3 years now. Turnkey construction. The revenue from turnkey construction projects has reached INR 673 crore in FY '20, with an increase of 18.7% over FY '19. Turkey segment gross margins stand at 3.4%. Revenue in Q4 FY '20 has decreased because of some disruptions in March and here also only when the milestones are completed, the inspections by commissioner of railway safety are done and then only this becomes available item. So there were certain inspections scheduled for March and they were deferred, have been done in June now. Order book. You'll be happy to note that company's consolidated order book now stands at INR 6,223 crore as of 31st March '20, with new or extension of orders secured of the amount of INR 2,257 crore during the year. This order book gives us revenue visibility for the next 2 to 3 years. While this order book itself gives us enough headroom to go ahead, we are also catching whatever opportunities are coming in infrastructure sector, both at domestic level as well as abroad in the areas we are operating. You would have noticed that we signed 1 agreement with IRSDC for 24% equity stake in that company. The disbursement has not yet happened. And once everything is implemented, we'll have one director on their Board, and we hope to get some more engineering work from that company as well. You would have also noticed one important transaction already notified by us that Government of India has mandated our subsidiary company, REMCL, for installation of 3,000 megawatts of solar energy generating system. There are 3 transactions in this. And for the first 2 tranches, we have already put the tenders on 31st May and 15th June. Dividend. The final dividend of INR 6 per share has been recommended by the Board of Directors for the year FY '20, making it the highest ever annual dividend of INR 400 crores, that is INR 16 per share with a dividend payout of 67% from PAT or if you compare with the, say, price level of INR 250 crore, dividend yield is around 6.4%. With this, I think my submissions to you are over. Now we can open the forum for questions and answers. Thank you very much for your attention.

[Operator Instructions] The first question is from the line of Jonas Bhutta from PhillipCapital.

Congratulations on a great set of numbers despite the challenging environment. I have 2 questions, sir. Firstly, margins on -- in the leasing business, sir, for the past 2 quarters, have averaged around 33% or 34% versus the earlier trend of, say, 43%, 42%. Has there been any change in terms that is related to this margin or this is purely just quarterly aberration, and we can expect those 40-plus percent margins back in the following year?

Well, I think we have said around 38% to 40% sustainable margins. There is no change in the terms. At times, you end up buying some spares in some particular month or quarter. That could have impacted, but I have no reason to worry. So this is -- some natural correction has happened and not a significant change in the pricing of leasing product.

Sure. That is helpful. Sir, my second question is on this plan to build a 1-gigawatt solar power project. If you can give us details on what is the kind of equity infusion that is expected out of RITES for REMCL? What is the capital subsidy? And what will be the power purchase rate at which you're going to sell that power? That's my first part of the second question, if you can answer this, and then I'll follow it up.

This may have to be a slightly longer answer, but it's important for, I think, all the participants. This 3-gigawatt transaction is in 3 components. Component 1 is on railways land and on developer model. So the developer has to put equity and our job is to see that it is done correctly on the land and then connections and all those things are done as per the technical specifications. And then we get around INR 0.07 per unit, we are negotiating for INR 0.07 per unit, every year for the power transmitted from there to the consumption centers. So that is the revenue model for this component where no equity is involved from REMCL. So this is Tranche 1 or, say, Case 1, where developer would put investment, our job is only to supervise and to then see the supply management efficacy per year. This is -- now second category, or I will say the Plan 2 in this scheme, is again 1 gigawatt where the PSU investment model because this company is owned by RITES and railways. Since more than 26% is there, this will be counted as own generation for own consumption, especially in this case where the open access is not there or the technical term for this is captive power. So this will become a captive power generator for railways. Therefore, it is necessary to put some equity. Out of this 1,000 megawatts, we have so far identified land only for 400 acres -- 400 megawatts, I'm sorry. Now this 400-megawatt tender has already been issued on 15th of June. So let us talk of the equity requirement of this component first. And this will be on equity subsidy from MNRE and borrowing by REMCL. So it is estimated that the total investment equity of about INR 350 crores, INR 360 crores will be required, half of which, 51%, would be done by RITES, balance by Ministry of Railways. We have not yet taken investment approval and not notified to the investors because we are in the process of just ascertaining the rates first, at what rate on railways land this would be doable. Once the financial closure is nearing, then we will -- if the rates are not acceptable, then only we will go for investment approval. This about INR 180 crores to INR 200 crores investment would again be spread over 2 years. Now this is Part 2. Part 3 of this, another 1,000 megawatts, is parallel to the railway track. There's a huge land available parallel to the tracks and a lot of these pockets have been identified already. Some more are in the process. Now this will again be on developer mode. Railways will only buy the power. Our role is to supervise and again see the technical issues in supply throughout the life of the project, and we get paid around INR 0.07 per unit there also. So this scheme is very big, and this is first step. Let me tell you the potential is still more. And once we successfully do this, more such land parcels which are in the process of being identified would be opened up by railways. So that is the overall, say, umbrella of things to happen. Within this equity stake for rights to invest in REMCL could be in the range of INR 180 crores to INR 200 crores spread over 2 years, FY '21 to FY '22.

So for the full 1,000 megawatts, sir, it will be INR 500 crores, roughly?

This might actually spill over to '22 onwards because 400 megawatts we have just tendered out. The installation itself will take -- maybe once more land is available, we may go for that. And this is eligible for 20%, we call it, subsidy from the MNRE under CPSU scheme.

Sure. And my allied question to this, sir, is we've always perceived RITES to be an asset-light business model. But when investments such as this or that in IRSDC come along, should we -- does this sort of indicate lack of opportunity for the company in its existing business? So if you can first answer that and then maybe highlight the kind of opportunities that are there in Consultancy over the next 2 to 3 years maybe, not in FY '21, but if you can spread it over a 2-year period, what are the growth opportunities available in consultancy? Or should we expect RITES to become an asset-heavy business like it gets -- it makes investments and then gets business I think once a year?

Okay. Okay. Sorry, have you finished?

Yes, sir.

All these businesses have emerged because we are predominantly a consulting company. We are a consultant, we could spot exports. We are a consultant, we could spot leasing. We are a consultant, we could develop the open access model through REMCL for railways. And since we are a consultant, we are able to do the solar or the renewable portions required to be met by railways because they are a deemed distribution licensee or a distribution company. So this is a logical offshoot of what has been done in the past for railways. And again, there, you are earning -- my exposure is not very high coming to the fee portion which is consulting part, INR 0.05, INR 0.07 per unit. So I think the predominant nature of consultancy is there intact. These are add-on businesses. Otherwise, [indiscernible] go at 5% or 7% or 37%, 22%, which we have done in the past 2 years. If you just ignore these add-on businesses, and then we come to the impact of COVID and other things, you will see that the diversity of our business actually was helpful in saying positively that even during lockdown we kept generating wind power; even during lockdown, we kept running our locomotives on lease; even during lockdown, the inspection of steel rails at Bhilai continued. So if a consultant was there, you would have just operated something from home and remained low. So I think this is a part of our approach to go faster. There's no conflict with consultancy, and there's no move to shift away to asset-heavy model. In 3,000 megawatts, only 400 is asset based, rest is asset light. And the buyer is Government of India -- the buyer of the power is Government of India. What a risk-light investment would you see in a country like this where the Government of India is buying power from you on 25 years' basis. So I think the management has done enough exercise to see that we are doing our investments. That is on the solar part. On IRSDC, let me tell you, IRSDC is a beginning. There's a lot to happen in the segment. And we, as an engineering consultant, hope to see -- make significant revenues from there also. Every station would be a huge investment, maybe INR 100 crores to INR 300 crores, INR 400 crores. So this is again an opportunity for which investment has been done, and it has to be seen with that perspective in mind.

Sure, sir. And if you can highlight consultancy opportunities over the next -- opportunities in that base business over the next 2 to 3 years? Which segments do you think would perform?

Did consultancy suffer in FY '21? Yes, we remained almost flat or had a 2% fall on annual basis. But that's not the end of it. We have enough order book. If you see the order book, the order book of consultancy has gone up despite delivering about INR 1,100 crores of turnover in consultancy. Our order book in consultancy is sitting at almost INR 2,400 crores, which is much higher than the opening -- if you recall, there were concerns in the beginning that consultancy order book is not increasing. So we have ordered -- we have added orders. There are a lot of orders which are in the pipeline. Since we get success, we will not declare. But I will cover again the number. The consultancy for -- order book for consultancy at 31st March is INR 2,464 crores against opening balance of INR 2,317 crores. Similarly, exports, INR 1,086 crores opening was there. We have ended year with INR 1,436 crores. So I think consultancy and exports I see predominantly helping RITES to grow in next 2 to 3 years. And whatever exports you are seeing, it also requires a consulting component of business; design, customization, et cetera.

The next question is from the line of Rohit Natarajan from Antique Stockbroking.

Sir, you said consultancy would be flat in FY '21. So if I understand it correctly, are we maintaining that INR 100 crore revenue billing every month? Also, if you could touch upon the billing of turnkey that is happening at every month, export and some bit on leasing?

Mr. Rohit, I have not said it will remain flat. We have not given any quantified outlook. We have given outlook based on the order book, based on the sectoral investments as appeared in NIP. But I did not say that we are going to remain flat on consultancy. We will predominantly remain a consulting company. Now increasing consulting by 10% is itself a big job, let me tell you, because you are just going on the fee income, which is almost 1/20th of the project cost. So you are delivering 20x projects, then you add a consulting fee. But looking at the opportunities, we did not have enough orders from metro in last 5, 6 months. So all this impacted the FY '20 numbers. But FY '21, we have submitted several bids. I think in metro alone, our bids -- about INR 1,500 crores worth of bids we have submitted. And if law of probability, we must get at least a reasonable share there. So there is no reason to be pessimistic about consulting. And even today, we are the biggest consulting billing company in the country. If we cannot grow, then there's something seriously wrong in this sector -- or in the services sector.

Sir, I appreciate those points. But my question was more on how this lockdown scenario has impacted your billing part?

Okay. Lockdown -- last month, in fact, almost entire March, there were travel restrictions. People could not go to overseas. There are certain inspections done in China. There are certain inspections done in different cities in the country. So the March effect had started seeing reduced travel. And last 10 days almost no -- and peak 10 days of the year were lost because of the lockdown. So whatever downfall you are seeing in consultancy was quite possible to make up if that had not happened. And there are milestones in consultancy. We just cannot do by the completion method, which is there in construction business.

Efficiency level, sir, would you want to quantify some efficiency level of numbers over there?

For FY '21, we'll give the outlook in next quarter because -- whether we are able to open up in July or August or not. If this goes to September, then it's very difficult to make up the entire thing in remaining half of the year, then the industry in general would have the impact. But yes, if we are -- I'm optimistic that by July end, we should start seeing numbers returning, then there will be a good reason to be more optimistic about the consulting part.

Okay, sir. Sir, my second question is more on the order backlog part. We were targeting close to INR 8,000 crore of order backlog by the end of FY '20. I understand those mix is largely probably from construction segment -- the turnkey segment. So is there anything that is already under talks in pipeline that immediately can be converted into an order inflow?

Yes, this is a very important question and I would like to clarify that there was a change in policy in award of railway works to PSUs. After that reason, we have been asked to submit our expression of interest, which we have done in May. So I expect some outcome of that in July. There is every reason to believe -- and that you can see even in the order book. The order book of turnkey has gone down by almost INR 500 crores because most of the orders are on the verge of being executed in '21 or already done in '20. So we are expecting, yes, orders. And my assessment of INR 8,000 crores was based on certain information I had about progress of turnkey as well as this export order from Mozambique which has materialized already.

Sir, finally, on those export order -- export margins, sir, you said some provisions on that front which has led to a dip in margin probably. Sir, if you could quantify how much is that sustainable EBITDA -- EBIT margins for export segment looking like?

Okay. This particular item of provisioning, we had 1 locomotive on leasing in a foreign country. It was met with an accident in their own train system. And as per the contract, they are supposed to reimburse the cost of that locomotive to us. They have agreed to reimburse it. Now because of lockdown, this is delayed. And -- I mean not to get into the audit issues, we thought we'll provide for it. But this is recoverable. The client has signed as fresh as sometime in January '20 that they will pay us.

So is it fair to assume that we can spring back to 20-plus kind of EBIT margins in export segment?

I will say our guidelines on this -- guideline on this has been 15% to 25% -- 15% to 20%, actually.

Next question is from the line of [ Uzair Sami ], individual investor.

Congratulations for the results. My first question is around the dividend. So I looked at the long-term averages of how the company has redistributed the profits into reinvest -- reinvestment and then now it looks like over the past 1, 2 years, the dividend has increased. So my question to you how much percentage has increased? So my question to you is that, is this because you have a lot of reserve cash and not that many opportunities to reinvest? Or you have opportunities to reinvest but not [ being a ] hurdle rate that you aspire to? So just want to understand that.

Look, dividend decision is largely out of the, say, the extent of profits we have made. If we have made the best profits, the shareholders can expect the best dividend, which is the payout. This year, we are offering INR 16 per share total; INR 6 is the final dividend and INR 10 already paid. So we have the highest profits this year and we have proposed it. Now whether this payout is high or low, a lot of debate goes into this before the Board takes the decision. Let me tell you that we have still retained about 1/3 of the current year's profit, which we will be using for investments like the solar investments or the station development. The company already has other surplus cash funds available. And I have been saying that this is an investor-friendly company. We also care for our investors. So it's a combination of profit, availability of cash, opportunities, investor friendliness and, therefore, we have INR 16 for the current year.

Sure, sir. I was looking, not from an absolute point of view but I was looking at comparing the long-term average of the dividend payout ratio and the reinvested percent, and in the last 1 year and that looks kind of the percentage given out as dividend is much higher compared to the last INR 5.50 average. So is that a management strategic decision that this is what you want to do in this year and the coming years or this is something else, just because you have too much cash on hand?

If you are looking at last 2 years, these are the years which have given highest growth to this company and, therefore, the rewards to shareholders have also been higher. We have opportunities and we have been -- despite being a consultant, we have been investing in locomotive leasing, we have been investing in windmills, we have been investing in solar. So as the opportunities are emerging, we have investable surplus. We are completely debt-free balance sheet. So should this be necessary, we can even mobilize resources whenever needed. I don't see any requirement in next 1, maybe 1.5 years to do that. But lack of opportunities is not an issue. Consultants are very conservative, as is the investors. We also look at things very, very manually before we put our investments. So I think that summarizes the position on dividend that we have best 2 years, the best 2 years have seen best 2 pay out. We have cash, we have opportunities and we will make sure that we keep evaluating the possibilities continuously.

Understood, sir. One question on the income statement. Sir, I saw this line of purchases for export in the expense statement. So that has gone down from INR 125 crores in Q4 FY '19 to INR 2 crores in the latest quarter. However, on a yearly basis, the numbers are comparable. So I just want to understand, and also the fact that the exports have gone up in FY '20 versus FY '19. So why this purchases for export line has gone down from INR 125 crores to INR 2 crores in this quarter and what does it indicate?

I think one general observation I'll make before answering this point in detail, that in our business, all the milestones in construction, exports or consultancy are not evenly spread in quarters. So it can be erroneous to draw results based on just quarter alone. And you have a full year before you. So I will request that rather have a look on the yearly margins. Are they in line with the guidance? Are they stable? Are they growing? That would give a more, I will say, correct answer than just one quarter alone. And then...

Sure. Understood, sir. One final question. You mentioned on the aspiration side that the national infrastructure pipeline of INR 110,00,000 crore. So how does -- how will RITES play a role in there? And what are your expectations in terms of revenue? Or what will be the play of RITES in that pipeline projects?

I think we consider RITES as the consultants who get into the formation stage or pre-formation stage or we call it pre-feasibility of mega projects. So once before these projects go into DPR stage, normally, we get into several of these projects associated. And then once these projects go for detailed engineering, at that stage, again, we get a chance to do this. And third stage is when the construction starts, we do project supervision. It's not necessary that we get into all the 3 stages in all the projects; maybe 1 in some, maybe second also in some, maybe all the 3 in some. If the investments of those scales are being already spelled out, maybe there would be some delays because of the social costs which have suddenly come up in the system. But I'm optimistic that the infra spending would have to increase maybe after H1. And therefore, we tend to gain from those opportunities.

And then will that be in terms of when we expect to see any play of RITES, particularly with respect to the project of the form of a national infrastructure pipeline like, what's your guidance in terms of what fiscal year or what's the time line for this for you to have a play in there?

It's very difficult to draw a definite correlation with the projects in the pipeline there. But to give you an idea, and I'm not committing that we are bound to get those projects, I'm just giving you a flair of the things which is already going on. For 3 metro -- I'm sorry, for 3 DFC corridors, the tenders are already out. These are very high-value tenders for preparing DPR. So we have submitted our tender for this. For certain metro projects also, the GC consultancy appointments are going on. We are also preparing for the investment in high speed -- we'll join some Japanese consultants. We are planning to join as the GC partners from Indian side. All these things are going on parallelly. But finally, in which month this will materialize and who would finally make it is, again, a play of competition, again, a play of funds availability. But the NIP is a very strong, I will say, guidance to look at, and then we see projects emerging out of it. And I think RITES is being one of the biggest beneficiaries of this because we are into railways, we are into metros, highways, ports, airports and not only in India, outside India also.

[Operator Instructions] The next question is from the line of Saurabh Poddar from Lucky Investment Managers.

Congratulations on a strong performance despite a difficult outlook. Just wanted to understand, sir, I think understandably, our order book because of policy changes, et cetera, was impacted. Going forward, do you see any structural change in terms of the government's payment cycle or your receivables fund because -- given that it's been a tough environment for the government, not only the central government but also the state government. Do you think there will be a structural payment sort of a change in projects going forward? I just wanted to understand that.

Let me first answer this with reference to railway projects. If railways put a project for execution, normally that work would be given in a year for which they have already allocated funds. So once the capital funds are allocated, there could be a few days' delays here and there because of reasons. But then there's no reason to believe that this will not be funded. We rather get -- I think it's right, 20%. We get 20% money upfront as the project advances and then spend out of it. So the possibility of being cash out -- out of cash for these projects is actually not there. Yes, what can happen that there could be a shift in the CapEx timing by the government. But once a project is put to construction, I don't see such a thing happening as a policy change. No.

Okay. So that -- basically, I think that was my biggest concern. And otherwise -- but yes, I think that should be it from my end.

Thank you.

The next question is from the line of Chintan Sheth from Sameeksha Capital.

Congrats for the whole set of numbers. Sir, again, on the consultancy part, when we look at the margins, we are consistently improving upon it. I'm just trying to understand, if we look at fourth quarter, even our revenues were lower, we clocked around 50% kind of margins. So I'm trying to understand what can be the sustainable margins or any lever available for further improving it? And particularly for fourth quarter when revenues were lower, but margins were significantly higher?

Well, Chintan, I will suggest that let us not go by 1 quarter analysis for such major pricing impact analysis. Fourth, yes, we have improved margins because there was some billing from a major overseas project which is metro. So that came at a higher dollar rate and it impacted the margins. But yes, we remain within the outlook for consultancy fee income given. Yes, within that, 1 or 2 percentage points because we have almost hundreds of projects going on. Somewhere 1 or 2 percentage points somewhere going up and down is there, but there's no major shift in the pricing of consultancy as such. You have to believe that we will attempt to maintain the margins we have seen in the last 2 years.

Okay. And sir, on the Mozambique, your presentation provides that you have to execute it in FY '21. So we expect that the entire revenue to accrue in FY '21 or it can spill over to FY '22?

This question, I had reserved for outlook to be given in next quarter. But since you're asking, yes, although the delivery period is longer, this can be one of the drivers for us to achieve our targets, and we are trying actually to start from Q4, some part of deliveries in Q4.

Q4 of this year or FY '21?

Sorry. Let me clarify. The supply terms are calendar year '21. Only in June first week, we have signed this contract.

Okay. Okay. So it's calendar year '21?

We are trying to see that we start -- because that is going to be a help in pushing the exports this year. Maybe Q4, we'll target something for this new order also. We have already started working on this. But I'll be more specific when I give you outlook maybe a little later.

Sure. And bid pipeline for each segment, if you can provide, that would be helpful. That will be last.

Sorry, sorry?

Bid pipeline as of -- as on date for each segment, exports, turnkey and consultancy?

I think it would not be correct to quantify a pipeline more than what is already confirmed in hand. We keep applying in several tenders. Just to give you an example there, we have applied for 7 tunneling tenders where the value is INR 250 crores. So this is the thing. I may get one, I may get all, I may get none. So it won't be better to quantify a number to this forum at this stage. But yes, we are working all out for metros. We are working for major DPRs. We are working for bridges. We are working for ROBs, flyovers. We are working for highway tunnels. We got a major order in Ladakh for 3 tunnels road projects there. So even that segment we are trying. We have worked very hard to get a project of highway in Bangladesh. We have been declared eligible for one more rail consultancy project in Bangladesh. But all this is a continuous process. So there are enough -- I can only say that there are enough attempts in the pipeline, but I would not like to quantify. I have given you a flair of the types of things we are working on.

And we haven't signed MoU for this year with the railways yet?

Okay. That MoU is still under discussion because a lot of companies, they want to revisit the target based on the outlook for this year. And I hope this might be done maybe sometime in July.

The next question is from the line of Akshay Bhor from Premji Invest.

First of all, congratulations for a steady performance throughout last year. Sir, I wanted to understand IRSDC model a little better. Sir, first question within that is, is IRSDC going to be more of a consulting or IRSDC leads securing capital of their own as well while developing a specific station. And within that, the participation of RITES is -- I understand it's an equity participation. But are you also hoping for more work coming out of that overall station project? I mean -- and if you could just quantify what's the scope of work there?

Okay. I'll start with the last point first. Yes, we do hope to get some technical work because we have a strong team, which is trained in the structural design and construction supervision. So that was one of the objectives in getting there. Now station development has been going through different models over the last 4, 5 years. But I know that now there is a lot of clarity on how they want to take it. They have increased the lease period up to 90 years for any property development. They have also permitted mix use, which is commercial cum residential on railway land. There are also some other -- I would not preempt because that would amount to passing out the secret of this company. They're also working on an interesting revenue model which will sustain those investments. You might hear this very soon. So it's not that somebody wanted investments and we have done there. We have gone through the process. We see value coming in 2 ways: return on equity what we are putting and also engineering services. Third is that the IRSDC per se is going in a combination of their own investments, which is a limited way. We have done only 2 projects on this. They are now bidding out stations to the developers. So there, they will have a revenue model from these earnings. I think it's not going to be an asset-heavy company, rather a company managing heavy assets, I will say.

Sure, sir. Sure. Sir, just a clarification on the solar investment that you talked about. Is it fair to say that all the 3 plants put together 3-gigawatt of plants, you would be putting in INR 180 crores of capital? Is that understanding correct? And...

No, no, no. You asked a second question?

Sir, yes. Secondly, just your revenue potential of -- recently you have put together, any rough indication that you may have?

Look, the investment of INR 180 crores, let me clarify. There are 3 tranches in this. Tranche 1, 1,000 megawatts, already tender is out on 31st May, maybe in sometime in July. This will be -- this is on developer model. There's no capital investment by RITES or REMCL. Now we come to Tranche 2. Tranche 2 is in PSU mode where only 400 acres of -- 400 megawatts equivalent of required land is available. So this tender is out for 400, which is in investment mode and that is where INR 180 crores to INR 200 crores is needed. And they normally would be following the CERC guidelines of investments, the return on investment. And the buyer is railways. So there are no utility [indiscernible] utilities, we will be completely out of it.

Understood. No, my question was, if you go for that additional 400, 600 megawatts, will you need to put in additional capital there or your investment is restricted to that INR 180 crores to INR 200 crores of capital?

Actually, what we have done -- it's a very important question, and I think I should have clarified this. We have told to railways that the land you are giving us for Tranche 1 can actually take 1,600 megawatts. So we have already written to them that why don't you increase this to 1,600 megawatts and reduce the CapEx model to 400 megawatts. But should there be another land piece of another 100 or 200 megawatts, that is doable. But beyond that, I don't think REMCL can borrow for the entire 1,000 megawatts.

Understood, sir. Just the revenue potential, if you can, just in a ballpark number?

Revenue potential, we have notified this to be around -- I mean this was very conservatively put only as a fee component, INR 20 crores, because taking INR 0.05 to INR 0.07 would be agreed and then this would give at least INR 20 crores per year to REMCL, and there are hardly any costs with this. Maybe it should be very profitable per se because very limited number of people will be deployed for supervision. So it is fact that the project is fully on the fee income of INR 20 crores to INR 25 crores plus return on equity. That's completely different.

[Operator Instructions] The next question is from the line of Siddarth Mohta from Principal Asset Management.

Sir, regarding this solar project, you said that once all the project has been commissioned and INR 0.05 to INR 0.07 rate is being fixed. For all these 3 projects together, we will be earning INR 20 crores to INR 25 crores of fee income?