Earnings Call Transcript - XNSE:AFCONS 2026-11-05

Operator

Ladies and gentlemen, good day, and welcome to AFCON's Infrastructure Limited Q2 and H1-FI27 Earnings Conference Call, hosted by Anand Rati, Shared and Stock Brokers Limited. As a reminder, all participant lines will be in the lesson 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 to zero on your touch-on phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Bhavin Modi from Anandrathi Institutional Equities. Thank you, and over to you, Mr. Modi.

Bhavin Modi, Analyst — Anand Rathi Institutional Equity

Yes, thank you. This is Bhavin Modi from Anandrathi Institutional Equities. Good morning, everyone, and a warm welcome to the Q2 and H1 FY27 earnings calls of FCONS Infrastructure Limited. To discuss the results today, we have the management with us, which is represented by Mr. Srinivasan, Paramah Sivam, the Managing Director, Mr. Ramesh Jhada, CFO, and Mr. Hitesh Singh, the Power Strategy Head. Now, at this point, I will hand over the floor to the management for the initial remarks, and post which, we can open the floor for the question and answer session. With that, over to you, sir.

Srinivasan Parmasivan, Other

Thank you, Bawin. Good morning, ladies and gentlemen. Our financial results and Investar presentation for the quarter and half year ended September 26 have been uploaded on the stock exchanges, and I am sure you had the opportunity to review them. Let me begin with a brief overview of our performance. For Q2-FI27, Afkans reported a revenue of 2906 crores. EBITDA of 316 crores with an EBITDA margin of 10.9% and profit after tax of 41 crores. For the first half-year, revenue stood at 5633 crores, EBITDA at 578 crores with an EBITDA margin of 10.3% while profit after tax stood at 71 crores. At the same time, our order booking continued to strengthen. During H1, we secured orders worth close to 16,000 crores. Taking our total order book to 43,836 crores. This excludes L1 orders. As on date, for the year, our intake is close to Rs. 19,500 crores, excluding L1 orders, with an identified project pipeline of around 80,000 crores for financial year 27, bid center evaluation, and several opportunities. At different stages of tendering, we remain on track towards our full-year order inflow guidance of 30,000 crores. These wins have strengthened our order book and provide healthy revenue visibility for the coming years. Let me now address the operating performance. Our Q2 performance was lower than the corresponding period last year. The constraints that we discussed in our Q1 call have evolved differently across projects. Land endeavors are progressing at affected sites and certain approvals and clearances have moved forward. These are important developments because they should enable higher activity at these projects during the second half. While these developments are encouraging, our endeavor is to deliver higher level of execution. We remain focused on translating the improving project environment into stronger operating performance in the periods ahead. Not everything has moved at the same pace. Liquidity and collection remain challenging, and execution on the GELG1 mission project in UP continues to remain gradual. Let me assure you, we are managing the issue project by project with particular attention to execution readiness, client interfaces, collections, and cash flow. Our objective is to address the issues within our control and be ready to accelerate execution as the remaining constraints are resolved. Against this background, our Q2 performance was broadly in line with our expectations. On the positive side, both tunnel boring missions at the Mumbai-Armandabad high-speed rail project are progressing in line with the schedule, and our teams remain focused on achieving the planned execution progress. We have also achieved significant progress at our Greater Malay Connectivity project. The final segment of Tilamale Bridge connecting... Willimale Island to the capital Malay was completed during the quarter, marking a significant step forward to the project. It is the largest infrastructure project funded by India outside the country. It will, upon completion, stand as an engineering marvel and serve as an important catalyst for connectivity and economic development across greater Malay region. Beyond the execution progress discussed, we also achieved project milestones. Phase 2 of Mitapur-Sifara elevated corridor was inaugurated by the Honorable Chief Minister of Bihar during the quarter. The corridor is expected to reduce travel time between Mitapur, Mahuli and Punpan for approximately 1 hour to around 15 minutes. The engineering capabilities, execution discipline and safety systems that underpin these achievements also continue to receive recognition from leading industry institutions during the period. Afkans was named Construction Contractor of the Year at the 16th Construction Week Awards, while several of our projects received safety awards and recognitions from domestic and international institutions. Turning briefly to the business environment, the infrastructure opportunity in DR remains healthy, although the pace of project awards remains uneven and competition is intense in certain segments. Internationally, geopolitical tensions in West Asia continue to affect logistics. And the cost of certain inputs on some of our projects. We are addressing these through advanced procurement, alternate sourcing, and close coordination with clients, suppliers, and logistics partners. As I look to the second half of the year, I see clear priorities for us, accelerating execution where the necessary funds and approvals are available, improving collections and cash generation, and mobilizing new projects faster to make us ready for growth in the next financial year. Our execution visibility for H2 is better today than what was at the beginning of the financial year. Based on the visibility, we expect execution in the second half to be stronger than in the first half. Let me conclude with one point. We are very confident of achieving the provided order book cadence of 30,000 crore and beyond. Our H1 performance was largely unexpected lines, and we remain focused on translating the improved visibility into enhanced execution and execution into collections and cash flows. The strength of our order book, diversified project portfolio, and healthy pipeline continues to provide confidence in our long-term growth outlook. While our immediate priority remains driving execution and cash flow delivery, I would like to thank our clients, employees, partners, investors, and all other stakeholders for their continued trust and support. I now invite our Chief Financial Officer, Mr. Ramesh Jha, to take you through the financial performance in greater detail. Thank you.

Ramesh Kumar Jhaad, CFO

Thank you, sir. Good morning, everyone. Before talking on the numbers, let me recreate. Company is into business of construction. The margin in quarterly, quarter varies based on the nature, type, and quantum of work we executed. So quarterly results may vary in different quarter and may not be indicative of annual results or trends. Now, let me begin with the revenue number. For the half year ended, we have done Rs. 5,633 crores of top line against last year, H1 top line of 6,520 crores, showing a degrowth of 13.6% year-on-year basis. Whereas, in Q2, we have achieved top line of 2,906 crores. This is 6.3% degrowth in top line over the previous year Q2. Both H1 and Q2 execution is on the expected line. As we have already explained that in many projects, there were lack of work front availability, and second quarter was a monsoon quarter, which remains to be a relatively soft quarter. Pace of the execution is also a manifestation of stress payment across few projects. Where certification and payments are not happening. We had explained in Q1 earning call that generally Q1 remains little bit slow in terms of collection, but then things pick up from Q2 onwards. But this year we are feeling that the customers are continuing with the stress liquidity, and we strongly feel liquidity across the market needs significant improvement. Payment related issues in UP GELD1 mission is still continuing. We are receiving small payment based on certain threshold of percentage which they have defined of the overall work once that is completed. We retreat across the spectrum. Payments are being stressed for some or the other reason because the executing agencies, the government, the various state governments or the executing agencies do not want to borrow from banks. We are aware that banks are influxed with liquidity, but these entities, they do not want to borrow, but they want to stress the contractor's payment as they may be getting reflected as creditors in their respective balance sheet. So, we do not want to go overboard in terms of funding any project, and we want to maintain a healthy balance between execution and the liquidity. We are maintaining a very healthy liquidity situation as far as company's treasury is concerned. Now, moving to the guidance we have talked about, in FY 2027, we have booked order amounting to 19,437 crores till now, taking the pending order book in excess of 47,000 crores. In FY 2027, we are targeting to significantly improve the order booking and improve the balance sheet by collecting some of the stuck receivables. Uncertainty around the economic activity because of war, geopolitical and related stuff continues. So we have held back any guidance in terms of growth for the time being. We will reinstate the guidance once we see a broader uncertainty around this when it goes away. In terms of EBITDA, for the quarter Q2, we have done 316 crores, which works out to be 10.9%. As again, we have done 401 crores in the Q2 of 26, the last year, where we have done 12.9%. And on the half yearly basis, we have done 578 crores, which works out to be 10.3%. In our EBITDA calculation, we have considered BG Commission as part of our operating expenditure. So EBITDA what we are talking about is after removal of BG Commission as an expenditure. Also, we have included other income. We have explained earlier also that arbitration interest, foreign currency exchange gains, and miscellaneous incomes are recurring and very integral to our business. Also, there are corresponding expenditure to earn these other income, which has been factored in operating expenditure. Hence, these incomes need to be factored as part of the operating income to consider the EBITDA margin. So far, in H1, we have 326 scores of total operating income, which we have factored. In terms of profitability, the profit before tax in the quarter, we have 82 crores, which works out to be 2.8 percent as compared to previous year Q2, wherein we had done 149 crores at 4.8 percent. And for the half year, we have done 133 crores, which is 2.4 percent of the total top line. Whereas last year, we had done 333 crores at 5.1 percent of the PPT. Profit after tax during the quarter, it is 41 crore for the quarter and 71 crore in the H1 FY27. Correspondingly, last year we had done 105 crore in last year Q2 and 242 crores of profit after tax in the H1 last year. Now, profits got impacted because of lower turnover on the overall basis. Margin in our individual projects continued to be robust, but because of lower turnover overall, they could not generate sufficient overall contribution to cover the overhead cost or the fixed cost and still leave sufficient profit. What traditionally the company used to generate profit, I am talking about. We have put a lot of efforts towards reducing cost on the possible avenues, and that you will see that some of the other costs like manpower costs and other costs have gone down. But that has been partially offset by increase in energy, transport and logistics, finance, and provisioning costs. Now, I would just like to clarify here that in other costs, you might have noticed that there is a significant increase in other costs, which is largely towards the ECL provisioning we have done. And because of that, during this quarter, the other cost has gone up. We have put in place a new ECL matrix. There is an automatic provisioning if the period of outstanding receivable or the contract asset changes from one bucket to another, and we need to provide ECL on that. We have certain arbitration receivable, which we are negotiating for settlement. We have provided for some discount negotiation possibility, because we are looking at if we can realize those arbitration award by giving some discount. So towards that, we have made a provision. Third, in Middle East, we have certain outstanding in one of the subsidiaries, and we had been, like, you know, for this financial year, we have set up a task force, which is following up with all the customers, and in our interaction in Middle East with the customers. With banks, we have got very negative feedback around one of the locations where we have got outstanding. So, in order to, you know, in future we are not giving you any surprise. We thought that it would be prudent to make a provision. But when we realize, and not that, you know, we will be leaving that receiver, we will be following up. Once we realize, then, you know, a lot of these receivers may need to be reversed. So, we need to see how things progress, and then basis that will take the call. But at the moment, we thought that it would be prudent to make such conservative provisioning. Now, talking on the specific finance cost, that finance cost has also increased for the quarter as well as for the half year. We have seen higher average borrowing during the half year. Because of this, The interest cost has gone up. Coupled with this, interest bearing advances, more than 40% of our overall advance is interest bearing. So because of that also the interest cost towards client advances has gone up. Currently, of the total advance, currently around 59% of the advances are interest free and 41% of the advances are interest bearing. This year, we have booked substantial order, but the corresponding advances of those new orders have not come yet, for the, till, you know, Q2 financials we have prepared. We have big amount of advances lined up for collection, and that will change the working capital scenario significantly. Interest-free advances will help us in reduction in the finance cost as we move forward. Because of the advances we are looking at collecting for the new project, 60% of the advances are interest-free. Depreciation during the quarter, we had 181.51 crore, which worked out to be 3.22% of the turnover. Tax also, this period, it was higher, which is almost 46% of the PBT. This is primarily because an AFCON's profit, we are paying 25% tax. However, in the consolidation, the profit has decreased due to provisioning, as just explained, in one of the overseas subsidiaries. Thank you. And that was done, you know, primarily based on the local market feedback and the geopolitical scenario in that market. So, and also in some of the closed projects, which are in joint venture, we are required to make ECL provisioning and, you know, that also takes the consolidated Let it drop it down. As a result, consolidated profit has reduced, but 25 percent tax on expense profit, which is far higher than the consolidated number, works out to be the higher tax percentage on the consolidated profit. Other factors contributing in some of the JVs, we pay tax in the range of say 35 to 36 percent in some JVs. And in overseas locations like Bangladesh, the tax is charged on turnover. And in such situation, and if you are not making profit in say in a place like Bangladesh, the tax, they do not have any provision of refunds. So that needs to be charged off as an expenditure in tax. So because of all this, there is an increase in tax. ROC, I am not talking about because we will see this number. At the moment, it is around 8.2, 8.3%. We will talk about when we see the number annually. In terms of networking capital, the networking capital number is for the half year 147 days. Networking capital is at elevated level because of funding to the projects and less than expected collection of blocks of assets. We are witnessing delays in certification of the work done and release of payments in projects. This has led to increase in uncertified work done leading to jump in working capital requirement. Generally, this remains the trend in H1. We have seen that last, say, 4 years, the working capital requirement in H1 is anywhere between 800 to 1000 crore, and this year also remains to be the similar situation. So, this is no different from the previous year. As we have booked significant order this year and corresponding advances will come in next six months, we are also working towards realization of some of the stuck receivables. Hence, we are confident that there will be significant improvement in networking capital or other metrics going forward. In terms of debt, in H1, payment issues has continued and operations have been funded. Also, we have done sizable capex payment during this period. So, debt has moved to 4765 on a gross basis, and on net basis, it is 4050 crore. On net basis, it is around, the debt equity works out to be around 0.74 times of the net worth. We are maintaining a very healthy liquidity in terms of funds and also in terms of bank guarantee. So, we have to limit our ability. If I talk about the cash flow from operations, cash flow from operations is negative in the first half, which remains to be the trend every year. As I told that, say, we have seen that last four years also there was a similar negative cash flow in the range of, say, 800 to 1,000 crore. However, this year we can inform you that in next six months, we are likely to receive substantial amount of advances on the already secured job. Also, we are likely to receive stuck receivables, which we have targeted this year. So, in an overall probability, we will see a significant improvement in cash flow from operations in H2 leading to an overall annual number correction for the cash flow from operations. Debt reduction, net working capital number reduction. So, this is what from my side on behalf of AFCONS, I thank everyone for attending this call. Now, I request the moderator to open the floor for question and answers.

Operator

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Bhartyo from Investec. Please go ahead.

Aditya Bhartyo, Analyst — Investec

Hi, good morning, sir. So you spoke about execution pace picking up in second half. So just wanted to kind of clarify, are we looking at it on a year-on-year basis, that revenue decline would be lesser, or are we speaking about in absolute terms, like let's say we have done around 5,500 odd crore rupees of revenues in first half, second half should be materially higher than that.

Srinivasan Parmasivan, Other

Second half would be definitely higher than the first half. That much we can say for certainty.

Operator

Sure, Sam.

Aditya Bhartyo, Analyst — Investec

Also, if you could give us some indication about high-speed rail project, how's the execution going on that? What kind of revenue accretion should we be looking at it in second half as well as next year? And if we are, given that we've already gotten decent amount of orders in first half, plus we are L1 for a few contracts as well, how would you look at revenue growth from the perspective of next year?

Srinivasan Parmasivan, Other

Next year, as we conveyed to you earlier also, we do expect about 20 to 25% growth from that of current year, number one. Number two, with respect to high-speed railway project, as in the earnings call we mentioned earlier, in the previous quarter, both the tunnel boring machines have come, and that has been put into operation. And as we call initial drive with respect to one tunnel boring machine is completed, regular working has started. With respect to second tunnel boring machine, initial drive is likely to get completed in the month of November. We are on track to achieve the budgeted number in high-speed railway project for the current year.

Aditya Bhartyo, Analyst — Investec

So, my second question is on the ECL provisioning that we've done. Now, I could not understand what is really the change that we had put in, because from my understanding, ECL provisioning always is based on buckets, and as soon as a contract asset or a receiver moves from one bucket to another, there is provisioning that is required. So, what was the change that was being done this particular quarter?

Ramesh Kumar Jhaad, CFO

No, so what earlier the practice we were following was based on the previous experience of different buckets, whatever provision we had done in past or we had experience of any receivable going bad, this is that the provisioning used to happen. From March 2026 onwards, what we have done, we have now, rather than looking at the past trend, what we have done, we have defined that. Any receivable which moves from, say, more than six months, then more than one year, more than two years, likewise we have bifurcated. And the basis that there will be automatic provisioning rather than looking at the previous. So this has called for an enhanced provisioning now going forward. If you compare our ECL provisioning, what is appearing, we have looked at that number with other industry players. You will find that our provisioning is far higher than the others. Now, so this is one change. And as I explained to you that we have formed a task force in the company. We are looking at some 15 odd projects where the amounts are stuck. And that task force is on a continuous basis interacting with the customer. There are many projects which are in overseas locations. People are visiting. They are meeting the concerned team. And they are taking feedback how it is going to get materialized. Now, in that endeavor, in the Middle East, the feedback we got from the bankers and the overall geopolitical situation, it was not very encouraging. So then we thought that let's make the provision. At this point in time, and as things materialize, then we will see how to go about on the ECL provisioning. So there will not be any surprise going forward. Rather, it could be a positive surprise. And two, we are also, we have received some 3-4 arbitration award, which we are on a constant basis in the same exercise we are discussing with the customer. On a slow-moto basis, we have made this provision towards this. It will give us some headroom for negotiation so that we can realize the cash quickly. At the moment, we are not seeing that anybody has asked for any discount, but then from our end, we thought that it would be better we keep it so that it gives us flexibility. We can quickly conclude the deal. So that's where we have made the provision. If we realize all that amount, there could be a reversal.

Aditya Bhartyo, Analyst — Investec

Sure, understood. And what had really warranted this change of kind of increasing the way we are creating provisions? Because we had a one-off kind of provisioning in fourth quarter as well. Now, if we are fairly confident that we should be receiving these amounts, then why change the rate at which provisioning gets created?

Ramesh Kumar Jhaad, CFO

Because, see, the amounts are outstanding for, you know, the period of outstanding is higher, and once that outstanding receival moves to a certain bucket, basis that bucket, we are making provisions. The rate whatever you know is defined for that particular bucket.

Aditya Bhartyo, Analyst — Investec

Sure, sure. Understood, sir. One last question. On Pune Ring Road, has there been any progress? Are we anticipating that project award in the near term?

Srinivasan Parmasivan, Other

Pune Ring Road, we expect maybe Q4 it could get awarded because tender has already been floated with 45 days deadline for submission. And after the submission, then it will take about a month for them to evaluate and give. So, we do expect the award of Pune Ring Road job in Q4.

Aditya Bhartyo, Analyst — Investec

Sure.

Srinivasan Parmasivan, Other

Thank you so much. As this thing has this fresh bid, depending on who is the L1, that will get awarded. And we are quite confident.

Operator

Thank you, Sutta. Thank you so much. Thank you. Thank you, Aletia.

Operator

Thank you. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. The next question is from the line of Shravan Shah from Dollars Capital Private Limited. Please go ahead.

Shravan Shah, Analyst — Dollar Capital Private Limited

Hi, sir. A couple of questions. Sir, just wanted to get a clarification that for next year, for 28, when we are saying that we are looking at 20-25% kind of revenue growth, and even for the second half, we are saying confident that the things will improve on the execution front and obviously on the entire working capital payment, everything, and also the mobilization. So then why not to give a guidance for the second half or maybe for the full year of FF27? What stops the office to give a guidance on the revenue and the margin for second half or maybe for full year of opportunity is seven.

Ramesh Kumar Jhaad, CFO

You see, what we have explained is the guidance which was held back because of, you know, the geopolitical situation, there were challenges related to energy availability at many project sites. Because of that, we had held back. See, even when we speak today, we are experiencing in place like, say, Bangladesh, there is a challenge of availability of energy, and we are facing challenges in terms of the logistics for sending material to places. So, considering that we do not want to get into a situation where we factor something and then things go haywire. We are now expecting that situation should improve in terms of geopolitical situation, and once we see that the uncertainty around that is done away with, we will be reinstating back the guidance.

Shravan Shah, Analyst — Dollar Capital Private Limited

But then, sir, if when we are saying FY28, we will look at 20-25%, but if we don't know the base, then also that also contracts that we are confident for FY28, but we are not confident for the second half of FY, which is very immediate and one month is already passed for this. So, some sense in terms of where we can look at the 5,300 crore revenue that we did in 1S, could it be a 6,000 crore, 6,500, 7,000 less than, higher than, some idea on that front.

Ramesh Kumar Jhaad, CFO

This is 20-25% number we are talking about. We are talking about that number from the full year of March 26.

Shravan Shah, Analyst — Dollar Capital Private Limited

Okay, from March 26, we are looking at a 20-25% growth in FY28. Okay, got it. And second, sir, on the margin front, so two, three things to get a clarification. What was the ECL provision for Q2? Second, so my understanding is it would be around 86 or kind of a number would be there. So, even if we remove that also, then also the margin for what the second half, not as per you, but as per the reported, is close to a kind of a 6.7%, which is given the similar revenue 1Q and Q2, it is significantly lower versus a 9.4% as per the reported. So, still not able to understand what is impacted the margin in the second quarter and related is now how we can look at the arbitration. So, whatever till now we have got. So, in third and fourth quarter, how are we looking at the arbitration amount because that will change significantly in terms of the margin for us.

Ramesh Kumar Jhaad, CFO

No, see, what, I mean, the way we'll have to look at it is, in terms of top line, when we do, say, around, say, 2,400, 2,500 crore kind of a top line, at that number, we'll not, we, that gives you a kind of break-even kind of a situation, because the fixed cost, whatever you are incurring, that will remain fixed. Now, incrementally, over and above those numbers, say around 2,400, 2,500 numbers, we start generating margin. If we look at the gross margin we are generating is around 35%, maybe say 10, 20 basis point here and there. So, we generate that 35% margin on the gross profit basis. Incrementally, every 100 crore, we will be generating another 35 crore, and that adds to your EBITDA margin, to your profitability. Now, what we are trying to say that H2, we will have a better number than what we have done in H1, and that's where we are trying to give you a confidence that for the full year, we are looking at correcting the situation as far as the margins are concerned. Now, specifically, you are talking about the H1 number, you are talking about. Maybe, you know, the difference we are having, we have explained that we include other income also as part of our operating income, and that's why we are having difference. Maybe you are looking at the number excluding the other income. If you look at the standalone AFCON's profitability, that will give you a sense that we are generating, the projects are generating Sufficient margin because as I explained that in one of the overseas entities we had to make ECL provision and that has pulled the overall profitability down.

Shravan Shah, Analyst — Dollar Capital Private Limited

So, sir, total ACL provision in Q2 in console is how much, 86 odd per hour?

Ramesh Kumar Jhaad, CFO

No, in Q2 it is higher than that.

Shravan Shah, Analyst — Dollar Capital Private Limited

Can you specify the number?

Ramesh Kumar Jhaad, CFO

I'll give you that number, maybe, I'll give you that number of them.

Shravan Shah, Analyst — Dollar Capital Private Limited

Okay, and two, three data points on the CapEx front, we have already done 700 crore. So, previously, we were looking at 700, 800 crore for this year and 600, 650 for next year. So, how one can look at now and in terms of the gross date level, we were looking at kind of a 3,500 crore, similar number of.

Ramesh Kumar Jhaad, CFO

See, the capex number we have talked about for the FY27 and 28, that number remains to be the same. It is not going to change. We are looking at for FY27, capex in the range of 700 crores, and in FY28, around, say, 650 crores, that number remains to be the same. And in terms of debt, we had talked about that FY27 will be on gross debt basis will be around 3,500. On net debt basis, it will be around say 2,750, 2,800 crore. That number will remain. I think important point in debt one needs to understand is we will have of the March 27th debt, a significant portion will be a term debt towards the capex. The working capital debt will come down.

Operator

Mr. Bhandari, do you have any follow-up questions? Mr. Bhandari, we are not able to hear you.

Operator

As there is no response, we move on to the next participant. The next question is from the line of Shirom Kapoor from Jeff. Please, please go ahead.

Shirom Kapoor, Analyst — JEFF

Hi, sir. Thanks for the opportunity. Just a couple of questions. You mentioned, you know, your order book is excluding L1 orders. So, would you be able to, you know, quantify and give us some detail on what these L1 orders are that you currently have?

Srinivasan Parmasivan, Other

There are a couple of orders in Europe. Aggregating to around 4,000 crores, between 4,200 crores, two projects, we are in one.

Shirom Kapoor, Analyst — JEFF

Got it, sir. By when do you expect, you know, conversion of this?

Srinivasan Parmasivan, Other

More or less, when you look at it on the 30,000 cadence, Europe, it takes a little longer time to convert into order as compared to other markets. Therefore, we have not considered this in FI27. We do expect it in FI28.

Shirom Kapoor, Analyst — JEFF

Got it, sir. And secondly, in your last quarter, you mentioned a couple of big ticket projects coming up, such as the Brahmaputra Tunnel and Dolera Connectivity in Ahmedabad, you know, about 18,000, 19,000 crores worth of projects. So any update on these tenders, you know, how we are positioned in these?

Hitesh Singh, Other

See, it won't be appropriate to discuss individual tenders, but as MD sir mentioned, we are fully confident that we will achieve our guidance of 30,000 crores. Pune Ring Road is already being discussed in the previous question. Brahm Putra, also the tenders are out. So, if everything goes fine, the award for that project should also happen this year as well, considering we will be L1 there, and for other projects, there are certain bid ticket projects which are in the pipeline, and we are fairly confident, considering our strike rate and various considerations, we will achieve that target.

Shirom Kapoor, Analyst — JEFF

Got it, sir. And if I could ask, you know, you've maintained your 30,000 crore order flow guidance for this year. But, you know, we're almost, you know, seven months in and looking ahead to FY28, you know, directionally, maybe you don't have to quantify the guidance, but directionally, do you see that the 30,000 crore is largely a function of, you know, a lot of bunching up of orders from last year and maybe next year, the quantum could come down? Or do you expect this to continue growing in terms of order flow in FY28-29?

Srinivasan Parmasivan, Other

From last year, only one job we got, 7,500 drawers of Khrushchev. And all others are fresh jobs. Okay, so it may not be appropriate to look at bunching up of orders from the previous year. And as opposed to 7,500 drawers of Khrushchev, we already have about 4,200 drawers of other European jobs in the pipeline, which is marginally less, I would put it. So, for the next year order book guidance, we would say it will be too early to say. And for the year, we will achieve first, and then we will come back to you with guidance for next year.

Hitesh Singh, Other

However, we will keep in mind our book-to-build ratio and other risk factors. Even if there is a large availability, we will make sure that we will take the projects which we didn't deliver. So, all those factors will prevail.

Shirom Kapoor, Analyst — JEFF

Got it, sir. And just, you know, lastly, you usually give a two-year prospect pipeline. You split it between your businesses and between domestic export, if you could just share those numbers.

Hitesh Singh, Other

Sure, we'll do that. So for the remaining H2, our pending pipeline which we see is around 80,000 crores and which is spread across segments. Hydro is around 35%, marine also 35%, surface which is road and rail is relatively less, around 10%, and urban infrastructure is 20%. For For the next year, that is FY28. And plus this quarter, which means around six quarters, the total pipeline, the total temp for us is 3.6 lakh crores. Again, equally spread across segments, 20% in hydro and underground, 27% in marine and industrial, 20% in surface and surface transport, and around 32% in urban infrastructure. And in terms of geography, 65% of this pipeline is domestic and 35% is outside India.

Shirom Kapoor, Analyst — JEFF

Got it. Thank you, sir.

Operator

Thank you. The next question is from the line of Bhavik Shah from Invexa Capital LLP. Please go ahead.

Bhavik Shah, Analyst — Invexa Capital

Yeah. Hello, sir. Am I right here? Yeah, you are right here. Yes, you are right here. My first question is regarding the provisioning. So, sir, is it fair to say like in the coming quarters of LLP, do you think we will increase provisioning? No. Okay, so this is a one-off which will get corrected in the coming quarters, right?

Ramesh Kumar Jhaad, CFO

Yes, so as I explained that even these provisioning what we have done, we have explained that we are at a very advanced stage of certain arbitration award realization, and we thought that let's have something in hand so that we can, if there is a requirement to offer some discount, we will be able to offer and we can get the amounts realized. So we don't foresee going forward there will be any requirement. And even if we are able to realize this amount, there will not be, maybe we can look at correction in the provisioning. And two, in one of the overseas subsidiaries, we had to, based on the market feedback, we had done the provisioning, but then we will be following up with the customer for realization of that. And based on the progress, we will take call how to go about on the provisioning.

Srinivasan Parmasivan, Other

Third, newer arbitrations also, when we get arbitration award, we will keep some cushion for negotiation.

Bhavik Shah, Analyst — Invexa Capital

Understood. So, what is the receivables outstanding from these debtors, like which have been provisioned or which have been provided for in this round, the additional ones? So, what is the total amount of the receivables outstanding we have?

Operator

Ladies and gentlemen, we have lost the connection to the management. Give me a moment while I have them back in the conference. Thank you for your patience. We have the management line back again in the conference. Mr. Shah, please go ahead with the question.

Bhavik Shah, Analyst — Invexa Capital

Yes. So, what is the receivables outstanding from these subsidiaries or projects which have been provided for in this round, like of the total receivables?

Ramesh Kumar Jhaad, CFO

See, the total receivable, it would not be appropriate to give the number, but we have made sufficient provision, and we don't foresee that there will be any further requirement of any provisioning.

Bhavik Shah, Analyst — Invexa Capital

Understood, sir. Sir, and in our, say, order book, what is the proportion of, say, now the JJM order book and the JJM receivables which are outstanding?

Ramesh Kumar Jhaad, CFO

So, in JJM, we have explained in past that in JJM, we are doing project at 2-3 location, but the difficulty we are facing is in UP only. The pending order book in UP is around 474 crores now, which the discussion what we had with the customer, they are expecting us to complete 75 percent, and then after that, they will release that payment. So, going forward, we are going to execute. We will take whatever percentage we have completed to 75%, we will get the realization, and then with that money, we will try to complete. As far as outstanding is concerned, we have got 372 crores in UP outstanding. We have realized some amount of payment in last 2-3 months, but the amount realization is small. But I think the going forward, the way forward we are looking at, it will not be, you know, a significant chunk getting released. We will have to progressively complete 75 percent and against that we will get the realization of payment.

Bhavik Shah, Analyst — Invexa Capital

So, outstanding is 372 crores or we have realized 372 crores till now?

Ramesh Kumar Jhaad, CFO

So, outstanding amount is 372 crores. This amount we had talked about in past, it used to be in excess of 400 crores, but then gradually they have released some payment. And now going forward, we have got a plan we have discussed with the customer. They are looking at completing certain segment, which progressively we will complete, we will cross the threshold of 75 percent, and once we complete, they will release the payment.

Bhavik Shah, Analyst — Invexa Capital

Sir, you told us some projects are seeing slowdown from the customer's end. So, which are these projects and which you see will pick up execution in H2?

Ramesh Kumar Jhaad, CFO

So, see, slowdown in the sense what we have talked about, one we have talked about that the payments are getting stretched. So, that we are seeing that it is across the spectrum that kind of a trend we are seeing. In second half, the execution phase picking up, we have talked about in past that in some of the Maharashtra projects, there were certain land acquisition related issues. There were certain design related aspects which had to be changed. So those have already been completed and going forward, we will be looking at Q3, Q4, partial phase of execution. Also some of the project which is into offshore marine related project which generally slows down In monsoon season, we will see a pickup there.

Bhavik Shah, Analyst — Invexa Capital

All the best. Thank you.

Operator

Thank you. The next question is from the line of Mudid Bhandari from IIFL Capital Limited. Please go ahead.

Mudid Bhandari, Analyst — IIFL Capital

Yeah, thank you. Sir, over the last few quarters, we have seen this in terms of various projects like either change in scope, like you recently mentioned, in terms of either design-related or any other issues or pending clearances, either in terms of land acquisition or any other clearances. So, as we speak till now, whether the work has actually started or the project that we are talking about since. It's been some time that aggregation is yet to start.

Ramesh Kumar Jhaad, CFO

Now, the work was happening in those projects, work was happening. See, please understand that the project we are talking about are long stretch projects, you know, it runs into kilometers. So, the customer had given certain land with which we had commenced the work. Certain land they had to acquire and there were certain challenges in the acquisition or maybe, you know, during the course on some aspect of the project, there is a change in design. So, as I explained that those aspects we have already crossed and going forward, we'll be looking at a faster execution in the entire stretch of the project. So, we were already working in those projects.

Mudid Bhandari, Analyst — IIFL Capital

Got it, sir. And when we say in terms of delays in receivables due to un-fertified bills and so how that has panned out since if you look at September numbers, that still feels elevated. So any progress till late? Can you just explain, once again, so when we say that there would be improvement in collection in the second half, so till now, if you have seen any major collection being realized post-September till now or any other in terms of interactions that you have seen that in terms of visibility of improvement of collection.

Ramesh Kumar Jhaad, CFO

See, there are three aspects to it. One, what we are saying is, the work done we are doing, the customers are taking time in certifying and releasing the payment. I am not saying that they are not releasing, what I am saying is they are stretching the payment. That is one. So whatever work done we are doing, we are getting it and going forward also we will get. So when we are talking about any number for the March, we have factored in this kind of a stretched payment. Two, what we are talking about is we have got certain stock receivable which we have to receive. So, say we have completed the project, some places the retention is to be released, likewise. So, those collections, we have set a target for this financial year. We have set the target for first half also. So we have seen a substantial movement in first half, and in the close interaction with the customer, we are quite confident that the target we have set for this financial year, we are going to achieve that number. So that will give us a big boost in terms of fund, you know, getting into the company from the stuck receivables. So that will bring down the, say, receivables or contract assets, and then that will also help in reduction of debt, networking capital, and, you know, that will aid to the cash flow from operation. The third aspect we are talking about is the new projects we have won now. For those projects, there is a eligibility of mobilization advance. So, till we have finalized the September accounts, we have not realized those advances. Those advances are going to get fructified in Q3 and Q4. So, that is also going to aid the fundability for the company. And that's how we are saying that we will see an improvement in cash flow from operations.

Mudid Bhandari, Analyst — IIFL Capital

Got it, sir. And lastly, when you said that our other cost has three other things, including ECL provision, arbitration receivable provision, and run overseas subsidiaries provision, so is it possible to quantify this amount to get the correct run rate of other cost?

Ramesh Kumar Jhaad, CFO

As I explained that ECL provision, we have done, because we have moved to a new ECL provisioning matrix, basis that we have done the ECL provisioning, and they will not be, as such, you know, you will be able to extrapolate that ECL provisioning for the remaining period, because, you know, that was some, on certain specific aspect, we have made that provisioning. Now, Going forward, I don't think that there will be a similar ECL provisioning in say Q3, Q4 or maybe future period. Even on this provisioning aspect what we have done, if we see the collection is happening, then maybe we can see how do we take this ECL provisioning.

Mudid Bhandari, Analyst — IIFL Capital

Okay, okay. Got it. I was asking in terms of correct, but that's fine.

Operator

Thank you. Next question is from the line of Bala Subramanian from Arihav Capital. Please go ahead.

Bala Subramanian, Analyst — Arihant Capital

Good afternoon, sir. Thank you so much for the opportunities. Sir, actually, tunneling turnover technically starts in this November onwards. If you look at our depreciation anywhere between 85-90 crore range. But historically, nearly 120 to 130 crore range. I think whether once that DPM-related tunneling activities will ramp up, whether the depreciation run rate will hit nearly 120 to 130 crore per quarter range, sir.

Ramesh Kumar Jhaad, CFO

Yeah, so you are right, the depreciation will go up, and as the TBM starts operating, you will have uptick in the turnover, and also the contribution, because the TBM-related turning, we have explained in past that it generates a higher contribution margin. So, you are right, it will, the depreciation will go up, but at the same time, it will also take the top line up, and it will also contribute more margin.

Bala Subramanian, Analyst — Arihant Capital

Okay, sir, is there any risk on that Vatwan port execution side, because Vatwan is restricted to geotechnical investigation, and designed due to land reclamation, handover delays, and public agitation? So, what are the risks we have? Are we protected in terms of contractual or escalation clauses or equipment conversation in both sides?

Srinivasan Parmasivan, Other

In Wadwan port, there are three aspects. One is our own execution. Two is approach. The approach, one project is being handled by energy. Another project is handled by Wadwan port only. Both are already delayed. And with respect to our work, we have already started geotechnical investigation. We have not faced any local issues so far. And we have kind of engaged locals also wherever needed, all that. But the issue would remain without the approach being handed over to us, which is contractually to be handed over to us. And there is going to be a challenge for a full-scale working. So, clients are in discussion with us for alternative methods of doing the work, which is something currently under discussion. As this forms part of follow-up of projects in the Pragati portal, there could be specific discussion around that. The alternatives are being discussed as to how to get the work going, not confining ourselves only to geotechnical and design. And in terms of extension of time and other areas, we don't find any issues. But the issue could come up on the execution side till the alternatives are frozen and cost related to the additional work is frozen. So to that extent, the turnover could be less till that time. But we are working on the geotechnical based on which designs and all we will complete.

Mudid Bhandari, Analyst — IIFL Capital

Yes, sir.

Bala Subramanian, Analyst — Arihant Capital

Yes, sir. Sir, my last question on that Grotia radio project side, if you look at the international market, supply chain related challenges and material availabilities is still there. Once, what is that, expected peak revenue contributions from this project, whether it will start from FI28 or FI29, and how the supply chain has been localized to product the margin side. To look at, on the export side, generally 200 to 300 basis point, higher margin compared to domestic projects. Still, we are in that same side to get higher margins compared to our domestic projects.

Srinivasan Parmasivan, Other

Well, on this project, typically, international projects don't have a pass-through mechanism. But fortunately, in this project, beyond 10%, the escalation is compensable. Thank you. The 10% we have already taken appropriate provisions. So we don't foresee any issue on profitability. Revenue will start in FY28.

Mudid Bhandari, Analyst — IIFL Capital

I got it, sir. Thank you.

Operator

Thank you. Ladies and gentlemen, before we take the next question, a reminder to all the participants, to ask a question, please press star and 1. Next question is from the line of Savan Shah from Dalit Capital. Please go ahead.

Shravan Shah, Analyst — Dollar Capital Private Limited

Hi, sir. Just two, three things to clarify. Sir, we are looking at a mobilization advance to be received in the second half where we have received recently the 19,500 crore order inflow. So, how much are we looking at broadly in terms of the mobilization advance in the second half?

Ramesh Kumar Jhaad, CFO

See, it would not be appropriate to give you a specific number, but then I can tell you that generally in our project, we are eligible for 10%. In some projects, there is a 15% advance possibility also. But at the same time, the entire amount is not dispersed in all projects in one go. In some project, it is given at one go. In some project, it is given initially, they will give 5 percent, and then subsequently, they will give another 5. Once you utilize the 5 percent, then they will give you the subsequent 5 percent. But I can tell you with certainty that we are looking at a very sizable number of advance in the next half.

Shravan Shah, Analyst — Dollar Capital Private Limited

Okay, got it. Second, sir, this contract asset, so particularly the unbilled revenue, so 6,200 crore part of current assets and 2,000 crore kind of a part of non-current assets. So, this 8,200 odd crore, so have we seen any kind of a certification post September till now in last 35 odd days? I have this number came off or maybe because of the ongoing execution, this number is broadly the similar. The old one is getting certified, but the new one is also getting added.

Ramesh Kumar Jhaad, CFO

Yeah, so you are right. It remains to be the trend, but then our endeavor is to bring it down, and maybe we will see this number at the year end. There is a full effort that we should bring it down.

Shravan Shah, Analyst — Dollar Capital Private Limited

Okay, got it. And on the arbitration and the other income part, so till now, whatever we have received in terms of arbitration, do we expect is there any arbitration claim the way we have 183 or corroding Q2 in third quarter or fourth quarter? Any likely given till now, whatever the situation we have?

Ramesh Kumar Jhaad, CFO

See, I mean, these are all, you know, semi-judicial process, and we will not be able to pinpoint that, you know, we are receiving or not receiving. There are various cases we are fighting, and the company is putting its best foot forward, you know, to defend its position in the arbitration. So, there are many cases which is there. Whether, you know, that is going to get fructified in Q3, Q4, it will be difficult to give.

Shravan Shah, Analyst — Dollar Capital Private Limited

So, if we, let's say, if we exclude that, then how one can look at the other income in the second half, the run rate that we have normally, 60, 70 yards per hour, that run rate is to be continued in the second half? It will be, yes. Okay, okay. And, Thank you. Yeah, yeah, and on the finance cost, so given the obviously the data has increased, so excluding the bank charges, the current 136 crore kind of a quarterly run rate, will it be higher in the second half or given the way we are looking at the reduction in the working capital leading to a reduction in the gross rate, but will that impact will be in the Q4 onwards or maybe one quarter? But this run rate or maybe it would be increasing the finance cost at least in the second half.

Ramesh Kumar Jhaad, CFO

See, this finance cost, what we are looking at, I don't think that, you know, from this kind of run rate, it is going to go up. Only thing is, incrementally, if we back project and if we are required to, you know, if the bank guarantee utilizes and goes up, there will be increase in the bank guarantee cost. But as far as the borrowing cost is concerned, I don't think that, you know, this is going to, we are going to cross the kind of run rate we have clocked, say, in H1.

Shravan Shah, Analyst — Dollar Capital Private Limited

Okay. Okay. Got it, sir. And then last, just a clarification, the L1 order that what we have mentioned, 4,200 crore. So, that is not part of 19,500 odd crore the YTD order received. So, that is where we have received the LOA. And this is the separate one, 4,200.

Ramesh Kumar Jhaad, CFO

Yeah. So, 19,400, we have got the confirm order. This L1 order, we have talked about this 4,200 odd is not counted in that.

Shravan Shah, Analyst — Dollar Capital Private Limited

Thank you. Thank you very much.

Operator

Thank you. Next question is from the line of Yogesh Doshi, an individual investor. Please go ahead.

Yogesh Doshi, Analyst — Individual Investor

Good afternoon, sir.

Ramesh Kumar Jhaad, CFO

Yeah, good afternoon.

Yogesh Doshi, Analyst — Individual Investor

Sir, as a layman investor, I would love to know from you that we are in two extreme engineering businesses. So, can we not have payment schedule in an extreme way? How many cases we are fighting? We are very competitive to European companies in terms of our margin. We are one of the best engineering company in India. Yeah, so... For every good project, we have some arbitration or legal issues. Can't we have a board with a legal strong point so that our payment schedule is not delayed, and if it is delayed, then compensated with interest? Because as we are paying interest for our borrowing for that particular project, can you please... Guide me whether this extreme engineering is supposed to have extreme measures of collections. Thank you so much.

Srinivasan Parmasivan, Other

Thank you. The point what you are making is well made. There are some projects, especially some overseas projects, where delays in payments are compensated with interest. Domestic projects, barring exceptions, Generally, there is no interest loss. And it is not that for a complex project there are separate contract terms. It is not so in India as of now. Currently, it is all on pure L1 basis. First of the jobs had come in India with 60% technical, 40% commercial. First time it has come under QCBS.

Bhavin Modi, Analyst — Anand Rathi Institutional Equity

Now.

Srinivasan Parmasivan, Other

So, going forward, if that comes in, then technical will get a weightage. So, even if somebody is not L1 in terms of price, they would get as the lowest evaluated bidder. But in terms of payment terms, that is something which is more or less fixed under the Government of India procurement guidelines in most of the times. Therefore, their changes in the payment terms may be difficult. And another difficulty in these things, in arbitration, barring some, I would say, some employers or some states, other places. I can hear you, sir. So, on payment terms, it remains uniform, mostly guided by the Government of India procurement guidelines. And in terms of QCBS, First of the projects, one or two projects have started coming. We need to see how it is taking shape. And therefore, just because we do complex projects, we don't get a premium in the domestic market. In the international market, many places, it is QCBS, and where technical proposal gets significant weightage, and based on which you are not necessarily required to be L1. And in terms of pricing, but if you are a lowest evaluated bidder based on technical and commercial score, you will get it. There also payment terms, whatever is the standard payment terms, that reminds. Therefore, for complex projects, there are separate payment terms. For other projects, it's a normal payment term. That kind of a differentiation is not there. Both domestic and international.

Yogesh Doshi, Analyst — Individual Investor

Sir, how can we, I mean, make ourselves unique or how an investor can? Get premium or pay premium to our company's market cap if it is equal to everyone. I mean, the payment cycle or projects. See, just to make my point, if I am buying. EFCON infrastructure and so many other infrastructure EPC companies. Why should one pay premium to EFCON's infrastructure despite of this much of arbitration, legal issues, and net margin or gross margin is very much similar? No, let me complete, sir. The Sapurji Group and EFCONS are known as the best EPC companies overall in the world. But if we can't insist, the payment schedule with Indian government... We should be little choosy about taking all the projects where you feel that payment can be an issue. We should be only concentrating and focusing on projects where we see the payment cycle and promise. Of facilities are good enough. Instead of having 50,000 crores of orders, we can have 25,000 crores of orders for next two years. Anywhere, we are doing only 10,000, 12,000 crore orders. We can choose among the projects, no?

Srinivasan Parmasivan, Other

Traditionally, if you look at the... Why Afkans is held at a premium? One, corporate governance. Second, if you look at profitability in the infrastructure segment, in a normal circumstances, we have always been at the higher end of the profit spectrum. And EBITDA margin in excess of 11-12%, I don't think most of the construction companies are cheap. You are aware of yourself. As you are an investor, you know these things. And third, there is a huge international recognition which adds to the intrinsic value, even though it may not necessarily convert into transactional value. So, at some stage, if some stocks have moved like stocks, some of the other stocks have moved to like a portfolio stock, at some stage, Afghans could also move into a portfolio stock. That is what we expect. So, therefore, taking that into consideration, I, taking that into consideration, I think, in our assessment. AFCONS would continue to be a premium segment. As you know, AFCONS is the 8th largest player in marine in the world. 12th largest player of bridges in the world. These are not my statistics. These are Engineering News Record USA statistics. Okay. And we are the only company for 11 years in succession. We have been... I'm judged as the most admired or most innovative knowledge enterprise at India level, Asia Pacific level and global level. And taking all that into consideration, it is for the individual investors or the group of investors to decide what kind of premium one can acquire or all that. I cannot comment on that.

Yogesh Doshi, Analyst — Individual Investor

Thank you so much. Thank you, sir. Thank you for enlightening individual shareholders with this confidence. Thank you very much.

Srinivasan Parmasivan, Other

Thank you. Thank you very much. Happy Deepavali to you all. Thank you. Happy Deepavali and very happy and prosperous new year. Thank you.

Operator

Thank you, sir. Ladies and gentlemen, as there are no further questions from the participants, I would now like to hand the conference back to management for closing comments.

Srinivasan Parmasivan, Other

Thank you very much. Happy Deepavali and Happy New Year to you all. As conveyed to you, we are looking at a 20 to 25% growth in FY28, and the second half will be better than first half. We stand by our guidance of 30,000 crore of order book, and we are looking forward. Two exciting times back. Thank you.

Operator

Thank you very much. On behalf of Arantra Adhi Shares and Stock Brokers Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.