Earnings Call Transcript - XNSE:PATELENG 2026-11-06

Operator

Ladies and gentlemen, good day and welcome to the Patel Engineering Limited's Q2 and H1FY 2027 earnings conference call hosted by Valoram Advisors. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Purwangi Jain from Valoram Advisors. Thank you, and over to you, ma'am.

Purwangi Jain, Head of Investor Relations

Thank you. Good morning, everyone, and a very warm welcome to you all. My name is Purwangi Jain from Valoram Advisors. We represent the Investor Relations of Patel Engineering Limited. On behalf of the company and Validum Advisors, I would like to thank you all for participating in the company's earnings conference call for the second quarter and half year ended on September 30, 2026. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risk and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would now like to introduce you to the management team joining us on today's call. We have with us Ms. Kavita Shirvaikar, Managing Director, and Ms. Rahul Agarwal, Chief Financial Officer. Without any delay, I request Ms. Kavita to start with her opening remark. Thank you, and over to you, ma'am.

Kavita Shirvaykar, Other

Thank you, Purwange. Good morning, everyone. First of all, on behalf of the entire Patel Engineering family, I would like to wish you and your families a very happy Dhanteras and a wonderful Diwali. Thank you for joining us on this festive occasion to discuss our Q2 and H1 FY27 performance. Let me begin with a brief overview of our performance. Followed by an update on our autobook, business development pipeline, and key project milestones. I will also save our outlook for the upcoming quarters, after which Shahul Agarwal, our CFO, will take you through the financial performance in greater detail. The monsoon this year was somewhat uneven. While overall rainfall remained below normal, Certain project locations, particularly in the hilly region, experience spells of heavy rainfall, resulting in temporary disruption to construction activities. Despite these challenges, our teams maintain steady execution progress across our projects. For Q2 F527, our revenue stood at 1211 crores, with EBITDA margin at 12.42%. Net profit increased by 7.64% to 83 crores. Our H1 performance was encouraging with EBITDA margin at 13.24%, a net profit registering a growth of 15.94% to 177 crores. It reflects our continued focus on execution efficiency, cost control, and discipline project management. Moving to our order book, as of September 30, 2026, our order book stood at 13,546 crores, providing a strong foundation for revenue visibility in the coming quarter. The composition of our order book reflects our established trends in specialized infrastructure segments. Hydropower, 64%, irrigation, 14%, taloning, 4%, roads, urban infrastructure, and other segments, 13%. Our business development activities have gained good momentum. We have already submitted bids aggregating approximately 30,000 crores, covering several significant hydropower and infrastructure opportunities. Some of the major projects include 1125 MW Torchilling Hydropower Project in Bhutan, covering various packages. THDC's 1,200 MW Kalai 2 Hydropower Project. In addition to this, we have also participated in bidding for private farm storage projects, an emerging segment, which we believe offers significant long-term opportunities. Looking ahead, we see another 50,000 crore of further projects expected to come up for bidding over the next 12 months. These opportunities include road and tunnel projects in Ladakh and JNK, railway infrastructure projects, pump storage projects in Manashtra, Madhya Pradesh, and Andhra Pradesh, as well as several hydropower projects currently progressing through various stages of clearance. This provides us with a substantial opportunity to strengthen our order book and participate in the next phase of infrastructure development in the country. We are particularly encouraged by the growing opportunities in pump storage alongside conventional hydro, irrigation, and tunneling. These are segments where Patel Engineering has a considerable experience, technical expertise, and a proven execution track record. Our approach to breeding will continue to be selective and disciplined. We will focus on projects where we can leverage our strengths, ensure efficiency, execution, and achieve sustainable returns. Overall, we believe our current order book combined with the Substantial Building Pipeline provides a strong platform for future growth. Let me now take you through the progress at some of our key projects during the quarter. Q2 was marked by steady execution across our sites with several important milestones achieved. I would particularly like to highlight the progress at our major hydropower projects and the breakthrough at Slimanabad. Work at Subhansari continues to progress well. During the quarter, Unit 5 achieved wet commissioning and has subsequently been commissioned and integrated with the National Grid. With this, 5 of the 8 units are now operational, supplying a total of 1 to 50 MW of clean power to the National Grid. Work on the remaining 3 units is progressing steadily and we remain on track to complete all 8 units within the current financial year. This is an important milestone for one of India's largest hydropower projects and demonstrates our capabilities in executing complex, large-scale infrastructure projects. At Quar and JNK, construction activities have progressed well. We have crossed 4,000,000 cubic meters of dam concreting against the total requirement of approximately 7.5,000,000 cubic meters. The TRT outlet bridge has been completed. And work on the draft tube structure has come in. Excavation of the powerhouse is also complete with concreting activities now underway. Kiroo in J&K has achieved significant progress and is moving closer to completion. We have completed approximately 12 lakh cubic meter of dam concreting against the total requirement of 12.5 lakh cubic meters. And the powerhouse slab concreting up to the service floor has been completed for all four units. Our Shumtong project in Imachal Pradesh is also progressing steadily with concreting activities continuing at a good pace. We remain focused on maintaining execution momentum and achieving the planned milestone across these important heteropower projects. One of the most significant achievements during the quarter was at our Slimanabad irrigation project in Madhya Pradesh. We successfully achieved the breakthrough of India's longest irrigation tunnel, measuring approximately 12 kilometers. This is a major engineering milestone for Patel Engineering and reflects our expertise in executing technically challenging tunneling projects. The project is now moving towards final completion and once operational, it will bring irrigation benefits to approximately 2.45 lakh hectares of palm land in Madhya Pradesh. The project is particularly meaningful because of its potential contribution to agricultural cultural productivity and regional development. Alongside our operational progress, we continue to take steps towards unlocking value from non-core assets and strengthening our balance sheet. During the quarter, we transferred our entire 32% stake in ACP to Always Private Limited and Associate Company for a consideration of 55 crores. This follows the sale of a land parcel in the previous part through which we realized 26 crores. With this transaction, our total realization from non-core assets monetization during H1 at 81 crores. We will continue to evaluate opportunities to unlock value from non-core assets and deploy our resources more effectively towards our core infrastructure business. To conclude, we have made steady progress during the first half of April 27, both in terms of project execution and financial performance. With a healthy order book, substantial bidding opportunities, and the government's continued focus on infrastructure development, we are optimistic about the growth prospects ahead. Our experience and execution capabilities in hydropower tunneling and irrigation position us well to capitalize on these opportunities. We will remain focused on timely project execution, selective bidding, profitable growth, and strengthening our balance sheet. Thank you, everyone, for your continued trust and support. I will now hand over to Rahul Agarwal, our CFO, to take you through the financial performance in greater detail.

Rahul Agarwal, CFO

Thank you, Kavitha. Good afternoon. Good morning, everyone. Welcome to the earnings call. I will take you through the company's performance for Q2 in H1 FY27. Our revenue stands at 1211 crores compared to 1208 crores in Q2 FY26. Operating EBITDA stands at 150 crores with a margin of 12.42% compared to 159 crores with a corresponding margin of 13.13% in Q2 FY26. Net profit after tax has increased by 7.64% and stands at 83 crores. Compared to 77 crores in Q2 FY26. On a standalone basis, we have achieved a revenue of 123 crores compared to 1198 crores in Q2 FY26. Operating EBITDA is 147 crores with a margin of 12.22% compared to 151 crores with a corresponding margin of 12.6% in Q2 FY26. Net profit after tax is 51 crores compared to 64 crores in the corresponding period last year. Revenue breakup for the sector-wise is Hydro 71%, Irrigation 14%, Tunneling 11%, Roads, Urban Infrastructure and others 4%. On a consolidated basis, for H1, our revenue stands at 2,491 crores compared to 2,442 crores in last year. Operating EBITDA stands at 330 crores with a margin of 13.24%. Good morning, everyone. Compared to 324 crores with a corresponding margin of 13.27%. Net profit after tax for the H1 is 177 crores compared to 152 crores in the corresponding period last year, which is up by 15.94%. On a standalone basis, revenue is 2477 crores compared to 2422 crores in H1 FY26. Operating EBITDA is 323 crores with a margin of 13.04% compared to 310 crores with a corresponding margin of 12.79% in H1 FI26. Net profit after tax is 133.5 crores compared to 133.8 crores in the corresponding period last year. Speaking about debt and working capital, the consolidated debt as of September is 1312 crores. Client advances is 609 crores compared to 622 crores as of March. Debt equity ratio is at 0.28. Out of the debt, total term debt is 350 crores, and the rest 960 odd crores is working capital debt. That concludes the financial overview. Now we are happy to take any questions that you may have.

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask questions may please press star and one on their touchstone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Please, ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and want to ask questions. The first question is from the line of Rajiv Rupani, an individual investor. Please go ahead.

Rajiv Rupani, Analyst — Individual Investor

Good morning, Kavita, ma'am, and Rahul ji. Happy Dhanteras and happy Diwali to you and your family and the entire Quartel Engineering team. Rahul ji, I had a follow-up question on the promoter pledge. So, last con-call, you had told that the promoter pledge will be reduced by about 20%. So, can we have an update on that, please?

Rahul Agarwal, CFO

Yeah, so the promoter pledge has come down from around 88-90% to 67%.

Rajiv Rupani, Analyst — Individual Investor

So, and what about further reduction? When do we see the promoter pledge being less than 50% or going down to zero? Because I believe we have good fundamentals now, and we have land bank worth 800 crores. So, can't we approach the bankers to reduce the pledge by a bigger percentage?

Rahul Agarwal, CFO

See, it takes some time, because once the place is created, you know, we have to... Go through steadily only. So, this year, whatever we had established or, you know, whatever we had estimated has come. Now, we will have, we will see next year after this year's performance, next year again, we will try to approach the lender and see what further.

Rajiv Rupani, Analyst — Individual Investor

And also, my next question was, sir, the promoter's stake has been reduced from 39% to about 31%, and they have not participated in the rights issue also, and the current market price is below the rights issue. So, are the promoters not interested in increasing the stakes back to about 40% or they are happy at this level?

Rahul Agarwal, CFO

They cannot comment on, you know, whether they are happy, but, you know, we are in discussion with them, and as and when, whatever company requirement will be there, we will take a look at that accordingly.

Rajiv Rupani, Analyst — Individual Investor

Okay, sir. And my next question was on the land bank. So, can we have the location of our Funville land bank and the Hyderabad land bank, about 400 acres, which is left? Can you give us the location, please?

Rahul Agarwal, CFO

Yeah, but see, the location is outskirts of Hyderabad, and Panvel is in Panvel only, means near Bombay.

Rajiv Rupani, Analyst — Individual Investor

No, but is it near the Choke or near the airport, approach location, can you share with us? It's on the old Bombay.

Rahul Agarwal, CFO

And Hyderabad also the area, outskirts of Hyderabad, can you share us which area it is? You can, what you can do is, I don't have the exact area details right now. You can write to us, we can revert back to you. Okay, thank you.

Rajiv Rupani, Analyst — Individual Investor

I'll get back in the queue.

Operator

Thank you. The next question is from the line of Devan Shah from Eternal Capiti. Please go ahead.

Devan Shah, Analyst — Eternal Capital

Yeah, hi. So, thank you so much for the opportunity. So, firstly, I just want to understand that the company is targeting to enter very high entry-to-barrier segments. So, how is the management seeing the competitive positioning against large EPC players, and particularly in terms of technical capabilities, project execution, and how is the environment on the bidding front? Just on the ground, how is it going?

Kavita Shirvaykar, Other

So, hi, I'm Kavita here. So, see, there are four or five bidders in this segment, particularly in large hydropower projects. So, compared to other sectors, we see here less competition and opportunities available in future are huge. So, we see, we are fairly confident we will get our share of work.

Devan Shah, Analyst — Eternal Capital

Okay, and anything on the technical capabilities, anything that we are still trying to reach on the competitive front, or we are capable enough to bid for any project that we would like?

Kavita Shirvaykar, Other

See, we are capable as of now. We have a strong PQ and hydro-irrigation internally, and we are capable of bidding on our own any value, any size, any type of project.

Devan Shah, Analyst — Eternal Capital

Got it. And just to follow up on the same, so, the tunnel boring machines that are being imported from China, I think that, as I understand it, that would be one of the use cases for you. So, and that has seen export restrictions from China. So, any commentary on that? How are we seeing it? I know that India has already said that we'll be manufacturing it in India, but what are your comments on that?

Kavita Shirvaykar, Other

It's been a round of four TGM machines. And we see that we already own four tunnel boring machines. We feel that whenever this kind of opportunity will come, first, we can use our own available machine. And if it's a requirement, we can, you know, explore the manufacturing, buying from India, other options.

Rahul Agarwal, CFO

Yes, in China, in Germany, TBMs are also available, and there are other options, you know, for We are open for all, and we hope that China restrictions will be lifted.

Devan Shah, Analyst — Eternal Capital

Okay, that's actually perfect. And just to understand, I think Germany tunnel boring machines are much more expensive, right?

Rahul Agarwal, CFO

It depends upon, you know, the comparative pricing may be a little expensive, but they have now started opening manufacturing facilities in India also. They are trying to be competitive.

Devan Shah, Analyst — Eternal Capital

Just coming to my second question. So I think the company has indicated transportation and adjacent infrastructure segments. So what are the segments that you are seeing as the most attractive risk-adjusted opportunities? And what will be the criteria for entering such new projects?

Rahul Agarwal, CFO

New projects, what we are trying to see is, you know, it will be an expansion of what we are doing existing only. So, for example, hydropower, we are trying to get into PSP project. For tunneling, now there were, earlier we were doing water tunnels or, you know, railway tunnels. Now there is a road tunnels also, a lot of projects, road projects are coming where tunnels are there. So, we are exploring those projects. High rail projects are there. There is an extension of what we do already and there is no additional pre-qualifications required.

Devan Shah, Analyst — Eternal Capital

Just if I can squeeze one more in, how is the manager intending to improve the cash flow conversion from our reported earnings? So, particularly the working capital intensity, and I see the receivable cycle being very long from at least the government infrastructure associations. So, what are your comments on that? How do you see it?

Rahul Agarwal, CFO

So, we have a couple of central PSUs. So, there, you know, cash flow realisation is not a problem. Only some projects where there are some milestone payments. So, temporarily, you may see cash flow up-down. And that is what is being reflected in this quarter if you see that, you know, some working capital limits have been utilised because cash flow realisation, because of milestones, has been deferred. So, that is only a timing issue. So, we don't see a challenge.

Devan Shah, Analyst — Eternal Capital

Got it. That's it from my side. Thank you so much, and all the best for the future.

Operator

Thank you. The next question is from the line of Viraj Mahadevya from Malibro. Please go ahead.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Hi, Tabitha Rahul. Thank you so much for the comprehensive introduction. Questions from my side. So revenue growth has been a bit disappointing, but as you articulated, this was some of because of the heavy monsoon in execution. Looking at slide 9 of your deck, there's about 4,500 crores of orders across 36-odd projects, which are... Targeted guidance of 10% revenue growth, and then much more in FY28 and FY29, so 15% to 20%.

Rahul Agarwal, CFO

So, basically what we are seeing is, we have bidded almost 30,000 crores of projects, which were expected to open in the next few months. So, once these projects come in, some initial mobilization phase of 6-7 months is there, so then the revenue will pick up. So, that's what we are going to go about, the revenue growth. It's only about... FY 27, 28, exactly, we cannot comment. FY 27 will be a marginal growth. And FY 28 is expected to pick up once these projects come in.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay. This 30,000 crores that's been big, can you give us a sense, Rahul, across how many projects this is? Is it one or two large projects? Is it, you know, 10 projects of 3,000 crores each? Just to give us a sense of the binary risk nature around your order book. Multiple is how many, Rahul. Three is multiple. Ten is also multiple. More than 10, right?

Rahul Agarwal, CFO

Around 15.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

17 projects, ma'am.

Rahul Agarwal, CFO

15, 15.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

15. Okay, great. So that's reasonably diversified. Also, I saw that the receivable spike in the first half of this year. Is that purely a timing issue, Rahul? And we're still on track for broadly receivable days of 40 to 45 to 50 that we've been doing in the last year or two?

Rahul Agarwal, CFO

Yeah, it is only a timing issue. Okay.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

My next question is, Kavitan, I mentioned about monetization of about 80 crores. I didn't catch that. This was the JV stake plus land monetization, and which land was this, if you don't mind?

Rahul Agarwal, CFO

First quarter, we had done a land monetization of around 26 crores, plus we sold a stake in SPV 55 crores, combined with JV 55 crores.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Understood. And any progress on Electronic City, the remaining Telangana land, Pandel, are they all live and looking to be monetized?

Rahul Agarwal, CFO

Yeah, yeah, we are working on them.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

I mean, all I would say to the management is, which is, I think, pretty obvious, is clearly the tailwinds in the sector seem to be very exciting. The order book, I know, has dipped a bit, but, you know, hopefully with the order winds ahead, we should build that back up. We've got a 350 crore term loan. So much of the perception around the company is linked to the history, which is now well behind us. I would really push the pedal on monetization of this land bank, which is well over 600-700 crores. Become debt-free, get the pledge shares released. And frankly, for a company that has consistently, over the last two years and going forward, will do a 400-500 crore free cash flow. I can't see why the company would not pursue an aggressive buyback. This would achieve a few objectives, in my opinion, as a humble shareholder. One, it pushes up promoter stake, which I think is a concern given the dilutions of the past and skin in the game. Number two, it announces to the market that Patel has arrived after a troublesome journey and the cash is real. And number three, you're buying at terrific value at a 2,400 crore market cap, potentially 400 crore PAT, sort of mid-single-digit PEs, which is a significant discount to the sector. So I would urge the professional management team to please take this up seriously with the board and consider a buyback. Thank you.

Kavita Shirvaykar, Other

Thank you. Thank you. We'll discuss internally.

Operator

Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment. Please go ahead.

Pritesh Chheda, Analyst — Lucky Investments

So I just have one question. In the half year of your inflow, the industry saw what kind of order inflow, and how much did you get? What kind of projects were finalized, and which projects did you bid for you did not win? You can give some details around it.

Rahul Agarwal, CFO

So, Pritesh, there is not many projects where we have bidded and which has opened. So, across industry, because we are focusing on India and Bhutan mainly, so there are not many projects which has come in our segment, which has opened. And so, whatever we had, in around June, we had bidded around 8,000, 9,000. Now, we are bidded across around 30,000 worth of projects. So, they are all expected to open. Hydro projects, particularly because they go through a lot of clearances, the government gives little time, but we expect that to open next.

Pritesh Chheda, Analyst — Lucky Investments

And let's say, so this comment of yours refers to projects which you had built and have not opened, but let's say if you had to assess this in totality, there will be projects which you did not build and have also opened. So maybe if you could tell in totality what kind of, so when you got 650 crores, did industry in total saw finalization of what number?

Rahul Agarwal, CFO

I think hydropower projects are concerned, nothing has come in the last six months, and you know, other projects, irrigation, obviously, must be there, but...

Pritesh Chheda, Analyst — Lucky Investments

So in hydropower, you have also not got any problems and there were no finalizations also. That's how I should put it. I mean, you're four and a half thousand crores in flow. 4,400 crore inflow that you reported last year, order intake. How much was hydropower in this and what was your market share?

Rahul Agarwal, CFO

Hydropower last year was, I think, one project only. Yeah, only one project. And so last year was particularly where we had seen that projects like, big projects like Dibang, you know, had come, which we didn't get. They were one out, other project, new entrant had taken it. So last year also, Hydropower projects, I think out of three, four projects, we got one project.

Pritesh Chheda, Analyst — Lucky Investments

No, if you could put it value-wise, sir. What was your inflow, and what was the total finalization?

Rahul Agarwal, CFO

So, value-wise, we got around 700 crores worth of projects. There was one single project of around 14,000-15,000 crores, which went to a new PUC layer. So, in terms of value, that number will look very big. Okay.

Pritesh Chheda, Analyst — Lucky Investments

And my last question is, now, in terms of this 30,000 crores of bits that you have put in,

Rahul Agarwal, CFO

We expect next 2-3 months it will open and then LOA can be in quarter 4 actually.

Pritesh Chheda, Analyst — Lucky Investments

For the bulk of this 30,000?

Rahul Agarwal, CFO

Yeah, we see majority might open by March. Correct.

Pritesh Chheda, Analyst — Lucky Investments

Thank you, ma'am. I'm happy to have you. Thank you. Thank you.

Operator

Happy to have you. Thank you. The next question is from the line of Santosh from WellFund Investments. Please go ahead.

Santosh, Analyst — WellFund Investments

Thank you for the opportunity. I have a question on the revenue side. During Q4, 2026, it was given that the expected revenue for the FY27 was 10%. I mean, it's a 10% appreciation when you compare with the FI26, but this H1 looks more like, more than, I think, it doesn't get more, it doesn't get more than 1% or 2% in the new side in each quarter. So, to achieve the 10%, at least that was given by the management, right? So, not our assumption. So, to achieve that 10%, so H2 has to get 20%, more than. So, do you think it's possible to get that or is again the problem with the guidance?

Rahul Agarwal, CFO

So, we would say, see, as you mentioned, revenue during the Sparta remains broadly stable as compared to Q2, FY26. See, because primarily, because commencement of certain new projects has been delayed due to pending forest clearances. So, with clearance coming through, execution of these projects is expected to gain momentum. And the further the opening of this... Projects worth are approximately 30,000 crores along with additional pipeline. We see there is a growth opportunity. But accordingly, revenue growth for F5-27 is expected to remain marginal, we are saying. Maybe 7-8 percent, something. And for F5-28, we expect better visibility on the growth outlook as the bridge opens and the outcome of new orders will become clearer.

Santosh, Analyst — WellFund Investments

Okay. So now, it's hard to get a 10% annual year, like FI27. That's what the revised guidance.

Rahul Agarwal, CFO

Yeah.

Santosh, Analyst — WellFund Investments

Okay. Yeah, I think that's all right. Thank you.

Operator

Thank you. The next question is from the line of Viraj Mahadevyan from MoneyGrow. Please go ahead.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Hi. A couple of more questions, please. The arbitration awards, any update on that, likely for this financial year? Is it still on track for that 100 to 150 crores?

Rahul Agarwal, CFO

So, we are on track for around 150 crores. 80 crores is total already done this year. So, balance, we should be able to...

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Sorry, sorry, Rahul, I lost you. I lost you briefly on the line.

Rahul Agarwal, CFO

So, balance is already done. So, balance, we should be able to do by March. We are on track. Either some land parcel sale or some realization of award money.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay. So, arbitrations do continue and they are progressing through the system and we hold our views at 100, 150 crores.

Rahul Agarwal, CFO

Yeah, so we are total non-core, but whatever we said, annually should come.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Specifically on arbitrations, keeping land aside?

Rahul Agarwal, CFO

So, arbitrations, we cannot say on an annual basis, because... Yeah, understood.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

But they're all progressing through the system, through the various courts.

Rahul Agarwal, CFO

That's happening, that's happening.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

That is happening, right? Secondly is, what is likely to be, Rahul, the capital expenditure over the next three years? FY27 likely, and then 28, 29, given that you're expecting a leg up. Meaningful double-digit leg-up in revenue growth.

Rahul Agarwal, CFO

Capex generally happens when we get new projects, so around 3% new Capex is required, so that we fund from client advances, so that may happen when new projects come in.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

So in absolute numbers, are we talking about roughly 150 crore Capex each of the next 2-3 Correct. Right? 27, 28, 29 in that zip code. And this would be primarily, Rahul, just for our understanding, is to buy equipment, lease it, what is the nature of this kind of capex, given ours is predominantly a contracting services business.

Rahul Agarwal, CFO

So we have to buy heavy machinery equipment for projects, like BBM machines, or, you know, there are other machines which are required to buy, which we can use for multiple projects.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

And do we have to buy it, or can we even lease some of these machines? I'm just thinking about what it comes up.

Rahul Agarwal, CFO

Thank you.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Are we paying out dividends or returning capital to shareholders from the free cash starting this year, or is that something that's not been discussed?

Rahul Agarwal, CFO

No, because there are multiple projects which are bidded, and once they open, we will need capital for that. So we are not looking at any sort of... Next year, please take a call once these projects come and how these are proceeding.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay. Okay. Any international project bidding happening or it's predominantly focused on the domestic market given the last...

Rahul Agarwal, CFO

Bhutan, we are exploring.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay. So, it's mainly Bhutan and Nepal, right, man? Like the past?

Rahul Agarwal, CFO

Right, right.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay. And are you seeing a big impact on, you know, cost of materials, you know, cost escalations on your projects? Are you able to pass them on in subsequent bidding and tenders that you're submitting to protect our margins?

Rahul Agarwal, CFO

Most of our projects have escalation clause, so it is passed through, actually.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

It is an entire pass-through, ma'am, live, or it's got like a three-month, six-month delay?

Rahul Agarwal, CFO

It is pass-through, but there might be something, you know, calculation and everything, there might be, it may take some time for realization.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay, so there is a bit of a lag. So is the large part of the EBITDA margin compression, Rahul, in this last quarter predominantly driven by the lower revenue booking and the inflation on the cost side? Would you say that's a reasonable assumption? And that that should normalize going forward?

Rahul Agarwal, CFO

Yes, but yes, that is one part of it.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Sorry, I missed the early part, you said?

Rahul Agarwal, CFO

I said multiple factors, but yes, this is also one part of it.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay, what are the other parts of it?

Rahul Agarwal, CFO

So that depends upon, like, the monsoon and then, you know, what stage of project we are executing. So there are projects which are initial mobilization phase, so there the work will be low.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Okay, great. And do we now have adequate working capital lines to take on, you know, large projects, even out of the 30,000 crore bid, if we were to win one-third of them, for example, we have the adequate working capital lines in place from our lenders to take them on?

Rahul Agarwal, CFO

The working capital lines are there, and we keep on reassessing every year. So, once new projects come, there will be further assessments, and then we will take a call to, you know, take...

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Right. And in terms of our borrowing costs, given, you know, now our…

Operator

Sir, I'm sorry to interrupt you. I would like to finally reach you. We'll come back. Thank you. Thank you. We'll take the next question from the line of P. Bhatt Chha, an individual investor. Please go ahead.

P. Bhatt Chha, Analyst — Individual Investor

Thanks for the opportunity. With the very vague reply about your vital... 700 crores, be it outside, had fun well. Also, these assets, whatever you have sold, have been at nothing at a very high prices or anything, a crore rupee per acre or something, if I remember correctly. My point is, it's very limited. A wise and a prudent management would like to liquidate these assets because you're paying something like 11% or 10% on your borrowings. So if you liquidate these a little aggressively, and instead of, you know, waiting for Godot for three years or four years from now, where it does not see much appreciation, and you save on that interest cost, it will send a very good signal. So why is the management not serious about, you know, aggressively selling? And getting the debt reduced to a reasonable level and free your, you know. And perhaps if the share stays at these abysmally low levels, anyone can think of buying it back, if they have faith in their company, and to, you know, raise the investors' confidence. It is with the ability of being at the top in certain areas, I'm certain the opportunity is big. That you carry has dragged you to such levels. Arbitration may not be in your hands. And arbitration, subsequently, if you receive the publicist, that goes to your bottom line and improve your working capital conditions. I never understand this. And henceforth, I definitely would expect you. Thank you, guys. It's very transparent. Nowadays, people would know. Thank you.

Rahul Agarwal, CFO

Thank you. So we just want to say that, you know, we are working on the land sales, and it also depends on the market. It is not easy to sell everything at a trot. We have in the past, if you see the last four or five years, we have sold more than 1,000 crores of land and realized those monies. So that, we are working on it continuously.

P. Bhatt Chha, Analyst — Individual Investor

No, a limited point is that you should come to tech. Where the land is situated, if somebody asks, you're a transparent company, you should be able to answer. Well, this is an address, this is a Google address. These days, things are very transparent, and one can figure it out. For all you know, some of the investors can help you.

Rahul Agarwal, CFO

No, no, of course, of course.

P. Bhatt Chha, Analyst — Individual Investor

Thank you. All the best.

Rahul Agarwal, CFO

Thank you.

Operator

Thank you. We'll take the next question from the line of Viraj Mahadevia from MoneyGrow. Please go ahead.

Viraj Mahadevan, Analyst — Malibro / MoneyGrow

Yeah, I think my questions have been answered. I'll come back if I recollect anything missing.

Operator

Thank you. The next question is from the line of Rajiv Rupani, an individual investor. Please go ahead.

Rajiv Rupani, Analyst — Individual Investor

Yeah, so my question was on the total debt. So total debt is around 1312 crores and the term debt is 350 crores. So my question was, once we receive the bids what we have submitted, we receive the orders. So will this total debt go up significantly or it will be around this level? Also, another point is whatever cash we receive from land sales, will this term debt go to zero? Could you clarify, please?

Rahul Agarwal, CFO

Yeah, so the land sale or non-core monetization will reduce the term debt, and what we are looking at is, see, overall debt, there will be some increase if it happens, new projects come in, obviously, new working capital lines will be used. But with the land sale and other asset monetization from awards, every year we have been monetizing So, as a combination on a year-on-year basis, we don't see substantial increase in debt, but in between, it can happen that some debt goes up.

Rajiv Rupani, Analyst — Individual Investor

Okay, and my last point is, the promoter pledge, instead of waiting for next year, I would request the promoters reduce their pledge significantly as soon as possible.

Operator

Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to the management for closing comments. Thank you and over to you, sir.

Rahul Agarwal, CFO

Thank you all for joining this call, and once again, happy Diwali. Thank you.

Operator

Happy Dunkerth. Thank you all. Thank you, ma'am. Thank you, members of the management. Ladies and gentlemen, on behalf of Patel Engineering, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.