Ahluwalia Contracts (India) (NSE:AHLUCONT) Q1 2026 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Ahluwalia Contracts (India Limited Q1 FY 'twenty seven Earnings Conference Call hosted by Ambit Capital Private Limited. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Sudip Bora. Thank you, and over to you, sir. Good evening, everyone. On behalf of Ambit Capital, I thank the management of Ahluwalia Contracts (India Limited) the opportunity to host the Q1 FY 'twenty seven Earnings Conference Call.

0:46 To discuss the results, I'm pleased to welcome Mr. Shabid Upil, Deputy Managing Director Mr. Vikas Ahluwalia, Director and Mr. Sabir Singh, Chief Financial Officer. Now I invite the management to take us through the key highlights of the quarter, which will open up for Q and A. Thank you, and over to you, sir. Thank you. Good afternoon, everybody. Ahluwalia Contracts (India Limited has announced its financial results for Q1 FY 'twenty seven. During Q1 FY 'twenty seven, the company has achieved a turnover of INR 1,025.81 crores and a PAT of INR 11.42 crores in comparison to a turnover of INR 1,004.88 crores and a PAT of INR 51.11 crores during Q1 FY 'twenty six.

1:39 The company has registered a growth of 12.03% in turnover and degrowth of 77.65% in PAT during Q1 FY 'twenty seven in comparison to Q1 FY 'twenty six. EPS of the company for Q1 FY 'twenty seven is INR 1.70 compared to EPS of INR 7.63 in Q1 FY 'twenty six. During Q1 FY 'twenty seven, the company's EBITDA margin is 4.29% as compared to 8.59% in Q1 FY 'twenty six and PAT margin is 1% as compared to PAT margin of 5.01% in Q1 FY 'twenty six. The primary reasons for the dip in EBITDA margin are as under.

2:27 We have there has been a finalization of the bill of the Ames Jammu project, which has resulted in a reduction of bill value by INR 29 crores. This is a cause of dispute. And now that the bill has been finalized, the dispute will be raised through an arbitration process. The adverse impact on this account is 2.6% on our EBITDA. Then there has been an adverse impact on account of West Bengal And Assam SIR drive and elections. This has led to a reduction of turnover in the projects that are being executed in these states.

3:12 And it has impacted in higher IDC costs, thereby impacting our EBITDA margins. Then during this quarter, labor rates have increased significantly in NCR, which contributes nearly 50% to our total portfolio. The minimum wage increase has been to the tune of about 35% to 40%, spanning over unskilled and skilled categories. This has led to an increase, a substantial increase in our waste costs. Then there has been an increase in our staff costs, where we have significantly increased our employee base as we have strengthened the organization and mobilized staff resources for our enlarged project portfolio.

4:03 The net order book of the company as on June 30 is INR2663.52 crores to be executed over next three, three point five years. Total order inflow during FY 'twenty seven till thirty six, twenty twenty six as well as up to basis INR512.81 crores. We are ready to receive questions. Thank you very much. We will now begin the question and answer session. The first question is from the line of Sharavan Shah from DOLLET Capital.

5:05 EBITDA margin because this is 4.3% is kind of one of the historic lowest margin. I understand you try to explain, but further want to understand in detail. So first, you are saying this 29 crore for that the bill, which was under dispute now finalized. So this 29 crore, we have booked in raw material cost and which has led to a kind of a 2.6% impact. You can say that. This was this is under dispute now after finalization of the bill. As you know, the project was completed last year and final billing and its checking was under process.

5:55 Now during this quarter of Q1, it has been frozen, and we have now this bill value, final bill value has come down by INR 29 crores. Okay. And you're right, the costs have been there, but the bill value has come down. The receivables have come down. Yes. But the other part, you highlighted in terms of West Bengal, Assam and the labor cost increase. So in the the last call, then when we did, so that must be known to you at that time or at this time even post the last phone call, this was the thing, and that's why there is a significant impact on the margin?

6:46 Yes, the labor the increase in labor was not known at the last during the last call. And it is a hefty increase. While there is a labor escalation clause in a few of our contracts, but quite a few contracts don't have this clause. A lot of our large orders with some large developers, the labor escalation is not there. Post this increase, we have reached out to these clients and submitted claims, if you may say, wherein we are asking for a revision in our item rate, which can lead to compensation on account of the large increase in labor costs.

7:40 And the most significant increase has been in NCR, especially Haryana and UP, where 50% in NCR, 50% of our order book is in NCR. That is why it has hit us in this quarter. Yes. Got it. So now given these things we know, so in Q2, do we see one of how much the clients have agreed to kind of compensate or still it will take time? So how one can look at net net in Q2? Will the similar margin or can we because we were looking at double digit. So when can we start seeing a double digit from Q3 itself? So for full year, how one can look at the margins?

8:31 So look, there are a number of external factors. One being this radical increase in pricing by the government of Haryana and the government of UP. So there is it is not possible for us to put a date as to when we will be compensated, whether it will be in Q2. But we expect that over the next two quarters, this some of this compensation will start flowing in. I have answered the first part of your question. The second part, Q3, again, we are hearing rumors about NGT or the impact on account of NGT, Government of Delhi and Haryana are looking to take stringent measures, while nothing is still out is there in black and white, but we can't quantify the impact on our EBITDA of the NGT, potential NGT impact.

9:34 So I cannot tell you whether we will be hitting the double digit in Q3. Q3 is likely to be impacted by NGT. How much? We cannot sort of give you an indication today. So at current juncture, what do you think that the what kind of a margin we can look at, let's say, from for the full year or maybe Q3? Or when can we start seeing double digit from Q1 FY 'twenty eight? Or still it will be a difficult maybe one off? Yes, this year, there have been a few black swan events. One, of course, has been the war. Second, of course, has been this labor pricing has impacted us in a major way because a couple of our projects, there are the labor factors as it is are higher because some materials are being supplied by the client or clients.

10:34 So it would be fair to say that this financial year, we are ruling out having a double digit EBITDA margin. But at what max number one can look at, let's say, if I have to look at other way, how max because as you highlighted Q3 also? Q2 look, Q2 is an aberration. Primarily, as I said, 2.6 percentage points have been shaved off because of one listing. And that also is something that the client at one time had agreed and now for various reasons, they've gone back on it.

11:19 It will we are already looking at we are starting arbitration proceedings. So we should whatever we had, what was there in Q1 of the last financial year, we are hoping that we would get back to those margins over the next three quarters. The effect of NGT, that is a rider that I'm putting here. We are unaware how much that is going to contribute or hit our margins. And this in any way is also impacting the execution. So what we were looking at 15%, 20% growth for this year, and even similar number for FY 'twenty eight.

12:06 So there is there any change on the lower side? No, we still feel there has been a top line growth this time around. We still feel that we will grow at about 12% to 15% top line growth. And it will, as per the historical EBITDA margin over the past couple of years, we should be there and thereabouts. Okay. Okay. Some balance sheet numbers are... So... So this... Sir, if you can provide It is. In inventory data trade payable? This is 776 crore.

12:56 $7.76? Yes, sir. That is the data. What? Pardon? That is the data. Trade receivable is $7.76 currently, you said? $7.76, trade level and data is 632 crores and retention is 401 crore. Sorry, how much you said retention is? Retention is 401 crore. 401 crore. And inventory is? Inventory, including the real estate inventory, 391 crore.

13:43 $3.91 crore. And mobilization and unbilled revenue? Mobilization, 924 crore, and unbilled revenue, $9.46 crore. $9.56 crore. Okay. That is also soft in this. And gross date and the cash? That is there are $2.02 crores, hardly. $24.28 lakhs. And cash and bank balances, including cash and bank balance, 920 crore. INR $9.20 crore. Okay. Thank you, sir. Thank you. Thank you. The next question is from the line of Waipao Shah from GM Financial. Please go ahead. Sir, we saw a sharp increase in interest cost in the first quarter.

14:34 So the reason for that? And could this be a recurring number in coming quarters? This is due to we have availed the mobilization demand during this quarter for the new project, central VISA project. So that's why there is increase in finance cost. So in coming quarters, this it will be a similar number every quarter, $15.16 crores? Yes, yes. More the proportion we think right now. And it will be a similar number. Amount by And sir, out of Mobilize add ons of INR $9.24 crores, what is the interest bearing portion and interest rate? 31%.

15:25 31%. And the interest rate? Interest rates, you might say around average 8%. Okay. So secondly, on Gemso and Jewelry Park, so when do we... What are the challenges which you are facing, and when can the work on the ground begin? And what is the revenue expectation on the project in this year and next year? Year? So there is a change in design or requirement happening from the client side. That is why the while our designing the architectural designing has been done, but that is undergoing a change.

16:15 So I think work on the ground will only begin it will not happen in this quarter. It is likely to begin in quarter three. And we are looking at a billing of about 100 crores in this financial year. Sir, next year? Next year, the billing should be INR $4.50 crores. So what is the time frame of completion for the project? It's three point five years. Okay. Okay. And sir, on the CST project, we have not seen that kind of pickup even in the first quarter. So how do you see the revenue moving in over there into this year and next year?

17:08 So we are looking at an average billing in the nine months after the first quarter to about INR 40 crores to INR 45 crores. That is roughly a billing of about INR $4.50 crores, INR 400 crores to $4.50 crores in this financial year, which will be ramped up to about INR 700 crores in the next year. Sir, what is the main challenge over here? So we have earlier, we were targeting close to INR 600 crores in this year. So what is stopping us from doing that? So we are hopeful that we'll still touch about INR 500 crores. As I said, we've done about INR 70 crores in this quarter.

17:54 And if we do about INR $4.50 crores in the balance nine months, we'll still we are hoping to cross INR 500 crores here. Sorry? Any projects or any issues over there? No, it was the project is basically divided in two parts. One is the platforms and the station area and the other is the new buildings, which are coming up. Work on the new buildings, which is the LD node, DRM building, all this the DRM building has started, LD node will start now. The building there, the client is approving in stages.

18:41 That's why the work cannot be taken up all at one go. As far as the platforms and station areas go, there, we get blocks as per the traffic. That is why it is taking time. Okay. Okay. And sir, lastly, on Central Vistas, how is the work on ground going? And what revenue are we targeting for 'twenty seven and 'twenty eight? So FY 'twenty one, let me first tell you, there are two buildings which were to be broken there, Nirman Bhavan and Upyog Bhavan. Nirman Bhavan completely broken. The foundation casting has begun. And in September, we'll start erecting the structural steel.

19:29 Udyogbaven was handed over to us about three weeks ago. And 90% of that has been demolished. The demolition will be completed in the next fifteen days. And we've started the excavation work. So a month from now, the foundation works will start in that area also. We are looking at a billing of about INR 700 crores in this financial year. And for next year? Next year, it would be about INR 1,000 crores. Okay. And sir, you mentioned that we looking to complete the building, which we started where Nirman Dhawan existed, which is about 50% of the job. We are looking to commission it by the end of next year.

20:27 And enterprise will be completed in FY 'twenty '9? Entire project will be completed in FY 'twenty nine, yes. And sir, on revenue, you mentioned 12% to 15% growth, right? So we are lowering the guidance from It the previous was 15%. We are sticking to that. As I said, the lower 12% the NGT is something which we are not sure about what impact that is going to cause. So that is why. So if it is similar to what happened last year, then we could we may cross 15%? Thank you, sir. Thank you.

21:15 Thank you. Next question is from the line of Sandeep Sabharwal from ask SandeepSagarwal dot com. Please go ahead. Yes. I think your last conference call happened fifteen days after the end of the previous quarter. So it's very difficult to believe that you did not know the impact of the new labor core, labor charges, etcetera. And what impact it will have on your first quarter results? Because what your results and comp costs typically happen forty five days last day of the reserve season. So like I've been observing that you've been giving guidance on growth, on margins, etcetera, last many quarters.

22:01 But I think those have no relevance actually because the numbers which come out are totally different. So have you any comments to offer on that? It's a very generic observation that you've given. You have some data or we can have a separate meeting, our CFO can meet you. I would like to think that we have been more or less in line with the guidance that I've been giving over the past three, four years post COVID. If you could be a little more specific. While I agree no, no, no, no, no, let me complete. Let me complete. While let me address the first part of your query that whether I was aware or whether we were aware of the impact of the price escalation on account of labor when we did our last investor call.

22:57 Are you insinuating that I was aware and I hit that? There is no... Or do you have some specific data? Do you have some specific data, which you want an answer from me, too? No. 40 your last conference call happened forty five days after the end of the previous quarter. So you, I think, had a call around the fifteenth or May 16. So if you are saying that so you are saying that the new labor charges were imposed on you after May 15 or before May 15? Was the impact of the full month or full quarter or half of the quarter? If you know the nature of our business, if you track this industry, you would know that April, May, June are traditionally that part of the calendar year where labor is in extreme short supply on account of various factors.

23:57 This quarter, this was further exacerbated by slew of festivals, especially Muslim festivals, 50%, 60% of our labor skilled labor or 80% of our skilled labor is Muslim, right? So the impact on the ground was felt much more, which was very difficult to predict, especially in NCR, especially in Ariana and UP, where government further compounded this issue by increasing the labor cost by 40%, 35% to 40% between skilled and unskilled. It was very difficult for us to predict the impact on our costs.

24:43 Have I spelled out the position clearly? No, not really, because when was the increase in labor costs done for you? Was it from April 1? It's an ongoing process. Then you are not understanding. Then it seems you've not tracked this industry. Please understand, what we are paying today on the ground to a bar binder or a car center or a mason, That is totally based on demand and supply. And in most cases, over the past two months, it has been more than what the government has mandated. It's a demand and supply issue. If you practice industry, you would know that. If you don't, we would be more than willing to meet up with you and give you a refresher course. No, no, don't need a refresher course. There's no need for you to become aggressive on the call.

25:32 No, I'm just telling you, you are insinuating your first question that you asked me, you are insinuating that I've hidden some facts. Didn't... You need to articulate better your question. No, no. I said you have a call middle of the quarter. By that time, you should have a fair idea of what's happening in that quarter. If you don't have a fair idea of what's happening in that quarter, then any kind of guidance is of no relevance. Look, I know what guidance I am giving. It is your prerogative to agree to it, believe it or not believe it. I am willing to invest more time with you and trying to take you through what impacts my costs on the ground. You are the one who's saying you don't need it. What more do you expect from me?

26:20 I don't think. Anyways, let's move on. Thank you. The next question is from the line of Vishal Periwalia from PL Capital. Please go ahead. Yes, sir. Thanks for the opportunity. Think I really like to know... Yeah. Thanks, sir. Sir, on this labor, whenever these changes happen, I mean, can this be considered more like a GST related changes, a change of law? Will this become applicable? And then same can be passed on to our clients? So this is not considered as a statutory increase. While if a certain component of the increase, say, if the was getting increased, that would a certain amount of that would be taken as a statutory increase, which the clients would have to necessarily bear.

27:19 In terms of increase by the government, it's not a strategy increase, I said. But having said that, we are still writing to all our clients and telling them that this increase coupled with the demand and supply issue. Today, labor has become a big issue. Especially over the last two, two point five months, all our projects, especially in NCR, have been operating at 40% to 50% labor strength. So we have reached out to our clients, and they have been sympathetic in at least listening to or going through the numbers that we are presenting to them as to the impact on our costs.

28:05 So we are hopeful that the projects which do not have a labor escalation clause with some of our larger clients in NCR, client will consider compensating us to some extent. Okay. Okay. And from accounting point of view, the employee costs that we booked in our P and L, does this have an impact of labor? Or it's only the actual related and other things, which is part of the employee cost? Say INR 120 crore in this quarter. Has. To the extent that such labor is employed by the company, rest, it is included there is and what is not employed and they are into like contractors or labor suppliers that is in the subcontractor or labor costs.

28:58 Okay. Okay. Because what see, from the P and L, it looks like, I think, probably a 30 crore kind of impact, which is coming from the aims. And if it is getting moved somewhere in the raw material and subcontracting, where the labor cost is also there, then that explain probably a 30 crore impact. The other impact is the employee cost increase that is impacting much more to our p and l. I think that's what I could gather. You already answered, Nunav, the number... No, no, no. So I think that's it. So yes, you're right. One is that INR 30 crores. There is actually a threefold impact on our EBITDA, right? One is at INR 30 crores. The other is broadly split up into our increased staff cost and increased labor cost.

29:48 Okay. Okay. Okay. And maybe one last thing, in terms of the employee cost, there any one off in terms of any bonuses or anything that has happened? It's more like a recurring employee cost? No, no, it's just this that this should rationalize over the next three quarters because we have ramped up considerably on account of our large projects like Central Vista starting or Dahlia starting. These are large projects. One is a INR 3,000 plus crore project, one is a INR 2,000 crore plus project. Also, another project for DLF, which is downtown, which is also INR $1,617,100 crores project. That project has been delayed going to design changes.

30:34 So there, the time line is the client is looking to compress time line. We further ramped up our mobilization in terms of us staffing there. So these large projects, so to say, we as their turnover from these projects or their contribution to top line increases, the percentage wise staff cost will rationalize. Okay. Okay. Okay. I think that's all from my side, sir. Thank you very much. Thank you. Thank you. The next question is from the line of Sharavan Shah from Daulif Capital. Please go ahead. Hello. Sir, currently, the l one last time you said $16.20 odd crore of the the hospital in Delhi and Odisha Government University, Bhumaneswar.

31:21 So out of that, which one got converted into No, university, they were asking us to increase our bid validity. We refused because that was a fixed price contract and seeing the volatility and the increase in costs at the ground level, we refused. So that has fallen through. That is no longer live now. So RML continues to be live. Okay. So INR $5.12 crore inflow for this quarter is different from the RML, which is still L1 or that is the one which got converted into? RML is still L1. RML has not translated into a work order. So this INR $5.12 crores is different from that.

32:14 Okay. So RML value is INR 700 crores, 600 crores? No, no. INR 500 INR 500 crores. INR 500 crores. Okay. So and then full year, what we guided in terms of inflow, 8,000 crores, so that remains intact? No. To be frank, we are no longer very aggressive. That should come down because this volatility, both in terms of material prices as well as labor prices, we are looking for this to stabilize. And as it is, our order book is INR 20,000 crores plus. So we are being conservative as far as the rest of this year is concerned.

33:05 In our approach towards picking up new orders. So, maybe INR 4,000 crores, 5,000 crores for full year? Yes, it's not. Okay. Okay. Got it. Currently, in terms of the bid pipeline, that will also will be now reduced, should be INR $56,000 crore? Yes. What I'm saying is our big pipeline, the visibility is there. We will bid only and we will factor in we'll not be very aggressive. We'll factor in the ground realities and these fluctuations and then bid. We will not bid very aggressively.

33:52 Okay. Okay. Got it. And currently, from the total order book of INR 20,000 crore plus, 11%, 12% will be the fixed price contract? Yes. 10.34%. 10.34%. Okay. Okay. Okay. And then CapEx in Q1, how much we have done in the full year we were looking at INR 300 crores, so there also any slowdown in terms of the CapEx? Yes, we are looking to reduce the CapEx for the INR 60 crores. This quarter was 60 crores, so that full year, we will reduce it to anywhere between INR $2.20 crores to INR $2.60 crores.

34:40 Okay. But overall, in terms of the at working capital level, so there from here on, do we see some further pressure will be there? Or it will remain here or can improve by year end? That we are expecting in this quarter that to be reduced from the existing level. As presented to one hundred and nineteen days and because of we are getting money from the Assam regions and that we are expecting that will be at previous quarter's level. Okay. Got it. Thank you, sir. Thank you.

35:26 Thank you. The next question is from the line of Parvesh Kasi from Navama Group. Please go ahead. Hi. Good afternoon, sir. Thanks for Hi. Taking my So I mean the external environment is challenging. There is no doubt about it, both on execution and on the cost front. So the first question is, I mean, you have a relatively lower proportion of fixed price contracted about 10 odd percent. But in general, how have or how has commodity price volatility been over the last, let's say, five odd months since the Iran war started? And what are I mean, on the ground, how difficult or easy has it been to navigate through these challenges?

36:19 So as I mentioned earlier, we are facing the brunt both on account of materials and labor, right? While labor, I've answered in detail as the questions have been asked since the call began. As far as the material is concerned, it's impacted impact is on two counts. One is the price increase and second is the supply chain getting impacted in terms of the delivery getting impacted because of the war. That has also led to, say, let me give you an example. Now we buy a lot of panels, which run into many, many crores, right? The switch gear is not available. So delivery, which used to take four to six weeks, is now taking three to four months.

37:13 That is impacting our performance on the ground also. So while in between, whenever there was a call for ceasefire or news of ceasefire happening, the prices used to stabilize. But the impact, it's been up and down. So yes, this quarter has been impacted by that also. Coming back to some of our large contract and labor, specifically, say, for instance, DLF, there have been changes in design at Dalia, which is one of our largest projects. That has also contributed to lesser work being done in this quarter on that project.

38:00 Our IDC costs have also impacted our margins there, right? So these are some things which have sort of hit us as far as this quarter is concerned. Having said that, it's geographically, these projects are in NCR. NCR seems to have won the brunt as far as supply chain issues are concerned also and labor price increase is concerned also. Hopefully, going forward, I think now that these projects have started in real earnest, we are targeting a billing of, as I said, nearly INR 30 crores, 35 crores every month from Dalia. We are targeting a billing of close to INR 60 crores from Central Vista. We are targeting a billing of INR 25 crores, 30 crores from DLF downtown, where design issues also seem to be a thing of the past.

38:59 So I think the increased turnover from these projects should sort of help us in sort of getting back to the margins that we had we were showing over the past couple of years. Sure. Secondly, in terms of payments, etcetera, how are things today vis a vis, let's say, what they were six months back, specifically with regards to central government, state government, etcetera? Central government projects payments are not an issue.

39:46 Central Vista just started. We are doing Varanasi, Erpangat, these are airport authority, India project. There is a project that we're doing, which is a Central University in Himachal, where we haven't been paid for the last five months because the project has gone over budget. Our bills are line certified, but the payments are not coming through. Other than that, one project, central government projects, we're not having any issue. State Government, as we mentioned, Assam due to elections, our bills were not getting signed off and payments were not coming. But as of fifteen days ago, that process also seems to be getting streamlined and we started receiving major chunks of our outstanding dues.

40:40 Sure. And lastly, I mean, when we look at the business over last three, four years, in general, one would say volatility has increased in terms of... I mean, labor is a perpetual problem. But whether it is NGT, whether it's supply chain issue or even approvals, etcetera, those have become difficult, and it is impacting everyone. So how are we kind of incorporating it in our risk management framework, especially when bidding for newer projects so that we can at least contain the impact of some of these issues in future projects? So one thing, the more obvious thing that our experience over the last year, one years, point whatever the impact on our bottom line, we've seen the empirical data shows, we are actually now putting that as a part of our costing while bidding for future tender.

41:40 Say, for instance, we know there is a huge shortage of carpenters, bar binders, as I mentioned earlier, our bid prices are now incorporating this. We have virtually doubled our shutting prices or steel prices and other such similar items where labor is in extreme short supply. Secondly, we are seeing that staff cost, now this has become the new normal. Our project staff cost used to be about 3.5%, 4%, 4.5%. Now with increased focus on extreme increased focus on safety measures, especially with large developers and even government clients, our safety budget, we've increased from about one percentage point to nearly three percentage points. Our staff costs, we've now started taking in excess of 5%.

42:33 So all this is being incorporated in our bids going forward. And we feel that this is something that all large construction companies have begun doing. And this is how we feel going forward in our newer jobs, getting these higher rates, quoting and getting these higher rates will help us get back to our historical high margins. Sure, sir. Thanks and all the best. Thank you. Thank you. The next question comes from the line of Mr. Shah of Securities. Go ahead. Mister, line has been unmuted. Please go ahead with your question.

43:24 Yeah. Hi. Can you hear me now? Yes. Hello. Yeah. Somewhat. Yes. Yes. So my question is on the part. So, of course, 29 crore has not been recognized into the revenue. Do we have anything in terms of unbilled revenue or inventory or any other asset item related to this income that you were talking about? In Jammu? For Jammu per Jammu? Yeah. No. No. That project is now closed. Okay. So we have booked everything in the expense, but this 29 crore has not been recognized into the revenue because of some. So I think what you seem to be asking is, is there a potential for any further hit? No.

44:10 Got it. Got it. Yes. Thank you so much, sir. Thank you. The next question is from the line of Parthakad from JM Financial. Please go ahead. Thank you for the opportunity. Sir, depreciation was higher in the first quarter. So can we expect this to be recurring in the nature or it was just a one time thing? That would be. Yes. Yes. That would be recurring. Because the highest capital expenditure in the last two, three years, that now that would be recurring. Okay. And can we expect the margins to be double digit double digit in FY '28? In FY? 'twenty eight. 'twenty eight. As I said, we aspire to get there, and we are hopefully, whatever our empirical data has shown us over the last year, 1.5 we are trying to factor that in our costing and bidding.

45:16 So your guess is as good as mine. But as Parvez said and Sravan also said, this is becoming a number of issues which keep cropping up, like the NGT or labor shortage for that matter. So elections around the year in some part of the country or the other. So the there are a number of headwinds, which sort of two, three years ago, this used to be occurring only one or two months in a year. Now something or the other happens every other month. So it's very difficult to give a projection or prediction. The next question is from the line of Mahesh Patel from ICICI Securities.

46:12 Yeah. Hi, sir. Sir, mostly my questions have been answered. Just one query. I think last call, discussed that 89% of our order book has escalation clause for the materials. Right? In terms of labor, also can we quantify it? How much percentage of our order book value do we have this clause and for the remaining, we have to kind of get it done, especially for NCR? We don't have that data as of now, but we can you can reach out to Sandeep. We will get back to you on that. You may send mail to me, please. Okay, sir. Thanks.

46:59 Thank you. Thank you. The next question is from the line of Shivam Harneh from Ubuntartha Investment Advisors. Please go ahead. My first question is how many months of increased labor cost impact is the number? Sorry, I don't understand your question. Could you clarify? So labor cost increase in mid of the quarter, let's say, for one month or one point five months, we got impacted by increased labor costs. So it is a one month or two month time period or for the whole quarter labor cost has been improved?

47:46 No, no, whole quarter and going forward, the labor cost, once the labor price gets increased, it doesn't come back down. No, no. That's clear to me. But in the current quarter, for the whole three months, increased labor cost is there. It is. Okay. So this would be a new base? Yes. Got it. Second, on NGT impact. So in last con call, you have said that the Central Vista will start. So NGT impact would be minimum for the current year? Yes. On that particular project, no yes.

48:32 On that particular project, the impact that work will go on there. The impact will only be limited to, if at all, because we are trying to get special permissions, will be limited to raw material coming in from other parts of the country. So earlier also, the same assumption was there, correct? Yes, yes. Central Vista, the work per se on the ground does not stop. And can you move labor from other projects in NCR to Central Vista? Which we will definitely do that.

49:19 Got it. And my last question is on EBITDA margin. So 2.6% impact is roughly due to JNK sorry, AHLU issue, 2.6%, while the rest is of raw material and increased labor cost, correct? There is nothing else. And increased staffing cost also. Okay. So increased staffing and labor cost will continue and material price will vary, basically? Yes. And as material wise will vary and a lot of material costs or volatile material costs is a pass through, like cement, steel. That's a pass through. So the major impact, which is what I've been stressing from the beginning of the call is on account of labor.

50:10 Got it. When could we since this labor cost material cost increased material cost, what is the time lag between increased cost and what usually our customers will give that increased labor cost to us? Right. I think I did say earlier that it would take over the next two quarters for us to sort of for the client to agree or get the client to agree to compensate us. No. Material cost, so already client has agreed, correct? And what the time line? What So is the time line goes to that path there are two formulae for this.

51:01 On the private sector side, there is a base price for cement and steel. Any increase on that from that base price is compensated to us with every bill. So the lag is about thirty days, right? And as regards the government contracts, the escalation is based on wholesale price index, which is released every quarter. So every quarter, an escalation bill is proffered and based on the index published and that the government pays. Got it. Thank you, sir.

51:47 Thank you. Thank you. The next question is from the line of from JM Financial. Please go ahead. Sir, just one thing. You mentioned initially in the call that you are in talks with the clients regarding this higher labor cost. So it is for the 90% of the book where it which is not which is variable price in nature? So primarily, we are in talks with our clients in NCR, few of our large where the impact has been sizable. And we are sort of talking to them to showing them what the actual costs are and telling them that it be very difficult for us to continue to work on old pricing.

52:43 Sir, but if they don't agree, so they so it is a necessary, they may comply to this, right? So it is a clause I agree with you. It's not contractually strictly going by the contract, they may not. Okay. So sir, in in... So we know that the labor rates are here to say, you mentioned that we don't expect it to come back down once they are increased now. So in that case, for the NCR book, there could be a sizable impact on the margins from where we had bidded when you won the project? So we are wherever the impact is sizable, we've already told the client that so there are two parts to this compensation.

53:28 One is for the job already executed in this quarter, where the impact has already been felt by us. The other is going forward and the potential for the impact on the balance contract. So we are telling the client either we are giving them various options that one is the impact till now. They are within their rights to say no. Going forward, we are telling them that either they agree to supply the labor there, various options that we are discussing with them. And all I can say at this stage is that the clients are looking at what we are saying favorably because they have realized that today, their contracts today, one major thing which can make or mar a project is labor. And labor is an extreme, especially skilled labor is an extreme short supply.

54:26 Thank you. The next question is from the line of Mathur Rathi from Countercyclic Investments. Please go ahead. Sir, I'm trying to understand that due to one reason or the other, if we look at our numbers, still FY 'twenty four, the growth was really strong. Sir, but after that, even though our order book has unexecuted order book has doubled over the last two years, but somehow the execution is just not moving due to either labor or this or that, sir. But, basically, labor is a core... The thing for... It's it's a part of our business. So, I mean, if there is a shortage and everything, NGT and so on, sir, I mean, these are all routine matters. Now so the concern is I hope it is not the case that we will have to pay some penalty to our customers for not executing the projects on time.

55:24 So till date, Ahluwalia has not paid any penalty to any customer. If you were to go through, we would be more than happy to share historical data, especially over the last two years or three years, where projects have been delayed. But it's been amply proven and accepted by the client that they've been delayed for no fault of us. And it's not only Ahluwalia Contracts. If you were to do a deep dive into the historical project completion days of all our peers, you will see that the extreme there are a number of factors leading to headwinds as far as project execution is concerned.

56:11 Labor is one thing, and this shortage has been building up over the last four, five, six, seven years. Projects have become more and more complex. Projects have increased in scale. There are changes happening as we move along executing a project on a month to month basis from the client side, which clients are recognizing. That is why extension of time is granted on projects, be it on private projects or government sector projects. So if you've been covering this sector, you would know all this is a part and parcel of this industry. While we when we bid for a project, we factor in some delays. But as I said, there have been a few black swan events over the last two to three years, which are part of the historical data.

57:04 The impact has been that has been felt on our bottom line has been more than we could have predicted. And it's not only us. If you do a peer to peer comparison, I think we've been showing better numbers than some of our peers. Now sir, if we compare BL Kashyap, which is operating our geography is a fraction of our size has balance sheet nowhere compared to us, Browning and debt, sir, they have grown in the first quarter, their margins, their EBITDA actually has also grown. So I'm not able to understand in the... Base is very small. I'm trying to tell you, if you do a comparison, which is spread over a larger tract of time, You do a comparison with, say, if you want to do Beelkasher, compare the results for the last two years at least, right? This is very small. When we were at that base, our margin was some of your peers would tell you, our margins were 12%, 13%.

58:06 Sir, in fact, that was my another question that I remember that few years back when I had asked that why our margins have declined from low teens to single digits. So you had said that once the private sector orders become the majority of our order book, then our margins will expand to the previous levels of low teens. So but now our private sector is 62 of our order book, but still our margins have actually declined to single digits? As I said, there are a number of factors or newer factors, which have cropped up in the last two, three, four years, labor shortage being one And as I said, increased projects have become much more complex, increased staffing costs and other IDC costs.

58:58 These are some things which have hit our margins, which are leading us to going forward, when we are bidding for large projects, we are factoring this in. Sir, now lastly, sir, if you look at our stock price since 2008, still now the stock then the stock price was INR $3.50 today to INR $7.95. So the stock price has grown at less than 5% CAGR and there have been no dividends also. Sir, so after such a huge underperformance also, we have a cash raise balance sheet, the stock price has halved since FY We are a dividend paying company. I think we've been paying dividend for the last three to four years. Sir, it is 0.07% dividend yield. Is practically irrelevant. My point is different, sir. My point is that when our stock price has grown at sub-five percent CAGR for the past eighteen years and we have surplus cash on balance sheet, then why aren't we doing share buyback?

1:00:04 I think I had answered this question during the last call. This sector is facing extreme volatility, right? Our focus is on growing our business. We don't want to use our war chest to buy back our share. At the moment, we want to going forward as it is we are at an inflection point. We are growing rapidly. We have a healthy order book. We want to digitize. We want to become more efficient. We want to invest in machinery to counter or offset the labor paucity. So all that share buyback is not really on the annual for us. It's not a part of our plan. I did explain this in detail last time around also.

1:00:51 Understood, sir. Thank you very much. Thank you. Thank you. The next question is from the line of Parikshit Kanpal from HDFC Securities. Please go ahead. Yes. Hi, So my question is more on industry and generic question. So just on the NCR market, this is 50% off of our order book. So just wanted to understand how much of our labor cost or how many labor is deployed in that market? And are all these labor currently at minimum basis because there is... You said that there is a demand supply issue also, so I would understand that there would be certain percent of the labor which will be above the minimum wages. So if you can help us understand, like, the quantification in terms of how many would be under just about the minimum wage of how many above that? And what was the total quantifiable impact in terms of crores on the profitability of the EBITDA in this quarter because of labor issue and CR?

1:01:51 Okay. So just to put a number, it may not be extremely accurate, but it will be there and thereabouts. We would have close to about 10,000 to 12,000 people working for us, which I would categorize as labor, both unskilled and skilled. Now 70% of this labor would be skilled, which would constitute barbinders, carpenters, masons, electricians, plumbers and so on and so forth. While the unskilled labor would be at the threshold of the minimum wage, the skilled labor would be in excess of that, excess of the skilled wage declared by the government.

1:02:41 It is the skilled labor, which is in extreme short supply, demand and supply conundrum that I mentioned. The impact on our projects in NCR per se would vary on our total top line. I'm talking about the impact, again, detailed figures Sameer can get back to you on if you write to him, but it could vary from 2% on some projects to about 5% of the turnover, where the material is pre issue by the client. So do you think in this quarter, particularly in this quarter, what is the quantifiable impact on EBITDA because of the labor increase, the minimum we should consider? So on a at a company level, it is about a percentage in the half, 1.5%.

1:03:35 So this is a permanent now this is permanent in nature. So we start off if there is no explanation given on this account from the customer. So we have a 150 basis point hit on the MCR order book because of the labor issues as of now. Is it the right assumption? This there will be a hit if there is no escalation given, but it would be to the tune of about 1% because in some of these contracts, escalation is a pass through. And some of the contracts, the escalation kicks in after a certain amount of time has elapsed on a particular project, which varies from six months to a year. So that's the average is about 100 basis points if the client doesn't give us any escalation.

1:04:23 So we have a hit of about 100 basis points. So I think why... I mean, I think we took a lot of time debating this. I think if this was quantified, it would have been helpful earlier. So... And how do you intend to cover up this, like, cost savings, other measures? So how much do you think the client doesn't give us any escalation? So any off layers, any growth which will cover? Do you think you can cover a part of this damage? Again, it's very what is happening, as I said earlier, client is recognizing this. So what client is doing, even if they are while we feel on some of the projects, some of our larger clients will look at this favorably. But even if they don't, what they've already started doing, the God rays of this world, the DLFs of this world, the signature globals of this world, they've started announcing incentives, which are linked to progress or stage wise timely completion.

1:05:20 You cast a certain number of slabs in a month, they give incentive, right? So which, to some extent, may offset some of these higher costs. So you will gain a part of it through the productivity gains or the site levels, which could be ahead of schedule. Exactly. Yes. So part of that could be That's why a lot of you, as I mentioned earlier, should we'll be more than open to share You should go a deep dive. This labor problem is a huge problem, right? Yes. While some of us so I'm sure you would have you cover this sector, and you've been doing it for a number of years. We would be more than happy to take you to project sites and show you how we are being impacted.

1:06:10 Some of our peers may have recognized that impact this quarter, they will also feel it going forward. Different geographies are facing it at different times. The bigger question right now is whether one was what was the motivation of the Hainan government to do this and if other states start doing it, then it becomes a broader level issue on the entire order book, so which can exacerbate our overall margin impact. If you can help us understand why did it happen first. And then also earlier in the call, you said 70% of the labor is killed. I assume that the hit would not have been there. It would be at the labor which is at the borderline level. Right? So so if you can help us understand whether... What was the motivation behind this, and why could this... Why was the hit so high if it was only to the part of the labor force? Because the So, Mariana Mariana, government...

1:07:01 Go ahead. Sorry. Sorry. I'm saying it it was out of the 100 labor, you said 70 is is still to where, anyway, it's a market determined pricing. So I assume they would... It will be push and pull, which will determine their wages, not the common mandated minimum wages. It will be more like where the part was exposed to the minimum level of basis where you had to align with the government policy and given escalation. So what was the motivation of the Ariana government and specifically whether other states can also now give advantage at least for the border line cases? So your first question, what was the motivation of the government? The Haryana government over the past one month has cracked down on RMC manufacturing plants. And today, 90% of the plants are shut down in Haryana, right? What is the motivation behind it? Who can say, right? With governments, it's very difficult to say.

1:07:56 Similarly, they have had such a time increase the labor pricing. It's very while the developer lobbies are talking to the government, they may agree to sort of reopen some of these plants, but I don't think there's going to be a rollback on the labor pricing. It's never happened. It's a very sensitive political issue. So it's very difficult for us to comment. Second thing is our push and pull on the skilled labor is right. But it's as I said, it's demand and supply. There is a huge shortage of skilled manpower and whatever skilled manpower is there, the skill levels are down. The buildings are becoming more and more complex, right?

1:08:43 So it's the productivity that leads to low productivity on the project. So so that's why the cost our costs are rising. That's why I'm saying that you guys should maybe it would be prudent for you guys to we would be more than happy to take you to a project site and show you how it's very difficult to sort of explain all this on an investor call. But at ground zero, we can show to you how the impact is happening. Just this last question, can you replace I mean, is it only for the labor domicile in Haryana state? Or if you can say pull out labor from AP or some other states, do you still have to pay them the minimum wages? So how does it work? Is all migrant labor. Labor which works in a particular state. This labor is coming in from the yard or for Bengal or Odisha or Madhya Pradesh.

1:09:35 It's not Haryana labor. Okay. It's not a domicile issue. It's more like a motivation, but anyways, I'll take it offline. Thank you. Yes. Thank you. Thank you. Ladies and gentlemen, due to time constraints, we will take that as a last question for the day. And I would now like to hand the conference over to the management for closing comments. Thank you so much, everybody. As I said, any further queries, please reach out to us and we'd be more than happy to explain the ground realities to some of you, even if you want to sort of visit our project site to get more clarity. Thank you so much. See you on the next call. Thank you. On behalf of Ambit Capital Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.