Ladies and gentlemen, good day and welcome to KEC International Limited Q2 NFI 2026 results conference call. We have the management from KEC International Limited joining us today: Mr. Vimal Kajriwal, Managing Director and CEO; Mr. Rajiv Aggarwal, Chief Financial Officer. As a reminder, all participants' 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 Mr. Vimal Kajriwal. Thank you, and over to you, sir.
Thank you, Danish, and good morning, everyone, and welcome to the Q2 earnings call of KEC. Let me begin by sharing an overview of our financial performance of the quarter and H1, along with the highlights of the respective businesses. We have delivered a good performance this quarter, achieving record revenues in Q2, substantial growth in profitability, and strong momentum in order intake, especially in the T&D business. Our top line witnessed healthy growth with revenues of INR 6,092 crore in Q2 FY2026, reflecting an increase of 19% Y-on-Y, primarily driven by robust execution in our T&D business, both in India and internationally. With this, we have achieved a revenue growth of 15% for H1, which is in line with our guidance for the year. Aligned with our strategic focus, the T&D segment's contribution to overall revenues increased to 65%, up from 55% in H1 last year.
Our EBITDA has grown by 34% in Q2 and 27% in H1. EBITDA margins for Q2 increased by 80 basis points to 7.1%, up from 6.3% in Q2 FY2025, while H1 margins rose by 60 basis points to 7% from 6.4%. Interest expenses as a percentage of revenue have reduced by 50 basis points in both Q2 and H1, resulting in an interest cost of 2.8% for Q2 and 2.9% for H1. We have significantly enhanced our bottom line with a remarkable PBT growth of 88% in both Q2 and H1. PBT margins increased by a good 130 basis points in Q2 to 3.5%, versus 2.2% last year, and increased by 100 basis points in H1 to 3.3%, versus 2.3% last year. We have achieved a PAT of INR 161 crore in Q2 and INR 285 crore in H1. The growth in PBT and PAT continues to outpace EBITDA.
We have a clear emphasis on profitable growth, not just top line expansion. Our profitable growth continues to outpace revenue growth. In terms of order intake, we are pleased to share that we have achieved a record YTD order intake of over INR 16,000 crores, reflecting a healthy growth of 20% Y-on-Y. Notably, a substantial 75% of this order intake has been secured by our T&D business across India and the international markets. Additionally, we hold L-1 positions of INR 5,000 crores, again primarily in the T&D segment. We have a well-diversified and strong order book of over INR 39,000 crores as of date, including the L-1 position. Our order book and L-1 stands at a record level of INR 44,000 crores. Coming to our debt levels, our net debt, including acceptances, stands at INR 6,480 crores as of 30th September, besides INR 5,265 in the previous September.
The increase in debt level is on account of strong revenue growth, increase in strategic inventory due to benign commodity prices, delayed release of payments in water projects, and spillover of certain large collections which happened in the subsequent months. We expect the debt levels to normalize going forward. Coming to our specific businesses, our T&D business continues to be the key growth engine in this quarter, delivering revenues of INR 4,080 crores, a remarkable growth of 44%. This stellar performance reflects our strong execution capabilities across multiple geographies. The business continues to maintain its profitability momentum with double-digit EBITDA margins. On the order intake front, the business secured orders of INR 12,000 crores across India, Middle East, CIS, and the Americas. The T&D business has expanded its geographical footprint by securing its maiden order in a new country in the CIS.
The business has also secured two landmark orders in the Middle East, which include our largest-ever EPC order of over INR 3,100 crores in the UAE, our largest-ever substation order of over INR 1,000 crores in Saudi Arabia. These prestigious orders in the Middle East have widened our portfolio and client base and further solidified our leadership in the region. In India, the business has secured multiple orders from various clients. We continue to build a strong presence in the promising HVDC segment, having bagged another significant order this quarter from a private developer. We are currently executing five HVDC projects, including a major converter station project spread across three locations and four transmission line projects. We have significantly increased the share of private sector orders in our India T&D order intake this year.
It gives me great pleasure to share that this year marks a significant milestone as we celebrate 15 years of SAE acquisition, a journey that has redefined our global footprint and set new benchmarks in the transmission industry. Over the years, SAE has grown not only in scale but also in capability, innovation, and operational excellence. I'm delighted to share that SAE continues to perform strongly with revenues of INR 429 crores for the quarter, reflecting a robust 35% growth. In Brazil, we continue to witness good traction in hardware orders. We have further strengthened our operational capabilities through the installation of new robotic equipment at our manufacturing facility. This will enhance production capacity and improve efficiency. In Mexico, the business continues to experience steady order momentum, supported by a positive outlook in the North American T&D market, further aided by the US tariffs on the rest of the world.
Overall, SAE continues to deliver steady, profitable growth backed by healthy order inflow and a robust order book plus L-1 position of over INR 2,300 crores. We are making notable progress with expanding our tower manufacturing facilities, following successful capacity enhancements at our plants in Dubai, Jaipur, and Jabalpur. The expansion of our beauty facility in Nagpur is underway and is expected to be completed by this year-end. This position is well to meet the increasing demand for transmission infrastructure in both the domestic and international markets. The overall tender pipeline in T&D continues to be healthy in both domestic and international markets. In India, the government's thrust on renewable evacuation corridors, green energy transmission, and interregional interconnections is creating a robust pipeline of opportunities. Several large intrastate projects, earlier executed by state utilities, have now transitioned to the TBCB route, attracting considerable interest from private developers and utilities.
This shift is opening up a new and promising market for us. On the international front, the market outlook remains highly promising. The Middle East continues to be a key growth engine, with major transmission initiatives underway in Saudi Arabia, UAE, and Oman. Additionally, we are pursuing opportunities across Americas, CIS, and Africa. With a record order book and L-1 in T&D of almost INR 29,000 crores, we are confident of delivering significant growth in this business. In civil, we delivered revenues of INR 968 crores for the quarter. The revenues could have been higher, but for the prolonged monsoon in certain regions, labor shortages, and delayed payments in the water segment. While the labor situation is gradually improving, it remains below desired levels. We continue to adopt a calibrated approach to the execution in water projects, given the current payment scenario in this segment.
The business continues to strengthen its order book with multiple orders of over INR 3,000 crores in the buildings and factories vertical from reputed clients. In a key strategic achievement, we have further expanded our presence in the factory segment by securing an order for civil and structural works for a thermal power plant and thereby widened our customer base with the addition of a marquee client. The business also strengthened its footprint in the residential building segment with a repeat order from an existing marquee client. With a gradual improvement in the labor situation, steady collections from water projects, and a large order book and L-1 of over INR 10,000 crores, we are confident that the civil business will see good growth in the coming quarters. The transportation business recorded revenues of INR 425 crores for the quarter. The focus remained on timely execution of new orders and completion of ongoing projects.
The quarter was marked by two landmark projects inaugurated by the Honorable Prime Minister, the Vellikatta Himantra Metro Station in Kolkata and the Vanchi Maniyachi Nagarkoil Railway Dublin in Tamil Nadu, where KEC played a key role in the successful execution. The business has secured two more orders for the KICAS under coverage in partnership with our JV partner. The business has successfully implemented coverage across 482 route kilometers and is currently deploying the coverage system on an additional 2,000 route kilometers of the rail network. The advanced rail protection system will significantly enhance the safety, reliability, and speed of railway operations. We expect to secure additional orders in this segment. We are actively pursuing international opportunities.
With an order book and L-1 of over INR 3,000 crores in railways, our strategic priorities remain clear: fast-track completion of existing projects, optimize working capital, and selectively bid for high-quality margin equity opportunities in both domestic and international markets. Our cable business has achieved healthy revenues of INR 524 crores, a solid growth of 19% year-on-year. The profitability of this business is also witnessing a gradual improvement driven by a better product mix and cost optimization. Our capital investment for E-Beam and electromeric cables is progressing as planned, and we expect commercial production to commence by the end of this year. This plant will cater to high-performance applications across defense, automotive, and railway sectors, where superior durability and thermal resistance are critical. Our renewable business has achieved revenues of INR 190 crores. We are currently executing two large solar projects in Karnataka and Rajasthan.
The 500-megawatt solar project in Karnataka is scheduled for completion this quarter, and the 500-megawatt solar in Rajasthan is expected to be completed early next year. We continue to bid for select opportunities in solar, wind, and gas. The oil and gas pipeline business is well placed to secure its third international order for a pipeline laying project in the Middle East. Following sustained efforts, the business has secured pre-qualification from a leading Middle East utility for pipeline projects, a key milestone in our international growth journey for this business. Given the subdued domestic tender pipeline and the heightened competition, the business continues to strategically focus on expanding its global footprint. Overall, we are pleased with our consistent revenue growth, improving trajectory of our profitability, and momentum in order intake.
With a strong focus on execution, expanding capacity, a robust and diversified order book and L-1 of over INR 44,000 crores, and a current tender pipeline of over INR 180,000 crores, particularly in T&D and civil, we are well positioned to deliver sustained profitable growth in the coming quarters. Thank you so much. We are now open to take questions.
Thank you very much, sir. Ladies and gentlemen, we'll now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question comes from the line of Mohit Kumar from ICICI Securities. Please go ahead with the question, sir.
Yeah, good morning, sir. And
good morning, Mohit.
These are the numbers. My first question is, sir, of course, the domestic T&D order has been pretty strong in the first half. Are you seeing the domestic T&D order prospect declining because the tariff-based competitive bidding has been lukewarm in the fiscal? Is the opportunity remaining strong because the bidding activity happened last couple of years and the ordering is still to be done?
I think, Mohit, you have read the mail. Clearly, I think in the first quarter, the ordering was low. Second quarter, the ordering has picked up. Okay. We are seeing some interesting orders which we got in the last, I'll say, a month or two. Also, we are now seeing some ordering, some, I'll say, violation happening towards the south side, Kakinada and Tuticorin and all those of these things.
The other piece which I mentioned in my speech is on the intrastate, where many orders, many projects which would have otherwise been executed by the state utilities have moved to TBCB. In fact, we are L-1 in one of them in a recent one. That is an area where we were not there because I would not have typically bid for intrastate projects. More than intrastate, I think intrastate is also an interesting area. I do not think we should see a major, I'll say, downside in ordering. The other thing is that some of the major orders which had been awarded, TBCB, which have been won, let's say, an HVDC in Gujarat and others, and there are large orders coming in from some private clients which are outside TBCB. We announced one of them some time back, are also due for finalization now.
I think in this quarter, you will see a lot of finalization happening on TBCB plus intrastate. I do not think we are worried or concerned about the domestic order inflows slowing down.
No. Understood, sir. My second question on the water segment. What is the water segment dues at the end of September 2025? If I remember the number correctly, at the end of March 2025, it was INR 1,000 crore odd, right? Are we still executing on the projects or the progress has been pretty slow?
Mohit, I do not have the exact number, but I think our dues are around INR 850 crore or around INR 900 crore. INR 875 crore, yeah. Our dues are around INR 875 crore, and they have generally been constant. Even in March, also, they were around INR 850 crore, INR 825 crore.
They would have gone up by INR 40-50 crore generally, which I think we should be getting now. The policy which we have been following is that it is almost like cash and carry. Whatever money we get, we reinvest and execute the projects. We are not increasing the exposure in any significant manner. Our marginal exposures may go up or down. We are in two states, Madhya Pradesh and Odisha. Madhya Pradesh is virtually, I will say, online on all the payments. Odisha has been slow, but we did start getting some payments from there after a long time. I think we are, are we happy? We are not happy with it. In fact, that is one of the reasons why the civil revenues have gone lower than last year because we did slow down. We were expecting it to pick up.
Let's see, the discussions with the Jal Jeevan Mission in both center and the states have been slightly more positive than it was before. We are seeing some trickle happening even in Odisha.
Understood, sir. Thank you, Nabesh. Thank you.
Thanks, Mohit.
Thank you, sir. Our next question comes from the line of Parikshit Kanpal from HDFC Securities. Please go ahead, sir.
Yes, sir. Hi, congratulations on a decent quarter. Sir, my first question is on the comment which you made earlier in the call that the T&D business is tracking double-digit margin. If I look at the numbers, double-digit margin, the H1 revenue contributions, EBITDA have been about INR 722 crore from the T&D business, even at 10%. That means the rest of the business is just eleven and EBITDA of INR 58 crore, which is 1.5% EBITDA margin.
I'm assuming that cables and civil would be doing much better. Do I have the major losses coming on the margin side, sir, if you can help us understand that?
I don't have the exact numbers, but you are more or less on track. I think the problem which we had is more on the civil side also because of the heavy rainfall and slowdown in some of the projects. Also, we had packed in a little bit more of water. Civil is at significantly lower single-digit margins. It's a combination of civil and railways. Cables, I don't have the exact number, but it would be more than, it would be higher single-digit, I will say, maybe 6% or something like that would be the margins. The net margin for non-T&D would be, I don't know, close to 1% or 1.5% overall.
That's the way the numbers stack up.
How does it improve here from, sir? I mean, is it just the legacy orders are running down the profitability and now with the mix improving towards better margins? When do we see this thing changing? Because at the headline level, the margins are not improving, and we are still looking like we are still behind the trajectory of moving towards that 8%-9% corridor, and double digits do not look too far away from here now.
Parikshit , headline numbers are improving. We said from 6.2, we have gone up to 7.1, and we are still looking at reaching our 8% for the year, which means around 8.8 or 8.9 for the balance H2. We still have almost 60% of our revenues coming in.
What is changing is that we have discussed it earlier that metros, especially the Delhi metro, had been a problem with us. Those projects have been completed. One of them is awaiting Prime Minister's inauguration, which is also a reason why I have a cash flow issue because a lot of money is tied up to the formal inauguration of the line. The second one also is very close to inauguration. Once that happens, those cash flows will also come in. The negative which was coming from them is now getting stopped, which will add to the non-T&D margins. Also, on the civil side, if you notice that we have announced pretty large orders, and these are at a significantly better margins, and the execution from them is starting now. Clearly, we will see a bump-up happening on the civil margins. One is on the percentage margin.
Also, the leverage benefit will come in because the revenues will go up. Okay. I think that is what it will. This also from cables, we do expect that there will be some improvement in the cable margin also. I think all of that put together should help us in increasing our non-T&D. Also, as you rightly said, that we have legacy orders and all those orders are getting closed. Like in H1, I think we closed seven or eight orders, seven orders in the transportation business. The negative from those orders beyond what we had factored is getting closed. We do expect that we should have better overall numbers coming in H2.
Okay. The second question is on networking capital now, sir. I mean, we have a high share of international, almost 36% contribution coming from international revenues, which typically have low working capital.
Despite that, why is the net working capital getting still elevated? We have seen peers have high international order book. There has been contraction in NWC days, but in our case, order book is also at 45% international. We would have received some advances. Despite that, why NWC seems to be so high?
Parikshit , a large amount of advances is yet to come in. We have announced some very large orders in the last two months, and those advances will come in now. The impact of that would be clearly visible in the Q3 numbers. I think the difference is that if you compare the immediate competitors and all that, most of them have done very poorly in the Middle East.
We have a very large order book and a large revenue coming out of Saudi, where unfortunately, there is a 20% retention. Okay. These orders had come in from the last two, I think, two years or two and a half years. Now we have started heading for completion of many of these orders. From now onward, you'll see a sort of a cyclical thing where advances will come in, old order retentions will get paid, new order retentions will keep on happening. We do expect that with the closure of the current lot of projects, I think seven or eight projects we are planning to complete and close this financial year in Saudi, that will release a lot of retention. That's why we are slightly different from other people in the international piece.
Obviously, the margins in Saudi are better, which is why we have been talking about overall double-digit margin in T&D. The second piece, I already talked about a little bit on the water side. Third piece, which has not got covered, is also I did allude to it in benign poverty prices. Especially in our cable business, as well as in our transmission business, the steel prices, especially steel, have been at a lower level, INR 4,000-5,000 below what we had factored in earlier, which has resulted in keeping some stock with us, and it has paid us up well. Our inventories for the year would have gone up by INR 250-300 crore as compared to what was there, and it is a very conscious decision. That is something which has added to the networking.
I think the last point which we have been discussing has been that if you look at our last Q4 revenues, and there was a significant increase in that revenue. Typically, most of our purchase is at 180 days, and a large amount of liabilities got paid off in around August, September. When you look at the net working capital, what has happened is that at some places, the AR has gone up, and other places, the payables have come down, actually. It has been a sort of, I'll say, double whammy, if you can use that word, where AR is going up and APs have been coming down, which will get normalized. Are we worried? Yes, we are worried that the numbers are beyond what we had expected. We still wanted to go to 5,000.
But the good part of it, Parikshit, is if you have seen our interest numbers, our interest cost has gone down by 50 basis points, where the entire benefit of leverage of 19% revenue increase has come in. If you even look at the 19% increase and with a typical 140 days or 130 days of net working capital, some part of the working capital increase is also attributed to the higher revenue. I hope I have clarified it.
This is just the last question, sir. Now we are almost near the lifetime high debt, and also I have seen in your cash flows, there are some entries on bad debts of INR 930 million and forex gains of INR 830 million. Just clarification on this too, and how does one look at debt from now, from here on?
Is it the peak we have reached, and now debt will directionally go down, or still there's headroom before we correct the debts?
I don't think we are looking at increasing our debt beyond this, or not in our list. As far as I don't know what, Rajiv, you have any other bad debt? Anyway, I think just to clarify that, I think we have had a significant ECL provision, okay, during the quarter as well as H1. In fact, our overall ECL provision is now at almost a lifetime of INR 475 crore. Okay. That's an expected credit loss provision, which we are providing as per agreed format with our auditors, and which is that number which you are looking at. We hardly have any significant bad debts write-off.
Okay. I was referring to the cash flows, right? There was INR 92 crore for the half year.
I think this was ECL provisioning only, and INR 830 million of forex gains were showcased, so.
Maybe you may like to check with us, check on much more details, but I think there's nothing to worry. Worry in this part, yeah?
On the debt, you are now sure that this is a peak debt, and now you're not looking at the remainder?
We expect that to be our peak debt. I think it started to come down. I think there are three or four large payments which we had been discussing. You know, Afghanistan, we have received a large money, but there was some chunk which was supposed to come from one of the lenders, which we were hoping, and there were discussions that should come in, but I think it has got delayed by some reason. I think now they have moved it to Q4.
Q4, a large chunk would come in from there. I think plus we have got some very large advances on the order releases, which we announced, which will also come in hopefully within this month. There are some other payments, as I said, from Saudi retention, etc. I think the debt will come in control. Plus, I talked about DMRC commissioning itself. That will release a lot of cash for us.
Gotcha. Thank you.
Thanks, Parikshit.
Thank you, sir. Our next question comes from the line of Sumit Kishore from Axis Capital. Please go ahead.
Good morning, sir. Thanks for the opportunity. It's a very strong performance in T&D, but once again, non-T&D led by civil has been weak. You have mentioned some of the explanations.
With a decline of 14% in revenues from Civil in the first half, how should we look at this settling on a full year basis? How is the second half going to be? That is the first question. Just a follow-up from the previous question. From 138 days of net working capital where you are now, how do you see this normalizing by the end of the fiscal in terms of number of days of state?
Sumit, as far as Civil is concerned, we do expect that there will be a growth of overall 10-12, 15% maybe for the year. We did around INR 4,400 million last year. We should be around INR 5,000 million hopefully for the year. Okay.
As I said earlier, the negative has basically happened because there is a very, very poor, I will say not poor, we did not take any new orders on the infra side. The entire metro revenues are now not there. Out of four projects, three have been completed, so the revenue flow has come down. We have announced some very large BNF orders, and those order execution has started now. We are clear that we will be able to make up for this shortfall. I think we are around INR 1,800 or INR 1,900 crore of revenue for the first half. The second half, we will be able to easily reach close to INR 5,000 crore.
That would mean that nearly INR 3,000 crore of revenue in civil in the second half, which would be a steep growth on a year-on-year basis.
Given the margin profile of civil is meaningfully lower, it is going to hurt your prospects of crossing 8.5% margin in the second half, which is required to get to even 8% on a full year basis.
Yeah. Sumit, what is also happening is that in the last six months, as I said, the metro projects have got almost closed, where the margin profile was very poor relatively. That is one thing. Also, some of the older projects have been getting closed, and the newer projects with an order book what we have, the quality of margins in the newer projects is much higher. So much higher, sorry.
What will happen is that whatever revenues we now start getting into civil would be at enhanced margin levels, which is why we have been talking about overall at least 8% margin for the full year for the entire business. Otherwise, I already mentioned that T&D is more than double digits. We are factoring in the lower margins from these businesses when we talk about an 8% number.
This is very clear. All net working capital, 138 days, would it be below last year on normalizing or still high? I think we do expect that to be at a similar level, 180-120, yeah.
I think we should be at least at that level. That is what we are expecting, yeah.
Just one bookkeeping question.
When you give the T&D order book and the fiscal year-to-date inflow, could you just give us an indication of the split between international and domestic for T&D? So that we understand how much is domestic?
I do not have the exact number, but I think it was around INR 12,000 and INR 4,000, roughly. I do not have the exact, maybe Abhishek can give you later on, but I think it was around INR 16,000 for the year order intake. So broadly, around INR 12,000 international and INR 4,000 India.
That is very clear, but in the INR 12,000 crore within T&D, would international be also largely coming from how much would be T&D international?
That is international T&D only, INR 16,000. When I say INR 12,000, that is international T&D.
Right.
Thanks, Sumit. Thank you.
Thank you, sir. Our next question comes from the line of Vaibhav Shah from JM Financial. Please go ahead.
Yeah.
Sir, you mentioned on the Afghanistan payment, you received some part and the major part to come in for Q. So could you elaborate on the value?
Yeah, Rajiv.
So Vaibhav, basically, out of the Afghanistan payment, there were three situations which were involved in total funding of five projects. Three have been more or less closed. World Bank and USAID has paid us the money. So far, we have already recovered close to about INR 450 crore. ADB payments are pending. The projects have been canceled and bank guarantees have been returned to us. They are processing our payment. Total payment outstanding with ADB is roughly about $30 million. We expect a majority chunk should get in the quarter four, as Vimal mentioned. Although actually, we were expecting that payment to come in Q2 or Q3, but for some reason, it has been delayed.
We expect this payment to come in Q4. There is no doubt in terms of the payment recovery. ADB has confirmed in writing that they are processing the payment and they will release the payment shortly.
Apart from ADB, there are no pending receivables from Afghanistan?
Apart from, yeah. Afghanistan, there is no other payment other than ADB. Except that now we have started the project with the World Bank, so that payment will also start flowing in regularly.
Okay. Secondly, what would be our CAPEX for 2026 and 2027?
Typically, we have been spending around INR 250 crore-INR 300 crore of CAPEX. I think that is where we should be. This year it may be higher than that because of our cable expansion and the factory expansion. This year, maybe with all the three factory expansions and the cable, this year we may touch around INR 400 crore.
Okay. Typically, otherwise, we have normally been spending around INR 250 crore-INR 300 crore.
Okay. Sir, lastly, our interest cost is around INR 170 crore for Q2. Can we see a reduction in terms of actual interest cost in the second half, or would it be at similar levels on a quarterly basis?
It would be some reduction, maybe INR 20 crore-INR 25 crore in quarter three and quarter four. We are expecting the total interest cost that we are expecting, as we guided earlier, is roughly about 2.5% of our revenues. We continue to maintain our guidance of 2.5% of our revenue. We can see a reduction of maybe INR 25 crore-INR 30 crore in the overall interest cost that we paid last year.
Okay.
Sir, on the civil business, as you mentioned that certain high margin orders are coming in the execution, and we will see a sharp uptake in the second half. That momentum should continue in 2027-2028 as well, and margins also should improve from current 5% odd levels.
I think they should definitely improve. I think we are very confident about next year, etc., because two or three things have changed. One is we have generally stepped out of some of the infra projects where we are seeing historically now margins being low. Secondly, we have basically increased the minimum size of our order intake. Overheads are getting better. If you look at the last four or five orders on civil, almost all of them are at least INR 400 crore each. They are definitely at a better margin.
Also, I think the other piece is the capability build has been significant in the civil business. We do expect better execution and hence maintaining margins at the quoted levels. We do expect that next year the civil business will grow by at least 15-20%. Okay. At a, I'll say, higher single-digit margins.
Sir, which are the main two or three sub-verticals which you are targeting in civil?
Civil, basically, one is obviously residential, which is now becoming a very large number for us. Second is factories. Third would be data centers. And fourth, sorry, would be also, and fourth would be water pipelines outside India.
No metro for now, largely?
Metro, let me put it this way, nothing aggressive. Okay. We have not bid any metro for a long time.
We may just bid in for the sake of being in the market for some time. Nothing, not at normal margins. Okay. Also, we have been looking at underground. We're still looking at it, okay? It's still far away, but that's an area where the margins have been better in. Obviously, there's a huge amount of CAPEX, so we are still thinking of what needs to be done on the underground piece of it. Okay.
Sir, one last data point. What would be your JGM order backlog right now?
Yeah. INR 1,600 crores. Largely in Odisha, I think 1,000 or kithna? Odisha mein kithna? INR 1,000 crores would be in Odisha and INR 600 crores would be in MP.
Okay. Thank you, sir.
Thanks, Vebhosh.
Thank you.
Thank you, sir. Our next question comes from the line of Subramaniam Yadav from SBI Life Insurance. Please go ahead.
Thank you, sir, for the opportunity. Sir, I just wanted to understand what would be your debt by end of this year?
We are expecting it to be around INR 5,000 crore.
INR 5,000 crore. Yes, sir. Sir, you have mentioned that there have been some delay in collection in Q2, and we have received that in October. If you can highlight what was the amount and which sector does it belong to?
I do not have the exact amount, but some payments were from international where it is coming in September, and they came in the first week of October. Those are happening, but it is not significant. Yes, there was overflow, I will say almost INR 4,500 crore, which happened in the first, second week of October.
Okay. We can see some reduction in Q3, you mentioned, sir, because of this collection.
Yes. Definitely.
There will be some reduction in Q3 and balance in Q4. When I say 5,000, it will be done that way.
Okay. And sir, apart from this water collection, which we are looking at, because that stays roughly around INR 875 crore, which is more or less similar if you look at from the start of the year, which other sector is contributing to this pain apart from water?
I think the major sector would be the metro sector in Civil, okay, where considering the past performance of earlier contractors, the significant backending of payments is there. As I said, out of our four projects, three are completed. One is ready for commissioning any day. The second one also is 75% ready for commissioning. The third one should get commissioned, the Chennai one in January. Those are very large back-ended payments.
Once they get commissioned, you do receive a large amount of money, almost INR 200-300 crore of cash flow would flow in from the commercialization of these projects, or ROD, as you call them. Okay. Then we had announced some very large projects, order intake in Saudi, and Saudi, so those cash flows would also come in, and from retention in Saudi.
Okay.
Okay. Thank you, Kreshal. Thank you, sir. Thank you so much.
Thank you, sir. Our next question comes from the line of Harshit Kapadia from Elara Capital. Please go ahead, sir.
Thanks for the opportunity and congrats for a very strong performance on T&D, sir. Just wanted to check with you on the order pipeline of INR 180,000 crore. Could you give a breakup on T&D and non-T&D, and within T&D, what would be the international and what would be the India project?
So broadly, T&D is around INR 60,000-65,000 crores. And out of that, India is roughly around between INR 20,000 and 23,000 crores is the India pipeline.
Okay. And within the international, the geographies would be mainly Middle East?
It is Middle East and also Africa and CIS, plus a little bit is coming from the America Tower Supply.
Okay. And within the, let's say, INR 120,000 crores, how would we break up into railway and civil, sir? Railway, civil, solar?
So civil would be half of it broadly, and the rest would be divided between renewables and rai lways.
Okay. And sir, just wanted to check, there are some news reports which are going that because of TPAs not being signed in a lot of renewable projects, there is a possibility of a slowdown on the renewable tenders coming out. Are you seeing any kind of a trend like that, sir?
Not yet. In fact, in the last one month, we have bid for, we have had reverse auctions of, I think, 19 tenders in NTPC in the last month, or including current month, in fact, last 30 days. We are still not seeing a significant slowdown in the tenders or what had been announced.
Okay.
Let's see how it pans out.
Fair enough, sir. On the T&D growth, which you have reported in this Q2, how have been the mix of domestic and international?
Domestic growth has been higher than international, slightly higher. Okay. On an average, I'll say they would be similar. Okay. Domestic is slightly higher, despite the rains and all that.
Okay, sir. Wishing you all the best, sir. Thanks for answering all the questions.
Thank you, Arshad. Thank you, sir.
Our next question comes from the line of Teena Virmani from Motilal Oswal Financial Services. Please go ahead, ma'am.
Thanks, sir. Congratulations for a good set of numbers. Actually, now. Yeah. Sir, my question is related to the other segments beyond T&D. T&D has done pretty well from last few quarters. Railway business, when we see the run rate in the revenue, it seems to be relatively lower, and you had always mentioned that because of payment-related issues, you have been going slow. How do we see this business going forward? Because historically, it used to be a very high-growth segment earlier, and from last three, four years, it has been continuously declining. Where do we see it bottoming out and growing from there on? When we look at first-half run rate, it is around INR 900 crore of revenue, which we have seen in railway segment.
That's my first question. Then I'll ask you, sir.
So Teena, we expect to do around INR 2,000 crore out in railways for the year this year. We have an order book of roughly around INR 3,000 crore today. If you take out the next INR 1,000 crore for H2O, I think we are at least having an order book for doing another INR 2,000 crore this year also. What we have done is that we have relooked at the entire structure of the railway ordering, etc., and we have got out of many, let's say, segments like Pure Play, Civil, where we had a major competition from road players because NHAI was not giving them orders. They all came into the railway and you know how the competition among those players is. I think that's one of the reasons why you are seeing a lower order intake.
Plus, our major focus now has been a little bit more on the technology side. That's why I said TCAS, signaling, BLT. So many of our orders are now from the metro segment. We are already executing one project in Bangladesh, and we have bid for quite a few projects in the Middle East. I think you will see a sea change in the segment-wise numbers in railways. While saying that, I think let me also say that at a board level, we are pretty positive about the railway business growing in the next few years or so. You may still see a flattish or a downward for next year, but after that, we do expect that the railway business, with whatever consolidation we are doing, will definitely pick up. It is not a business which we are writing off.
We are very clear that there is huge potential in this business. It's a matter of time that we have had some wrong calls and wrong projects, and execution got delayed for maybe some our fault and maybe the client's fault. I think we are getting over it, and maybe we'll take another six months or a year to completely consolidate properly and come back. I think as a whole, we are still very positive on the business in the long term.
Okay. Okay. In this business, with the kind of change that you are having in the project mix, can margins improve going forward?
Margins have to improve. Otherwise, the business will have to be shut down. We are very clear that unless the business reaches a margin level what we are looking for, okay, there's no fun in doing it.
If in the long term we do not see margins improving, we will take our calls. I think our calls are very clear.
Maybe a 7%-8% kind of margin range can still be possible going forward for railways.
[Foureign launguage].
Got it. Got it. Same thing on the civil businesses. For this year, you mentioned some of the challenges and some of the projects. Where do we see this civil business settling in this financial year for FY 2026? Going ahead, you mentioned about 15%-20% growth rate, but.
Yeah. As I said, Tina, we expect the business to do around INR 5,000 crore, up from INR 4,400 crore for the last year. Margin should be, I will say, mid-single digit for this year. Okay.
But then we do expect that from next year onwards, it will start inching to higher single digit. The target again is that how soon we can reach 9%, 10% margin. I do not think we will be able to do that next year, but the year after, definitely. Next year, we are clearly looking at at least a 15%-20% growth, almost, let's say, INR 6,500 or so revenue from the INR 5,000, which we expect this year.
All the slow-moving projects would be over by end of this year or maybe early beginning of next year?
I think civil, most of them are already over. Okay. I do not think we have got too many slow-moving projects. Very, very few, in fact.
Got it. Got it. That is it from my side. I will come back in a few days.
Thanks, Tina. Thank you.
Thank you.
Thank you, ma'am.
Our next question comes from the line of Balasubramanian A from Arihant Capital. Please go ahead.
Good morning, sir. Thank you so much for the opportunities. Actually, on the renewable side, we have ambition to make at least INR 3,000-4,000 crore kind of revenue over the next two to three years. But currently, it counterpoints only 4%-5% kind of revenue. What are the key bottlenecks? Is it the margin for share and land issues in India? Are there any model suppliers in the Middle East side? What kind of working capital requirement compared to other projects? How do you look at in this business over the next three to four years' timeframe?
Typically, the working capital here is much more benign than what you see in other industries, other segments. From a working capital angle, I think we are pretty okay.
Generally, if you look at YTD project till date, most of the projects are positive. You look at the entire project that way. I don't think working capital is a concern here. Margin, yes, there has been a lot of pressure on margins in the new tenders, primarily because all the players want to go for IPOs. If you look at the last three, four months or six months, the number of IPOs which have come from the solar companies has been phenomenal. These are the players who have gone for a significant, I'll say, competitive intensity increase. Okay. We are slowly seeing that dying down now. People have realized that they are killing themselves by doing it. That's number one. There are a lot of projects which are coming up in the private sector, which are more like captive.
There are at least three or four large groups which are setting up large projects for the captive use of their own sister concerns, whether it is metals or anywhere else. There are enough names available. I think we are talking with them, targeting with them because for them, quality matters, not just pricing. Third is that we started bidding for wind also. I think it is a matter of time. We had said earlier that this year, we should announce our first wind EPC also. Fourth, I will say is that with the experience of now implementing these two large projects of almost 1 gigawatt, we have also developed significant capability in terms of cost optimization and team build also. We now have a proper team in place. I think that gives us a lot more confidence.
Fifth is that with our backward integration with cables and our substation knowledge, etc., I think we can add a lot of value in terms of cost for these projects going forward, which is why we have been talking about INR 3,000-4,000 crore, not next year, but a year after and all that, how do we reach INR 3,000-4,000 crore? I think we are pretty positive about achieving that. I'll say the last point would be international. We have till now not been focusing on international because we wanted to complete these two projects.
Now that these projects are nearing completion, that adds a lot of confidence and also gives a lot of confidence to the clients with whom we are talking, saying, "Have you done large projects?" If you go back and say that I've done 1 gigawatt, very few people, apart from one or two of our competitors, have done that sort of large projects. Internationally, something which we have now started looking at. Maybe not this year, but next year, we will definitely have a few international projects, not the mega-sized ones which others are doing, but maybe 300, 400, or maybe 500 megawatts. Yeah.
Okay, sir. Actually, on the Saudi Arabia side for large T&D orders, the competitive incentive has been reduced. Earlier, if you look at 7-8 bids, but currently, it's been reduced to 3-4 bids. What has driven these consolidations?
Is this a permanent structural shift or a temporary phase? How do you look at this market in terms of competitive intensities? Is there any concerning project resolutions maybe in coming years?
Let me put it this way. There is no reduction in the number of competitors, or there is no consolidation in competitors. The reason why you see a lower number of bids coming in is because of the size of the market. Unlike other clients, in Saudi, the bidding is by invitation. What also happens is when the client floats a tender, he looks at what is happening, what is your status, how many projects you have got, what is your capability here. We are having a lot of background noise.
I think what is happening is that the client then looks at who has got the capability to do work, and accordingly, they invite people for bidding. It's not automatic that any Tom, Dick, and Harry can come and bid in Saudi. Which is what is happening where they see that, okay, let's say contractor A has got too much work, and he doesn't have capability, then he may not invite him. That's why in some tenders and projects which are of very critical importance, they have been inviting a lesser number of people to come and bid, which is why in some tenders, we have been seeing four or five or three only. We still see in some tenders seven or eight, which are not very critical where they are okay to invite the whole junta, if I can call it. That's the way it is.
Difficult to say that there's consolidation, but yes, competitive intensity in large and critical projects has come down significantly because the client is not asking others to come in.
Got it, sir. Thank you.
Thank you, sir. Our next question comes from the line of Ashwani Sharma from Emkay Global Financial Service Limited. Please go ahead.
Yeah. Thank you for the opportunity. And congrats for your set of numbers, sir. My first question is that I wanted to check on the tender pipeline in data center within the civil business.
Data centers, I think today the number which we have is roughly around INR 2,000 crore and out, but it's only the civil part of it. Okay. We have started bidding for the MEP piece also.
What has happened was that I think last two quarters, or I'll say Q4 and Q1, very few data centers were announced. Q2 onwards, we again started seeing some movement happening because I think somewhere the deep seek and others played some role, and people went slow on their data center plans. Now we are seeing that people have again dusted up whatever they had done earlier, and now they're coming back. We do expect that there will be a lot more data center inquiries now. It was low in Q1 and even Q4 last year, but Q2 onwards, we started getting some inquiries, and I think it's improving.
Thank you, sir. Secondly, sir, in the T&D, especially in the domestic side, are we facing any ROW issues, which a lot of news flows have been there on the ROW side?
What's your sense on that, sir?
There is clearly an ROW issue. There's no question about it. Earlier, someone asked about transmission bottlenecks and all that. It's not that the transmission lines are not being bid. The problem is that they are not getting completed because of ROW. Okay. ROW is definitely there. Some months back, the Ministry of Power has again announced a revised guideline for significantly higher compensation, but it is still voluntary for the states to implement it. Some states have implemented it. Wherever it has been implemented, I think the ROW problem is getting, I'll say, better. I'll not say it is fully resolved. The problem is also more in places like Gujarat, Rajasthan, etc., where a lot of solar development is happening because what happens is the guy whose land is taken away, solar guy gets paid fully.
Where the transmission gets set up, you get a right to pay, right to use pay. So the payments are lower. There's a lot of, I'll say, heart burning between various landowners, etc., which is now getting resolved with the increase in the compensation. Hopefully, we think that there should be a better situation on the ROW, but as of now, it's not good, I'll say.
Okay. Thank you very much, sir. Sir, lastly, one bookkeeping question. How much is the retention money in the book as of now?
I don't have an exact number, but it will be at least 20%-25% of our year. Maybe we can speak to Abhishek later on.
Yeah. I'll do that, sir. Thank you very much.
Thank you, sir. Our next question comes from the line of Sakit Kapoor from Kapoor & Company. Please go ahead.
Namaskar, sir.
Thank you for the opportunity. Hope I'm audible. Namaskar, Kapoor sir. Sir, traditionally, we have seen that H2, our execution, is much higher than how in the way H1 behaves. On a conservative also way, what should we look at H2 in terms of the revenue execution, and how should then the margin profile look for the entity as a whole?
Sageet ji, normally what happens is that H2 is around 60%. Typically, 60-40 is always the ratio of H2 to H1. Particular years may vary, but it shall be [Foreign language].
Sir, for the margin?
[Foreign language] we are at 7% guidance is around 8%. Obviously, H2 will have to be higher than 8.5% to meet the guidance.
That's the way we are looking at it.
We are in line to achieve.
Yes, yes, yes.
Sir, for the cable segment, we are on CAPEX done there. When will that get commissioned, and what's the outlook for the contribution from the cable segment? Thirdly, how has our subsidiary spur performed in terms of this pipeline project, [Foreign language]?
Spur has performed badly, if I can use that word, because [Foreign language] oil and gas [Foreign language] we have got some projects in international market, but they are in the name of KEC, because KEC as an entity is qualified, not KEC spur. [Foreign language] international [Foreign language] we have got a large qualification in KEC spur. We do expect that KEC spur will start picking up as an entity. Okay. Okay, sir, sir.
[Foreign language] investment [Foreign language], which was in aluminum conductor, that is already fully commissioned, and we have already started getting full revenue out of that. We were expecting INR 500 crore-INR 600 crore. Let's see where we touch, but we should be close to those numbers in terms of revenue in the conductor. On the electromeric cable and E-beam, what I said was that we will commission the first, the electromeric part should be commissioned in Q4, and E-beam, which requires a lot more approval because of its radioactivity, etc., that will get commissioned in Q1 of next year. [Foreign language] revenue Q4 [Foreign language] revenue Q1 [Foreign language] Q2 onwards, I think we should start getting full revenue of that expansion also. Okay.
We have the solar E-beam also in our product profile along with the EHV cable segment?
Yeah, [Foreign language] solar [Foreign language]. Once you install the E-beam, the material cost and all will get optimized. The margins on solar can improve, obviously, because once you treat by E-beam, the quality of the cable becomes better, the raw material consumption comes down. That will definitely have a positive impact on our margins from Q2 onwards next year.
For the EHV segment, H2 high voltage?
EHV [Foreign language]. We already have a full-fledged line of [Foreign language], copper [Foreign language] copper [Foreign language] aluminum [Foreign language]. There could be a revenue impact slightly here and there, but the line is full.
We are completely booked.
Okay, [Foreign language], sir. [Foreign language] sir, and all the best. I hope the payment issues get resolved. The entire industry is getting stuck up in the receivable segment.
Hope to. [Foreign language] interest [Foreign language]. Thank you so much.
Thank you, sir, [Foreign language]. Thank you.
Thank you. Thank you, sir. Our next question comes from the line of Amit Amwani from PL Capital. Please go ahead.
Hi sir, thank you for the opportunity.
Hi, Amit.
Hi, sir. First question, sir, you did highlight it in your opening remark about the demand in U.S. and tariffs. Just wanted to understand any implication on your Mexico-Brazilian facility supplies to U.S. and what is the near understanding on the demand in U.S. for these subsidiaries?
Any impact of tariff you're seeing by any chance on these subsidiaries? That is the first question there.
Amit, what is happening is that with a tariff of 50% on steel, our exports to the U.S. are getting, I'll say, not impacted because every country has the same tariff. However, for Mexico, under the USMCA, there is a relaxation where if you use U.S. steel, then the products go tariff-free into the U.S. market from our Mexico factory. What was happening was with the steel pricing, which was there in the U.S. and Mexico. The India, Turkish, and Chinese steel was much cheaper when supplied to the U.S. Now, with the 50% duty, we are finding that the Mexican steel, even with U.S., Mexican towers, even with U.S. steel, is becoming competitive.
The U.S. market has actually opened up for Mexico for the U.S. tower supplies, okay, when you look at the earlier situation. Not that it was a large market for us, but the larger market was from India, and for the Mexico plant, it was Mexico itself. That's it. That is one impact which is positive for Mexico as far as tariffs are concerned. Okay. The second piece, although you're not asking me, is that there is a significant increase which is happening in Mexico itself for the demand. Right now, if I look at my Mexico factory, probably 60-70% of my production is for the local Mexican market. Okay, we have clearly seen an uptick happening with the, see, if you look at the President Sharman, she is an environmental engineer.
What has happened is that she has pushed a lot on the renewable side, unlike the other president, and because of which we are seeing a lot more demand coming up in Mexico itself. As far as Brazil is concerned, Brazil was hardly catering to the U.S., except for some small hardware products, which they are still doing, but Brazil, as far as our products are concerned, is not impacted in any way by the tariffs.
Understood, sir. Yes, yes, sir. That is very clear. Second question on the margins. You did guide that earlier, now we are targeting 8%. I recollect, I think you were giving some 8.5%. Now we are formally saying 8%. Is there any downside risk to 8% also? Second, which segment, you know, where we are seeing some drag and not able to meet what we are expecting?
Any color on that? The second part to this question is, seeing your current order book with you, and you said there was a double-digit margin in T&D, how much more is left? Are we eyeing mid-10, early 10s in T&D, seeing the current order book scenario, which is there with you?
Yeah, Amit, I do not think we can increase the margin beyond a particular level in T&D. However, there are individual projects where the margins are significantly higher than the numbers which we are talking about. Okay. I have always been mentioning that let us take a market like Saudi. We have projects at 7-8% margins. We have projects at 20% plus also. The same thing applies in India also, incidentally. In India also, we have done projects at a lower margin. I have done projects at 20% plus also.
Margins in EPC business are determined more by the complexity, by the expected competition in particular projects.
Okay. Can the margin go up? Maybe 50 basis points here and there can go up in the T&D market.
Overall, I think you're right. We have been talking about 8%-8.5%. We are not talking about more on the lower band at 8% because you know whatever has happened on the delays in civil, etc., and all that, that may or may not lead to a little bit of a margin erosion. In many cases, we are in discussion with the clients, etc., saying this is what has happened and then the clients need to pay up. Unless and until they pay up, you know that's why we have become a little bit more conservative and said that you know we should be closer to 8%.
I do not think we are seeing too much of risk to the numbers unless and until, you know, let's say the steel and cement prices spike up suddenly or something, which we are not seeing that happening at all. I do not think we are seeing any significant risk to what we are talking. No.
Understood, sir. Lastly, on labor shortage, you have been highlighting labor shortage for quite some time. Our order books are growing. We are growing overall, seeing an upcycle with very strong growth expected in forward years. How are you dealing with this situation? I think this being the key concern and you have been highlighting this thing from, I think, almost two, three years. Just wanted to understand, will this be achieved with some mix change or naturally since T&D is increasing, we will be able to deal with this situation?
Just wanted to have more color on this situation and going forward however we deal with it.
I think, Amit, you are absolutely right. I've been talking about it for some time. Even today, I mentioned it. One thing is that if you heard of my order intake breakup, almost INR 12,000 million out of these numbers come from international. We are generally not faced with any significant labor issue in the international market. We've been hiring from India, we've been hiring from other countries, we've been hiring from Egypt. There are many other countries from Africa. We are not now taking labor gangs and all that. Internationally, I think we are pretty insulated on the labor problem. As far as India is concerned, our requirement was around 30,000 earlier. We had 17,000. Now we are already at, you know, 24,000 and short available.
The number keeps on going up and down. Bihar election is also sadi, all the people have gone. Now again, they'll start coming back from tomorrow. First set ho gaya elections, some people from those areas have already come back. So there is definitely a shortage, and also shortage could be on specific pieces like in T&D. I don't have a shortage on civil or on stringing, but the shortage is on erection. I think those are getting addressed. The other thing what we are trying to do is we are trying to increase our mechanization quotient significantly. Like India, we were never doing erection by cranes or towers. Now we have started doing a lot of erection by crane, which you should do in the Middle East earlier.
Or if you take civil, you know, you had fitters coming and cutting in and, you know, bar bending होता था, side per bandshe there. Now we are using automatic bar bending machines, we have set up bar bending plants in some of our projects. Also, we are talking with Tata's and all that. We are actually buying mesh, steel, etc. directly. What you are trying to do is how do you reduce the requirement of labor or work with them to increase productivity by using a lot more mechanization. Okay. Like we are now doing plastering by drones, for example. A lot of things are being used to. How do you reduce the requirement of masons? Individual category of, you know, workers are being addressed one by one. Yes, the problem still continues.
I could have definitely done at least INR 200 crore-INR 300 crore more, I'm telling you, in civil had we had a full contingent of 30,000 people with us. Okay, but now it's already reaching a better number. Hopefully that's one of the reasons why we are saying we'll do better in civil. Plus, now next three-four months, we don't see any festival till the next Holi. Hopefully the labor will continue where they are. Hope I've answered your question, Amit.
Yes, sir. Thank you so much for answering the questions.
Thank you, sir. Ladies and gentlemen, that was the last question for today. I now would like to hand the conference over to Mr. Vimal Kejriwal for the closing comment. Thank you, and over to you, sir.
Thank you, Ganesh, and thank you everyone for your continued interest in KEC. Thank you so much.
Thank you, sir.
On behalf of KEC International Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.