Ladies and gentlemen, good day and welcome to the KEC International Limited Q1 fiscal year 2027 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. From the management today, we have Mr. Vimal Kejriwal, Managing Director and Chief Executive Officer, and Mr. Rajeev Aggarwal, Chief Financial Officer. I now hand the conference over to Mr. Vimal Kejriwal. Thank you, and over to you, sir.
Thank you, Alaric. Good morning, everyone, and welcome to the KEC International's Q1 earnings conference call. Let me begin by sharing an overview of the operating environment, followed by our performance during the quarter and business-wise updates. In the Middle East, our Dubai manufacturing facility and the execution of all ongoing projects continue to operate near normal on the ground. The region accounts for approximately 25% of our overall order book and L1 position. While tendering activity remains strong across the region, we are witnessing some delays in the finalization and award of new orders. Cash flows remain stable, and we continue to be optimistic about the medium to long-term outlook, supported by sustained investments in grid expansion, regional interconnections, grid resilience, renewable energy integration, and reconstruction initiatives. While on-ground execution continues across our sites, we continue to face challenges on the supply chain and logistics.
Shipments, especially from Europe, China, and India to the GCC countries which had come to a standstill earlier, have gradually resumed, albeit with some delays. This has resulted in slower execution on certain projects on the supply side. Freight costs, including war-related surcharges, insurances, et cetera, remain elevated, though they are expected to moderate over the coming weeks. This also had a cascading increase on logistics, fuel, and power costs, also in the manufacturing facilities in India. We are working closely with our supply chain partners to minimize these disruptions and are also engaging with our customers to recover these additional costs. Procurement or project execution may get deferred until customer alignment is achieved on recovery of the additional costs, resulting in revenue margin timing impact. These challenges impacted execution during Q1 and are expected to have a spillover effect on Q2 also.
Coming to Q1 performance, despite the challenging operating environment, we delivered a resilient performance by maintaining revenues, strengthening our order book, reducing debt, and continuing to build a healthy pipeline for future growth. We delivered revenues at INR 5,024 crore, marginally higher than Q1 last year. We have delivered a PBT of INR 90 crore with PBT margins of 1.8% and our PAT stands at INR 73 crore. Our performance could have been better but for the continued geopolitical disruption in the Middle East, shortage of labor, and calibrated execution of water projects owing to delays in payments. The labor situation has started improving from June 26 onwards. Delay in legal closure of disputes to settlement of claims in transportation and metro projects also impacted the profitability.
On the order intake front, we secured new orders of over INR 6,300 crore across T&D, civil, renewables, cable and conductors, and transportation business. Additionally, we have an L1 position of almost INR 3,000 crore, predominantly in the T&D business, which are expected to be awarded in the near future. We have a diversified and strong order book of INR 37,697 crore as on date. Including the L1 position, our order book and L1 stands at over INR 40,000 crore. On the debt front, net debt including acceptances have been reduced by over INR 150 crore- INR 6,568 crore in June 2026 from March 2026, supported by a free cash flow generation. This reduction in debt has also translated in a lower absolute interest cost compared to Q4 2026.
The debt could have been further reduced but for the delay in realizing significant collections from Afghanistan, which we now expect to materialize in Q2, as well as higher inventory levels due to delayed dispatches from Dubai factory as well as some raw materials storage amidst the ongoing Middle East disruptions. On specific businesses, T&D, the business achieved revenues of INR 3,217 crore, higher than last year. The revenues could have been better but for the supply chain constraints in Middle East. On the order intake front, the business secured orders of INR 3,600 crore across India, Middle East, Africa, and the Americas. In India, we secured repeat orders from leading private developers, including a significant order in the rapidly growing HVDC segment. We continue to witness a robust opportunity pipeline in this space.
We have already participated in multiple packages in the Barmer Rajasthan HVDC scheme and expect additional schemes to be floated during the course of the year. We have also secured our first transmission line order for evacuation of power to a data center in Western India from a private developer. This order marks an important milestone for the T&D business in supporting the power infrastructure needs of the growing data center segment. We are also engaged in discussions with other data center developers for similar opportunities. In addition to PGCIL and other private developers, we have started bidding for three new developers during the quarter. In international, we are witnessing a gradual revival in the African market, reflected in the recent win of a significant transmission line order that further strengthens our presence in the region.
We have also expanded our tower supply business by securing a substantial order in the Middle East, opening up a sizable new market beyond our presence in the Americas, Australia, and Europe. In SAE, the business achieved revenues of INR 450 crore, a strong growth of 25% year-on-year. We continue to witness strong momentum in order flows with new orders of over INR 1,650 crore for the supply of towers, hardware, ports, and engineering services across the U.S., Mexico, and Brazil, an increase of nearly four times compared to last year. These orders include the largest ever tower supply order from the U.S., reflecting the growing momentum in the American T&D market. With these orders, the order book and L1 position has been scaled up to a record level of over INR 3,800 crore.
In line with the strategy of diversifying our product portfolio and expanding into new markets, we continue to make encouraging progress. In Brazil, we successfully executed our first pilot order for mining structures, opening up opportunities beyond the power transmission sector. In Mexico, we expanded our international footprint by securing an order for the supply of structures for a solar project outside Mexico. On the manufacturing front, following the successful capacity enhancements at our facilities in Dubai, Jaipur, and Jabalpur, we completed the expansion of our Butibori facility in Nagpur in Q1. With this, our global manufacturing capacity has increased to 483,800 metric tons. These capacity additions further strengthen our manufacturing capabilities and position us well to cater to the growing demand for transmission infrastructure across both domestic and international markets. The overall tender pipeline in T&D continues to remain robust across both domestic and the international markets.
In India, the sector continues to offer a strong multi-year growth opportunity driven by rising power demand, accelerated renewable energy capacity addition, grid modernization, and the increasing need to address grid congestion through expansion and strengthening of the transmission network. With a robust tender pipeline, we see significant multi-year opportunities ahead and remain well positioned to capitalize on this growth. The international T&D market continues to present a strong growth outlook supported by robust transmission investments across the Middle East, a recovery in Africa, expanding opportunities in Americas, CIS, and the SAARC regions, and increasing infrastructure demand driven by renewable energy integration and the AI-led data center boom. Our diversified global positions us well to capitalize on these opportunities. With a healthy order book and L1 in T&D of over INR 25,000 crore, we are confident of delivering significant growth in the T&D business.
In Civil, we delivered revenues of INR 993 crore for the quarter, a growth of 6% year-on-year. While execution has progressed across multiple sites, growth was slightly lower owing to the labor shortages arising from the election period and the delays in customer payments in the water segment.
During the quarter, we successfully commissioned the Bheden Water Supply Project in Odisha, which was inaugurated by the Honorable Prime Minister Shri Narendra Modi. This landmark project will provide safe and reliable drinking water to 166 villages through 58,000 household tap connections, creating a meaningful social impact. During the quarter, the business secured multiple orders through L1s of over INR 1,400 crore in the buildings and factories vertical from reputed clients. The Civil business has widened its presence in the automobile segment with an order from one of India's leading automobile manufacturers, adding a marquee client to its portfolio.
The business continues to strengthen its presence in the high-rise residential segment, expanding its customer base with a prestigious order in Northern India. It is also well-positioned to secure another order from a repeat customer, reflecting our strong execution capabilities and customer confidence. With these wins, KEC is now constructing approximately 80 high-rise buildings for marquee clients across the country. Our geographic footprint extends with a strong presence in markets such as Mumbai, Gurugram, Pune, Goa, Bangalore, Hyderabad, and Kolkata.
During the quarter, we further strengthened our civil leadership capabilities through onboarding of senior talent. Looking ahead, with the labor situation gradually normalizing, a sharp focus on execution, a robust order book and L1 of over INR 10,000 crore, we are confident that the Civil business is well positioned to deliver healthy growth over the coming quarters. Our transportation business has accrued a revenue of INR 259 crore for the quarter.
The business continues to focus on execution of the new orders and completion of ongoing projects. During the quarter, the Honorable Chief Minister of Maharashtra inaugurated the Mumbai Metro Line 2B section between Mandale and Diamond Garden, where KEC executed the ballastless track works. The business has also secured new orders over INR 250 crore in the technologically advanced automatic block signaling segment. The business has successfully implemented KAVACH across 667 route km and is currently executing deployments across an additional 780 rout km of the railway network and over 3,000 locos. We continue to actively pursue opportunities in KAVACH, technologically advanced metro systems, and tunnel ventilation projects. Going forward, our focus remains on accelerating project closures, improving working capital efficiency, and selectively pursuing high-value domestic and international opportunities to drive profitable growth.
Our cables and conductors business has assured a revenue of over INR 600 crore, a stellar growth of 57% year-on-year, driven by robust demand across the infrastructure, power transmission and industrial segments. We also continue to witness steady inflow of orders for supply of both cables and conductors. On the new product front, elastomeric cables are slated to commence production in this quarter, followed by the commissioning of the EBM plant in the next quarter. These investments are expected to strengthen our specialty product portfolio, improve our product mix, and support long-term margin expansion. In the renewables business, we secured new orders of INR 800 crore from an existing customer during the quarter. These include prestigious projects in both the wind and solar segments. We are now executing solar and wind energy projects with a cumulative capacity of over 600 megawatt.
In addition, the 1 GW solar projects for Ircon International Limited in Karnataka and NTPC Limited in Rajasthan commissioned recently are operating successfully at their rated capacity. The outlook for the renewable business remains highly encouraging, driven by sustained investments in clean energy, grid modernization, and the increasing focus on reliable and dispatchable power solutions. We continue to engage with leading wind OEMs for strategic partnerships to strengthen our presence in the wind segment.
With our expanding execution capability and growing project portfolio both across wind and solar, we are confident that the renewable business will become a significant contributor to KEC's long-term growth. In the oil and gas pipeline business, we have initiated the merger of our wholly owned subsidiary, KEC Spur Infrastructure Private Limited, with KEC International. Post the merger, the oil and gas pipeline portfolio will be integrated into our civil hydrocarbon segment, enabling a more unified approach towards hydrocarbon projects.
Going forward, we see significant opportunities to expand our hydrocarbon business across both domestic and international markets. In conclusion, our performance during the quarter reflects the resilience of our diversified geographical portfolio. While we continue to face certain near-term challenges, we believe these are largely transitory. With supply chains gradually normalizing, labor availability improving, a strong order book and L1 position of over INR 40,000 crore, a robust tender pipeline exceeding INR 2 lakh crore, and encouraging opportunities across both domestic and international markets, we remain confident of delivering stronger execution and improved financial performance over the remaining quarters of the year. Thank you. We are now open to take questions.
Thank you. We will now begin with the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Vaibhav Shah with JM Financial. Please go ahead.
Yeah. So firstly, on the standalone performance, we saw EBITDA margin decline to almost 4% odd for Q1, and PAT was negligible. So what was the reason for that at standalone level?
Vaibhav, as you have seen our numbers, T&D obviously is at a higher margin and railways and civil has been negative, and that is in the standalone. A large part of our T&D is also in the consolidated piece. Which is the major reason why the standalone is showing a much lower number as compared to the consolidated.
Okay. So you may expect the T&D to pick up from Q2 onwards, or it should be in the second half?
There should be some pickup happening in Q2. I think the problem in Q2 in T&D in India is there because of very heavy rainfall, especially in Gujarat, where most of our projects are right now concentrated. But clearly Q2 will definitely be better on standalone.
Okay. Secondly, you mentioned about the stuck receivables in Afghanistan and JJM. What is the quantum of receivables from Afghanistan and JJM? Can you split the JJM receivables in both MP and Odisha, and how do you see the inflows coming in?
I do not have the split numbers, but the total receivable should be around INR 800 crore or INR 900 crore, of which around INR 400 crore to INR 500 crore are sort of overdue. Okay? Balance are pending certification, et cetera. If things happen, we have been talking with everyone, including the state governments and the central governments, and the assurance is that funds have now been released. We will keep our fingers crossed. In fact, in the month of July and August till date, we have received around INR 110 crore or so between the two states. I do not have the exact figures. The dues are equally split between Odisha and MP. As far as Afghanistan is concerned, we have around roughly INR 300 crore of money which is due for payment for some time, and it has to come from ADB.
We have been getting repeated assurances that we should get the money. It was supposed to come in Q1. Now they have told us Q2. I think it is a matter of time. I think if we are lucky, let me put it, that we should get it in Q2 itself. Otherwise, definitely Q3, and that is a large amount, INR 300 crore without any outflow against it. So that will help us in improving our debt situation, which did improve a little bit in this quarter.
Sir, lastly, you mentioned that in the previous call that we are targeting 120 days by September and 110 days by March in terms of overall working capital. If we receive this INR 300 crore from Afghanistan and another INR 300 crore-INR 400 crore from JJM, then also to achieve that target, we need another improvement as well. So what could be that lever to reach towards the 110 days?
I think these two should be decent, will help us decently. Also, I did mention that we had a higher inventory level in Q1. One is partly in our Dubai factories because there was some balancing equipment, et cetera, which did not reach there, which have now reached. That is one. Secondly, now cable business also with all the uncertainty on the plastic side, et cetera, we had increased our raw material, et cetera, and finished goods also. Now they are getting going. So I think maybe around INR 200 crore-INR 250 crore should get released from the working capital side without the debtors also. So I think we are pretty okay with the numbers, what we are talking about.
Okay. Sir, lastly, on interest cost, we are seeing some reduction on a quarter-over-quarter basis. Incrementally, this should be running on a quarterly basis for the entire year?
No, it should be much less than that. This quarter we had 3.3%, largely because a lot of cash came in in the end of the quarter. While the absolute borrowings went down by the quarter end, I think in April, May, it was elevated. So our expectation is that against the 3.3% which we did, we should be around 2.3% or so for the whole year. Our total interest should be around INR 600 crore. That is our expectation.
Okay. Thanks a lot, sir. I will fall back in touch.
Thanks, Vaibhav. Thank you, Vaibhav.
Thank you. The next question comes from the line of Sumit Kishore with Axis Capital. Please go ahead.
Good morning, sir.
Morning, Sumit.
My first question is in relation to your 25% order book in Middle East. Could you speak about the composition of this order book, the challenges that you faced in terms of execution? Excluding Middle East, what would have been your revenue growth? Just trying to understand the impact here.
Our 25% order book is broadly, I'll say, equally divided between Saudi and UAE. That's the basics. When you say 25%, it's almost INR 10,000 crore. So INR 5,000 each between the two countries. Very broadly, maybe 1% or 2% here and there. That's one part of it. On challenges, we are not seeing anything significant on the ground. Project executions are going on. I think in the last four months, we have commissioned three or four projects during these four months, and a lot more is happening. I think the problem is twofold. One is the logistics costs have gone up, fuel costs have gone up, so local operating costs have gone up significantly, which is reflected in the margins. We are in touch with the client, et cetera. Let us see what happens.
Since the costs are being incurred, they're getting booked immediately. That's one part of it. The second part is on the supplies. Typically, 25%-30% of our revenues come from supplies items. We are seeing a significant challenge on the shipping side with the ports under attack or so. Vessels from China, Europe, and even from India are difficult to get, and then also the rates have gone up. Whatever is impacting the quality of revenue, we have been deferring it for some time. Hopefully, the situation is slowly normalizing, so it should come back maybe by the end of this quarter or so. We'll keep our fingers crossed on this. The major impact is not on the physical execution, but towards the supplies which go into the projects.
Okay. Revenue growth excluding Middle East would also have been flattish, just like we have seen on a year-over-year basis for KEC at consolidated level in Q1.
I think the revenue growth was slightly, I will say, impacted in India T&D, and also civil because of labor in the civil side. India T&D, I think we are still seeing a huge headwind in terms of ROWs, whether it is Rajasthan, whether it is Gujarat. I think these are two major states where we are operating majorly because all the renewable projects are there. Most of our projects are in that side. That is one issue. I think slowly it is getting resolved. Gujarat has come out with a new scheme where they have increased it twice of market value. I hope that we will start seeing a lot more movement on the India T&D side.
Okay. On the fiscal year 2026 call, you had indicated an expectation to grow 12%-15% in revenue terms, order inflow of INR 300 billion, and you had not given any specific margin guidance. Would you like to revisit your guidance for the fiscal?
I think we are okay with the guidance. I think only on the revenue side, we were 12%- 15%, so it will depend upon what happens in the war. I think maybe a 0.5% or 1% here and there, but I do not think there is anything major for us to worry because we have an order book of around INR 40,000 crore. Q3, Q4 typically are good for execution. I think right now we are pretty okay with our guidance.
Okay. Finally, in your civil segment, how much is water as a percentage of your order book now?
I think it is about. Yeah, go ahead.
Yeah. Basically, with the headwinds or working capital challenges, what is the outlook on execution there? Particularly within Civil, I think you had expressed the expectation of INR 80 billion of order inflow in fiscal year 2027. How much of that would be particularly from water?
We have not taken anything from water, first of all. Secondly, I think on order book, we are roughly around INR 1,200 or INR 1,300 crore in water. So that would be, let us say, 13%-14% of our order book. I think for the balance numbers, I think we are pretty okay. We have got a large pipeline, a tender pipeline for Civil, so we are not too much worried. There is enough and more work happening, especially on the residential and the commercial piece of it, and continued work, a lot of inquiries from the metals and mining. I do not think we are seeing too much on other sectors, but at least on this sector, there is a continuous inquiries coming on.
Okay. Thank you, and wish you all the best.
Thanks, Sumit. Thank you.
The next question comes from the line of Parikshit Kandpal with HDFC Securities. Please go ahead.
Yes, sir. Hi. Congratulations on a decent quarter in a tough environment. My first question is on the standalone revenues and the profitability. If I do simple maths, it is almost close to about INR 3,900 crore of revenues, and you have reported 4% EBITDA. Historically, this business had 10% margin, but assuming if you take even 8% normalized margin, it is a INR 311 or INR 300 odd crore EBITDA. We are shortfall for almost INR 150 crore. Lastly, this loss is coming from which segment within the book, order book?
It is difficult to quantifiscal year which exactly, but it is primarily coming from our transportation and civil business. That is where the shortfall is coming. T&D is doing reasonably well, I would say.
Civil, sir, we were approaching high single-digit margins, so what is happening in Civil now? Why Civil has turned negative?
No, it has not turned negative. I think the issue what we have been discussing is that we have got a few old Metro projects and all that. I can give you example. I have got four Metro projects, two in DMRC, two in Chennai Metro. One of the DMRC project was commissioned sometime back. The second one is ready for commissioning since, I think, last June. The client has not taken over. Chennai Metro, the same thing. One of them is ready for commissioning for, I do not know how many months now. It has not been commissioned for whatever reason because somebody is not available or I do not know what is happening. Because of that, what happens is that the client will not take over, you are supposed to maintain. So virtually, you end up spending almost INR 10 crore per month on each project.
Now all these are going in the expense account. You will make a claim and all that. That is where it is continuing, and I think it is a saga which is I do not know what to say about it. Hopefully, we are now hearing that they will get commissioned, and they are stuck for commissioning because the second part is not getting ready or something else has happened and all that. So that is where this is happening. When you say that we are going towards a higher margin, it is a fact on all the new orders are all profitable, and we are pretty okay with them. It is a question of as soon as we are able to close the tap on these orders, we will start seeing a turnaround.
When we talk about the line of size, I mean, Q1 is INR 150 crore of shortfall. If I annualize, it is almost INR 600 crore on standalone. Where does it end? I mean, what is the order backlog right now from all these troublesome projects which are underfunded or maybe are loss-making? What is the pending cost to completion, I mean, or maybe extra cost which you need to cover up? If one has to look at which quarter down the line we turn profitable, move towards 8%-10% standalone margins. If you can give some color on that, it will be helpful.
Difficult to give it today. On the second part or the first part on the order book, these are not in the order book because they are all completed projects. They do not have any backlog of orders except one CMRL project which will get completed in maybe next six months, where we may have an order book of INR 100 crore-INR 150 crore or so. Rest of all are not. As I said, they are completed, ready to hand over, everything is done. They are not in the order book. I will not be able to give you exact numbers, but I do think that this quarter also, Q2 also would remain in a similar line, maybe 50 basis points here or there. But that is the way at least Q2 will be there.
Q3, Q4 would depend upon what happens also in West Asia, because most of the projects of West Asia, many of them are in my standalone.
Okay. The other part is the one thing which is there on the civil side and the transportation side. Secondly, challenges which are coming upon the freight and the commodity side. Steel, aluminum, prices are going up. Is there a case when in the T&D business, which is supposed to be high margins, now starts seeing headwinds on the margins because of all this conflict and they will start reporting lower margins and traditionally our aspiration to reach high single-digit margin gets pushed out maybe by a year or a couple of years?
T&D, I am not seeing too much of a challenge on a double-digit margin. We have, I think, enough cushions available. A lot of them are hedged already. I do not think we are too much worried about it. T&D, I think we are okay. Steel and all that, what has happened is that the costs have come down again, especially on the plates, et cetera, and angles. Aluminum, we have some exposure. I think we have enough time to look at it. Are we worried? No, I do not think we are significantly worried about maybe 50 basis points here and there. Our view is that T&D would probably continue to be in double digit or maybe very close to double digit going forward.
What about the other segments, civil, transportation, others, if you can give a color.
They are still negative. That is where the overall numbers are under pressure.
Any guesstimates of from which quarter do you think the margins turnaround will start happening? If you have to give, if someone has to hold you and give a call, then which quarter we will see the turnaround happening? Will it happen in fiscal year 2027 or now we look at maybe towards the fiscal year 2028, start of fiscal year 2028 where the margin turnaround will start happening?
No, I think the margins will keep on inching up. Where and how they attend which, I have no numbers to give you today. Okay? But do we think we will get into double digit and all in fiscal year 2027? No, not possible.
High single digit starting 2028? Q1.
High single digit in 2028 should be possible. Yes.
Sure, sir. Thank you. Those were my questions. The biggest worry is on the margin side now because that impacts the Chief Financial Officer and Chief Financial Officer impacts the debt.
I thought your biggest worry was on working capital, which you are not asking.
Yeah. Eventually Chief Financial Officer leads to working capital and then how working capital gets impacted, so it flows down from profitability. But anyways, that is a challenge right now that I am not able to grapple with.
Thanks, Parikshit. Thank you so much.
Yeah. Thank you, sir.
The next question comes from the line of Jainam Jain with DAM Capital. Please go ahead.
Thank you for the opportunity. Sir, I wanted to understand how do we see the opportunity in data center EPC business in terms of competitions, margins, and what is the right to win over in that segment?
Jainam, it's a difficult business in the sense that what we are seeing is that although there are large opportunities being there, but traditionally we are seeing developers breaking up the orders into various smaller sections. Slicing it into different ways. Very few, I'll say, hyperscalers are there who are willing to give orders for your civil as well as MEP and all together. Typically, most of them break it up on the high, low. We're not seeing large orders coming in from most of the clients. A few exceptions are there. Right to win for us is that we can do civil as well as we can do MEP together, and that's what is being pitched. I think hopefully we will see some wins happening on data centers maybe next quarter.
The market is large, but as I said, there's too many players with small, I'll say, ticket sizes, which is creating a problem overall. But for me, the interesting part, Jainam, in data center is more coming on my T&D side, where we are seeing inquiries coming in where the data center may get built in 15 to 18 months, but then the lines and the power supply, et cetera, are becoming challenged in some places, which is why we announced that we got a private order now. We are seeing developers like U.S. also resorting to having their own connectivity, et cetera. I think that is also very interesting.
Okay. We have been pursuing the opportunities for the U.S. data center as well, especially in the T&D segment.
I am not pursuing for the U.S., but we got some large orders and a lot of inquiries are there, which are from also private developers in U.S. who are supplying to data centers.
Okay. And sir, how about the competition? How is it panning out?
In which area?
In the data center business.
Data center. It is very fragmented. It is region-wise and all that. Each region has got different players, so difficult to say who are there. Otherwise, if you look at the bigger players, it would be people like Tata Projects and Larsen & Toubro, et cetera.
Okay. Sir, what would be the civil TAM if we have to compare it? Right now we have got order in the T&D space, right, for data center. How about the civil segment for data centers?
Right now we do not have a single order in data centers. We have finished five data centers in the last couple of years. We have bid for a few of them, which is why I said that hopefully by next quarter, we should at least have a few orders in the civil side on the data centers.
But sir, if you have to quantify, per mega or if it is available on a per megawatt basis.
Typically, our size would be around INR 10 crore per MW or something like that.
Okay, sir.
Because, Jainam, what happens is every developer gives in a different format. So it is difficult to put numbers. Each tender has got a different number.
Okay. Sir, my last question is in the Jal Jeevan Mission side. What is the pending order book currently and how much the receivables are stuck over there, sir?
We have order book of roughly around INR 1,300 crore or so pending. Gross debtors would be around INR 800, INR 900 crore. I think INR 400 or something are due for payment, so we hope that that will come in.
Okay, sir. That answers my question. Thank you so much and all the best.
Thanks, Jainam. Thank you.
The next question comes from the line of Amit Anwani with PL Capital. Please go ahead.
Hi, sir. Good morning. Thank you for the opportunity.
Hi, Amit. Morning.
First question, you did highlight about the delays in conversion. Just wanted to understand, is it more so with the domestic market or the export market, particularly Middle East? Second, you have highlighted 2 lakh crore pipeline, 50, I think 1 lakh crore for T&D and 1 lakh for non-T&D. Within 1 lakh of T&D, how much you are really factoring in from the Middle East market? Third, what is the expected inflow now amid whatever is happening? Because we are already four, five months in the financial year. For full year, what is the expectation of inflows on? Yeah.
Amit, when we talked about delay in conversion, it was primarily the West Asia market, primarily. We have built quite a few projects in Saudi and U.A.E. and Oman. In fact, we are L1 in a few of them, but the conversion is taking its time. It is not that it is unduly delayed, but it is taking time. The tender pipeline is there. In fact, now also we saw some new tenders getting announced even yesterday also in the Middle East. I think we are not worried about it because tenders are getting announced even now. There has been some talk saying will there be scaling down? I do not think there is a scaling down because continuously projects are coming up. To me, that is the basic thing as far as West Asia is concerned.
As far as order, I will say when you look at the order intake when we had said INR 30,000 or so, roughly I will say 60%-65% would be from the T&D market and I think international is around INR 9,000-INR 10,000, right?
INR 9,000.
Yes. I think our international expectation was that we will be between INR 9,000-INR 10,000 in terms of order intake. A significant part of it would obviously come from West Asia.
Right. Second,
Yeah
On the cables business, you have done very strong and probably few quarters the performance has been quite strong. What is the capacity now and with elastomeric, are you seeing more growth happening? Are you seeing more CapEx lined up in cables because we are seeing other fair play cables or conductor players has still been front loading the capacity. That is one. Second, any thought on the exports of cables also to the U.S. market? What are the margins which you are currently making in the cable business?
Our exports have been roughly around, I will say, INR 200 crore last year. We obviously want to expand the same. With the speciality cables coming up, I think by Q4 we should have increase happening in our export market. I don't think we have very large CapEx programs. We normally have been spending around INR 75, INR 80 or maybe INR 100 crore in cables every year. Last three years, we have spent INR 300 crore. A large CapEx will happen if we decide to expand our EHV, which we have been looking at it. Once we see the demand stabilizing, maybe we will put in a larger CapEx. Not immediately, could be next year or something, but I think it's still on the drawing board. Otherwise, INR 50, INR 75 crore we keep on spending.
We will definitely, I think, add some capacity on our aluminum conductor side, more specialized products on HTLS, et cetera. That's the way we are looking at cables. The margins have been okay. I think they are around 5% right now, almost 200 basis points still below the market. With the speciality cables coming up, I think the margin will start inching up. That's the expectation.
Right. What is the capacity or probably the peak revenue you can do with the fixed asset you have?
I do not have the capacity in terms of kilometer and all that, but I think we can do around INR 3,000 crore with the current assets without any more CapEx.
Right. Lastly, what was the deferment, I would say, or probably you were not able to book it revenue because of the Middle East conflict and the overall expectation now, in terms of the full year growth. I think this will help.
Amit, full year we are still saying what we had said last quarter, around 12%-15% growth should be feasible today. But at least I think the number would be around INR 300 crore or so for the quarter.
Right. Is it like, that is also probably dragging the growth this year or this is something which is recoverable in the subsequent quarter for this?
No, it will definitely be recovered. This is not a product sale that it is lost.
Right.
It is an EPC number, so whatever has not happened in this quarter and what did not happen in Q4 also, ultimately all of that should happen, which is why in spite of having a flat quarter this quarter, we are still saying that we will maintain our growth.
Right. Thank you, sir. Thank you for answering my question. Bye.
Thank you.
The next question comes from the line of Sudeep Bora with Ambit Capital. Please go ahead.
Hello. Thank you for the opportunity, sir. Sir, I wanted to understand on the SAE Towers business. The current set of fixed assets that we have, in terms of the revenue potential, how much can we execute in a year and what is the utilization percentage? Maybe you can throw some light on that.
I think it is difficult to give a number because it will depend upon what type of product you make. But broadly, I will say around INR 2,000 crore could be the utilization based on today's fixed assets, but we have been adding a little bit here and there. Okay. It may go up slightly, but INR 2,000 is the number which you can take.
Okay.
The utilization is reasonably okay. I think we are now at almost at a full capacity. You can always add something by adding extra shifts and all that. But broadly, I think we are at 100% now.
Okay. The current order book from this particular segment is around INR 3,800 crore. That would be delivered in a matter of, say, one and a half to two years, right?
Yes. Typically, those markets, you get orders much in advance, at least 12 months in advance. Okay? That's the way it works in the Brazil and the U.S. market.
Okay. Got it. And typically, what would be the margins from this business, the tower manufacturing, SAE Towers?
I think SAE is close. I think it's almost double digit right now.
Okay. Double digit, right, sir?
Yeah.
Yes. Okay. Sir, for fiscal year 2027 on the order inflow guidance, how much are we expecting?
We have said that we should be around 60%-65% or either 60%-70%. Out of INR 30,000 crore, if you take it, roughly it would be INR 20,000 crore, maybe a little bit here and there.
Okay, got it. Thank you, sir. Those were my questions.
Thank you, Sudeep.
The next question comes from the line of Arafat with Dolat Capital. Please go ahead.
Yeah. Hi, sir. Thanks for taking my question. My first question is on, let's say, if you see apart from the Middle East and labor challenges, now we are seeing a labor challenge now sorting out and Middle East also, let's say, in next couple of months, we will get some clarity on that. Which are the other factors need to watch out in the near future to get back to, let's say, 15% annual growth and EBITDA margin 8%?
Difficult to say, because these are the two major factors which we are seeing. Once they are out of the way, obviously the margins should improve. Other thing we have always been talking out is that we have got lot of arbitration and other issues which are going on, especially on the railway side. If something really adverse happens, then it could have some impact. But I think to me it's a little bit of a far fetch, but since you asked a specific question, I'm giving an answer. Otherwise, with West Asia and labor situation getting resolved, I think a large part of the headwinds will go away.
Got it. Got you. Secondly, on which are the slow-moving project in railway and water projects? Any sense on that? By when you are expecting this to get out from this project and get back to normalized margin?
Railways, most of the slow-moving projects are at 95%, 97% closure and all that. It is a question of when the railway gives the block or when they approve the design of the depot, et cetera, they will get completed. Water, we only have two states where we are working, MP and Orissa. Orissa, I think we have got six or seven projects. All of them are at various stages of completion. Our expectation is that if cash flow happens regularly by this year end, we will have maybe two projects are still continuing post-March. Otherwise, most of them should get completed within this year.
Got it, sir.
Thank you, Arafat. Thank you.
Yeah. Sir, lastly, if you can just give any guidance on working capital days for fiscal year 2027?
I think we are talking about 110 days for working capital at the end of the year.
Okay. Thank you, sir. That's it from my side.
Thank you.
The next question comes from the line of Priyankar Biswas with JM Financial. Please go ahead.
Hi, sir. Thanks for the opportunity.
Hi, Priyankar.
Hi, sir. Sir, coming back to this working capital question. Just trying to visualize sort of a roadmap on, let's say, the working capital reduction. Whatever I heard from the call. First of all, you are going to get, let's say, if not in the next quarter, let's say in the coming two, three quarters, at least, let's say INR 300 odd crore from Afghanistan, right? That is the first point. Secondly, from the water, what I understand is right now the current dues are INR 300 crore- INR 400 crore. You should ideally receive that as well. Then there is this inventory build that had happened in West Asia, there should be some unwinding also. These are the plus factors that I have.
If you can give a cumulative factor, taking everything together, what should be the working capital reduction if we take all of this? Then finally, also this JJM still has INR 1,300 crore of order book left, is what I understand. In the individual projects, what sort of completion on an average you have got there? To complete this entire INR 1,300, to run down this entire INR 1,300 crore of, let's say, orders, what sort of costs would be required? This is what I wanted to know.
Priyank, as you rightly said that I think these are some of the levers that are available with us to reduce the working capital. See, overall reduction, what we are looking at in the current financial year is roughly about INR 1,200 crore debt reduction. At the beginning of the year, we were at about INR 6,700 crore, and what we are guiding is by March, we should reach to about INR 5,500 crore.
Apart from the two or three levers that you just counted, apart from that, let's say in Saudi, we are closing few projects which were started about 2.5 years back. These projects will also get closed, and then we will be able to recover at least 50% of the retention money on physical closure. 50% comes at the time of physical handover and 50% comes after the six months period. At least the first part of it, we should be able to collect. These are basically largely. Then another item that we are looking at is in railways, there are few claims which have been decided positively in our favor in DABs and arbitration.
We are hoping that with the intervention of the client and with the client negotiation, et cetera, we should be able to recover some of the claims. Additionally, we are also looking at closure of all the projects, as Vimal alluded sometime earlier, that we are towards the 90%, 95% closure of these projects. We are hoping that these projects will get closed and we should be able to collect the retention money. These are the few levers which are available with us and which we are confident that we should be able to realize and able to reduce our working capital debt to about INR 5,500 crore.
Sir, for this water-related project, like the INR 1,300 crore order book that you are speaking about, what would be the cost to complete it? What I am trying to assess is how much further losses can be there or cash outflows can be there to kitchen sink the entire JJM book.
Look, as Vimal sometime back said that these water projects are profitable. The only challenge is that because we have a large outstanding which is there. We have deliberately slowed down the execution, although the construction is going on full force. What is happening is that supply items, we are actually doing it need-based. Depending on the project requirement, we are supplying those items like DI pipes and valves and other things. Those are the items which are. I think these projects are all profitable and they are around 8%-10% margin at various stages. I do not see there is any challenge in terms of the cost structure or the profitability of this project.
Okay, sir. If I may just harp on that. Afghanistan, you said that in the next couple of quarters, let us say you will get INR 300 odd crore, right? If I heard it correctly.
Yeah.
Roughly. Water in, let us say the next half, like INR 300, INR 400 crore you are saying is the current deal.
Sure
You should be able to recover that, but of course, there would be some new deals also will come over. So what could be the collections in water, the net collection? Today the deal is INR 300.
Priyank, we are expecting roughly about INR 300 crore-INR 400 crore for which the cost has already been incurred. What we are hearing from the government is that water from the Jal Jeevan Missions have started getting released. If that really happens, then whatever overdues are there, we should be able to collect at least roughly about INR 300 crore-INR 400 crore. Whatever the next revenue is happening, we will incur the cost and we will be regularizing the collection from the water segment in the remaining part of the year.
Okay. That is clear. Also you said about this Saudi Arabia project and let's say the railway claim. Saudi Arabia project should lead to how much increase, rough ballpark, if 50% of the retention comes there, cash is there roughly?
We are expecting between Saudi and some of the project in the Middle East, I think we should be able to collect easily INR 300 crore-INR 400 crore there. That is what we are expecting because in Saudi there is a lot of execution which is also happening. Our assumption is that with the collection of this INR 300 crore, INR 400 crore, although the overall retention may not really come down but there will not be further investment at the time of execution of these revenues. That will give us the. Yeah.
What about the claims in the railway? How much has been decided which is debitably for us, roughly?
Claims we are expecting roughly about INR 200 crore to realize in this current financial year. We have already got the award for about INR 150, INR 160 crore already. It all depends how much we are able to negotiate and how much we are able to realize from the customer. That all depends on that. But our expectation is, between now and March, we should be able to realize between INR 150- INR 200 crore from the claims.
Okay. Sir, just squeezing one more in. We had heard during the early parts of this West Asian crisis that the GCC governments were probably discussing about reducing the amount of retention in EPC projects. Has any statement taken in this direction yet or is it still something that they sometimes talk but not yet implemented?
Priyankar, we have not seen any reduction happening in the retention amounts. What is also happening is that there is a little bit of easing of general payment. Otherwise, if they are paying 70%, you can ask them, saying, "In one case, I know they agreed to pay 95%. In some cases, they change the billing breakups, et cetera, to allow you to claim faster on your progress bills. I do not see any major thing, but what we have seen in retention is that the release of retentions has been fast-tracked, not the percentage. The percentage remains 10% in UAE and 20% in Saudi and 30%-35% in Kuwait. But at least in Saudi and also Dubai, we have seen that the payment of retention as and when it is due, has been actually fast-tracked, much faster than what we had expected them to pay.
Okay. Very well understood. These may be the levers that can hopefully, let us say, reduce the debt by at least INR 1,000-INR 1,200 odd crore.
Yeah. I think, Priyankar, if I can summarize what Rajeev said. Basically, some money from Afghanistan, some money from closed projects. Okay, a little bit of reduction in working capital inventory, et cetera. I think there are three, and if water comes in, when I say water INR 400 is beyond the normal payment. Say whatever normal they pay, we are reinvesting in the business. But your outstanding old one, let us say an old one is revolving, but it has INR 300-INR 400 crore which is there. If that comes in, then that put together, we are talking about INR 1,000-INR 1,200 crore of debt reduction. Yeah.
Okay. That was all from my side. Thanks for the-
Thanks, Priyankar. Thanks for your question.
Yeah.
Thank you.
The next question comes from the line of Nipun Khemka with CD Equisearch. Please go ahead.
Yeah. Hi, sir.
Hi, Nipun.
Is there some way that you can bring down the net working capital by tinkering, let's say, with the nature or type of the EPC orders which we get? How willing are you people to do that?
It's not a question of how willing I am. It will ultimately be a question of whether the client is willing to agree to it. I'll tell you a simple example is we recently negotiated a contract where we told the client that we'll not work with less than 20% advance. The client has finally, in an exceptional case, agreed. The earlier question from Priyankar was on can you play with retention? There are places where you're going and talking with the client saying, "We don't agree for cash retention." Typically in some of the private clients, especially on civil, these negotiations are possible. T&D, at least on Power Grid or Middle East and all that, which are standard tender conditions, there it does not work out.
You can always go and negotiate on particular contracts and say, "You know, don't wait for the entire billing to happen," et cetera. These are contracts which you need to. Obviously, we always ask for the moon, but it would depend on individual client. I can say one thing is, generally, if you ask me a comment, payment terms are improving. I can say that both in civil, T&D, private, I am seeing them improving. Power Grid also, in some cases, have now improved if an interest they may advance, right? Like interest earlier, Power Grid used to charge interest on advances. Now they have made it interest free.
Okay.
Generally, I'm saying I'll make a sweeping statement that we are seeing improvement in payment terms or payment cycle.
Okay. How much of your current order book pertains to orders with, let's say, high execution complexity, and in some way we have some high entry barriers to that?
Very difficult to say high complexity, because I know we have got couple of orders which were on a single negotiation basis because the client felt that no one else can do it. Whether it is complexity or difficult to execute, difficult terrain, very difficult to say because most of the orders are still on a tender basis.
Okay.
Very difficult because it's. We would have built it, the cost and all that in our base. There are not too many entry barriers, if I can say, except for the very large projects. We have seen entry barriers in the private sector when they are doing, where they pick and choose whom they want to give. That's where the entry barriers in a way come in.
Got it. Lastly, if I may ask, we have a current order book of some INR 40,000 crore. How much of it would be from the Adani Group specifically?
Total, I don't think we give individual numbers, but it will be, I think close to maybe 5% or less as of now.
Close to 5%, sorry?
It would be spread across T&D, railways, civil, and all. Across all the businesses.
Okay. What was the input last fiscal?
From Adani?
Yeah.
I do not have the exact number, but I think we got one HVDC and one. I think we got two or three orders from them. It must be close to INR 1,000 crore or slightly more than that. Around that number you can take it.
Okay. Not much. Okay. That answers it. Thank you so much.
The next question comes from the line of Vaibhav Shah with JM Financial. Please go ahead.
Yeah. Thanks for the follow-up. Only one question. Are we guiding anything on margins for this year?
No, not yet.
Okay. But we should see it improving quarter by quarter every quarter now? Or Q2 would be weak?
At least from Q3 onwards. Q2 it will not be that low, but I don't see a significant increase right now happening. It will all depend when the war ends, honestly. Okay? I admit that we have not given a guidance. But yes, you're right that there has to be an improvement.
For 28 we may say it being better than 26?
100%.
Okay. Thank you, sir.
The next question comes from the line of Saket Kapoor with Kapoor & Co. Please go ahead.
Yeah. [Non-English content] and thank you.
[Non-English content]
Thank you, sir. Sir, in the cable segment, you have mentioned about some new product introduction in your investor deck. If you could just explain to us what kind of potential these products have? And then my follow-up.
Ultimately our view is that these products should add around INR 300 crore-INR 400 crore of revenue [Non-English content] . How it pans out is a new product [Non-English content] next year [Non-English content] revenue [Non-English content] . That is the size. These are specialized products used for ships and all that. [Non-English content] elastomeric cable [Non-English content]. [Non-English content] some of these like EBM etc. may not add too much in revenue but [Non-English content] insulation [Non-English content] .
Your costs will go down, your margins are supposed to improve especially on your LT and HT cables.
Right. So these elastomeric cables are for the ship building [Non-English content].
[Non-English content]
Okay. Sir, currently we are running the cable at optimum so this INR 600 revenue we can annualize it at INR 2,400, INR 2,500 for the year or we will have higher number?
More than that. [Non-English content] Saket ji, [Non-English content] ultimately metal plays a role. [Non-English content] aluminum INR 3,500 [Non-English content] INR 2,400 [Non-English content] obviously the per kilometer price will start coming down. Based on numbers today, I think we can do around INR 3,000 crore with the present capacity.
Okay. Sir, now coming to our the financial result, [Non-English content] second quarter [Non-English content] material change [Non-English content]. Sir, as investors [Non-English content] expect [Non-English content] KEC [Non-English content] going ahead [Non-English content] these are not the numbers which KEC is associated to. [Non-English content] operating profits, [Non-English content] margin, [Non-English content] exceptional [Non-English content]. [Non-English content] phase [Non-English content] in terms of the execution as well as the financial results, what is the path to profitability or improvement in profitability going ahead as per your understanding? Sir, you are at a long helm here. [Non-English content] [Non-English content] [Non-English content] [Non-English content] sir, [Non-English content] financial results [Non-English content]?
[Non-English content] we will start seeing improvements happening in Q3 onwards. [Non-English content] because most of them are fast track and we can do those projects. [Non-English content] Some of the orders were obviously at a challenging margin. Those orders are now coming to an end. [Non-English content] I think by the end of this year, hopefully we will start seeing a much more positive thing. The other thing was on the working capital [Non-English content] You will also start seeing a positive impact coming at the PBT level also. [Non-English content] Definitely you will find some improvement happening.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Vimal Kejriwal for the closing remarks.
Thank you everyone for your continued interest. Thank you so much.
Thank you, sir. Ladies and gentlemen, on behalf of KEC International that concludes this conference call. Thank you for joining us and you may now disconnect your lines.