Ladies and gentlemen, good day, and welcome to the Kalpataru Projects International Q2 FY 2025 earnings conference call, hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing the star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Bhumika Nair from DAM Capital Advisors Limited. Thank you, and over to you, ma'am.
Yeah. Thanks, Steve. Good morning, everyone. A warm welcome to the Q2 FY 2025 earnings call of Kalpataru Projects International Limited. We have the management today being represented by Mr. Manish Mohnot, Managing Director and CEO, Mr. S.K. Tripathi, Deputy Managing Director, Mr. Sanjay Dalmia, Executive Director, Mr. Amit Uplenchwar, Director, Group Strategy, and Mr. Ram Patodia, President, Finance and CFO. At this point, I'll hand over the floor to Mr. Mohnot for his initial remarks, post which we'll open up the floor for Q&A. Thank you, and over to you, sir.
Thank you, Bhumika. Good morning, everyone, and thank you for joining us on the call today. Let me first provide a quick update on the operating context before I move on to our performance and key highlights of each of the individual businesses. Post our last interaction for the Q1 earnings conference, we have witnessed noteworthy improvement on the execution front, with improving labor availability and moderating working capital intensity compared to Q1 of FY 2025. Our B&F, Buildings and Factories, Oil and Gas, and Urban Infrastructure business, each at individual level, have reported YOY growth in excess of 20% for first half of 2025. Our water business has remained subdued, which we expect will moderate the overall growth to some extent, but not significant. We have also completed the signing of definitive agreements for sale of Indore Bhopal Expressway, VEPL.
We expect to close the deal post receipt of necessary approval from concerned authorities and lenders in the next few quarters. As far as business landscape is concerned, government plans for infrastructure development, including the transmission and distribution CapEx, is getting better and firmer as we are progressing ahead in the year. In this backdrop, we have secured record order inflows of INR 11,865 crores, including INR 835 crores announced yesterday. Nearly 90% of our order inflows are from T&D and B&F business, in which we continue to improve our capabilities and strengthen our market position. Additionally, we have an order book and orders worth INR 7,000 crores. More than 75% of the order book is in the domestic T&D business. Our consolidated order book stands at INR 60,631 crores at the end of September 2024.
Our order book remains well diversified across businesses and markets, which depicts inherent strength of our business model. Now, moving on to the performance. We have delivered yet another quarter of good performance, marked by growth in turnover, improved profitability, moderation in debt levels as compared to June quarter. We reported a consolidated revenue growth of 9% both for Q2 and first half of twenty-five. Our consolidated revenue reached INR 4,923 crores for Q2, and INR 9,517 crores for first half of twenty-five. The revenue growth is largely driven by good project progress and healthy order backlog in our T &D, B&F, oil and gas, and urban infra business. Our consolidated EBITDA margins improved by seventy basis points YOY, to reach 8.9% for Q2 twenty-five.
Our consolidated EBITDA went up by 18% YOY to INR 438 crores in Q2 2025. Similarly, our consolidated PBT grew by 42% YOY to reach INR 188 crores, and PAT grew by 40% YOY to reach INR 126 crores for Q2 2025. For the first half, consolidated PBT reached INR 325 crores and PAT at INR 210 crores. This improvement in margins is driven by a combination of robust execution, healthy project mix, and diversified business profile. Our consolidated debt declined to INR 3,668 crores in September 2025, compared to INR 3,739 crores in June 2024. Our consolidated working capital declined by five days compared to June quarter, which 98 days as at September 2024. Our standalone revenue grew up by 8% YOY and stands at INR 4,133 crores for Q2 2025.
Our standalone EBITDA margins grew by 40 basis to reach 8.4%, and PBT grew by 15% YOY, and PAT grew by 17% YOY for Q2 FY 2025 standalone level. Our standalone intake declined by INR 114 crore QOQ to reach INR 2,973 crore for period ending September 2024. On the individual business verticals front, first, starting with the T&D business, our revenue grew by 25% in Q2 2025, driven by robust execution and strong order backlog. So far, we have secured orders worth approximately INR 6,000 crore in the current fiscal year in T&D, with an additional relevant position of INR 5,500 crore. On the infrastructure front, performance in Sweden business saw significant improvement compared to the same quarter last year....
Our Linjemontage in Sweden, Q2 revenues should be INR 380 crore, up by about 100% compared to the similar quarter last year. Our order book at Linjemontage stood at record high of INR 2,958 crore as of September 2024. In Brazil, Fasttel reported INR 285 crore in Q2 revenue, reflecting a 48% year-on-year increase. The order book at Fasttel stood at INR 828 crore at the end of September 2024. Our overall P&E order book, including international subsidiaries, stands at INR 22,669 crore as of September 30, 2024. The business outlook remains positive with a robust tender pipeline in both domestic and international markets. Our P&S business achieved revenue growth of 19% year-on-year in Q2, driven by a healthy project mix and improved project momentum.
We have secured orders for INR 4,500 crores till date in FY 2025. Our P&S business order book stands at over 613 thousand crores. In Q2, we have secured some prestigious orders in design build, luxury housing and airport segment. Moving on to water business, our revenue dropped by 43% year-on-year in Q2 2025 due to delay in collections in a few states, which impacted execution and project progress. We are closely talking with clients for improving the collection cycle and scale up project execution. The business has witnessed slowdown in tendering activity post elections. However, we have a strong order book position of INR 10,500+ crores as of thirtieth September 2024, ensuring good visibility for the next few years.
In our oil and gas business, revenue grew up by 170% year-on-year to INR 463 crores in Q2 2025. The growth was largely the result of improved execution on existing projects and start of Aramco project. Our order book in the oil and gas business stands at INR 8,474 crores, giving a good visibility going forward. In our railway business, revenue dipped by 30% in Q2 2025. As reiterated in our earlier calls, we are staying cautious and selective in our bidding approach, given the intense competition. Our priority in railways is to complete the existing projects on hand and reduce the capital employed on the business. In the urban and infra business, revenue grew by 31% in Q2 2025, driven by stronger backlog in the metro rail sector.
We are focused on elevated and underground metro projects, bridges, flyovers, elevated road corridors and tunneling works. Our order book in the urban and infra business is at a very healthy level of INR 2,600 plus crores and we expect our order book to grow further. In our Road BOOT projects, daily revenues increased to INR 66.5 lakhs in Q2 2025. In the first half of 2025, we invested INR 39 crores in Road BOOT projects, primarily for debt repayment. As mentioned earlier, we signed an agreement to divest VEPL for an enterprise value of INR 775 crores, with expectations for the deal to close in FY 2026, subject to regulatory approval and closing adjustments.
Given our healthy order book, improved visibility on project plans and diversified portfolio, along with a strong execution team, we are confident of delivering healthy growth with improved margins from Q3 onwards. With that, I will wrap up my opening remarks. I'd also like to extend my warm wishes for a happy Diwali to you and your loved ones. I would request now the moderator to open the line for Q&A. Thank you.
Thank you very much, sir. We will now begin 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 handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is in the line of Bharat Sheth from Quest Investment Advisors. Please go ahead.
Hi. Congratulations, Manish and team on a good, very good result. Manish, I have two questions. First one, if you really look at, I mean, our core EPC business, which has grew as per segmental report by around 10% and, EBIT has also improved by almost 53%. So how do we see this business going ahead, kind of attraction that we have based on the order book?
So, good morning, Bharat. I think, you know, typically Bharat, Q2 is always a subdued quarter when it comes to EPC execution, given the monsoons, given all of that, right? The good part is that across all businesses, now visibility is very, very good, except railways, where we have consciously taken a call. I believe, going forward, we should be doing much better in terms of delivering on our projected numbers, delivering on our budgeted numbers. And also the next two quarters, visibility on every front is very good, right? Whether it is cash flow, whether it is labor availability, whether it is wide mix of portfolios. So I think growth as well as improvement in margins is visible.
We also said the fact that margins are going up because the entire new order book, which we've got over the last two years, will obviously have better margins than what we had in the past. And that, in fact, you should see it coming in. You, you'll see some portion of it coming in Q2, and you'll continue to see that over the next six to eight, if not more than that, quarters, so our own belief is that from a two-year perspective, I think growth and improvement in margins is visible, and we should be able to deliver at least whatever we have committed in every form. Yes, we have faced some challenges in the first six months, primarily in water business, right?
And as I explained earlier, that, you know, that's something which is beyond us, because we have not been able to collect anything in a few states, right? It was the election time, it was the government change, whatever. We've been in continuous touch with them, and whatever we've lost in the first six months might not come back in the current year. But on an overall trend, you know, that's something which we will deliver going into the next year.
Sir, is that, I mean, based on your comment, where that, again, I mean, on this stand-alone, our core EPC business, slowly we see the reduction in the borrowing, correct?
Yes.
Okay. And sir, would you like? Yeah.
Typically, our business first two quarters, you see always working capital being high. It's slightly higher than what we projected for us, because even the collections which were delayed in the water business. Pretty confident that going forward, Q2, Q4, the debt levels will only come down from where we are today. It will not go up. And we stand committed to, you know, keeping the working capital just below hundred, even at a standard level by the end of Q4.
That's great. Good. Sir, and would you like to revise our, I mean, order intake growth as well as the top line growth?
So, clearly, as far as order intake growth is concerned, we stand committed to the numbers which we gave earlier. Right? So the focus right now is improving margins, because we have a very good visibility on our book. So while today we have visibility of around 70,000-odd crores, including L1, we believe that for improving margins, even if we have to compromise slightly on absolute value, we are happy to do that. So we stand committed on the same number, 22,000-23,000 crores. We will revisit that number at the end of Q3, once we have more visibility coming through. As far as revenue growth is concerned, I think Q3, Q4 will be very healthy, and I think that will help us deliver healthy growth compared to what we did in the previous year.
We definitely could face some challenges on whatever we've not been able to achieve in the water business in Q1 and Q2, but on an overall basis, we still believe that you'll see healthy growth going forward.
Last question, sir, on order inflow. In first half, we have seen that mix changing toward more, towards the domestic. So strategically, are we, I mean, focusing more on a domestic, in view of geopolitical problem? Also, if you can like to say, throw more color on that.
I don't, I do not think consciously we are doing anything driven by geopolitical. Yes, we continue to be risk-averse on areas where, you know, we know that things could go from bad to worse. The T&D growth in the domestic front was visible right from March, April onwards, and those have got converted now. We continue to stay bullish in the international front also, but we continue to be risk-averse based on the volatile environment. So I wouldn't say strategically it changes a lot. You will see international order book going up in Q3, Q4. But for us, I think more important for us are, you know, looking at the return ratios more than anything else, because today everyone has a healthy order book.
Even margins are good, but if you deliver on time and where those are high is where our shareholders are getting value added. And that's why clearly our difference is that T&D and B&F, if you look at what, you know, we are, whatever orders we have brought in the first six months, are EPC margins, which are poor margins for us.
Thank you very much, sir, and wish you happy Diwali, you and your team, and all the best for future.
Wish you all happy Diwali.
Thank you. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Amit Anwani from PL Capital. Please go ahead.
Sir, am I audible?
Yes, yes, very much so.
Yeah. So my first question is, on the non-core assets, if you would like to update on, for the quarter three, Shubham Logistics, and also Indore Real Estate. And third part is VEPL, how much was our investment, and what are the expectations, on exit gains? Yeah.
Okay. So I think let me start with VPL first. As mentioned earlier, our enterprise value is around INR 775 crores. And over the period of the next two, till we, handle the asset, whatever cash flows, coming would get adjusted to this enterprise value. So we get the benefit of whatever cash flow happens from now till that time. We expect this deal to be closing in the next, six to nine months, depending upon the necessary approvals. We believe with at, at the current enterprise level, we have a gain of approximately INR 100 crores over the equity which we have invested. And this gain could be different depending upon the closing, whatever happens at the closing time, but it should be in this range.
As far as the Shubham business is concerned, you'll be looking at more Shubham from a revenue perspective or more from a ... I think both. As far as Shubham business is concerned, H1, 25 million, around INR 62 crores, a growth of 10%. And on an overall basis, at a PBT level, we become positive. So the margins are closer to INR 1.6 crores for the Q1 2018 and half year basis, around INR 7.8 crores. So margin of around 10%-11%, and the top line growth of 10% is as far as Shubham is concerned. On the Indore front, we have not had much sales in Q2, given that Q2 has always those challenges around push out and all of that, but we expect sales to grow significantly in Q3 and Q4.
We're expecting the OC of the last bidding to come, anytime in the next one month. And once that happens, we should be getting in those fully in the next two to three quarters itself. We're seeing healthy traction there, and we believe that will definitely be possible.
Sure, sir. And just to reconfirm, are we maintaining our guidance given during Q1 on the revenue front? Because I can see H1 is about 5% revenue growth, and H2 upgrade is quite high. So that is one, and second, on PBT, last time we guided 4.5%-5%. So are we maintaining these guidances for consolidated level?
At a PBT level, we definitely believe that we should be in that range what we have guided for on an annualized basis. At a revenue level, you know, we've seen some challenges in the water business, and that could impact some of our guidance on an annualized basis. Although on the next two quarters time, we're pretty confident of a very healthy growth.
Sure. And lastly, on international T&D, you said, there's been a pretty strong development there. Any specific geographies where you're sensing this? Because we are seeing geopolitically things have been unstable. I just wanted to understand which geographies in international market for T&D and other businesses are really becoming fruitful now.
For KPI, I think our opportunities in on the international front, primarily a lot more in our two subsidiaries, which are Linjemontage and Fasttel, which are doing extremely well, driven by the Swedish, driven by the Nordic and the Brazilian market. We continue to stay bullish for the T&D in the Latin America segment also, where we today have leadership position, equipment projects across Chile, Guyana, Suriname, all of that. Finally, we're seeing good traction in Africa and Middle East also. Although we're not so much bullish on Middle East in the T&D segment, driven by profitability constraints, but we're seeing good opportunities coming up there also. So if you ask me to prioritize, Europe continues to be the first, Latin America continues to be the second, driven by Africa and then Middle East.
Sure, sir. Thanks for taking my question. All the best.
Thank you.
Thank you. The next question is from the line of Ashish Shah from HDFC Asset Managers. Please go ahead.
Hello. Yeah, good morning. So just had a couple of questions. One, on the water business, you did say that the first half was slow because of the, you know, water collections being delayed. How are things looking on the ground now? Has the, you know, government started disbursing the money and releasing payments, and are you seeing an improvement as we speak on the ground, on water side?
Good morning, Ashish.
Good morning.
Ashish, we have significant presence in five states. I'm not getting into the detailing of each of the states, but I can say out of the five states, three states, we have seen good traction in the last 15 days, where, you know, more than 70% or 80% of whatever was billed has been paid. But the other two states, we're seeing zero traction, right? So as with the other two states, we have an, you know, a huge amount which is outstanding for more than 180 days. As to we believe they would, it should change soon. One of the states is just going into election, and one of them we've seen a government change which happened, three months ago. So we're working along with the states.
If you personally ask me, maybe it might take two, three more months to, for those states to come back to reality. In these states, which is more than 70% of our order book, so we have seen traction coming back. To that extent, at least you'll see delivery improving in Q3. How we back to where we were normally across the entire business, the answer would be no as of now.
Okay. So would you expect this business or this segment to end at a similar level as last year, or it may be actually lower?
So our own drive is to make sure that at least it grows slightly as compared to last year, right? It's good for the division, it's good for the employer, it's good for the corporation as a whole. That's the drive. But realistically, if collections don't improve, right, after a point it will be difficult for us to keep on pumping in cash flow to continue delivery. But yes, as of today, our internal drive is to make sure that we at least do minimum of what we did in the previous year, and as a corporation, we're driving towards that.
Right, sir. And, also on the oil and gas business, you know, the big pipeline contract that we have now, how do you see that shaping up in terms of the development cycle? When do the revenues hit the PNL, and how would you expect that contract to flow through our numbers?
Ashish, the revenues have already started hitting our PNL. Currently, the revenue, maybe not the profit is now, because we do not recognize profit till, you know, a project, which is 10% of its revenue. But on the revenue front, we've already seen 30 lakh coming in. Execution on the ground actually started on all the three projects which we have got. The team is fully there, the equipment have been mobilized, all the design is more than 50% design is already done. So if you ask me, as of now, the traction has started. What will be the peak? The peak will be next year. It has 2025, 2026 in terms of delivery. But in terms of revenue visibility, we have already seen that.
That's why you've seen a 170% plus growth between Q2 and in the Oil & Gas business. And you'll see that similar traction going on at least for the next four to six quarters.
Sure. And just one last thing, on the domestic T&D pipeline, obviously, you've indicated that a lot of your L1 orders are from the domestic T&D. How's the margin outlook for some of these orders? Is the competitive environment still benign, as it used to be, and we are able to get these orders at a good margin?
Sir, in comparison to what we have seen over the last five years, the margins are much better. It might not be those days which were there 15 years ago, right, of 15% plus, but definitely we're reaching the double-digit margin as far as T&D is concerned. It's a very healthy visibility today, and given the kind of work which is available, I think there's enough work for everyone, whoever is in this field, so it's not a competitive drive, it's your ability to deliver which defines what work you can take, so today, margins are improving, visibility is good, and competition is what it is, because there's so much variability that I don't think competitive intensity will change the margin profile.
Got that, sir. Thank you. That's all, and wish you all a very happy Diwali. Thank you.
Thank you, Ashish. Wishing you and your family a very happy Diwali.
The next question is from the line of Subhadip Mitra from Nuvama. Please go ahead.
Good morning, sir, and thank you for the opportunity. So thanks for the comments that you mentioned on the overall order inflow and margins. My understanding is that you are clearly focusing more on execution and margins, given that there is ample order inflow to be had. So just to focus on the order inflow piece, right? Given that you have a larger component that's coming from the India business, are you looking at a very large, you know, chunky orders, which could potentially come from the two or three HVDC projects which are currently under tender there? And what kind of, you know, potential time can you build in for yourself there?
We already L1 in one large HVDC project, which has two, three specific components of that project, the substation and couple of transmission lines. We already L1 in that, and we expect that order to come in any time in the next two to three weeks itself. Going forward, yes, there are a lot of HVDC projects we are bidding along with Power Grid and along with some of the private sector players. We do believe that we should be getting some more orders getting into the next two to three months. I do not understand the meaning of chunky, but for us, any order which is above 500 with a reasonable margin, so with a double-digit margin is as good as anything else.
So to put it differently, we definitely believe T&D order book will further go up in the next six months. We definitely believe we'll have some more orders coming in the HVDC space. The orders could be in the range of INR 500-700 crores. Individual orders could even be 200 there. The next six months clearly looks like T&D domestic on the order front on all aspects.
Understood. So if I heard you correctly, I think you mentioned that each of these packages could be around 500-700 crores. And typically, if an HVDC project is worth, let's say, 15,000-20,000 crores, would it be right to assume that roughly 50% of that is what falls in the EPC bucket?
Yeah, I think it could, it might be different. You know, including substation, at times it could even be more than that. But if you remove, for example, the transformer side of it, you know, the HVDC instruments which are given, which are bought directly by Power Grid, then 40%-50% would be EPC is the right estimate, including substation.
Understood. And in this specific HVDC bucket, my understanding is that there are very few qualified EPC competitors, right? So probably maybe three, four, or five players. So would there be a possibility of naturally seeing better margins given limited competition and a large TAM?
I think, you know, two aspects, as we would have said earlier, the competition is healthy, and we're happy with healthy competition given that, we have advantage on everything, right, from supply chain to design to delivery. As far as improvement in margin is concerned, definitely that's the intent. But let's be very clear that, whoever the developer, they also compete in a CPQ environment. So you cannot expect unrealistic margins, because suppose the TAM of the developer, he loses the EPC projects. So yes, margins are going to be healthy. They will improve, but they will not be unrealistic, because it's a competitive market.
Understood, so you did mention in an earlier comment that you were looking at close to double-digit margins, at least in the T&D segment. That's more or less what we should assume?
Yes, got you.
Perfect, sir. Perfect. That is understood. So my last bit is on the international, you know, orders, especially the large chunky orders that you saw from Middle East, earlier in the year. Given where, you know, hydrocarbon prices are headed currently, is there any risk of a slowdown, in terms of, let's say, incremental ordering or even execution of existing order book, from the Middle East exposure?
Today, we are largely working with oil and gas on the Saudi Aramco order, right? We have started work on, the entire order book packages which we have. You know, there's obviously could be some changes in the value there, and that's driven by the nature of the business. But the size of the order itself is so big for us, that at least from the next, eighteen to twenty-four month perspective, we have our hands full. Actually, we have already qualified in ADNOC, we are there in Aramco, we are there in a few more, you know, countries in Middle East, which we've qualified for oil and gas business. We see good traction there, for various reasons. One, because the CapEx in majority of the countries is on the uptrend. Second, there are limited players globally who are doing this kind of projects.
So I'm not so much worried about getting an order there, environment and the current speed things are happening. I think delivery in terms of projects will also not be a challenge.
Understood, sir. Thank you so much for answering my questions.
Thank you. The next question is from the line of Vaibhav Shah from JM Financial. Please go ahead.
Yeah, thanks for the opportunity. Sir, firstly, when do we expect the cash inflow to come from the VPL?
You know, there are a lot of approvals which we need to take, right now, matters to the authorities, to a lot of other agencies. We ourselves believe it could be anywhere between six to nine months. We'll work hard to see if it can happen before March, but realistically, it will get into 2025, 2026.
What would be the usage? Will we repay the debt in the other two assets, the third party debt?
It will be primarily for long term.
What could come in for the standalone company after repaying those third-party debt?
I think, you know, out of the total enterprise value of INR 750 crores, the external debt is closer to INR 350 odd crores. It's closer to INR 300 crores if I'm not mistaken. The balance should come to the company. Sorry, am I hearing it correctly? INR 260 crores is our external debt, and everything else will come to the company.
Okay. So secondly, we mentioned that we want to do a QIP up to 1,000 crores. So what could be the usage of those funds, and when are you targeting to do the QIP?
So I think the board has yesterday approved the QIP process, and now we'll be going to the shareholders for approval. The primary reason for the QIP would be utilizing it for working capital for the growth which is visible now. We are not in a position to give you a timeline right now, except that the board has approved it, and we'll be going to shareholders for. The value of this QIP is INR 1,000 crores, and not 2,000. I think what has been approved is up to INR 1,000 crores.
Yes. Yes. Sir, and lastly, on the revenue guidance front, we had mentioned 20% plus kind of growth in the previous call. So, can you give a particular number right now, what when can we build in for the entire year for FY 2025 on the standalone basis?
Given the current challenges we have on our water business, you know, where it was very different when we started the year versus what it is today, becoming difficult for us to give guidance in totality. As I mentioned earlier, all our businesses except water have grown 20% plus in the last six months, except water and railway. I believe those businesses will continue to do well. I also believe that Q3 could well be much better than what we have seen in Q1 and Q2. Given the current volatility of the situation in the water business, I'm not able to give you an indicative number, but I definitely believe that we might not be able to achieve what we had targeted at the beginning of the year. We could be slightly lower than that.
Okay. And, sir, we had mentioned in the PPT that around 40-odd crores funding we have done for the road portfolio in first half. So what will be the number for the entire year, and what would be the same for the next year as well, given the cash inflows would be coming maybe in first or second quarter next year?
I think we targeted for around INR 75 crores inflow in the current year, and where we stand today, I believe we should be a similar number, plus or minus by INR 10 crores. As I mentioned earlier, this entire majority of this amount is going to repay the debt because all projects and debts will be repaid over the next three years max. So it's only a timing mismatch more than anything else. So I think we will stand at our budgeted number of INR 75 crores and should be in that range as far as road projects are concerned.
For twenty-six?
For twenty-six numbers, we've not gave particular numbers, but in case the deal happens, obviously, the numbers would. If the transaction comes in, which we are hoping it will, the numbers will reduce significantly. It would be opposite, right? The funding would come from them to us.
Okay. And sir, lastly, over a longer time frame, what kind of EBITDA margins are we targeting? So currently, we are roughly around 8.5% on EBITDA for non-standalone basis. So what could be our target over the next couple, two to three years in terms of margin expansion?
So I think clearly, we've, we have articulated in the past also that we are more focused on PBT margins now. And I think that margin we definitely expect to improve by at least 25-50 basis points getting into the next year. And that's what similarly you'll see at a EBITDA level. I think the more important thing is also to look at the consolidated margins, right? Because today, consolidated business has a significant business which comes from our core T&D in Sweden, core T&D in Brazil, our Chile subsidiary, a lot of them. So I think it's important going forward that to look at the consolidated numbers also, where margins have reached, EBITDA margin is closer to 9%, and I believe that number should only go up because there are no surprises left on that margin anymore.
On a consolidated basis, I think, the number should go above nine sooner than later. On a standalone basis, I think you'll slowly see margins improving with a clear twenty-five to fifty basis points of improvement coming into the next few years.
Okay. Thank you, sir. Those are my questions.
Thank you. Participants who wish to ask a question may press star and one at this time. The next question is from the line of Deepak Krishnan from Kotak Institutional Equities. Please go ahead.
Hi, sir. Am I audible?
Yeah, yeah, Deepak, good morning. You're audible.
Yeah, good morning, sir. Just wanted to check the Q1 increase in our finance costs when our sort of debt levels have gone down due to improved collections. Any effects or any other factor that has caused our, you know, interest expense to increase on a sequential basis?
... No, I think it's primarily driven by two aspects. One, you know, volume was significantly high over the first two quarters of the quarter. As I said earlier, with the water money started coming in later part of the quarter. Second, interest cost has been slightly higher, driven by, customer advances, where interest rates are more in the range of 9%-10%. And given our improved order book, we have advanced it also, which has led the corner. But as I said earlier, on an annual basis, we're still targeting our interest cost as a percentage of sales to be below 2%, with net working capital unlimited. So it's only a timing issue of Q2, and I would expect this to improve getting into Q3 onwards.
But absolutely, no, obviously, with the growth, the interest cost is going to blow up, right, than before expected, because it's slightly higher than the revenue growth, but timing issue more than anything else.
Sure, sir. And maybe just from a revenue perspective, I think we understand this year, you know, water has been slightly slow and we may be lower than the 20% number. But given that, you know, the backlog is closer to 60,000 crores, should we see a sharp uptake in 2026 and 2027? How are we looking at it, except water, if you look at all of it? You know, how do we see growth beyond the current year as well?
I think the current order book clearly gives us good visibility even for next year in terms of very good growth with improved margins. I would not like to quantify that growth at this stage, given that, you know, we still have the next five, six months to build an order book or to get into a definitive situation on various aspects, but with the current order book visibility, I think a healthy growth in improved margins is visible from here.
Sure, sir. Those are my questions. Thanks a lot, and best of luck with your quarters.
Thank you. The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Hi, Manish, congratulations on a decent quarter, sir. So my first question is on the domestic T&D. So you said that there's an L1 sitting in your order book on HVDC site. So if you can quantify that, and what is the HVDC pipeline right now?
We are in the domestic business. We are entering closer to INR 5,000-odd crores, as I said earlier, around INR 5,500 crores. HVDC of that would be closer to INR 203,000-plus crores. It, in general terms, means closer to INR 3,000 crores, including the substation business. Out of the INR 5,500 crores, 3,000-plus is HVDC, where Power Grid has already won the reverse auction or the T&D to be built, and they've got clearance from the government to go ahead with the project. We expect the tenders, the awards, to come in any time within 2, 3, 4 weeks. Going forward, there are a couple of large HVDC in the pipeline now.
I think the value would be in the range of INR 50-20,000 crores, all this happening in the next couple of months itself. We are working, as I said earlier, with Power Grid, with some private developers on those projects. I will not be able to quantify, you know, our scope of what we're working on given the confidentiality at this stage. But definitely in the next three to four months, I think there are tenders for at least INR 50-20,000 crore HVDC, which are led by REC and PFC.
Okay, so what is the name of this project? Is it the Khavda one, sir, or which one? What is this project?
Yeah, it's the Khavda.
Okay. And, the other question, connected question is beyond the HVDC pipeline, which may be very healthy for this year. So how do you think would the next year look from the HVDC side? And beyond HVDC, what are the other transmission opportunities in domestic, if you can quantify?
See, I think, you know, the entire environment on T&D has changed significantly in the last six months, right? Driven by a lot of aspects. I think driven by the first aspect has been a refocus on renewable power generation, where you can see a lot of tenders coming by NTPC and other private sector developers on the whole, the mega tenders coming in, for which they will require the capacity to make sure that the delivery happens. Second, strengthening of HVDC, which will continue going into the next year also. Third, is looking at projects which are coming in, Northeast as well as in Jammu & Kashmir. And fourth, is strengthening of the system itself.
I'm sure you must have seen the NEP, which just came out last month, where they have clearly said that, the transmission capacity needs to improve around 30% in the next five years to what it is today. So given that, I think, visibility looks very good, right? And it's only about, you know, making sure that we can deliver on, on the stringent timelines. Because today, majority of the projects are 24-36 months. There's nothing beyond that. And that's more important for us to ensure that we deliver on stringent timelines. So for me, the next two years clearly looks like a very big bullish drive on T&D domestic, driven by all aspects which I mentioned earlier, due to utility orders, worth 50-60 thousand crores only for PGCIL T&D coming in only on this three, four things.
Besides the state level orders, it would be different, so we continue to stay very bullish. It's completely opposite to what I found in the last three years, where if you would have heard me, I used to say that in the T&D business, if it does 5-7%, we'll be happy, but now I think that business definitely can look at a 20% plus growth, at least from a three-year perspective, if not beyond that, and with improved margins.
Got it. So, then what is the timeline of this HVDC execution? I think you said in next couple of weeks or three weeks, you will get the order. So from then, how much time do you need to-
HVDC orders, which are 36-42 months.
Okay.
One of the substation, which will be slightly low, but otherwise, 36-42 months.
Okay. Now, the second question is on the fundraise. So you have announced INR 1,000 crores fundraise. So now if I look at the context, so you have monetized, announced a deal wherein you will get some money, you have claims upwards of INR 300 crores, which may get realized over the two years. So roughly, after repaying everything, you still have 750-800, and then Indore adds on top of it. So you will closely touch around 900-1,000 crores of inflows in the next two years. So what are you seeing? Are you seeing a deterioration in net working capital in the near future? Because even if growth of 15%-20%, I think you'll still be NWC positive in a scenario when you are looking at going below 100 days. So what is driving this one raise?
Is it just that the market sentiment is favorable, that's, that's the reason you're looking at it, or so? How do we read into it?
So I think it's a very good question, and this was the exact question that the board raised yesterday, and good to spend a few minutes on this. I think first thing it's important to understand that majority of the business where we are are CapEx intensive in nature. And look at what we have done in the last three years. We've done INR 1,500 crores plus of CapEx out of our free cash flows, right? Means 30%-35% of our free cash flows has gone only in CapEx in the last three years. 40% has gone in working capital, and the balance 30% has gone as dividend and interest payment and all that.
I think when we look at the last three years, given the healthy order book, we realize that it's a combination of three, four things which we need to take care. First is the CapEx, right? Because without CapEx, a lot of projects might not be deliverable. Whether it is the B&F, where you need staging sheltering, whether it's oil and gas in Saudi or wherever else, where you need equipment, whether it's international transmission line requirements, where you have to spend because there is no CapEx in those countries, or whether it's a plant expansion, right? Our capacity of around 220-250 thousand tons, we might need to revisit that and look at expansion there also.
So it was first driven by a requirement of saying that how much do we need in terms of CapEx to make sure that the healthy growth continues? Second, the reality also is that while we've been able to manage working capital, it becomes- it's becoming more intense because a lot of projects are now milestone-based payments, which are back ended. We always have the 10% retention, but we also have milestone-based payments, right? Given that also, it was important to make sure that given the growth rates for the next three years, we have enough liquidity with us. Third, the timing of all that cash flow, which you said, could be nine months, could be 12 months, could be 15 months, because they're dependent on external factors, and we work hard to get it.
Because remember, the same projects we have arbitration awards also, which we have won in, and which we have declared in the last two quarters. Now, obviously, we have arbitration awards to be taken from the client, and we go through them to finally get full of that. It's not going to be an easy journey. Yes, we want to walk through it, it's not going to be an easy journey. So to that extent, there is a timing issue which could also be there, right? And fourth, given the current environment, we believe that it's better to be on the right side of the banking environment with stringent norms on a lot of ratios.
You know, as it's better to be on the right side on all the issues on banking environment, and this will help us achieve that also. Last, and the most important, our last activity in 2010, right? From 2010 till now, the organization has grown more than fifteen times, right? So internal cash flows. So I think, you know, the mix of all five, six of them, which go back, you know, the market has been like this for the last 12-18 months. So it's not driven by necessarily the market sentiment, but yes, it is, for sure. It is a mix of these four, five things. Added to that, clearly, we have opportunities of acquisition also in the manufacturing space within where we are.
We're not going to diversify anything, and that's something also which we have not looked very closely, given that all our cash flows are already blocked for working capital and CapEx. So I think it's a mix of all of those five or six things which helps us to say that what do we do? And that's where the board historically has also seen that, you know, this could be a good step, looking at three years of 5%-10%.
Okay. And, sorry, you said manufacturing, into manufacturing? I'm sorry, your voice is little bit, was not-
Yes, yes. Manufacturing opportunities within the sectors where we are. There's no diversification, but getting to the value chain within that. So our plants, they are already doing staging sheltering, they are doing girders, they are doing T&D. They could do a lot more in oil and gas. They could do a lot more in water. They could do a lot more in infrastructure.
So what do you mean by manufacturing, sir? I mean, is it like you're looking at something on the solar side, so or the conductors and looking to increase, I mean, set up conductor capacity? So what do you mean by manufacturing?
So, right now, our focus is within the steel sector, within the steel segment. So I would say within the fabrication, galvanizing, and high-end fabrication sectors is what our focus is. So let's say the railway girders, you know, the staging sheltering, which we use for BNMF, let's say the pipes for water, where welding is required, right? Oil and gas, so whatever is required. So those things can still fit in our plant at Raipur, where we have a huge land available with us and capital expenditure which we could look at. We've not zeroed down on anything as of now. So these are possibilities which we could look at, but it is within the value chain of the businesses where we already are in.
And I again want to remind you, majority of this plant expansion would be for our own EP business.
Not into conductors and all? No, you're not setting up a conductor line.
Hello?
I'm asking you, are you also looking to set up a conductor line, like some of the peers are doing conductor for backward integration and also to sell in market? So you have tower capacity, so looking at setting up. You have any plans to set up conductor capacity as well?
We're not looking at that opportunity as of now, but I don't know how things turn up in the future, but as of now, we're not looking at that opportunity.
Okay. Just lastly, sir, any exposure to Bangladesh? I think you were doing something on the power evacuation side for the Rooppur Power Plant. Anything there, any update on that?
On the power transmission side, we had completed the project two years ago. We have a small retention, which is pending, but since it's funded, we do not believe the challenge in getting that money. We have a project which is funded by EXIM, where it's along with Afcons, we're doing that project. Again, on that project also, we are capital positive, and I do not see any challenges on that project also.
Are you been getting payments after the change in government? Are you seeing any delays or the payments are on time, or has the work stopped or restarted? So any update on that?
So we first had to remove the entire team, which was done when all this happened. Now, the teams have gone back in the last two weeks. We obviously not placed any invoices because last three months we've not done any work. I think the teams have just gone back, and I believe Q4 onwards, the recognition of the payment collection should also start because they're all funded by EXIM. I do not see a challenge in that in any form.
Okay. Okay, sir. Thank you, and wish you happy Diwali. Thank you.
Thank you. You also very happy Diwali.
Thank you. The next question is from the line of Ashwani Sharma from Emkay Global Financial Services. Please go ahead.
Yeah, and thanks for the opportunity. Most of the questions of mine have been answered. Just a couple of things. One is that, if you can comment, Manish, sir, on the tendering on the metro side, how are the activity over there? And secondly, on the water side, we understand, you know, this year it is a little bit of challenging. How do you see pipeline in FY twenty-six and, you know, thereafter? Yeah, those were my questions.
Sure. Let me first answer the water side, and on the metro side, I will ask my colleague, Amit, to answer. On the water side, clearly, as I mentioned earlier, the first six months we've not seen many tenders come up. So post-elections, what we were expecting a lot of tenders, they've not come out. We believe it's only a timing issue, because, as far as the Jal Jeevan Mission of the entire country is concerned, there's a lot more which needs to be done at a country level. So current year, maybe it could be subdued in terms of tenders, but getting into next year, we believe that those tenders should be back in every form. On the metro side, I would request my colleague, Amit, to perhaps just respond to this question.
Hi, Prashant. So, you know, today, so far as metro segment is concerned, if you look at our population and our usage of metro per person compared to most of the other countries like China, U.S., and all that, we are far, far behind. And now that, you know, there is no other option as most cities that cross 25, 30 lakhs in terms of population, mobility is becoming a huge problem. And now that barrier is gone. Most of these are funded projects by JICA, EIB, ADB, et cetera, and they see that as a long-term, stable, sovereign, guarantee from the Indian government to lend at very, very attractive rates. We've got, you know, this metro in Nagpur, which we've just become L1. It's a 17-kilometer elevated metro.
So you know, the size and scale of these metros are becoming large and individual packages, which make them very attractive for large players like us, because a sensible competition prevails there with five or six people who are all similar kind of peer groups. There is now a metro coming in Lucknow, Delhi, Bombay, Pune. All of these cities with a mix of underground and above ground metros projects are expanding. So I think from the next two, three years perspective, we already have visibility of which metros are happening, and we believe it's an attractive segment to be in.
Sir, I just want to understand, is there any slackness in the current year as far as tendering is concerned? Is there a slowdown that you see?
Typically, unlike a transmission, a metro takes a long time from a bid to an award cycle, because, one, they have to go through their funding agencies and multilaterals for approvals, et cetera, at every stage. So that adds time to, from tender to award. Also, second, you know, the time required for bidding, because these are very, very complex projects in terms of engineering during tendering phase. The entire tendering period also is much longer than, you know, conventional projects in other businesses. So while there is the number of projects that have been announced this year, they've been a little slow because of government and lot of code of conduct, et cetera. But I think next year onwards, as the cycle picks up, you'll have five or six, seven bids across various metros at any given time going on.
So I think that little sluggishness that could have been there this year was not because of demand, but because of, you know, elections, et cetera, should even out.
Okay. And last question to Manish-ji, sir. At a company level, how do you see supply chain? Has our supply chain fully, you know, completely improved? I mean, is it at a pre-COVID level, or still we are facing some challenges?
I think, we're back to what we were at a pre-COVID, if not better than that, with a lot of people expanding their capacity also. We still have some challenges in some equipment, but as a reduced from a state of scale, I would say it will do. Yes, at times the global uncertainties do impact us, the entire thing, what happened at Red Sea and all of that, but again, just a timing issue of few months here and there. We are back to normalcy, like, in nine out of 10 cases, if not 10 out of 10 cases.
Okay, sir. Those were my questions. Thank you very much.
Thank you. The next question is from the line of Anuj Upadhyay from Investec. Please go ahead.
Yeah. Hi, thanks for the opportunity. Sir, it's a follow-up on the 60,000 crores of opportunity you referred to in the T&D space. So this is spread across over the next two years, kind of a time period, and with such a scalability of opportunity, how do you see the competitive intensity out here? And just to get a sense on how the margins could be across this project, because the overall market size has scaled up significantly.
So as I said earlier, the competition in T&D continues to stay healthy, and to me, actually, the competition is healthy for majority of our businesses except railways, right? And healthy competition is always good for everyone. You know, everyone in the sector, everyone in the business is good for them. As I mentioned earlier, while we've definitely seen margins improve from what we have seen in the past, but it can't go beyond a point, because whoever the developer you are interacting with, they also in a T&D environment, have to fight against, you know, the large developers. So yes, the margins in the last one, they have reached a particular level. Personally, if you ask me, can it go significantly higher from there? My answer is no. Because it's still a very competitive environment, both at T&D as well as at EPC level.
But it's healthy competition. You now don't see differences in tenders which are like 20%, 25%, 30%. You now see differences which are 1%, 2%, 3%, 4%. And healthy competition is very good for all of us.
Got it, sir. And the 60,000 opportunity you referred is over the next two years time period? Because, last week, one of the developer, asset developer, had referred that close to around one lakh crores of, bidding is scheduled to happen over the next 6-7 months kind of a time period. So just want to get a sense, the 60,000 you referred was?
I believe this could happen in the next 12 months itself. You know, I said 50-60 thousand on annualized basis for the next three years of business.
Okay.
This is 50-60 thousand, on an annualized basis minimum. I think it could be higher than that, but on an annualized basis, it's not for two years, it's on an annualized basis.
That's helpful, sir. And lastly, on the pledge share, sir. In the last call, you had mentioned that, probably, you know, the percentage of the promoter share might come down to a single digits. So any thought or update on that front?
No, I think you've got the wrong word. I never mentioned the single digit ever, right? I was very clear in what I mentioned that they would come down below 30%. Right now, they're at around 23.46%. Clearly, the intent is to continuously reduce it, and we believe that, you know, over a period of time, this will come down. But over the history of this pledge, 18 years I've been with Kalpataru , it's always been in excess of 30, now they're at 23%, and this will continue to go down.
Got it, sir. Thanks for this. And wish you all a very happy Diwali, sir.
Thank you very much. Wishing you also a very happy Diwali.
Thank you. The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
Thanks for the follow-up. My question is on margins. If I go a little back in the history, so three, four quarters back, I mean, you were more confident on doing a double-digit margin. Though your commentary on segment-wise margins improvement are reaching double-digit, even in domestic T&D, sounds to be positive, but the signaling on the blended EBITDA margin at the standalone level doesn't look like you are guiding for double-digit margin. Why is that? And is that now the peak margins could be nine and a half times?
Parikshit, as I said earlier, I would be happy to guide margins at the EBITDA level, given that our EBITDA issues are very different. I definitely believe margins would go up, right? I'm not exactly quantifying how much going into the next year. Currently, we've given a range of 4.5 to 5. Next year, definitely I'd say 25 to 50 basis points are going up. It would further go up, depending upon how, you know, activities happen across some of the sectors where we have been.
Got it, sir. And the 60,000 opportunity you referred is over the next two years time period? Because, last week, one of the developer, asset developer, had referred that close to around one lakh crores of bidding is scheduled to happen over the next six to seven months kind of a time period. So just want to get a sense, the 60,000 you referred was?
I believe this could happen in the next 12 months itself. You know, I said 50-60 thousand on annualized basis for the next three years of business.
Okay.
So this is 50-60 thousand, on an annualized basis minimum. I think it could be higher than that, but on an annualized basis, it's not for two years, it's on an annualized basis.
That's helpful, sir. And lastly, on the pledge share, sir, in the last call you had mentioned that, probably, you know, the percentage of the promoter share might come down to a single digits. So any thought or update on that front?
No, I think you, you've got the wrong word. I never mentioned the single digit ever, right? I was very clear in what I mentioned, that they would come down below 30%. Right now, they're at around 23.46%. Clearly, the intent is to continuously reduce it, and we believe that, you know, over a period of time, this will come down. But over the history of this pledge, 18 years I've been with Kalpataru , it's always been in excess of 30, now they're at 23%, and this will continue to go down.
Got it, sir. Thanks for this. And wish you all a very happy Diwali, sir.
Thank you very much. Wishing you also a very happy Diwali. Thank you, everyone.
Thank you. The next question is from the line of Parikshit Kandpal from HDFC Securities. Please go ahead.
So thanks for the follow-up. So my question is on margins. If I go a little back in the history, so three, four quarters back, I mean, you were more confident on doing a double-digit margin. Though your commentary on segment-wise margins improvement are reaching double digit, even in domestic T&D is sounds to be positive, but the signaling on the blended EBITDA margin at the standalone level doesn't look like you are guiding for double-digit margin. So why is that? And is that now the peak margins could be nine and a half times?
Parikshit, as I said earlier, I would, right, I would be happy to guide margins at the EBITDA level, given that our verticals issues are very different. I definitely believe margins would go up, right? I'm not exactly quantifying how much going into the next year. Currently, we've given a range of 4.5-5. Next year, definitely I'd say 25-50 basis points are going up. It would further go up, depending upon how, you know, activities happen across some of the sectors where we last six months facing some challenges. So I think fortunately, they're going up with a healthy top line growth. Would it be 10% in the near future?
Could be difficult, but, maybe from a two-year perspective, we might be back there where we were at some point of time. Difficult in the current year and even the next year. Yes, on a consolidated, we would be driving our margins to reach there over the next 12 to 18 months itself, if not earlier than that. Standalone could take some more time. And Parikshit, it's important for us to realize that for us now, consolidated business is equally important. You know, in my T&D business, there's more than 25%, if not more than 35% of our revenue, which comes from the consolidated operations. Whether it is, you know, Sweden, whether it's Brazil, whether it's Chile, whether it's Saudi, all of that. So I think we should be looking at both of them.
So on an EPC basis, on our EPC business, consolidated will take some time, but we are in that direction.
Okay. And just one more question on the clean energy side. So any plans of doing anything on the solar or hydrogen or battery storage, either on the EPC side or the manufacturing side, on hydrogen side? So any color on that over the next two, three years, how are you thinking this and that clean energy thing? Because it aligns with your T&D segment and the energy segment, which is a part of the order books.
On the renewable side, we have done a few projects already on the international front, not on the domestic front. We have built a team, and we continue to explore opportunities on solar on the international front. As far as the other segments, whether it is green hydro, battery storage, all of that, well, we have small teams which are looking at it. But in the near short term, I don't see much happening on that front. But from a three-year perspective, we definitely could look at opportunities there. Also, today, Parikshit, for us, given the huge order book and visibility, and as I mentioned earlier, right, 60% of our backlog generated both in working capital and CapEx, I think from a two- to three-year horizon, we are well up on our feet.
While we get so, we continue to explore some opportunities in this space, and at the right time, we will announce them to everyone.
Are you now open to do any equity intensive projects? Like something like a solar project or something, or you will stay away and continue to focus on EPC only?
No, I think we will continue to focus on the EPC business, and that's our main focus as of today.
Okay, sir. Okay, for sure. Thank you.
Thank you.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to Ms. Bhumika Nair for the closing comments.
Yeah, on behalf of DAM Capital, I would like to thank the management for giving us an opportunity to host the call, and wishing you all the very best and happy Diwali, as also to all the participants. Thank you very much, sir.
Thank you. Wishing you all a very happy Diwali. Thank you, everyone.
On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you.