Ahluwalia Contracts (India) Limited (AHLUCONT.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ahluwalia Contracts Limited India Q2 FY '26 Earnings Conference Call hosted by AMBIT Capital Private Limited. [Operator Instructions] please note that this conference is being recorded. I now hand the conference over to Mr. Sudhir Vora from AMBIT Capital Private Limited. Thank you, and over to you, sir.

Good day to all. And on behalf of AMBIT Capital, I thank the management of Ahluwalia Contracts India Limited for the opportunity to host your Q2 FY '26 earnings call. We have the following members of the management with us today: Mr. Shobhit Uppal, Deputy Managing Director; Mr. Vikas Ahluwalia, Director; Mr. Satbeer Singh, Chief Financial Officer. I will now hand over the call to Mr. Shobhit to walk us through the quarter. Thank you all, and over to you, sir.

Thank you so much. Good afternoon, everybody. Ahluwalia Contracts India Limited has announced financial results for Q2 FY '26. During Q2 FY '26, the company has achieved a turnover of INR 1,177.30 crores and a PAT of INR 79.45 crores in comparison to a turnover of INR 1,011.48 crores and a PAT of INR 38.36 crores in Q2 FY '25. The company has registered a growth of 16.39% and 106.07% in turnover and PAT respectively, during Q2 FY '26 in comparison to Q2 FY '25. EPS of the company for Q2 FY '26 is INR 11.80 as compared to INR 5.73 in Q2 FY '25. During Q2 FY '26, the company's EBITDA margin is 10.92% as compared to 7.25% and a PAT margin 6.63% as compared to 3.75% in the corresponding period. During the H1 FY '26, the company has achieved a turnover of INR 2,182.18 crores and a PAT of INR 130.16 crores in comparison to a turnover of INR 1,930.83 crores and a PAT of INR 68.96 crores in H1 of FY '25. EPS of the company for H1 FY '26 is INR 19.43 as compared to INR 10.29 in H1 FY '25. During H1 FY '26, the company's EBITDA margin is 9.85% as compared to 6.93% and a PAT margin of 5.88% as compared to 3.53% in the corresponding period of the last financial year. Net order book of the company as on 30th September 2025 is INR 18,057.60 crores to be executed in the next 2.5 years. Total order inflow during FY '26 is INR 4,521.06 crores. At present, we are L1 in 2 projects aggregating INR 1,620 crores. Thank you. Over to you for questions.

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital.

And congratulations on good margins sir, specifically. A couple of questions, sir. First, this L11620 is the same of Bhubaneswar University and MIDC of Mumbai because it was INR 1,800 crores last time.

No, MIDC tender has since been canceled. OUTR Bhubaneswar Unity 1620 OUTR about INR 1,000 crores and about INR 570 crores or thereabouts is RML Hospital in Delhi...

Okay. Got it. So now given that in 1H upon execution, we have done for full year [Technical Difficulty] given if I include the L1 INR 6,000 crores kind of inflow is at so meaning 4.5 months to more order inflow are we looking at?

So our target was, as I had explained last time, similar to last year, about INR 8,000 crores. We are confident that, that is where we'll end up at around that figure.

Okay. And in terms of revenue for full year, how much we can look at now?

I've given you a projection of 15% to 20%, we are maintaining that.

That range in the second half actually leads to a decent 17% to 26% kind of a growth. So that's what wanted maybe a narrow range.

Look, H2 traditionally is more remunerative both in terms of revenue as well as consequently in terms of our earnings. So I think we are going to maintain that -- it's not possible as you know, [Foreign Language] that is -- there is a degree of uncertainty there. And today, since approximately 40% of our order book comes from NCR, that is a factor which will hit, but we are confident of our earlier projections being met. There are 2 projections that I've given during the last call, which is 15% to 20% top line growth and double-digit EBITDA margins. We are well on our way to get there.

Yes. So that's what I wanted to ask this NCR ban in terms of last time also, it got impacted. So how severe it is and how much it -- obviously, it is difficult to predict how long it will continue and how it will impact, but still [Technical Difficulty]

So you see, we feel that there are some measures which have been taken both by clients and us to mitigate the impact because both are -- the entire ecosystem is impacted when the work is shut down totally. So this time, the labor is not being allowed to go back to their native place. In fact, labor is post elections in Bihar and the results, labor has started coming back. Even when there is no work, the clients have agreed to pay them even when they are on site. So as and when the work restarts, the time will not be wasted for getting the labor back from their native place or other locations. So we feel the impact this time around should be lesser.

Okay. And the margin now can we see a 10.5% kind of a margin going forward or maybe 11% going forward as [indiscernible].

Shravan, I am sticking my neck out and staying and saying that we will maintain what I had projected last time. And we've done that. We are almost -- for this quarter, we've crossed 10%. We are nearly at 11%, and we are nearly at 10% for H1. So I think overall, it will be more than double digit. Let me just say that for the entire year.

And now sir, private sector wise is close to a 6% to 9% in order book, we wanted a 60-odd percent. So how do we see -- so now going forward, we would be more on government orders? And do we see competition there?

Yes. At the moment, there is a lot of competition. So our focus by design only has been on private sector. But in the long run, 60-40 we see now with NDA coming with more majority, even stronger in Bihar, we see development picking up there. We now see development again picking up in states like Assam. We see some private sector development. We bid for a couple of IT campuses in Bengal. So we see all round -- well-rounded development happening both across public and private sector in states in which we are already present. So going forward, that's why I said [Foreign Language ] new order inflow, I don't see a challenge in meeting that. They will drive our earnings going forward, continue to drive.

True, true. So next year onwards also, can we see the similar 8-odd thousand crores kind of order inflow and 15% plus kind of revenue growth?

I think so. I think so. I don't -- there is no -- I don't think there is going to be any slowdown. There is no slowdown on the horizon. At the moment, actually, to sort of give you a correct picture on the private sector side, we are actually refusing work every month because we don't want the ratio to be skewed too much. I don't see a challenge in maintaining the growth of 15% to 20% even next year.

Got it. Sir, this quarter, the employee cost has jumped up significantly, INR 121-odd crores versus Q1, it was INR 90-odd crores. So anything specific from third quarter, how one can look at the staff cost on a quarterly basis?

So this will -- in H2, this will taper off slightly. This quarter, it has gone up because we have declared increments and paid arrear because our increment we put -- they start from the calendar year, which is 1st January. This time, we got delayed in implementing -- we were studying, doing our due diligence of what's happening in the industry. So we paid the arrears in this quarter, Q2. That is why this figure is higher. As our high volume projects, value projects, sorry, start like Dahlias and Downtown, they pick up steam. This figure will come down slightly.

[Operator Instructions] The next question is from the line of Mahesh Patil from ICICI Securities.

Congrats on a very good set of results. First question is on the pipeline, sir. What is the bid pipeline currently? If you can quantify where the bids are open and where you expect it to open for next 5, 6 months?

So the bids which have opened in which we are L1 that I mentioned in response to Shravan's question, OUTR in Bhubaneswar and Ram Manohar Lohia Hospital in Delhi. As far as the order pipeline is concerned, at the moment, it is about INR 6,500 crores. I would not like to give out the names of the projects that are under bidding at the moment, but it is -- let me say, it's a healthy mix of private and government sector projects...

Okay, sir. And sir, just one clarification. The figure that is mentioned in the PPT in terms of order inflow around INR 4,374 crores, this is still YTD or this is for H1?

This is till date.

And sir, what will be the figure for H1?

H1, I think -- in the last month or so, we have not got any new orders. This is -- basically it's H1 and YTD is same.

The next question is from the line of Lakshminarayanan from Tunga Capital Investments.

I have one question. See, as we are becoming larger, and I believe in the next couple of years, we'll be 2x or even more. I want to see -- want to understand how are you building up for scale in terms of either leadership -- I mean, not leadership alone, but in terms of systems and how do you ensure that we are able to deliver at scale as we become much, much larger?

So primarily, if I understand your question correctly, you're talking about us scaling up in terms of staffing, in terms of...

Yes. I mean we are looking at for a much larger order book, right? And as we become bigger, we'll have a different set of challenges. It could be exponentially higher. For example, getting the engineering talent or getting -- ensuring that the cash flows are managed, the systems are done. I just want to understand how are you thinking about that aspect if at all, that is a thing that you are actually spending a lot of time.

No, no, it's a valid question. But I think we have started preparing for this a few years ago or 2, 3 years ago. One -- and we've mentioned this in -- both me and Vikas have mentioned this in our interactions with all of you either one-to-one or during investor calls, the company a couple of years ago, embarked on a digitization drive, and it's an ambitious drive, which is helmed by Vikas himself. And as a step 1, we have implemented SAP. PwC has done that for us. We've gone live. The process or this is being refined continuously as we speak. And this is the first step. We've -- the use of IT tools, be it tools developed by Autodesk, virtual modeling, digital twins, financial software. This is something that the company is doing very, very aggressively. And as I said, this is an ongoing process. Secondly, all of you know, we have -- we are heavily -- our CapEx has increased. We are heavily investing into machinery, getting in new machinery from outside, getting in new shuttering systems so that our efficacy...

May I ask you what kind of machinery you are actually spending on?

So this is -- a lot of projects that we are doing now are going up vertically. They are high-rise buildings, right? So we are investing in heavy-duty machinery. Traditional cranes has given way to heavier cranes where these cranes can be used not only to do RCC buildings, but also to do structural steel buildings. A lot of buildings that we are doing now have pre-engineered -- are designed using pre-engineered techniques or using structural steel. So we are importing heavy-duty cranes. We are using larger and larger batching plants so that we can make higher -- and these are all electronic batching plants so that we can make higher grades of concrete captively because all these buildings, high-rise buildings now using traditionally, the highest grade of concrete, which was used 5 years ago is M30 to give you -- to put things in context. Now we're manufacturing our own grade going up to M80, right? So that is why we are using more and more sophisticated machinery. Then the CapEx is also towards using more refined shuttering systems or system shuttering, so to say so that we can mitigate the skill shortage in terms of carpenters. We're using machinery, CNC machines to do bar cutting or fabrication of reinforcement steel. So these are some of the measures. And then as far as the other aspect of skill shortage, which is tough, Ahluwalia over the last few years, even prior to COVID has been investing in fresh talent. We go to campuses every year, barring the 2 or 3 years where COVID had impacted the industry, we recruit 50 to 60 fresh engineers and we train them. So our investment in training is going up now. So these are a slew of measures that we've taken to sort of prepare for the growth, which is on the anvil.

For example, since you have so many parallel running projects, do you have a visibility of whether your procurement is actually optimized. So for example, you may be buying a lot of scaffolding. There will be -- in some places, there will be inventory shortage, some places you may be using more. Is that something which you actually are able to track now given the digitization exactly on a daily basis, what is the planned target, what is an achieved target? Is your procurement getting centralized? I mean all those things, I'm just trying to understand. And on the journey of 1 to 10 -- I mean, on a journey of 1 to 10 in your own assessment, where are we? And when do you think we would be in a much comfortable position, again, as per your own aspiration?

So let me answer the easier bit first. On a journey of 1 to 10, I think we would be at 4 if I was honest. Having said that, we've always, say, over the last 10 years or so, we've used some homegrown software that has sort of helped us keep in touch with what has been happening at the ground as we multiplied our geographical locations. Now that is why we're using more and more tried and tested software now. SAP, I gave you an example. We're using tools like Power BI now that SAP is operational or we've gone live to provide various kinds of dashboards to people at different levels of hierarchy in the company. So while it would be -- I don't think it's a mix if anybody says or it's a fallacy, if anybody says that decisions are based anywhere in the world on a daily basis based on a set of figures, that's not happening anywhere. But yes, from doing a due diligence every quarter, I think the top management of the company is now looking at dashboards on a monthly basis. And our intuition is coupled with more accurate or hygienic data, which is coming to us or flowing to the top management, which is helping us take decisions even for projects where we are unable to sort of hit the ground ourselves.

The next question is from the line of Vaibhav Shah from JM Financial.

Sir, firstly, on any update on Gems & Jewelry project?

Vikas, would you like to answer that?

Yes. So we have received the environmental clearance on the project. And some ground clearance and exploration work is being done, but that is in the scope of the client. So while that is happening, we have now started with the engineering side of it, design and other things. So I think another 2 months' time, some work should start on ground.

Okay. So any guidance on how much revenue are we targeting for FY '27? I believe '26 would not be much of a revenue on account of the initial work going on.

So for the total book order value, the first year is usually where things take shape. So maybe about 30%, 35% of the order value.

In FY '27?

Yes.

Okay. Sir, secondly, on the working capital side, are you facing any challenge in any of the states? Or is it smooth across?

No, I don't think there is anything untoward to sort of report as far as the working capital challenge is concerned in many of the.

Maybe these are improved in the next quarter. Already working capital has been improved in this quarter versus 87 days approximately from 95 days...

There is only one challenge, which is on a broader this thing, I don't think it's something which is very challenging, but some money is stuck up in Maharashtra and Assam on account of GST revisions. That's a statutory increase. It's just a matter of time when it will come.

But not sizable.

It's around INR 70 crores.

Okay. Sir, secondly, on CST junction redevelopment, we have seen improved execution in the second quarter. So going forward, we should maintain this run rate in the second half? And how do you see '27 shaping up?

Now finally things have started to move. The design is finally getting closed, and we started the first round of work above the track also. Up till now, we were not doing work above the track and the greenfield buildings they are now -- the biggest one is now out of the ground and it's now -- the progress is now better. We are expanding our structural steel fabrication capacity also, we are doubling it now in the next 2, 3 months. Now the clearances have come. So now it makes sense to expand.

Okay. Sir, any revenue guidance for '26 and '27 from the project?

Pardon.

Revenue guidance for the project in '26 and '27?

About 40% of the order book or the order value.

In '27?

Yes.

Okay. And sir, lastly, any challenge we are facing on the labor side?

Yes, yes, labor is a continuous challenge. It is the biggest challenge that we are facing. It's -- in addition to the labor, there being a skill shortage, there is also an impact on account of events such as festivals such as Diwali, Chhath and then elections now, which just got over in Bihar. En masse, a lot of skilled workforce has gone to Bihar, especially this year because of implementation of SIR. So yes, that challenge is there. That's why I mentioned in response to Shravan's question, the first question that was asked, that we are trying to reduce our dependency on labor or mitigate this problem by investing in higher mechanization.

Okay. Sir, lastly, what would be our mobilization advances and the interest bearing portion.

Mobilization advances right now is -- this is INR 708 crores as on 30th September.

And the interest bearing portion?

Pardon.

Interest bearing out of this?

Interest bearing it's around 33%.

[Operator Instructions] The next question is from the line of Aditya Sahu from HDFC Securities.

I wanted to understand on the other 2 major projects that we have apart from the [indiscernible]. On the CSMT part, so I think you have mentioned to the previous individual, the execution has started over there, correct me if I'm wrong. And since we were in designing phase till now and the revenue that we are expecting is 40% in '27 of the order value. How much are we expecting in '26?

'26, we don't have much of expectation. We have about another INR 400 crores in the midst...

Actually, yes, what Vikas is saying is totally we've given a projection of about INR 400 crores for the entire year for the entire FY '26. And also the balance in H2, it will be about INR 250 crores.

Okay. Understood, sir. And same for the Gems & Jewelry, 30% to 35% of the order value is what we consider it as revenue potential for '26 also.

No, no, no, '27 -- 30% to 35% FY '27.

Understood, sir. Understood. On the Dahlias project for Gurugram, I just wanted to check on the execution since we were expecting that the execution to begin by September '25. So has that like are we on track on that part?

We are slightly delayed, but DLF has handed over 2 towers to us, where work has begun. It just began prior to the rains -- because of the heavy rains in September, they got delayed in handing over the towers to us. Out of 8 towers, they have handed over 2 towers. And the third tower also will be handed over now that the work is stopped for graft. That's why that's got delayed. But 2 towers, we started work on the ground, and we are expecting to pour concrete as soon as the graft is lifted.