Ceinsys Tech Limited (538734) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ceinsys Tech Limited Q1 FY '27 Earnings Conference Call, hosted by Arihant Capital Markets. [Operator Instructions]. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Ritesh Kadam from Arihant Capital Markets. Thank you, and over to you, sir.

Hello, and good morning to everyone. On behalf of Arihant Capital Markets, I thank you all for joining me to the Q1 FY '27 Earnings Conference Call of Ceinsys Tech Limited. Today from the management, we have Mr. Kaushik Khona, Managing Director, India Operations; Dr. Abhay Kimmatkar, Managing Director; Ms. Amita Saxena, CFO. So without any further delay, I'll hand over the call to management for their opening remarks. Over to you, sir.

Thank you, Ritesh ji. Thank you, and good morning, everyone. It is a pleasure to welcome you to this earnings conference call for the first quarter of financial year 2026-'27. Let me first thank our host for today's con call, Arihant Capital. In the interest of some of the people who may be new to the company, let me first start by giving you a brief overview of the company first, followed by the performance highlights for the quarter under review. Ceinsys Tech, which is rebranded to CS Tech Ai while the corporate name remains as Ceinsys Tech Limited, we are a leading technology solution provider in the IT-enabled sector, providing engineering and technology solutions in the infrastructure domain. We have a claim for our expertise in geospatial engineering as well as other engineering services and solutions. We offer a broad range of geospatial intelligence services, including data creation, data analytics, decision support system and enterprise web solutions. After the acquisition of Mobility business of Allegro in 2022, we acquired a geospatial business of VTS in U.S.A in 2024, which was majorly operating in telecom domain. Since then, we are identifying some more targets for inorganic growth to expand our horizon into the domain where the company is already operating. That is the geospatial engineering services and the technology solutions for which the company has already mobilized almost around USD 28 million. We serve prestigious global client that include large corporates, OEMs, asset management companies and government bodies, highlighting its robust reputation in both geospatial and manufacturing sectors, with offices in India, in U.S., U.K. and Germany, the company combines local expertise with a broad international reach. Additionally, the company has initiated and invested into a development of product solutions focused on infrastructure vertical and emerging technologies through a vertical focus on the artificial intelligence and machine learning and embedded electronics. This vertical emphasize the development of the AI and ML-enabled applications and solutions to enhance our delivery for the existing domains at the outset and then reflecting the company's commitment to innovation and maintaining a competitive edge in the dynamic technological and scale. Now let me come to the financial and operational highlights for the first quarter of the financial year 2026-'27. We are going to disclose the consolidated numbers. For the quarter under review, operational revenue stood at INR 158 crores registering a marginal year-on-year growth of 1%. EBITDA increased substantially by 27% on a year-on-year basis to INR 39 crores, with EBITDA margins improving to 24.4%, representing an expansion of 505 basis points over the corresponding period last year. This improvement was supported by continued gains in the project delivery efficiency with EBITDA increasing sequentially for the eighth consecutive quarter. Profit after tax stood at INR 31 crores, which was a marginal decline, while PAT margin stood at 19.6%, a contraction of around 59 basis points year-on-year. In terms of segmental performance, our geospatial Engineering Services revenue for the quarter increased by 30% year-on-year to INR 94 crores, while Technology Solutions side, revenue declined by around 25% year-on-year to INR 63 crores. For the benefit of all, the mix between the geospatial Engineering Services and the Technology Solutions side is on changing [indiscernible] based on the execution phase of each project. As a team, the company aims to enhance its technology services segment revenue and aims to go beyond 51% of the total segment revenue. Moving to our operational performance. The quarter saw continued momentum in our order inflows, with the company securing fresh contracts worth INR 143 crores during the period. Our order book stood at INR 990 crore at the end of quarter, providing a healthy base for the revenue visibility going forward. We continue to see encouraging traction across our key business verticals. Our international geospatial mobility business showed a meaningful improvement during the quarter with new business development opportunities and contract aborts gaining momentum. This progress is encouraging as we continue to expand our presence across international markets and leverage our capabilities across geospatial Engineered and mobility solutions. We are also taking deliberate steps to build capabilities in emerging technology areas. We have approved an investment up to INR 25 crores in joint venture with AI Fabric U.S.A to be incorporated to create a sovereign AI cloud in India for Indian government, citizens and companies focused on cybersecurity services and defense to offer GPU-as-a-service, model-as-a-service and AI service to build or lease data center capacity. This initiative is in fact creating capabilities in an emerging technology segment while complementing our existing technology strength. On the domestic front, our engagement with government-led programs also continues to strengthen. We have received a letter of intent from the Director of Urban Administration and Development, Madhya Pradesh for the selection and appointment of a [indiscernible] agency for beneficiary led constant vertical under the Pradhan Mantri Awaz Yojana with a total contract value of approximately INR 67 crores, which is going to be gained over the next 3 years. This contract enables application of enterprise solutions-based gospatial technology and also application of AI. We also strengthened our presence with water and smart city infrastructure segment. We recently issued a letter of intent from Bandara Municipal Counsel for a supply, installation, commissioning of a consumer, domestic ultrasonic and electromagnetic AMR water meters under the Amrut of 2.0 with an order value of INR 17 crores. This project is to be executed over a period of 12 months and further strengthens our [indiscernible] smart water management solutions. Our recent order also demonstrate the breadth of capabilities across our business. In the mobility segment, we received an order of approximately INR 4 crores from AKS Intech India for design planning and simulation for production times to be executed over 3 months. We also secured international order for U.S. subsidiary, Technology Association for the meter development of hybrid power transfer case for [indiscernible] mobility USA were around INR 4 crores. The routine contracts for mobility continue, which are not built in the order book. In our Geospatial business, we continue to deepen our intact international customers, our early engagement with [indiscernible] includes NVME [indiscernible] supply as well as AI-powered building and road extraction [indiscernible] monitoring through big AI platform, along with enterprise geospatial imagery repository AI feature extraction capabilities. The aggregate value of these purchase orders was INR 30 crores. On working capital cycle stood at 164 days during the quarter, broadly in line with the levels seen over the previous 2 quarters. We have received recent government institution issued by Maharashtra government towards allocation of funds for the deals related to IoT and other projects to support collection and meaningfully improve the working capital cycle over the next 2 to 3 quarters. Overall, we remain focused on converting a strong order pipeline to execution, while continue to diversify across geographies, business verticals and emerging technology opportunities. With improving traction in our international businesses, a healthy order book and new initiatives in AI and digital technologies, we believe we are building a stronger [indiscernible] and more diversified platform for sustainable growth. With this, now I open the floor for question-and-answer session. Thank you.

Thank you very much, sir. [Operator Instructions] We have our first question from the line of Deepak Poddar from Sapphire Capital.

So just first, I wanted to understand this is around INR 1,000 crores order that we had. What would be the execution time line and then what sort of order pipeline we have according to target that we are looking at?

So I will just give you the breakup of the order book. As I said, we have around INR 990 crore order book. The execution time lines will be -- some orders have to be executive in 3 months, some 6 months, some 12 months and some of them have a plan up to 18 months. There are certain orders, which also have O&M, which goes beyond the CapEx position, which goes to 2 years to 5 years, the O&M position. So there are orders which have an execution time line, which are different. On an average, the execution time line [indiscernible] will be between 12 to 18 months. I hope I answered your question. [indiscernible] Dr. Abhay would like to comment.

No, no. I continuing with what about Mr. Khona has said. We have the execution spread up next 2, 3 years, the first 12 to 18 months will be the CapEx and then later, we will have 3 or 4 years of the OpEx. So that order book is going to get spread and we will have that revenue coming through those, Yes.

So on the funnel side, I mean, what sort of funnel we have in terms of order book.

From now onwards?

SP1 Yes, I mean going forward this.

Yes, going forward. So next 2 quarters looks very upbeat and -- as in last con call also, we said that we have a robust funnel. We were [indiscernible] we are about to receive our orders. Funnel is pretty strong, and we'll see -- we are passing our last year's number. That's for sure that I will maintain it and reiterate it, we have a very strong funnel across our [indiscernible] .

SP1 Yes. Will it be possible for you to quantify? I mean what is the range of funnel like you're looking at? .

Exact number, I wouldn't be able to tell you. But I think Mr. Khona has indicated you the kind of funnel, a number, but not exactly the number. But definitely, we have surpassed, already said that -- you also said that already cost about INR 1,000 crores. So we will be achieving this [indiscernible]. But I will pass this question to Kaushik ji.

So sir, just wanted to reiterate. We don't give the forward guidance because that's not within our policy. But we are -- as Abhay ji already indicated, we have a strong funnel. In fact, the order book within this quarter, which is around INR 143 crores also shows a substantial improvement from the order book as compared to the previous 2 quarters. And as Abhay ji mentioned, there are a few opportunities where we already bid, we expect the results shortly. So let's -- and as you are aware, as and when we get the substantial orders getting awarded, we also publish it to the stock exchange by way of routine declaration. So we keep you posted about that.

Understood. And just 1 last thing from my side. Now in terms of growth, I think this first quarter, we didn't see much growth rate. So what efforts we are doing to kind of improve our growth and what the growth we might be looking. We have seen last 2 years, very good growth in the range of 50%, 60% now. So how should one look at this year and what effort we are doing [indiscernible].

So as I said, we are on the on the target to not only increase the growth of turnover, we are also on the target to increase the margins. And you would have seen that this quarter, the margins have shown substantial improvement. The growth, obviously, will continue as the fund is also getting built up. Some of the orders, which I already mentioned were INR 143 crores, which was received, have the execution time within next 3 months, 6 months. So you will see the growth in next 2 to 3 quarters. As I again reiterate and for the benefit of all the listeners, we don't give forward-looking statements, and therefore, we will be restricting ourselves to mention about the numbers, but we are sure to have -- continue the trend of the growth, which we have seen in the last 2.5 years.

[Operator Instructions] We have our next question from the line of Madhu Rathi from Counter Cyclical Investments.

So firstly, I wanted to understand regarding our order book. Sir, Last quarter, our order book was INR 880 crores and that does [indiscernible] close to INR 990 crores this quarter. But if I look at order that we have received of INR 140 crores minus order that we executed of close to INR 148 crores. So this number is not matching. So if you could help me understand on this year.

Thank you for your time and this question. I would just again clarify in the previous conference call also, we have clarified that not all the businesses go into the order book, there are certain run rate businesses, which we don't build in the order book. For example, the Mobility business, we don't build in the order book. For example, the OEM products and services, we don't build into the order book. So therefore, there are certain business segments, which do not form into the order book. And this quarter also almost say, around 40 -- sorry, around INR 50 crores of the turnover was without the order book because they are run rate business. And this run rate business will continue. So there will be certain orders which flow into the order books and certain the execution happens without the order book also. I hope that reconciliation, if you want, I can make a reconciliation and then give it to the IR agency who can then forward it to you. So [indiscernible] question, just what needs to be understood is during this quarter, even after execution of INR 157 crores, we have increased the net order book by around INR 110 crores, which I think is a phenomenal progress. Thank you for your question. And I will pass on the information to IR Agency.

Got it, sir. So the non order business, at what rate -- what percentage of our revenue was the number in FY '26? And where do we see it [indiscernible] FY '27 [indiscernible] our business during this year?

So FY '26, we had business, as I mentioned, are the 2 segments, which are without order book was INR 130 crores, which includes mobility and the Product Solutions business. There will be some orders, which is within other existing domain, which are small granted business, which don't go into the order book. But out of [indiscernible] INR 60 crores which we recorded last year, I think more than 20%, 22% or 25% most without the order book and which traction will continue.

Got it. Sir, just a final question from my side. This fabric AI partnership that you have created. What kind of -- so this INR 25 crore investment, what is this towards and what will be the solution -- will we set up the whole cloud infrastructure for the government and we will receive payment and for that? Or will we just become more of a PPC player for the sovereign cloud. If you could help us understand the direction in which you are planning to go.

So let me clarify. This is the initial phase of evaluating the business volatility of setting up the the AI cloud for the purpose of sovereign cloud for the government. And this is basically going to cater to the defense requirement of the government is our target. The proposed JV is between fabric of U.S. Inc. and with the contribution of 50% each. Present situation is where we are contemplating to incorporate the JV, which should be done in the next 1 or 1.5 months. And after the JV is formed, the complete due diligence and the technical due diligence as well as the market due diligence will be carried out. And then the pace of -- second phase of another investment of INR 20 crores from our side will be done. So that's a kind of present traction. We don't intend to be an EPC company. We intend to be the AI solutions company. That's the objective. We won't be catering to the EPC cost -- the EPC part. But obviously, when we build up our infrastructure, some of the infrastructure will be kind of constructed through contractors also. But our business will be AI solutions, not the EPC.

Got it. Sir, so will we be providing something on the geospatial lines only to the defense sector through this cloud that you are setting up for the government? Or will it be more of data analytics or something on that front?

No, it will -- as of now, it will be a kind of technology platform, which will integrate the geospatial as well as the satellite data as well as the enterprise solution, which will the user-defined custom oriented based on the requirement of the customer. So right now, we don't -- we are not expecting ourselves to be the only data analytics company. It will be a complete solutions company. But as we progress, we will then keep on kind of updating the investors.

Got it. Sir, just a final question from me, how is the margin for our -- because our margin has improved. So what has led to this margin improvement. Actually, what is the margin for the order book [indiscernible] the run rate business from the mobility and product solutions. So how does the margin defer for these 2 segments?

So margins are improving as you see. That is because we are scaling up on the kind of the kind of maturity scale of the businesses. So we are earlier before 3, 2 years, we were into more of data acquisition. Now we are into more of enterprise solutions. So we are -- I mean, in a scale of growth, if typically a business is measured on the platforms like it's a scale 1, scale 2, scale 3, scale 4, scale 4 is the highest. We don't say we are between scale 2 to scale 3 and going up. So earlier, the margins were, let's say, when we began before 2 years, margins were around 15% to 17%, and we are now going up to 24%. Second issue is, before 2 years, we also enabled our technology solutions as a part of new domain where the margins are slightly better. And therefore, the overall mix of margin will be improving. As regards the margin in the order book, obviously, they will be either the same or better because as we keep on executing because of the improvement in the way we execute and the economies of scale, the margins are expected to improve. But we would -- as I said in the earlier question also, we don't give guidance about what will be the margin improvement. What was the next question?

No, I think that answers my question...

Next question is from the line of [indiscernible].

My first question pertains to the previous participant. So I just want to understand if you can explain...

Let me again clarify. Right now, the Board has decided and resolved to invest total INR 25 crores in 2 phases, first INR 5 crores towards incorporation of the company; and second INR 20 crores once the due diligence of the business is done. The due diligence will include the technical as well as the market due diligence. What we have envisaged is to provide the solutions in the form of either the GPU as a service, model as a service or AI services. And this will be based on the building up of the data center for the purpose of serving the sovereign defense purpose of the country. This is the right now objective. As we progress, I think it's still a little far off to right now comment on what will be the business model and how we will structure the business model because the phase of due diligence, et cetera, will take another 3 to 4 months. And by that time, we will be able to freeze the business model. I hope I answered.

Got it, sir. So basically, we are eyeing it in FY '23.

One moment while I notify the call. Yes, right.

Yes, right. Yes. Got it. Sir, second question would be on the trade receivables. So I just want to understand, we have seen a notification from the government that they have released some payment from Jive. So what are the trade receivables we have been stuck in and how much receivables we are expecting going in a few months? And how is the traction going forward from JJM now?

I would, first of all, answer the question on the overall parameter. If you see our working capital cycle this quarter is also 164 days. And the same previous quarter, previous 2 quarters was also in the range of around 162 to 164 days. So we have maintained the working capital cycle, which means that whatever billing is happening is being recovered. That is first thing. Second thing, I also mentioned in our presentation, which is posted on the stock exchange that recently, I would say, before 2 weeks, the government of Maharashtra has issued a GR where they have said that the majority of the funds which was stuck earlier for the IoT-related projects under the Jal Jeevan mission, they have already resolved that the funds -- major funds will be disbursed. And therefore, we expect as per the process which it takes, the time which it takes, we expect that in next 2 to 3 quarters and obviously, before 31st March, all the overdues of IoT projects and other projects which are under the Jal Jeevan mission will be cleared, which will substantially bring down the working capital cycle. So this is what we are expecting. However, as I already mentioned, whatever we are billing, we are collecting, so there is no additional buildup of working capital cycle. Amita ji, if you would like to clarify?

We have IoT debtors and received from IP approximately UPR of around total amount of INR 100 crores, and we are expecting to get these funds by end of third quarter, most probably. So these -- we have that thing in mind, and we have the clarity from the government also that these funds will get released very soon.

And in terms of traction, if you can tell something?

So if you look at our execution in the past 2 quarters of conference also, we have mentioned that while Jalzeevan Mission projects continue to be executed, our -- the focus now is also going into various other domains. So for example, transport or energy or other geospatial and recently, if you see the wins which we have had, which is under the Madhya Pradesh an Urban and Administration development department, there also, it is more of a geospatial. So we are taking conscious call to see that we bid for those opportunities where there is more clarity of the funds, budget allocation is already there and funds are already arranged by the government projects. So we -- earlier, we had a setback for some time till November 2025 for the issues of Jal Jeevan Mission. But now since November '25, we are not seeing any buildup on that and things are more manageable. I hope these things are clarified.

Got it, sir. And I want to understand the Allegro visibility. So how it has been panning out? What are your expectations in terms of growth? And what is the current challenges which we have been facing over there?

So I think it's been -- at least from 2025 December onwards, we are seeing positivity in the mobility business. As you may recollect, Allegro was acquired and then it's already since merged with the company. So right now, mobility is a division. The only thing which remains out of this company is a JV, which is Alligram, which is JV with Grammer AG of Germany, where we are 70% stakeholder and 30% is Grammer. These results of Grammer are -- these results of Alligram are not consolidated because they are a JV. Now as regards mobility, the things are looking better. In fact, Grammer also has seen that there is an improvement in the order book for the calendar year 2026, and that is a general improvement overall in the mobility business. So we are expecting some more traction in the mobility. On the international side, I think the subsidiary -- wholly owned subsidiary, which has mobility as well as Geospatial, we are seeing that there is a substantial improvement in this quarter as compared to the previous year same quarter. And even...

Top line has also increased for our overseas business in this quarter, even the margins have improved in that business. So we foresee a good traction in the U.S. subsidiary also in this coming year.

Got it, sir. And last time, we have mentioned about the RFID of the transport, which we have been planning to scale up. Is that tendering started or it's still under the approval from the government and it will start soon?

No. So as regards the ITMS and the ATM business on the transport, which is the intelligent traffic management system, we have already gathered the capabilities. In some of the cases where we did not have, we already tied up with the partners, and we are already in discussion with the government for some more opportunities. So we expect some positive developments in the next 1 or 2 quarters on the transport domain.