E to E Transportation Infrastructure Limited ($E2ERAIL)

Ladies and gentlemen, good day, and welcome to the H2 and FY '26 Earnings Conference Call for E To E Transportation Infrastructure Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shruti Vasani from Stellar Investor Relations. Thank you, and over to you, ma'am.

Thank you. Good evening, everyone, and thank you for joining us today. To discuss the H1 and FY '26 business performance, we have with us the senior management team represented by Mr. Sourajit Mukherjee, the Whole-Time Director and Chief Executive Officer; Mr. Suresh Maddali, Chief Financial Officer; and Mr. [indiscernible] Rao, Chairman and Non-Executive Director, representing the Board. Before we proceed with this call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. The company also undertakes no obligation to update any forward-looking statements to reflect developments that occur after the statement is made. Documents relating to the company's financial performance, including the investor presentation has been uploaded on the stock exchange and the company's website. I now invite Mr. Sourajit Mukherjee to share his initial remarks on the company's performance, and then we will open the floor for the Q&A. Thank you, and over to you, sir.

Thank you. Thank you, Shrutiji. Good evening, everyone, and thank you for joining us today. On behalf of the management team, I welcome all our investors, analysts, shareholders and stakeholders to the FY '26 earnings call of E to E Transportation Infrastructure Limited. Financial year '26 has been one of the most defining years in our journey, not only from a financial standpoint, but more importantly, from the standpoint of strategic transformation of this company. Over the last several years, we have consciously worked towards building a differentiated railway platform, one that combines execution capability, engineering ownership, technology development and life cycle services together under one integrated structure. Today, we are no longer positioning ourselves as only a conventional system integrator. We are steadily evolving into a full stack railway safety automation and integrated rail systems platform. The Indian railway sector is entering a once-in-a-generation modernization cycle driven by safety, automation, digital traffic management, indigenous technologies and intelligent rail infrastructure. We believe the future leaders in this sector will be the companies capable of combining design capability, product ownership, execution capability and life cycle support together. That is precisely the platform we at E 2 E Rail are building. Today, our operating structure is built around 4 integrated pillars. First, our core system integration business across signaling, telecom, electrification and composite railway projects. Second, our engineering and design capability through EDRC, where we are building internal engineering depth and proprietary design capability. Third, NOVA Control Technologies, our deep tech OEM and railway safety products platform. And fourth, our operations and maintenance business, which creates long-term recurring revenue opportunities and life cycle integration capability. This combination is strategically important because the railway industry historically operate in silos. OEMs build products, but lacks execution capabilities. System integrators execute projects, but depend heavily on third-party suppliers. EPC companies operate a low differentiation and margin structures and operation and maintenance players generally operate downstream without upstream integration capabilities. We believe that very few companies in India currently possess all these layers together under one platform. This creates a long-term strategic moat for us at E To E Rail in terms of execution control, margin expansion, supply chain integration and customer retention and recurring revenue potential. Our journey over the last 16 years is reflecting this evolution. From metro signaling projects and industrial railway works, we have steadily expanded into mainline signaling, telecom systems, overhead electrification, composite rail infrastructure, private railway sidings, engineering services and now most importantly, a railway safety technology developer. One of the most important milestones in this transformation journey came this month through nov. On 15th of May 2026, NOVA received CCA approval from ISO for commercial development. This is a major strategic milestone for the organization. With this approval, NOVA is now eligible to submit its prototype for approval while being eligible to receive field trial orders under the [indiscernible] ecosystem. For us, this is not nearly a product milestone, this is the beginning of our transition towards becoming an indigenous railway technology platform with long-term OEM capability in safety critical system. [indiscernible] itself represents one of the largest railway safety opportunities in India over the coming decade. More importantly, the long-term strategic value lies beyond a single product. Through NOVA, now we are actively working towards expanding our capabilities across several other additional safety critical and locomotive-related systems together with Tata [indiscernible], our co-development partner, and our broader technology ecosystem. The strategic objective for us is very clear. If we can develop RDSO-approved indigenous products across critical signaling and railway safety domains, we can significantly reduce dependence on imported systems and third-party OEMs. This creates multiple advantage for the group: better, stronger execution control, margin expansion, reduced supply chain dependency and stronger life cycle service integration. On the other hand, at the same time, NOVA benefits from having a internal consumer ecosystem through E To E's execution and system integration platform. This dramatically reduces the go-to-market challenge that most of the other stand-alone product companies face. We believe this combination of OEM capability, system integration capability and O&M capability together is extremely rare within the Indian railway industry and can become a significant long-term differentiator for the company. So now coming to the business performance of last year. FY '26 was a strong year operationally. We closed the year with a consolidated revenue of INR 380 crores, reflecting growth of more than 51% on a year-on-year basis. The adjusted EBITDA is approximately INR 39 crores while PAT stood at around -- INR 39.5 crores, while PAT stood at around INR 17.9 crores. Over the last 4 years, the revenue CAGR has crossed approximately 41%. Importantly, this growth was achieved while simultaneously building institutional governance, executing the IPO, rolling out company-wide ERP systems, investing into safety critical product development company, NOVA, strengthening engineering capabilities and expanding organizational bandwidth. So from a business mix standpoint, we continue to maintain a balanced approach across the B2G and B2B opportunities. The B2G segment, which is primarily to the Indian Railways continues to provide scale and participation in large national railway modernization programs. At the same time, the B2B business is helping improve the cash conversion efficiency through faster receivable cycles and lower working capital intensity. We are also seeing a strong traction in the order inflows. As of now, our executable order book, including L1 position stands at approximately INR 860 crores plus GST, which is more than INR 1,000 crores, including -- if we include the GST. Within the first 45 days of FY '27 itself, we have already secured significant order wins and L1 positions across multiple railway signaling and infrastructure projects. This gives us a stronger execution visibility entering FY '27. Now going to the cash flow. Now let me address the operating cash flow and working capital situation, which our investors and shareholders will naturally observe carefully. The elevated receivables and operating cash flow situation during FY '26, which you see in the balance sheet, were largely driven by an extraordinary timing distortion in project award cycles. Several large railway projects, primarily on the second half of the year, which experienced delays in [indiscernible] conversion pipelines in the second half. As a result execution and billing were heavily concentrated towards the end of Mach instead of being evenly distributed across the quarter. This created a temporary spike in receivable at [indiscernible]. Importantly, this is a timing issue rather than a structural collection risk. Our customer base largely consists of sovereign railway entities, metros and established industrial collect comfort have already started normalizing steadily in the Q1 FY '27 in last 45 days, we have collected more than INR 90 crores in this cycle of the last 2 months billing. Management is actively working towards smoothening the cash flow cycles by significantly improving the order book to revenue ratio with increased focus on billing discipline, receivable governance and smoother execution distribution during financial year '27. This strategy is already put in motion, which is reflected by the fact that within the first 45 days, we have added around almost INR 350 crores of new orders, giving us the ability to spread our execution and cash flow requirements more efficiently. We expect operating cash flow quality to improve materially over the coming quarters as the order cycle stabilizes and billing distribution normalizes. Despite scaling at more than 50% year-on-year, we continue to maintain a disciplined balance sheet management. If you see our adjusted debt equity ratio stands at approximately 0.68 while our ROC remains strong at around 17%. This reflects our continued focus on balancing growth with capital discipline. As we look ahead, this financial year becomes an important execution and scaling year for us. The management is positive towards keeping the momentum on the same CAGR of 45% to 50% by maintaining the same profitability at the margin level. The targets what we have taken for ourselves are supported by a significantly stronger open order book, healthy order pipeline visibility, strong signaling modernization opportunities and increasing strategic positioning through NOVA. Alongside domestic growth, we are also carefully evaluating international opportunities, particularly through our design engineering and product verticals. We believe markets across Southeast Asia, Middle East and Africa can create meaningful opportunities over the medium term. However, at the same time, given the current geopolitical environment globally, we remain cautious and calibrated in our international strategy approach. So as we move towards Vision 2029, our ambition is very clear, we aim to build a resilient innovation-led railway technology enterprise capable of crossing INR 1,000 crores in annual revenue while sustainably expanding profitability through technology ownership, vertical integration, OEM capability and recurring life cycle revenues. Most importantly, we remain committed to building safer, smarter and more efficient railway systems that contribute meaningfully to the future of mobility and national infrastructure. I would like to thank all our investors, shareholders, customers, banking partners, employees and the Board for their continued trust and support. With that, we will -- I request to open the floor for the questions. Thank you.

[Operator Instructions] Our first question comes from the line of [ Darshan Jhaveri] with Crown Capital.

Firstly, congrats on a really great set of results, sir. Sir, I just wanted to know we have roughly INR 1,000 crores order book. So what is the execution period for that, sir?

So generally, execution cycle for our business is typically around 24 -- 18 to 24 months. And sometimes it gets extended to a maximum 30 months.

Okay. Fair enough, sir. So sir, with that logic, we could easily -- we'll be able to easily do more than INR 500 crores revenue this year, right, if it is 18 to 24 months, right?

Yes. So from the management, so what we are trying to do this particular year is that we will continue to have a 45% to 50% growth momentum while also having a sustainable profitability and operating cash flow cycle. So that is the main aim. And as you understand Darshan, that we are building this company for a long haul for INR 1,000 crore vision by 2029. And we are trying to get the company completely capable of taking forward this journey.

Okay. That's really great to hear, sir. So just with regards to margins, sir, I just wanted to know because of the war impact, do we see some headwinds in margins? And FY '26 also had some decline in EBITDA margins compared to FY '25, right? So can we read at least that 11.5% range? Or what do you feel, sir, about the margins? Because even H2 FY '25 and H2 FY '26 is significantly different. So how do you -- on a higher scale of revenue, why are the margins a bit lower, sir?

Right. So good question. So there were very few specific factors during FY '26, which have contributed towards marginally lowering the total lower EBITDA margins. So -- and most of them are transitional or timing related rather than any structural in nature. So if you carefully see that we have our [indiscernible], which are fully factored into post IPO. This was the first year where we factored in. Secondly, we have also invested into NOVA and there were a lot of expenses. So on the ESOP part of it, so if -- on the ESOP part of it, it is around INR 1.5 crores, which basically contributed to that. So the total difference in terms of -- on a percent basis, if it is on a percentage basis year-on-year, it was like INR 4 crore difference in terms of PAT, right? So there are 3 basic things. One is this ESOP part of it. Second, there is NOVA [indiscernible], which we are targeting and there is commasculation is yet to start, right? So there were some expenses of NOVA, which have been put into P&L. And then that is something around INR 50 lakh-odd. So that becomes basically INR 2 crores. And due to these, during the last quarter of FY '26, there was a temporary disruption in the commodity and supply chain pricing across certain categories due to the year-end procurement due to the supply chain volatility and you know the conditions, the geopolitical conditions. Now while most of our contracts contain PVC clauses which protects us against commodity price fluctuations, the timing of the sudden increase and the year-end execution concentration did not actually allow the full impact of those escalations to be recovered within the same financial period. So that basically have an impact of around INR 2 crores, so that's a direct EBITDA impact as well. So if you take this for INR 2 crores, INR 1.5 crores and INR 0.54 crores, we should have maintained the same PAT percentage. So also I wanted to mention 1 point that going forward -- while going forward, structurally we remain protected through the contractual PVC mechanisms and even there is a commodity listed volatility it will be normalized through the better execution and billing distortion and through the -- while we realize it through the PVC clauses. More importantly, we believe the medium-term margin trajectory for the company remains pretty positive because future margin expansion as we see, we are creating drivers for the future margin expansion through the NOVA product integration, higher engineering contribution through EDRC and the O&M revenues coming up, stronger signaling mix and also a part of B2B right now growing very rapidly where the operation -- the working capital cycles are much more less intense. So while FY '26 included this kind of small changes, but on our medium term, we expect to keep up the margins in a similar way.

Okay. Fair enough, sir. Sir, just wanted to know like when we have the price escalation clauses, so example, if a commodity has risen 20%, then do we get that similar 20% or government has their own mechanisms? Or how does that work? Because we heard that sometimes government doesn't give us as much escalation as we know that we require. So will this higher because the war has not ended yet. So will this also commodity prices be a factor in our H1 margins also?

So as I said, we are generally protected by the PVC clauses, right? But it also depends on a bit of timing, timing related. So there are spot prices for -- especially for materials like copper, right, which is a very important ingredient for the cables, which we use for the signaling or in [indiscernible] projects. Now for steel and copper kind of commodification part is the timing when we are supplying is very critical to adjust the amount of PVC which we can take. So because in the last quarter, we had to basically supply it and then there was a margin -- so there was a billing concentration happening in March. We did not have a choice to distribute it over a time line. But when we are going in this new financial year, we have enough time to distribute it properly to get the maximum advantage of the PVC clause to come very close to the amount of inflation that commodity prices are [indiscernible].

[Operator Instructions] Our next question comes from the line of Murtaza with PinPoint X Capital.

Am I audible?

Yes.

I just had a couple of questions. Firstly, sir, regarding the working capital. It mentioned in the investor presentation that we have already received roughly INR 90 crores in quarter 1. So could you give a little bit more commentary regarding the receivables recovery time line? And what exact -- what can we expect the working capital days to normalize by the end of FY '27?

So I think it is important for all of us to understand the nature of the railway infrastructure business model. The railway industry is inherently seasonal and back-ended in nature, right? So in most railway projects, especially in signaling and system integration businesses, the execution intensity billing activity and customer certification processes are heavily concentrated towards the second half, and you can also see for other companies as well. And particularly the last quarter of the year, it is maximum concentrated. At the same time, the railway expenditure deployment also accelerates. So the execution ramp up material deployment increases, subcontracting activity increases. So structurally, the industry itself tends to show elevated working capital deployment towards the year-end. No FY '26, this normal seasonality also got amplified further due to some of the delays into [indiscernible] conversion guidelines. So basically, it is like a 2-month shift, which created this anomaly as most of the billing were done in March instead of being distributed evenly in January, February, March. So our debter, in terms of debter days in terms of, say, railway receivables on the data bases it's around 60 to 70 days and we get back the month. So if we could have billed some of [indiscernible] of the proportionate billing in January, we could have easily recovered these INR 90 crores, so the INR 100 crores we are collecting now by March itself. And that itself would have normalized our cash flow.

Right, sir. So is my understanding a little [indiscernible] if I say it in this manner that it's structurally a little difficult to show our operating cash flow positive at the year-end?

It is not structurally, I will say it's more of a timing issue. It's more of a timing issue around the businesses which we operate. But what we are actively doing this year is we are trying to nullifying that [indiscernible] or nullify that kind of anomaly by doing a order -- open order book to revenue conversion cycle much more front ended. So if you see our -- right now, in the last 45 days itself, we have taken almost INR 350 crores of orders. So now if my execution -- if we have order book in hand of, say, INR 1,000 crores or INR 860 crores as of now, INR 1,000 crores, the execution time lines can be streamlined. And hence, the timing for the supplies and execution, we can plan it better. And that's why, this year, we are very optimistic that this year we can bid this cycle and come close to the operating cash flow neutral.

Okay, sir. And sir, regarding the order inflows like you've rightly said, we have already received roughly INR 350 crores of orders in this current financial year. So I just wanted to understand what sort of order inflow are we targeting for FY '27? And also, are there any large ticket orders in our pipeline, let's say, probably triple-digit INR 100 crores plus or something like that in our pipeline?

Thank you for the question. So see, if you see right now itself, we have around INR 860 crores plus GST, so around INR 1,000 crores of order book roughly, right? But throughout the year, we are targeting somewhere around -- taking our -- this year itself, the new orders this year itself around INR 1,000 crores on this year itself, new orders, new orders accumulated throughout the year should be around INR 1,000 crores. So this will be primarily, as the railway is also entering a large-scale modernization cycling in signaling upgrades, automatic block signaling, AI modern and the safety systems, we are pretty much positive that these opportunities are increased. Also that now we -- our credentials are also developed for taking the 3-figure -- single orders of 3 figures. And then, for that reason, our order conversion cycles are also becoming better. Now this INR 350 crores order itself, we have a significant single order of around INR 200 crores plus, which comprises -- which is a composite system comprises of signaling and signaling and electrification order in South Central Railway. So that is -- we have been adjusted as a bidder for that. The order is just going to come in a few days. So we are in a very good position this year to accumulate this INR 1,000 crore order book because of our credentials, which have been developed and obviously, the market also giving us that opportunity.

Right, sir. Sir, is it possible for you to quantify a little what sort of target we have for the order inflows? Or is it a little difficult at the moment?

Come again, please.

Potential new orders.

Potential new orders. Potential new orders will be around -- this year we will accumulate new orders of INR 1,000 crores, new orders, of which INR 350 crores we have got it, INR 650 crores, we are targeting more.

Okay, sir. And sir, what is the roughly win rate in these orders?

So we have been maintaining a steady bid conversion ratio of around 20% to 25% over the years. and then that is one of moat which the company has because of the design capability, which is an in-house design capability which we have through our EDRC and the better how the signaling system modernizations are being planned and designed is very critical to basically derive the bill of material from our, say, our engineering scale plan. And that's what helps us in winning the conversion ratio much better than our competition.

Right, sir. And that's really great, sir. And I have another question regarding NOVA. I just wanted to have a little better understanding in terms of what sort of investment will we have to do in terms of CapEx and OpEx for NOVA like in this financial year? And what sort of contribution can NOVA make in our consolidated P&L for FY '27 and let's say, FY '28? plus rough numbers would work?

Yes, yes. So right now, we are operating -- so we are under -- how much is under development, right? And we are also planning to introduce a few more projects for NOVA around the safety-critical application. So there an investment plan of around INR 15 crores this particular year to be made in to NOVA and that will be basically through our approval from E To E because it's 100% owned subsidiary. So going forward, on the revenue part of it, so this year, we have been basically eligible for the field trial. So we are positive that we will be gating our field trial order around the end of H1. The field trial, which is around INR 15 crores to INR 20 crores field trials. But the revenue realization of that will take some time and it should start reflecting from FY '28 start, Q1 of FY '28.

Understood, sir. And just a clarification the INR 15 crores amount you said, it is a capital expenditure?

Yes. It's more on the capital expenditure, but there are expenses in nature, which are regular in expenses in nature, which you cannot capitalize also, which will obviously be there.

Right. Yes, sir. You can continue with same [indiscernible].

So you can see our coverage order book, co verge reflecting your order book in Q4 FY '27 itself.

Right, right, sir. Understood. Sir, just lastly, I just wanted to understand our [indiscernible] revenue from O&M and AMC contracts like what sort of percentage does it have or what is the target percentage by, let's say, end of FY '27 or FY '28?

This is a year in which we are actually actively working with a few of the metros and especially led by DMRC. We are working very closely with DMCRC for participating in several metro O&M tenders. And we are also discussing with a lot of our private clients where we are actually working right now on the B2B business that operational maintenance is a very important subject in terms of keeping the asset health properly. So this year, this particular FY '27, we are trying to at least get to around 5% to 6% of our revenues from the O&M business.

Our next question is from the line of Mudit Jain from Hem Securities.

Am I audible?

Yes.

A couple of questions from my side. First is regarding what is the proportion of unbilled revenue in this half in FY '26 H2?

Unbilled revenue is -- one second, I'll just come back to it. What is the percentage? so I think it is INR [ 1,318 ] crores, So it will be around 20% to 25% if I roughly remember. I'll just confirm you, one second. For this year, it is 8.6%.

8.6% for FY '26?

Yes. Yes.

And sir, last year in H1, this proportion was around 96.2%. So will we see similar numbers in H1 of this year also regarding unbilled revenue?

Come again, please? Sorry. You are talking about cumulative numbers, right? Are you talking about balance sheet cumulative numbers or for the year?

Yes, sir.

So the cumulative number as of FY '26 is around 43%. For the year it is 8.6%. So as you know, our projects, as I said, it goes sometimes 18 to 24 months or some times 30 months cycle. So this unbilled revenue will be progressively realized over this period of time. So right now in H1 itself, we will -- we are trying to close up several projects, but the accumulating of unbilled revenue will keep continuing because whenever we bill, we will have this 10% to 15% of the bill revenue to be on unbilled part of it. So this is feature of our business model. And all the work -- so unbilled over year, again I am emphasizing, it is -- the 100% work is 35. 100% work is 35. The work is done, there is no additional cost around it. It's just related to another separate milestone which basically triggers the release of it. So this will continue to be around 30%, 25% to 30% number throughout the year itself.

Okay. Okay. And, sir, proportion of subcontracting expenses as a percent of other expenses this year?

So I will just give to my CFO, he will like to answer this.

So basically, regarding the [indiscernible] business and the contracts, now the contracts are spread across geographies and contracts are spread across different scope. So what happens actually it is not a [indiscernible] ratio. Normally, the subcontractor and the abomination of expenses are relation to the scope parity because the scope vary from project to project. See what happens, sometimes we [indiscernible] year and the execution portion is more, so subcontract expenses will be more. Similarly, when the supplies are more, the supply should be more.

So let me give a little bit more clarity. So basically, the nature of contract determines how much of this -- how much will be percentage of execution or what is the supply. So there will be a few contracts where it will be execution maybe and the supply will be lesser in which there will be some labor component which will be where there is a subcontractor part will increase. In somewhere, there will be the supplies will be more, the system integration will be and labor part will be very less. So it depends on the nature of contract. It cannot be -- and also we need to emphasize one point that we do not -- we are not allowed even. We do not give a back-to-back contract or we are not even allowed by the contract to give back-to-back contracts to any contractors. The only [indiscernible] portion which you see are the labor jobs like the trenching, the cable laying activities, which are basically subcontracted through the labor contractors.

Okay. Git it, sir. Got it. And sir, one more question. To sustain this 30% CAGR, which you said for next 3, 4 years, how much order inflow is required?

Our CAGR, which we are positive to maintain around 45% to 50% over the next 2 to 3 years.

And then [indiscernible], how much order inflow is required, sir?

We are working on the same model that the order conversion ration for this particular year. So new years we are around -- we are planning planning to get around INR 1,000 crores of new orders this year. So end of the year, if we execute around INR 500 crores to INR 60 crores orders this year, the opening order book will be similar around INR 1,000 crores.

Okay.

So from FY '28, we project around -- we target around INR 1,000 crores of open order book at the end of the year or the opening of FY '28.

Okay. And sir, regarding margins, as you explained earlier, so you said that around INR 4 crores was the difference, INR 2 crores for raw materials, INR 50 lakhs for -- which we invested in NOVA and INR 1.5 crore [indiscernible] expenses, right?

Right.

So if I include this also, the margins look pretty low compared to last year's second half, H2. So what exactly is the reason behind that, sir?

No, no. See, you need to basically -- when you see our entire balance sheet or my financials, you need to compare year-on-year because it gives -- because there are some portions, some portions -- so it's integrated work orders which we execute. So there are some portion of it which will carry higher margins, some portion will carry lower margins. You need to see a year-on-year to have a good comparison. Half yearly basis, it's very difficult to compare because the orders are stretched over the full year.

Our next question comes from the line of [ Vedan Sonawani ] with MM Capital.

First of all, congratulations for a great financial year. Sir, I wanted to ask that in your Jan 2026 PPT, you gave the TAM for covers was INR 50,000 crores. And in May '26 PPT, you said the time was -- for covers was INR 1.5 lakh to INR 2 lakh crores. Why is that, sir?

No, see, you need to understand when the first coverage total -- when the first coverage was paid, it was getting rolled in the market, the first target for the government was to do 40,000 kilometers and the first 10,000 locomotives. So when we gave the initial presentation, so we were taking the earlier total addressable market for coverage. Now once -- now you see that the government is [indiscernible] of the initial rollout of covers, the government have focused on rolling our coverage for the entire high density, high utilized network plus also the other corridors and the total 20,000 locomotives, which is in the cycle, plus we have every year 300 to 500 locomotives being added in the system, which includes electric your locomotives and your [indiscernible] and some of the metros trains as well. Now in fact, if you have -- our honorable Railway Minister also mentioned that the rolling stock for high-speed rail is also going to be from India and -- for the new corridors, and that will also mean that coverage to be -- coverage will be [indiscernible] signaling system for the high-speed rail as well. This number is not a fixed number because coverage is as a system will keep on increasing. It's a solution. It's not a single product and it has a lifetime. It will continue. So the more it will evolve, the more it will get commercial, the total addressable market will keep on increasing. So it is the same in terms of the other technologies, and you can also compare the technology with the other automatic train protection systems across the globe where the total addressable market is continuously evolves and increases.

Our next question is from the line of Rahul Kumar Paliwal with Shefa Family Office.

So my question is on NOVA front. So what is the competitive landscape on coverage as market is getting crowded there? How do you stand different or creating moat getting into deep and how Tata [indiscernible] you to creating this moat for you?

Rahul, thank you for the question. So if you see the total coverage opportunity, right, comprises of not only locomotive coverage, but it also involves wayside coverage as well, plus integrating those coverage systems with the existing interlocking systems, right? So now when we were talking about competition, right, when we are talking about competition, we are talking about competition for not a single product which can be installed in a locomotive. We are talking about a solution. We are talking about a solution which basically encompasses a total track network of 132,000 kilometers and a growing locomotive count of 20,000 plus around 10% year-on-year increase, right. So when you see the total overall opportunity, there are the amount -- the enormity of this work will be obviously niche more able OEMs and system integrates coming together, right? So when our moat in terms of the coverage journey is not only Tata [indiscernible], but our deep expertise in the system integration front. So when we talk about coverage as a system, it has to be installed in a locomotive, it has to be installed on the way side and then on the station and then this entire system has to take its feedback from the interlocking systems over there. So whenever we are talking about -- when we talk about other competition, if you see all the people, which are approved right now or under development, those are all only OEMs or product manufacturers. They do not have a background or experience of system integration. And there we come from our complete product background [indiscernible] on the product background and we come from the systems integration background. And this [indiscernible] is going to create a moat, which will make the rollout much faster, much seamless. So even with the 3 OEMs being approved over the last 3 years, the total rollout, if you have seen, is very little. The reason for this is, whenever there is a field trial, whenever they are going to put it in the field and do an interoperability test, they are getting -- they are struggling because the expertise is required, which the other [indiscernible] are absent with those people. But we are already evolving from there. And that's why we [indiscernible] a much higher challenge in terms of competitiveness and the roll out practicality.

This is [indiscernible] here. I would just want to add a few points around what Sourajit just mentioned. I mean the question is absolutely as given that there are already close to about 15 players who, today, have put their hat in the ring for coverage develop, where we see a significant more for ourselves is in the fact that, as Sourajit mentioned, we have coverage, which goes into the locomotive, but we also have significant part of coverage that goes into stations as well as the wayside, right, on the track. Now our system integration capability, our signaling capabilities have been on the station as well as on the wayside, right? Our understanding of all the other subsystems that coverage would have to work with has been built over the last 15 to 16 years, and we have proven experience there. When it comes to today, what is happening, today, the landscape that you see, today, a large number of coverage orders that are coming are largely focused around locomotives. And the advantage that the loco coverage orders have is that, one, OEM can directly participate; second, the level of interoperability is the -- complexity involved in making it interoperable is moderate, right? It is not very high. When it comes to wayside and when it comes to station coverage, the level of interoperability, especially with other subsystems, including electronic interlocking automated block signaling is significantly higher. There, our system integration capabilities will come to the fray. It will make us significantly better in terms of our costing when those projects come in. Second, while execution of those projects, ensuring interoperability which requires understanding of all the other subsystems, we will be able to we will be able to roll out faster. We will also be able to be L1 driven given what it takes to sort of the modification that are required to achieve successful coverage implementation, right? So that is where our strength will start showing up significantly versus local coverage.

Got it. Two short questions. How does this annuity work in coverage orders? For example, if it is INR 1,000 crore order, what will be the annuity business for you? That's question number one. And second, you spoke about in presentation being a product company from an EPC company. I guess you don't want to get into manufacturing side. So -- and product company through NOVA platform or there are some others iteration, which are coming into as a system integration? And I see PE backing for you, so PE promoter at your boardroom. So what kind of contribution coming from those promoters? What are the key boardroom decisions which are turning into business for you now, which been discussed in the last couple of years?

I mean since the promoter is in the room, I'll just take that question. So this is Vinay Rao. I am the promoter here with E To E Rail. So we take a very active role in the company. We are extremely focused towards value build for ourselves and for all the shareholders of the company. We have been constant in this company since 2012. So this is 16 years being associated with the company. And in that period, we have seen the company grow, pivot as well as successfully now list, right? So our contribution continues to be on the strategy side. Given our background and the depth that we have in the market, we bring to bear a lot of resources that is also helping become a successful product company.

Okay. Right. Yes. And then anyone can address that annuity business?

So see, if you have to understand coverage is a blend of hardware and software, right? Now what happens is that the moment you put coverage on a locomotive and then you are basically doing the wayside and the station, right? And then there is a safety thing, which a complete safety net, which is being established. But however, whenever there is a change in the signaling plans because coverage is a safety layer, it's not a logical layer. So whenever there is change in the systems, in the station routes are more -- some more lines are being laid, some more signals have been put, there are automatic blocks signaling comes from absolute block signals, then there are alterations which keep on coming on the coverage -- of already installed coverage. And that gives you -- so this is happening also now for the electronic interlocking, which is being installed. And when we are talking about this, we are talking about more on the wayside and station part of it, right? And then it is already happening in electronic interlocking where we call it as alterations of the existing systems. So there is continuos alterations which happens and there are software and hardware changes which needs to be done to accommodate those alterations in the design. So that is part of one of the annuity. The second is the continuous maintenance of the systems, which is around -- somewhere around 3% to 5% of your product revenue. And at this point of time when the [indiscernible] and the entire product is new to the system, they are basically taking 2 to 3 year maintenance cost along with the tender itself. So -- but after 3 years, the system has to be still maintained and this 3% to 5% will keep on coming to all the product manufacturers throughout the life cycle -- life of the product, which is around 15 years.

Our next question is from the line of Kapil Adwani with Alt Growth Funds.

Am I audible?

Yes, yes, you are audible.

First of all, congrats on the [indiscernible] coverage. Sir, my question is on the coverage order inflow. How much revenue we expect from coverage in FY '28?

So right now, what we plan is that around January 2028 we will be eligible for 20% developmental order, and we will be receiving that in, say, around March or April 2028. So our approval will come around October 2028. So -- but we will be able to start our -- once my field trials are completed, which we aim to finish around next year Jan to March, we will eligible to start supplying the products for the already won orders. So we have taken a very conservative approach at this time. And even FY 2028, we are only planning for the field trial executions of INR 20 crores to be executed in FY '28. However, in FY '29, [indiscernible] commercial cycle will come and there, we have projected around the major revenue to be coming around FY '29, which is around INR 150 to crores to INR 200 crores.

Sir, I think, in the PPt, it is mentioned that the RDSO approval will be -- we will be getting by April 2027. So I thought that the coverage revenue will be flowing in, in FY '28.

No. So the -- so once April RDSO final approval, then we will basically be eligible to apply for all the products -- all the tenders. And then the supply and execution cycle starts. So generally, the execution cycle for coverage is around 12 months. So we are not projecting too aggressively at this point, but we will recalibrate this once we come closer to this approval. But at this point of time, we have taken -- we have not taken much of revenues from the covers on the FY '28.

Okay, sir. Got it.

So I just want to reiterate that we have been very conservative in terms of the time line. And hence, we are giving a guidance for commercialization in FY '29. We will certainly try to do better and as early as possible. So I mean, there could be upsides, but conservatively, we are projecting full commercialization starting FY '29.

Okay. Okay. And sir, what is the guidance for the margins for FY '27, FY '28?

FY 27, we will continue to maintain the margin that we had in FY '26. We do have ESOP expenses continuing into FY '27. And this will -- we likely will have 3 years of vesting and, as a result, ESOP expenses coming for us. FY '28, see, as I said, FY '29 is when we are looking at coverage full commercialization. That is our big PAT lever, right? That is where we would start seeing our product margins come upwards of 30% to 40% and that will have a direct impact on the overall company level PAT, right? So which should start moving from 3%, 5% range that we are in right now towards the 7% to 8% range. And this is in FY '29.

Okay, sir. And sir, are there any new products that we are working in?

So NOVA is actively right now working in developing a few of the safety critical applications. We will be in a position to announce the exact products in a few months of time once we have started and properly registered in the right forums and the authorities. And once we do that, we will be obviously announcing to the market. But what we are trying to do over here in NOVA is that we want to create a complete one integrated railway safety platform. So what we see today as a system integrator that there are multiple products, there are multiple safety critical applications in railways. Coverage is one of them. So safety and efficiency both together is what signaling and telecommunication are all about. And what we are trying to create in NOVA that we will be focusing on the safety critical applications and building efficient and intelligent product for the entire portfolio. So at this point, what we can let you know that we are working on hardware and electronics for several -- few of the critical applications, and we shall be able to disclose it to the market in coming few months of time.

Our next question is a follow-up from Murtaza with PinPoint X Capital.

I just had a couple more questions regarding execution. I just wanted to understand it a little better. Sir, just talking about our monthly average -- average monthly execution run rate in FY '27, what was it excluding the March portion? Because I guess it was abnormally a little higher in the March.

Yes. So the March revenues were supposed to be distributed in Jan, Feb, March. So basically, the March itself was around INR 170 crores, INR 70 crores, INR 80 crores almost. So 48% of the revenue came in March, which was supposed to be distributed in Jan, Feb, March itself. So if you see the run rate for quarter 4 should have been around INR INR 70-odd crores per month, INR 70 crores to INR 80 crores per month in quarter 4, which we planned initially. But the delay in the order conversions basically resulted into revenue concentration in March.

See one other I would like to give you is there is a billing cycle and then there is an execution cycle, right? So while we might have built up to INR 170 crores in March, to bill that INR 170 crores, there has been work going on from January, February, right? So there is quite a bit of design work that needs to be done, design approvals that need to be taken. Subsequently, vendors have to be finalized, a lot of negotiations has to happen. then you need to place the PO, then you have to ensure manufacturing happens in time, delivery happens, inspections happen in time and so on, right? So there's a lot of execution that is happening in parallel. However, the billing is a summation of a lot of these activities, right, which sort of gets back ended into March.

Right, sir, I understand there's a difference between billing and the execution side. So I just wanted to understand, in that context, like what was the execution part of things like on an average monthly versus what are we planning that to be in FY '27, the monthly run rate -- the execution run rate? So just wanted to broadly understand if like are we at least like pushing it up a bit, and how will we sort of be able to at least sort of reach our 30%, 35% CAGR target to actually...

So Murtaza, what we target is around, say -- we generally have around H1, H2 of around 35%, 65%, right, 35%, 65%. We are trying to mitigate by 40%, 60%. So -- but this year, what our proposal and our projection is, H1 we should be around -- closing in around INR 200 crores. So that's the guidance what we are trying to give. The rest will be billing issue. Monthly is a little difficult to project, but it is more or less quarterly and the quarterly run rate for the H1 is around INR 100 crores and for H1 it will be around INR INR 160 crores to INR 170 crores.

Right. Right. Understand this is very sufficient. It fulfills my need. And just one final question. I just wanted to understand on the [indiscernible] or manpower side of things, like how is it -- because like for the past few days ever since the summer has kick in, there's a lot of labor shortage or something in the industry going on. So is it something we are also facing? And by any chance will we -- have we seen some sort of an impact because of it on our execution?

See, on a seasonal -- this is a -- so we are in India and this is the seasons we understand. And we take our proper measures around what kind of execution to be done in which season. We are basically planned. So there are -- so during the rainy season per se, we will not be able to do the outdoor work, right? So we will be majorly focusing on the system integration side on various subsystem integration inside the stations. In the summer months, what -- we have certain schedules for distribution of the manpower where it will be deployed. See, our major work does not include too much of labor. It is more on the system integration side and technology side, right? So there are labor component, but those labor component are well planned into different timing cycles and they will be [indiscernible]. So for an example, for the peak summer, our working hours generally happen from 6:30 to 11:30. And then we start doing the work from 4 o'clock to 7 o'clock. So even some point of time where it is allowed to do night working, we can also do with proper lighting and safety measures, we also do some night working in case of any kind of emergency or expedited work requirements.

Perfect. That's great. And just one final question regarding the O&M and AMC contracts. Is it right for me to assume that we are expecting roughly about INR 20 crores of revenue from the annuity type contract by the end of FY '27? And secondly, I just also wanted to understand what is the nature of the contract? Like what sort of duration does the -- let's say, DMRC appoint a certain entity [indiscernible] very short term.

No it is not short term. So [indiscernible] go for annuity mode of minimum of 5 years and it can go up 15 years. So right now, the opportunities which we are discussing with [indiscernible] are for 15 years. And it might start with 1 year and then they extend it for 5 years and then the 5 years extended into 10 and 15. But there are some discussions on long-term annuity models also in some -- with some of the metros where they are looking at 15 years time line for the maintenance as well. So -- and then for the private sidings, we are looking at somewhere around 1 to 2 years where obviously the dynamics will change. So that's a sustainable part of the business. And we are looking at that this life cycle maintenance part will be obviously major when we -- our own products will kick in, that will be a pretty substantial part of our revenue and the margin levers will be there. But till then, we are trying to do the system maintenance. And then the system maintenance will have longer period cycles.

Right, sir. And just one final thing regarding this as well. Like in terms of the longer duration contracts, let's say, 5 years or 15 years, how does the pricing escalation clause come into picture? How does that happen?

So generally there are 2 types, so, one, there is PVC clause as I said, which [indiscernible] of the inflation and there are separate components for manpower and for the materials. And these are always built into the contracts. So when we basically do the costing, we can see that this is part of the PVCs are [indiscernible] to basically cover our inflations and the uncertainties around it, and we will build the risks around it. We will build the cost with the risk. We also see contracts where there are very long-term contracts, these are -- these might be renegotiated in next 5 years, or next 3 years. Then every 3 years, there is renegotiation clauses also comes in, in few of the contracts. So it depends on the nature of contract and how do we budget it.

We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments.

So thank you to all our shareholders, stakeholders and analysts for taking out the time. And we can certainly say that we are in a great position at this point of time as per the company's fundamentals are concerned, plus we are at the right time in terms of the market. Indian Railways is going through the tremendous modernization cycle. And as a technology-back railway system integrator, becoming completely safety-led OEM, we are positive to bring around a complete safe, smarter and efficient system for the railways and also deliver profitable growth for the company and all our shareholders. Thank you.

On behalf of E To E Transportation Infrastructure Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.