EMS Limited ($EMSLIMITED)

Ladies and gentlemen, good day, and welcome to the earnings conference call for Q4 and FY '26 for EMS Limited. [Operator Instructions] EMS Limited was incorporated in 2010 by Mr. Ramveer Singh and Mr. Ashish Tomar and is involved in the business of sewage solution providers, water supply system, water and waste treatment plants, electrical transmission and distribution, road and allied works, operation and maintenance of wastewater scheme projects and water supply scheme project for government authorities. Let us now begin with the introduction of the management. We have with us today Mr. Ashish Tomar, Promoter and Managing Director of the company. Also joining us today is Mr. H.K. Kansal, Chief Executive Officer. I would now like to hand the conference over to Mr. Ashish Tomar, Promoter and Managing Director, to give his opening remarks. Thank you, and over to you, sir.

Yes. Good afternoon, and thank you all for joining EMS Limited's earnings call today. I am Ashish Tomar, and I'll be opening today's call. I want to begin by acknowledging the hard work of our teams and the patience of our investors and partners. We know this quarter's results are disappointing, and we take full responsibility for keeping you informed and accountable. The shortfall this quarter was driven largely by factors outside our direct control. Several of our projects were delayed because required government permissions were not granted in time and a prolonged cash flow constraint on the government side has delayed payments to contractors, including us. These issues constrained our ability to operate at planned capacity and materially impacted revenue and margins. While these are external challenges, we have already taken concrete steps to mitigate the impact and strengthened our resilience, intensifying engagement with relevant government stakeholders to expedite permissions and payments, reinforcing our working capital management and contingency planning to reduce vulnerability to counterparty delays, reprioritizing projects and controlling discretionary spending to focus on higher-value, lower-risk work streams, and preparing clear milestones and metrics so we can demonstrate progress and restore confidence. Mr. H.K. Kansal, our CEO, will now walk through the quarter's financial results in detail and explain which projects and regions were affected and outline the specific actions and time lines we are committing to. After these remarks, we will open the call for questions. Thank you for your continued interest and for joining us today. I'll now turn over the call to Mr. H.K. Kansal.

Yes. I am H.K. Kansal, CEO of the company, as Mr. Ashish told that the results are not in the line of expectation and somewhat disappointing to the investors and to us also. But that is not due to any sudden drop in strategy of the management. It was just there are certain reasons which I would like to draw attention of you that the results looks like falling that much. So first of all, I will come to the results. FY '26 quarter 4 as the total revenue is INR 84 crores as a stand-alone of EMS Limited and consolidated revenue is INR 120 crores, and that is a very significant fall from the last year similar period. And FY '26 as a whole year, the stand-alone revenue is INR 608 crores and consolidated is INR 732 crores. This is again about 36%, 37% fall from the last year due to the major contribution comes from the Q4 revenue. So the main reasons for this, which I would like to draw attention that as you could see in our balance sheet probably, our inventory has increased about INR 100 crores because the works which are having some milestones couldn't be completed up to that extent and the inventory got generated. That is called work in progress. At certain places, we have put the material on. At certain places, we have done the partial work and milestone couldn't be achieved. So that is around INR 100 crores. If that could have been built, so that could be the financial year Q4 results would be looking like INR 184 crores type of thing as a stand-alone, not the INR 84 crores. So this is one of the reasons. The other reason was the West Bengal election. And the election, what happens that once the elections are declared, so all the works of the nature, which creates the hindrance in the public life, like digging the roads for laying the sever because we are having a big project of around INR 780 crores in West Bengal, which mainly have the STPs and sever laying works. So sever laying works need extensive digging in the roads. So in election, the ruling party doesn't want key roads are dug and the public may go against the government's verdict government's favor with the reason that they should -- the public should not feel inconvenient. So the work is stopped. That is the general practice before election of any state. So from there only, we were expecting minimum INR 70 crores, INR 80 crores revenue in the quarter with the reason that, that is a INR 780 crores project, INR 500-something crores is the project for the CapEx work, and we have to complete this work in 6 quarters. So around INR 70 crores, INR 80 crores per quarter had to be done, which was hindered and we could only do for INR 20 crores work. So that is a shortfall. Some issue of bitumen supply was also seen after this West Asia disturbance in Uttarakhand also, where we have done the restoration of work of roads up to the subgrade level. And that is, of course, not a milestone. We could have built the amount once the bituminous layer is laid on the road for the restoration. So that was a drawback. Third thing is the government has changed the payment system from the state and central government alliance. There is a new portal now in the capital of every state which ensures the share of the central government and state government. So that is internal payment system. So that is called SPARSH and that is taking a gestation period and payments are still not normal because central government has to put the share and the state government has to put the pro rata share, whatever is the share of the state government, then the payments can be made. So that is a common escrow type of account that is done by the treasury of the Reserve Bank of India. So that is the third reason. And there were certain issues which were related to the heavy rainfall in particularly in Uttarakhand area, where the property, the under the lines of the transmission lines got damaged and restoration work had to be done first. And then after we were allowed to dig the roads. So these are the factors which happens in civil engineering. I mean this is sometimes in 3, 4 years, this cycle comes and that happens. So that is our reasoning for so low revenue collection in this FY '26 Q4 particularly and which impacted the FY '26, the whole year's result. So that is from my side. And I think now the people can ask question and answers.

[Operator Instructions] The first question is from the line of [ Atul Kumar ], an individual investor.

Explaining the reason for fall in Q4 revenue and also the profit. So basically, my question was if all those reasons, let's say, would not have happened, what sort of top line and bottom line we would be expecting in Q4 at consol level?

Sorry, I couldn't get exactly the question.

Sir, am I audible?

That would have been, I think, of the order of INR 250 crores, INR 240 crores because INR 100 crores, we have increased the inventory that directly adds into INR 84 crores. That becomes INR 184 crores. And some restoration works we couldn't do, particularly of the road restoration work. So that could be again INR 30 crores, INR 40 crores. And West Bengal elections had affected, as I told you, that could another add INR 50 crores minimum. So it could have been INR 250 crores crossed.

Okay. Okay, sir. And also, then margin number also would have looked better. Right now, I think at consol level, it is 15%...

Exactly. Yes, yes, got it. Margin is basically a pseudo figure, which is being reflected with the reason that suppose there are works going on different sites. So our total cost of establishment costs, watch and wall cost and there are certain costs which are included in the tender conditions like restorations of the work, which are -- which comes into dilapidated condition after any season or something. So we had to deploy the capital. And in return, we couldn't get anything. So that is the reason that this margin is looking. So basically, this margin doesn't carry much meaning in case of the civil engineering project. Once the whole inventory is clear and every unbilled bill is done, then margin will again come to 16%, 17% or minimum 15% in the coming quarters, say it may take to restore everything further 2 or 3 quarters. Until next year, FY '27, we will be able to control all the damage and to restore the things, which is seen on the balance sheet and on the margins, et cetera. I think I'm able to answer the things.

Okay, sir. And also, sir, the effective tax for the Q4, it comes around 60 -- like roughly 60%. Is there a reason that, that is not very high?

Can you please speak up, sir? We could not hear you properly.

Okay. Sir, I was saying the effective tax for Q4 also comes at around 61%. Is there a reason the tax -- effective tax is that high in this quarter? And I think that is lowering the net profit just to INR 6 crores.

Are you talking about the stand-alone basis or consolidated figure?

Consolidated basis, tax rate.

We'll just have a look.

I'm talking just about Q4 not the whole year.

Sir, I think the tax figure would be something tax INR 38 crores. The tax figure is INR 38 crores against a revenue of about INR 732 crores. So that comes out to near by about.

Yes. No, sir, I'm talking just about Q4, not the whole year and also at consol level. Just Q4.

Yes. Okay. Just give us a moment.

So that also against the revenue of INR 120 crores, the tax is about INR 4 40 current tax. INR 430 crores for current tax. Okay. Okay. Sir, I'll check like maybe if I have something I'll check. That comes out to -- yes. Okay. Okay. Also, sir, at current stage, like after Q4, what is the order book that we have -- like unexecuted order book that we are starting FY '27 with? And what sort of top line we are expecting? Earlier -- I think in earlier conference calls, we have given a guidance of roughly increasing at a rate of -- growing at a rate of 30%. So could you share some details on what top line and bottom lines we are expecting for the coming year?

Yes. So the order book is as on March 31, 2026, the order book stood at INR 1,837 crores of unexecuted work. After that, we have received orders of about INR 209 crores from UP Jal Nigam in Varanasi. And within this month, 3 more tenders are expected to be finalized there. And considering that the rate that we bid for are similar to the ones that we secured, we are quite hopeful of turning those bids into work orders. Apart from that, almost about INR 2,500 crores to INR 3,000 crores of tenders are in pipeline that we are bidding for in Delhi-Jaipur and also some projects in Maharashtra. So we are hopeful of securing work in excess of about INR 1,500 crores this year. That is our plan. And considering that, since the typical time line for completion of work is about 2 to 3 years against a work order of about INR 3,000-odd crores. INR 100 crores. We should be able to target a revenue of about 1/3 of that. That's about -- somewhere about INR 1,000-odd crores. So that is the plan.

Okay. Okay. And also, sir, in your earlier response, you said that we should get back to the normal range of EBITDA margin of 15%. But in past, you have done...

You are talking about PAT margins, not EBITDA. EBITDA would be somewhere...

PAT margin of 15%?

Yes.

Okay. And also, sir, if you are targeting INR 1,000 crores, that means in FY '25, we have done about INR 1,000 crores top line, INR 966 crores to be precise. So you're saying in '27 also, we are targeting INR 1,000 crores. So is it like it will just be a growth from FY '26. But if we look back 1 more year, we have already done INR 1,000 crores of top line. So like are we not -- are we being conservative in giving the target? Or can you throw some light on that?

Because we are navigating some troubled waters as far as geostrategic conditions in the world or the funding that is deployed by government in the sector. See, all that -- all the work that we carry out is dependent upon funding being released by the government on a timely manner. So since there has been some delay on their part, so the pressure can be seen in our balance sheet also.

[Operator Instructions] Next question is from the line of [ Azhar ], an individual investor.

Can you hear me?

Yes, yes, we can hear you.

Okay. So I just have a couple of questions. So firstly, if we look at earnings call Q2 that was held on 14th Feb and the commitment was -- rather I asked this question, if the company is facing any balance sheet stress or you need any funds in near term, the answer was that we don't have any stress on the balance sheet. Just 10 days later, I see this earnings file that you are raising funds up to INR 300 crores, not probably up to INR 300 crores. And also to the another question was said that -- there is a plan of reducing pledge. Just 5 days after we received the exchange filing that 4.5 lakh shares were pledged to Tata AIG, which was later released, but then that has been increased. So then go back to Q2, we grew in Q2. And it was said that we'll cover some base -- lost base in Q3. In Q3, obviously, that rain and land flights happened in Dehradun, and we were expecting revenue from Dehradun. That didn't work out well. So I asked this question that FY '26 is a goner. So what is our plan for FY '27? Do we see ourselves outpassing FY '25? We did somewhere around INR 1,000 crores in FY '25. And the commitment was yet, and we'll recover some lost ground in Q4, right? If we look at Q1, FY '26, the commitment was to bring the pledge to almost 0 by the end of FY '26. That didn't happen. I just want to understand why do we have these misinformation or on every con call because it doesn't make sense. I mean, it doesn't draw a nice picture that when we are having -- holding an earnings call, we are committing something, but happening within a week, within a fortnight, it's completely different. That doesn't boost the investor confidence. That actually shadows the company image of giving fake commitments.

Yes. Sorry for that, sir. But as far as our commitment for delivering growth is concerned, see, all the commitments were given earnestly with true intent. But since our performance is also dependent...

I'm sorry to interrupt there, but how can I plan that I don't have any fund requirement for the next 6 months. And then within 10 days of holding earnings call, I -- I hold the best Board meeting and I hold the Board meeting and pass the resolution to raise up to INR 300 crores.

Sir, that was just a permission from the Board that we took. We did not act on it. Yes. So it's a resolution that is valid for 1 year. We just had it passed in the Board so that in case any eventuality arise, we do not have to go back to the Board but we assure you that now we don't have any plan to raise any funds right now. In case we secure a large HAM project, in which capital is required to be pumped in by the company, then we might go for that. Apart from that, for regular EPC projects, we do not intend to raise any funds.

Yes, sir. And when in Q1 FY '26 earnings call, we had committed that we'll bring down the pledge by the end of FY '26. It has only increased since. And within 10 days of last quarter's earnings call, we again pledged 4.5 lakh shares on 10th of March to Tata AIG.

Sir, I think there might be some confusion there. If you will take the latest filings by the company, the pledge numbers have been reducing relatively steadily. And by end of next year, it will be 0.

To be honest, it is mind-boggling. I don't want to be -- I want to be very sober in stating my question, but it is mind-boggling that whatever commitments we are making quarter after quarter, we are -- like, for example, if we look at Q4, in Q3, we said that there were land slides and we have the visibility in Q4. That was already 1.5 months past, and we have the visibility that, okay, Q4 will be softer, but it will be relatively better than Q3. Forget about last year's Q4, it is worse than Q-o-Q, it is worse Y-o-Y. We have -- having that visibility being in the quarter for a month, 1.5 months, I mean, I do not understand why is it so difficult being transparent.

Please let me be clear, we cannot force government's hand. If government does not give permission to excavate roads, we cannot work there. We were expecting to get permission since we were constantly being told by our employer, which is Kolkata Municipal Corporation that please deploy the site, mobilize on the site, deploy all machinery and you are required to take -- execute the work by this quarter. But since when we deploy the machinery on site, citing nonclearance of permissions, we are not allowed to work. And now we cannot force government's hand. All we can do.

I totally understand that, sir. That is not my point. My point is that if I can understand it as a business practice that certain unforeseen circumstances happen. But I can understand that being happening on a quarter basis or they happen rarely. I cannot understand the misconnection there being every -- after every quarter because whenever we are holding earnings call, we are already in the quarter for a month or in some cases, 1.5 months. We have that visibility. We had it in Q2, we had it in Q3. I can understand at this point in time, you face the backlash from the elections that were happening in Kolkata, that's fine. I can understand that. But I cannot understand that this disconnect happening every quarter, either it is this...

What can I say, it has been a perfect storm. We are trying to navigate it and our effort is sincere. And coincidentally, it all happened...

Sir, may I also ask that in last quarter, that is Q3.

Sorry to interrupt, sir. Can you please rejoin the queue for follow-up question? Next question is from the line of [ Mr. Ajay ], an individual investor.

So I want to follow up on the last question that the investor asked. Hello?

Yes, sir.

Yes. So I want to follow up on the last question that the investor asked. It is a perfect storm, as you said, happening every quarter after quarter. Let us give you that. Now can you tell me that in Q3, we lost some revenue. We were expecting to build some revenue from Dehradun. And because of the land slides and everything, we postponed it. So can you tell me like what was the revenue loss in Dehradun? And did we build for the lost revenue in Q3 from Uttarakhand?

Sir, what I can tell you is not the exact numbers, but somewhere around INR 50-odd crores of work is lying finished waiting to be built in Dehradun.

So that will -- you are expecting that to be built in Q1 FY '27.

Yes.

And what is the total amount of number that we're expecting to garner from Q1 from Uttarakhand?

From Uttarakhand, that would be somewhere in excess of that.

Okay. And because there has been delay from the West Bengal, do you think you can -- we can build some amount from West Bengal in Q1 FY '27?

Yes. What now the -- what we are facing there is since the government has changed, there has been some shuffling in the department transfers. And as soon as, I think, within 10 to 15 days, the new officials join, then we can progress and...

One last question on the margin structure. Like if I look at margins, we were operating at, say, operating margin of somewhere around 22% to 25%. We can't actually compare that with this quarter when the revenue has been more than 50% down. But at an operating level -- operating margin level where we traditionally operated between 25% to 30%. So 25% being a median over there, what do we see FY '27 operating at as an operating margin level? So what we are targeting is upwards of profit after tax of 15%.

So you're talking about EBIT of 15%. So that would be operating.

EBITDA would be somewhere around Yes. So 21% EBITDA we have already achieved in '25, '26. We will try to rectify it and raise it to about 25%.

So we are saying operating margin of roughly around 25% for FY '27 and PBT of somewhere around 15%. Profit after tax, not PBT.

Okay. PAT of somewhere around 15%, right?

Yes, yes.

And what we have as a guidance that we did somewhere around INR 970 crores FY '27. FY '26 is a washout, but we will probably surpass FY '25 figures, that is INR 950 crores in FY '27, right?

Yes, almost similar.

And okay, sir, any visibility that you have for Q1 revenue ballpark where it could land?

Yes. No sir, as our CEO, sir, has already said, we are still recovering. And I don't think the numbers would be too good, but we are trying to improve on that as far as Q1 is concerned.

So you're expecting to outpace the growth in second phase of the coming year because we still recovering in the next quarter.

Yes. As soon as the stabilize -- yes. And one last humble submission from my end and one last request from my end is business up cycles and down cycles happen, but we shouldn't feel under confident ourselves, and it doesn't take much to be transparent, and we should actually hold our corporate practices and investor practices and transparency to investors to highest regards. That is the only request that I would submit over here.

Next question is from the line of [ Atul Kumar ], an individual investor.

Sir, I was looking at your past numbers and if I -- sorry, am I audible?

Yes, yes. Yes, sir. So I was looking at your past numbers. And if I see your trends from 2020, year 2020 to like financial year 2020 to financial year 2025, your top line has sir has grown from around 300 levels to INR 326 crores to INR 956 crores, so roughly 3x, and that would be like roughly 25% CAGR, so which has been impressive in past. Since now we are saying that in FY '27, we are giving a guidance of what we achieved in FY '25, that's okay because 6 is a washout. So we know it takes like some time to get back to the road again. But sir, if one has to understand the view of the management and the company, how we are looking 2, 3, 4 years out, -- so what sort of CAGR we should be expecting? Is it that we should be -- we were thinking to go back to that 25% CAGR kind of range? Or is it more or less? So any kind of color you can shed on that, sir, it will be really great. So if I, let's say, from here, if I have to think about -- like we roughly know FY '27. But if I have to think of FY -- how are we going to progress towards FY 2030. So like if any sort of vision -- in the long run, that would be great.

Yes. In the long run, if the figures till 2030 or further are to be given a guidance. So I think we can hope to achieve somewhere around 20%, 25% growth over the long run. From FY '27, I would like to add something for the answer of your question that in civil engineering industry, particularly once it is government-driven or is dependent on the government funding, what happens that any 1 year or 2 or some quarters can go with surprisingly low revenues and profits. You see our company was incorporated in 2030 in full shape to 2013. And till 2019, we tripled our revenue from something INR 107 crores to INR 320 crores or so. And again, from 2019 to 2025, in 6 years, we have again tripled our revenue. So if you see the 12-year graph or 2 graphs of 6 years from 2013 to 2019 and from 2019 to 2025, it is flat 20% growth in terms of CAGR. Although in '22 -- FY '22, we were down from FY '21. And similarly, if we can -- I mean, project and if we can foresee, we are down in FY '26 from FY '25. But definitely, if we look for 2030, the 5-year or 6 year '31, that the CAGR will be maintained at 20%. That is our organic growth -- and with this setback due to unprecedented conditions, which happened this financial year, we foresee that we will be able to maintain it, say, 25%, 30% growth from this figure of 26 that will touch around 25% figure. And then if we maintain it more than 25% and for 4, 5 years, then it will be flat 20% in further 5, 6 years. So that is the target always remains with an industry like us. But 1 year should not disappoint us, and we have the sufficient reasons maybe that investors are thinking that the figures are looking on paper, they are looking very disappointing. But if you have the reason behind everything, then of course, you can very well calculate. We, as a management, can very well calculate that after 4, 5 years, if you see the figure of 2030, this will again be a 20% CAGR from 2013 to 2030. That is what I think you are trying to -- and I'm able to answer your question. Thank you so much.

Yes, yes. So actually, that was the intention behind asking that question that historically, we have seen a very good growth. So of course, like 1 year can be a washout, it's understandable, but that's why it was more on the horizon that how are we thinking to go ahead from here. And like also I mean once you give such kind of answers, right, it will be easy for investors community to take this 1 year as a bygone and then look forward and see how we are progressing and of course, assess you on your guidance again. Sir, one last question I have like you mentioned that we are into -- mostly into government projects. So actually, do we have any plans to sort of, let's say, next 1 or 2 or 3, 4 years to diversify our work area so that the dependence is reduced from government? And second, sir, I also see in shareholding, right? Currently, we don't have FIIs, DIIs. So do you have any kind of investor meetings or plan to kind of pitch our company and growth plan and then get more institutional investor on board to your company in, let's say, 1, 2, 3 years. So if you can share some details on that, that will be helpful, sir.

As far as diversification is concerned, what I could get is diversification, you mean to say that we are going to diversify from government sector to private sector. That is one diversification. And other diversification, you may mean that from water supply and sewage sector to another sector. Client diversification as well as business, maybe let's say, getting into power because there are a lot of projects going into power and there also there.

Yes, sir. Yes, sir. I would like to answer for this that there is a tremendous and huge scope in water supply and sewage treatment sector of the urban India. It's a huge, tremendous. We are just 1% of the work we are able to do as far as pan-India scope is concerned. So we are not going to divert from the government sector as of now, we are not planning. And from the water sector also, we are doing 70% to 75% business from the water sector, which is likely to continue. We are bidding rigorously in the water sector and about INR 3,000 crores bids are in pipeline. And soon, depending upon the data and how we bid, how we select the bidding condition, we are looking for at least INR 300 crores, INR 400 crores potential of winning the bids in this month or in the coming month. So the sector is -- we are not going to leave the sector. We are not going to diversify. And as far as clients are concerned, we are already working in 7 states, and that is housing and urban development ministries projects, that is AMRUT projects and Namami Gange projects. So let us tell you that we work only in urban sector, and we don't work in rural sectors like Jal Jeevan Mission or such Bharat Mission. And because we have not -- we don't need to diversify because there is a tremendous things. What happened this year, again, I will have to emphasize the change in the government system, some payment delayed due to some gestation disturbance, some AMRUT projects, they were delayed in payment. If the payment is delayed from the government, what happens, we are unable to further pay it to our subcontractors. And ultimately, the work is stopped. So that becomes a big reason. So continuous payment supply is very, very essential of our business. And -- and once the subcontractor is not paid and labor leaves the site, you just visualize it, labor leaves the site, say there are 400, 500 people which work on a project. Suppose they leave the site. What happens to rearrange them, to reassure them, it takes a month or 1.5 months to reengage them. And the people of the area also get disturbed because we have dug the road, and we are not restoring due to lack of labor. So it's a very rigorous cycle to work on the serious things. And that is why so many big companies are now not into the digging of the sever. They are working on SPPs. They are working on WTPs, but they are not working on sever lane. So this goes like that in civil engine sometimes. It is certain times, it is luck dependent also. But the management, the company is of the view that we will, in long term, give the CAGR of 20%, may not be able to give this year. But if we even catch the FY '25 figures in FY '27, even then we will have to raise by 30% from FY '26 or even more than 40%, we will have to raise. So we will do that. But next year, if we raise by 25%, 27%, then average will be of 20%, we will achieve in 2, 3, 4 years. So that's it about this, not a need to diversify from the government sector, not need to diversify as far as the water sector is concerned. Thank you.

Okay. Okay, sir. And also, sir, second part of my question was, like are you planning to onboard institutional investors anytime near?

With institutional investors, we keep on meeting through roadshows in Mumbai. Actually, there are certain projects which we were looking and we are looking for. They are HAM projects, in which 60% is -- you are asking that why the institutional investors have not purchased our shares or they are not holding our shareholding is not there. So initially, that was there. Initially, they were there, but our share roll to INR 1,000 per share, INR 900 plus then they have exited. So they were having shares.

And I'll just say that we are trusting your words from here. and I echo the same sentiment that other investors -- other 2 individual investors have requested. So let's be transparent in disclosing the numbers, our plan and let's work together to see where it goes.

As there are no further questions, I would now like to hand the conference over to Mr. Ashish Kumar, Promoter and Managing Director, for closing comments.

Yes. I would like to thank everyone for attending this earnings call and would like to reassure our investors that we are sincerely putting in our best efforts to get back on the track and would deliver the growth that we promised. Thank you.

Thank you. Ladies and gentlemen, on behalf of EMS Limited, that concludes this conference. Thank you for your participation, and you may now disconnect your lines.