Markolines Pavement Technologies Limited (MARKOLINES.BO) Earnings Call Transcript & Summary

[Audio Gap] Q1 FY '26 for Markolines Pavement Technologies Limited, MPTL. Markolines Pavement Technologies Limited established in 2002, is one of India's leading highway operations and maintenance, O&M and specialized infrastructure solutions provider. The company offers a comprehensive range of services, including preventive maintenance, major maintenance, microsurfacing, tunneling and other modern pavement technologies. We have with us Mr. Vijay Oswal, Founder and Chief Financial Officer, having over 3 decades of experience across infrastructure, finance, manufacturing and international business. [Operator Instructions] Please note that this conference is being recorded. I would now like to request Mr. Vijay Oswal, Founder and Chief Financial Officer, to run us through the presentation for the quarter ended 30th June 2025. Thank you, and over to you, sir.

Yes. Thank you, Sagar, for the quick introduction. And good afternoon, guys, and welcome to the earnings call for Q1 of Markolines. I'm thankful that you all have spent the time and be here to listen to what we do, how we do. So I will quickly take you through the presentation. Yes, Sagar, we can scroll down to the slides. So this is the table of content. Move next. So as a management, I want to tell you that, okay, we are really thankful to all the stakeholders for being with us and their contributions and giving us what we do. In 2026, particularly, we have -- we are doing a good amount of orders unexecuted orders book as of today stands at about close to INR 400 crores, and we are also working at an active pipeline of INR 600 crores. And this year, we are -- with the government's continued support, we are seeing that there is quite a bit of a thrust into the infrastructure segment. So we are confident on capitalizing our opportunities here, setting the new benchmarks. And we are looking at the future approach with 5 key pillars. One is, of course, the client satisfaction, then driving revenue through the scaling of the ticket size, then leveraging our expertise into -- along the -- across the other sectors of infrastructure and of course, encashing on our leadership position and be the leader in the infrastructure O&M space. Next. So if I have to just quickly go through the Q1 highlights, our PAT has increased about 119% from -- to INR 3.79 crores. Then earnings per share has also increased to INR 1.72 from INR 0.90. Then we have also migrated from the SME platform to the BSE main board. And as I already said, we have a strong order book of INR 400 crores unexecuted -- then in this first quarter, we have also added about INR [ 30-plus ] crores of orders. And post, we added another INR 40 plus yesterday, we have gotten INR 100 crores worth order, which will be spread over the next 5 years. Next. So as far as corporate actions are considered on to that side, after being on to the main board of BSE, now we have already applied for the NSE main boarding also. Then already merger, we are settling the queries. And whenever it will take some due course of time, we will have the merger of Markolines Pavement and Markolines Infra done. And as we have already said that we have migrated. Next. So now how does we view the future? Basically, our -- as usual, the first primary importance to us is the client-centric approach, prioritizing their satisfaction and delivering the driven solutions. Of course, the -- we are also -- we keep looking for the innovations and new technologies coming into the market. We will keep evolving the client needs to add more and more services to the portfolio. Then we are also looking at increasing the -- with the growth in the turnover, our eligibility for the higher size also increases. So now we are targeting the larger-sized projects so that it could -- we could click the revenue growth. Then -- now we are also looking at the skill set that we have to expand into the other sectors of infrastructure. And of course, we always been and we aspire to remain at the leadership position in the infra O&M space. Next. So next -- so as you know that it is Mr. Sanjay Patil, our Founder, Chairman and Managing Director; and myself who have been leading this since then. And with us, we also have capable team. Go to next Sagar, team with Mr. Praveen Panchal, Mr. Nagarkar, and we have Mr. Anil Nikam, who has a wide and vast industry experience, who has recently joined us as a CEO. And -- go next. So now to just explain about Markolines. As you all are aware, we've been in this long 22 years of experience. We have a lot of gain and experience in terms of microsurfacing where we have done 115 lakh square meters of microsurfacing, then we have done about close to 5,000 kilometers of major maintenance work, INR 400 crores of unexecuted pipeline order book and INR 600 crores of pipeline. And also, we have done a soil stabilization FDR work of 1.37 lakh kilometers. And of course, CIPR as it is project specific, and we have done 197 lane kilometers of the CIPR, which is highest in the country. Nobody else other than Markolines with such an experience. Next, Sagar. So this is the order summary out of INR 400 crores or INR 111 crores. This is, of course, I'm talking as of 1st of July 2025, we added another 20 plus -- INR 120 crores of order to this. As of the close of the first quarter, we had INR 111 crores of major maintenance and INR 285 crores of specialized construction segment orders in orders -- unexecuted order book. And we have another INR 600 crores of orders in pipeline, we are expecting to convert in due course of time in this financial year itself. Next. Now about the Markolines, as I said, starting from 2002 with a single product of road marking, now we have transferred into India's leading largest O&M company. We are the only company having -- we have done many -- the first-time things in India. We are the only company with a backup technology center who does complete R&D testing facilities in-house. Then we are the first highway O&M company to be listed on BSE. And of course, we have pan-India presence. As of now, we are operating in 17 states and operating various sites. Now what is it that in this sector that we are looking at? Obviously, the India is growing in the road network. Basically, we have one of the largest road network even if we consider the national highway and which is a must for our growing Indian economy where if we want to be a developed nation. Then there is a focus from government on privatization by way of TOT, HAM, BOT or whatever ways. So the private sector is becoming increasingly evident. And then it requires really professional players to operate and maintain the highways. And highways being the wear and tear -- are exposed to the wear and tear, so they are variable in nature. So there is a recurring potential for highway maintenance. And that's what keeps us growing and potential of these businesses also growing, ultimately boiling down to our business growth. Next. As regards to journey, it has been a lot of time. And as rightly shared on the presentation, it too has been a roller coaster, right, but it has been always been a good journey with everybody who has been supportive on this. journey. And as of today, as I said, I have already mentioned, we are one of the largest and only listed company in this space, migrated to main board. Now we are looking at the merger of infra, then NSE listing, all of this is parallelly happening. Next. Now as regards to business, if you have to categorize our businesses, it is categorized into 3 verticals: highway maintenances, specialized maintenance, and the specialized construction services. Next, under highway maintenance, there are services such as the preventive maintenance, major maintenance, and rigid pavement. Rigid pavement means the concrete roads, which are now slowly increasing. We have started -- last year, we have started with the separate division for that, wherein we are doing a lot of working on the cement concrete roads. Major maintenance and repairs is basically service where being a variable and there is a guideline from the MORTH and IRC. So that we have to put in preventive or the 40 mm, our renewable layer every 5 years to 7 years so that the road condition is maintained. which is a recurring potential, as I already said. And under preventive maintenance, basically, this is a regular activity that keeps on going as per the damages and wear and tear and maybe for various reasons. It could be traffic load, it could be geographical transitions and any other reason and includes a lot of things. Next. Under specialized maintenance services, there are 2, 3 -- 2 things that we do. One is microsurfacing and one is cold-in-place recycling. Microsurfacing basically is an alternate treatment, which is a preventive maintenance treatment. It is green and eco-friendly. It is about 40% to 60% cheaper than major maintenance. And if done at an appropriate time, this could extend the life of the highway by 100% to 300%. So extending the major maintenance and achieving the better cash flow positions for our clients. Then CIPR is basically -- it is in a layman's language, you have to explain, it is recycling of road, the -- our train of equipment which passes through the bad road at one single point of time, it adds the additives, the excavates, the bad road mixes with the strengthening material, relays recompact. As this train of equipment passes, a bad road is excavated and almost finished road is laid. That is CIPR. This is under the specialized maintenance services. Next. So -- and under the specialized construction services, we do 2 types of activities. One is the soil stabilization or the FDR that is full-depth reclamation. Basically, a lot of new alignments, which are being proposed as expressways and direct connectivities to increase the speed of the logistics. So when passing through the greenfield areas, where the farmlands do not have the requisite strength to hold the roads, basically rather than excavating deep and replacing the entire soil, now there is an alternate solution called soil stabilization where approximately a little bit -- partial portion is excavated and treated with chemicals and compacted, which gives a very hard foundation base, and this is FDR. And of course, tunneling is that we are seeing that India is a land of basically a lot of undulations and terrain, wherein to increase the speed, the tunneling is the activity which is going across the nation. We are one of the very few contractors having a good tunnel experience. As of today, we are doing 2 tunnels, one in Maharashtra and one in Jammu-Kashmir, which is done in consortium. Next. Now what is it that people -- our active customers look into for us as a Markolines as a competitive advantage. We have being -- having operating across the India, except Northeast where the development has started. So we have a very good understanding of regional and cultural things, what is happening. We are the people who have always followed the ethical practices added to the SOPs. Then we have a very strong and experienced team who is taking care of the -- all the activities that are happening. Then, of course, the risk mitigation and efficiency -- efficient contingency management is also one of the things. And we have always been following the 100% compliances on statutories. Then we have a focus on safety, security and environmental issues and customer-centric approach has always kept us ahead. And it is Markolines have always been innovative in terms of launching the -- getting the newer technologies to India. Definitely, that has given us the leadership position. Next. So now what is it that keeps us driving is basically at the leadership position is, one is the market leadership. First-mover advantage. As I said, we've been into this business for long and at the same time, the adoption of newer technologies. We have excellent track records. We have established our credibility and credentials only performances. And definitely now the movements of the market scenarios in terms of the highway infrastructure is changing. A lot of international funds are entering the business. Privatization is growing. So we have an experienced team, strong order book, robust business model. Definitely, this is what is driving us to whatever -- wherever we are. And of course, huge potential, which is in the market is also the main thing for our growth. Next, Sagar. So if you have to look at our SWOT analysis, what are the things that we have established the expertise, strong portfolio of projects across the country, skilled workforce, in-house capability of doing every activity that we do other than outsourcing. I mean at the most outsourcing, whatever is done is only at the labor or maybe the very regular activities, and proven track record then adhering to the time lines, we have created our credentials and credibility. And we are the only company who offers end-to-end solution that definitely gives us the leadership position. Now if I have to really look at weakness, as such, no weaknesses, I would say. But if I have to look at overall industry, the skilled workforce, which is currently impacted due to high demand, probably could be a weakness. Since the -- basically, the roads are owned by government and handed over to the private players on a PPP basis, but they will also remain vulnerable to the policies and budget changes. Of course, the high capital expenditure and operational costs because of the huge machinery requirement and the short tenure of the projects and probably a delay in the client payments could significantly impact the cash flows. Now in opportunities, there is a lot to look at as India, as I've already said, we have the second largest road network in the world, which we are continuously expanding. There is a focus from the government side on the infrastructure development with the increased budgets. Then private sector is increasing leadership advantages also to our credit. And then we can also look at -- though today, there is a huge potential. But going forward, we could also look at expanding beyond the boundaries. Now what are the threats if I have to look at? Fluctuating prices of raw material. But for us, generally, this is always covered with the escalation clause. So major -- the only fluctuating item is bitumen. So none of our order is without the escalation clause. So this is definitely well taken care of. And of course, the natural disasters and extreme weather conditions could be a threat. And competition, growing competition. But as I said, with credentials, credibility, the experience, what we do, we are being the leader at the leadership position. Every new entrant in this space in the organized sector is our client today, and that's what is our strength, I would say. Go next. As you can see that this is the spread of our work across India. We are practically working across the country. Next. So as far as this industry is concerned, basically, today, as I said, that it is -- the lot of privatization is going on. A lot of the foreign funds who are acquiring the assets because this is a good proposition for them. So every fund that has entered into the highway sector in India is our client, may it be Cube or the Interise, NXT, ROADIS and every -- rather for that matter, every major player in this country is our client. We have been working with them along with some government and semi-government also. The semi-government organizations like MMRDA, few corporations, the PWD directly NHAI also. Next. As I said that as Markolines, we always stand with our credentials and credibility. We have been awarded and acknowledged with appreciations [ 10 ] times by our client. This is the display of a few of them. Next. Now let's look at the industry. So as I have already briefed, there is a lot of movement going on into the highway sector. National highway network is growing. We have close to 1.5 lakh kilometers of national grid, and we are also growing at a significant pace of about 34 kilometers per day. And then monetization, which government is looking at, they have already done about a huge monetization also expecting their target is in near future to -- as of today, there are about INR 18,000 crores, which has been monetized and the target is in longer run to reach about INR 1 lakh crores by prioritizing the existing grid. Next. Then the cabinet has been -- on every budget, there has been an increased allocation, more and more roads and expressways are being declared. And even at local level, the bypasses, tunnels, bridges are being declared and government is backing the full infrastructure sector fully. Next. This is the list of various projects and corridors, which are being developed across the country. As of today, if I have to say about 25,000 kilometers of additional length of roads are being developed in India. Next. And if we look at the EPC, as I said, now about only 500 kilometers of length under BOT, HAM. So we can say there is a lot of scope for the private players, even the government is also increasing the -- what is promoting the As of today, if I have to say about 25,000 kilometers of additional length of roads are being developed in India. Next. And if we look at the EPC, as I said, now about only 500 kilometers of length under BOT HAM. So we can say there is a lot of scope for the private players, even the government is also increasing the -- what is promoting the InvITs along with the international funds so that the projects are owned by the larger groups, easier for them for monetization. Next, go next, I have covered this. These are the various list of roads which are being expressways and access control roads. Next. Yes. Now coming back to the Markolines, the financials of Q1, if we look at, now our revenue has grown by 44%, giving a growth of about 36% in EBITDA and 119% in PAT. And the earnings per -- this thing also has -- share has increased by 91% from INR 0.90 to INR 1.72 per share. Go next. Then this is the Q4 versus Q1 as a preceding comparison, but this technically in the infrastructure space doesn't become very relevant, because for us, the first half of the first semester of the year is always low because our business is affected by the environmental conditions, that is weather conditions, that is monsoon. But still as a comparison, we have put in this. And go next. On a comparative with '24 versus '25, which we have already covered in the last presentation, but quickly I can run you through. In the preceding year, though we have closed lesser than the earlier year, but that last year, we had purely kept our focus on to the increasing profitability than to the revenue and which was visible in our profitability, wherein we have given a good growth in terms of the profitability as well as the earnings per share. Go next. This is the quick review of the financials. If you look at as compared to the INR 50 crores of Q1 last year, we have done about INR 72 crores of revenue, and EBITDA has grown from INR 5.45 crores to INR 7.5 crores and the profit -- net profit has grown to INR 3.79 crores from INR 1.73 crores. Now in spite of having the early monsoons, our business development as well as the execution team has worked well. And of course, our planning in terms of -- with the experiences, we are also learning which areas to focus since the India is a large country. And we got some projects in the range of areas. So we work also and put up this much of this revenue. And of course, the specialized constructions like tunneling, which also helps us. It is irrespective of the weather, though the work is hampered a little bit, but we could still do and achieve good growth in terms of first quarter. Go next. So this is the annualized profit, which we have already revised and a summary, which you can go through. Next, this is the balance sheet of the last year, which has already been on the listing, and we can answer if you have anything further. Next. The shareholder pattern, which is almost not changed, except a little bit of dilution on one of the promoter side for the personal need. Otherwise, it remains almost the same. Next. And next. So that's all as a quarter 1 achievement. Just to summarize quickly that in this quarter, we have done a good growth over last year. Secondly, there is a substantial growth in terms of not only revenue but also EBITDA as well as the profitability. Order book has also been increasing, and we are also looking at a huge growth in terms of orders because generally, monsoon is the period when the orders get finalized for us so that we could start post monsoon. We are on the verge of finalizing a few more orders -- and in terms of the corporate actions, also I have already said that a lot of corporate actions of NSE merger going on. So this is what the Markolines is in summary. Now Sagar, we can open the forum for the Q&A. You can start with the questions one by one.

[Operator Instructions] Our first question comes from the line of Madhur Rathi from Counter Cyclical.

I wanted to understand what is the receivables currently? And sir, what led -- sir, I'm trying to understand between FY '23 and FY '25, our revenues were flat, but our receivables increased by 2.3x from INR 76 crores to, I think, INR 160 crores, INR 176 crores. So why is that?

So typically, Madhur, what happens is generally for us, the Q4s are the high revenue quarter. So this is the typical scenario as the closing books, you will often see receivables grown. So -- and particularly last year when because of we had worked a lot for the BMC and MMRDA in Mumbai and because of the elections, we had some funds locked up, but which in my earlier presentation of the annual presentation also, we had said that by April, we had recovered all the monies from the outstanding money from the government projects.

Got it. So sir what is the receivable pending currently?

Currently, one second. Currently, as of today, it is about INR 132 crores.

Okay. INR 132 crores. Got it. Sir, so like are the local government or state government -- sir, what percentage of our current order book is from local or state government? And sir, are the working capital cycle for these lower than what it would be for a private player or NHAI or any central government entity?

So Madhur, just to answer, we do not work with the state highways in much. I don't think there is any state highway project as of today. But in terms of the private and this thing, it keeps fluctuating from time to time since our projects are short term. So as of now, if you have to tell -- ask me or I have to answer you, most of the projects which are running are on the national grid. And there would be a 50-50 contribution in terms of private and government. But government also, when I say it is not directly in government, it could be a 70-30. For us, the major -- the -- what is a specialized construction are all privatized. One project is through in the consortium name and one is through the infrastructure players, but with the tripartite agreement. So there is no state government project as such.

Got it. And sir, last quarter, we mentioned that our margins for specialized maintenance is 12% and specialized construction is 18% to 20%. So this highway maintenance and specialized maintenance is the same thing or highway maintenance is lesser than what it would be for a specialized maintenance?

So when we say highway maintenance, technically, everything would come under highway maintenance, but this is how we have been segregating the specialized constructions. Okay? Specialized constructions are the specific treatments which have been adopted recently apart from the conventional treatments. And they definitely give us a better margins over the conventional treatments.

Got it. Sir, just a final question from me. Sir, for FY '26, sir, what kind of revenue growth and margin on an overall basis do we expect? Sir, can we expect to achieve a 15% EBITDA just because of the order book that we have currently?

So basically, the -- since we keep working on the -- as far as growth, your two questions. One is the growth. Definitely, we are expecting about 25% to 30% growth in terms of revenue. And what was your second question was?

Sir, on EBITDA margin, sir, what kind of margin profile we should expect for the next 1 or 2 years?

The EBITDA margins would be more or less same as last year. If you see -- basically into the private sectors and the competitive market, our margins would remain same. The volume is the -- I've always been saying that volume is the gain. So we are increasing the size that will only add to our revenues in the bottom line.

Got it. Sir. And why did our margins reduce from 13% in FY '22 to 9% for FY '23 and FY '24? And sir, I'm relatively new to the company. And sir, what led it again to increase to 13% in FY '25?

So till the time we were on '23 Okay. So one second, let me just look at -- so probably it will be the 2 reasons. That time, we did not have the specialized constructions this thing. As we said that we have added the specialized construction activities over the last 3, 4 years only. And particularly microsurfacing, though we have been doing, but that was for quite some years now, almost 9, 10 years, but that was always in a small quantity. As we grow in size, our ticket size increased, our project size increased, the specialized construction sector is also increasing, and that is giving us the increase in the margins. And of course, with this increase in the size, we are also looking at the cost optimized because of the consolidation.

So sir, was FY '22, 13% margins a one-off or because we are like are specialized and this has been only in last 3, 4 years, and it was 13% 3, 4 years back as well.

Yes, it could be one of the things that has happened. I would not have the exact data, but write to me, I can also dig into the '22 data and can come back and give you the details.

Our next question comes from the line of Arvind Deshpande.

Can you hear me now?

Yes, sir. Please go ahead.

Yes. First of all, let me congratulate management for the good performance.

Thank you, Arvind.

Yes. But what is important is like basic infra companies which build roads make 6% to 7% PAT margins. We are a repair company and that too specialized. We should be at least making double this margin in my view. See, the whole India story has started from, let's say, 14 to 25, 9 years. So if we take the repairs are coming last 4 years, that's where you may be seeing a traction in your business of repairs. So 5 to 7 years is where major repairs come up for all the toll roads. And this space is going to go up. So effectively, for a company -- specialized company like Markolines, the TAM is going to be very big, very big. I mean -- and if you are just making 5% margins, then that's not going to become very interesting. You are like any other infra company then...

Yes, I understand that. So slowly, if you have looked at our results, we have been increasing in terms of our margins also growing steadily over a few years. Now in FY '25, it is close to 7.5%. But at the same time, as I said, in fact, I have been saying also earlier, if you had attended my earlier calls. So basically, till a particular time, we were only catering to the private players and major maintenances and to establish ourselves into the business, we have always been looking at the satisfaction, the transparent worksheets. And we have always operated on a cost-plus basis. Now what is changing for us is, one, the larger ticket size, then the specialized construction. And as we are growing, we could also look at the direct projects from the government, which we are focusing slowly. And this is our plan for the growth in terms of margin. And particularly, we do not compare ourselves with the infrastructure construction companies. They are way too big in terms of size, in terms of the capital requirement. But in this space, we are one of the very few players in the organized sector. Otherwise, till particular point of time, there was a lot of unethical competition also we had to cater to and be into the market with the competitiveness. But with funds coming in, but of course, with the funds, the privatization going on, they will not -- we can only assure of the payments at a competitive. So the size, that is why I said, we always keep focusing on the size to maintain the growth.

No, I fully appreciate. But the scope, I'm just trying to talk about the scope. This industry is getting mature just now. And the scope for an excellent high-tech repair company such as yours, the scope is immense. You have to be a premier player and a partner of choice for all the invite owners. And that is where if your company focuses, I believe more than 5% margin will come about and you have a repeat business all the time, unlike an infra onetime margin. So if there is a vision towards that, then I see a lot of PE expansion for your company. Anyway, every shareholder buys cash flows. He's not buying anything more than that. Your vision and cash flow matching to that vision. So we need to see that vision matching and the expectation of a higher margin and a cash flow there.

Definitely. Arvind, thank you very much. I have already said what we have on our minds. We are also looking -- we are talking to various funds for the long term and the consolidated partnerships. And we are definitely working in all the things, whatever you have said in your -- you have definitely a good understanding of this market, I can say. Believe me that we are working on it.

Our next follow-up question comes from Madhur Rathi from Counter Cyclical.

Would most of our order be tender-based or -- and that's why there's this competition for margin or like for the private players, it's more of a service based and we can maintain our margins going forward?