Patel Engineering Limited (531120) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Patel Engineering Limited Q1 FY '26 Earnings Conference Call, hosted by Share India Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harsh Patel from Share India Securities. Thank you, and over to you, Mr. Patel.

Thank you. Good evening, everyone. I would like to congratulate management on a very good set of numbers. On behalf of Share India Securities, I would like to welcome all the participants for Q1 FY '26 earnings conference call of Patel Engineering Limited. We are pleased to have with us the management team represented by Mr. -- by Managing Director, Ms. Kavita Shirvaikar; and Chief Financial Officer, Mr. Rahul Agarwal. We will have the opening remarks from the management followed by Q&A session. Thank you, and over to you, ma'am.

Thank you, Harsh. Good evening, everyone. Thank you for joining our Q1 FY '26 earnings call. It's a pleasure to speak with you all here today. We have uploaded the presentation summarizing the company's performance for Q1 FY '26, along with the results on the stock exchange. I hope you have had the opportunity to review the same. Overall, this financial year has commenced on a very good note, and we are happy and proud to present a good set of financials for Q1 FY '26. We have been able to achieve a consolidated revenue of INR 1,233 crores, which is growth of around 12% for the quarter as compared to corresponding previous quarter. And our net profit has grown by around 56% from INR 48 crores Q1 FY '25 to INR 75 crores in Q1 FY '26. In this quarter, we have received letters of our first 3 projects. This includes the 240-megawatt HEO hydropower project by NEEPCO, which is located in Arunachal Pradesh and valued at INR 7.1 crores. Next is the Kondhane project by CIDCO, located at Karjat, valued at INR 1,319 crores, and Nira Deoghar Right Bank Main Canal irrigation project from Maharashtra Krishna Valley Development Corporation located in Maharashtra and valued at around INR 1,000 crores, which is to be executed in JV, and our share is around INR 200 crores. Thus, altogether, orders of around INR 2,250 crores have been received in the first quarter. Besides these projects, recently post Q1, we have also received LoA for the Teesta V Hydropower Project from NHPC located in Sikkim, valued at INR 240 crores. This quarter, strong revenue are due to our team's commitment and accelerated execution at all project sites, despite impact of early monsoon at some of our sites. Now, let me take you through some of our operational achievements for the quarter. At Arun III Hydropower Project, which is located in Nepal, we completed the powerhouse unit 1, and also, the project's 155-meter shell shaft having a massive 24-meter diameter. At Kwar Hydropower Project, located in Jammu and Kashmir, we achieved breakthrough of the main access tunnel at the powerhouse serve bay level. The project also achieved of pouring of our 120,000 cubic meters of concrete and casted the under-sluice slab. At PGRW project, which is an underground water tunnel located in Mumbai, we completed 1,972 meters of tunneling using a 2.8 meter diameter TBM and achieved a breakthrough at the Ghatkoper high-level reservoir shaft. At Subansiri Hydropower Project, which is located in Arunachal Pradesh, we completed all the civil works of the 12.5 kilometer water conductor system. At T-7 tunnel project, which is located in Sikkim, also achieved significant progress, where we completed over 3 kilometers of lining up. This quarter has been steady progress, and we expect to continue the momentum going forward. Moving on to our order book. As of June 30, 2025, our order book stands at INR 16,285 crores, which excludes the Teesta V Hydropower Project of around INR 240 crores, for which LoA was received recently in Q2. Out of this, 61% of the order book comprises hydropower projects, around 20% is irrigation, 7% tunneling and the remaining 12% from urban infra and other segments. Receiving the new orders of around INR 2,500 crores so far has set a positive note for the remainder of FY '26. The Indian infrastructure sector continues to be the key driver for economic growth, although the ordering activity have not gained enough momentum till now as was expected. However, with the suspension of the Indus water treaty, we are now witnessing a significant acceleration and execution and tendering of several long-stalled projects. After many years, big projects like the Sawalkot Dam are finally back on track, making a fresh start for India's water and power plants. Other hydropower projects like the 240-megawatt Uri, 260-megawatt [indiscernible] and 700-megawatt [indiscernible] also in advanced stage of tendering. We currently have tenders submitted of around INR 11,000 crores, which are yet under evolution and further identified projects of around INR 40,000 crores to INR 50,000 crores, for which bids are expected to be submitted this year. Maharashtra state has been taking keen interest developing PSC projects and have recently signed multiple MoUs in recent months for development of these projects, and have set a long-term target of achieving 1 lakh megawatt peak capacity for the state. In June, the Ministry of Road Transports and Highways approved 19 road and tunnel projects for J&K with an investment of around INR 10,000 crores. These are strategically important projects, which will help improve logistical support and trucks movement. In conclusion, the focus of the government on hydropower internally aligns perfectly with our core expertise. This opens up a huge pipeline of opportunities for us moving forward, and we are already seeing some major tenders being floated. We remain committed to focus on execution and maintain steady growth. Thank you. And now I will hand it over to Rahul, our CFO, to take you through the company's financial numbers.

Thank you, Kavita. Good evening, everyone. I will now take you through the company's financial performance for the quarter. On a consolidated basis, the revenue for the quarter is INR 1,233 crores, which is up by 12% year-on-year, driven by strong project execution. Operating EBITDA for the quarter is INR 165 crores, a margin of 13.4%. Profit after tax has increased by around 56% and stands at INR 75 crores with a margin of 6.09%. On a stand-alone basis, the revenue is INR 1,224 crores, an increase of 13%. Operating EBITDA is INR 159 crores, and EBITDA margin is around 13%. Profit after tax is INR 69 crores with a margin of 5.67%. Sector-wise revenue breakup, hydro is 55%, tunneling is 19%, irrigation is also 19% and roads and others are 7%. Our book-to-bill ratio currently stands at around 3.3, providing strong revenue visibility. Our total debt as on 30th June '25, is INR 1,527 crores, out of which working capital debt is INR 981 crores and term debt is INR 546 crores. The debt as of March was INR 1,603 crores, that's implying a reduction of INR 76 crores during the quarter. Total debt plus contractee advances as of 30th June is INR 2,145 crores as compared to INR 2,267 crores as of March, hence a reduction overall of INR 122 crores in the quarter. The finance cost has accordingly reduced from INR 84 crores to INR 73 crores in this quarter, compared to Q1 last year. Overall debt equity has improved by -- from 0.42 in March to 0.40 in 30th June. The net working capital days is almost similar at around 168 days. And after adjusting of land, arbitration claims and in cash and bank balances, the net working capital is around 110 days. We remain positive on the outlook of the sector, the enhanced government spending and their focus on renewable energy, and we expect to continue the momentum going forward and focus on execution across all project sites. That was a brief for Q1. We are now happy to take questions, which you have. Thank you very much.

[Operator Instructions] The first question is from the line of [ Sucrit D Patil ] from Eyesight Fintrade Private Limited.

My name is Sucrit Patil. And I have a specific question for Mrs. Shirvaikar. Is ma'am online?

Yes, sir. Yes, sir. I'm there.

So my question is as Patel Engineering looks to grow over the next few years, especially with its presence in hydro, what will be your plan of action about expanding into newer infrastructure segments or areas that could diversify the order book and improve margin visibility? And a follow-up is that, if in case there are project delays or funding bottlenecks to slow down execution process, what kind of backup or alternative growth planes are you building in to keep the momentum intact and protect the profitability? And just on an ending note, have I mentioned your name correctly? Is it Shirvaikar?

Yes, it is Shirvaikar. So -- thank you, sir. See, let me start with our current order book. See our current order book is around INR 16,500 crores. Out of that 60% is hydro, 20% is irrigation and rest from other sectors. So as you're aware, traditionally, we are focused on hydro, civil work and tunneling and irrigation. So going forward also, looking at the current opportunity available in the sector itself where we have a expertise and government plan going forward, like, as I mentioned in my speech also that due to Indus water treaty, the hydro power and dam and everything is -- government is also completely focusing and long stuck projects also getting clearance faster. So considering the opportunity available in the sector, we will continue to focus. Our main focus in the similar areas only, like our order book is -- first this year, we have -- you have seen the good momentum. We have INR 2,000 crores plus order we have received LoA. Our target is to increase the order book to around -- by INR 25,000 crores by this year-end. So we expect another INR 800 crores to INR 10,000 crores addition in the order book. Now the plan, as you are seeing, like funding of the project and such things, we are -- as you have seen, we are consistently reducing the debt. So our financial position and balance sheet is stronger day by day. Our rating also has improved from BBB minus to A minus -- BBB plus to A minus now. So we are focusing on monetization also. Current year, our target is to reduce around INR 150 crores to INR 200 crores debt. Out of that INR 75 crores, we have already achieved in the first quarter itself. So going forward, we have enough bank guarantee lines available with us to bid for these kinds of projects. So we say this is a -- we are fairly confident that considering overall situation, we'll be able to achieve our target. I hope I have answered your question. If anything, else, please you can tell me.

Yes. So just sum up whatever we have discussed. So hydro project is somewhere where you are very bullish on. I would like to understand just one final thing, is there one area which you are watching execution risk more closely? And what kind of risks are you factoring in those areas?

So see, let us evaluate hydro, what kind of -- in past, I think you might have seen in the auto projects getting delayed beyond expectation. So now what is the reason? One is the hydro is the environmental risk, and one is approval risk and all such risks. Now even government also taken various steps to improve this. Unless and until land acquisition is done 90% to 100%, they are not issuing the LoA. So we have overcome this [indiscernible]. So going forward, we see there will not be unnecessary delay in execution of the project because government is also proactive resolving all issues -- timely resolving all of our issues. If you see our performance, Subansiri, we have complete -- almost completed the project; Nepal, Arun III, we have almost -- 90% of our work is done. We have completed a tunneling, T-15 tunnel, last year. Sela Pass tunnel last year we have completed. So you see, now the execution cycle is fast and government -- with the government support, focus, timely decisions, everything, execution is also moving fast. So we don't see any major risk as of now.

Best of luck for all your future ventures ahead.

Thank you so much.

[Operator Instructions] The next question is from the line of Dhananjay Mishra from Sunidhi Securities.

Just wanted to check in this quarter, we have grown about 1%, right, so -- and last time we -- for the full year, we have given guidance of 5%. So any change in guidance? And also, this quarter margin has come down, so any one-off in this quarter as well?

See, I'll tell you, this year, our target is to source the INR 5,000 crores plus turnover, that was initially we said. Out of this, first quarter, we have already achieved INR 1,240 crores. So we are hopeful and we are confident that we'll be able to meet our target. Now, coming to the EBITDA margin, in beginning only we said our EBITDA margin will be 13% to 14%, and quarterly, it will vary based on the project execution, which work we do. So that we will continue to -- we are confident that we will be able to maintain that kind of margin.

Okay. And with respect to order inflow, we are setting 8,000. So any specific projects we are -- I mean bidding for, which will be inhouse or tendering will happen in the next 2, 3 quarters that you want to mention?

Next 2 to 3 quarters, we are expected to be around INR 40,000 crores to INR 50,000 crores of work, which mainly -- majorly hydro, civil and tunneling and irrigation only. And considering our success ratio in the past, which is 20% to 25%, so we are fairly estimating that around INR 8,000 crores worth we should be able to get.

Okay. And this quarter, we have also seen working capital has improved slightly. So can we expect this trend to continue in the upcoming quarters?

So as we are assuming the turnover, as I mentioned, that government also has taken various steps to release the payments fast and everything, so yes, yes, we are hopeful that this trend will continue.

The next question is from the line of Chirag Shah from White Pine Investment Management Private Limited.

So first question is if I go back, our peak order book was around INR 20,000 crores, and now, we have seen a gradual decrease, and I understand it is more to do with awarding happening from government side rather than anything from our side. But any thoughts on that, how do you look at this ramp-up of order book? And related is, of this INR 40,000 crore, INR 50,000 crores that you indicated, so by when do you expect the submission would happen for at least 60%, 70% of the project?

By this financial year, we expect to submit this lease.

Okay. And any thought process on how to look at order book? And why I'm asking this question is as I see, as an outsider, it appears the focus of government seeing the power -- hydropower as states use to be slightly lower priority as compared to, let's say, a defense, which is a different segment altogether, but from government allocation or Jal Jeevan Mission or solar, which are small ticket items may be retail oriented, but much bigger in outflow that government is looking to spend? And given the hydro being a very large ticket size project in general, so anything that you can share, which gives you confident there will be a piece of change happening from the government?

See after the Indus water treaty, government's focus is in large dam and -- clearance of large dam and hydropower projects. Because as you rightly said, there is a -- because of the large ticket size, it takes time for the approval and all the process, but once approved, but they are expediting. And we see now going forward next 2 quarters, lot of projects are coming from the bidding, actually.

And if you can also indicate if not very large projects, but projects which are in the range of INR 2,000 crores to INR 5,000 crores projects. So how many of these type of projects are coming up? Because I don't think a much larger size projects government may still take a lot of time. But up to INR 2,000 crores or up to INR 5,000 crores process can happen at a faster pace. So if you can help us understand what size of projects that we are looking to bid, this INR 40,000, INR 50,000 crore projects that we're looking to bid? Are they -- there are 1 or 2 big ticket size projects or most of them are like INR 1,000 or INR 2,000 crores type of projects?

So most of them are some INR 1,000 to INR 2,000 crores, INR 2,500 crores, INR 3,000 crores, in the range of that kind of value and 1 or 2 large projects, I can say that.

No, but 1 or 2 large products would take away 60% of the budget -- 60% of the INR 40,000 crores, INR 50,000 crores.

25%, 30%, you can say.

Sorry, I missed you. Sorry for that. If you can repeat.

Not 50% to 60%. I say maybe 25% to 30%.

Okay. Okay. And anything on pump story that you would.

Chirag sir, sorry to interrupt. There is some background noise coming from your side. Chirag, sir.

Okay. Is it better now?

Yes, sir.

Yes, Chirag.

Yes. So one last question. I'll come back in queue again. On the pump storage side, any -- because that was supposed to be a very big agenda on government side, but again it seems to have gone on some kind of back burner. So any updates you could share on urgency on the government side?

I will tell you pump storage, there are government projects also and there are some of the private payers also who have taken on further development. So we are targeting both these projects. And which -- INR 40,000 crores, INR 50,000 crores, which we said that includes PSP also.

Okay. And at least 20% of that would be PSP nature or it will be a lower number?

We'll have to check, maybe 10%.

Maybe 10%.

Maybe 10%. No, sir, from a ballpark. All the best.

Next question is from the line of Viraj Mahadevia from MoneyGrow.

Encouraging results. A couple of quick questions. One is, you paid down debt of about INR 80 crores in the quarter. Can we reasonably assume over by FY '27, your term loan will be completely repaid? And were there any one-offs or asset monetizations in the Q1?

See, Viraj, we are looking at INR 150 crores, INR 200 crores reduction this year. So term debt -- by next year, obviously, majority of the term debts will go. But then monetization, we are looking to do monetization also this year, some land banks, some money that's expected from claims also.

And none of that has happened in Q1, right?

Q1, no. I mean, we have got some money from the government on claims and all, but not substantial.

Understood. Secondly, given the improvement in your retails, what is your current interest expense as a percentage? And is it likely to go lower?

See interest expense currently is between INR 11 crores and INR 11.5 crores, so -- and it may go lower also. Right now, we are looking at talking to all lenders to get the interest rates going down.

Great. And my last question is looking at -- I'm referring to your deck showing the project completion, do you expect a meaningful uptick in execution and consequently billings in the latter half of this year?

So that is already happening. We have accelerated execution at all project sizes. That is why we could achieve that 12%, 13% growth in revenue this quarter.

Okay. Great. And lastly, do you intend to do some kind of road shows for investors given the limited institutional investor in your shareholding book and the fact that your company is relatively undervalued to the other infra players.

Yes, we'll be happy to do it.

[Operator Instructions] The next question is from the line of [ Rahil ] from Sapphire Capital.

Ma'am, just going back to that growth -- revenue growth question, I was just not able to understand clearly. So you're saying the momentum is to continue, right, in the coming quarters because execution is looking good, and you have a very healthy order book. Given that you've done a strong double-digit 12% growth in quarter 1, it's fair to assume that this can be the same growth rate for the whole year of FY '26?

So FY '26, as I mentioned earlier, our target -- initial target was to achieve INR 5,000 crores this year also, revenue. But now since we have accelerated, we said we are confident to achieve the 5% to 10% growth.

Okay. So why not like more than 10% given that you see the shift in momentum is on the higher side and it's to continue? So are you just being conservative at this moment?

So yes, we are -- one is we are conservative. Second, we are saying our current order book is INR 16,500 crores, which is 3, 3.5 book-to-bill ratio. And plus, we are expecting some of the new projects during the next 2 to 3 quarters. Our cycle is such once we get the project 6 months' time it takes for mobilization and then it starts giving -- it starts adding to the revenue. So considering overall and on the conservative side, we are saying we are fairly confident, hopeful, we should be able to cross INR 5,000 crores this year also. And overall, that 5% to 10% guidance will remain.

And both revenue and margins, they both depend on the kind of projects you execute, right, like given in terms of value of the order?

Right.

So if you do large order values, then both revenue and margins can go up?

Margins, more or less. EBITDA margin, we said it will be around 13%, 13.5%. That we should be able to maintain. And based on the growth of the turnover, and we are fairly hopeful that our net profit margin will increase.

Okay. Net profit will increase. Okay. And any sort of -- as of today, the way you see the current scenario, you're also bidding for large projects, your pipeline is pretty huge as well, so any sort of like general outlook for the next year as well, FY '27, which you've internally like projected for the company?

So as we expected INR 8,000 crore order book, and at the year-end, we expect around INR 20,000 crores to INR 25,000 crores order book, considering that from FY '27 onwards, we are hopeful to achieve around 10% to 15% growth going forward.

And any scope of improvement in the margins there given the new orders?

Margin, EBITDA will remain in the similar range, and net profit will go up based on the growth in the revenue.

The next question is from the line of [ Prashant Kshirsagar ] from Unived Corporate Research Private Limited.

Yes. In the opening remarks, you mentioned about the civil works of a connecting tunnel being completed for Subansiri Hydroelectric Power, and later on in the questioning -- correct me if I'm wrong with just -- so am I correct on this part because I'm...

No, no, it was a water conductor system.

Water conductor system, I said. Subansiri Hydropower Project, we completed all the civil works of the 12.5 kilometer water conductor system.

So the conductor was from the dam to the powerhouse or how -- which part it was like...

Yes, it is part of the power house only.

Connecting to the dam or to the reservoir?

Yes, yes. It is part of the powerhouse only, so it is all connecting various powerhouses.

Okay. And the reason I'm asking you, were you involved with the dam -- civil work of the dam with Subansiri?

No, we are not involved civil work of the dam in Subansiri project. We are doing...

You are not doing.

WE are doing underground powerhouse and HRT and other package.

Okay. And second question is on the Dibang Hydroelectric Project were you have bidded. So can you share at what stage your bidding is comes to...

Dibang, let me tell you that it is coming up for rebidding, which will be come up in the next 1 or 2 months.

It is coming for rebidding. Okay.

Yes.

And the third question is in this order book, which you said, INR 40,000 crores or INR 50,000 crores, which you're planning to bid, what part would be the hydroelectric in that?

Around 60%.

60% of that. Okay. So that would include the Dibang, which you are bidding actually, so...

Yes, one will be Dibang.

Yes, that will include Dibang also.

Dibang also. Okay. Okay, ma'am. And last question is regarding your projects in Arunachal, so...

The line for the current participant has dropped, so can we move to next question?

Okay.

The next question is from the line of Chirag Shah.

Yes, just one question. You indicated -- did you mention that you are targeting INR 20,000 crores to INR 25,000 crores order book by end of the financial year F '26?

Yes, we are targeting. [indiscernible] it should be between INR 20,000 crores to INR 25,000 crores our order book should be.

Okay. And this is net of the execution, right, that you will do?

Right.