Prostarm Info Systems Limited (PROSTARM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Prostarm Info Systems Limited Q1 FY '27 Earnings Conference Call hosted by Arihant Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohan Baranwal from Arihant Capital.

Afternoon, everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining...

I am sorry to interrupt sir. Your line is not clear properly.

Am I audible?

Yes, sir.

Hello, and good afternoon, everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining the Q1 FY '27 Earnings Conference Call of Prostarm Info Systems Limited. Today from the management, we have Mr. Ram Agarwal, Chief Executive Officer and the Director of the company; Mr. Abhishek Jain, Chief Financial Officer. So without any further delay, I hand over the call to the management for their opening remarks. Over to you, sir.

Yes. I am Ram Agarwal. Good afternoon to everyone, and a warm welcome to all of you for joining our earnings conference call for the first quarter of the financial year '27. For some of you who may not be familiar with the company, let me begin by giving you a brief overview of the company. After that, our CFO will take you through the financial and operational performance of the period under review. Prostarm Info Systems Limited was established in 2008 with the objective of becoming the power electronic solution provider. Over the years, we have evolved from being a specialized equipment supplier into a comprehensive power solutions company with a strong manufacturing and service capabilities. Today, we focus on designing, manufacturing, assembling and servicing energy storage, power quality equipments. Our product portfolio includes UPS systems, Solar hybrid inverters, battery packs, Servo-controlled voltage stabilizers, Isolation transformer, Battery Energy Storage Systems and other power solutions products, et cetera. In addition to our manufactured products, we also execute Solar EPC projects, system integration solutions and provide value-added services such as installations, AMCs, rental solutions, et cetera. As the Indian power ecosystem continue to evolve, we have strategically expanded our capabilities beyond conventional power backup solutions into fast-growing segments such as battery energy storage system. With increasing renewable energy penetration, rising investment in grid modernization and growing demand for reliable power infrastructure in C&I space, we believe this business will be a key driver of our long-term growth. To support growing opportunities across our business, we continue to strengthen our manufacturing footprint. Alongside our existing manufacturing facilities in Pune and Navi Mumbai, we are setting up a 12-gigawatt-hour battery energy storage system manufacturing facility at Jhajjar, Haryana, which is in the final stage of commissioning and is expected to become operational shortly. We are also establishing our new UPS manufacturing facility in Gujarat, which is progressing as planned and is expected to commence commercial operations during the second quarter of financial year '27. These facilities will significantly enhance our manufacturing capabilities, expand our product offering and strengthen our ability to cater to the growing demand across both conventional power solutions and emerging energy storage applications. Our confidence in the business is also reflected in our healthy order pipeline. As on 30th June '26, our order book stood at INR 1,085 crores with an additional INR 5 crores under L1 status, taking the order book -- total order book, including L1 order, is around INR 1,090 crores. The order book is well diversified and with energy storage systems accounting for the largest share, providing us with strong execution visibility and reinforcing our confidence in the company's growth trajectory. Looking ahead, we remain focused on strengthening our execution capabilities, expanding our manufacturing footprint and delivering innovative power and energy storage solutions that create long-term value for our customers and stakeholders. With that, I now request Mr. Abhishek to take through the operational and financial performance of the quarter.

Thank you, Ram. And good afternoon, everyone. Let me take you through the financial and operational highlights for the quarter -- for the first quarter of the financial year 2027. Revenue from operations for the quarter stood at INR 76 crores, representing a 38% year-on-year growth. While revenue moderated sequentially, this was in line with the seasonal nature of our business, as the first quarter typically witnessed lower order activity following the execution cycle of the previous financial year. EBITDA for the quarter stood at INR 7 crores with an EBITDA margin of 8.55%, reflecting an improvement of 126 bps over the corresponding quarter for the previous year. Profit after tax stood at INR 5 crores, registering a 156% year-on-year growth, while PAT margin improved to 6.05%. The improvement in profitability during the quarter was supported by higher revenues and improved operating leverage. At the same time, given the project-led nature of our business, quarterly margins may vary depending on the mix of projects executed, execution time line and revenue recognition. We, therefore, continue to focus on maintaining healthy profitability over the medium term through disciplined project execution, cost optimization and operational efficiencies. From the operational perspective, we secured several strategic orders during the quarter, including a battery energy storage project worth approximately INR 11 crores from a reputed corporate customer and a Solar EPC order worth approximately INR 165 crores from Solarium Green Energy, which is a listed company. These orders further strengthens our execution pipeline and reinforce our growing presence across the clean energy ecosystem. We also continue to make steady progress on our strategic expansion initiatives. Our 1.2-gigawatt-hour battery energy storage system manufacturing facility at Jhajjar is in the final stage of commissioning, while the UPS manufacturing facility in Gujarat is progressing as planned. Both facilities are expected to become operational during the second quarter of FY '27 and will significantly enhance our manufacturing capabilities. In parallel, the implementation of SAP and Salesforce is nearing completion and is expected to be operational by the end of first half of FY '27, further strengthening our operational efficiency and our digital drive. As Ram highlighted earlier, the company continues to maintain a healthy order book, providing strong execution visibility for the coming quarters, backed by our expanding manufacturing capabilities and robust order pipeline. We remain confident of sustaining our growth momentum. Looking ahead, we remain optimistic about the long-term opportunities across the Power Solutions and battery energy storage ecosystem. Supported by our integrated business model, strengthening execution capabilities and continued investment in manufacturing infrastructure, we are well positioned to capitalize on these opportunities and deliver sustainable value for our stakeholders. With that, I now open the floor for question.

[Operator Instructions] The first question is from the line of Archit Agarwal from Steptrade Capital.

My first question is about the Q4 deferred orders. So you had indicated that Q4 revenue...

Archit, sorry. Archit your voice is not clear.

So sir, in the previous con call, you had indicated that Q4 revenue shortfall was primarily an execution timing issue with around INR 43 crores of Adani, INR 7 crores of SAIL and INR 13 crores of South Eastern Railway order deferred to Q1. So how much of the deferred order has actually been executed and billed in Q1? And how much is still pending?

Out of this three orders which I mentioned -- which we mentioned last time, INR 36 crores has been executed and remaining majority would be billed in quarter 2. Related to Adani, it's almost billed. Related to SAIL and South Eastern Railway, that would be billed in Q2 and Q3.

Q3?

Q2. Majority would be in Q2 and some part of the order related mainly to South Eastern Railway would spill over to Q3 because they are giving sites to us. So, as and when they would give us the site clearance, it would be installed.

Okay. And sir, even after the deferred of orders, the Q1 revenue is only INR 76 crores. It is 27% lower sequentially Q4 revenue of INR 104 crores. What is the reason behind this decline?

Archit, if you look at the number, then if you have the major order, which we done is only INR 36 crores related to Adani. The rest has been the normal order execution, which has been done. And generally, quarter 1 is always on the lower side. If this two billings, which of INR 20 crores would have been done in Q1, it would have been something around INR 96 crores is in line. So it is in line. It is in line because if you look at quarter 1 last year, it was INR 55 crores against which we did INR 76 crores, INR 77 crore. So the spillover is still existing in our books.

Okay. And what is the order inflow in Q1?

Total order as on is INR 1,090 crores. If you remove the BESS developer order of INR 855 crores, remaining order is about INR 236 crores in hand. Plus there has been dealer business, which is around something around INR 10 crores per month, we add additional INR 70 crores. So this is the number roughly which is there in hand as INR 306 crores or INR 307 crores additional order in hand as on today. Means INR 306 crores or INR 307 crores additional order is in hand other than the order which we have participated. And post June, there has been some more order which we have won, which is also of a significant size, which has been won post June.

Okay. And the last question is about the margin front. So you have guided for the margin of 12% to 13%.

Archit, that is still maintained. Archit, that is still maintained. The 12% to 13% margin what we told, we've always specified it is order-to-order and then based on the yearly number. Right now, we are sitting on INR 76 crores of turnover. So your fixed cost to turnover ratio is always high. So that's the reason of the lower margin. But on a year basis -- yearly basis, where our H2 is always on the higher side, this margin would equate to 12%, 13%.

Okay, okay. Got it.

Yes, yes. You see my past trend as well. I always speak on the overall year-wise revenue mix. Quarter-to-quarter, it gets changed because of the order mix that we have.

Okay. And what will be the guideline for FY '27?

As mentioned earlier, minimum 25% growth is what we are targeting.

The next question is from the line of Paras Chheda from Purpleone Vertex Ventures LLP.

Congratulations for... My question is with regards to working capital days. Our working capital days had increased sharply last year to 185 days from 60 days in FY '25...

I am sorry to interrupt sir. Your voice is not audible properly.

What is the target for working capital days by March 27? And can you quantify the amount of cash which will be released from working capital improvement?

Yes, Paras. First, the working capital cycle, it was 185 days in quarter 4 FY '26, which has improved to 168 days in quarter 1. And even the cash flow from operating activity, which was negative at INR 49 crores, it improved to around INR 16 crores negative. So there has been significant improvement in the cash flow from operating activity as well as on the working capital side. And with the further unlocking of some of the major realization which is happening, which we told you last time. So some collection has happened in quarter 1 and remaining major amount would be collected in quarter 2. So you would find some major unlocking of the working capital.

So, by the end of March '27, what target working capital days should we assume?

Around 150 days. 150.

150.

120 to 150 between I'm saying, because if I do it in the month of March, the EBITDA goes up, capital gets locked because we refer to a particular debt number, not the continuous number. So around 120 to 150 days as what I had mentioned earlier, same. On the same track.

Understood, sir. 120 to 150 days. Okay. Sir, for FY '27, now we've got this INR 875 crores BESS orders in hand of which INR 854 crores are all developer projects. So is it -- would you be able to revenue recognition project-wise and/or cash flow contribution from this Bihar, KPTCL and Adani project. So how much of this INR 875 crores do you expect in FY '27 revenue and EBITDA?

See this INR 857 crores is the developer business. So here, you would get 60 -- I would give you project-wise breakup. One is Bihar project. In Bihar projects, we are going to get yearly cash flow of INR 16 crores for spread over 12 years, along with the capital subsidy of INR 32.40 crores. This is for Bihar based project. This is a developer model, rental model. Second is Karnataka project. Here, the total cash flow on a year basis would be around INR 46 crores -- INR 45.72 crores spread over next 12 years with the capital subsidy of around INR 81 crores. So if you add these two projects, it comes to around INR 853 crores. Now related to Adani, which you had mentioned, Adani mostly we have billed. That's a straight EPC business. So it is not a developer model. That billing we have done majorly in quarter 1. So that -- this is the breakup of the EPC. And additionally, we have received one more EPC order, which is of around -- I'm not naming the name of company, considering market not conducive. So that is around INR 12 crores of another Solar EPC business for 8.36 megawatt hour.

Right sir. So for FY '27...

That is up to EPC business. Yes.

Sir, for FY '27, then from the developer projects, how much revenue do you expect from Bihar and KPTCL?

In FY '27, there would not be any recognition because first this project would go for completion. But yes, there would be an EPC billing coming up on the stand-alone balance sheet. Bihar base EPC would be done by Prostarm Info Systems Limited. So that EPC revenue would come on the books, but not the recurrent rental business would come on the books.

Right, sir. And sir, you've guided for about 25% minimum revenue growth for FY '27. Yes, correct. Right. And sir, on cash flow from operations, do you expect this year to end positive? Or do you still think this will be negative?

Yes, sir, we have already moved in that direction. And as I told you, even it was INR 49 crores negative last year, it has come down to INR 15 crores. But at times, project decide about how it behaves, but we are doing it and that discipline is coming on the books. We have started working with the partner. We have started working with our national distributors. Like last month -- this month, we have taken one order of around INR 7.5 crores, and that billing is not routed to us directly from system integrator, but it is routed through national distributor. So all this could result into a disciplined cash flow. And yes, we are positive and very hopeful we would convert positive in -- by the end of this financial year. [Technical Difficulty]

Sorry to interrupt. Sir your line is not clear properly. We can't hear you.

No, I was trying to say that, sir, for this 1.2-gigawatt-hour Jhajjar facility, my understanding was that at peak, you can probably earn about INR 1,000 crores to INR 1,200 crores of revenue, right? So what EBITDA margin do we expect from the manufacturing business, sir, realistically in FY '27 and '28?

This BESS manufacturing facility of Jhajjar, we are yet to start. So we would be commencing operation by the end of this -- sorry, by H1 -- end of H1. And then it would gradually get stabilized. And -- but however, parallely, there is also disturbance in the market, as far as you must be aware, regarding lithium cell, regarding the export incentives and dollar and freight movement. So all those factors are somewhat impacting the overall margin for BESS. So instead of focusing on the utility side of BESS application, we have started focusing on the C&I side of BESS application. On the C&I side, the margin is better as compared to the utility side. In the utility side, you will find megawatt size installation. And then the C&I side, you will find 500, 200, 300 kilowatt hour -- kilowatt size installation. So on an overall basis, if I give you an example, last -- in this current year, we posted around 26% of GP from BESS project, which we did for Adani. So that would moderate to somewhat, but it would be better than the other core activity that we are doing.

Sir, in that case, then, let's say, if we commence operations end of H1, then what kind of utilization do we expect in FY '27 and FY '28 because these are...

FY '27, it would not be more than 20%, 25%. Yes. We had earlier mentioned about 25% to 50%, considering utility market was also very attractive. But utility -- you would have seen the balance sheet of most of the companies, they are bleeding because of the utility result. Today, the result was also out for H.G. Infra. You would have seen the number. You would have seen the Pace Digitek number. You would have seen the Vikram Solar number. So there has been a margin erosion, which has happened. So that's the reason -- considering our size, we are not focusing on utility at all. So that's the reason we are targeting that utilization would not be more than 25%. So that we can concentrate on a high margin and C&I segment business.

That is for FY '27. And for FY '28?

'28, it should move to around 40% to 50%.

Okay. And that should more or less mean about INR 600-odd crores of revenue -- INR 500 crores to INR 600 crores in FY...

Around INR 500 crores of revenue should be targeted.