Rajesh Power Services Limited (544291) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Kashmita, moderator for the earnings conference call. Welcome to Rajesh Power Services Limited Q2 FY '27 Earnings Conference Call. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Gulshan Singh from Sunidhi Securities for the cautionary statement. Thank you, and over to you, sir.

Yes. Thank you ma'am. Good evening, and very warm welcome to everyone. On behalf of Sunidhi Securities, I welcome you all to Rajesh Power Service Limited H1 FY '27 Earnings Conference Call. Today, we have with us management represented by Mr. Utsav Panchal, CEO; Ms. Nikita Shah, Financial Head; and Mr. Kaxil Patel, General Manager, Finance. We thank Rajesh Power Service Limited for giving us the opportunity to host the call. I would now like to hand over the floor to management for their opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, Utsav.

Very good afternoon, everyone. Thank you for joining us today for Rajesh Power Services Limited H1 FY '27 Earnings Conference Call. Let me begin by welcoming all our investors, analysts and other participants. We've had a strong first half of FY '27 with healthy growth in revenue and profitability, supported by our execution capabilities in the distribution business, expansion into higher voltage transmission and our entry into the emerging energy storage segment. Before I take you through our performance, I would like to spend a few minutes talking about the larger opportunity unfolding in India's power sector because I believe this is important to understand where Rajesh Power is headed. India's power sector is entering a significant investment cycle. As our economy grows, electricity demand is rising across industries, infrastructure, urban centers, data centers, railways, electric mobility and several other sectors. But generating electricity is only one part of the equation, that electricity needs to be transmitted efficiently, distributed reliably, stored when required and increasingly managed intelligently. This is where the next phase of India's power infrastructure development will create opportunities for companies like Rajesh Power. Let me start with transmission. India's transmission infrastructure is going a major expansion. By 2032, the country plans to add approximately 1.4 lakh circuit kilometers of transmission lines and nearly 870 GVA of transformation capacity. This expansion is being driven not just by rising electricity consumption, but also by the changing nature of India's energy mix. Renewable energy integration, particularly solar and wind requires stronger transmission corridors. At the same time, industrialization, urbanization, data centers, green hydrogen, electric mobility are creating new demands on the grid. The government has recently approved the Green Energy Corridor Phase 3, that is the GEC 3 scheme. This historic initiative will strengthen India's intrastate transmission system to enable evacuation up to 135 gigawatts of renewable energy across states, union territories and 50 gigawatt hour of battery energy storage systems to be deployed for grid flexibility. These measures are undertaken to help manage intermittency, congestion and power curtailment while supporting demand during nonsolar hours. The scheme is targeted with total project outlay of INR 1.86 lakh crores, comprising of INR 1.36 lakh crores of development of intrastate transmission systems and INR 50,000 crores of 50 gigawatt of battery storage systems. For Rajesh Power, GEC 3 shall create significant opportunity pipeline in the intrastate transmission grid strengthening and renewable power evacuation aligning well with the company's established capabilities in T&D, substation, underground cabling and emerging energy storage solutions. Moving to the distribution segment. This has traditionally been the foundation of our business, and we continue to see significant opportunities in this segment. India's distribution infrastructure is undergoing a structural transformation. Under the broader Viksit Bharat vision, the National Electricity Policy 2047 has set target of 100% undergrounding of cables in towns having a population of more than 10 lakh. Recently, Gujarat has also announced the Gujarat Wire Free City mission. The objective is to progressively convert overhead electricity networks into underground cable networks across all 17 municipal corporations and 151 municipalities by 2030. The program undergrounding of more than 14,000 circuit kilometers of high tension lines and 31,000 circuit kilometers of low tension lines. Together, that represents approximately 46,000 circuit kilometers of distribution infrastructure. Now this is a particularly relevant opportunity for us. Over the years, we have been built considerable experience in underground cabling, medium voltage power conductor networks, ring main units, distribution transformers and turnkey distribution EPC projects. We believe the distribution network of tomorrow will increasingly be underground, more reliable, smarter and digitally managed. These are precisely the capabilities we have been building over the years. Alongside transmission and distribution, there is another important development that is changing the power sector landscape, and that is energy storage. India has already crossed 300 gigawatts of nonfossil fuel-based installed capacity and the country's BESS requirement is projected to reach approximately 47 gigawatt by 2032. India's electricity supply shortfall reached approximately 560 million units in September 2026, the highest level since August 2023. At the same time, nearly 47 of the coal-fired power plants were reported to be operating with critically low fuel stocks, while several states approach the center for additional power allocation. So what does this tell us? It tells us that the India's power challenge is no longer just about how much electricity we can generate. Increasingly, it is about whether we can make the electricity available at the right time, at the right location and within the required reliability. BESS allows the electricity to be stored when it is available and released when the demand is higher. It helps manage peak demand, balance the grid, improve renewable energy utilization and strengthen the reliability of the electricity supply. In our view, BESS will increasingly become an essential part of India's power infrastructure. It should not be looked at merely as an extension of renewable energy sector. It is an important infrastructure layer on its own. For Rajesh Power, we see this as a natural extension of our existing business rather than an unrelated diversification. Our experience in transmission, distribution and electrical infrastructure gives us a strong foundation to participate in this emerging segment. And in this context, our 65 megawatt by 130-megawatt hour stand-alone BESS project at Virpore, Gujarat is an important milestone. It represents our entry into the utility scale battery storage and gives us an opportunity to build capabilities in a segment that we believe will become increasingly important in the India's power ecosystem. There's one more dimension to this opportunity that I would like to highlight that is the smart energy management solution. As power infrastructure becomes more complex, it is no longer sufficient to simply build electrical networks. The ability to monitor, control, automate and manage these networks intelligently is becoming equally important. This is where technology comes into picture. Our strategic investment in HKRP Innovations Limited helps us to take this advantage of this change. HKRP operates at the intersection of industrial IoT, cloud computing and power sector intelligence. It provides specialized technology solutions for the energy sector with capabilities in IoT-enabled and SCADA-based platforms. for smart grids and smart renewable applications. Importantly, HKRP's platform, which also underpins the BESS system currently monitors and manages an extensive network of smart grid nodes and industrial IoT systems across India. Going forward, we intend to deepen the integration of HKRP's technology capabilities with our core EPC business. We are moving beyond electrical infrastructure execution company to building capabilities in the intelligent energy infrastructure. We believe the combination of EPC execution, grid infrastructure and technology-led energy management and create a differentiated proposition for Rajesh Power. I would like to highlight the operational performance of Rajesh Power in the first half of FY '27. These numbers reflect the strong -- the strength of our execution capabilities and the healthy momentum across our businesses. During the first half itself, we installed more than 2,700 ring main units, taking the cumulative installation to more than 17,000 units. We installed more than 300 distribution transformers, taking the cumulative installations to more than 6,500 units. We laid 905 kilometers of LTC 11 kV and 11 kV cables, taking the cumulative length to 11,400 kilometers. We laid 10,800 kilometers of medium voltage powered conductor, taking the cumulative length to almost 35,000 kilometers and approximately 25,000 kilometers currently under execution. We have commissioned 4 air insulated substations, taking cumulative commissioning to 104 substations. We laid 157 kilometers of extra high-voltage cables, taking the cumulative length to over 2,700 kilometers. We have also erected 12,000 poles during the first half itself. These operational numbers are important because they demonstrate the scale of our execution capabilities and the depth of our experience across different segments of electrical infra. On the order front, we secured fresh order inflows of INR 1,250 crores during the first half FY '27. Our unexecuted order book stood at approximately INR 3,647 crores as of 30th September 2026. And further during October, we have received additional order inflows of approximately INR 450 crores. This gives us a healthy visibility for execution and growth going forward. Beyond the growth in our existing business, we are also consciously expanding our capabilities and geographical reach. As reported earlier in June 2026, we secured a INR 1,212 crores EPC order from Odisha Power Transmission Corporation Limited. This is an important milestone for us as it marks our entry into Eastern India and demonstrates our ability to compete for projects beyond our traditional geographical markets. Our investment in HDRP innovation is strengthening our capabilities in smart grid monitoring, automation and digital energy management solutions. We have also established a wholly-owned subsidiary in New Zealand. This represents a measured first step towards exploring international opportunities while remaining focused on our domestic growth priorities. Looking ahead, I believe the long-term opportunity for Rajesh Power is very encouraging. India's power sector is entering a multiyear investment cycle with significant requirements across power transmission expansion, distribution modernization, renewable energy integration and energy storage. [indiscernible] has taken a part of India's electrical infrastructure journey since 1971. Over these decades, we have built our capabilities, strengthened our execution track record and established a presence across several important segments of the power infrastructure value chain. Today, we are taking that foundation forward from transmission to -- from distribution to transmission, from transmission to energy storage and from conventional electrical infrastructure to intelligent energy management solutions. Our priorities remain clear. We will continue to strengthen our position in distribution, scale up our transmission capabilities, build our presence in energy storage and technology and selectively explore new geographical markets. At the same time, we remain conscious of the importance of execution discipline, financial prudence and working capital management as we scale the business. We are equally committed to maintaining high standards of corporate governance, transparency, business ethics, health and safety and environmental responsibility. Ultimately, our objective is to build a stronger, more diversified and technology-enabled power infrastructure company that creates sustainable long-term value for our shareholders while contributing to India's infrastructure development. Let me leave you with one thought. The next phase of India's power transmission power infrastructure expansion will not be defined by generation capacity alone. It will increasingly be defined by how effectively we can transmit power, distribute it, store it and manage it. We believe battery storage will play a significant role in this transition, and Rajesh Power is positioning itself to participate in this opportunity. With that, I would like to thank all our investors and stakeholders for their continued trust and confidence in the company. I would now like to hand over the call to our Finance Head, Ms. Nikita Shah, who will take you through the detailed financial performance of the company. Thank you. Just a correction in the call, the Odisha order was INR 212 crores. I mistakenly said some other number, just a correction.

Thank you,. Good evening, everyone, and a warm welcome to Rajesh Power Services Limited H1 Financial Year '26-'27 Results Earnings Conference Call. Thank you for joining us today. It is my pleasure to walk you through key financial highlights for H1 financial year '26, '27 as compared to H1 financial year '25, '26. During the first half of financial year '27, the company delivered a strong performance across all key metrics. Revenue grew by 46% year-over-year to INR 929 crores driven by disciplined project execution and strength of well-diversified order book. EBITDA for H1 financial year '27 increased by 33% year-year to INR 112 crores with a healthy EBITDA margin of 12%, reflecting improved operating efficiency and effective cost management. Profit after tax grew by 35% year-on-year to INR 79 crores, resulting into a PAT margin of 8.5% supported by high operating leverage and stable financial cost. Another significant milestone for the company is the achievement of positive cash flow from operating activities. This reflects a meaningful improvement in our financial position, driven by stronger operational performance, improved collections and disciplined working capital management. This achievement further strengthens our liquidity position, enhances financial flexibility and reinforces our commitment in maintaining financial discipline while pursuing our growth objectives. Going forward, our focus will remain on sustaining positive operating cash flow alongside our planned business expansion. One more to net worth of the company has grown more than 8x from INR 59 crores in financial year '23 to INR 484 crores in H1 financial year '27. Overall, the results highlight Rajesh Power Services Limited to strong operation execution, balance sheet strength and continued focus on sustainable well-diversified growth. With that, I conclude the financial highlights. I now request the moderator to open the floor for question-answer session. Thank you.

[Operator Instructions] The first question comes from the line of Mr. Vishwinder Singh from Surat Equities.

Sir, I wanted to -- first of all, congratulations on a good set of numbers. Can you highlight on the share of profit from JV? It is very significantly lower as compared to previous half. So is that business H2 heavy? Or what sort of guidance should we take for that?

I think the -- the business HKRP was H2 heavy. By the year-end, I think the targeted profit margins will be achieved by the company.

Okay. So out of the total order book, what is the contribution from that company, HKRP, sir?

In the order book -- in our order book, there is no HKRP's order book.

Okay. So it is 100% for the currency company.

Correct.

Got it. And the current position is the current position and what is the current order pipeline?

So I think the current bid pipeline is almost INR 3,500 crores to INR 4,000 crores. And I think L1 status would be around maybe INR 100 crores also.

Okay. And by when are you targeting to get them to come under that bracket?

I think it will come as the utilities release the final order for the allotment of -- allotment of [indiscernible].

Got it. And on the BESS segment, I believe you IPO funds towards BESS segment for that CapEx. So what should we look at as a percentage of revenue and margin for that segment? And what can be the blended margin for the company as a whole for full year FY '27?

So I think the BESS project is more like a return IR driven project. From the size of which Rajesh Power operates, the difference will be very marginal in terms of revenue contribution as well as the margin contribution.

Okay. So can we expect similar 11% to 12% margin for going ahead for full year?

What?

Margin for full year, sir.

11% to 12% EBITDA margin, yes, for the company, for Rajesh Power.

Got it. And recently, we have established a new company, Rajesh Power Services NZ Limited. So what is that pertains to?

So basically, we are seeing NZ as an emerging market for carrying out EPC -- electrical infra EPC jobs. We have had a team visit the country as well as we have done some feasibility study. We were in some advanced stages of discussion for 2 or 3 particular opportunities, which required us to open a 100% wholly owned subsidiary in New Zealand. So we are going in a slow and steady manner to work in that segment.

Okay. So are we going with a joint venture partner or...

No, it is 100% wholly-owned subsidiary.

Okay. So what sort of investment are we looking at for that subsidiary to bid for orders in that country?

So currently, we are evaluating opportunities in New Zealand. So there is no specific number to answer.

Okay. Got it. And on the bookkeeping side, I have a question on the other financial assets. It jumped from almost INR 86 lakhs to INR 56 crores. So what that pertains to?

So what we have done -- correct. So the current retention part of it.

Okay. So majority of that is the retention that is hold by that?

Yes, the current retention, which will be during the execution of the current year itself.

Okay. Got it. sir, last question on the inventory side. So I believe our inventory on our book is somewhere like flat for this half versus full year last year. But if we compare that with the previous half, like H1 FY '26, there was a jump in the inventory side. So is that a correct way to assume that we are seeing some slowdown and some project slippages in second half? Or how should we look at that?

Not at all. Our inventory level is around INR 100 crores to INR 125 crores only. Nothing like that.

Got it. And just last confirmation, are you on track to beat our guidance of 40%? Or should we have a revision for that since we have a large number of orders coming in?

We are maintaining our guidance to whatever we have stated earlier.

Okay, sir. So 35% to 40% and 11% to 12% EBITDA margin, sir?

Yes. Perfect.

The next question comes from the line of Mr. Atul Kumar, an individual investor.

So thank you for the good set of numbers giving us a rundown on the that we are looking at in power distribution and transmission. So one question I had on the previous [indiscernible] status is INR 1,800 crores. Is that correct or some other number?

No, no, not INR 1,800 crores. I said about INR 100 crores like margin...

Okay. INR 100 crores.

INR 100 crores.

Yes, sir. I got it. So you said INR 100 crores, right? Our order book is around -- order book pipeline is around INR 4,000 crores, but L1 is around INR 100 crores.

Yes, yes, that's correct.

Okay. Okay. Sir, one question I have on basically -- so there are 2 metrics in balance sheet that has increased. One is that current financial assets. And the other thing also which has increased is other current assets. That has also increased to INR 71 crores from INR 40 crores. So roughly, it will be like INR 57 crores, INR 58 crores has in current financial assets and then other current assets. Can you explain sir, what are these both?

So as you are going back to our collection cycle, I will just take a few moments to more detail. So whenever our utility or our clients, 80% of the money is received within 45 days. The next 10% is received when we install those items on site and the last 10% is the money which we receive at the completion of -- commissioning of the entire project. So the current retention is the 10%, which you -- which we will receive those items will be installed on site. And the noncurrent retention will be the retention which will be received at the end of the project when we commission the entire project.

So basically both are retention money, current financial assets and other current assets, they are 2 assets, both are tentention money?

No, no. The other financial assets is the retention money.

So there is increased from [ INR 86 lakh ] to INR 58 crores and other current assets that has increased from [ INR 39 crores ] boost to [ INR 81 crores ]?

Yes. The other current assets, what you see increased is the unbilled revenue as per Ind AS of INR 38 crores roughly.

Okay. So are we expecting like these are we expecting any further issues in working capital management of stress? I think we had issues with the working capital cycle in future, are we going to expect that to cool down and become more smooth...

No, I think the working cycle is actually becoming more prudent. And I think we are higher control on collections. I think that is what we are working to improve on and we have and secondly is getting extended terms from our suppliers. So that's also where we have seen a good amount of wins in doing that. So we see the technically more or less rather than deteriorates.

Okay. So in H1 we are expecting -- we are expecting a better working capital management in...

Yes that will be similar working capital management.

Okay. Sir, HKRP I had a question. I heard in the previous term that right now, it's not a considerable level in terms of the overall revenue and profit. But if we to understand let's say, next 2, 3 years, how are envisioning the acqusition and what are the standalone numbers for example, FY '27, standalone numbers will be what for HKRP?

I'll take that question. Basically, HKRP is a very promising business in terms of making the utility, the infrastructure, whatever we are carrying out at Rajesh Power, they will have to be made in the coming years. Additionally, the government has announced that they will make the entire grid towards a unified platform and more smart technologies, SCADA technologies will be introduced to the distribution level as well. So that is exactly what we are doing at HKRP. We have -- we are under execution of 3 projects in all the 3 DISCOMs of Gujarat, namely UGVCL, GVCL and PGVCL, where we are doing the entire SCADA and distribution management system, DMS projects along with setting up the greenfield command and control centers for these utilities. So this project is one of the most advanced projects of the RDSS probably executed at such a large scale. And as time goes, more and more states have started adopting this kind of a model where they are floating the requirement of SCADA DMS tenders. And we are actively pursuing those opportunities and we feel that the future of HKRP is very promising because of this kind of investment. But FY '27 we -- the target in FY '27 for HKRP is around INR 150 crores of revenue and 20% PAT margin is what on stand-alone basis HKRP we are expecting.

Okay. One more question I had on the transmission lines that government is focusing on, interstate transmission, right? So I think currently, we are present in 440, 440 kilo volt, are we also there in 765 kilo volt?

So right now, what we are executing is 400 kV level substations. No, we are not executing 765 kV voltage levels, but we will very soon be qualified to bid for voltage levels after we commissioning 440 kV project in a couple of months. So yes, we will be entering that segment going forward.

Okay. And are we expecting to enter 765 kV this year? And also is it a opportunity to separately like build in opportunity once we enter into 765 KV space?

So to answer the first question, we will not be able to enter very immediately this year, but we are targeting to enter very soon. Secondly, 765 kV voltage level, yes, there are very few players that execute this kind of a capability, even 400 kV level what we are doing are very few players in the country who can be able to execute such complex large-scale projects. And we being one of them. So yes, the market -- the number of players having the capability will definitely reduce and the opportunity size is also increasing. So yes, we are expecting higher revenues from that segment.

And will the margin also be more in...

Please join back the queue for more questions. [Operator Instructions] The next question comes from the line of Mythri Shah from [indiscernible] Capital.

Yes, you mentioned again going back to the HKRP segment, you mentioned that target for FY '27. I just wanted to know the projects that we are executing what kind of opportunities of size is the order value for these projects if that's possible?

Yes. So currently, the projects that we are executing are in the range of between INR 100 crores to INR 150 crores. The projects are 2 categories. One is the SCADA DMS projects and another is the SFMS projects. SFMS is smart feeder monitoring system projects. So these are being carried out by the state distribution utilities as well as transmission utilities. And the opportunity size of these are very huge. Just to give you an idea, if one particular state targets to float this opportunity in one very small zone or one segment of the state, the approximate value we are seeing is again between INR 100 crores to INR 150 crores worth of opportunity in this segment. So considering all the states one by one slowly and steadily going choosing this. So we are seeing total opportunity size of more than INR 3,000 crores for this particular opportunities.

And this is only from Gujarat that you are seeing the INR 3,000 crores...

No, this is pan-India. This is pan-India.

Pan-India, okay. And what is currently tendering for this except for Gujarat?

Maharashtra, Assam, Kerala and UP and Bihar, these states are in the process of floating tenders and finalizing tenders and even Utrakhand.

And once we have the execution capability on these 3 projects in Gujarat, do you expect to expand in these 3 states as well the tender?

Yes, absolutely. No, we are already in the process of approaching them and finalizing contracts with them meeting the tender, right?

Got it. And secondly, I think in the presentation, we've also mentioned some data center opportunity on the EPC and also on the tech side as being in the pilot phase. If you could give some clarity what sort of EPC on the data center side are we doing? Is this with the electrical solutions that we are getting with EPC providers or is it to connect the DMV to data developers or what opportunities are we getting on this side?

Yes. So again, there are 2 categories, 2 types of projects in this. One is the power transmission infrastructure that we can help set up the data center companies. We can connect the data center to the grid. One we are working on something on that front. And second is the internal data center. There is a huge opportunity for data center infrastructure solutions also. So this is a very preliminary stage, but we are working with leading data center company to get our expertise on those sides.

Okay. The projects we are currently building on this side, these are just on [indiscernible] basis or do you expect some tenders to [indiscernible] the kind of base for them?

No, the data center tenders will not be tender basis. They will be more towards other players.

And on the international business side, we opened up in New Zealand and you did mention that in the evaluation phase. Are we targeting the same distribution transmission that we've done in the domestic business and also the opportunity size on the New Zealand side, if you could kind of quantify that?

I can tell you. So basically, yes, we are contributing towards not just electrical transmission and distribution side, but a very huge opportunity on the generation side as well, more towards EPC, nothing developer based. But yes, New Zealand is experiencing a huge uptick in solar generation that they will have to cope with the requirements. Right now, it is heavily driven by hydro -- hydro generation profile. And they are -- they want to grow their solar portfolio to more than around 4 to 5 gigawatts in the next few years. So I think that is where we are seeing a very huge opportunity for us.

And these businesses will require a sourcing and procuring things. So will that happen from the -- from our country or you will need to partner up with international side as well?

It will be a hybrid model.

Hybrid model. Okay. And no JVs we are doing are going to be entering this completely on our own subsidiary?

Yes. Yes.

Got it. Yes and the BESS pipeline if we could have any -- what sort of tenders are we bidding or are we just going for more EPC in the BESS?

So we are not bidding for the BOT model. We are bidding for the EPC model of BESS. And there are many opportunity NTPC and some [indiscernible] of Gujarat pipeline. And we shall be disclosing whenever we are able to.

[Operator Instructions] The next question comes from the line of Mr. Nikhil Kanodia from Sunidhi Securities.

So firstly, congratulations on a great set of numbers like posting good decent growth on year-over-year basis. Sir, my question related to the order book. So in that sense, we have seen some good order wins in H1. So if you can highlight some key order wins, number one? What would be the margin profile for them? And what are we looking at the execution time lines for those projects? And what is the current bid pipeline?

So I think more or less everything has been announced, but still majorly cover what has been announced. The major project wins are from PGVCL, [indiscernible] Gujarat Company Limited, which is, I think, more than INR 800 crores to INR 900 crores. This is very rough. The increment timelines in these are 18 to 24 months. Second order we got was from Rajasthan [indiscernible] Nigam Limited [indiscernible] for setting up 12 kV gas insulated substation in Jodpur 12 kV connectivity to that substation. And the third order we received was from Odisha, that is from Odisha Power Transmission Corporation Limited, valued around INR 212 crores for transmitting power to underground cable from one substation to another. And just to highlight, we are seeing a very promising opportunity -- experiencing a promising opportunity in Odisha, where just recently in, we had heard the announcement that the government has investing more than INR 16,000 crores to bring up 765 kV, 400 and 220 kV substations projects, underground cable projects and transmission lines. And I think we'll be -- we aim to be one of the key beneficiaries of these CapEx from Odisha government.

Okay. So sir, what would be your bid pipeline currently?

Around INR 3,000 crores to INR 4,000 crores is the bid pipeline.

Okay. And sir, coming to the margin front, so what we have seen is there was some gross margin kind of year-on-year sharply and which was partly offset by some savings in employee benefits and adjustment. So I believe that some cost measure saving measures are going on. So just wanted to understand what could be the sustainable level, for example, if you were to see the H2 and the following from there on, where can we see the normalized EBITDA margin and the gross margin front? Because I understand there is a lot of volatility in the import prices. So where can we see this normalizing?