Sanghvi Movers Limited (530073) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon, and a warm welcome, everyone, to Q1 FY '27 Earnings Call of Sanghvi Movers Limited. Please note the investor presentation and the financial results are available on the company website and the stock exchanges. Also, anything said on this call, which reflects our outlook for the future or which could be constructed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. The conference call is being recorded. and the transcript, along with the audio of the same will be made available on the website of the company as well on the exchanges. Please also note that the audio of the conference call is the copyright material of Sanghvi Movers Limited and cannot be copied, rebroadcasted or attributed in the press or media without specific and written consent of the company. From the management side, we have with us Mr. Rishi Sanghvi, Managing Director; Mr. Gaurang Desai, Chief Executive Officer; and Mr. Pradeep Mehta, Chief Financial Officer. Now I request Mr. Pradeep Mehta, the Chief Financial Officer of Sanghvi Movers Limited, to provide you with the updates for the quarter ended on 30th June 2026. Thank you, and over to you, sir.

Thank you, Huda, and good afternoon. Thank you all for joining us. I will take you through quarter in four parts. One, the headline number. Two, the sequential comparisons. Three, the core crane rental margin, which I expect is on everyone's mind, and which I'll explain in this discussion. And then the last is balance sheet and Capex. On headline numbers, on consolidated basis, revenue from operations for Q1 FY '27 was INR 380 crore against INR 273 crore in Q1 FY '26. That is growth of 39%. And total income was INR 393 crore against INR281 crore, growth of 40%. EBITDA was INR 139 crore against INR 107 crore, growth of 30% at a margin of 35%. Profit after tax was INR 65 crore against INR 50 crore, also 30% growth. The cash profit was INR104 crore against INR 82 crore. I want to address the sequential picture directly because year-on-year numbers tell only half the story. Against Q4 FY '26, the revenue rose from INR350 crore to INR380 crore, that is INR 29 crore up. But EBITDA was INR139 crore against INR 143 crore, and margin was 35% against 40%, and profit after tax was INR 65 crore against INR69 crore. So overall, we grew the top line and gave back margin, and that is a real outcome. And I will now explain exactly what caused it. The core crane rental EBITDA margin moved from 53% in FY '26 to 47% in Q1 FY '27. That is a 6% point drop. So there are four components for the same. Two points related to a higher expected credit loss provisions driven by aging of receivables, that is around INR 6.2 crore. We expect it to rationalize over the course of this year as collection improves. One point is regarding mark-to-market reinstatement of foreign currency loan, and that is INR1.4 crore, and it is a non-cash accounting entry. One point is one-time incentive paid to frontline employees and to senior management teams. The Company has rewarded for first time surpassing INR1,000 crore top line and extraordinary performance by the employee in FY '26. The remaining two points are change in revenue mix. During the quarter, we served incremental demand through higher ancillary equipment and through gross rental of cranes. This is rather than doing fresh capital expenditures. I want to be precise about the last item, what I explained, because it is one that is in structure. These are deliberate capital allocation choice, not a margin leakage. The higher equipment and gross rental carry lower percentage margin, but they consume no capital. Therefore, this is accretive to ROCE and cash generation because while these are being optically dilutive to reported margin, however, it is without investment. So we prefer to earn lower margin instead of investing more capital on this front. So putting together, excluding this Forex and incentive item, the underlying core margin for the quarter was approximately 49%. And if the credit provision rationalized as we are expecting in during the course of the year, the return towards 51%. Taking all together, we regard this core margin are structurally intact, and our guidance for '27 is still between INR 525 crore to INR 575 crore, which is unchanged. Since I have raised the crane position, let me also give you the working capital position. Group days sales outstanding stood at 116 days, which includes crane rental 124 days, renewal E&C 98 days, and GCC business 201 days. This year collection is very focused and in GCC, collection has improved in the month of July after the end of quarter June 26th. On business mix, the crane rental contribute approximately 60% of revenue from operation and 37% renewal E&C and balance 3% from project EPC. Renewable business, w e run ahead of our full year mix in Q1 on execution phasing [Phonetic], and for the full year we continue to expect roughly two-third revenue from crane rental and one-third from renewal E&C business. As the revenue will scale up in the second half for the year, following to the capex which are going to happen in the remaining part of the year. On the operational side, our crane fleet stood at INR 492 crore and gross block is approximately INR 3,300 crore. The India and Botswana business reported utilization of around 86% at a yield of 2.29%, and the GCC business utilization was 86% at a yield of 4.10%. And that yield differential, that is between 4.10% and 2.29%, is the core of Middle East investment. GCC total income was INR 19 crore at an EBITDA margin of 23%, and this Saudi operation has now delivered cumulative EBITDA positive performance. On balance sheet, gross debt to equity stood at 0.54 times, against our guided FY ceiling, 0.72 times. And group ROCE was around 16% as of March 26th. On capex FY '27, out of INR 652 crore as approved by the board of directors. INR 92 crore already capitalized in Q1 and balance deployment is in second half. We are consistently tracking OEM delivery and project commissioning dates, and this INR 560 crore will be deployed in the remaining part of the year. We are expecting approximately 15% increase in revenue within FY '27 because of this investment. And subsequently, all the pools are revenue generating. With that, I will hand over to Mr. Gaurang Desai, our Chief Executive Officer.

Thank you, Pradeep, and a very good afternoon to everybody. It's always a pleasure connecting with all of you. So quarter 1 of this financial year has been a good start of the year. Total income of INR 393 crores, growth of 40% and an order book of almost INR 1,250 crores. So Pradeep has been candid about where margin moved and why. So let me begin by sharing our perspective on the business environment and the opportunities ahead. India continues to be the fastest-growing major economy, closing the last financial year with 7.7% of GDP growth, while Q1 FY '27 is tracking at around 6.6% -- most importantly, the quality of the growth remains investment led. Government capital expenditure is a record INR 12.2 lakh crores. Manufacturing and construction continue to expand. Financing costs have eased 100 basis points reduction in the repo rate and inflation remains well under control. So this environment is particularly encouraging for Sanghvi Movers because this investment directly translate into demand across the sectors we serve, including refining, steel, cement, power, renewable infrastructure and heavy engineering. Against this favorable backdrop, we entered FY '27 with a position of strength. We have a secured order book, as I mentioned, of almost INR 1,250 crores, which is fully executable within this financial year, providing strong revenue visibility. In addition, we have a healthy project pipeline or inquiry pipeline of almost INR 5,600 crores across multiple sectors, giving us the confidence in sustained business momentum. Combined with our diversified sector presence, provides greater earnings visibility while reducing dependence on any single industry. So let me talk about the industrial sector. On the demand side, India is adding capacity across every sector we serve. Wind added a record of 6 gigawatts last year with almost 29 gigawatts under construction. Thermal has given 62 gigawatts under bid in award. Steel is targeting 300 million tonnes by 2030 and cement is adding over 160 million tones. Nuclear, I'm sure all of you will be aware, has open to privatization under the Shanti Act. Each one of which requires a heavy lift. The industrial sector continues to offer significant opportunities for Sanghvi Movers. We are witnessing a broad-based investment cycle across all the sectors. And over the next few years, this industry is expected to add significant capacity, creating long-term opportunities for heavy lift and specialized crane service. The energy sector remains another important growth story for the company. India's rising power demand and ongoing energy transition are driving investment across wind thermal and nuclear power. Sanghvi future renewables continues to strengthen our position across the wind value chain. It's an asset-light, high return on capital and a complement to the core business. It generates incremental EBITDA without consuming capital, and it secures demand for the crane fleet through integrated execution. We also closed off quarter with an order book of almost INR 680 crores. Our Middle East business, as Pradeep mentioned, achieved cumulative EBITDA positive performance during the quarter. This is an important milestone in the first year of operation itself. We have secured new orders in Qatar, and we have completed Botswana commissioning on schedule repatriating almost $1.1 billion to India. So in terms of, let's say, pipeline for the Middle East, our 0-24 pipeline is almost around $38 million. Let me talk about strengthening the organization. So Elevate 2030 is progressing in line with our commitments. We have moved from a single country crane rental business to a group operating across India, Saudi Arabia, Botswana and Qatar with a professional leadership team, a broader product portfolio and high return business models. Beyond this, market opportunities, we are equally focusing on strengthening our organization for the future. So enhancing customer centricity through digital initiatives that improves our responsiveness transparency and pursuing international expansion by exploring attractive growth opportunities in new markets, enabling us to diversify our revenue base and strengthen our global presence. Advancing our digital transformation, we are scheduled to go live for our new HRMS and CRM software. In terms of outlook, our guideline stands as published. So consolidated for FY '27, consolidated revenue of roughly INR1,400 to INR1,500 crores, EBITDA INR525 to INR575, and a blended return on capital of 16.25 to 16.5. To summarize, the core is healthy, renewables are scaling, International is gaining traction, and the order book gives us visibility for the year. We remain focused on disciplined capital allocation, on safety, and on sustainable value creation for our stakeholders. Thank you so much, and we can now open the floor for questions.

Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Vivek Rakholiya from Ficom Family Office. Please proceed.

Thanks, thanks a lot for the opportunity. My first question is that FY '27 Capex is roughly INR190 crores in India versus INR200 crores in KSA. If you had one incremental crane and you could place it on either side, where does it go today? And what is the deciding factor for it? Is it yield, utilization, tenure, payback, or anything else? That's my first question.

Good afternoon. My name is Rishi Sanghvi , and thanks for that question. So, as we open international markets throughout the world, our role becomes, transforms from being a crane rental company to a capital allocator. There are several factors that determine whether we will invest a dollar of Capex in a particular market. Primarily, what is the inquiry pipeline? What is the order visibility? What do we need to do? What is the order duration? What is the look-ahead visibility for a crane? What do we need to do in order to secure our market share in that particular market? What is the internal hurdle rate for making an investment in a particular crane? So there are several factors that get considered prior to deployment of capital. What we are focused on is being a judicious capital allocator, ensuring that the group ROCE is maintained and that all investments meet our internal IRR criteria before we deploy capital.

Thank you for that answer, sir. Continuing on the same lines, is this shift towards KSA a positive view on Saudi, or is it partly a view that India's crane rental yields are structurally capped by competition? How do you see competition in India shaping up, say, over the next one to two years? And overall demand and supply scenario for the crane rental equipment industry?

You've asked four questions in one, so maybe I'll try and answer one out of those four questions. So Saudi is not a response to India, and India is not a response to Saudi Arabia. What is happening in Saudi Arabia and our investment thesis to go to Saudi Arabia has always been that there is a tremendous amount of opportunity and demand for cranes in Saudi Arabia. And as we are already witnessing at use and utilization levels, often utilization levels at par with India, but yields that are much higher than India. Now in Saudi Arabia, because of the Vision 2030, the FIFA World Cup, the Expo - World Expo Games, and the Commonwealth Games, World Expo Games, not Commonwealth, the games, the World Expo and a number of other projects. The entire economy is modernizing and there is a tremendous amount of activity that is taking place in the Saudi Arabia market. This is not to mention what Saudi Aramco will do across the next five years, which is spend almost $0.5 trillion. So Saudi Arabia today is the construction backyard of the world and we see tremendous amount of activity happening across all sectors. Our investment thesis to go to Saudi Arabia was correct because, as Pradeep has announced, we are already cumulatively EBITDA positive in the country and we continue to deploy capital in the region. If you look at it from an India perspective, yields in India have improved. Over the last quarter, we have been able to shift yields. So yields are not being capped by competition, and there is a tremendous demand for cranes that still remains in the country. So we are positive on both markets. For us, we are building two markets where we are pivoting into becoming capital deployers, allocators, and where we will chase the right return for the company with the right fleet all keeping in mind that we have to deliver ROCE for - for the company and for our stakeholders.

Thanks a lot for that elaborate answer. Sir just one last short question, would be that, are you seeing any changes in terms of client behavior on contract tenure or say rate resets in India? Like for example, is a Tier 1 client pushing for a shorter tenure or rate negotiation as and when more fleet becomes available?

Hi, Vivek. This is Gaurang. So we don't see any material shift in the customer's perspective as of now.

Thank you. The next question is from the line of Abhinav from Equitas Investments. Please proceed.

Hi, thank you for the opportunity. My first question was regarding the revenue mix. Since you mentioned you'll be having one-third of your revenue from renewables, so do you expect margin decrease on the total basis? What is the EBITDA margin going forward?

So Abhinav, thanks for the question. This is Rishi again. So what you need to understand is that Sangreen is an asset-light, high ROCE business with a lower EBITDA margin. We are able to grow the renewables business beyond the balance sheet because it doesn't require us to deploy capital in Sangreen Future Renewable Limited. It is working capital asset-light. So the entirety of our capex still remains dedicated to our crane rental business, of which we are doing INR652 crores this year. And this is still being deployed at a minimum 80% utilization, 2% yield. The crane business is a Capex heavy -- the crane business is a capex-heavy, high EBITDA business. So these two businesses that we are talking about, where two-thirds revenue is coming from the crane vertical across geographies and one-third third revenue is coming from renewables, they're truly complementary. Now, in terms of guidance, we have given you a detailed guidance in the presentation which is available on page number 25. This is the KPIs for Q1 quarter, and the guidance is further available on page number 90. So For FY '27, we are projecting EBITDA in the range of INR525 to INR575. Yes, the blended EBITDA margin will be lower, but in absolute terms it is gone up significantly as the EBITDA in FY '26 was INR429. So we are forecasting a 20% to 30% growth on this EBITDA f or FY '27.

Hi Rishi, this is Riya here. So the question is in terms of debt portion. So in your guidance, as per the PPT, it is mentioned that the debt-to-equity would be around 0.72. So if you just take a conservative approach and then take your next year's equity, so debt will be more than INR 1,000 crores to INR 1,100 crores between. Is that understanding right? Hello?

So 0. 72 is on consol basis, right?

Right.

So what is your question? Say again.

So basically, considering we will do somewhere around INR250 crores-INR300 crore PAT levels, and if I take---

Sorry, Riya, you are not audible. You need to come again into the - we can't hear you.

Hello? Am I - is this better?

Yeah, tell me.

Yeah. So basis the guidance given, my debt-to-equity is 0.72 for the next year. After my calculation, it gives me that we would reach a debt of around INR 1,000 crores to INR 1,100 crores. Is my understanding right? And is this a comfortable debt position we would be going ahead with going forward?

So this ratio, what we projected, 0.72, is comfortable. We are conservatively going ahead with that. And the Capex are accordingly planned, which will add on this EBITDA margin, as well as we are completely under control of debt level for the financial year FY '27.

Riya, the 0.72 debt-to-equity forecast is-- is at a gross level, not at a-- It is not at a net level. We are still - we are sitting on a treasury today of more than INR300 crore surplus. So if you look at it that effective net debt-to-equity in the range of 0.3 to 0.

Got it. And regarding the ECL provision which you have taken, this is for India client or KSA? And is this a one-time thing? If you could elaborate more on the ECL provisioning?

It's mostly - all, mostly in India, nothing to KSA or any other country.

Okay, and, so going forward, are you going to have a higher provisioning?

So the ECL provision is expected to normalize in the course of the financial year as we recover debtors which has basically aged. If you look at it from Q4 to Q1, there was a positive swing where almost INR 3 crores - INR 4 crores of ECL provision was added back to the Q4 of FY '26. So this is nothing but a statistical model where the ECL provision has to be accounted for. And over the course of the financial year, we expect the ECL provision to normalize as we recover dues from the aged basket.

And how much would be an aged basket? More than 90 days?

As we have given you the numbers in DSO days, so you can look at it at a crane rental level, GCC level, and E&C business. It's already available in the presentation on page number 25. It's the last row.

Sure, sure, sure. And, for KSA, when we say we are at 4.1, there we are purely doing crane rental business, or we are doing EPC, the entire mix? And do we expect these margins to sustain?

So yield is not a margin. Yield is a return on the asset and yes, in KSA we are - we expect the rental margin to remain substantially higher. Going forward, we expect to maintain a 4% yield notwithstanding the current situation that is there in West Asia. What is - what's noting is that the EBITDA margin in KSA is lower than in India. It is around 47%, and the reason is because the cost of operations is higher in Saudi Arabia. However, in previous quarter calls, we have stated that as we gain experience in the region, we will be able to pull up the EBITDA profile of the business, and we will leverage our 37 years of operational history and legacy in India in KSA.

Got it. And in terms of EPC - wind EPC in India, are we seeing any competition incrementally in the EPC space, and that will lead to normalization of margins to around 10%-11% like other EPCs?

First of all, we are not in the EPC segment. We are - we are in the Engineering and Construction segment. We don't do any procurement as the turbine is pre-issued from the OEM for the IPP. There is competition, but none of the competition is organized. We are the only organized, well-structured, well-governed company, and this really matters with the clientele that we work with, because we work with large PE funds who have platforms like such as which I cannot name in this call. And for them, working with a well-governed, well-structured, financially solvent company with a proven track record of execution is extremely important. Our business has delivered almost 18 to 20 gigawatts of erection of wind turbines, and we have been in this space since the inception of the wind industry in India. And Sangreen has been able to leverage this legacy and the financial strength, the governance, etc., of the company to get preferential rates from its customers. And therefore, we believe that going forward, we will be able to normalize these margins between 12% to 15% in the E&C business.

Got it, got it. Okay, I'll join back in the queue for further questions. Thanks, Rishi. Thanks, Gaurang.

Thank you. [Operator Instructions] The next question is from the line of Sunil Jain from Nirmal Bang Securities. Please proceed.

Yeah, thanks for this opportunity and congratulations on result and also excellent presentation which company had said. So my question relates to GCC. We are seeing that a lot of disturbance are there. So how you see the Capex moving in such a scenario, whether we are able to procure cranes in Middle East or it's getting delayed, and what's the timeline you expect for your capex in the GCC?

Yeah, Hi Sunil, and thanks for your compliments on the presentation and results. We really appreciate it as a management. So, given the situation in West Asia, as the company has been spending a lot of - the management, including myself, has been spending a lot of time in the country. And what we see is that there are no structural changes to the hypothesis with which we have come to the Middle East. We are still extremely confident and bullish in terms of what, what the country and the region is doing. And we see what we would call as a temporary disruption in supply chains, which will get normalized in the - in within this financial year. Whether it's a matter of few months or quarters is to be seen. With respect to our Capex allotment, we will be doing approximately INR 300 plus crores or rather INR 324 crores, of which INR 316 crores is in revenue-generating capex in the region. Right now, the entirety of this Capex orders have been placed on the equipment manufacturers, and it is their responsibility to bring the equipment to Saudi Arabia. As far as we are concerned, we don't see any delay in bringing this Capex to the - to Saudi Arabia either via Jeddah or via Dammam. And we believe that the entirety of this Capex should come online in terms of revenue generation between the third and fourth quarter of this financial year.

This is something great to hear from you, Sir. Second thing about the your E&C business. It's one and a half year since we have come into this business. And really seen great performance in that. In fact, you are a bit optimistic on the margin also, which you are underguiding, and we are getting comparatively better margin. So how -- I just like to understand your feeling about this business and how you see this business, because the pipeline also seems very strong in this. So if you can comment on this, how we can see future in this in next two to three years?

Yeah, Sunil. So if you look at slide number 25 in our presentation, we have disclosed the inquiry pipeline of nearly INR 4,656 crores. Now we have secured an order book of roughly INR 0686crores till date. We are confident that we will secure additional orders in the course of - of this financial year. As most of the orders for this year get closed in the second quarter, considering that the E&C activity in the renewables, the engineering and construction activity picks up in the second half of the year post-monsoons. So we see this order book growing. Currently we are at INR 686 crores. So our order book is more than our revenue that we had earned in the previous financial year. So in a way, we are bullish on this segment - revenue segment. And really, our ability to execute and translate the inquiry pipeline to order book and order book to revenue is what is the decisive winning factor in this business. While we have guided, while you may say that we are underguiding and overdelivering, what happens is in engineering and construction business segment, as you scale, there is some depreciation of margin because your execution across projects may slow down due to both internal and external factors. There are a lot of significant delays from the client side in terms of site readiness, OEM supply, local ROW issues. Sometimes there are internal delays or challenges in terms of project execution, which may result in a delay in revenue recognition and a translation of the order book to revenue. And this may sometimes reduce or suppress the margin. Therefore, there is lumpiness in the revenue recognition dictated by the percentage of completion methodology of accounting. Going forward, you know, we started this business, it was approximately INR 250 crores in the first year. We have doubled that revenue. If you club SFRPL and SLPL, which is Sanghvi Logistics and Sanghvi Future Renewables, we have doubled last year. This year, it is our expectation to once again double. So every year for three years we are doubling, and going forward we would like to maintain this pace of growth, again with a caution that our execution abilities will dictate how much exposure and order intake we will take.

Thank you. The next question is from the line of Trushank Jani from Moneybee Investments. Please proceed.

Yeah, hi. Thanks for the opportunity. My question is regarding the DSO days. So the Middle East business is reporting a DSO of 201 days compared to 124 days for the India crane rental business. So could you explain the key difference reason for this significant difference, and what is your target timeline to reduce the DSO days going forward?

Yeah, Mr. Trushank, thanks for the question. I'm sure that you're aware that there is a conflict between USA and Israel with Iran, and that has caused a certain amount of disruption in West Asia. So this DSO that you are seeing is reflective of the situation that is there on ground. Now, this is a DSO position that was closed as of June. However, in the month of July, we have recovered a significant portion of the outstanding, and there will be an improvement in the DSO days which will be published in our Q2 results and will be visible in them. So significant amount of collection has happened in July. Also, for this region, while the yields are definitely better than India, the EBITDA margin is around 47%. One of the things which is a known factor when we entered this market was a longer days sales outstanding process. So it is a known risk, and we are doing a lot of things internally to monitor and ensure that this DSO is within control. It is - I am happy to report that although we have such a large or what we may perceive as a higher DSO as compared to India, we have a zero working capital draw in the Kingdom of Saudi Arabia. So we are not pumping money into business operations to keep the operations running and this is a testament to the kind of business that we are seeing there and our investment thesis to enter into the market.

Okay, I got it. And my second question is regarding the Sangreen. So given your 2 gigawatt of order book and 5 gigawatt of inquiry pipeline, what market share do you expect Sangreen to capture in annual wind energy and construction section over the next two to three years?

So first of all, we are not quoting 5 gigawatt and 2 gigawatt. We are saying our inquiry pipeline as of today stands at INR 4,656 crores, and our order book stands at around INR 686 crores. So first, I would like to just correct that statement, please. Secondly, in terms of market share, with this kind of inquiry pipeline, we can convert a significant amount of this inquiry pipeline to orders. But we have a reputation for delivering whatever projects that we take, and our ability to scale the revenue and build the - build the order book and scale the revenue and eventually improve the performance of the company is dependent on our ability to scale up our execution mandate. So going forward, in the last 3 years, as I described to you, we have doubled every year from 250 to 500. This year we are on track to double as our order book already stands at approximately INR 686 crores. Certain percentage of this order book, around 15%, may get postponed into the next financial year on account of a delay in execution of projects caused by the clients or due to internal delays and inability to recognize revenue due to POCM methodology of accounting. But next year we can significantly I think we have already given a guidance on the growth that we expect for next year which is on page - no, next year, next year, Pradeep.