Servotech Renewable Power System Limited ($SERVOTECH)

Ladies and gentlemen, good day, and welcome to the Q4 FY '26 Investor Earnings Conference Call for Servotech Renewable Power Systems Limited. [Operator Instructions] Please note that this conference call is being recorded. I now hand the conference over to Mr. Raman Bhatia, the Managing Director of Servotech Renewable Power Systems Limited. Thank you, and over to you, sir.

Thank you. Good morning, ladies and gentlemen, and a warm welcome to the Q4 and Full Year FY '26 Earnings Conference Call of Servotech Renewable Power Systems Limited. Thank you for joining us today. I am Raman Bhatia, Managing Director, and I'm joined by our [ Chief Financial Officer ], Mr. Vipin Kaushik. We will walk you through the results, the context behind that and our outlook, after which we will be happy to take your questions. FY '26 was a transformational year for Servotech. We exited the year with our strongest quarter ever recorded as a listed company. Let me start with what defines the year. In Q4 FY '26, the quarter just ended on 31st March 2026. Our stand-alone revenue was INR 211.2 crores growing 67% year-on-year. Our stand-alone EBITDA was INR 23.2 crores, growing 70% year-on-year, and our stand-alone PAT was INR 11.7 crores, growing 49% year-on-year. On a consolidated basis, Q4 revenue was INR 219 crore, up 49% year-on-year, and consolidated EBITDA was INR 24.2 crores, up 81% year-on-year. This is not a 1-quarter phenomenon, the strength is in the second half of the year. Standalone revenue in H2 FY '26 was INR 411 crores year-on-year, while EBITDA margin in H2 was 12%, the highest in our listed history. In short, we entered FY '27 with our strongest run rate ever and with capacity already commissioned to support ideal growth. Coming to the full year, on a stand-alone basis, revenue from operations was INR 637 crores, growing 8.4% year-on-year on a higher basis of INR 587 crores in FY '25. Operating EBITDA was INR 74.2 crores, growing 26.5% year-on-year. EBITDA margin expanded to 11.6%, the highest in our listed history, up from 9.7% in FY '25, and expansion of 161 basis points. Profit after tax was INR 36.3 crores, growing 8.3%. The reason PAT growth lagged EBITDA growth was that we commissioned INR 64 crores of a new manufacturing capacity during the year. The full year impact of higher depreciation and finance costs from the commissioning is reflected in the profit and loss. From FY '27 onwards, we expect the CapEx flow-through to be lapped and the operating leverage should fully reflect in the bottom line. On a consolidated basis, FY '26 revenue was INR 675 crores compared to INR 676 crores in FY '25, broadly flat. Consolidated EBITDA was INR 71 crores, growing 22%, while profit after tax attributable to shareholders was INR 33.5 crores broadly in line with FY '25, INR 32.7 crores. I want to address the consolidated revenue directly. The flat consolidated number compared to stand-alone growth of 8.5% reflects our deliberate scale-down of low-margin trading activity in our medical equipment subsidiaries, Rebreathe Medical Devices. Rebreathe's revenue moved from INR 98 crores in FY '25 to INR 32 crores in FY '26. [indiscernible] as we focused capital on our higher-margin core renewable energy and EV businesses. Excluding this single subsidiary effect, our consolidated revenue grew approximately 12% year-on-year. The PAT impact of Rebreathe's scale down is minimal. The subsidiary remained profitable just as a low scale. Operationally, FY '26 was a year of significant capability building. First capacity, we commissioned new manufacturing line for solar hybrid inverters and grid tied models, which is our flagship growth product for battery energy storage systems and for a lithium ion battery pack. We also added quality testing and R&D infrastructure. Total CapEx for the year was INR 64 crores. Importantly, this CapEx program is now substantially complete, and it will help us to deliver the growth ahead in FY '26, '27. We expect '27 CapEx to moderate to a lower run rate funded entirely from internal accruals. Second, product mix, the shift towards solar inverter and higher capacity rechargers in the 120-kilowatt to 360 kilowatt models and BESS is the structural reason for our 200 basis point margin expansion. This is not a 1-year benefit. As solar DC chargers and BESS volume grow, we expect this margin profile to be sustained or modestly improved. Third, retail and brand expansion. Our retail channels, which was just INR 2 crore per month in FY '22, is now running at approximately INR 25 crores per month, with major growth expected ahead. To support the scaling, we have signed a brand ambassador and run TV advertisement campaigns and undertake expenses above the line and below the line marketing activities to create a structured platform for these brand-building initiatives. We have organized our email management dealer engagement and content production capability through 3 group entities, Servotech Sports and Entertainment, Hertz and Pixelz and our investment in cricket through the Siliguri Strikers franchise. Cricket is the most powerful brand building platform in India, and these initiatives are directly supporting the retail channel scale up that drove our FY '26 growth. Fourth, EPC and project execution, our government EPC business includes state EV charging tenders and Railway projects contract has grown into a meaningful portion of revenue. We have also strengthened our institutional relationship with Railway and major oil marketing companies supported by a strong order pipeline. Now I'm talking about balance sheet, working capital and FY '27 plans. I want to take a moment to address our balance sheet movement directly because I expect it will be on your minds. Our standalone borrowing increased from INR 75 crores to INR 196 crores during the year. Our trade receivables increased from INR 155 crores to INR 243 crores. Operating cash flow was negative for the year. These movements reflect 3 specific business sectors and each has a clear part to normalization in FY '27. First, CapEx and asset purchase of our INR 121 crores [indiscernible] debt during the year, approximately INR 79 crores was deployed into capital expenditures and asset purchase and investment in solar PV manufacturing company, including the new manufacturing capacity, I mentioned earlier. This is an invested capital, not consumed working capital. The asset base grew from INR 64 crores to INR 117 crores, an increase that supports our future revenue capacity. Second, receivables. The increase in receivable has 2 specific drivers. Approximately INR 40 crores is stuck with oil marketing companies, IOCL, BPCL, HPCL, due to infrastructure-related payment delays. We are already engaged with our bankers on this, and we are working through commercial mechanism to release this position. Approximately INR 60 crores is in respect of Railway projects which were in -- work in progress as of 31st March. Our payment terms on these contracts are 60% against delivery and 40% against commissioning. As these projects commissioned in the current financial year, the cash will flow in. Together, these 2 specific situations account for approximately INR 100 crores of our receivable increase and both have a clear path to release. Third, working capital cycle structure, as our government EPC business has grown, our working capital cycle has structurally lengthened. Milestone billing, retention money over 5 years, perform bank guarantees and the absence of mobilization, advances are inherent feature of their business model -- of this business model. We are addressing these through specific operational levers in FY '27, including incremental growth in channel sales, where working capital is less than 30 days. Conversion of retention money to bank guarantee instruments to release working capital and dedicated treasury follow-up on running bills realization. Looking forward, FY '27 is a year of operational consolidation. We have planned no fresh long-term debt, CapEx moderated significantly. Our focus is on 3 main outcomes, restoring positive operating cash flow, reducing our gearing back below half a turn over the year and bringing receivable collection back to industry's typical levels. Importantly, the order book and the run rate we exited Q4 will give us a confidence in our top line trajectory while we execute this normalization. Now I hand over to Vipin Kaushik.

Thank you. Just to summarize the key ratios for the financial FY '26 on a stand-alone basis. Operating EBITDA margin is 11.6 percentage compared to 9.7 percentage in FY '25. Interest coverage on EBITDA basis was 6.2x, which was well above the stress level. Debt to equity at the year-end 0.74x. Net debt-to-EBITDA is 1.8x within comfortable lender ranges. Current ratio is 1.5x. Return on equity is 14.7 percentage. Earnings per share basis INR 1.61 per share, growing 8% year-on-year. Our credit rating from Infomerics remains at BBB+ with a stable outlook on the long term and A2 short term, an upgrade we received in September '25. We engage to continue appropriately with the rating agencies. So I'll hand over to Raman.

Looking ahead to FY '27, we see strong demand visibility across our 4 segments, solar, inverters, DC chargers, driven by the central government's EV infrastructure rollout, BESS driven by both grid scales and behind the meter application and our project execution pipeline supported by healthy order book. FY '27 will be a year of operational consolidation built on FY '26 capacity additions. Our focus will be on operating leverage, flow-through, working capital normalization and disciplined capital allocation. Margin expansion in FY '26 was structural, and we expect to sustain the modesty and grow from current levels. We will continue to engage proactively with our bankers, our rating agencies and our investor community throughout FY '27. With that, I would like to thank you for your time and your continued support. We can start with the questions. Please open the line for questions.

[Operator Instructions] The first question is from the line of Randhir Kumar Singh from Randhir HUF.

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[Operator Instructions] We have a question from the line of Prashant Pardesi, an Individual Investor.

Hello?

Hello.

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[Operator Instructions] The next question is from the line of Mahesh Val, an individual investor.

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[Operator Instructions] The next is a follow-up from the line of Randhir Singh.

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The next question is from the line of Jitesh Parmar, an Individual Investor.

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Yes, 50% of the total revenue. [Foreign Language] we are trying to cross more than 50%, and we are working on that.

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[Foreign Language] including inventory turnover.

[Foreign Language] Do you think we have peaked or [Foreign Language], it would take another couple of quarters, okay, for this to basically stabilize?

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[Operator Instructions] We have the next question from the line of Jayesh Shah from HDFC Securities.

I just wanted to ask a couple of questions that what is the revenue like breakup in terms of the EV...

Product wise?

Yes, product wise, split.

You want to ask product-wise or...

Correct. Revenue contribution in terms of each and every product...

Correct. Solar products, we are calculating in total. It is around 51% of the total revenue and if you are talking about DC chargers, it is around 15%. And if we are talking about AC and small chargers, then it is around 27% and energy storage is still only 1% because it has just started. And power again around 1%. IMC and AMC, which will become a very big chunk in coming years, that is around 4%, so total is around 100%.

Okay. And the margin contribution similar to that? What would be...

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Okay, okay. And like going forward for FY '27, '28 onwards, so what are your plans in terms of growing the company towards like solar based or you are like planning to penetrate more in EV segment? So like I can see in the presentation, but I just wanted to know from you, like what is your view for like a couple of years down the line?

[Foreign Language] our charger with solar with battery energy storage also. So EV charger with energy storage. That is number one. [Foreign Language] energy storage is also a part of a EV. Energy storage is a part of the solar [Foreign Language]

[Foreign Language] Sir, because I just wanted to know like going forward, so on -- in terms of capacity and in terms of...

[Foreign Language] 60% solar and 40% EV.

Okay. And going forward, what would be the like guidance? Like I know that you are not willing to like give exact numbers, but in terms of percentage, so that we can...

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We have a follow-up from the line of Jitesh Parmar, individual Investor.

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[Foreign Language] Okay, let me ask it different way. [Foreign Language]

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[Foreign Language] where we would like to be, okay? [Foreign Language]

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Okay, sir. Last question from my side, [Foreign Language]

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[Operator Instructions] We have a follow-up from the line of Randhir.

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Around 50% [Foreign Language]

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[Operator Instructions] As there are no further questions, I would like to hand the floor over to the management for closing comments.

Thank you. So thank you, ladies and gentlemen, for your time and your questions today. FY '26 has been a defining year for Servotech, the strongest quarter in our listed history, our highest ever EBITDA margin and capacity now commissioned to support continued growth. The questions you have asked today reflects the genuine engagement that drives us to do better, and we welcome that scrutiny. As we enter FY '27, our priorities are clear, operational consolidation, working capital normalization and disciplined capital allocation. We are committed to delivering on these priorities and to continue transparent engagement with the investor community. On behalf of Vipin and the entire Servotech team, I want to thank our shareholders for our -- for your continued trust, our customer and partners for the long-lasting relationship we share and our employees for their dedication through a year of significant transformation. Should you have any further questions following this call, please reach us through our Investor Relations team. The contact details are available on our website. We look forward to engaging with you again at our Q1 FY '27 results. Thank you, and good day. Bye-bye. Thank you.

Thank you very much, everyone. On behalf of Servotech Renewable Power Systems Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.