SPML Infra Limited (SPMLINFRA.NS) Earnings Call Transcript & Summary

Hello, everyone. A very good afternoon, and welcome to SPML Infra Limited's Quarter 2 and H1 FY '26 Earnings Conference Call. From the senior management, we have with us on the call today, Mr. Manoj Digga, Executive Director and Chief Financial Officer; Mr. Samir Patel, Chief of Technology and Operations of BESS segment; Mr. Vikas Sharma, Vice President, Finance and Accounts; and Mr. Kapil Joshi, Investor Relations Officer. Before we begin the earnings call, I would like to mention that some of the statements made during today's call may be forward-looking in nature, and hence, may involve risks and uncertainties, including those related to the future financials and operational performance of the company. I would now like to hand over the call to Mr. Manoj Digga for his opening remarks. Thank you, and over to you, sir.

Thanks Devyanshi, and good afternoon, everyone, and thank you for joining SPML Infra Limited Q2 financial year '26 Earnings Call. The first half of the current fiscal has been a defining period for SPML Infra, reflecting strong order inflows and strategic progress across both our core water and power infrastructure business and emerging energy storage segment. This momentum reaffirm SPML long-standing reputation of more than 4 decades as a trusted partner in India's infrastructure growth story and highlights our transition into a diversified future-ready organization. Our focus remains on profitable growth, selected bidding and strong project execution. This disciplined approach has enabled SPML to sustain healthy margin and strengthen our project mix building a foundation of long-term growth. The company is mainly focusing on the water, power and BESS sector, which has significant potential to grow in the years to come. A pipeline of over INR 17 lakh crores is fully centrally or state-funded water infrastructure project has been identified across major scheme such as Jal Jeevan Mission, AMRUT 2.0, Namami Gange, River Linking program and others covering water supplies, sanitation and reuse. India's BESS market is projected to reach 236 gigawatt by '31, '32, which makes the USD investment of USD 57 billion driven by renewable energy mandates, including a minimum 10% storage requirement in new renewable project. The 500 gigawatt RE target by 2030 grid stability needs and energy storage obligation, representing a market potential of more than INR 5 lakh crores since the government has also begun focusing on BESS in thermal power, the opportunity will significantly multiply. The government is also focusing on building smart power infrastructure across India supported by major investment plan. We are expecting approximately INR 25,000 crores of tenders in the current financial year from the aforesaid opportunity including over INR 5,000 crores of BESS tenders, which will be a key target area for the company. From a business standpoint, H1 financial year '26 has been marked by robust order momentum with SPML Infra securing a new project individually and through a JV in the Water Infrastructure segment totaling over INR 3,772 crores across Jharkhand, Madhya Pradesh, Rajasthan and Tamil Nadu. At present, the company is in L1 position in tenders worth around INR 1,125 crores, which are expected to be awarded in the current financial year. Further, the company has an existing order book of around INR 1,600 crores, which we plan to execute swiftly. The L1 tenders and the [indiscernible] opportunity in the water sector and BESS sector will help us to achieve our targeted business volume of INR 5,000 crores in the current financial fiscal. The growing business opportunity across all 3 sectors will also help the company exceed level in the coming financial year. This win underscore our technical expertise, execution, excellence and proven ability to deliver large and complex infrastructure development project. All the aforesaid projects are fully funded and meet our critical criteria of strategic business planning. Our overall order book and the future prospect provides clear visibility on revenue and earnings growth in the current and coming years. We continue to prioritize projects with sure funding, prudent contract structures, efficient execution, timeliness and higher margin. SPML today stands a stronger financial footing, reflecting continued progress in the strengthening its balance sheet and access to capital. Our sanctioned bank facility have been enhanced from INR 205 crores to INR 505 crores by a leading public sector bank under resourcing lenders confidence in the company's financial stability and governance. The extended facility provides greater flexibility to participate in a larger project and manage working capital more efficiently. Further, the company has received approval of a surety bond from a leading insurance company providing additional bidding flexibility. The company has also been recognized as a stable firm by ICRA for its intact financial and banking facility. The company does not have any pressure on the operational cash flow since the remaining debt of INR 400 crores, including interest owned to any RCL is expected to be paid through arbitration award of INR 647 crores, including interest up to October 2025, ensuring a clear path towards the linear and more resilient balance sheet. SPML's power EPC expertise has been built through years of executing large capacity, substation and rural electricity vocational project. Diversification into battery energy storage system is a natural extension of these capabilities, positioning the company to leverage its technical strengths and capture new growth opportunities in the clean energy space. The 2.5 gigawatt Phase 1 facility at Pune, MIDC is progressing on schedule and is targeted for commissioning by Q1 financial year '27 with Phase 2 to follow by financial year '28. Mr. Samir Patel, our Chief of Technology and Operations for BESS is also with us to explain the opportunity in the BESS sector and our progress in manufacturing and business activity in this segment. The construction of the BESS plant at Supa, Pune is at advanced stage. And once completed, it will be a modern and efficient manufacturing facility for the BESS in India. With a solid order book, improved liquidity and strategic alignment across both business verticals. SPML Infra is positioning for sustainable revenue and profitability growth through financial year '26 and coming years. Coming to our performance during the first half of the fiscal year, a period that is a seasonally slower for infrastructure companies due to extended monsoon, state election and tendering billings. Despite these challenges, we have delivered stable operation performance. On a stand-alone basis, revenue stood at INR 363 crores, EBITDA at INR 35 crores and PAT at INR 27 crores for H1 financial year '26. The EBITDA and PAT margin improved to 9.8% and 7.6%, respectively, compared to the same period last year, remaining in line with the guidance margin range. Revenue from new projects where margins are higher will be reflected in Q3 and Q4 and the substantial progress has already been made on approvals of design and drawing. Going forward, revenue contribution from these new orders is expected to increase significantly. Similarly, for Q2, revenue stood at INR 199 crores, marginally up by 2% year-on-year EBITDA at INR 20 crores and PAT at INR 15 crores. The EBITDA and PAT margin were 10% and 7.7%, respectively. As we move into the second half of financial year, SPML Infra is very pleased to capitalize on the strong momentum built during H1. Thank you. We are now open for the questions, if anybody has.

[Operator Instructions] We have the first question from Hardik Gandhi.

Congratulations on a stable set of numbers. Just wanted to know a few things on your -- where have we reached on our BESS manufacturing? How is the progress going? Are we on time line? And are we seeing any major market changes in that sector? A lot of new players are entering into the space. So just wanted your thoughts around that in the first instance.

Yes. So operationally, we have already started the groundworks and we are on track to set up the infrastructure by Q1 next year. So we are on track, and that means that we will be ready with our first product by end of Q1. So we are on track with that. As far as the market sentiments and dynamics are concerned from a technological perspective, it is still LFP cell concepts, and that is what is going to be driven for the entire India market. So China dominating the entire industry. LFP cell is a special 314Ah cell is what is venturing into Indian segment. And this is more about 5.015 megawatt TC block systems is what we are anticipating to launch, and this is what the clients and customers are asking for.

Okay. But are we seeing any import challenges for the battery blocks from China?

No, we don't see any challenges because SPML concept or the way the business is modeled is to make in India. So from an import perspective, the only commodities which we need to import, as I said previously, are the critical commodities like the cell and the PCS, right? The rest of the commodities we are planning to localize within Pune.

Understood. And from the sampling, since you'll be starting manufacturing in Q1, the sampling and everything will be completed by the end of Q1 or...

Same time exactly. So our first FAT planning is scheduled for January next year. And SAT for the site itself at Supa is planned for April next year. So within that 3 months' time frame, we are going to do an end-to-end testing and validations for the entire product and the assembly line.

Okay. And is there any audit period required from the customer side? Do they have an audit done or they just check the product and they give an order? How does that process work?

From an auditing perspective, it really depends from customer to customer. Like, for example, if it's public listed clients like NTPC or Power Grid, et cetera. So they have their own protocols. But the major protocol is to make sure that the products are certified and you have the right documentation to prove that the entire BESS has met those obligations, including the regulatory obligations. So those certifications will be part of the tendering process. And once the product is ready, it is SPML's duty to make sure that it meets those certifications in a timely manner.

And like for the BESS part, are we only going to assemble and do the EPC ourselves? Or are we going to assemble and provide for other EPC players as well? So, we may not have the orders.

SPML's entire model is to do an end-to-end turnkey integration. So we will be a one-stop solution provider for the clients. That means we start from designing and developing of the containers and then we take that into manufacturing and then we take that to the site to commission and install. And after that, we do the operational and maintenance as well. So we take care of the entire project within SPML.

And just to have more understanding, what would be a good time line for that, assuming that we got an order today. So how much time does it take for you to manufacture, design, install and then like the end-to-end for a 100-megawatt are, let's just say, usually, the tenders are in the multiples of 50 or 100, right?

So you're talking about large-scale projects, 100 megawatt is a large-scale project. So that depends with how the solar or the other renewable energy projects are getting maturity. But from a manufacturing standpoint, once we get an order, within, let's say, post April, we have a manufacturing capacity of 2 containers per day. So for 100 megawatts, I'm taking the bet of roughly 2 months. Within 2 months, we'll be ready to start delivering those products to the site actually. Commissioning itself will take 45 to 60 days. So you're talking about 3 to 4 months from order placement to commissioning. So that...

And coming on the motor side, sir, what are we expecting?

Here, I want to add one more, Samir. Basically, earlier, it was the BESS is only for the renewable energy. But now very recently, the tender has started for the thermal power also. So that's a great move changer. And you will see the volume and requirement of BESS will increase to the manifold. So it's [indiscernible] of the government, and that will happen, but it has happened now and the tenders are coming into that line also.

So again, on the water side, first thing I saw that there was a preferential allotment to the NARCL. So can you help us understand that what was -- what happened on that front? NARCL, you got a notification for preferential allotment and...

As per our understanding with NARCL, we have to pay roughly around -- we have to keep their holding roughly around 12.5% on the expanded capital. We have certain warrants which are going to be converted. We have the due date up to March, but we would like to convert it early. So that -- after that conversion, we have to maintain the NARCL to 12.5%. So we are issuing to the NARCL additional share for keeping their percentage to 12.5%.

Understood. And how much will we be putting in the warrants? Sorry, I forgot the number. The early warrants...

Warrant has already been issued. Warrant has already been issued about year onward up to March, we are expecting roughly around INR 150 crores that is going to come. It is as per the plan. And you will find that every month, it will start coming to bring the further liquidity into the company.

Okay. And on the water side, what kind of growth are we expecting this year? Because I know H1, we had a long period of rains and elections are going on. So just wanted some color on that. And along with that, if you -- along with the growth, since our old projects are lower-margin projects and the new ones are comparatively higher. So can we expect the higher-margin projects some EBITDA uptick from here on? Or what are we looking on that...

No, in the water, water and power substations, these are the 2 other than the base we are focused into that. Both sectors is a huge, huge business opportunity. Now first time in the power substation volume of tendering is much more compared to the water, but there are various water tenders are supposed to become in Madhya Pradesh, in Maharashtra in Karnataka, in Odisha. And that will keep on flowing into that. So there will be a sizable water order, there will be sizable substation power order that is going to come. Normally, when this order comes, roughly around 3 to 5, 6 months is required for -- because it's an EPC and design drawing contract. So roughly around 3 to 6 months is required to complete all the approvals of the design drawing, which has been passed. Like if you see our Konar project in the Q3, you will find the turnover of Konar, you will find the turnover of ACR3 into the Q3. You will find a massive turnover, some turnover of the Indore also. And that's the way you will find the new order turnover into the Q3 and Q4. And they will keep on dominating the total turnover. In the total turnover, the new order turnover will be much more compared to the older order.

So just on the -- again, on the revenue side, what are we expecting? What kind of growth are we expecting for this year at least?

The old project will continue like you have seen the first Q1 and Q2, Q3 will also remain for the old project on the same level. The new project will further start giving the revenue. Every project require roughly around -- you can take the target of 3 years. And every quarter, roughly, you can take divided by 12 around 8% to 9%. That is the turnover of the new project will keep on coming and adding barring few commissioning and piping supply, et cetera. So more or less benchmark figure, you can take total project cost divided by 12 is every quarter turnover into the new water project.

So are we expecting like INR 850 crores, INR 900 crores top line this year, maybe more...

By that calculation, it should happen more than...

And what are we expecting our closing order book to be? Like right now, we have substantial orders, but I think after Q1, we've not gotten any big orders as such. So what are we expecting our closing order book to be for this year at least?

As I told the new order, we have taken INR 3,772 crores and roughly around INR 1,200 crores, INR 1,125 crores we are in the L1, which we are expecting into this financial year, maybe in the Q3 also. And there is a sizable order roughly around INR 25,000 crore order which are going to be tendered into that year, including INR 5,000 crores of this. So we should take some share from that also. So our target of INR 5,000 crores order book, new order book into this year and next year more than that, that is [indiscernible].

[Operator Instructions] We have next question from Darshan Jhaveri.

Am I audible?

Yes, you are audible.

Firstly, congratulations on a good set of results, sir. So just wanted to ask on the previous participant was asking for. In H2, what is the execution that we are targeting right now, sir?

H2, we -- again, old order will continue, which we will keep on executing. We are expecting a sizable turnover from the 3 projects, which we have already taken, Konar and [indiscernible] INR 385 crores; Jharkhand, INR 650 crores; and Indore, INR 1,036 crores. So we are expecting the turnover of Phase 3 orders in the Q3. And maybe in the Q4, there are a few more orders which we have taken. So Q3 and Q4, you will get a reasonable order and reasonable execution from the new order.

Okay, that's fair enough, sir. Sir, so just wanted to know the margin trajectory like H2 is usually when you say more orders will be executed. So the margins will be better, right? So any kind of guidance in terms of overall margins like in terms of EBITDA, PAT percentage that we want to do, sir?

As we have told that the new orders where we are having the margin more than 10% and the old orders are having a margin at a low margin. So there will be a mix of these 2. We -- all the 3 orders which we have taken where execution will happen into the Q3 and Q4, all where the margins are more than 10%.

Okay. Their margins are more than 10%. Okay, okay. That helps a lot, sir. And sir, with regards to low ones, Q1 next year, your BESS and everything starts. What is our targeted revenue for FY '27, sir?

I have given you the guidance. Basically, every year, our target is on the water side, INR 5,000 crore order, which will be executed into the 3.5 years. So that this year orders, we will continue to execute in the next 4 years. And the next 4-year order, again, the 3 to 6 months is required for the design drawing approval. So when we will keep on getting the order because we are very selective in taking order because that criteria, we have made it out that if it is a fully funded project, if it is a project which is our desire and support we have with our supplier and customer, which is a profit more than 10%, where the contract clause is having the pass-through and the speed is having where we can easily and comfortably execute the project. So those are the criteria we will select. And based on the -- keep on getting the order and approval of the design and drawing, the execution will keep on happening. We don't have any issue on the execution because we have a strong team. We don't have any issue in taking the new order because of the BG limit, what we have and surety bond further what we have. We don't have any working capital shortage because enough liquidity is there. So if all the 4 factors and the sector where we are having a huge potential to grow all the 3 sectors, water, power substation and BESS. So all these things, we should get and the reasonable order, what we are targeting, INR 5,000 crores this year and more than INR 5,000 crores into the subsequent year, and the execution will keep on happening.

No, I get that, sir, in terms of water side. I wanted to understand in terms of BESS when we start our plants, like how would it work after we start up and only then will we be able to bid for orders or what will be the time line if we start, for example, 1st of April...

One thing is very clear that we are not waiting for the -- because BESS as an EPC, we can execute when we will have our own battery pack manufacturing, then it will add value in our EPC. So that is still -- so any order we are participating into the BESS order and we will participate into the BESS order, the INR 5,000 crore order, which is coming into this financial year. We are participating into that. So we will get the orders until we will have our battery pack unit ready, we will do the EPC and later on [Technical Difficulty] do the EPC, but use our battery. Samir, if you want to add here.

Yes. So that is true. So EPC will commence as Manoj said. And as far as the battery packs are concerned, we have 2 options. The first option is once our assembly lines are ready and operational, then we will start feeding that to the customer base. That's one thing. But the second thing is like if you think -- or if you see from a market geographics or demographics, you'll see that the tendering process and when the customers need these products is kind of mid next year. So you're talking about June, July, August next year. So if you take that time frame, you'll see that SPML will be ready in March, April, right? So we are ahead like 3 to 4 months before even when the customer starts commissioning their facilities.

Okay. Just one bookkeeping question from my end. What was the opening order book for the year, sir?

This year, we are having the INR 2,000 crores of order book appeal. INR 600 crores we have already, the INR 400 crores, we have already executed. So roughly around INR 1,600 crores of our old order book we have, the INR 3,772 crores order we have taken, INR 1,125 crores we have in L1. And we have the [indiscernible] order where we will be and we are targeting to close our new order book into this financial year of roughly around INR 5,000 crores.

[Operator Instructions] [indiscernible] you can ask the question, if you want.

Congratulations on a good set of numbers. I just wanted to ask you, can you provide like an update on the awarded or pending arbitration claims? What inflow seems likely over the next 3 to 4 years? Or how do you plan to deploy these?