Techno Electric & Engineering Company Limited (TECHNOE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '26 Earnings Conference Call of Techno Electric & Engineering Company Limited hosted by Asian Market Securities Private Limited. [Operator Instructions] Also before we begin, we'd like to inform you that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as of the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I would now like to hand the conference over to Mr. Suraj Sonulkar from Asian Market Securities. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of Asian Market Securities, we welcome you all to the Q2 FY '26 Earnings Conference Call of Techno Electric & Engineering Company Limited. We have with us today, Mr. P. Gupta, Chairman and Managing Director; and Mr. Ankit Saraiya, Director; and Shivani Chandok, VP, Strategic Initiative and Investor Relationships. I request Guptaji to take us through the overview of company quarterly results, and then we begin with the Q&A session. Over to you, sir.

Thank you, Suraj. Very good afternoon to all of you, and thank you for joining us to discuss Techno Electric's financial results for the quarter and the half year ended 30th September 2025. Before we begin A short note on forward-looking statements, any comments on our future outlook should be that in conjunction with Danish and uncertainties that affect our industry and the company. the key operational highlights of this quarter basically are A quick note on comparability, our results are not directly comparable quarter-on-quarter because of the project-driven nature of our business and the seasonality of execution. H1 generally contributes 40% of the full year revenue and H2 60%. This year, we are broadly in line with our guidelines. INR 3,500 crores F '25 financial year '26 target. We remain on track to meet our H2 targets, supported by a robust order book and clear visibility of further opportunities in the T&D segment. Given the sustained growth in our order book over the past 2 years and a positive market outlook, we are now focused on consolidating operations to improve efficiency and scalability. Coming to data centers, I'm pleased to inform report that the Phase 1 of the Chennai data center was inaugurated in August '25 as the initial set of customers are being onboarded. The [indiscernible] data center, the first to up online under our Delta DDG contract has commenced commercial operations. We have also started implementation of 16-megawatt gross load data center project in Narita by Dali's projecting a terrane share model, similar to our edge sectors. Financial update. It gives me a great pride to share that we remain softly on courts to meet our financial year targets, even though this quarter tested our a dire patients or construction ecosystem persistent across key regions where our projects located in Rajhastan Padala. [indiscernible] wide alters including delayed site turnovers, evolving customer requirements and environmental challenges yet through vigorous lending, because and focus on delivery and supply chain and private catchallenges, we not only stay vigilant successfully achieved our quarterly growth. I will request my colleague Shivani of VP IR and strategic initiatives to take you through our financial results. Shivani?

Thank you, sir. Thank you so much for the cash I would now like to take you through our quarterly performance as well as the half year ended September '25 performance. So our revenue from operations also 6 months has started the 6 months performance. So revenues from operations stand at INR 1,352 crores with an EBITDA of INR 194 crores, which is roughly 14.4% of our revenue. Our other income stands at INR 105 crores, PBT at INR 267 crores, PAT at INR 222 crores which is 15% of our revenue. Our EPS for the 6 months ended September 25 stands at INR 2121 per share. which is a 23.6% growth over the similar period last year. For the quarter ended September 25, our revenues from operations stands at INR 39 crores with an EBITDA of INR 15 crores. The EBITDA margin on our revenue is 13.8%. Our PBT is at INR 144 crores with a bank at 122, giving us a PAT margin of 13.9%. Other income during the quarter changed INR 47 crores, giving us an EPS now at INR 10.64 per share for this quarter. EPS has grown around 24.6% over the previous year quarter. With respect to our equity investment in cash, our cash balances stand at INR 2,600 crores, which is roughly around INR 225 per share. Our order book remains to stand robust at INR 9,967 crores as at September '25. We have received order of INR 4004 September as a still date. Then we can say that we speaks can say that we have an order book of roughly around [indiscernible] crores plus. With respect to L1 orders, we are currently even on 1 of the projects by America at INR 300 crores and 2 PTCL at INR 482 crores. So roughly INR 782 crores, we are a -- we have various bids in the pipeline and are confident to get additional orders for around INR 1,500 crores in the current financial year, which includes the new data center as well as edge data center projects being built by us. This will take a total order intake for the current financial year to around INR 3,000 crores. Thus, we will have enough orders to keep on the growth momentum. The company has -- as you are aware, the company has achieved roughly 4x of our revenue growth in the past 3 years with only a modest rise in our manpower. We are now undergoing an extensive transformation and digitization price to be data driven for strategic execution and to prepare for the next growth phase. Our focus remains on timely high-quality project delivery, maintaining a INR 3,500 crores to INR 500 crores of top line over the next 2 years. We continue to be selective in new orders in our focus segments, while investing in upscaling our team process efficiency as well as continuing with our cash flow discipline to ensure sustainable and profitable business. Now we can now focus on the data center update for the same. I would like to hand over to Mr. Ankit Saraiya.

Yes. So as we have informed our Chennai Phase 1 was inaugurated in August '25. The first phase is of approximately 5.6 megawatts. And the total capacity of the project is 24 megawatts, which will be commissioned in phases as we continue acquiring customers. And the Gurgaon edge data center under the RailTel contract has also been commissioned, and we have started onboarding customers at our Chennai and the Boost Early adopters in Chennai include customers from media and entertainment industry, domestic cloud service providers and a few telecom players. At Bourbon, RailTel has consumed about 60% of the capacity, and the remaining capacity will be used to provide private cloud and managed services, which materially increases our RAC monetization, almost by 3x of pure colocation. The second edge data center in Mumbai is expected to be operational by the end of the financial year. And partially, we have started construction of a 16-megawatt data center in Noida under similar partnership with RailTel as for edge data center and another 16-megawatt data center in Calcutta. In Chennai, we have also launched managed bare metal services and are receiving strong customer interest for this particular product. Our data centers, especially the Chennai data center is natively designed for high-density power delivery on per RAG basis. And this, we believe, is a differentiated proposition for customers exploring high-density computing, which is quite relevant for deployment of deployment of artificial intelligence. We are in active discussion with multiple customers who require high-density computing and look forward to exploring those opportunities. Given customer migration time line, set up requirements and data center revenues this year will be modest. We expect the data center vertical to contribute close to about INR 125 crores in top line during the financial year 2017. Once the asset becomes revenue accretive, its impact will be apparent in the financials and can be analyzed at that time. Phase 1 of Chennai has been capitalized at INR 470 crores. And further in the financial year, we expect to spend around INR 85 crores to INR 100 crores on our ongoing DC projects, which are under construction in Noida and Calcutta. On the outlook of the data center industry, India's data center industry is entering a phase of consolidation and maturation. According to a recent report by [indiscernible] and Wake the country added approximately 160 megawatts of new capacity in the last 6 months, taking the total operational capacity to around 1,280 megawatts. The industry continues to operate at healthy utilization rate of 80%, reflecting sustained demand momentum. The market currently comprises around 28 active operators managing over 130 facilities largely concentrated across 7 key metros, which is Mumbai, Chennai, Bangalore, Hyderabad, Pune, Noida and Calcutta. Over the past 2 years, the sector has also begun expanding beyond traditional hubs with Tier 2 cities such as meat, Lana, Patna, Jaipur and Chandigar emerging as new destinations. Adding further momentum, Google's recent announcement of a multi-megawatt data center campus in Vishakha Putnam signals a new phase of large-scale investments. This move is expected to attract AI-focused global hyperscalers and technology firms seeking diversified and similar high-capacity locations across India. And this possibly is the inflection point of the industry. Given Techno Electric's expanding footprint in data centers across key Indian markets, we are uniquely positioned to deliver end-to-end integrated solutions. As we transition from being primarily a developer to an operator, our focus is shifting towards high-value service-led offerings, such as cloud, managed services, bare metal services, amongst others. This strategic pivot not only enhances our customer value proposition, but also drives margin expansion and positions us as a differentiator, a full stack player in India, which is rapidly growing in a digital infrastructure landscape. To cover the transmission industry outlook and hand it over to Mr. P.K. Gupta.

Yes. India's power demand continue our search driven by industrial expansion, data center and digitization. In May 2024, the country recorded a peak demand of 250 gagawatt, the highest ever yet as generation rises, especially from renewable study challenges transmission, moving power reliably across regions. India grade part 4.5 lakhs[N]00,000 per kilometer of lines and $1.36 million MVA of transformation capacity with under 18.7 gigawatt of interregional transfer capability. You can refer to see for June 2025. Still over 50 gigawatt of radio capacity, the pad strategy. The lack of evacuation infrastructure is closing all these challenges. To create this gap, the Nash electricity plan, 23 to 32 calls were adding 1.9 lakhs[N]00,000 per kilometer of like 1.3 million of transport in capacity and estimated INR 9.1 trillion in investment which will include HVDCs and renewable power energy evacuations. Policy momentum is strong. General network concerts amendment in August to other 25 streamlined credit assets and integrate storage and hybrid projects. updated write-on guidelines, standardizes compensation and 30% of land value in rural areas at 16%. We have got are reducing delays in acquiring right. Meanwhile, the IHC charge we were at both opted custom at the 30-megawatt hour battery storage Glee, strengthened project economics and enable the storage retired. The grid itself is turning smarter. The CPU deployment guidelines push or guide data visibility, while utilities adopt AI base product in maintenance, loans and digital wins or faster safer operations. Together, these measures mark the start of India's largest ever grid modernization. Transmission is now both the bottleneck and backbone of the power system grow share to unlocking enable growth and ensuring reliability. With a strong EPC track record, disciplined bidding and early mover into digital grid solutions. Petro electric is well positioned to benefit from these multiyear policy back transmission investment cycle. Further, with the mergers of large-scale transmission projects and growing interest from long-term sovereign and infrastructure points, we are evaluating strategic partnership at the platform level, at the asset level to jointly bid Parish project and also expand our participation in competitive opportunities. Our segment smart meter, as you all know, we are executing smart meter order book out of which 50% stands deployed. [indiscernible] will be completed in the coming year maybe by September 26. The company's current broad is to ensure timely completion of all ongoing projects. And given the recent pressure on margins in new banners, we have adopted a selective bidding approach, and are not pursuing additional projects at this stage, focusing instead of quality execution and operational efficiency with like this portfolio. Our ongoing FGD projects are progressing as per side. However, due to policies in consist achieve had delays in regulatory clarity, no new FGD tenders have been released 10 months. The CA has come out with new guidelines laying locations in ABG category, we are a category will be focused first, which are within 10 the semiauto with a population of immediate at projects within 10-kilometer age. The company continues to monitor the situation closely and remain prepared to participate as and when new opportunities arise. None of our ongoing projection is impacted by these new guidelines. With this, I now put the like that the floor we open to further detailing or anybody having any full requirement of information sharing is welcome.

[Operator Instructions] The first question is from C Garidel from Invest Analytics.

First question is on the guidance part. We have guided for 50 EPS for this year and 75 for next year. But just a confusion, like if I look at the continuing operations, consolidated EPS or era, it is around 18.4. So what is giving you the confidence that this figure of 18.4 will be by the end of this financial year? So that is my first question.

Yes. You see our previous year's track record. As I said quarter-on-quarter is not equitably distributed number one. Number two, first 2 quarters are generally not more than 40%. At which you can see our INR 50 guidance, we are already exceeding INR 20 plus EPS already in first 2 quarters. And if you see last year also, we are confident to achieve 50-plus as EPS on the current year.

So when you mentioned 50 EPS, are you speaking about the stand-alone including continuing to discontinue?

Can you repeat your question?

Then you're leaving the guidance of EPS of INR 50. So are you speaking about the stand-alone number, sir?

Yes. More or less stand-alone or consolidated, they are nearly saying with a 5%, 5 years at the

No, because in fourth quarter, if I look at here 2 things. One is the continuing operations second is the discontinuing operations. So are we including the discontinuing operations as well why giving me the projections?

See, that is obligatory to include number as a disclosure, but we are confident to achieve 50% of an ongoing operation, you take it that way.

So in the ongoing operations, if I look at the consolidated financial numbers that you released for first half, we have done 18.48 EPS.

Yes, you can take that 8.5% and it will be 50% by the year-end.

And secondly, with the tax part, sir, I'm not able to understand the fluctuations in the tax rate. So can you put some color like spent some Mint maybe the CFO in explaining like how the taxation is working for Technoelectric, sir?

Taxation is very normal. As per the rules last time also I guided, you take on an average, in our case, tax applicability at 20%.

20% will be the tax rate for this year. That's what you are doing?

Applicable on our pretax income, which includes other income also. What gets exempted is our dividend income. Dividend we earn as other income and dividend payout, both stands exempted. So on the actual bottom line, you pay a tax at 25% -- and then a bit of adjustment on depreciation...

Understood. So going ahead, for full year basis, it will be the uniform, 20% rate will be -- that's what...

You can take norm of 20%.

Okay. And regarding the order inflow, sir, earlier, as far as I remember, we were targeting around INR 3,500 crores order inflow for this year. And now I think in the opening remarks, you had mentioned like we will be getting INR 3,000 crores. So are you witnessing any kind of weakness in the order inflows in the industry?

Not at all. Question is we have sufficient business in hand. We want to have more juicy business 3 or 3,500 D. It's only a number at the end of the day. maybe we end up more than 34% and 50 also. But just as a conservative approach we have, we only guided you INR 3,000 to than INR500 omit what way we go to 0. The Board issue is execution today in the given challenges of supply chain and the climate change, readiness of the grounds to deploy facilities, enabling the challenges are more than the capability to deploy them.

So the execution so you are doing very good The thing is only the margins. So what is your guidance for H2 margin, sir?

We have always maintained 13% to 14% on an average and maybe a little more depending on the mix of the job. So you can work on a guidance of about 14%, 13.5% to 14%.

And lastly, on the data center part. Mumbai data center is further getting delayed, like earlier, we were speaking about December, now we are seeing the end of financial year. And secondly, from Chennai Data Center also, the revenue is getting delayed as far as I am understanding -- so how do you people look at it, like till we are maintaining the EPS target for ever '27 or that will further maybe revise downwards?

Ankit, would you like to answer this question?

Yes. So Bombay data center as far as the schedule is concerned, we are still targeting it to be completed by financial year-end. We were earlier targeting it to be completed by December end, but because of delay in handover of land for a particular facility, the target has shifted. And regarding the revenue is concerned, we are pretty much on target as far as Chennai is concerned, and we are confident that we'll possibly be able to deliver better than what is visible in the industry across. And anyway, those revenues don't have an impact on the EPS of FY '27 because we've maintained that whatever EPS that we've spoken about till date is without consolidating the data center numbers.

Sir, one thing I need a clarification again, like also Sara mentioned, clarified like '18 consolidated from continuing operation will get near to 50%. But when you say we will be consolidating data center operation -- are we currently consolidating any court relative data center in our consolidated financial results, sir?

Yes. It's consolidation, we have to do, but there is no financial impact considered what we are projecting to the market. 50 is purely out of the conventional business, ongoing business, as ABS. This year, we are not factoring any EPS contribution from Data Center. It is only value-accretive business as well as the current Dr. But next year, some EPS may happen out of it. which we have yet not talk as fast.

Got it. And lastly, one thing, sir. We requested for visiting for our NCR data center, but we did not get a response to our e-mail, sir. So can you connect us with the right people like to whom or to which ID we have to request

Ankit?

Yes, sure. So we'll connect with you once we have the database of joining today, we'll specifically connect with you and we'll arrange for a visit.

The next question is from Ravi Naredi from Naredi Investment.

Well, how is the smart meter business going on whatever investment in funding is required, how we arrange the funds in future? That is my question.

You see, we are -- as you know, we are generally that diverse company. Presently, we are all funding it with our own resources, which we raised through -- and we just -- we will be able to meet obligation of 2.5 million meters of the ongoing job out of our internal resources.

And when our work will be many more multifold than how we arrange the fund?

Look, we explored at that time, whether we leverage it by borrowing or maybe monetizing the commission assets, some of them we have not applied mind because at the moment, focus is 2.5 million meters job in an anti by stopo6.

Understand. But I hope we definitely in the past, you did well. So this -- you also will manage well. Sir, in data center, how much investment we did in Chennai?

Ankit, would you like to answer?

Yes. The investment made in Chennai is approximately INR 450 crores to INR 470 crores.

INR 450 crores to INR 470 crores. And what is the expectation for financial year 27% top line.

It will contribute anywhere around INR 125 crores.

And what is the bottom line here?

I would take it at approximately 55% to 60%.

The next question is from Sarvesh Gupta from Maximal Capital.

Sir, first question was, again, related to the order inflows. So you partially answered it, but just wanted to understand it a little bit more. So I think our order book has stayed constant at around INR 10,000 crores for many quarters now. So 1 way to look at it is that we are proactively only not taking much orders because there is a limit to how we can execute these orders. And the other thing would be that there is some slowdown in terms of ordering because we are seeing government not prioritizing infra power and all these areas, in general, the kind of orders that we were witnessing 2, 3 years back, right now, we are not able to sort of see that growth. So if you can throw some more light, I mean, to your answer, I can to understand that maybe once we receive -- we reach INR 5,000-odd crores top line next year. We will have to again get aggressive about getting new orders if we were to grow from that level. So which of the scenarios is playing out, sir, if you can explain?

Look, these are all the perceptions and the LPs are very different. Look, the issue is basically deployment. Somebody wins the concession. He has to deploy a share. He has to acquire right away and land parcels. And that is not easy in India, the challenges on the ground. And that is what I was sharing with -- now the order, we can have -- you are a preferred supplier or vendor to any, [indiscernible] or anybody effect and as far as station is concerned. The question is, you can pile up any amount of number as an order. What I am talking to you is a good and that is more than sufficient for the next 2 years for us as the moment. So we want to discuss business with you, which is a real. Business as the order and still not visibility of execution. This may be a number that has no value to you and me as a company.So please don't get confused. It's a long story in this market. Renewables is still beginning, I will say, the whole ecosystem has to go through energy transition. And unless there is a drop of grid, none of these projects are going to be successful. The present hindrance in the whole value chain in the [indiscernible] energy is not reasonable even deployment or generation. But the grid, the grid is not available. Feeds are not available. They are not being made ready. So that is the challenge countries washing at an overall level. So it's a small story. We want us business. We want quality business, a business which can happen in time. And we can make good bottom light out of it.

So sir, so on that, sir, basically, let's say, in the second half of next financial year, we would have made another INR 7,500 crores revenues from the current order book. So I think at that -- so basically, the way I'm understanding is that if we have to grow 15%, 20% FY '28 onwards, we can always get more orders. Right now, we are not taking as much because we can't execute if you take more.