Welspun Enterprises Limited (WELENT) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Welspun Enterprises Q2 FY '26 Earnings Conference Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Shah. Thank you, and over to you, sir.

Thank you. On behalf of JM Financial, I welcome everybody to Q2 FY '23 Earnings Conference Call of Welspun Enterprises Limited. I will now hand over the call to Mr. Salil Bawa, Group Head, Investor Relations of Welspun One. Over to you sir.

Thank you, Vaibhav, and good afternoon to all of you. On behalf of Welspun Enterprises Limited, I welcome all of you to the Q2 FY 2026 Earnings Call. Along with me, I have Mr. Sandeep Garg, Managing Director of Welspun Enterprises Limited; Mr. Saurin Patel, Managing Director of Welspun Michigan Engineers Limited and Head, Integrated Water Vertical. I have with me Mr. Abhishek Chaudhary, Chief Executive Officer, Transport Welspun Enterprises Limited; Mr. Hardik Dhebar, President, Finance and CFO, Welspun Michigan Engineers; and Mr. Lalit Jain, CFO of Welspun Enterprises Limited. We hope you have had a chance to review the investor presentation that we filed with the exchanges yesterday. The same is also uploaded on the company's website. During the discussion today, we may be making references to this presentation. We would request you to take a moment to review the safe harbor statement in our presentation. As usual, we'll start the forum with opening remarks by the leadership team. And then we'll open the floor for your questions. Once the call gets over, should you have any questions, feel free to connect with any one of us. With that, I hand over the floor to Mr. Sandeep Garg. Over to you, Sandeep.

Thank you, Salil. Good afternoon, everyone. I'm pleased to welcome you all to the Welspun Enterprises Q2 FY '26 Results Conference Call. I thank you all for being present today. I'm happy to share that we have received a new order from BMC for water treatment plant of 910 MLD at Panjrapur near Mumbai. This is our second water treatment project in the Mumbai region after Bhandup. Once completed, these 2 water treatment projects will provide for 70% of Mumbai's freshwater requirements. This new project is another element of our participation in the holistic management of Mumbai's water resources, comprising of water treatment, transmission and reuse of treated water. This unique combination of projects sets a comprehensive benchmark for urban water management. In the Transport segment, we emerged L1 for Pune-Shirur Elevated Highway corridor, a BOT toll project of MSIDC with a total project cost of INR 7,300 crores. Abhishek, who is our new CEO Transportation vertical, will provide more details on our projects in the transport segment and digitalization journey shortly. Our stand-alone order book stands at INR 14,000 crores, while our subsidiaries, Welspun Michigan holds an order book of INR 2,650 crores, bringing the consolidated order book upto INR 15,615 crores. It is important to clarify that Welspun Michigan's order include -- order book includes an order of INR 1,069 crores related to DGT projects, which has been sourced from Welspun Enterprises. Additionally, the consolidated order book also includes O&M contracts worth approximately INR 5,400 crores. The order book mentioned excludes the MSIDC projects for which we have been -- we have emerged L1. Once the order fructifies, it will add more than INR 5,000 crores to the order book. As per earlier guidance, we are on track to achieve our top line target of INR 4,000 crores for the year at the consolidated level, subject to the climate supporting us and the statutory approvals for the new projects. Our consolidated EBITDA grew at 28% year-on-year to INR 192 crores in FY '26 as compared to INR 150 crores in Q2 FY '25, underscoring our continued focus on operational efficiency and margin resilience. On the balance sheet side, we continue to maintain a strong financial position with consolidated cash reserves of INR 1,043 crores. This provides us with significant flexibility to pursue growth opportunities while maintaining financial discipline. Lalit, our CFO, will walk you through the financials in greater detail. Our subsidiary, Welspun Michigan Enterprise Limited, building on a healthy performance of the previous quarter reported revenues of INR 169 crores this quarter, up 60% year-on-year. Saurin, our Managing Director of WMEL and Head, Integrated Water vertical, will provide further insights on WMEL and updates on our water vertical shortly. On oil and gas, we have 3 major blocks called MB or Mumbai block, B9 and C37 for which we are in discussions on evacuation of gas with ONGC and DGH. Once the plans are finalized and we have clarity, we will come back to you with our future course of action. On the awards, I'm happy to share that our commitment to excellence continues to be recognized. Welspun Enterprises was awarded the Wealth Creator Award at Construction World Global Awards 2025. This accolade reaffirms our commitment to excellence across project management, innovation and technology. On the guidance, I would want to talk about the industry. On the industry front, we are anticipating a strong traction in BOT toll and HAM projects in transportation at both NHAI and state level as well as in the water segment across river interlinking water treatment plant and desalination. Expanding opportunities in the tunneling segment for both transport and water are also on the horizon. We are actively evaluating these opportunities and will bid for these projects, which will fill our return criteria. On NHAI, I'm happy to share that NHAI is revisiting its evaluation criteria for PPV projects. As per the revised guidelines issued for HAM projects, they are considering available net worth, which is the net worth of the company minus its commitments as new qualification criteria. Along with this, we are expecting that larger projects will be announced on PPV basis, which will require a strong balance sheet. To capitalize on these upcoming opportunities, we are in the process of raising INR 1,000 crores through a preferential issue of warrants by way of private placement with participation from the promoter growth. This demonstrates the confidence we have in the business going forward. To capitalize on these opportunities, we are also strengthening the organization and focusing on digitization. Appointment of Abhishek as CEO, Transportation and addition of Hardik as President, Finance for WEL are steps in this -- in that direction. In coming times, we shall see similar augmentation to the verticals across organization. To conclude, I want to reemphasize our strong foundation for sustainable value creation. By concentrating on profitable segments, maintaining rigorous operational discipline and leveraging the momentum of a healthy order pipeline, we are confident in our continued ability to generate sustainable growth and enhance value for all stakeholders. Thank you once again for your time and support. I will now hand over to Saurin for his remarks.

Thank you, Sandeep, and good afternoon, everyone. Let me share an update on our water business, a segment where we are bringing together scale, technology and purpose to create meaningful impact. The recently awarded 910 MLD water treatment plant at Panjrapur in Maharashtra will be executed over the next 4 years, followed by 15 years of operations and maintenance. The EPC value of the contract is INR 1,685 crores, excluding GST, while the O&M component is valued at INR 980 crores. All our major water projects include an O&M component, ensuring long-term engagement and steady recovering revenue visibility. Our current water order book stands at around INR 11,000 crores, of which approximately INR 5,400 crores pertains to operations and maintenance, providing a strong visibility of sustained cash flows over the coming years. To reiterate what Sandeep mentioned, once all our ongoing projects are completed, Welspun Enterprises will be managing nearly 70% of Mumbai's freshwater supply and around 15% of its wastewater treatment needs, a scale that truly reflects both our execution strength and our commitment to sustainable future-ready water infrastructure. At Welspun, we have some unique record-setting water projects, which have catered their USP to urban available space issues and constraints, and we are proud to have provided successful solutions. Let me talk briefly on some of the ongoing projects that cater to this. The 418 MLD wastewater treatment facility at Dharavi is on track for execution. Work is in progress and in line with the latest schedule. Major civil structures such as the SBR, [indiscernible] building, administration building are nearing completion and other structures such as the IPS, SBR feed pumping station, et cetera, are under progress. Mechanical equipment directions such as decanters, air blowers for the SBR and [indiscernible] building has commenced. This project is on track and expected to be commissioned by July 2027. Once completed, this will be Asia's first multistory sewage treatment plant. The 2,000 MLD WTP at Bhandup, being one of the world's largest water treatment plants under construction has a 30% to 50% lesser footprint compared to conventional water treatment plants. With the extended monsoon over and the necessary permissions and civil contracts are in place, execution has picked up significantly and excavation is proceeding and progressing well within the schedule. The project is progressing towards achieving the completion target of April 2029. Once commissioned, this plant will play a vital role in strengthening Mumbai's drinking water supply and ensuring a cleaner and safer water supply for millions of households. The UP Jal Jeevan mission execution is on track, currently supplying safe and potable drinking water to over 300 villages. Upon completion, it will benefit nearly 2,500 villages, unlocking a real social and economic transformation in the state. The Dharavi-Ghatkopar tunnel, all the pre-project clearances will be in place by December and shaft work for 150-meter shaft at Ghatkopar should commence by early March. Moving to SmartOps, a technology-driven joint venture dedicated to rejuvenating water bodies through modular, scalable and cost-effective solutions. It gives me sense of contentment to state that in just 18 months since we launched SmartOps, 4 projects have gone live across India. The projects in Varanasi and Guwahati are complete as is the Pandharpur project, which focuses on cleaning a portion of the Chandrabhaga River near the Vitthal Temple in Pandharpur. Looking ahead, 4 to 5 new projects are expected to be executed over the next 6 to 8 months. And we are also exploring other exciting emerging technologies to tackle complex wastewater challenges and develop sustainable sludge management solutions. Our subsidiary, Welspun Michigan, continues to deliver a strong performance. In quarter 2 FY '26, it reported revenues of INR 169 crores, a 60% year-on-year growth with an EBITDA margin of 22%. For the 6 months ended September 30, Welspun Michigan posted revenues of INR 377 crores, a 51% year-on-year growth, while EBITDA increased by 50% year-on-year from INR 57 crores in H1 FY '25 to INR 86 crores in H1 FY '26. At Welspun Michigan, we have 3 segmental line tunnels projects, which -- of which we have successfully completed the Mithi Tunnel a few weeks ago. This feeds the Mithi wastewater to a Dharavi STP. The others feed wastewater when completed from Goregaon and Borivali catchment areas to the under construction Malad Suez treatment plant and are on track for a timely completion in FY '27, '28. In addition, we are executing multiple rehabilitation projects in Mumbai, Ahmedabad, Baroda and Delhi, using a variety of specialized techniques, including glass reinforced polymers, geopolymer cements and cured-in-place thermosetting resins. These works form the vanguard of municipal efforts at rejuvenating [Audio Gap] for this activity. Our Bihar and Yellow Bungalow pumping stations are on track to be in service prior to the next monsoon season in service of Mumbai's flooding needs. As of September 30, 2025, Welspun Michigan's order book stands at INR 2,650 crores, of which 60% is tunneling, 22% pumping stations and 14% rehabilitation projects. The robust order book provides strong revenue visibility. Going forward, the team continues to pursue opportunities across segments and expects to further strengthen the order book during quarter 3 and quarter 4 of this year. I would like to conclude by stating our strategic focus on wastewater treatment, large-scale water delivery systems and tunneling. This positions us to create sustainable long-term value in a sector that is both vital and fast growing. With that, I'll now hand over to Abhishek to take you through the Transport performance in detail.

Thank you, Saurin. Good afternoon, everyone. Welspun Enterprises has built a strong and a proven track record in India's infrastructure landscape. Over the years, we have successfully executed and monetized a series of road assets that stand as benchmark for quality, timely delivery and value creation. Today, we'll walk you through our strategic direction, our operational performance and how we are shaping the next chapter of Welspun journey in creating resilient and future-ready infrastructure. Let me now first brief you about the ongoing projects, which is Aunta-Simaria Road project in Bihar. Our latest landmark is the completion of this project, which is country's widest cable-stayed bridge with a span of [ 1.8 ] kilometers which was inaugurated by Honorable Prime Minister of India on August 22, 2025. This demonstrates not just our engineering excellence, but also the capability to execute at scale. The provisional commercial operation date, PCOD, was achieved on 15th May 2025, and the first annuity payment is scheduled for November. Monetization efforts for this project are presently underway, and we anticipate closure within this financial year. The second project is Varanasi-Aurangabad Road project, VARP. There is a steady progress here with main carriageway planned for completion by Jan 2026 and overall completion by Q1 of FY '27. Delays have occurred due to the availability of front, local disturbances, but we are fully geared up and are collaborating with all the stakeholders to actively resolve all issues and accelerate the remaining work. Third, SNRP, which is Sattanathapuram Nagapattinam Road project, which is approximately 74% complete, and we plan to submit the 75% financial milestone to the client by the end of December 2025. The pond ash issue has been resolved with 6.32 lakh cubic meter of pond ash, which has been secured through an auction process of NLC. We expect to receive the provisional completion in Q1 FY '27. Lastly, Pune-Shirur Road project, as informed by our MD, we are proud to have been emerged as the L1 bidder in this marquee BOT project, which is going to be 54 kilometer long 6 lane highway, including nearly 37 kilometers of elevated structures with an estimated total project cost of INR 7,300 crores. It marks a new phase of growth and diversification. We are awaiting the letter of award, which is expected soon. Now I'll just take you through the digital transformation initiatives, which are being undertaken at the company level. We continue to drive digitalization across all our operations, adopting advanced tools such as 3D, 4D, 5D modeling and have begun RFI-based detailed project report generation for our Bhandup project on a pilot basis. I'm also happy to inform you that we have successfully migrated to SAP RISE for our S/4HANA. The digitization of our project management dashboard has led to process optimization and real-time data analytics. We are also redefining our supply chain processes and integrating e-governance, which will further enhance operational efficiency and control. Lastly, I will touch upon the major awards and recognitions which we have secured in the recent past. Welspun Enterprises has been honored as the most admired company in the transportation vertical at the ET Now Infra Focus Awards 2025. We have also received the Excellence in Bridge Engineering for our Aunta-Simaria Road project at the [indiscernible] Awards 2025. Our safety team has been recognized with the Excellence in Safety Training and Education Award for Aunta-Simaria Road Project at OSH India 2025. Now I will hand it over to Lalit, Chief Financial Officer of our company, to take you all through the Q2 FY '26 financial results. Over to you, Lalit.

Thank you, Abhishek, and good afternoon, everyone. I appreciate your interest in our business. Let me present our Q2 FY '26 financial results and provide insight into the performance of each segment. Q2 FY '26 [indiscernible] financial performance we have delivered INR 803 crores of total income for Q2 FY '26 and consolidated income for H1 FY '26 stand at INR 1,674 crores. This is on track to reach our FY '26 revenue target of INR 4,000 crores with back-ended top line distribution as specified earlier by our MD. Our consolidated EBITDA for Q2 FY '26 is INR 192 crores against INR 155 crores in Q2 FY '25, marking a healthy 28% growth year-on-year. We have demonstrated strong operational efficiency by an improved EBITDA margin of approx 24% compared to 18% in Q2 FY '25, and year-on-year expansion of 600 basis points. Our consolidated EBITDA before exceptional item for the quarter has grown by 24% to INR 126 crores against INR 102 crores for Q2 FY '25. Further, our consolidated PAT for the quarter stand at INR 99 crores, a year-on-year increase of 52% as against INR 60 crores in Q2 FY '25. Right margin for the quarter stand at 12.3%, an improvement of $523 year-on-year. The H1 FY '26 confident at standard INR 200 crores against INR 169 crores in H1 FY '25, an increase of 18% over H1 FY '25, indicating a strong and robust profit. Q2 FY '26 stand-alone financial performance. Stand-alone revenue from operations for Q2 FY '26 was INR 593 crores, taking the H1 FY '26 revenue to INR 1,197 crores. EBITDA for the quarter is up by 18% year-year at INR 116 crores as against INR 99 crores in Q2 FY '25, while margin improved 450 basis [indiscernible] for the quarter grew at [indiscernible] year-on-year to INR 95 crores against INR 87 crores in Q2 FY '25. PBT for H1 FY '26 stand at INR 212 crores against INR 206 crores for H1 FY '25. Now come to balance sheet position. Our financial position remains strong and resilient. On [indiscernible] basis, net worth is INR 2,870 crores with a net debt of INR 688 crores. On a stand-alone basis, net worth stands at INR 2,810 crores and cash and cash equivalent of INR 986 crores. We are in process to raise INR 1,000 crores through [indiscernible] issue of warrants by the way of private placement, including to the promoter group. Now come to segmental documents for subject that is H1 FY '26, segment [indiscernible] INR 674 crores, 41% share, mother, INR 522 crores, 32% share; Tunneling and rehabilitation INR 433 crores, 27% share. The tunneling and rehabilitation segment registered robust growth of 75% year-on-year for H1 FY '26. The Water segment revenues remained stable. The Transport segment declined by 30%, impacted by the completion of 2 major projects, Mukarba Chowk-Panipat MCP project, [indiscernible] and Varanasi-Aurangabad project, which are near to completion. Segment margin, we also witnessed margin improvement across all segments. The segmental EBIT margin for H1 FY '26 stood as follows: Transport, 26%, water, 28%; tunnel and Rehabilitation 21%. The margin improvement this quarter is on account of our diversified project portfolio, continued emphasis on cost control and execution excellence. Overall, our results demonstrate resilience and strengthening profitability with a solid balance sheet, streamlined operations and robust pipeline of opportunities. We are well positioned for sustained growth and long-term value creation. Thank you very much. Now I hand over call to Mr. [indiscernible] . Thank you. We can go for question-and-answer session.

[Operator Instructions]. The first question is from the line of Sarvesh Gupta from Maximal Capital.

So sir, I had 2 questions. So what we are seeing is a tremendous margin expansion across all verticals, and this is much higher than what we used to previously report. So wanted to understand what are the sustainable margins that are being reported right now?

So the question is about margins. Yes, there is an increase across all segments because of operational excellence. There is some increase in the margin because Aunta-Simaria project has completed and it's operational and contributing to the EBITDA margins. The -- although we foresee at least for the next foreseeable future that these margins, what we are reporting right now may continue. But however, on an overall level, we do not change our guidance, which we have always maintained, it will be around 18% of there.

Okay. And sir, on the road projects, now we have brought in a very large project. So wanted to understand from when it will start contributing to our revenues and how much can be booked in FY '26 and FY '27 from these 2 large projects that we have received.

So talking about the large project in transportation, it's a BOT project, and it is still not awarded to us. We are hoping that it will get awarded shortly to us. As you may well know that in the BOT project, the first 6 months are supposed to be for financial closures and closures of other requirements. So we do not see -- foresee much of a turnover in this 6 months other than the expenses and other things incurred on the shifting of the utilities and enabling costs and design and engineering costs in this project. So it shall contribute a bit towards the bottom line -- towards the top line in the FY '26, but we do not see that to be substantial. FY '27 is when we see the project becoming fully operational and contributing to the top line as well as to the bottom line. Coming to the Panjrapur project, it is a design and build project. It will -- the first few months or quarters will go in its design and its approval. I expect it to start contributing substantially to the revenue in FY '27. However, we would expect minor contribution within the Q3 and Q4 from that project as well.

[indiscernible] we have already covered what we had guided for the order inflows for the full year. So if you can shed some more light on an updated guidance for order inflows for this financial year? And also throw some color on what is happening on the road project, while we have got in one large project, but at the industry level, we haven't seen much of orders coming in against the expectation of any orders coming from NHAI, et cetera. So if you can throw some color on the industry ordering on road as well and also our order inflows for the remainder of the year?

Thank you for reminding that our guidance on the order book of the financial year is almost -- we are already there in the first H1, which is a good sign. We will continue to pursue orders in the remaining period of the year depending upon how the governments move, we would expect more orders to come in. However, I would want to refrain from giving any guidance at this point in time of the order book that we will build in the next 5 months. I also would want to say that, yes, there is a bit of a slowdown at NHAI currently, but their targets within the FY '26 awards remain strong. And I expect as soon as the models of BOT are agreed of the revisions that the government is making as well as the HAM, I expect that it will open lot many projects will get awarded at the center. States are progressing as per the plan. So I do not see any major challenge in order book for at least us with a company which is -- which has a strong balance sheet and is not playing in the EPC market per se, I do not see a challenge in booking orders in the transportation.

The next question is from the line of Radha from B&K Securities.

Congratulations on good performance and also the L1 and LOI received in this quarter. So sir, my first question is the EBIT margin, both for the road and water seem to be higher towards the completion of the project as compared to the beginning of the project. So please help us understand why it is in this way and how to see these margins during the construction period of the project.

Radha, thank you for this very insightful question. As I had earlier spoken, I would repeat myself, the way the company operates is a conservative accounting principle. We do create contingencies at the start of the project, which depending upon the risk perception that we have. And as the project gets -- starts to get completed, then only we release the risk or when we have mitigated the risk in totality, we reduce this contingency towards profit. So in most of our projects, you would find that [indiscernible] the project, the margins improved a lot or a bit depending upon the [indiscernible] get consumed. Also, as a prudent policy, we book all the costs that we have incurred on the claims or change of scope, but do not account for them until unless we receive the order or a claim, which also sometimes depresses our reported profits. However, we stay within the prudent guidelines of accounting.

So on the road, this quarter, the margins have gone up because of -- primarily because of demobilization of the [indiscernible] Project. So is it fair to assume that when the Pune [indiscernible] project commences, so initially, the overall margins for the road segment will be lower because of the points that you just mentioned and then it will increase gradually. And would we -- should we consider 17%, 18% EBIT margin for as a sustainable margin?

Yes. So when we announce our margins, we do not account for the contingencies. So yes, initial phases, the -- any road project would see similar margins in our case. And if we are able to save on the contingencies or we do have certain change of scopes of claims, this shall help us in reporting better margins towards the end of the project.

Okay. And sir, in WMEL, what is the utilization level currently? And how does the margins differ between tunneling compensation and rehab?

So almost margins for the tunneling and rehabilitation almost 20% -- 22%.

So their margins are practically in the similar range, which are between 20% to 23% depending upon the segment. So there is no substantial difference between any particular vertical. But going forward, we do anticipate that their margins in the tunneling will improve because the scales of tunneling are changing as we go forward.

And sir, what is the utilization level currently?

What utilization are we talking about? Utilization of machines.

Yes, sir.

Utilization of machine, we are almost close to 100% because all our investments are majority in the tunnel boring machines, which are occupied fully on the project.

You mentioned that margins will improve because of the scale. So if we are at 100% utilization, I'm unable to [indiscernible] please help me here.

So the way to see it is that as you have larger projects, your mobilization, demobilization, your overhead, your cost of management bandwidth, your substantive costs get a portion on a larger revenue and your TBM, which is a large cost element is also a portion over a larger revenue. So and reuse takes place of the machines which are coming off the projects, which are currently occupying them and reuse creates a lot of value. So we do believe that as we move into larger and repeatable orders, the margins on the projects will improve substantially.

So also, we will be adding a machine for the new project, Dharavi-Ghatkopar. So we appreciate your comment and insight about 100% utilization. But for specialized projects, which require special diameters, et cetera, we always add capacity. So for the upcoming Dharavi-Ghatkopar tunnel, we are actually adding a machine.

So at peak, if we are doing now 22%, 23%, so during the point you mentioned that peak, should we assume 26%, 27% kind of margin potential from this business?

Yes, there is a higher potential in the margin for sure. Putting a number at this point in time would be not appropriate for us. So there is a potential improvement in margin as it unlocks as the orders become repeatable and larger, we shall surely share the development as it evolves.

Okay. Sir, on the receivables front, if we exclude the receivables and the concession agreement, your total current and noncurrent receivables is at INR 220 crores -- so is this entirely from the UP JJM project? And also for this project, I believe about INR 500 crores is unexecuted. So do you expect to complete this by year-end? And hence, when it is completed, it will get added to the receivables?

So the assumption in your question is that there will be no payments from -- coming from UP JJM, which is not the assumption that the management has. We do believe that this issue should resolve going forward in a few months. Now coming to your question, what are the receivables from UP JJM, it is true that the receivables stand between INR 200 to INR 220 crores exact numbers, I'm not right now able to give to you. However, we do believe that there is an assurance at the highest level, including at the Chief Minister level to support these projects going forward. So we expect the payments to come. And yes, there is still a substantial work balance, which we do not expect to complete within this financial year, but we expect to complete in the next financial year.

[Operator Instructions]. The next question is from the line of Riddhesh Gandhi from Discover Capital.

Just a quick question. So given we still have like almost INR 1,000 crores of cash on books and given ultimately, we are looking to potentially also actually monetize the oil and gas, which should again lead to a reasonable amount of cash. Just wanted to understand the rationale of raising capital right now, especially given the strong growth prospects, which still aren't reflected in the stock price right now.