RITES Limited (RITES) Earnings Call Transcript
August 5, 2026
Earnings Call Speaker Segments
Good morning, ladies and gentlemen. I am Karthikeyan, moderator for the conference call. Welcome to RITES Limited Q1 FY '27 Post Results Conference Call. We have with us today, Mr. Rahul Mithal, Chairman and Managing Director, RITES Limited; Dr. Deepak Tripathi, Director, Technical; Mr. Krishna Gopal Agarwal; Director, Finance, CFO; and Mr. Prem Singh Meena, Director, Projects. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to Mr. Rahul Mithal, CMD, RITES Limited. Thank you, and over to you, sir.
Good morning, everyone. Thank you. Let me start with the safe harbor statement. The presentation and the press release, which we uploaded on our website and exchanges yesterday and discussions during the call today may have some forward-looking statements. These statements consider the environment we see as of today and obviously carry a risk in terms of uncertainty because of which the actual results could be different, and we do not undertake to update those statements periodically. Let me give you a brief overview of the quarter 1 performance, the way we see it. We are quite upbeat and confident in the way quarter 1 has panned out in terms of the road map, which we have set ourselves at the beginning of the FY. And that, as you recall, was primarily that we all-time high order book of last year starts generating revenue. And we touch -- we have a substantial growth Y-o-Y in the overall FY. So having said that, the -- while the quarter 1 has been in Y-o-Y good growth of 9%, 10% and bottom line also about 8%. We need to really step on the gas and keep on improving the execution over the -- sequentially over the coming quarters so that the entire FY is as per the guidance, which I laid down at the beginning of the FY of having a substantial growth vis-a-vis the last entire FY. So that in a nutshell is how we see the performance of Q1 and the quarters going forward. And I'll go into details as I answer specific questions.
[Operator Instructions] We have the first question from the line of Mahesh Solani from. The next question comes from the line of Vipul Kumar from Narnolia Financial Services.
So my first question for opportunity first. So my first question was regarding the export side. So as management, as the revenue recognition will start from 1st July 2026 from the Bangladesh product. So what was that why the revenue recognition was not coming in the first quarter?
Yes. So Vipul, in our export business, as you would be aware, the revenue recognition happens in the entire stock that is whether it's a bunch of locomotors or in case of coaches, Bangladesh order, the entire rate of 20 coaches is spent as a group. So while the coaches are getting ready in bits and portions, the entire rate will be shipped out in the next 10 days. The why it did not happen in Q1 because -- you see this is the first rake and has about 4 types of coaches. If you recall my last call, in fact, I had mentioned that the prototypes have got approved and the March production has started. So basically being the first rake in terms of the approval of the final rake has taken a few days and now the rake is in the final stages of being dispatched. And we foresee that the subsequent rakes should take a little lesser time per rake because of the designs now getting approved and accepted.
The next question comes from the line of Vishal Periwal from PL Capital. .
Sir, with respect to export order, can you give the breakup of orders which is pending from Bangladesh, Mozambique and others?
Yes. So the -- we have an export -- total RITES order book, let me include both the export and consultancy is INR 2,100 crores. Out of that, about INR 70 crores, INR 75 crores is the export of rolling stock. And out of that, about INR 900-odd crores is the order from Bangladesh, which is about 200 coaches. The rest of the orders are for locomotives, both from Mozambique as well as the in-service locomotives, et cetera, from the various countries in the African geography. So broadly, if I total, it's about 50% of the export order book is for the coaches to Bangladesh, and the balance is for the locomotives.
Okay. And in terms of variation could be the revenue looking on a quarterly basis, but in terms of our time line, Bangladesh, can we conclude all our order deliveries this year? And second, Mozambique, will it start anything this more to move to FY '28?
So in terms of Bangladesh, these are 200 coaches, so roughly about 10 rakes each. The first starting now in this month, we will not be able to complete all the 10 rakes this year. Contractually also, we have time till next year, and we foresee that -- yes, it will definitely gets completed in the next FY. The coming quarters will tell us how many maximum we can push in this because the first rake, once it goes and stabilizes, it will hasten up the speed of the subsequent rakes. But definitely, yes, it will get completed in next FY, maybe somewhere the early second or maybe third quarter of the next FY. As far as the locomotives are concerned, the Mozambique, yes, we are trying that maybe by the end of this FY, we could aim for beginning of the deliveries, but again, a little more clarity would happen maybe by end of Q2 in terms of the flat visibility, while we are trying to start some deliveries by end of this FY.
[Operator Instructions] The next question comes from the line of Uttam Srimal from Axis Securities.
Sir, just wanted to know how much revenue we are expecting from export side this year and the next financial year.
So our assessment is that this year, export, we should try and achieve at least INR 300 crores plus. As I said, the coming quarters will -- maybe by end of Q2, we'll get a little more visibility in terms of progress and being able to aim for some starting of delivery on the Mozambique locomotive order as well as the gap between the successive delivery of rakes of the Bangladesh order. So the first rake as it goes in the next few days, and it stabilizes there in the coming weeks will give us a clarity on the gap between the successive rakes. So maybe by end of Q2, we'll be able to further fine-tune the figure, but definitely not less than about INR 300 crores for this FY.
And sir, as you've said this order has been exhibited in the 2 years. So can I can mean that in next year will be a bigger part of the revenue.
Yes, for sure. So both the export of rolling stock and the project consultancy arrives with this order book, which is at INR 2,100 crores as of 30th June. We are aiming that this year, it should account for roughly about 15% out of my total revenue. And as the quarters progress and more clarity emerges on the exact quantum, which we can achieve this year, for sure, as you correctly predicted that the current order book, which we have should, by and large, get covered in the next FY. And that is the reason why we are aiming that we continue to get fresh orders also, which also 1 order, 1 export order, which we are trying this year, this quarter also we got it, quarter 2 also, we've got on order, which is not currently included in the order book and declared to the exchanges. So while the -- as you correctly said, the current order book will aim to definitely finish by next year, there will be a fresh addition in the coming quarters.
Next, we have a follow-up question from Vipul Kumar from Financial Services.
As we see Vande Bharat going global. So what is the opportunity looking for the company in that adaptive?
I'm sorry, please repeat your question? I didn't get it.
As we see Vande Bharat is going global. So what is the opportunity looking by the company in area?
Yes. So we have already initiated the possibility of exploring exporting Vande Bharat on the standard gauge platform to certain geographies. We have reached out to certain possible countries, which have evinced some interest in it. The process of trying to develop a prototype on the standard gauge platform, the initial discussions with Indian Railways have already started. And I think in the coming months, this will gather pace in terms of developing the first prototype on the standard gauge platform.
The next question comes from Laxminaray GK from Shemwell Private Limited.
Sir, could you throw a light on projects. I see the margins are very low. Is it usually that there or is there something else going there?
Yes. So the turnkey is about 50% of the order book and it contributed roughly about 30%, 33% of the revenue of this quarter. Basically, they always remain in the range of about 1.5% to 2%. We are very clear. We -- as we have said earlier, we are not a construction company. So we are not -- we are a consultancy company. And the turnkey orders also that we take, the scope of work for us these turnkey order is the same as the PMC work which we take. So it's just that the method of account, let's say, for explaining if an order is -- if a project is INR 100 crores and the, let's say, the piece is INR 5 crores, consultancy, our order value in a turnkey model, it would be INR 105 crores, where the revenue sits through our P&L. So that's the only difference. And that's why being the denominator being bigger, the margins become smaller. So that's -- but certain clients prefer to give it on that model because of dealing with a single entity. And strategically also, that's why we take it in that mode. So yes, you're correct, the margins are much, much lesser compared to the consultancy mode. .
Okay. So like are base like in order book personal we taking the whole base or later part is going to come?
Yes. So order book also, the size of the order is -- the full order of, let's say, INR 105 crores would be the order in the turnkey mode, and if it would be in a P&C or a consultancy mode, it would be INR 5 crores. So that's the way it's accounted in the order book also.
[Operator Instructions] Next, we have a follow-up question from Vishal Periwal from PL Capital. .
Sir, in terms of new opportunity, 1 is into consultancy aging to export. Can you give some color how is the environment looking like any big pipeline or that can further take our order book to almost maybe more than INR 10,000-odd crores or what we have been seeing. So can you give some color around this particular point?
Yes, the total order book or export in particular?
Yes. Yes, consultancy and how the opportunities are exposed?
So you see this quarter also, we have got 128 orders totaling to INR 670 crores. And we maintained the strike rate of 1 plus, which is nearly 1.4 orders a day. And again, despite the execution, the order book has grown. So we are now at INR 9,450 crores. And our target of achieving INR 10,000 crores -- and the interesting thing is that about 70% of this fresh orders are on a competitive basis. So while we continue to get orders, we are getting them even on -- a bulk of them on a competitive basis. So whether it is consultancy or export, we are getting orders at the rate that we have envisioned. And we are on track of reaching the INR 10,000 crore order book despite heavy execution aimed for this FY. .
Okay. And in terms of new opportunity and anything that you are seeing, I mean, a size-wise export side, how things are? So the brief you've been mentioned on the Vande Bharat. So anything that the quantification can be provided, sir, how are the big items are looking like?
So in exports, specifically, again, we have been maintaining now nearly for about 7, 8 quarters the aim of one order of quarter of export. And this quarter also in July, we have got an order for about 35 million for 9 locomotives to South Africa. We haven't yet accounted for it -- when we declared it to the stock exchange, we haven't yet accounted for it in our order book because we're waiting for the formal agreement to be signed and then we will account for it in the order book. So in terms of getting orders on the export front, whether there are a number of bids that we have bid now. And as you are aware now, most of the export orders are on competitive global tender bidding. So we have bid up for a number of orders, both in the locomotive front, the coaches, DRUs, et cetera. And I'm sure that we are targeting to maintain at least export orders of 1 order a quarter besides in the project, international project consultants also there are a number of bids in the pipeline and combined the order book of INR 2,100 crores of RITES on 30th June is definitely aimed to even with execution not get depleted over a period of the coming quarters.
The next question is from the line of Ashit Kapadia from Elara Capital.
Congrats for a good recovery in the revenue. Just wanted to get your head on the margin end, sir. We are seeing margins probably coming down both sequentially as well as on a Y-o-Y basis. Do you think have we hit the bottom? Or is there a possibility that you can further see margins to be...
So see, broadly, if I lay down while the execution is happening and the young order book will continue to generate revenue sequentially, as I took out in the beginning we will step on the execution. There are probably 3 elements, which are definitely contributing to the overall stress in the margin. The first is definitely, as you see that since about 70% plus are on competitive mode. The -- as they generate revenue in the coming quarters, these have been taken definitely at a more tougher margin. So the overall mix in terms of margin, whether it is from consultancy or turnkey that they will obviously add a stress to the margin. The second element is the travel. So being a consultancy organization, both domestic and international travel is a major element. And the -- there is definitely a pressure on the travel costs, while we've got very strong guardrails foot on it to keep a check on it. But yes, that is definitely contributor, which has to be kept on watch. And the third element is that the impending payer revision has to be definitely accounted for somewhere down the line. So broadly with all these 3 in a nutshell, the EBITDA margins will always be under pressure. But as you see, we have been giving a guidance that on a console basis, our red lines are not coming below the 20% EBITDA margin. And even this quarter, we've been able to hold on to 22%. Sequentially also, we've held on to 22%. Q4, Q1, PAT margins, we've held out to about 17% sequentially also. So our red lines of 20% EBITDA margins and 15% PAT margins on a consol basis. We would definitely strategically pushing on the execution of some higher-margin orders out of the 700-plus order that we are executing. We will ensure that we don't go below the red lines. So specifically to answer your question, yes, these are -- these 22% and 17%, which are there currently on a consol basis. while they may fluctuate a bit here and there on a particular quarter. But as I said, on an annual basis, we will definitely not allow them to go below the red lines.
[Operator Instructions] We have the next question from the line of Parimal Mithani from Prudential Investments. .
Observation since last 2 years, so if you see the order book build up, mainly, I think the consultancy since we got into competitive bidding, the consultancy of the order have been on not on a great level compared to the turnkey side. Is there a -- how do we look at it we can answer that quite much better for us?
Yes. No, you see it's not really that it's not on a -- the mix, yes, it is changing if you see that. If you compare on 2 years back, the number of -- the quantum of the turnkey order was much lesser. Now it's about 50% of the order book. So that is why you incrementally you see a bigger increment. But in terms of the total order, today, also out of INR 9,450 crores about INR 4,700 crores is turnkey. And the balance, about INR 4,700 crores is both the project consultancy and the export consultancy export holding stock consultancy. So roughly, it is now 50-50. So in the pure consultancy, the export of rolling stock consultancy has grown up -- has grown quite substantially. Yes, as I again said, that the turnkey element now has grown at a much larger percentage. So you see that as a bigger growth.
Okay. And sir, in terms of since we clinical competitive bidding, the margins on the domestic fund will be the same going ahead from this from Q1?
Yes. So the margin, as I said, on an overall by case to case, since a large number of 70% order as I said, fresh inflows are on a competitive basis. The case to case, there may be tougher margin, but in overall EBITDA margins of 20% plus is what we are aiming to be maintained. We normally at beginning of every quarter or every half year, we are able to prioritize the -- some of the high-margin orders, along with the low margins, et cetera so that on a blended basis, on a quarter, we don't fall below 20%. And that is what we're going to definitely try and maintain.
Next is the follow-on question from Harshit Kapadia for Elara Capital.
On the employee cost, what is the increase that 1 can expect in FY '28, sir? .
So, Harshit, if you see a quarter-to-quarter -- sorry, Y-o-Y basis in Q1, there has been an increase of about INR 10-odd crores in the employee cost. And we would -- roughly, this is the trend on a per quarter basis is what we do. There are 2 elemants to it, which is to be seen in perspective. If you compare Y-o-Y, Q1 to Q1, there has been a net increase in our employee strength of about 450 numbers, which is a huge jump from about 2,675, it has gone up to about 3,125. So roughly about 450 numbers is a jump, and that's conscious because as we were early last year step up on getting new orders, and we were confident seeing the bids in the pipeline that we will get an order at -- a fresh order at the strike rate of 1 order a day. We had to build up our best strength for keeping -- executing these orders. And that is the reason why we could not have a gap in hiring the bench strength and then executing the orders. So there is a substantial increase in the numbers. So that is number one, which is contributing to the increased cost. And even now, with the fresh orders coming, there is a pipeline of about 200 plus for further inflow, and this will keep on increasing as we strategically on the sector that we get more orders. And the second element is brought out is that somewhere down the line, we have to account for the impending pay revision, which is expected. So both these elements will definitely have an impact on the overall employee cost on an annual basis this FY. And the answer is that we have to generate as much of top line so that even with the margins we have set the red line, you see an incremental growth in the actual bottom line.
Understood, sir. But would it be right to say at least maybe there will be a 20% increase next year in FY '27, mainly because of the pay revision not just because of the employee cost?
Not really 20%. I would put it more in the range of about 8% to 10%.
Fair enough, sir. This is very helpful. And sir, second question is mainly on the order book. We have seen the order book composition in 50-50 with turnkey being 50% share. Since you are now increasing your order book, the trend towards INR 10,000 crores maybe INR 11,000 crores, 12,000 crores, do you see turnkey as a proportion staying there? Or do you think it's going to increase or decrease? Any color if you can give from a 2-year perspective, that would be a great value?
You see today, as we stand, it's about turnkey about 50% of our order book. It is a low margin contributor. It's in the range of about 1.5% to 2%. So in terms -- it does pull down the margin -- and besides the fact that the consultancy and export are in any case now on or nearly a large chunk is on a competitive basis, so they, in any case, a tough margins. So we are not really very keen on taking much on turnkey basis. But -- more and more, many clients are preferring to give us on a turnkey mode in terms of dealing with a single point of contact, for compliance is GST provisions, et cetera. So strategically, it is -- we have to take certain orders and turnkey to keep the clients pipeline open. And that's the very reason why -- but we definitely will -- because the parallel growth in the consultancy and export is also there in the pipeline. So I don't think over a period of time, I see the turnkey being more than 50-odd percent on an average basis of the total order book.
[Operator Instructions] We have a followup question from Harshit Kapadia from Elara Capital.
I don't know whether you've answered this question, but would you be able to share within the consultancy, how much is the QA revenue in this quarter, sir?
So QA has been again, a good, good, steady growth. And if you recall, last FY, we touched the levels which we had touched about before the competitive of about 2 years back. So we touched an all-time again. And we are on track again, so it's about in the same range of about INR 70-odd crores.
Okay. So run rate is very...
We will definitely past the previous year's overall at least by a double-digit growth.
Next, we have a follow-up question from Parimal Mithani from Prudential Investments.
Sir, just, you did an update on the RMCL business. And second, sir, are we going to...
I lost your second question -- second part of the question, the voice cracked.
Yes. Sir, first question is on the RMC business, which is there. And the second part is in terms of dividend payout over the next 2 to 3 years, sir? Do we maintain the same momentum going ahead?
So let me tackle the second part of your question. I don't see any reason why you should have any doubt on that, the last 2, 3 years' trends I've assured you that we do not come in for any surprises and changes in our business model. And having said that, we are always 90% plus. So I don't foresee any -- will not give you any surprise in the change in our basic business model. Once there is no major change, we can -- with the low CapEx and hardly any working capital requirement, debt free, we don't see any major shift in the dividend payout policy. In terms of RMCL, RMCL has been steadily giving good PAT and dividend to us, it's about 50% plus PAT margins. This quarter also, it gave a profit of about INR 22 crores and that's a good dividend payout ratio of about 90%-plus, 91%. So we've got a good dividend of about INR 10 crores from -- and we see this on a steady growth basis. It's also -- last quarter, I had mentioned that this year is a focus for RMCL further diversifying into both international renewable consultancy as well as project consultancy -- I mean, renewable consultancy in the domestic area. In both these fronts, some headway has been made in quarter 1. It's early days, but I'm definitely sure by the end of the FY that will also start contributing in a substantial way in both the top and bottom line of RMCL.
[Operator Instructions] Sir, we don't have any questions. Now I hand over the floor to Mr. Rahul Mithal, CMD, RITES Limited, for closing comments.
Thank you. Thank you all. And just to reiterate that we focus on increased execution eventually to be able to achieve the targets that we had set ourselves for this FY that's the key focus in the coming quarters while definitely not compromising on the red lines of margins that we have set and definitely aiming that we have a double-digit growth on the revenue and have some incremental definitely growth. That's the aim in the quarters on a sequential basis. Thank you. Thank you very much.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using our call service. Thank you.
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