Ahluwalia Contracts (India) Limited (532811) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Ahluwalia Contracts India Limited Q3 FY '26 Earnings Conference Call hosted by AMBIT Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sudeep Bora. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of AMBIT Capital, I thank the management of Ahluwalia Contracts India Limited for the opportunity to host the Q3 FY '26 earnings conference call to discuss the results, I'm pleased to welcome Mr. Shobhit Uppal, Deputy Managing Director; Mr. Vikas Ahluwalia, Director; and Mr. Satbeer Singh, Chief Financial Officer. Now I invite management to discuss key highlights of the quarter, post which we'll open up for Q&A. Thank you, and over to you.

Hi. Good afternoon, good evening, everybody. Ahluwalia Contracts (India) Limited has announced its financial results for Q3 FY '26. During Q3 FY '26, the company has achieved a turnover of INR 1,060.72 crores and a PAT of INR 54.02 crores in comparison to a turnover of INR 951.96 crores and a PAT of INR 49.39 crores during Q3 FY '25. The company has registered a growth of 11.43% in turnover and a 9.38% growth in PAT during Q3 FY '26 as in comparison to the corresponding quarter FY '25. EPS of the company for Q3 FY '26 is INR 8.06 compared to INR 7.37 in the corresponding quarter FY '25. During Q3 FY '26, the company's EBITDA margin is 9.05% as compared to 8.86% in Q3 FY '25 and PAT margin is 5.02% as compared to the PAT margin of 5.11% in Q3 FY '25. During the period of 9 months FY '26 of the company, the company has achieved a turnover of INR 3,242.90 crores and a PAT of INR 184.18 crores in comparison to a turnover of INR 2,882.79 crores and a PAT of INR 118.35 crores during the corresponding 9 months of the last financial year FY '25. EPS of the company for the period of 9 months FY '26 is INR 27.49 as compared to EPS of INR 17.67 during the period of 9 months FY '25. During the period of 9 months FY '26, the company's EBITDA margin is 9.59% as compared to 7.57%, PAT margin of 5.6% as compared to 4.05% in the period of 9 months FY '25. Net order book of the company as on 31st December 2025 is INR 18,679.50 crores to be executed in the next 2.5 to 3 years. Total order inflow in FY '26 year-to-date is INR 9,562 crores. Thank you. We are open to take questions now.

[Operator Instructions] The first question is from the line of Vaibhav Shah from JM Financial.

So firstly, given the margins and the execution in 9 months, so how do you see the annual revenue for FY '25 -- for FY '26, you're targeting around 15% to 20% kind of growth.

No, more like anywhere between 10% to 15%. Margin projection is what I had given last time. It will be double digit. But December, January have been impacted by NGT and project closures in Delhi. And as nearly 44% of our order book comes from Delhi, that's impacted the top line a bit. And we are expecting slight disruption in March also this time because Holi is earlier this time. So yes, anywhere between 10% to 15% top line.

Sir, and for next year?

Next year, it will be 15% to 20%...

Okay. Sir, given the very strong order book and you mentioned that the orders are to be executed in roughly 3-odd years. So can the growth be even higher? Are we being conservative for '27?

Vaibhav, you asked me this every time. We are being slightly conservative. Yes, the order book is -- it was healthy last time around. It's healthier now. We've given a projection of about INR 8,000 crores worth of order book in this inflow -- fresh order inflow in this year. We've crossed that. It's at about INR 9,500 crores. So yes, we are being conservative when we are saying 15% to 20%.

Okay. Sir, secondly, on a few key projects. So when do we expect to start the work on Gem & Jewelry Park?

We will start it in Q1 FY '27. I mentioned last time around also in April, I said we'll start -- the drawings -- approvals are coming in now, and the client is in the process of handing over a part of the site to us. There was an overburden of earth, which was to be removed by the client. They have already done that substantially. And 30% to 40% of the area, they are in the process of handing over to us, which should happen in the next month, and we should start the work.

Any target that we look for this project in FY '27 in terms of revenue?

Definitely. Gem and Jewelry Park, definitely. We are -- as I said, Q1 FY '27, the work will start. Actual billing will start.

Can you do this 30%, 35% kind of execution which you are targeting earlier for '27?

Sorry, come again, 30%, 35%, what? Sorry?

For FY '27, what kind of revenue are we targeting from this project?

Of the total value of the project, I think it would be to the tune of about 20% -- 20% to 25%.

Okay. And sir, secondly, on CSMT, we have seen some weakness in execution in Q3 compared to the month -- quarterly run rate of last 4 quarters. So how do you say for the entire year and for next year?

I think totally, we had projected that we will execute in this financial year, we would be executing anywhere between INR 300 crores and INR 350 crores worth of work on CSMT. And we are confident we will be doing that. The work progress has picked up there. And so we should be meeting that target. As far as the next financial year goes, we should be doing a work of about INR 700 crores there.

Okay. And sir, lastly, one data point. So order inflow number is INR 9,562 crores. So of this, what would be the value ex of GST?

Out of this INR 9,562 crores, INR 603 crores.

INR 603 crores GST value?

GST value.

Yes.

The next question is from the line of Lakshminarayanan from Tunga Investment.

See, when we had a call in the third week of November, we were confident of growth of around 15% to 20%. And did you anticipate that this would actually get toned down to 10% to 15%? Or what actually happened in the last 5 to 6 weeks of Q3? That is my first question. The second question is that one of our key accounts, Signature Global, they called out some bit of slowness in their projects, particularly the Sector 37D Sarvam. I don't know whether we are working on the DLX...

We are working. Yes.

Sarvam DLX we are working?

We are working on DXP, Deluxe. Signature 37D, not the new one. New one is the name that you took, we are not working on that.

Okay. Okay. And also...

I think what they -- sorry to interject, but this is Sarvam -- what was the name that you said?

Yes. They talked about the Project Sarvam, which was launched in December 2025.

They are talking about a slowness in sales there. I don't -- so that's why we are not associated with that job nor have we bid for that job.

Got it. And also a larger question because we have -- DLF is also a large important client. And what is your sense of the entire market? I think last time also, you said that we are somehow ring-fenced ourselves from any particular slowdown or any particular cash issues with any of the developers. Can you just elaborate a bit more on that? So these are my 2 questions. One is that what happened between November 17 to December end, which led to seemingly an underwhelming guidance from where you started. Is there something that really happened? And then the second is in terms of the Gurgaon stuff?

Yes. So first question, this -- as I mentioned to Vaibhav in response to the question that he asked, the NGT impact this year has been -- has been more prolonged, so to say. Since 44% of our order book is from NCR, December and January have been impacted. Even the first week of February was impacted as far as the project closure on account of pollution was concerned. And this time, March, the Holi festival is in the first week of March. So generally, what we've seen in the past is that 3 or 4 days before the festival, the labor force starts going back to their hometown, and then it takes about a week for them to come back. So March is also going to be impacted. That's why we have reduced our projection by 2, 3, 4 percentage points as far as the top line is concerned. As regards ring-fencing or our exposure to the slowdown as far as sales of residential buildings or projects is concerned, I had mentioned last time around that we have now slowed down as far as bidding for further residential projects is concerned, we feel that out of our total bouquet of projects, residential is quite a bit. So we are now focusing on institutional projects or airports or hotels or commercial projects. Residential is not a focus area for us, especially in NCR. Having said that, the projects that we are working on, be it with DLF, as you mentioned, we have not seen any sort of issues with payments. DLF being obviously the premier development company in the country. Even with the likes of SmartWorld or Emaar, all the projects that we are executing were launched more than 2 years ago, RERA being in place, I don't see -- we've not felt any financial issues with all the clients that we are working for on these residential projects in NCR.

Got it. So just to understand, so the RERA ensures that the cash flows are restricted to that project and it is not actually taken out for any other things, right? So it...

Yes. In fact, it also puts pressure on the developer to sort of ensure that the projects are delivered in time. So we continue to face those pressures from developers to execute faster and build faster. And as I said, we've not faced any cash flow issues from these developers.

And just on the NGT thing, right? And it seems to be a recurring phenomenon every year, right? So if that is the case, is it that -- how do we build in, in our growth expectations internally? I mean, how do you realign yourself because this is happening maybe consecutively for the second or maybe third year also. And I mean, we have 44%, 45% in NCR region, and that's something which will be there for the next 2, 3 years also. So is it fair to assume that, that's something which is a given -- and I mean, is there any way in which you can address this?

So you're right, it's pretty much become a part of the annual calendar, especially the third quarter of the financial year. But having said that, because it's become a part now all the constituents of the ecosystem has become alive to it. And we are all constructively brainstorming as to how to mitigate the impact of this, how to sort of sensitize the powers that, be it the courts or the government, be it the state governments or the central government, the impact that this is having on the livelihoods of the workers involved with our industry. And we are reasonably hopeful that in the coming years, this impact is going to be mitigated with the measures that we are taking on the projects to ensure that our -- we are not contributing as much to pollution as the popular notion is. We are sensitizing the governments to this fact also. And the most important point is the -- all of us, be it the developer or be it the contractor or be it the bureaucracy, we seem to be getting aligned on this point. So we are hoping that in the coming year or years, the disruptions are not going to be as much as they have been in the last 2, 3 years. And this year has been a little more peculiar in the sense that right from the festive season, onwards, the disruption started. So -- and now wholly, as I said, is also earlier. So this impact starting from Diwali from October till January, January end has impacted our top line performance.

Just one more question. See, sometime back, maybe a year back or maybe 3 quarters back, you mentioned that there's a nonavailability of workers and especially post elections, you couldn't get them assembled, et cetera. Now I mean, how have you taken -- I mean, have any steps have been taken by the industry or by yourself so that we have -- we will have some UP elections coming next year and so on and so forth. So how do you ensure that the labor availability at the right time, at the right amount is actually taken care of? Or it's still that's a lurking issue at your end?

It's actually a full-blown issue. It's not a lurking issue. And -- but again, the slight advantage of this becoming such a large issue is that, again, all of us are aware of this fact now. It's not -- in the day it's gone by, it was only the contractor who used to grapple with this issue. Now everybody is aware. More importantly, the clients are aware of this. The governments are aware of this. And so what is happening is that there is -- this is leading to greater standardization, wherein we can do a lot of work offsite, use more mechanization to reduce the impact on -- or reduce the dependency on labor. And then training is also something that we've started, but that's in a very nascent stage. Have I answered your question?

The next question is from the line of Parvez Qazi from Nuvama.

So first, I mean, on this NGT issue, assuming, let's say, if it had not been there, what kind of execution would we have done in Q3?

What kind of execution -- we would have stayed on course for a 15-plus percent growth in our top line.

Sure. Secondly, on -- I mean, on the payment, et cetera, how do you see things now, especially from the government departments in some of the other segments of infra, we have seen a slowdown in payments in FY '26. So how is the situation in your government-funded projects?

We really -- a lot of our -- or most of our government funded government projects are central government projects. We are not really seeing much of a problem there. Other than in the odd project here and there, like we're doing a central university project in the state of Himachal Pradesh, which is partly funded by the state and partly by the center. So there, we are facing some challenges. That project is nearing completion. We are hoping to complete it in Q1 of FY '27. So there is a bit of a challenge there. We completed another hospital for the center and state government in, again, Himachal. The final payment there has been stuck for a while. So yes, with the state of Himachal, there is a bit of an issue. And we are also seeing some issues with the state of Assam. I think that's also due to the fact that the machinery there has slowed down a bit on account of the impending elections. Otherwise, we don't -- we haven't seen. All our other slow-moving projects, be it for the state of Bihar or other states, they are okay now. We've got our payments.

Sure. And a couple of data points that I needed from Satbeer-ji. What is our current gross debt level, I mean, gross borrowings?

Gross borrowing is INR 22 crores approximately.

What would be the cash level that we have currently?

Cash balance is INR 253 crores and bank balance is INR 587 crores.

What is the CapEx that we have done in...

In 9 months, we have incurred around INR 193 crores.

Okay. And apart from this order book, are we L1 in any other project?

Yes, we are L1 in both projects. This is amounting to INR 2,485 crores approx.

Sure. Last question, what is the status on the Chandigarh station redevelopment project? Has work picked up there? Or I mean what is the status now?

So Chandigarh station is nearing completion. We are targeting to complete it in Q1 FY '27. The 2 stations, Panchkula and Chandigarh have already been completed, and we have offered the client to take them over. And the platform work is also substantially underway. And as I said, in somewhere by May, we should be completing it.

The next question is from the line of Mahesh Patil from ICICI Securities.

Sir, my first question is on the DLF Dahlias project. I think last time we guided for more than INR 100 crores of revenue in this fiscal and around INR 3 billion to INR 3.5 billion next year. So are we on track for that for this year?

No. This year, it will be about 40% of that because new earthquake codes were put in place and DLF has redesigned or is in the process of redesigning or doing the structural design again. So that is why a lot of work had to be redone, obviously, at the client's cost. So that is why our target is going to be -- our turnover is going to be lesser by March end. But we should be -- post Holi, we should be in a position to take up the work in real earnest. The designs are coming in as we speak.

And sir, what is the estimate for FY '27 from this project?

From Dahlias for the next financial year, it remains what we had said last year.

Okay. And sir, this pollution issue, are we facing any challenges in the current month as well or -- because I think the last...

You're not very clearly audible. Repeat that, please?

Sir, I was asking in the last con call in November, we highlighted that till that date, we were around 11% of margins. So apart from this GRAP issue, anything else that impacted our revenue and margins this quarter?

Primarily it was GRAP only, as I said.

Yes. And sir, was there any impact of this issue in the base quarter last year, Q3?

The impact of GRAP you're talking about?

Correct -- in the last year.

It was there, definitely, but it was lesser since our exposure now has increased to the NCR market.

Okay. So you mentioned around 40% of the order book is...

Yes, more than 40% is now from NCR.

And sir, for next year, if I may ask, what would be our revenue estimate from this NCR region for FY '27? Any ballpark number?

We are in the process. It should be about 40%...

40% of revenue estimate -- okay.

The next question is from the line of Shravan Shah from Dolat Capital.

Sir, a couple of questions and clarifications. So in the fourth quarter, how much are we looking to do kind of revenue, INR 1,400-odd crores kind of a revenue that we are looking at in this fourth quarter?

Yes, exactly. It would be 10% to 15%.

Yes, about INR 1,400 crores, yes.

Okay. And next full year, then we should be doing 20% to 25%?

I said 15% to 20% earlier.

But some recoup should be there in the FY '27, given the inflow is also on the higher side, sir?

Yes, it should be. I had also mentioned that this is a conservative estimate that I think the recovery, what we've sort of lost out 3, 4 percentage points should be made up in the next financial year. That's why I said 15% to 20%.

Okay. And the margin for fourth quarter...

In our project -- just to put things in context, more so with the Central Vista project, which has come in, which is a fast -- which is a fast-moving project, will be a fast-moving project. And that is one project which the Central Vista projects are insulated from the GRAP impact. So that should also contribute substantially to our turnover next year.

Yes. So I was about to ask that only. So this out of this...

I know you well. That's why I preempted you.

So roughly, how one can look at -- so the overall time line for Central Vista is 24 months and in FY '27, can we see kind of a 40-odd percent of this INR 2,600 crores?

Yes, that's what -- initially, there is -- time is going to be taken by designing. It's a large project. It's a very complex project. So designing has already started. We are awaiting clearance from the authorities. These are important buildings which are having to be demolished. They have yet not been vacated. So we should be billing at least 30% plus in this year.

Okay. Got it. And in terms of the margin, Q4 and next year, 10% is doable or we can see even...

Definitely doable.

Okay. Okay. But a possibility towards 10.5% is there for next year?

That's 6% to 10%.

Okay. Okay. And just to clarify this INR 9,500 crores plus order inflow, so this is excluding the GST you're saying?

GST is included in that INR 603 crores.

INR 603 crores.

Yes, is included in the figure of INR 9,562 crores.

Okay. Okay. So if you remove that and broadly INR 8,900-odd crores.

Yes.

Okay. And the L1 that we said INR 2,485 crores, so that is also excluding GST or including?

That is also including GST because most of that government projects and that including GST.

Okay. And so these are 3 projects. So last time we were having the 2 projects, Bhubaneswar University and RML Hospital Delhi.

These are 4 projects.

Can you sir name it, all these 4 projects?

One is RML, one is Odisha University, one is Assam Judicial Complex, one is Kota Airport.

Okay. And lastly, sir, balance sheet details, inventory, debtors, trade payable and mobilization retention and unbilled...

Debtors are INR 638 crores and retention INR 431 crores, mobilization INR 729 crores, [indiscernible] INR 738 crores.

Sorry, INR 738 crores is what?

Creditors.