Ceinsys Tech Limited (538734) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Ceinsys Tech Limited Q1 FY '26 Earnings Conference Call, hosted by Arihant Capital Markets Limited. [Operator Instructions] Please note that this call is being recorded. With this, I now hand the conference over to Ms. Jyoti Singh for opening comments. Thank you, and over to you, ma'am.

Thank you so much. So, hello, and good morning to everyone. On behalf of Arihant Capital Markets Limited, I thank you all for joining into the Q1 FY '26 Earnings Conference Call of Ceinsys Tech Limited. Today, from the management, we have Mr. Prashant Kamat, he is the Vice Chairman and Chief Executive Officer; Mr. Surej KP, CEO Designated, Non-Executive and Non-Independent Director; Mr. Kaushik Khona, he is the Managing Director, India Operations; and Dr. Abhay Kimmatkar, he is the Managing Director. So, without any further delay, I will hand over call to Mr. Kaushik Khona, Managing Director, India Operations, for his opening remarks. Over to you, sir.

Thank you, and good morning, everyone. It's a pleasure to welcome you to this earnings conference call for the first quarter of the financial year 2026. Let me at the outset thank our host for today's con call, [ Mrs. ] Arihant Capital and Ms. Jyoti Singh in particular.   In the interest of some of the people who may be new to the company, let me first start by giving you a brief overview of the company and then follow with the performance highlights for the quarter under review. Ceinsys Tech has been recently rebranded to CS Tech Ai, while the corporate name remains as Ceinsys Tech Limited. We are a leading technology solution provider in the IT-enabled sector. We are acclaimed for our expertise in geospatial engineering as well as other engineering services and solutions. We offer a broad range of geospatial intelligence services, including data creation, data analytics, decision support system, enterprise web solutions and the like.   In the year 2022, the company strategically expanded into mobility sector by acquiring AllyGrow Technologies, a specialized engineering service provider with a strong international presence. This acquisition allowed the company to enhance its capabilities into manufacturing technology and mobility engineering solutions, covering the entire product development process and industrial automation for diverse sectors such as the 2 and 3-wheelers, passenger cars, commercial vehicles and [indiscernible].   In the year 2024, we acquired a geospatial business of VTS in USA, which was majorly operating into telecom domain. Since then, we are identifying some more targets for inorganic growth to expand our horizons into the domains where the company is already operating, that is geospatial and engineering services and technology solutions, for which the company has already mobilized almost USD 28 million. We serve prestigious global [ client ] that include large corporates, OEMs, asset management companies, and government bodies, highlighting its robust reputation in both the geospatial and manufacturing sectors.   With offices in India, the United States, United Kingdom, and Germany, [indiscernible] local expertise with a broad international reach. Additionally, the company is venturing into software product development and emerging technologies through a new vertical focused on artificial intelligence and machine learning and embedded electronics. This vertical emphasizes development of AI and ML-enabled applications and solutions to enhance our delivery for the existing domains at the outset, reflecting the company's commitment to innovation and maintaining a competitive edge in a dynamic technological landscape.   Now let me come to the highlights of the financial and operational performance for the first quarter ended 30th June, 2025. For the quarter under review, our operational revenues grew by 112% year-on-year to INR 157 crores, EBITDA grew by 130% year-on-year to INR 30 crores and EBITDA margins were at 19.35%, which were also higher by around 140 basis points as compared to the year -- the first quarter last year.   The net profit was reported at INR 32 crores, a growth of 166% year-on-year and the PAT margin stood at [ 20.18 ] %. The growth in both revenue and EBITDA margins was driven by successful execution of projects which have contributed to stronger margins. Additionally, our ongoing initiatives to improve operational efficiency have enabled us to manage higher volumes more effectively, further boosting our operational performance. The results reflect the amalgamation of 100% subsidiary, AllyGrow Technologies Private Limited, effective April 1, 2024, as approved by the honorable NCLT, while the -- that tech company was previously consolidated, and which helps the merger, therefore, streamline the reporting.   The company reported strong growth in geospatial engineering services and technology solutions business, driven by a focus on water, IoT and enterprise solutions. As of quarter end, it holds an operational cash surplus of INR 127 crores. As on June 25, the total order book stands at INR 1,209 crores. A key highlight of quarter 1 is the company's highest ever quarterly performance, marked by a record revenue and EBITDA.    Execution of technology solutions projects saw a [ INR 2.74 crores ] increase in quarter 1 of this year, rising from INR 31 crores of the quarter 1 of FY '25 to INR 84 crores in this quarter, underscoring robust demand and improved delivery capabilities. The contribution of technology solutions to total turnover rose from 51% in Q4 '25 to 54% in Q1 of this year, highlighting the company's strategic emphasis on high-value digital initiatives.   An investment of INR 10 crores this quarter has been towards business development for U.S. market expansion, which is also expensed out through the profit and loss account in this quarter 1 of '25-'26. The employee cost as a percentage of revenue declined to 23% in this quarter from 35% on the corresponding quarter of last year, highlighting improved operational efficiency.   We added major contracts secured during this quarter, which include an MMRDA contract worth INR 115 crores for being -- for selection of system integrator to monitor its infrastructure projects. We also added project management consulting project for around INR 11.5 crores and an Autodesk software development contract of INR 5.5 crores from MMRDA. These contracts reflect the breadth of our capabilities and continued success in securing significant projects across various domains.   We are focused on driving growth and continuing to deliver our commitments. We remain optimistic about the future and look forward to give more updates as well. With this, now I open the floor for question-and-answer session. Thank you.

[Operator Instructions] The first question comes from the line of Garvit Goyal from Nvest Analytics Advisory LLP.

Congrats for decent execution in this quarter. My first question is, in previous call, we did speak about some big orders worth more than INR 200 crores, INR 250 crores, to be received in 1 month or so. Since then, we did not receive this much order that we mentioned in the earlier call, while we speak about quarterly pipeline of INR 300 crores to INR 400 crores with 70%, 80% success rate. So I want to understand from you, what is [ poking ] us to get these orders? I agree that we can't look on quarter basis, but now it's almost 2 quarters where we did not get some major orders that we guided for. So I just want to understand what is the actual picture on ground level? So that's my first question.

This is Prashant. Let me try to address this and request Kaushik to add some more flavors. The major orders we were anticipating were from Jal Jeevan Mission, which was government scheme. But probably you know government decided to take a stock of the situation and they wanted to do the audit, the entire program of Jal Jeevan Mission. And that's where they put everything on hold. And some of the results are also affected because of that.   I guess that audit is coming to the -- towards the [ fag ] end, almost finishing and that pipeline should open now. So the guidance got delayed, it didn't vanish. That's the broader picture.   Kaushik, do you want to add something more?

No, that's correct. I think that's fair. I mean it's -- and the guidance given was valid and continues to remain valid. I think that's what Prashant ji said. Next question, please.

So can we expect orders in Q2?

Yes, we do expect the orders. Putting a timeline will depend on how fast government moves in terms of this -- removing that lock on the Jal Jeevan Mission. As soon as that happens -- we are already in -- I would say, in terms of qualification and the winning probability, we still remain at 80%, which we had told you long back. But unless government clears that for moving forward, it will be very imprudent on our side to put a definitive timeline.

Got it. And secondly, on the Vidarbha River linking project, while we were looking to execute INR 150 crores worth of contract this quarter, it seems like it did not materialize. So what is the current update on that, sir? And how much did we execute in Q1? And by when do we see the completion of this project?

This project we started already execution. The number is nowhere close to INR 150 crores. Again, it's not because of us. We are fully ready -- cranking to go. But because government wanted to systemize some of their side of the [indiscernible], the project took off slowly. Also, I think we did close to about INR 30 crores, INR 35 crores of order execution. So there is a large part of this order will get executed in coming months. But what we anticipated on river linking, we were able to do it from other projects. So our results still remain good.

Got it. And lastly, on the inorganic opportunities part. Last con call you mentioned about 2 opportunities where due diligence was expected to be completed by the month of May or June. So what is the update on that, sir? And anything material happened on that side?

Both of the things are moving pretty well. But you would probably appreciate that it is a M&A. So, timeline typically doesn't stay as optimistic as we would love to. Therefore, it will go back and forth. But both are positive, both are moving in good direction and both are at the stage of due diligence.

Understood. And how this quarter is going on, sir? Can we expect Q-on-Q growth like last we guided for, like where we will be growing Q-on-Q basis?

As we have always said, no forward-looking statements. We can tell you that we don't see any momentum reduction. We will continue to maintain our momentum.

The next question comes from the line of Shubhankar Gupta from Equitree Capital.

First of all, congratulations on the great set of numbers, really good results. There are 2 questions from my end. First question is on the segmental revenue split. And how I categorize [ geospatial ], first, let's say, between water, auto [ using ] AllyGrow, what is the segmental revenue split for this quarter and for last financial year? That's one question. Second question is split between orders from domestic, international, and then within domestic, government versus private split?

Kaushik, do you have any...?

Yes. So, I think the segmental split is already published where the geospatial and engineering services have contributed to almost INR 72 crores. The technology solutions have contributed almost INR 84 crores. And when we talk about the split between government and the organization, the domestic is more or less -- I would say, 85% of the domestic turnover is from government, 15% remains from the private corporates. On the export and -- sorry, the international revenue and the domestic revenue, this quarter we had an international revenue of around INR 7.5 crores out of the total turnover of INR 156 crores.

Okay, sir. Got it. Sir, actually, from the -- and second question is clear. In the first question, I was more keen on --   [Audio Gap]

The line for the participant has been dropped. The next question comes from the line of Raj Saraf from Finvestor.

Sir, first of all, congratulations for the [ stellar ] set of numbers. Sir, just wanted to have a reason that if I see the revenue which is in geospatial and engineering services, so it has increased, but the margins have decreased. So what could be the reason sir?

So, Prashant ji, should I take this?

Yes, yes. Please.

So, as I think you must be aware, last time also, we had explained that our focus will be to enhance our margins. And geospatial and engineering services continue to provide the margins as we have been doing in the past. However, our focus of our higher margins business is on the technology solutions. And if you see the overall numbers, the geospatial have been, in this quarter at around 15%, 16%, while the margins for the technology solutions have been in the range of around 30%. And that's where we would like to build up more deliveries in the future.   The split between geospatial and technology solutions is by, I would say, default in the sense the way we execute the projects. The project has elements of geospatial and engineering services, and they have also elements of technology solutions. So the numbers will vary based on the execution of each project, and therefore, segment revenue is guided by that.

Okay. So we are mainly focusing on technology solutions, not on geospatial margins?

We are focusing on both, but obviously, greater focus remains on development of technology solutions, and that can also be seen from the fact that quarter 1 of last year our turnover on the technology solutions was INR 31 crores, and this quarter it is INR 84 crores. So it's more than double.

Okay sir. And the second question is on the order book only, sir. So, we had executed like INR 156 crore orders in this quarter, but whereas the order booking is now slowing down. So -- and you are mentioning that Jal Jeevan Mission is also on hold from the government and there could be a slowdown on that side also. So how could we assess order booking going forward, because without increased orders, we can't see companies going to deliver more growth?

So, Prashant ji, should I take this?

Yes. Let me just take it. Look, our quarterly revenue is INR 157 crores. So, annualized revenue plus growth on quarter-on-quarter basis, you can pick up a number somewhere about -- I don't care what that number exactly would look like, somewhere between INR 600 crores, INR 700 crores. And if you really look at that number and plot our order book, we are always sitting on 2 years of order book as of now, end of this quarter. [ Counted ] for growth, you can say 18 months. So -- and we are almost 100% certain that within this 18 months, we would have our order book much larger than what we are having today.   What I said was there was a temporary hiccup because of this JJM putting everything under audit. It's coming to an end. So we would see orders taking off from here. We don't see any headwinds in that sense for the business, if that was your question.

Also, Mr. Saraf, if I can add. First is, in the beginning of the quarter, our order book was INR 1,197 crores. And as we speak, it is INR 1,209 crores. So there is no reduction of the order book. But you are right that order book growth has been a little slow. While one of the contributors, Prashant sir has already mentioned, we are also -- we have also kind of bid for other projects other than JJ Mission also, which are awaiting the final kind of approval. So we would probably see that happening within this quarter, with quarter 2, quarter 3. So it's not something that order book is not happening. It's only a time gap by which the new orders are awaited.

Sir, thank you very much. Sir, if you can allow me to put single question more?

Yes, please go ahead. One more question?

Yes, I don't think -- Yes, I don't think the [indiscernible] of people have restricted it yet, so you have a choice. Go ahead.

Okay. Sir, how is our subsidiary doing sir, the AllyGrow, which we have incorporated, and how we look at that growth and how it will contribute to our consolidated margin going forward?

Subsidiary is already merged with the parent. There is -- you won't be able to see it that way. But there is the other way if you really look at the numbers. In terms of international revenue, which is probably coming from this subsidiary, has grown almost, like, 20% quarter-on-quarter. It's been good, to answer your question.

Okay. And on the margins sir, margin profile, if I say from the [indiscernible], how it is sir, [indiscernible]?

It's also doing good.

The next question comes from the line of [ Meet ] from Niveshaay.

Sir, I would like to understand the role Surej Sir is playing in this financial year. What kind of initiatives or verticals he is currently involved? And he is directly engaging in any part of acquisition process or leading any new strategic focus area post-acquisition?

Okay. Surej is the CEO Designate for the CS TECH as a whole. He will be taking over from me on January 1, 2026. And until then, yes, he is playing active role in all day-to-day operations as well as strategic initiatives of the company.   If your question is, is he involved on a day-to-day decision-making reviews, operations? Answer is yes. Is he involved in M&A and is he actively participating? Answer is yes. In fact, some of these acquisitions are being driven by Surej personally.

Okay, okay, sir. Sir, what portion of this quarter revenue is unbilled, either in percentage or [ actual ] term?

Sorry, what was -- what did you ask?

What portion of this quarter revenue is unbilled?

Unbilled?

Yes.

Surej? Sorry, not Surej. Kaushik?

This quarter's unbilled percentage will be in the range of around 50%, 51% -- 50% -- around 50%.

Okay. Also, sir, could you update on the cash flow situation? Has the inflow materialized as projected in Q1? Or have there been any delays on side of cash flows?

So, I think -- if I can take, Prashant ji.

Yes.

So I think, we have already explained that there is a cash flow surplus of INR 127 crores. Secondly, there is -- as -- we already mentioned that there is a unbilled revenue, which obviously will be billed once the milestone to bill is available. And therefore, that also will materialize. So, cash flow situation does not seem to be any issue over here. On the overall perspective, the net surplus is what we already mentioned. And even though we have the government context, I think the realization of the revenues are as per the plan.

Okay. [indiscernible] could you provide any qualitative remarks on what are the plans for the international expansion like? And how do you intend to execute them? Just some brief qualitative remarks will be helpful.

I think our international outlook has not changed at all. Our strategy has not changed at all. We will continue to increase international revenue as a percentage of total revenue. And one of the reasons why Surej is coming in, that is his primary mandate to achieve that objective. That will be through both inorganic as well as organic growth.

Okay. And sir, any remarks on the latest progress in the river linking project?

As I said, the execution has started, not at the pace we would have loved, we had targeted, but that's primarily because of the delays from government to set their house in order, not from our end. But it looks like everything is being set correctly. So we should continue to see higher and higher revenues every quarter during the current year.

The next question comes from the line of Akshay from AK Investment.

My first question is, currently, we have an order book of INR 1,200 crores. And I think you have previously mentioned that execution timeline for the same is around 18 months. And about the new order flow, so in FY '26, remaining FY '26, how much can we expect the new order flow in all our categories?

Kaushik, [ you ], please.

So based on the opportunities which we have identified and we have bid and based on the opportunities which we expect to happen, will -- based on the programs which we are following in quarter 2, quarter 3 and quarter 4, we expect that at least we should be able to grab a fresh order book. I mean, this is again subject to the external factors, but our target is to at least get around INR 800 crores to INR 900 crores additional order book during this financial year.

Okay, sir. And sir, my second question was on the -- our cash flow conversion. So our cash from operations in the last year was very miniscule, at INR 6 crores. So how much cash flow from EBITDA we can convert this financial year in FY '26?

So I can talk about quarter 1. Our EBITDA is all converted into cash flow. If you look at the net EBITDA, which is around INR 30 crores, our cash flow accretion has been in the range of around INR 27 crores. So, whatever is earned as an EBITDA is forming part of the actual accretion to the cash flow. We will be able to comment upon the next quarters as we go through.

The next question comes from the line of Deekshant from DB Wealth.

Congratulations on the great set of numbers, management. So first question is sir, do we [indiscernible] have an opportunity of this [indiscernible]

Sir, sorry to interrupt. May I request you to use the handset? Your audio is a little low.

Is it [indiscernible] right now?

Yes sir. Yes sir, now it's better.

Okay. Sir, one thing is clear that there is clear opportunity with Jal Jeevan Mission and the other government projects, but it also seems to be a risk for us, government being the risk. The timeliness of these orders, execution from their end is our risk. How do we plan to diversify this risk going ahead?

Prashant ji, if I can, on the execution part?

Yes, yes. Please.

So, on the government, first of all, we don't see that government as a risk. So that's one thing because we have been in the business where we have been serving government and executing orders of government since last more than 17, 18 years in the geospatial [ area ] itself. And we have never seen any bad debts or any kind of risk, and that's financial risk. Now question is, there would be some delays based on the government process, which is also factored into while we bid for a contract or while we execute. So, whatever kind of known or estimated risk which could have, have already been built in while we project for that.   As regards diversifying, or I would say mitigating, we have always been focusing on those government orders where we know that there is a funding plan already approved. We don't go for those government orders where there is no visible funding. And therefore, we are sure about getting the funds released. It could be a matter of delay of 30, 40, 50 days as compared to what we would have projected, but it is still part of our process.   The -- another way to mitigate is obviously to try to reduce the percentage of the government business in the total, without reducing the actual numbers in the perspective. And that is being planned as a strategy by way of inorganic growth and focusing on international revenue, which I think Prashant ji has already mentioned in this as well as the previous investor calls.

Yes. Sir, firstly, thank you so much for the clarity there. By risk I don't mean that failure of payment. By risk I mean a delay of execution timeline as stipulated by the government, and that is not in our hands for sure. That's uncontrollable for us. Do you think going ahead is there some sort of revenue mix that we are targeting that you can give us some sort of directional guidance towards?  Not specific numbers, but even ballpark would help, let's say, 18 to 24 months from now?

So what we had said -- we didn't give a time line of 18 to 24 months. We had given probably a little longer time line. But what we had said was our current peak is like 70-30 in favor of Government of India. We would like to be somewhere in 60-40, 70-30 in favor of international business to India business. And that's the target in which we are working right now.

Is there any internal time line that we were working with this? Or is it much more open-ended right now?

No, we had said we will target to achieve this within 3 years. And right now that's what we are working towards. That is why M&A [ piece ] is there

That's good to hear, sir. Sir, my last question is on -- directionally, we are looking at next -- the orders that we have built up and you alluded that even if we look at our order book, it's strong and accounting for growth also we have next 18 months of orders figured out. So that's not a problem. And as soon as the international business starts coming in our favor, we will have a larger order book. So where it is that we are seeing a growth accelerator for us? So what is that one thing or those couple of business factors that we are looking in, geography related or client related, that we are accelerating on right now? What are the key areas where we are trying to get these orders from? If you can give us some sort of --

Geography is U.S. [ Actually ] it's the technology business. And once we have those orders, we will explain you a little bit more. But right now, these are the absolute correct bucketed answers.

Is it in the geospatial range that we are looking in U.S.? Or are we looking at our subsidiary business through U.S.?

As of now, both, but largely in geospatial.

Okay sir. Sir, do you -- can you guide us that when can we get more clarity on this next quarter maybe?

Maybe couple of quarters.

Okay. But in this financial year?

Yes, 100% will be [ this ] financial year.