Kilburn Engineering Limited (522101) Earnings Call Transcript

Good morning, ladies and gentlemen, and thank you for attending this virtual meeting. I'm pleased to welcome you on behalf of Kilburn Engineering Limited and SKP Securities to Kilburn Engineering's Q2 FY '26 and H1 FY '26 earnings webinar. We have with us Mr. Ranjit Lala, Managing Director; Mr. Amritanshu Khaitan, Director; Mr. Sachin Vijayakar, Chief Financial Officer; Mr. K Vijaysanker Kartha, Managing Director; and Mr. -- Managing Director, M.E. Energy Private Limited; and Mr. Amol Monga, Whole-Time Director, Monga Strayfield Private Limited. Friends, this virtual meeting is being recorded for compliance reasons. And during the course of this discussion, there may be certain forward-looking statements. These must be viewed in conjunction with the risk that the company faces. We will have the opening remarks from Mr. Lala followed by a Q&A session. Thank you, and over to you, Mr. Lala.

Thank you, Navin. Good morning, everybody. A warm welcome to all to the Q2 2026 earnings call and latest updates on the company and its subsidiaries. In continuation of strong operational and financial performance, in Q2 and its subsidiaries have delivered another round of [good] performance. A brief on the financial is as follows: Kilburn had a top line of INR 114.79 crores for the quarter with an EBITDA of 26.39%. This was a year-on-year growth of around 47% on top line and 48% on EBITDA margin. On a consolidated basis, we achieved a top line of INR 154 crores with an EBITDA of around 27%. As a group, we closed the quarter 2 with an order backlog of around INR 492 crores. And additionally, we have received orders or LOIs aggregating to INR 129 crores from 1st October till date, aggregating to an unexecuted order pipeline of around INR 600 crores. For the current financial year, we continue to have an inquiry pipeline of INR 4,000 crores at group level, indicating a good traction across various sectors. We continue to maintain target of 50% growth in top line over the last year, which is approximately INR 650 crores. The current margin profile looks sustainable, and we expect to close the year with EBITDA in the range of 26%. This, of course, is a result of mix of orders and the scale of execution. With this, I hand over back to Navin. Thank you.

[Operator Instructions] We'll take the first question from [ Dinesh Kulkarni ].

Sir, am I audible?

Yes, you are.

Okay, sir. First of all, congratulations on a really great set of numbers, sir. And we look forward to -- we are definitely looking forward for these kind of numbers and we expect the company to continue on this path. My question is, sir, like we have seen this 50% growth, but do we expect it to continue for the next -- over the next 2, 3 years? What is the medium-term outlook you can expect after consolidation?

Sure. So next 2 to 3 years, we expect a growth of around 25% CAGR. We are quite confident of that. And the EBITDA expected would be in the range of again, 23% to 25%.

Okay. That's really great, sir. And what about CapEx, sir, like for this year and next year?

So we had planned a CapEx of INR 25 crores for the brownfield expansion at Saravali. I think this was mentioned earlier. So we are very much focused on that, and we expect the expansion to complete by end of quarter 2 of next financial year. We're also planning a CapEx of around INR 10 crores to INR 15 crores at M.E. Energy Saravali, which would probably be commenced somewhere in end of next quarter.

We take the next question from [ Kush ].

Am I audible, sir?

Yes, you are. Please go ahead.

Congratulations on a great set of numbers, sir. I just had a query on the increase in receivables. I think it's increased by around INR 75 crores. I just wanted some details on that.

My colleague, Sachin, will answer on that.

See, this last quarter, we have physically dispatched around INR 142 crores. In the last month, that is in the month of September, in fact we dispatched around INR 94 crores, that money will come subsequently. That is the reason for the increase in the debtors. There's a very high number of physical dispatches which we have done. Correspondingly, in the last -- March quarter, we had done just INR 54 crores of this physical dispatches. Again, that we have done around INR 142 crores, hence the increase in these receivables. So this money will subsequently come in the next 2 -- coming quarter.

Right, sir. And I also noticed in the new contract, which you won a couple of days back, there's also a nuclear portion, I think. So -- is there more growth than expected in that area?

Well, we have a couple of inquiries in the nuclear vertical, which we expect to close in next, I would say few months, it would take some time, 2 to 3 months, hopefully. [Technical Difficulty] we have already received a couple of quarters back.

We'll take the next question from [ Naman Bhansali]. We'll take the next question from [Shaila Aditya]. We'll take the next question from [ Mythri ].

Navin, I guess the participants are unable to unmute themselves.

Yes. I've already given them the rights to go ahead. Just a second, please. Naman, can you unmute yourself and ask your question, please? Can we move on to the next participant?

I think the unmute option is disabled.

But they've been the rights to go ahead and ask. Just please go ahead and ask your question.

Am I audible?

Yes, you are loud and clear.

So congratulations on a good set of numbers, Mr. Lala and the team.

Thank you.

One question. The cash flow has increased, the negative -- I mean, still negative and has increased. Is it only because on the account of the late dispatches or something else?

Yes. Principally, it is on account of increase in the sales dispatches, debtors that is -- debtor level, which money will subsequently be received. Also, we have paid our creditors also as well as increase in payment of advances also which has led to this increase. But now with the -- this money is expected in the next 2 months, whatever we are dispatching. So that will definitely improve our cash position.

But even the creditors amount has increased, right? Despite paying some advances?

Yes. Advances, we have paid to creditors. That is what I'm saying. Advance to creditors I'm saying. That also has increased.

And are we getting any advances from any of our clients for any of these jobs that we're doing apart from the...

We are getting, but that is only 10% to 15%. So as compared to the amount of dispatch, that is lesser. That is where this increases appearing here.

And Mr. Lala, you mentioned that your -- like previous calls, you were maintaining that the EBITDA would be in the range 20%, 21%. Today, you are saying that you are -- it looks like we will be able to sustain this 25%, 26%. So do you think that even -- I mean, I'm sure -- I understand for the next year, you've already given a guidance 24%, 26%. So is this on account of better product mix or higher technology product mix? Or are you seeing some benefits because of some raw material or maybe some financials that we've been paying in advance and getting the cost down? If you can just throw some light on that.

Primarily, I would say that 2 reasons have contributed. One is the scale of operations and second is the mix of the orders that we have executed.

Okay. So sir, operating leverage it's worth kicking in this?

And what I've mentioned around 26% would be for the current year. And next year, I would expect it to be in the range of 25%. We will definitely apprise you from time to time.

We'll take the next question from [ Andrey Purushottam].

Can you hear me now?

Yes, we can.

I had a couple of questions. The first is a bit of an accounting question. So your tax over the -- whether you compare half year or quarterly that has gone up, right? So which is why your PAT has not grown as sharply as your PBT and EBIT. So can you just explain what was the reason behind that?

Last year, we had carryforward losses, which got used up by September. That is why we had less tax outgo go last year. So now those tax are -- carryforward losses are over. So we have to pay tax now -- on the entire profit. That is the reason the tax is higher.

So the current incidence of tax is what we should use as predictions going forward, is that you're saying?

Correct. Correct. The nominal tax rate of 25%, 27%, that should what you should consider for.

My second question was on exports. I think Mr. Khaitan had said in some commentary that you have a possible export market to the tune of $2 billion to $3 billion, right? Now if you -- what is the real addressable market here? The $2 billion, $3 billion, maybe a theoretical kind of potential. But if you were to break it down to the territories that you can serve or the products that you can serve or the markets that you can serve, what should we take as an addressable market? And over a period of time, can we say that we are targeting a certain market share, in which case, what could that market share of this addressable market be in terms of additional moolah of this thing that can come into the bottom line?

So [ Andrey ], this market size, which we are talking about of $2 billion to $3 billion, there's no fixed data on this. This is a global estimate. If you see the idea of highlighting the size of the market is to show that Kilburn is relatively still very small in terms of what the global opportunity showcases us. The reason being a lot of markets, especially the developed markets were not open to manufacturing by developing countries like India. But that gradually is now changing and the acceptance of Indian manufactured goods is gaining traction. We do have technology tie-up, which we have got with Nara from Japan. Recently, we've -- and a technology tie-up with Komline, which is a U.S.-based dryer company. So with our in-house manufacturing expertise and knowledge as well as technology tie-up, it is going to open up more opportunities in various geographies. It is very difficult to quantify, and it would not be right to aim for a market share but we can highlight the point that Kilburn export share will go up. Earlier, it used to be around 15% of revenue. We believe this can now be 30% to 40% of the revenue. We had focus on the domestic market, but we are now focusing as well on tapping the export market, where till history shows that we were only focused on repeat customers or relations, which have been there historically with the company. But our recent entry into JESA at Morocco for OCP, our entry into a fluoride company in Korea. These are opportunities which are now coming our way. So the basic idea is that we need to scale up our exports focus and thereby help in growing our top line. So when we are guiding for 20%, 25% top line growth on an organic manner, we will need the export opportunities to frutify to help us achieve that kind of pace going forward on a higher base.

Okay. The third thing I wanted to ask this. Firstly, I wanted to congratulate you on a great set of numbers.

Can you speak up a bit loudly? Your voice is a bit low.

I wanted to congratulate you on a very good set of numbers.

Thank you.

And in that context, I also appreciate the fact that you generally been conservative in your forecasts and you have delivered more than you have promised. That's a very nice sign. Now when we met last in your investor conference, Mr. Khaitan, you had given a guidance of about 40% growth top line for the year. Now you have already achieved 50% growth, right, in the first half. So does that mean -- how should I see the second half in terms of -- how should I say that, you will still stick to your 40% guideline in which case...

So actually, we had upped our guidance to 50% for the full year. We believe we should achieve the 50% top line growth with upward bias. Since we already have a INR 600 crore pending order book, at least 50% of that should get executed in the second half of the year along with some part of new orders, which we expect to get in the next few months. So I think 50% top line, we should comfortably achieve. How much more will it depend on customers, dispatches. Being a project-led business, there are times when our order can spill over from one quarter to the other. But I think 50% is something we are comfortable with for the current year.

And the pattern of consol growth being higher than stand-alone growth will continue?

The consolidated growth this year will be higher purely because Monga Strayfield was acquired in the month of February so that is getting added in every quarter. Recently, M.E. Energy has also got some large orders with our entry into the ferro alloy market. I think that's a very big breakthrough for M.E. Energy and for Kilburn as a whole because in India, waste heat recovery systems for ferro alloy has not been very prevalent. So with us entering this segment, this will open up a large market for us. And if M.E. Energy sees rapid growth automatically, the consolidated numbers will see a higher percentage growth in the coming quarter.

And one last query. Are you planning to be listed on the NSE?

So we are in the process for NSE listing. It's not possible for us to give a time line, but the Board has approved the company to apply for NSE listing.

We'll take the next question from [ Sagar Shah ]. And I guess he's also having some issue. [Samarth Khandelwal], please go ahead..

Am I audible now?

Yes, Sagar. Yes, you're audible.

So first of all, congratulations, sir, for such delivering such numbers in such a period in really, especially in this uncertain period, actually. So Kilburn has definitely been an exceptional performer actually in these times. Now my first question, sir, was related to the industry size that you referred to, the $2 billion to $3 billion that you referred to, actually. Now what I want to understand, even in domestic level as well as on the global level, what has been the key driver for actually Kilburn to get such healthy orders too from diversified industries also? So is it related to some weak competition? Or is it related to our, you can say, increasing bouquet of products that every year, we just kept -- we have just kept on introducing new products in the market. So what has been the key drivers, especially for you? That is my first question, sir.

So I would say that one of the key drivers has definitely been the Make in India concept, that has definitely provided a lot of traction, especially for the exports. When it comes to the equipment, I think we are offering the same equipment but more as a solution. So earlier, probably, when we are offering rotary dryers, we were not offering the peripherals. And this is something which we have been doing for the last 2 to 3 years, and we'll be looking at various applications and new applications like metal recovery was one of them. Then we are trying to look something in the cement market. So we are exploring all these verticals and wherever we find opportunities, we definitely bid for it. So there are multiple reasons why we have been growing. We're also...

Sir, basically if -- yes, sorry, sir. You can continue.

We are also looking at supplying equipment to our collaborators. Yes, if they want to manufacture it in India, we take orders from them as well. So there are multiple, Sagar.

Okay. Okay. So basically, what can I assume is that because of the competition that is actually focusing on maybe 1 or 2 or 3 products, as compared to we are actually offering some multiple products, and we are yielding some different applications, that has been the key driver, which the competition has not. Is it safe to assume, even globally, you're saying?

Well, definitely, for the Indian market, I would say that is relevant, what you mentioned. Globally, again, if you look at Europe, I think overall, the manufacturing over there has gone down. And we have a couple of American companies who are active in North America and Canada, yes. And I think the Chinese have definitely lost the market to the Indian manufacturers.

Okay. Okay. So very rare to listen, sir, actually. But good to hear that. My second question, sir, was related to M.E. Energy. M.E. Energy, finally, we have actually the goal that you had around when you had acquired around I think so 18 months back. So finally, the goal behind the diversification for M.E. Energy into getting higher products that you just mentioned in the PPT also that you are getting an EPC contract in the ferro alloys, you just mentioned to the previous participant. And also, you have secured a major EPC contract. Also, you have -- your trial shipment to Morocco. So basically, is it fair to assume that M.E. Energy definitely is on track? And to deliver and to sustain such high growth in revenue is actually above INR 100 crores? And can we see with the phase 2 expansion on track, can we see further growth in FY '27?

So if I can address the question on M.E. Energy. So M.E. Energy has the technology, has the expertise, has the management to do much larger contracts. Before we took over the company, they had working capital issues. They had issues with cash flow. So they were not able to do large orders. They did not have the credibility of financial backing for customers to give large orders to them. With Kilburn acquiring M.E. Energy, 2 things have happened. One, they are part of a larger group. The credibility of them executing large value project is a certain, not from an expertise point of view, but from a financial background point of view that they will be able to execute it. Plus because of our network at a group level, we are able to open doors for M.E. Energy to approach many more corporates, both private and public as well as open export opportunities for them. With all this happening, the market size addressable for M.E. Energy is very large. Again, M.E. Energy at INR 100 crores is just a small fish in the ocean. So we don't want to give any growth numbers, honestly, for M.E. Energy. But as I mentioned earlier, M.E. Energy can be a driver for high growth. Their order booking is over INR 150 crores till October, which is record order bookings for them. This will automatically ensure that top line goes above INR 100 crores. But I think if they are able to win 2 or 3 more large orders, then for M.E. Energy to look at doubling that turnover in the next 12 to 18 months or 24 months will not be such a big challenge because they are working from a very small base. We are also looking at M.E. Energy as a factory, M.E. Energy factory as a second factory for Kilburn Engineering. So a lot of job work of Kilburn Engineering will also be executed in the M.E. Energy factory in Pune. So when you look at our numbers, you will have to always look at our consolidated numbers because there could be times or a quarter where certain turnover comes in M.E. Energy and not in Kilburn or sometimes some orders are one in Kilburn but executed by M.E. Energy. So it's always better to look at a consolidated picture because we are using the M.E. Energy facility also as a third facility for Kilburn Engineering. And the CapEx, which is happening in M.E. Energy that will increase their capacity to also cater to over INR 300 crores to INR 400 crores when 40% of that is bought out. So combined output for Kilburn now with whatever CapEx we are planning, we are very comfortable to scaling up over INR 1,000 crores from a capacity point of view.

Okay. So phase 2 is on track, sir, expansion for M.E., the second factory that you just mentioned?

For M.E. we have not yet commenced. We'll commence by -- for the last quarter. We are in the process of obtaining approvals from various local bodies and MIDC. And we expect that this would get completed by Q2 -- end of Q2 next year.

Okay. So post that, we'll start recurring revenues for the phase 2 expansion. You'll get some additional space from Q2 basically?

Definitely.

Okay. My last 2 questions was on the data keeping, sir. What has been -- what is the utilization in each of our plant? Can you -- if you just can mention right from Saravali plant to this Ambernath plant, M.E. and Monga. And the second data-related question was, order -- can you just -- give the order breakup of each of the subsidiaries, M.E. and Monga actually?

As far as the utilization is concerned, I would say that for M.E. Energy and Kilburn, it would be in the range of 90% to 95%, yes. For Monga, I would request Amol Monga to come in and answer. As far as the order breakup is concerned, I would suggest that you look more at the group level rather than individual company levels. But we -- when you look at this current INR 600 crores, I think the total unexecuted order with M.E. Energy would be around INR 180 crores or something. And then, Monga, I would not recall the numbers. But I would suggest that you consider the order intake more at a group level, which is now INR 610 crores open orders. Amol, can you answer the question on the current utilization of the factory?

At Strayfield, we have 2 verticals. So the utilization of factory A, which is on sheet metal is close to 90%, I would say. And factory B is also close to 90%. So both verticals are close to 90%. We have an order book that is keeping us busy for the next quarter. And we are actually chasing our production teams to fulfill all the orders that we have already banked.

Okay, sir. So just my last question, sir. So what will be -- if the key utilization is 90% to 95% for Kilburn, including the Ambernath plant, 90% for M.E., Monga is getting on track. So what will be the -- means, where we'll get the -- where will we get the FY '27 growth number, sir? How will we get?

As I mentioned, as Mr. Lala also mentioned, we are undergoing a brownfield CapEx in Kilburn as well as phase 2 of M.E. Energy. With all this together, we are comfortable for whatever growth targets we have set for FY '27 as well.

We'll take the next question from [Samarth Khandelwal].

Yes, am I audible?

Yes, you are. Please go ahead.

Am I audible now?

Yes, Samarth. You are.

Congratulations on a [Technical Difficulty]

Samarth, we lost you.

Samarth, we can't hear you.

Am I audible now?

You are audible in pieces. Your voice is breaking.

I think -- yes. So my first question is on could you share some color on traction that you're seeing from which sectors specifically? Was that audible?

Yes. Yes. Yes. That's fine. I heard your question. I'll answer it Samarth. So based on the current inquiry pipeline, I can say that we are having a good traction in the chemical vertical, the fertilizers, nuclear, metal recovery and for Monga, I would say food. So these are the sectors where we are seeing good traction.

Okay. Sir, based on the order inflows in the current year, do we expect the subsidiaries to perform better than the base business? Would that be a fair assumption?

I don't think you need to look at it from that point of view. The way the order book is there today, I think Kilburn stand-alone will be seeing very strong growth as well. M.E. Energy itself, obviously, we'll see very strong growth in the second half because they have received certain orders in the month of September and October, which would be executed over the next 12 months. So next 4 quarters, you should see M.E. Energy delivering strong growth numbers. All this put together is what is giving us the confidence on the consolidated numbers we are talking about. Regarding Monga Strayfield, their business is fairly profitable. They are also seeing top line growth, but they're also seeing very strong bottom line growth. And that is why you are seeing at a consolidated level, we've seen strong margin expansion because the subsidiaries were clocking lower margins earlier, now they are coming to the stand-alone company margin level. So automatically, the blended margins are looking stronger.

Sir, lastly my -- what would -- are we expecting?

Samarth, your voice was not clear.

Samarth, you're not audible.

Sir,my final question was about FY '27 order inflow guidance, if you could help that.