Patel Engineering Limited (531120) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Patel Engineering Limited Q3 and 9 Months FY '26 Conference Call hosted by Share India Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harsh Patel from Share India. Thank you, and over to you, Mr. Patel.

Thank you, and good morning, everyone. On behalf of Share India Securities, I would welcome -- I would like to welcome all the participants for Q3 FY '26 Earnings Conference Call for Patel Engineering Limited. We are pleased to have with us the management team represented by Managing Director, Ms. Kavita Shirvaikar, Chief Financial Officer; Mr. Rahul Agarwal. We will have the opening remarks from the management followed by Q&A session. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone, and thank you for joining us for our Q3 and 9-month FY '26 earnings call. Our results and investor presentation have been uploaded on the stock exchange, and I hope you have had the opportunity to review them. Now let me begin with the industry outlook. The government's focus on infrastructure remains very strong. The Union Budget 2026 has increased capital expenditures to INR 12.2 lakh crores, clearly reinforcing its commitment to infrastructure-led growth. Hydropower and pump storage continue to be key priorities as India moves towards its 500 gigawatt clean energy target by 2030. Project approvals have accelerated, creating a healthy pipeline of opportunities. A recent example is the Sawalkot Hydroelectric Project, being developed by NHPC Limited with a planned capacity of 1,856 megawatts projects of this scale reflects the strong momentum in the hydro sector. In addition, enhanced funding support from Power Finance Corporation and Rural Electrification Corporation will improve access to structure and lower cost financing for hydro and transmission projects. Irrigation, river interlinking, metro rail and tunneling projects are also gaining traction. Overall, the sector environment remains supportive, and it aligns well with Patel Engineering's core strengths. Now speaking about our operational performance. Execution continues to remain our biggest strength. During the quarter, we achieved important milestones across multiple complex hydro and underground projects. The Subansiri Hydropower Project in Arunachal Pradesh has made good progress. Unit 2 and 3 were fully commissioned in December 2025 and February '26, adding 500 megawatts of clean energy to the national grid. Work on the remaining units is going smoothly, and they should be completed in the next few months. Completion of Surge Gallery-2 excavation at Kwar crossing 10 lakh cubic meter of concrete pouring at Kiru, a key dam milestone. Again, breakthrough achievement in the 9.2 kilometer Head Race Tunnel at Parnai Hydropower Project. Completion of the entire NATM tunneling scope at the PGRW underground water tunnel in Mumbai. These milestones reinforced our technical depth and execution credibility and challenging hydro and tunneling environments. Now coming to financial strengthening. This quarter was equally significant from a strategic perspective. We signed the MOA for the 144-megawatt Gongri Hydropower Project under wood model, strengthening our long-term asset portfolio. We monetized noncore assets and realized approximately INR 185 crores during the quarter. We successfully completed a INR 400 crore right issue, which was subscribed 1.1x, primarily aimed at debt reduction. Our focus remains clear: strengthen the balance sheet, reduce leverage and enhance our capacity to bid for larger high-quality projects. Now speaking about order book and growth visibility. As of 31st December 2025, our order book stands at INR 15,123 crores, providing strong multiyear visibility. We have this worth approximately INR 2,000 crores, which are under evaluation and expected to open in the coming months. Further, there is an identified pipeline of over INR 50,000 crores to come up bidding in the next 1 year. We remain confident of securing around INR 8,000 crores to INR 10,000 crores of new orders in the coming years, while maintaining strict margin discipline. Growth for us will remain calibrated, selective and profitability driven. For Q3 FY '26, consolidated revenue stood at INR 1,239 crores. EBITDA was INR 145 crores. Profit after tax stood at INR 71 crores. For 9 months FY '26, revenue increased to INR 3,681 crores, which was up INR 5.7 crores from corresponding previous last year. EBITDA at INR 469 crores with margin of 12.7%. Profit after tax for the 9 months is INR 223 crores. Margins have moderated slightly compared to the previous period, primarily due to project mix and execution phasing. However, we remain focused on maintaining operating discipline and improving efficiency as execution scales up. Now coming to our debt. Our total debt as of 31st December 2025 stands at INR 1,433 crores, reduced from INR 1,603 crores in March 2025. Overall serviceable debt has reduced by INR 200 crores during the 9-month period. Debt to equity stands at 0.33x, and finance costs have declined year-on-year. We remain to -- we remain committed to continue deleveraging alongside growth. I will now hand over to Rahul for the detailed financial performance.

Thank you, Kavita, and good morning, everyone. I will now take you through the company's performance for the financial quarter ended and 9 months ended FY '26. On a consolidated basis, the revenue for the quarter is INR 1,239 crores. Operating EBITDA for the quarter is INR 145 crores, a margin of 11.7%. Profit after tax stands at INR 71 crores with a margin of 5.69%. On a stand-alone basis, the revenue is INR 1,231 crores. Operating EBITDA is INR 139 crores, and the profit after tax is INR 89 crores. Sector-wise, revenue breakup for Q3 FY '26, hydro is 57%, irrigation 22%, tunneling 13%, roads and others are another 8%. Book-to-bill ratio currently stands at 3.08x, providing strong revenue visibility. Moving to 9 months numbers. For the 9 months, our consolidated revenue is INR 3,681 crores, up by 5.74%. Operating EBITDA is INR 469 crores, a margin of 12.73%. Profit after tax has increased by around 6.5% and stands at INR 223 crores with a margin of 6.06%. On a stand-alone basis, revenue is INR 3,652 crores, an increase of 6.69% year-on-year. Operating EBITDA is INR 449 crores with EBITDA of 12.29%. Profit after tax is INR 223 crores with a margin of 6.09%. Coming to debt. The overall debt as of December 31, 2025, is INR 1,433 crores, out of which working capital debt is INR 983 crores and remaining is term debt around INR 450 crores, which has reduced by INR 170 crores from INR 1603 crores as of March 25. Total debt and contracted advances as of 31st December '25, is INR 2,060 crores as compared to INR 2,267 crores. Hence, overall serviceable debt has reduced by INR 207 crores during the year in 9 months. Finance cost for the quarter has reduced from INR 80 crores in the corresponding quarter last year to INR 68 crores this quarter. Overall, debt to equity stands at 0.33% as of 31st December '25. Coming to working capital, our net working capital days is stable at 114 days. That was all on the Q3 FY '26 results brief from our side. We are now happy to take any questions. Thank you.

[Operator Instructions] The first question comes from the line of Disha from Safi Capital.

So what is the order inflow till now for the 9 months?

Around INR 3,000 crores.

And I think previously, we mentioned that we're expecting INR 8,000 crores to INR 10,000 crores inflow for this year as well. So where has the slowdown been exactly, if you could throw some light on that?

So let me tell you during the year, we've maintained a disciplined approach for bidding. See, in a few large tenders, pricing turned very aggressive, at least not to compromise on margin for this standard, particularly and technically complex hydro and underground projects. Our strategy remains focused on quality of products rather than volume-led growth. Importantly, we currently have approximately INR 12,000 crores, worth of bids under evaluation, and the strong pipeline is expected to open in the coming months. Based on current visibility, we remain confident of achieving our annual order inflow target while maintaining margin discipline. So next year -- next 1 year, we expect to around addition of around INR 8,000 crores to INR 10,000 crores of new orders.

So for this year, for Q4, what sort of order inflow are we expecting?

6 See, we cannot exactly tell you, what time new projects will come up for BD and what time it will get open, but we say another 6 months, we expect to get around INR 7,000 crores to INR 8,000 crores level.

Okay. All right. And what sort of -- so I think we're -- we've done around INR 3,700 crores you've done so far. So what sort of execution are you seeing for Q4? And what sort of growth are we expecting for FY '27?

So see, revenue as guided earlier, we expect to cross INR 5,000 crores this year. And however, with the new orders of around INR 3,000 crores already received and a few more expected in the coming few months, we expect FY '27 to see around 10% growth in the revenue, and considering -- yes.

And margins around 13%, 14%.

Margins around 13%. Correct.

Okay. And the order book mix will be more or less similar to what we have now?

Yes, I'll tell you -- let me tell you, our primary focus continues to be on hydropower and pump storage projects, which forms the core of our expertise. See, India has an estimated hydropower potential of around 133 gigawatts, of which only about 50 gigawatts has been harnessed so far, yielding significant untapped opportunity. In addition, the government has outlined an ambitious road map of gigawatts of pump storage capacity by [indiscernible] and we expect substantial bidding activity in this segment over the next [indiscernible]. We also see strong opportunities in irrigation and water resource management, especially river interlinking and tunnel projects where ordering activity is picking up. We'll continue to participate in tunneling and specialized underground work, particularly the technical complexity creates higher active values.

Yes.

So overall, we intend to focus on sectors, we have a strong capabilities and technical debt and the ability to maintain disciplined margins.

All right. And just a question on the execution. So I think you said you mentioned that you're expecting 10% sort of growth, but our order books, and the type of order wins that we are expecting is quite significant. So why only -- why are we only guiding for a 10% growth? Do we see any headwinds in terms of execution?

So the order inflow when it happens. So because these are -- hydro projects are generally 5 years tenure. So first year, it is mobilization. So then the order execution will be low.

Okay. So then you expect to pick up pace from FY '28 onwards?

Correct.

Correct.

The next question comes from the line of Aashka Trivedi from Keynote Capital Limited.

Am I audible?

Yes, you are.

So my first question would be on the amount of tenders we have submitted till 9-month FY '26.

So right now, the tenders, which are yet to open is around 12,000.

No. But I'm asking, sir, the -- already the amount of tenders which we have submitted, like the bids we have done.

So bids this year, last quarter, we had said around INR 30,000 crores we have bidded. Now INR 12,000 crores remains to be bidded, which is to be opened. And another INR 50,000 crores is in pipeline, which we have identified to bid in the next 1 year.

Okay. My second question, sorry, if it is being repeated, but it is on the order book. So last quarter, we guided that we are expecting the total order inflow for this year to be around INR 8,000 crores. And by far, we have done about INR 3,500 crores, INR 3,700-odd crores. So are we not expecting to achieve this INR 8,000 crore target this year for the order inflow?

See, it is depending as Kavita was explaining. So March, we cannot give a cutoff that by March, it may happen. It may go a few months here and there, but we have INR 12,000 crores, which we have already bidded and it will open in like 1, 2 months. So our success ratio is generally around 20%. So we expect something to come from there. Then we had revised our Gongri Project that INR 1,700 crores work that may come up. So considering everything we are still hopeful that we will reach there, but we cannot identify exact time line.

Okay. Okay. Got it, sir. And sir, last year, we also highlighted that we had bidded for a very large project, the value of which was about INR 15,000 crores plus, and we were expecting the outcome by 3 to 4 months. So any update on that order?

So that order is open. We are not 1 on that.

Okay. Okay. Got it. And sir, one more question would be on the total available land bank with us as on this date. And what will be the approx value in the books?

So land bank, we have still around INR 800-odd crores land bank.

Okay. And it's approx value we carry in the books?

Around that only.

Okay. Got it. And also, sir, if you can share with me the total amount of awards and claims as on the date, which are like pending?

So we have total awards and claims around INR 3,000 crores, around INR 700 crores is awarded.

INR 3,000 crores. Okay, INR 3,000 crores is pending, right?

Right. INR 3,000 crores means total, including awarded. So INR 700 crores is -- balance is under arbitration of various stages of fleet claims.

Okay. Got it. And sir, last question was on the right issue. So did the promoters participate in the rights issue?

Promoters participated, but not fully.

The next question comes from the line of Viraj Mahadevia from Moneygrow Asset.

A couple of questions. What is the net debt post the rights issue? If you can break it up into term loan, working capital and cash as of current?

The gross debt is around INR 200 crores, out of which INR 983 crores is what we see as term debt. We have right issue funds utilized right now. So which is like INR 200, INR 200-odd crores. So that much is we get in next quarter.

Speakers, sorry to interrupt there is an echo. Wait a minute please.

Sorry, Rahul, you said rights issue is INR 200 crores. Rights issue was about INR 400 crores.

No. So you saying partly it has been balance spending.

So what has it been utilized for the INR 150 crores already, if not debt repayment?

No, no. So it is utilized. So partly, it is utilized for debt repayment.

Okay.

And so out of the rights issue proceeds, INR 100 crores was the general profit and balance...

Rahul, sorry. I'm losing your voice.

I think there is echo. There is some disturbance in the call.

We are losing Rahul's voice.

Are you able to hear me?

Mr. Viraj can you mute your line when the management is speaking?

Sure.

So I'm saying that out of the rights issue proceeds, INR 100 crores was for general corporate purposes.

So who was asking the question now, I told him to keep yourself on mute.

Okay. Okay. Yes. So INR 100 crores was for general corporate purpose, and the balance was for debt. So that is why right now, unutilized funds remains around INR 250-odd crores.

Right. And are we looking to now retail the INR 250 crores for the term loan by March and work towards the term loan fee balance sheet?

Yes. So we will utilize it, but I'm trying to go beyond March.

Understood. You have some exceptional item in your -- this quarter's results related to, I think, the new labor costs. Is that onetime? Is it going to be recurring of this amount every year? Can you guide us?

No, no, it is one time.

Okay. Secondly, you have a tax of INR 65 crores of earlier years. Can you explain that a write-back?

So there were some assessments completed, because of which [indiscernible].

Mr. Viraj, keep your line on mute. Please, whenever management is answering your question, keep your lines on mute. There is an echo from your end.

Yes. So there was a completion of early assessment. Because of it, there has been a reversal.

Understood. Your cost of materials have gone up meaningfully in your reported results, some 16% in same period '24 to 19% in September '25, now to 26%. Can you explain to us what is happening there, because that's compressing your margins meaningfully.

It is just change in mix of what works we are executing. So if you see the corresponding cost of construction is also going down as a percentage.

Okay. And can you update us on the Dibang project? Did we lose that project, as I heard it on another EPC call?

Yes. So we were not on that project. That project, it has been bidded by someone else and had a very aggressive bidding. So we will probably not take that project.

Viraj, our strategy remains focused on quality of orders rather than volume-rated growth. See, we do not want to take risk, where the -- in complex and long-tenure projects, difficult projects.

Understood. So how much, the confirmed order book today is INR 15,000 crores, we've got outstanding bids placed already of how much?

INR 12,000 crores.

INR 12,000 crores. And we are bidding for another INR 15,000 crores.

Another INR 50,000 crores. 5-0.

Yes. We see in the next 6 months, another INR 50,000 crores.

Mr. Viraj, please keep your lines on mute, which is creating a lot of disturbance whenever the management is answering your question, there is an echo from your end.

Okay. I'll come back.

The next question comes from the line of Pritesh from Lucky Investment.

Yes. So in the 9 months, how much is the total orders issued in the system? And what was your market share at this INR 3,000 crore that you have?

So 9 months, we got orders of around INR 3,200 crores.

That I know. What's your market share?

So in the 9 months, it is actually difficult to say a market share because there was one single large project, but around 10%.

So the single large project, what was -- which was this? And what was the size of this project?

So this project size was around INR 16,000-odd crores.

Okay. And can you name the project, please?

It is Dibang. Dibang Project that dam books.

Okay. We have bid for it or we have not bid for it?

So we have bid for it. We had bid for it.

Okay. The other question is with respect to these last 12 months, announcements by various agencies on trying to explore the hydro potential in Northeast and around Indus, and then passing of [indiscernible]. So considering all this, when do you see tangible materialization of [indiscernible] get around these main areas because these are the potential growth. So tangible order [indiscernible] order inflow for [indiscernible].

Yes, next 1, 2 years.

[indiscernible] documents, how [indiscernible] years.

Your voice is breaking.

Pritesh, there is a lot of background noise from your end. We cannot hear you properly.

Is it okay now?

Yes, yes, much better.

So I'm just saying based on the -- are the RFQs or the bid documents for some of these projects out for which you're saying 1 to 2 years, you see a situation where order inflows materialize? Or they are yet to be out?

No, no, they are -- a lot of them are out like projects like Sawalkot then.

Kamala.

Kamala. So there are various projects, for which the RFQs are already out. And there are some projects and all where the RFQs are expected to come out better, we are saying 1, 2 years.

Some of these projects have finished the environmental clearances, approvals, et cetera, ministry, regulatory requirements, environmental requirements, everything is done with it, right?

Yes.

Financial closures of those projects.

Yes, yes. So see, all these projects basically are coming from clients like NHPC, SJVNL and all, which are Navratna company. So there should not be a problem of financial closure for them.

But the other pre-financial closure, requirements of the project in terms of environmental, et cetera, all those things are done with or they are in the process?

No. So some projects is already done, like Sawalkot and all, that's why they are coming up for bidding. And there are some projects like [indiscernible], which is still going on. So that is why we are saying all these projects will come up for bidding in the next 1, 2 years.

So how many worth projects is where the basic elementary clearances are done with, and they are ready for bid? So they are ready for bid and -- yes, currently. Currently, yes.

Yes. So currently, Sawalkot and Kamala got the CC clearance and RFP is out on, and which is ready for the bidding in near future, rest is under pipeline, we are saying.

Can you quantify these 2 projects, please?

This project's value will be around INR 10,000 crores to INR 20,000 crores, we can say.

It's a wide number, INR 10,000 crores to INR 20,000 crores. What is the total project size and the project?

Sawalkot, there are a couple of packages.

Yes, yes. So one package is announced. The second package, another -- one more package will be announced shortly. And Kamala, only one package is announced, rest is in the pipeline. That's why we are seeing around 12 -- around INR 8,000 crores is already announced. Balance INR 10,000 crores will come up, will be announced very shortly. So we are INR 10,000 crores to INR 20,000 crores. That's why I'm saying INR 10,000 crores.

So whatever is announced for which the bid has been, they'll call for a bit, right?

Immediately.

Correct. Correct. In the next 1 month also.

Got it. Okay. And if you just take this discussion a little bit ahead and in the next 12 months, how many more projects do you see where they pass the elementary clearances requirement and enter a bid stage?

So another 2, 3 projects are in advanced stage. We see Italian is 3,000 megawatts. So scarce to around INR 30,000 crores itself. So that's why we are seeing INR 50,000 crores. INR 20,000 crores near future and another INR 30,000 crores in next one.

And there are various small projects also, PSQ projects also.

Yes. Even Tata Project.

So projects, there are projects coming up in states like Bhutan, Nepal -- in countries like Bhutan, Nepal, everywhere. So all combined, we are clearly saying that INR 50,000 crores worth of projects should come up for bidding in the next 6 to 8 months.

Mr. Pritesh, you may rejoin the queue for the follow-up questions. The next question comes from the line of Nirmam from Unique PMS.

Yes. You mentioned on the call about some pricing pressure in some of these projects. Can you explain why is there pricing pressure? There was supposed to be a lot of projects in the pipeline, right?

Sorry, can you repeat the question, please?

You mentioned about pricing pressure on these large projects. So earlier, you were mentioning that there were a lot of projects and then we can...

Mr. Nirmam, can you speak loudly? We cannot hear you clearly. Your question is not loud and clear to us. Please speak loudly.

Hello?

Better.

Am I audible now?

Yes, yes.

So I was mentioning about the pricing pressure that you mentioned, a lot of projects in the pipeline for everyone, right? So can you explain this pricing pressure a bit?

So basically, see, there was one -- this project where a private company, not a listed company has bidded. And where the bid was done at a very aggressive price. And that's why we didn't get that project.

But there are other projects in pipeline. Many other projects are in pipeline.

And you don't expect -- you expect INR 10,000 crores of orders over the next year.

Yes, we expect that to happen in all the projects.

Correct.

Okay. Secondly, on this Gongri, are you comfortable now owning an asset on the books again, because we had problems in such a model in the past?