Z-Tech (India) Limited (ZTECH) Earnings Call Transcript

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Ladies and gentlemen, good day, and welcome to the Q1 FY '26 Earnings Conference Call hosted by ZTech India Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instruction] Please note that this conference is being recorded. I now hand the conference over to Ms. Sanghamitra Borgohain, Managing Director from ZTech India Limited. Thank you, and over to you, ma'am.

Thank you, [indiscernible]. Good afternoon, everyone. I extend my warm welcome to all our investors, analysts, stakeholders joining us today for the quarter 1 financial year '26 earnings call of ZTech India Limited. I am here with Mr. Dilip Kohli, our Chief Financial Officer; Mr. Sunil Ghorawat, Chief Business Officer; Mr. Ashish, Company Secretary and Compliance Officer; and our Investor Relations partner from Adfactors PR. Thank you for your continued interest in our progress. We have entered, as we know, the financial year '26 with strong operational momentum and a clear sense of direction. The first quarter has reinforced our strategic priorities in sustainable design, technological differentiation and on-ground execution. All 3 verticals, the Habitat, Agua and Terra continue to scale and mature, setting a strong sun for the year ahead. Our focus remains on delivering impactful urban infrastructure while deepening capabilities in specialized construction and environmental solutions. In Habitat segment, our ongoing work on landmark urban park project has progressed as planned. These public spaces are designed not just as destinations, but as an enduring asset for cities, enhancing quality of life and encouraging responsible tourism. Meanwhile, in Agua vertical, our proprietary dye technology enabled recovery of significant quantity of wastewater in quartz in this quarter, reflecting a value of decentralized smart treatment models in urban settings. We also saw healthy traction in our Terra vertical with new projects in stabilization, geosynthetic solutions, geos and high wall systems for highways and rail corridors. These wins underscore our growing presence in the geotechnical space and our reputation for executing precision infrastructure in topographical complex environment. From a financial standpoint, quarter 1 has been encouraging with steady revenue growth, margin resilience and healthy order pipeline. Financially, we delivered a solid performance in quarter 1. The revenue stood at around INR 20.48 crores, reflecting continued project momentum. The EBITDA came in at INR 5.01 crores, supported by our focus on high-margin design-led contracts. The profit after tax was INR 3.04 crores, maintaining our profitability trajectory as we scale. So we remain optimistic about our opportunities ahead and confident in our ability to deliver long-term value. Before I hand over to Mr. Sunil Ghorawat for further insight, I would like to thank you all our clients, partners and shareholders for your ongoing trust and support. So I would request Mr. Sunil Ghorawat to take over from here. Sunil ji.

Thank you, Sanghamitra, and good afternoon, everyone. It's a pleasure to connect with you all again. This has been an incredible fifth call which we have been having together where probably we have discussed quite a lot about in terms of how the business is shaping up. And as we begin the new financial year, we have also embarked on a significant growth plan for our several business divisions. For some of you, as you might have joined for the first time, ZTech operates in 3 distinctive business segments. The first one is called sustainable creative Park business. The second one is around the Geotech business and the third is on industrial wastewater treatment business. We started our year with good beginning in terms of strong order booking and our ability to probably execute these projects in spite of we're seeing heavy rains for last several months across India, which is a good thing. But from a point of view of -- in terms of our on-ground work, it does bring in a little bit of challenges in terms of the ground level execution, but we have learned now to probably how to overcome those and probably keep delivering more and more projects on time. It is also our pleasure to also share that ZTech has created a distinct brand identity for the Park business. Hence forth, the Park business division is called ZingPark. ZING is ZING and means Joy happiness. As I have described in earlier calls that our vision is that joy is for everyone. And in order to keep pushing that vision, we felt that having a brand identity for the Park is going to be very helpful as we build one of the unique park operator company, not only in India, but probably in the world. Going forward and also of our existing parks, we are rebranding them as a ZingPark under ZTech. And future parks will also continue to probably have the ZingPark as an identity as we go forward. In our previous calls, I had also mentioned about how ZingParks have evolved into a category, which is beyond just waste to art theme parks. We have become at a larger scale, a creative park development company. Waste to art remains one of our key focus areas. And apart from that, we are making urban forest parks. We are making children's park. We are developing concepts around wellness park. A whole new dimension is being offered now to the Indian consumers at large. If you look into the past situations, either we had community or public parks or we had amusement parks or water parks. There was a whole category which was missing in between these 2 spectrums. And that is something which we are now working on creating that is an interesting offering, not only meant for India, probably for larger parts of the world. In our Habitat work vertical, both ongoing projects are continuing as per the schedule with full kind of an absolute mindset on the timely execution. And these are becoming landmark at many level. Currently, we have a couple of our verticals, which are ready to be opened up. We are just waiting for a proper opening by the Chief Ministers of the state to open these parks. Subsequently, we have -- post June, we have also a couple of other parks which are getting ready for opening. We have planned the opening of such park in a way that we are beyond the monsoon part of the year for the -- so that we are able to target gatherings crowd at these parks. In terms of the water vertical, we have been relocating our business from Goa to Vadodara to be close to the customers. We are executing the various projects which we have in time, which we have in hand. And the idea is to probably start developing that business more aggressively once we have set up our new lab and everything else at Vadodara so that we are able to offer treatment of more such inorganic compounds, which needs to be taken out from the wastewater stream. Our geosynthetics business continues to do well. We have had several wins over the last few months of this year. And we believe that with the execution skill set, which have been there in place, we will be able to have a significant growth in that vertical this year. While as we see the Q1 performance reflects very balanced revenue contribution across our verticals with margins which are probably getting better quarter-to-quarter, we have created a significant savings in terms of the cost going forward because of number of parks, which we are going to build for the rest of the year. And the order inflow quantity has been very, very healthy. Our focus during the first 2 quarters have always been in terms of how well can we execute so that more and more people post monsoon can visit our parks and probably increase the significant footfall. And we remain committed in terms of doing that. As we speak, we have construction activities going on around 13 different parks, around 27 different project sites for the Geotech. But Geotech, as I have mentioned earlier, project cycle is 12 to 18 months, where most of our parks get delivered within less than 6 months. As Sanghamitra mentioned earlier that we mobilized a lot of projects, and we were able to grow our revenue also compared to the last quarter of -- the same Q1 of the last financial year. And we have been able to increase not only in terms of the revenue, but in terms of our overall profitability also has increased significantly. Our profit after tax has also increased with a significant percentage points. And we expect the momentum to grow further as we move forward to the last 6 months of the year, which probably are the most critical for our business. To sum up in terms of our Q1 performance, we have laid a very strong foundation for the year ahead. Our financial and operating metrics remained aligned with our long-term vision. We stand committed to our projections for the full financial year, and we are very confident that we will be able to maintain that momentum across our verticals and continue to grow both organically and inorganically as we go along. And having said that, I am ready to take any questions which you might have.

[Operator Instructions] We will take the first question from the line of Jay Chahan from Asset Managers.

Sir, Am I audible?

Yes, you are.

So sir, my first question is towards the habitat the ZingPark side, where in past con calls, you have mentioned there are various business models, right, like asset-light and maintenance model where you get right for non-ticketing revenue like F&B, fixed fee model like you're using in Pimpri Chinchwad and the full investment model like your flagship in Noida. So my question is around like as you look forward to rapidly scale Zingpark footprint, what will be your preferred model mix for the future? Which of these models do you find most attractive from a return on capital perspective? And how do you see this portfolio going ahead maybe over the next 2, 3 years?

Very good question. We have now gone through a learning curve of 15 months in terms of not only building these parks and -- but also running these parks. In terms of the way we see the model which works best is where the majority investment is done by the government. We take care of the operating expenses. And either we share the revenue with the government or we share a fixed rental with the government. We have now done both the models. There are certain states which are preferring that we do a revenue share. There are certain states which says that, no, we don't need the revenue share because it becomes complicated long-term period. You give us a fixed rental. And honestly, if I look from a company's point of view, I think a fixed rental model works better because there is a less coordination which requires with the government. We need to basically pay a monthly rental, while they have shared the majority of the CapEx and able to offer a good experience to the customers at large. Our headaches are much lesser in that. So in terms of the preference wise, let me list it down. Our best preferred model is government puts majority of the investment. We take care of the operating expenses and we pay a fixed rental. Our the second preferred model is government puts the majority CapEx we pay for the operating expenses and we pay a revenue share model with the government, whatever that can be. In some cases, it's like 50-50, some cases, it's 40-60, things like that. Our -- the investment model, we want to use it very selective because one thing which we are very clear is that we want to remain overall asset-light as a company. We are only going to invest our money for 2 reasons. One, either we are getting a location which is so good and it is in a very large urban agglomeration that we are 100% sure in terms of the footfall which we are able to generate on a continuous basis. That's #1 criteria. Number two criteria is any city which helps us leapfrog our other business objectives of creating more parks. And if we need to create a demo version of any park, which will help us expand the category, we don't mind putting our business. Rest other business models are primarily meant for where the government is putting the majority investment. And our asset -- our investment remains not more than 10% to 25%.

Got it, sir. Understood, understood. And as I can see, sir, you have around INR 126 crores of order book for creative park for Habitat. So this is just for EPC or how does it work if we take an example of the model that -- which is the most preferred one, the majority CapEx done by government and you get a fixed rental for the same. So for the order book that we see ---Yes, sir. Yes.

Those are only 2 parks as of now where we have that model. We have a few more lined up. So this is a trend which I see that happening in Maharashtra. So I want to build upon it. And then I want to take that concept into other states. So for example, recently, we have got a project in Bihar, Chief Minister laid the foundation stone a few days back. There, again, the thing is that they are putting all the CapEx, and we are not paying them any rental. We are only taking -- we are not paying them any rental nor we are doing the revenue share. We are saying that we are only going to take care of the operation and maintenance expenses and provide a very good experience to the consumer. So that's another model which has opened up a place which we are not sure yet that how it will evolve. By the way, I forgot to mention one other model which we have developed and we have already got the first order in that model is where the government not only allowed us to build the park, but has also allowed us to build staying facility in terms of putting luxury tents and also allowing us to do the banquet functions. So today, the park in [indiscernible] will become a 3-pronged revenue stream for us. One at the park level, the second is a kind of a hotel level and the third is at the banquet level. Now we are trying to also push that model in certain locations to see that we build enough reference points to show to the government that why this model is effective in certain places. So as of now, to answer your question, most of the orders which we have are in the revenue sharing model with the government.

Right, right. But my question was actually what I see in the order book of INR 126 crores, this is just the EPC contract, right? The CapEx that will be done by the government and by you and the fees that you take and then the recurring revenues come later, right? Right?

Absolutely.

That was my question. And the segment-wise revenue breakup that you gave, which was around 76% for specialized Park development, that consists of the recurring revenue that you get, right?

Yes. It includes both the EPC and the recurring revenue.

What percentage is the recurring revenue? And what

Right now, recurring revenue right now is around 30%, 25%, 30%. Most of them is otherwise the fixed revenue because that is getting built as we speak, right? Currently, we have -- the revenue streams are on only for 4 parks. There are 3 parks which are going to start any time in the near future where we will also have the recurring revenue. I expect that numbers to change -- by next year, it should be more like around 2/3, 1/3 year after that, probably reach to 50-50. And then going forward, third year, it should be 60% would be recurring, 40% would be EPC because still we have a long mile to go. We still see a lot of opportunities around there.

Right, right, sir understand. And these contracts are long term, right? What are the exact 20?

Most of them are for 20 years. We have one contract, which we purposely have taken for 5 years plus 5 years.

We take the next question from the line of Pranav Srimal from PC Wealth Advisory.

Hi sir, I hope I m audible?

Yes, you are.

Sir, I wanted to ask about the timeline with regard to the park. How many parks do we currently have that we are working on? How many do we have in the order book? And how many will be completed by this year?

So we have so far built around 17 parks. Out of that, we operate only 4 parks, the initial ones and the smaller ones are all on the EPC model. As we speak, we have around 11 parks which are at various stages of construction. So once let's say, they get completed within this year, which is December, that makes it 15. So I expect we will have at least a bouquet of 20 to 25 operating parks under our belt by end of this financial year.

20 to 25 parks. And most of them are revenue sharing or they are just EPC projects?

No, no, no, no. They are hardly -- out of that, we will have 2 or 3 of them might be EPC. All of them are revenue sharing. And that is why I was saying that probably next year onwards, the revenue share part will increase significantly when we have more number of parks which are coming on stream on a revenue sharing model.

Understood. So what revenue can we expect, let's say, in Q4 after all the parks have been completed?

It is very difficult to give you a breakup peak. But as I have mentioned in the past that if I do an x number of revenue this year, I expect around 70% of that will be from -- coming from the Park business and let's say, 30% comes from our other 2 verticals. Out of this 70% revenue which we get from the Park vertical, around out of that 70% when I look at the whole year kind of a thing, 20% to 25% of that revenue, 20% probably because it depends when does the park starts. Now for example, I have one park, which is ready to be opened for last almost a month, but it is not open yet because we are waiting for a CM's time to inaugurate that, and I have not been pushing it also because it's raining quite a bit here. So no point probably opening it increase your expenses and probably because of the rains, footfalls are low. So if I look at this year, out of our park revenue, 20% should be around coming from the recurring business.

Got it. 20% from recurring business. And sir, secondly, on the water division, you said that we are shifting our business to Baroda, correct?

Yes.

So is there any time line that we expect that the labs will open up and we can start expecting some revenue to start going...

By September, we should be functional with the lab in Vadodara. And the next 6 months will be a year in the time when we will start booking some more orders because it was becoming very difficult to hire team in Goa and also operate from there while most of your customers are in Gujarat.

Understood. Understood, sir. So the Baroda Lab, this will also help us in sort of increase the margins in the water division, especially the lab...

It will not only increase the margin, it also brings us closer to the customers. There are many things which our technology can do. Right now, we were struggling because of the manpower issues availability for such a niche business in Goa. Historically, this business when we acquired was based out of Goa. So we couldn't do anything much. Now then we realize that if we need to take it to the next level, we need to be place where we can easily get talent, and we are also close to the customers. So we have made all those decisions and probably soon we should expect some results to start coming in.

[Operator Instructions] The next question is from the line of Darshil Zaveri from Crown Capital.

Firstly, congratulations on a great set of results, sir. So just wanted to know, sir, that for FY '26 that we stated previously that we are targeting around INR 150 crores, INR 160 crores of revenue and INR 35 crores, INR 40 crores of PAT. Are we in line of achieving those targets, sir?

We are very, very confident about achieving those numbers. I won't be surprised if we surpass those numbers handsomely.

Okay. That's great to know, sir. So I just want to know then in terms of seasonality, like how do we look at it, sir, because so like Q2, Q3 would be major? Or how would it flow through? Because I think in the first quarter, it's not flowing a lot of revenue, so that's why.

No, because you need to appreciate that we are in the business of developing outdoor parks. By nature of that, when we are outdoor, we do have some impact of seasonality to start with. Now having said that, this year has been a little more challenging because the rains have been reasonably good in some way -- it's good for the country at large, but it is, in a way, affects a little bit of our revenue stream as of now because the rains in most of the part where we operate in has been heavy. But what is going to change as we evolve over the next 6, 12 months that now our parks are getting opened up in other parts of the country as well. The first park, which will open up beyond Northern India would be Pune Pimpri Chinchwad area. The other park, which is going to open up is in Ahmedabad area. The third park, which will open up is in Patna. Similarly, we are opening some park, some other work in what you call Telangana is the other area where we are looking at Hyderabad. So now once the distribution of parks happens across India, then some of that seasonality impact also gets taken care of. A challenge has been that as of now, the parks which we have opened and we are managing are all located in one geography. And as it changes, I don't see that as much of a problem. Moreover, if you look at many industries in India, you'll usually find that the last 6 months of the years are much, much better. both in terms of the consumption patterns, in terms of the weather situation, people are more out, more spending happens, festive season, the New Year and everything else, which falls during the last 6 months of the year. And this is a situation not only restricted to India. We have been exploring Dubai market, and we have had several rounds of meetings with the people who have operated parks there or are operating parks. There are also many parks which operates only -- they actually shut down for 4 months of the year. They operate only 8 months of the year, 6 months of the year. But the revenue which they generate in those 8 months, 4 -- 8 months, 6 months is significantly higher in terms of offsetting any kind of a distribution of the footfall, which happens during the whole year. So even if I look at our footfall vis-a-vis last year to this year, we have grown in terms of almost 25%.

Correct. Correct, sir. Fair enough, sir. And sir, just wanted to know like now, so the INR 126 crore order book for our specialized parks that we have right now, those all will get executed by the end of the year, right, if we go around by the 6 to 8 months target that we have for constructing.

So how-- Yes.

So if they are all going to get constructed how is the order bid pipeline looking like, sir, like how do we go ahead? Like what is the scenario of there? Because I think in a way, we are just -- we are the first creators of this kind of segment. So there is -- I think we are going and creating this in every state, right? So how do we just see the conversation happening? And like what is the longer term, like maybe next year or after that, what is our target, sir?

Sure. So the way I -- the way I look at it, out of these INR 126 crores, I expect almost INR 85 crores worth of orders, which will get executed, I am assuming by end of this year itself. by end of December. And I expect that we will be able to win several orders which are already at the tender stage, which we will get it in the next 2, 3 months' time, and they will also get executed by end of March. So as far as our overall timelines and the numbers are concerned for the FY '26, we are pretty much on track, and I don't see any deviation there. The second point about your pipeline, our pipeline is very, very strong right now. So we have almost more than 30, 35 parks which are under various stages of finalization to come up to the tender level. And these are not which have come at the tender level, but we have identified the concept, DPRs have been developed, which means the government authorities have been convinced they have been sold. They have bought the idea, they have arranged the funds. Now the tendering process is on. So when I look at these -- all the pipeline of 30-plus various inquiries, I am more than certain that at least 20 more will get converted into confirmed order before this financial year-end.

Okay. Okay. That's great to know, sir. And sir, just like last question from my end. So as like more recurring ticketing revenue starts flowing through us, so how will the margins behave? Because I think we have substantially better margins than like everywhere else. So I just wanted to know how do we see envisage the margins moving because ticketing margin should ideally will maybe flow directly through the PAT because all the costs would have been already been incurred? Or how would it just go ahead, sir, if you could help me out with that? How do we envisage the future margin, sir?

See future margin as we are able to master the art of operating these parks more and more effectively will definitely increase substantially. So to give you an example, last March, we opened the UP Darshan Park. We ran it for 1 year. We learned -- that was our first park which we are operating. We learned what needs to change there in terms of F&B. Now today, we are bringing those change in terms of the F&B experience. Now with that change itself, it should give us almost INR 1 crore of net impact on our bottom line just out of park. Now that learning has been made. It took us almost a year to probably figure out that what is that consumers are looking in terms of the F&B experience and what needs to be done in these parks. Similarly, we realized that events are an important part of what needs to be done in these parks. And we organized a summer Carnival in one park. As we speak, a monsoon carnival is going in another park. We saw that there is a significant uptick in terms of footfall whenever such events happens. Third thing which we realized that the kids adventure activities are very, very popular and brings in a lot of student crowd to the parks. We have signed an agreement with a company which specializes in 2 things. One, they create those experiences, rock climbing, zip cycling and many other activities like that. And we have signed them for 2 parks to start with. where they commit that they will be able to bring in almost more than 100,000 students in a year. Now these kind of things are probably making us do more of these things in future parks, which we are opening. So while we continue to see that this will probably get better day by day, but we are also learning at the same time and probably making those improvisation in the park design going forward. We opened the sports arena, the fast forward sports arena in Lucknow. We learned from that, that what are the consumers looking at, what kind of games which are of interest to them. Now the second one, which we are building up, we have tried to now do what probably sells most and take out what probably is not that where people don't have much interest and it also requires more capital investment. So I think with all these processes in place, the recurring part of the revenue will start seeing significant uptick starting next year. And that's where I said that probably that contribution will move up to almost 30%, 40% next year onwards, which currently might be around 20-odd percent.

We take the next question from the line of Man Asher from Vivek Jain Family Office.

I just wanted to -- I just have 3 questions. So first is that I wanted to understand that the order flow has been significantly slow. The way that we actually want to achieve those numbers of 20, 25 parks by the end of this year, do we have significant.

Sorry, you are breaking.

[Foreign Language] Yes, yes. So I just wanted to understand this [Foreign Language] order flow has been significantly slow in regards to what we want to achieve. So I would like to understand that how the order pipeline is going to flow like from where -- from where are we going to get the orders. And there have been certain orders for which we have been declared

Yes. But first of all, I don't think and I don't agree that our order inflow has been slow. We have got many orders in last couple of months. You will be starting to hear more about them. We just announced an order today only, which we have got from Bihar. And there are several more orders which we have received, and you will hear more about them. So I don't think it is slow at all. In fact, if I look at overall in terms of the number of orders and the number of orders where tender process is on, we are way ahead of what our expectation was at the beginning of the year. So the second point of yours, probably, yes, we do face some of those issues, not of our creation. But at times with the government side that, for example, Ahmedabad, we have already been awarded a job. We have given the AMDs and everything else. We have also been declared L1. -- but they are having some issue in terms of the handover of the land. Now they are -- the commissioner remains committed that otherwise, I will give you an alternate piece of land. Now these are part and parcel of the game, something which we can't control. But I feel in our overall scheme of things, we have enough backups which are available.

second question, I'll come to that is that the EBITDA margins or the margins in the par business has gone down significantly. And considering that EPC execution was low. and contribution of the same will be on account of O&M revenue. So why it is that the margins have dipped a bit considering the same as of that of, say, last quarter?

It has dipped marginally, and it probably looks like the margins have dipped because when you look at the EBITDA level and all that, probably 2, 3 things are happening, Ashar. One, we are ramping up the operating part of the team significantly. If you see the number of headcounts, it has increased significantly. We have added team for the revenue management. We have added team for the events. We have increased our marketing team. So obviously, those expenses are probably have come in into the books as of now. But the real impact will start seeing probably as we move forward. And so in terms of our gross margin on the projects, I don't think the margins have gone down. Yes, the operating margins -- operating costs have gone up because this is by design that unless until we invest in terms of the building up these teams and all, we will not be able to achieve our desired objectives. So overall, I expect that when you see the next half -- next 6 months of the year, which is the peak year for us, it will more than offset everything.

Got it. Got it. So we should see the margins going back to where the quarter 4 margins were.

Absolute -- absolutely my park operations and fine-tuning the operations part at the same time, this is not the peak season of the year, it is the slowest season of the year. ready for the peak season.

We take the next question from the line of Pratham from Orbit Fund Management.

Sir am I audible?

Yes, you are.

So my first question is, last time quarter 1 was 17.5% of our entire financial year revenue, but this time, INR 20 crores, if I extrapolate based on our target of INR 150 crores to INR 170 crores would be 12% to 13% of the entire financial year. So sir, do you think we were a little weak on execution this?

No, no, not at all. I think we will be -- you will see going forward -- first of all, this year has been a little more crazy in terms of rains and as we all know about it, most part of the country has had significant rains. And as you see that all our businesses have outdoor issues, whether I look at whether it's a geotech, whether it's a park, whether it's even the recovery business, wastewater recovery business, all of them have an element of outdoor construction, outdoor involvements are there. So while it might be lower, but at the same time, knowing what are the external circumstances, I feel we have done reasonably okay. we have significant orders in hand, which we are trying to push as much as we can. But at the same time, we need to be wiser because what happens is when you are, let's say, doing the construction, I dig a hole and it rains and probably the water is filled and it takes out my 3 days of time to probably get the site to be normal. I do it again and then again, it rains. So I would not probably extrapolate it like that.

Okay. Fair enough, sir. So my next question is, so can you help me understand how many Park EPC projects are currently ongoing? And what amount of billing or what value of billing those will generate?

No. So the parks which only have the EPC, you are saying?

Yes, sir, the ongoing projects, the Park EPC projects and what revenue will they generate...

No. So we have 2 kinds of parks. One is which is purely on an EPC basis. And the other one is where we are not only doing EPC, but we are also operating, which one are you referring to?