Ceinsys Tech Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Record quarter, margin step-up: Revenue grew 82% YoY to ₹164 crores and EBITDA margin expanded 310 bps to 21.77%, driven by a mix shift toward higher-margin technology projects and the roll-off of older, lower-margin work.
• Technology Solutions is now the engine: The segment surged 2.5x YoY to ₹88 crores and now contributes 54% of total revenue, with margins in the 27–32% range, materially above the Geospatial segment’s 18–24%.
• The order book is government-heavy and lumpy: A ₹700–800 crores pipeline is split roughly evenly between JJM/water and other domains, but Q4 is historically the make-or-break quarter for government award closures, and JJM schemes faced a review-led lull that only cleared in late October.
• US subsidiary is a deliberate investment drag: The former VTS business has consumed ₹36 crores in opex since acquisition (July 2024) against only ₹8 crores capitalized, with revenue absorption expected only from Q4 onward.
• What to watch next quarter: Whether the promised debtor recovery of ~₹60 crores in November–January actually lands and pulls the 160-day working-capital cycle toward the 100-day target, and whether the two fully diligence-completed acquisitions close within the “one or two months” window.

The Mix Shift: Technology Solutions Taking Over

• Segment surge: Technology Solutions revenue hit ₹88 crores, 2.5x the prior-year quarter, and now represents 54% of the consolidated top line. The segment carries structurally higher margins (27–32%) than the legacy Geospatial business (18–24%).
• Margin mechanism: Old, lower-margin projects are completing and the incoming book is richer in IoT, AI and ML work, which commands better pricing. Employee cost stayed flat at ~₹33 crores while revenue nearly doubled, reflecting a deliberate shift of resources into higher-realization technology delivery.
• Geospatial still growing, just slower: The Geospatial and Engineering Services segment grew 39% YoY to ₹75 crores, supported by water, IoT and enterprise solutions, but its margin profile makes it the less-preferred allocation choice when both segments have pipeline.
• AI/ML is internal-only for now: The company is building AI/ML solutions in-house to improve efficiency, reduce people cost and increase turnaround time. Two patents have been filed for the process technology, but the solutions are not yet being sold to customers, though POCs with >95% accuracy have been completed.

Kaushik Khona: "if you look at even margin numbers and percentage, technology margin has been between 27% to 32%. And the geospatial has been between, let's say, 18% to 24%. So, obviously, the choice with the given options which we have, we will prefer for a higher margin business."

Order Book & Pipeline: The Q4 Dependency

• Pipeline size and split: Management maintains a ₹700–800 crores bid pipeline, with roughly ₹400 crores linked to JJM/water and the balance spread across energy, municipal and other domains. The company insists it is not relying solely on JJM to meet its numbers.
• JJM review overhang cleared: A government review of JJM schemes suppressed activity for two quarters. That review is now complete, and major recoveries in late October give management confidence that balance monies will be disbursed over the next three months.
• Q4 is the critical quarter: Historically, maximum government orders close in Q4 as departments finalize decisions and tenders. Q3 has a good pipeline, but Q4 will be the largest quarter for closures, and management expects projected numbers to be fulfilled and possibly exceeded.
• Ticket sizes rising: Minimum bid ticket size is ~₹50 crores, with some pipeline orders in the ₹100–150 crores range. The MMRDA order won last quarter (₹115 crores) is cited as evidence of the company’s ability to win at that scale.
• River linking phased out: Phase-1 of the river linking project was completed ahead of schedule (by September vs. expected November/December), and the entire DPR with documents was finished before 15th October. The project has been phased out and the next phase could take another two to three quarters to materialize.
• Off-book recurring revenue: Mobility and product services carry annual contracts/commitments of ₹100–150 crores that are not added to the disclosed order book, providing a base layer of revenue not captured in pipeline figures.

Abhay Kimmatkar: "We are not 100% relying on JJM. That is not the only thing we are doing... even if JJM comes or not come, we will be closing what number we have envisaged. If at all JJM comes, then we will be surpassing the target numbers."

Working Capital: The Tightening Promise

• Current state: Net working capital cycle stood at 160 days in Q2, inflated by the typical H1 pattern where government disbursements concentrate in Q3 and Q4. Creditors have risen ~₹100 crores alongside ~₹140 crores in receivables, with ₹58 crores of the creditor increase linked to back-to-back payment terms with contractors.
• October inflection: A major tranche of ~₹40 crores was received in late October, followed by another ~₹20 crores, signaling that the government disbursement cycle has turned.
• Recovery roadmap: Management expects to recover almost all overdue debtors across November, December and January, targeting a working-capital cycle of ~100 days (down from 160). The normal debtor cycle, per management, should be 30–45 days.
• Aged receivables: Roughly 10% of debtors are more than six months old, and 80–82% of total receivables are government-linked. The older bucket is expected to recover during March and February when government departments receive year-end funds.
• Execution timeline: Average order execution runs 18–24 months, with O&M components extending to 2–5 years thereafter, meaning the working-capital drag from new orders is persistent even as old receivables are collected.

US Subsidiary: Investment Phase, Revenue Promise

• The cost run-rate: Since acquiring VTS in July 2024, the company has expensed ₹36 crores on business development, promotions and market-building, while capitalizing only ₹8 crores (IP and future prospects). The ₹7–8 crores quarterly opex has been consistent for the last 2–3 quarters.
• Strategic pivot beyond telecom: The US entity (now rebranded as Ceinsys Tech, the VTS name retired) is being repositioned beyond its original telecom domain into water, utilities, road transportation and mobility.
• Revenue absorption timeline: Management expects revenue to “substantially improve” and absorb the cost base as soon as Q4, with the scale of the business increasing in coming quarters based on sales activity and market traction.
• Acquisition targets in play: Two targets have completed full due diligence, and the company is actively working on acquisitions in geospatial and engineering services, targeting companies with revenue potential of ₹50–200 crores. A way forward is expected within one or two months, with a possible announcement by Q3 or Q4.

Kaushik Khona: "The overall CapEx from the last, I would say, since July 2024, because that was the time when we acquired the VTS business, since then, we have capitalized hardly Rs. 8 crores, which is basically the IP and the future prospects of business which we have acquired for."

Leadership & Structural Changes

• CEO transition: Surej K.P. has been appointed to the Board and will take over as CEO of the group. Prashant Kamat has resigned and will be active with the company only until December 2025, with no further ESOPs expected to be granted to him.
• Rebranding: The company has been branded as CS Tech Ai, while the corporate name remains Ceinsys Tech Limited.
• ESOP disclosure stance: When asked whether KMP share selling could be communicated to investors, management declined, stating there is no obligation to provide selling information as ESOP shares carry no lock-in once allotted.
• Revenue recognition policy: Revenue is recognized under Ind AS when milestones are achieved, not based on percentage-completion thresholds, which can create lumpiness in reported figures relative to work performed.

Guidance & Commitments

Key Metrics