EMS Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Record margins on tender execution: EBITDA margin spiked to an all-time high of ~29–30%, well above the guided ~25%, though management expects a normal 1–2% fluctuation band around this level.
• H1 muted by elections and monsoons: Revenue growth was held back by a pre-election order slowdown and an unusually severe monsoon that disrupted sites and cost working days, making Q2 the weakest quarter.
• Order book anchored in water, diversifying slowly: The ₹2,350 crores order book is still ~70–80% water-sector, but a first ₹700 crores Kolkata win and a ₹140 crores power project signal geographic and sectoral expansion.
• Cash flow turns positive: Cash flow from operations has "drastically improved" from negative to positive, and management plans to maintain and improve this position.
• What to watch next quarter: Conversion of the ₹6,400+ crores bid pipeline (mostly Amrit scheme projects) into orders over the coming 2–3 months, and whether the land acquisition from NCLT closes by March to be incorporated into the books.

Margin & Financial Performance

• EBITDA spike: Q2 delivered the highest-ever EBITDA margins of ~29–30%, driven by the nature of tender-based work; management is confident of maintaining this level with an expected 1–2% fluctuation going forward.
• Inventory spike explained: A ₹47.36 crores expense under Changes in Inventory reflects work-in-progress at new sites that has been executed but not yet measured, certified or billed, not a write-off.
• Cash flow turnaround: Cash flow from operations has moved from negative to positive, a shift management described as a drastic improvement and plans to sustain.
• Consolidated vs standalone gap: Consolidated revenue growth of ~11% lags standalone growth of ~20% because consolidated figures include only 4–5 SPVs floated for specific tenders; the majority of business is EPC and captured in standalone numbers.
• Debt position: The only debt on the books is for the Forbund-HAM project; there is no other debt.

Tomar: "So, I think we are confident of maintaining this going forward."

Demand Environment & Order Pipeline

• H1 slowdown: The first half of FY25 saw a slowdown due to the election process; management expects H2 to see many more orders floated by government bodies.
• Q2 monsoon disruption: Q2 is structurally the weakest quarter due to monsoons, and this year monsoons were significantly higher than last year, causing site disruption and loss of working days.
• Bid pipeline: The majority of the ₹6,400+ crores bid pipeline comprises projects under the Amrit scheme; results for the majority of this pipeline are expected to be declared in the coming 2–3 months.
• Conversion confidence: Management hopes to maintain the conversion ratio delivered so far, without quantifying it.
• Tender inflow: Every month brings a fresh influx of tenders; the company shortlists and bids continuously.

Order Book & Project Execution

• Order book size: The current order book stands at ~₹2,350 crores, with the majority of work to be completed in the coming 2 years and some work extending past that.
• Execution timeline: Average project execution time is about 2.5 years.
• Sector mix: The business mix remains ~70–80% water and ~20–30% other infrastructure sectors (power, building, road), a ratio management intends to maintain year on year.
• New Kolkata win: A ~₹700 crores sewerage scheme order from Kolkata Municipal Corporation, financed by Namami Gange, marks the company's first order in West Bengal.
• Power sector entry: Secured one project in the power distribution sector in Uttarakhand worth ~₹140 crores this year.
• Building project: Already executing a building sector project of ~₹320 crores (RBI housing colony, Navi Mumbai, client CPWD).
• Geographic expansion: The company is continuously bidding in Jharkhand, Chhattisgarh and Karnataka but has not yet secured projects there; management hopes to correct this soon.

Water Sector & Diversification

• Water dominance: The water sector remains the core business, with huge scope going forward in the country, per management.
• Amrit scheme exposure: The majority of the bid pipeline comprises Amrit scheme projects, positioning the company to benefit from government push in the water sector and increasing urbanization.
• Desalination: The company will be able to bid for desalination projects; currently none are in the order book.
• Sectoral diversification: The 20–30% non-water mix spans power distribution, building and road projects, a deliberate strategy maintained since inception.

Tomar: "I think there is a huge scope for water business going forward in the country and we have already been maintaining this mix of executing works in other infrastructure sectors of 20% to 30% year on year since the start."

Land Acquisition & Other Corporate Actions

• NCLT acquisition: The company is acquiring a company from NCLT solely for its land parcel; management is explicit that it is not interested in running the acquired company's plant and may scrap it.
• Land as collateral: The acquired land will be used as collateral for banking facilities.
• Timeline: The deal is under process and management hopes to close it soon; if acquired by end of March, those numbers would be incorporated into the books.
• Disputed debtor: An ₹34 crores disputed debtor relates to arbitration with UP Jal Nigam for a project in Narora; arbitration was awarded in the company's favour and the matter is now at the Allahabad High Court for execution.
• No penalties: No liquidated damages have been imposed on the company for delay.
• CFO search: The company is scouting for a suitable independent CFO and hopes to hire one as soon as possible.
• Rating upgrade: Discussions with a rating agency for an upgrade are in process.
• Fundraising: An enabling document for fundraising has been secured, but there is no timeline fixed; for current projects, internal accruals are sufficient, but larger projects might need funding.

Tomar: "We have been maintaining that we are only going after the land part and we are not interested in running any industry."

Guidance & Commitments

Key Metrics