KEC International Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Record revenue, margin expansion and debt reduction all delivered in one quarter: Q4 revenue hit an all-time high of INR6,872 crores (up 28% QoQ), EBITDA margin expanded 150 bps YoY to 7.8%, and net debt fell by over INR500 crores despite the revenue surge.
• The T&D engine is firing on all cylinders: T&D revenue grew 23% to INR12,833 crores for the full year, international order wins more than doubled, and India T&D working capital is virtually at zero days, a structural deleveraging lever.
• Non-T&D businesses are a mixed bag, but the worst appears priced in: Railways has bottomed out and is being restructured toward profitable orders, while Civil is emerging from a drag of four metro projects and water payment delays. Cables and Renewables both posted record performances.
• FY26 guidance is explicit and backstopped by a INR40,000+ crores order book plus L1: Management targets 15% revenue growth to INR25,000 crores, 8–8.5% EBITDA margin, and INR30,000 crores of order intake, with working capital days improving toward 100.
• What to watch next quarter: Whether water project payments from Madhya Pradesh and Odisha sustain into Q1, the pace of railway restructuring, and any update on the INR250 crores Afghanistan receivable from ADB.

T&D: The Core Growth Engine

• Record revenue and order book: Full-year T&D revenue reached INR12,833 crores, a 23% jump, with an order book to revenue ratio of 1.5x, among the best in the industry.
• India T&D orders surpassed INR7,200 crores, growing over 20%, driven by the government's push for 600 GW of non-fossil fuel capacity by 2032.
• International T&D orders more than doubled to over INR8,300 crores, with strong traction in the Middle East, Africa, CIS and the Americas. A landmark tower supply order from Australia and the largest ever international substation order from the UAE were secured.
• HVDC is a new frontier: KEC is already executing three HVDC lines and is the first EPC contractor to construct the converter station side, a role historically reserved for OEMs. A pipeline of new HVDC tenders in Gujarat, Leh Ladakh, Himachal Pradesh and Saudi Arabia is building.
• India T&D working capital is a structural advantage: At virtually zero to below 10 days, any incremental India T&D revenue directly deleverages the balance sheet.
• Margin trajectory is upward: With legacy projects now behind and cost items like cement, steel and aluminium stable, T&D margins are expected to improve from FY25's 10%, though the exact landing point (11% or 12%) remains uncertain.

Kejriwal: "In fact, our India T&D working capital is virtually close to 0, below 10 days. So whatever increase we have in the India T&D business will help us in clearly deleveraging our balance sheet."

Non-T&D Portfolio: Turnarounds and Records

Railways: Bottomed Out and Restructuring

• Revenue has found a floor at INR2,100 crores: Management stated explicitly that if turnover falls below this level, the business may be shut down.
• Order intake has shifted toward profitable, lower-risk segments: The INR2,200 crores of orders taken this year were on the BLT side, metro, tunnel ventilation and the Kavach system, avoiding electrification or speed upgradation work that requires live track blocks. Current orders are profitable.
• Workforce rationalization is underway: 30–40% of railway employees have either moved out or been redeployed, especially to T&D, since electrification capabilities overlap with transmission line work.
• Turnaround expected by FY27: Management expects the railway business to turn around in FY26 and be clearly positive by FY27.

Civil: Emerging from a Heavy Project Cycle

• Revenue of INR4,483 crores was held back by a deliberate moderation in water projects due to delayed client payments and labor shortages.
• Three of four metro projects are now complete, with the fourth finishing soon, which should release locked-up cost of capital and improve margins.
• Water execution is now directly tied to payment inflows: whatever money is received in a given month drives execution the next month. If payments do not arrive in Q1, a de-acceleration in Q2 will follow. Revenue targets for FY26 are INR1,200–1,500 crores, contingent on no major payment setback.
• New order wins are larger and more profitable: A very large, fast-track semiconductor complex order was secured, along with repeat orders in metals and mining. The residential segment remains bullish.
• Civil margins should recover to at least 7–8% in the coming years, up from current depressed levels.

Cables: Record Performance, Capacity Expansion and a Margin Target

• Record revenue of INR1,800 crores (10% growth) with record order intake and profitability. The business was transferred to a wholly owned subsidiary, KEC Asian Cables Limited, effective January 1, 2025.
• Capacity expansion is underway: an aluminium conductor plant was commissioned at Vadodara, doubling of conductor capacity has been initiated, and E-Beam and Elastomeric cable production is expected to commence in Q4 FY26. Capex of nearly INR150 crores is planned for FY26.
• Margin target is 8% in two years, up from the current ~5.7–5.8%, driven by margin-accretive E-Beam and Elastomeric products and better-margin aluminium conductors.
• Revenue target is INR3,400–3,500 crores by FY27, with FY26 expected at INR2,300–2,400 crores.
• Value unlocking is a future option, not a near-term plan: management will consider diluting a stake or raising capital in the cables business only after a year or 1.5 years.

Renewables: The Dark Horse

• Exceptional 92% growth delivered record revenue of INR853 crores. A 500 MW solar project in Karnataka was partly commissioned, and the first phase of a 500 MW Rajasthan project is slated for completion within the current quarter.
• The opportunity set is expanding: management has begun bidding for hybrid projects combining wind and battery energy storage alongside solar. India's target of 500 GW renewable capacity by 2030 implies ~50 GW of annual additions, with tender sizes increasing to 1,200 MW+, favoring large EPC players.
• No specific timeline, but high optionality: management described renewables as a "dark horse" that could reach INR3,000–5,000 crores in revenue, noting there are very few large EPC players in the space today.

Kejriwal: "Today, there are hardly any EPCs in -- except one large EPC in the entire renewables. You never know what will happen on the renewable part."

Balance Sheet and Working Capital: The Deleveraging Story

• Net debt fell by over INR500 crores to INR4,558 crores despite a INR2,000 crores sequential revenue increase, and borrowings dropped by INR1,000 crores versus December 2024.
• Net working capital improved by 12 days to 122 days from a peak of 134 days in December, driven by higher collections, commercial closure of ongoing projects and the increasing share of T&D projects with a better working capital profile.
• Most collections arrived in the last week of March, so the full interest cost benefit of the debt reduction will only show in Q1 FY26. Interest cost is expected to remain at about 2.5% of revenue for FY26 despite 15% revenue growth.
• Working capital intensity is expected to fall further, toward about 100 days by the end of FY26.
• SAE Towers reduced its debt by 25% to INR300 crores, despite a revenue decline of 8% caused by a 15% depreciation of the Brazilian currency against the USD. Order inflows surged 2.5x to over INR2,300 crores.
• Afghanistan dues of ~INR250 crores remain outstanding, with no payment received in Q4. ADB, the funding source, has been slower than the World Bank due to its wider Afghanistan exposure. Management is hopeful for a large payment by Q2 FY26.

Kejriwal: "ADB, because of its wider exposure has been going a bit slow. But I think we are quite hopeful that we should be getting some money. I think, by next quarter, if not a little bit in this quarter also we still have 1 month. We're keeping our fingers crossed."

Risks and Fragilities

• Water project payments are the swing factor for Civil execution: execution is now directly tied to monthly payment inflows from Madhya Pradesh and Odisha. If monies do not arrive in Q1, a de-acceleration in Q2 will follow, and the INR1,200–1,500 crores revenue target for FY26 is at risk.
• Labor shortages are structural and India-specific: rising labor costs for civil fitters, carpenters and electricians are being factored into new tenders, but older orders face a marginal impact. Management expects the shortage will not increase and may ease slightly, but it is not confident it will go away.
• Oil and gas pipeline revenue fell over 40% because expected conversion to large EPC contracts did not materialize in India, where tender sizes remain below INR100 crores, making KEC uncompetitive. Growth will depend entirely on international orders from Africa and the Middle East unless Indian PSUs change their procurement model.
• Railway cables revenue is declining (INR140–150 crores) as electrification projects reduce; KEC is remodeling the facility to manufacture LT cables instead.
• FY26 margin guidance was toned down slightly from an earlier 9% aspiration to 8–8.5%, with management citing water payment uncertainty and labor shortages as reasons for conservatism. Clarity is expected after a quarter or so.

Kejriwal: "I think right now, with what is happening in water and labor, etcetera, shortage, etcetera, we are a bit conservative, okay? I don't know whether we'll be able to achieve 9% or not. But I think maybe after a quarter or so, we'll be able to be more clear about the numbers, okay, which is why I'll say that is why we have toned it down slightly."

Guidance & Commitments

Key Metrics