KEC International Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Strong headline growth, margin improvement: Revenue grew 11% YoY and EBITDA margin expanded 50 bps to 7%, with PBT and PAT up over 40% on lower interest, depreciation and tax.
• T&D is the engine, now 63% of revenue: India T&D grew nearly 50% YoY, competitive intensity is easing in Saudi Arabia, and a INR90,000 crore tender pipeline sits ready for decision in the next 2-3 months.
• Non-T&D has been a deliberate and involuntary drag: Railways was intentionally slowed, oil and gas tenders dried up, civil suffered labor shortages and water payment delays, and cable margins were hit by approval delays. Management says the bottom is in.
• Working capital stretched to 128 days: The blowout is a mix of structural back-ended metro viaduct cash flows, opportunistic steel stocking, and a one-off cable inventory buildup now being liquidated. A sharp reduction to 110 days is promised by year-end.
• What to watch next quarter: Whether domestic T&D awards actually accelerate as promised, the pace of non-T&D revenue recovery from Q2, and progress on the working capital unwind.

T&D: The Engine Firing on All Cylinders

• India T&D surged nearly 50% YoY, driving the mix shift to 63% of revenue from 55% a year ago.
• Competitive intensity is easing where it matters: in Saudi Arabia, a recent large tender drew only 3-4 bidders versus 7-8 historically, as scaled players grow more satisfied with their order books. India is seeing a similar dynamic on large-value orders.
• A INR90,000 crore tender pipeline (INR30,000 crores India, INR60,000 crores international) is expected to be bid and decided in the next 2-3 months, with INR26,000 crores already in L1 position.
• Domestic awards slowed in Q1 as private-sector TBCB winners delayed awarding EPC contracts and some solar plant delays caused line reprioritization. Both issues are now resolved, and large order inflow to EPC companies is expected in the next 2-3 weeks.
• State T&D projects are unlocking: a Ministry of Power guideline requiring projects above INR200 crores to go through TBCB had frozen state-level awards as states resisted ceding control. Maharashtra has now accepted TBCB, other states are falling in line, and Gujarat secured an exemption by arguing TBCB would delay fast-track projects.
• HVDC and STATCOM orders are on the horizon: management expects HVDC wins on both lines and converter stations, and STATCOM awards to accelerate materially from Q3 onwards.
• SAE Towers is capacity-constrained: the Brazil subsidiary is operating at full capacity, with growth limited to hardware and local-currency effects. Tariff uncertainty is preventing main tower capacity expansion.

Kejriwal: "In fact, recently, where we have in L1 in one of the projects, which is then in 6,000, we just saw 3 or 4 bidders. Earlier, we used to see 7 or 8. So slowly, slowly, because the business has become, I'll say, so large and people are winning and I think they are more satisfied with what they have. The competitive intensity in Saudi, and you're not asking me but also in India, has become significantly less for the large value orders."

Non-T&D: The Deliberate and Involuntary Drag, Now Bottoming

• Non-T&D revenue has declined for 4-5 quarters, with the pace accelerating in the last 2-3 quarters. Railways was deliberately slowed from INR4,000 crores to INR2,500 crores as major government expenditure shifted to rolling stock, station redevelopment and passenger amenities rather than line expansion, electrification and signalling where KEC operates.
• Oil and gas has been disappointing: no tenders are coming in, and the Indian sub-INR100 crores market has been vacated due to excessive competitiveness. The focus is now on Middle East and Africa, where some tenders above INR100 crores are emerging.
• Civil revenue degrew on two fronts: a labor shortage that has now narrowed from 30-35% to roughly 10%, and delayed payments in the water segment where INR800 crores of receivables are stuck between central and state government funding disputes. The Jal Jeevan Mission figure appeared in the budget for the first time, and funds are expected to start releasing.
• Cable margins were pressured by a one-off: the commissioned plant could not get certain customer approvals, causing finished goods inventory buildup and higher interest costs. That inventory is now being liquidated.
• Management is explicit that non-T&D margins have bottomed at 7% this quarter, with a target of 8-8.5% for the year driven by recovery in civil and cables. Revenue growth is expected to start turning from Q2, with a significant uptick from Q3 and Q4.
• Civil is being restructured for quality: minimum order size is being raised to INR300-400 crores, and the number of active sites is being reduced from 310 toward 250.
• Railways capex is not coming back to KEC's segments soon: management pushed back on analyst figures of 50% YoY government spending increases, arguing the expenditure is overwhelmingly on rolling stock and passenger amenities, not on the line-expansion and electrification work KEC does.

Kejriwal: "Now if you are covering us for a long time, you'll see 3 years back, India T&D actually had a loss. Today, we are talking about more than a double-digit margin. So I think when you are in EPC business, these things will keep on happening, and you'll never be very sure in 2 years, which of your engines will fire and what will happen."

Working Capital: The 128-Day Problem and the Promised Unwind

• Net working capital days swelled to 128, driven by three distinct factors: INR300-500 crores of civil revenue degrowth from labor and water issues, back-ended cash flows on three large metro viaduct orders now fully handed over, and inventory buildup from opportunistic steel purchasing at favorable prices plus a one-off cable finished goods pile-up from delayed customer approvals.
• The unwind path is specific and time-bound: steel inventory will be consumed in Q2 and Q3, conductor inventory liquidation is already underway, a payment from Afghanistan is expected in Q3, and cash release from the three completed metro projects is pending.
• Management targets 110 days by year-end, with debt reducing to roughly INR4,500 crores despite 15% top-line growth. Interest cost is guided at 2.5%.
• Water receivables of roughly INR800 crores are a structural overhang: the company works only to the extent money is received and reinvests released funds back into projects. INR257 crores came in during Q1 and INR50 crores in July, described as money trickling in.

New Engines: Renewables, Semiconductors, and the Diversification Bet

• Renewables is being built cautiously: the company is targeting INR3,000-4,000 crores of business over the next 2-3 years, focused primarily on India. Two large 500 MW solar projects are nearing completion (Karnataka partly commissioned, Rajasthan first phase due this quarter), but management is deliberately not scaling solar EPC aggressively because margins remain unattractive.
• BESS is exploratory: the company has quoted for projects where battery storage is required as part of renewable packages and has seen smaller inquiries from the Middle East. An order this year is characterized as maybe, maybe not.
• Semiconductor EPC entry: a large first-of-its-kind order was won from a reputed client, marking a new adjacency.
• Buildings and factories hit two landmarks: the largest-ever order by value and the tallest structure undertaken (towers up to ground plus 70 stories), marking entry into the premium high-rise residential segment.
• International transportation is being pursued: bids have been submitted for multiple tenders in the Middle East as the company looks to diversify its civil and transportation footprint beyond India.
• Kavach is a steady, not explosive, opportunity: the company is executing 500 track kilometers with a JV partner and expects additional orders shortly, but management cautions that growth will be steady rather than very fast until supply chain issues are resolved.

Kejriwal: "In EPC, I don't know, we are getting a lot of numbers, but the margin is still not very high. So, when the margin improves slowly, we will expand it. Otherwise, you will say that your margin has reduced."

Margins: The Standalone vs Consolidated Bridge

• Consolidated EBITDA margin improved 50 bps to 7%, and management is confident of reaching the lower end of the 8-8.5% guided range for FY26, with a further 50-100 bps improvement in FY27 taking margins closer to 10%.
• Standalone margins dipped to 4.9% due to three factors: international T&D business is housed in the UAE subsidiary, civil degrowth created operating leverage headwinds, and the cable approval delay hit profitability. Management guides standalone margins at 75-80% of consolidated for the full year.
• T&D margins are at double digits, but further expansion faces a structural headwind: private-sector TBCB winners increasingly want to supply their own conductor and insulator, which may reduce the volume of business KEC generates and slightly cap margin upside. Management says it is too early to comment on whether T&D margins can increase further.
• Non-T&D margin recovery is the swing factor: civil and cable margin improvement is the explicit driver of the guided 100-150 bps consolidated margin expansion from the current 7% to the 8-8.5% target.

Risks and Pushback

• Power Grid debarment risk was addressed directly: an analyst asked about the bribery case potentially leading to exclusion from Power Grid projects. Management declined to comment on what Power Grid might do, but argued that even in the unlikely event of action, the impact on T&D growth would be minimal given a 6-8 quarter order book, 50% of TBCB orders going to non-PGCIL entities, and international diversification. The case remains sub judice with hearings yet to start.
• T&D margin ceiling: management could not commit to further T&D margin expansion, citing the private-sector self-supply dynamic and saying it is too early to comment.
• Non-T&D mix risk was walked back: when asked whether increasing non-T&D mix would threaten margin guidance, management clarified they never said T&D revenue percentage would decline, calling any such comment a mistake if made.
• Labor shortage quantification was vague: management estimated the civil revenue impact at INR300-500 crores but acknowledged the figure is imprecise, saying I don't have that number. The specialized erection gang shortage for 765 kV transmission lines persists even as general civil labor shortfall narrowed to roughly 10%.
• Solar EPC margin discipline: management is actively rejecting volume in solar EPC because margins are not yet high enough, prioritizing profitability over scale in the near term.

Kejriwal: "Even in the unlikely, say, that PGCIL takes something against us or something, I don't think it's going to impact our T&D growth in any manner. We have a large enough order book in India for the -- at least for the next 6 to 8 quarters."

Guidance & Commitments

Key Metrics