KEC International Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Record revenue, margin expansion: Q2 delivered record revenue with EBITDA margins up 80 bps YoY, while PBT growth outpaced EBITDA thanks to a 50 bps interest cost reduction.
• T&D is the unambiguous engine: The T&D business grew revenue 44% YoY with double-digit margins, anchored by the largest-ever EPC and substation orders in the UAE and Saudi Arabia.
• Non-T&D margins are the drag: Civil, Railways, and Renewables are all operating at low single-digit margins, pulling the blended non-T&D margin to roughly 1–1.5%, though a recovery path is laid out.
• Working capital spike demands attention: Net working capital days jumped to 138, driven by delayed advances, Saudi retentions, and a conscious inventory build; management calls this the peak and expects normalization.
• What to watch next quarter: Whether the large order advances actually land in Q3 to bring down debt, the pace of legacy project closures releasing cash, and any stabilization in Civil labor availability.

T&D: The Growth Engine

• Dominant performance: T&D revenue grew 44% YoY, delivering double-digit EBITDA margins and expanding its geographical footprint with a first marine order in a new CIS country.
• Record order wins: The quarter included the largest-ever EPC order of over ₹3,100 crores in the UAE and the largest-ever substation order of over ₹1,000 crores in Saudi Arabia, pushing YTD order intake past ₹16,000 crores, up 20% YoY.
• HVDC momentum: The company is now executing five HVDC projects, including a major converter station across three locations, and bagged another significant order from a private developer this quarter.
• Saudi competitive moat: In large, critical Saudi tenders, competitive intensity has fallen significantly because the client now invites only qualified players; non-critical tenders still see 7–8 bidders.
• Intrastate TBCB entry: KEC is L1 in a recent intrastate TBCB project, a segment it previously avoided, opening a new addressable opportunity.

Kejriwal: "In fact, we are L1 in one of them in the recent one. And that's an area where we were not there because I would not have typically bid for intrastate projects. So more than intrastate, I think intrastate is also an interesting area."

Working Capital & Debt: The Peak Thesis

• NWC days elevated at 138: Management attributes the spike to four factors: large advances on newly announced orders yet to be received, 20% retention on Saudi orders nearing completion, a conscious ₹250–₹300 crores inventory build on benign steel prices, and a payables squeeze from Q4's high revenue.
• Debt peak called: Management expects current debt levels to be the peak, with normalization ahead as advances land in Q3 and 7–8 Saudi projects close this financial year, releasing retentions.
• Year-end debt target: Debt is expected to settle around ₹5,000 crores by year-end, with NWC days normalizing to last year's level of 118–120 days.
• Afghanistan overhang clearing: Three of five projects are largely closed; the pending ADB payment of roughly $30 million has been confirmed in writing and is expected in Q4.
• ECL provision conservative: Lifetime ECL provisioning now stands at ₹475 crores, with hardly any significant bad debt write-off, per management.

Kejriwal: "I think the difference is that if you compare the major competitors and all that, most of them have done very poorly in Middle East, okay? We have a very large order book and a large revenue coming out of Saudi, where unfortunately, there is a 20% retention, okay?"

Non-T&D Margin Recovery

• The margin hole: Civil operates at significantly lower single-digit margins due to heavy rainfall and labor shortages; Railways is also a drag; Cables is at higher single digits (~6%). The blended non-T&D margin sits near 1–1.5%.
• Civil turnaround thesis: Legacy metro projects with poor margins are nearly closed; new orders carry much better margin quality, with minimum sizes raised to ~₹400 crores each to improve overhead absorption. Civil revenue is expected to hit ~₹5,000 crores this year with mid-single-digit margins, then grow 15–20% next year toward higher single digits.
• Railways reset: The company exited pure-play civil railway segments where displaced road players created intense competition, shifting focus to technology areas like TCAS signaling and BLT. Revenue this year is pegged at ~₹2,000 crores, with a flattish or downward outlook next year before a pickup.
• Renewable margin pressure easing: Competitive intensity spiked as many solar companies pursued IPOs in the last 3–6 months, but management sees this "slowly dying down" as players realize they are "killing themselves." The company is now bidding for wind EPC and expects a first win this year.
• Cable margin tailwind: The E-Beam facility, once commissioned in Q1 next year, will optimize material costs and improve solar cable margins from Q2 onwards.

Kejriwal: "Margins have to improve. Otherwise, the business will have to shut down. We are very clear that unless the business reaches a margin level what we are looking for, okay, there's no fun in doing it."

Civil & Labor: The Bottleneck

• Revenue left on the table: Civil revenues could have been higher but for prolonged monsoon, labor shortages, and delayed payments in the water segment; management estimates ₹200–₹300 crores more could have been executed with a full labor contingent.
• Labor shortage persists: Requirement is ~30,000 workers; the company had 17,000 and has rebuilt to 24,000, but the shortage is specifically in erection, not civil or stringing. Mechanization is being increased via cranes, automatic bar bending, and drone plastering.
• Water project caution: The company follows a "cash and carry" policy on water projects, reinvesting only what is collected, which caps execution speed. Water segment dues stand at approximately ₹875 crores.
• H2 civil ramp expected: Civil H2 revenue is expected to easily reach close to ₹5,000 crores, up from ~₹1,800–₹1,900 crores in H1, implying a sharp second-half skew.

Kejriwal: "I could have definitely done at least INR200 crores, INR300 crores more. I'm telling you in civil, had we had a full contingent of 30,000 people with us."

Renewables & New Engines

• Renewable revenue ambition: The company targets ₹3,000–₹4,000 crores in renewable revenue over the next 2–3 years, backed by two large solar projects nearing completion and a new push into wind EPC.
• International renewable entry: With two ~1 GW projects nearing completion, the company now has the confidence to pursue international renewable projects, expecting 300–500 MW of wins next year.
• Data center inquiries returning: After a slow Q4 and Q1, data center activity is picking up again as clients who paused after DeepSeek have now "dusted up plans."
• Oil & gas pipeline: The company secured prequalification from a leading Middle East utility and is well placed to secure a third international pipeline laying order.
• Spur turnaround expected: Spur has "performed badly" but holds large international qualifications under the KEC entity; management expects it to start picking up.

Kejriwal: "If you look at the last 3, 4 months or 6 months, the number of IPOs which have come from the solar companies have been phenomenal. And these are the players who have gone for a significant, I'll say, competitive intensity increase, okay? We are slowly seeing that dying down now. People have realized that they are killing themselves by doing it."

Guidance & Commitments

Key Metrics