KEC International Ltd Q3 FY2026 Concall Summary

Key Takeaways

• Record revenue, margin downgrade: Revenue hit ₹6,001 cr, up 12% YoY, but full-year EBITDA margin guidance was cut to 7.0–7.5% as legacy project delays and a Civil under-recovery bite.
• T&D is the engine, and it is accelerating: The segment grew 31% YoY to ₹4,161 cr, now 67% of revenue, with private-sector TBCB market share jumping to 75% from 45% last year.
• Legacy projects are a costly drag: Three completed metro projects await inauguration, burning ₹15–₹20 cr/month in maintenance, while railway closure delays and water-payment issues forced management to provide for claims it had expected to settle.
• The balance sheet is stretched but seasonal: Net debt rose to ₹6,806 cr on working-capital build; management expects normalization to ~₹5,500 cr by March-end, with ₹300 cr already repaid in January.
• What to watch next quarter: Whether the ₹300 cr January debt reduction holds and the year-end target is met, the pace of legacy-project closures (especially the three metro inaugurations), and any firm FY27 margin number.

T&D: The Core Growth Engine

• India private-sector shift is structural: Six new private players entered the TBCB segment, and KEC’s private market share expanded to 75% from 45% last year, with orders flowing from all large private clients including Adani, Sterlite and IndiGrid.
• Largest-ever India T&D order: Secured a ₹1,050 cr order from a reputed private player for a 765 kV transmission line and 765/400 kV AIS substation, reinforcing the private-sector momentum.
• International pipeline is broad: Multiple L1 orders across Middle East and Africa are expected to convert in Q4; demand is robust in the Americas (Brazil, Mexico, US), and the Middle East remains a key growth engine across Saudi, UAE and Oman.
• Supply-chain easing helps execution: Delivery times for transformers and substation equipment in India have shortened from 24 months to 15–17 months, partly because the threat of Chinese imports is pressuring domestic players to move faster, which benefits KEC as an EPC contractor.
• Ahmedabad-Navsari line commissioned: A large transmission line and substation were commissioned yesterday, with almost 2,600 MW of power flowing, mainly from the Khavda Renewable Park.

Kejriwal: "So to me, as an EPC, I'm very happy if that happens because today, a typical substation project, which used to take 12 months or so is now going into 18 to 24 months."

Margins: The Downgrade and the Path Back

• Full-year guidance cut to 7.0–7.5%: Management is no longer confident of hitting 7.5%, citing slower progress in higher-margin water projects, closure costs on legacy metro and railway jobs, and delays in claim settlements that forced early provisioning.
• Civil under-recovery is a material drag: A ₹1,000 cr revenue shortfall in Civil led to under-recovery of overheads; a special cost-cutting program is running but taking time to show results.
• Legacy metro costs are recurring: Three metro projects with viaducts ready and CMRS completed are not yet inaugurated, costing ₹15–₹20 cr per month in maintenance, for which provisions have been made.
• The core T&D business is healthy: T&D margins are in double digits, and the Cable segment delivered its highest-ever 9M profitability on better product mix and cost optimization.
• FY28 is the margin-recovery target: Management stated that by FY28, margins will definitely be at 9–10% after cleaning up the closure of railway and civil metro projects, though FY27 will already be better than this year’s 7.0–7.5%.

Kejriwal: "I don't think we are happy downgrading our, I'll say, estimates. But what is happening is what is happening. So we have to tell you this is what is there."

Civil & Transportation: The Intentional Reset

• Transportation is being deliberately shrunk: Management made a conscious decision to degrow the business for a couple of years until old projects are completed, prioritizing cash-flow realization and claim closures over new revenue.
• Civil order intake has pivoted entirely: 100% of Civil order intake this year is in buildings and factories, with multiple orders exceeding ₹4,000 cr across hospitals, thermal power, metals and mining, and luxury villa development.
• Labour shortage caps Civil output: The labour force grew from 18,000 to 24,000 but remains 2,000–4,000 short of optimal levels, causing a potential revenue loss of ₹500–₹600 cr per quarter, especially on the Civil side.
• Water projects are winding down: ₹600 cr of cash flow came in over 9 months, with ₹50–₹70 cr per month now flowing; if the trend holds, all water projects could close within 12–15 months, releasing working capital and ending the payment overhang.

Kejriwal: "So, looking at the revenue and order book, we have very clearly -- and I'll say it's a very conscious decision to degrow the business for a couple of years till we get out of the old projects."

SAE Towers & the Americas Opportunity

• SAE delivered 70% revenue growth: Revenues reached ₹525 cr, with large tower supply orders secured in Mexico and the US, signaling an uptick in the North American market.
• Order book and L1 stand at ~₹2,600 cr: The business is running at double-digit margins and reducing debt by ₹100–₹150 cr per year, with a cumulative debt reduction of ~₹200 cr over the last few years.
• Brazil manufacturing expansion underway: Small investments are being made to expand hardware and manufacturing facilities in Brazil, complementing the North American momentum.

New Growth Vectors: Renewables, Cables, KAVACH

• Wind energy entry with a breakthrough order: Secured a 100+ MW wind project in Southern India from a renowned private developer, adding to an existing 500 MW of solar projects nearing commissioning this quarter.
• Cables revenue up 37% YoY: The conductor business is driving growth, with profitability at a 9M high; order booking softened slightly as customers wait on aluminium and copper price direction, but the backlog covers the next couple of quarters.
• KAVACH deployment is scaling: Successfully implemented across 611 route kilometers, with an additional 1,836 route kilometers under deployment; more orders are expected within the next couple of weeks.
• Middle East renewables in sight: After gaining confidence from commissioning ~850–950 MW of solar capacity in India this year, management has started looking at Saudi and UAE markets for renewable opportunities.
• Oil and Gas goes international: A third international order was secured for a pipeline-laying project in the Middle East, as the domestic tender pipeline remains subdued and competition is heightened.

Guidance & Commitments

Key Metrics