KEC International Ltd Q4 FY2026 Concall Summary

Key Takeaways

• Record revenue, margin expansion, but Q4 hit by geopolitics and labor: Revenue grew 8% to a record INR23,506 crores, with PBT margins expanding 40 bps to 3.6%, yet Q4 lost INR380-400 crores in revenue from Middle East disruptions and saw labor shortages worsen in India.
• Order book quality is improving, not just growing: The order book plus L1 position exceeds INR40,000 crores, but the conscious shift to fewer, larger EPC orders (average size up from INR350 cr to over INR500 cr) and a new policy rejecting negative-cash-flow projects signal a focus on returns over volume.
• The Civil business is the swing factor for leverage and growth: Management expects a significant turnaround from Q2, targeting 30-35% revenue growth and INR8,000 crores in order intake, which would help manage overall leverage after years of being a drag.
• Debt reduction is a stated, quantified priority: The company targets a INR1,000 crore net debt reduction this year, with INR500 crores by Q2 and another INR500 crores by year-end, driven by water collections and revenue growth.
• What to watch next quarter: Whether the Middle East supply chain stabilizes enough to release delayed dispatches and collections, whether labor returns to Civil sites by May-end as expected, and whether the promised Q2 Civil turnaround actually materializes.

T&D: The Engine, Its Constraints, and the HVDC Opportunity

• Dominant and growing: T&D revenue reached a milestone INR15,883 crores, up 24% YoY, and now contributes 68% of overall revenue versus 59% last year, with an order book-to-revenue ratio among the best in the industry.
• Market structure shifting toward private players: Large intrastate projects are moving to the TBCB route, and the share of private players in TBCB tenders has jumped to ~80% from 45% last year; KEC is scaling up with private sector clients.
• SAE Towers delivering: The Americas subsidiary achieved profitable revenues of INR1,800 crores, 36% YoY growth, and secured large power supply orders in Mexico and the US, signaling an uptick in the North American market.
• Resource diversion is delaying new line starts: A lot of resources are being diverted to complete lines and release grid lock, so new lines that would normally have started work are on hold because resources for clearing Right of Way are limited from both KEC and the client side.
• ROW challenges persist: Land acquisition for transmission remains a "right to use" model with committee-based settlement that is long-drawn and helps only at the end, not the start; state government approvals for market-based procurement have not expedited the process. [19-20]
• HVDC pipeline building: KEC secured three HVDC orders from Adani and PGCIL and is executing five projects; one new project (Barmer complex) is in a very advanced stage, with seven to eight projects overall expected.
• Near-term pipeline robust: The T&D pipeline for the next three months stands at ~INR70,000 crores, equally divided between India and international markets.

Vimal Kejriwal: "A lot of our resources are all diverted towards completing lines to release the grid lock. And because of that, a lot of new lines where I would in the normal course would have started work are actually slight -- I'll say, put on hold because the resources for clearing ROW and other things are limited from our side as well as the client side also."

Middle East Disruption: Impact, Mitigation, and the Recovery Bet

• Q4 revenue loss quantified: The Middle East slowdown cost ~INR380-400 crores in revenue, and the inability to dispatch material from the Dubai factory increased both working capital and borrowing.
• Supply chain chaos is multi-layered: Steel was not available, shipments from China were stuck (a transformer was held up for two months), and supplies from India were initially badly affected; shipping routes are slowly stabilizing via Fujairah, the Red Sea, and the western side, but timelines and costs are increasing.
• Site execution continues, factory running: All sites remain ongoing; the factory stopped for only 1.5 days at the start of the conflict and has been running since, with off-and-on stoppages early on but no stoppages reported in the last month.
• Client compensation discussions underway: One client has already agreed to pay additional cash straight away, and diesel price hike discussions are ongoing with government clients; some contracts have clear Force Majeure clauses allowing cost pass-through.
• Q1 impact expected to continue, but less severe: Management expects some continuing impact in Q1, though not as severe as Q4, and supply chain normalization is likely to take time, potentially affecting Q2 as well.
• Long-term thesis intact: Clients in Saudi Arabia, UAE, and Oman say business will increase, driven by rehabilitation, redundancy, rebuild, and data centers; if Iran sanctions are removed, Iran becomes a very large market.

Vimal Kejriwal: "Like one client has said, okay, I'll pay you some additional cash straight away. So those things are getting discussed."

Civil Business: The Turnaround Thesis

• Past constraints are receding: Revenue was held back by labor constraints, delayed release of work fronts, slower payments in water projects, and real estate plan changes in NCR (new codes issued then withdrawn after three months) that suspended some project commencements; four or five projects with significant delays have now closed.
• Labor expected back by May-end: April and May will remain a challenge, but by May-end labor is expected to return, and most projects that were on hold have started.
• Order book diversifying into new segments: Wins include entry into semiconductor EPC, the largest-ever commercial real estate order from a global developer, an ~80-floor residential tower, a luxury villa development, a 150 MW thermal power plant, multi-specialty hospitals, and five orders from metals and mining players.
• Bidding in new infrastructure categories: The business has commenced bidding for underground metros, stations, tunnels, and pump storage projects, and strengthened organizational capabilities through strategic senior leadership hires.
• Transformation program launched: A transformational program in partnership with a global consultant, focused on execution excellence, has been initiated with select pilot projects.
• Three of four metro projects completed: Two Delhi Metro projects were inaugurated by the Prime Minister, and one Chennai project is done; the fourth will complete now, removing a historical overhang.
• Growth target is aggressive: Management targets at least 30-35% revenue growth and ~INR8,000 crores in order intake for Civil in FY27, with the turnaround contributing meaningfully to managing overall leverage.

Vimal Kejriwal: "I think Civil will now turn around this year onwards. So I think we should be seeing some uptick getting contributed by Civil, but it will also contribute a large number to the revenue, which will help us in managing our leverage."

Margins, Debt, and the Growth-versus-Returns Debate

• PBT and PAT outpaced revenue: Operating PBT grew 21% and operating PAT grew 18%, with PBT margins expanding 40 bps to 3.6% and PAT margins up 30 bps to 2.6%, despite Q4 headwinds.
• Debt reduction is a quantified, staged target: Net debt was marginally lower than December 2025, but could have been lower absent INR450 crores of collections spilling into April, higher inventory from delayed Dubai dispatches, and strategic raw material buildup; the target is INR1,000 crores reduction overall, with INR500 crores by Q2 and another INR500 crores by year-end.
• Working capital days to improve: Currently at ~135 days, the target is 120 days by H1 and 110 days by year-end, aided by Saudi retention releases as large contracts head into completion and water collections improving with recent budgetary allocations.
• Order intake policy tightened: The company has stopped taking any order with negative cash flow over the project life, a conscious shift toward quality over volume.
• Double-digit margin ambition is distant: Management acknowledged the ambition but said it looks difficult next year, perhaps achievable by FY29, and depends on securing three to four very large high-margin projects. [21-22]
• Growth-versus-margin debate is live: The tension between pursuing growth and protecting margins is being debated even at the Board level, described as "a very tough decision to take."
• Margin guidance withheld: Management declined to give margin guidance, citing the need for the West Asia situation to settle and better visibility on client reaction and price stabilization, possibly in a month or two.

Vimal Kejriwal: "When do we reach double-digit is a million-dollar question. I will probably not be able to answer today, but that's also our ambition and our aspiration that we reach it as fast. Can we do it next year? It looks difficult to me."

Cables, Renewables, and the Non-T&D Portfolio

• Cables profitability at a record: The cables business achieved its highest-ever profitability during the year, driven by a better product mix and cost optimization.
• New products and capacity coming: An aluminum conductor plant was commissioned last March; elastomeric cables are slated to commence production in Q2, and an E-Beam plant will be commissioned within the same quarter.
• Cables subsidiarization on a three-year track: The process began January 1, 2025, with strategic investment or value unlocking on the anvil for FY28-29.
• Renewables: record execution, tough EPC market: KEC commissioned a record 1,000 MW of solar capacity, but the solar EPC market is "shut for large players" due to small-time players undercutting pricing on government tenders; the company is now focused on the private sector and wind, where it has forayed with two 100 MW orders.
• Wind is the shift: People are moving toward wind because of grid lock, night power shortages, and 60 GW of solar back-down; wind offers more perennial generation and easier land acquisition since turbines can be half a mile apart.
• Railways in decline: The business is running down except for KAVACH, signaling, tunnel ventilation, and metro, after the unexpected decision that all railway projects will be done by divisional railways rather than PSUs, and electrification is largely over; stabilization will take another year or so.
• Oil & gas enters GCC: The business entered the GCC region with a composite station works project, unlocking a large growth market, with geopolitical developments in West Asia expected to accelerate investments in energy security and pipeline infrastructure.

Guidance & Commitments

Key Metrics