RBM Infracon Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Revenue surged, guidance cut: Total income rose 95% YoY in Q3, but FY25 guidance was slashed from ₹400 crore to ₹300-325 crore because a client-side plant redesign slowed a major project beyond the company's control.
• ONGC takeover is the story: The 15-year production enhancement contract was taken over ahead of schedule on 17 January 2025, and while the first year will contribute only ₹40-50 crore, management expects a visible difference next year and peak impact in 1-2 years.
• Order book flat, big bets pending: The order book stayed at ₹958 crore as new wins merely offset ₹65 crore of execution; management is targeting ₹600+ crore in new orders next year but has not yet secured them.
• ₹290 crore fundraise to fuel the pivot: A preferential warrant issue at ₹580 per share, mostly to promoters, will fund ONGC working capital and other EPC contracts, with first tranche expected after exchange approval by June.
• What to watch next quarter: Whether the ₹165 crore Q4 revenue target is met, any confirmation of the big orders management is "working towards," and the pace of ONGC workover ramp-up.

The ONGC Transformation

• Contract mechanics: RBM took over an existing ONGC asset on 17 January 2025, ahead of the client's timeline. The 15-year contract splits into two parts: workover (5 years) and drilling. Workover has already begun.
• Revenue model: For existing production, RBM earns service charges. For any enhancement beyond the baseline, the incremental quantity is shared 66% to RBM and 34% to ONGC, with no cap on the upside quantity.
• First-year contribution: Management expects only ₹40-50 crore from ONGC in the first year, calling it a slow take-off while workover ramps up. The real financial impact becomes visible after a year, with peak contribution in 1-2 years.
• Margin profile: ONGC margins will be low initially because the first five years are an investment phase, but after 10 years margins will be "big margin." Even at the start, ONGC profit is better than EPC margins, though blended corporate margins depend on the overall revenue mix.
• Drilling economics: Drilling is the highest-cost component at ₹20-30 crore per well. The company's eco-dynamite team is doing research work now; once finalized, drilling will begin.
• Rig expansion: The company targets 40 rigs for FY26, up from 6 currently, with 5 more to be added soon and a total of 30 rigs planned. This scale-up underpins the revenue ambition.

Sharma: "It will take us a year or two to reach the peak and then you will see the real impact of the ONGC project. But definitely the next year you'll see the difference."

Guidance Revision: What Broke and What Holds

• The cut: FY25 revenue guidance dropped from ₹400 crore to ₹300-325 crore. The cause was a client-side plant redesign at a larger project, which slowed work but did not stop it. Management called the redesign "beyond our control."
• The Q4 bridge: To hit the revised full-year target, RBM must execute roughly ₹165 crore in Q4 alone, a sharp ramp from the 9-month run rate.
• FY26 ambition intact: Management set an FY26 revenue target of ₹650-700 crore with a PAT margin of 9-10%, implying the ONGC ramp and new orders fill the gap left by the FY25 miss.
• Order book target: The company is targeting an order book of ₹600+ crore for next year and says management is "confident" of securing big orders, though none are confirmed yet.

Sharma: "I believe that it was INR 400 crore initially but due to some alignment at the customer, our client side there were some redesigning to be done... we have to revise the figure."

Order Book and Project Updates

• Order book composition: Of the ₹958 crore total, ₹600-650 crore comes from ONGC. The Epitome project, originally ₹957 crore and now revised to ₹2,350 crore after two scope expansions, will need a higher run rate to close in the next 1-3 years.
• Epitome progress: Civil works and tank construction are 60% complete, but only roughly 10% of billing has been done. The client doubled production capacity, changing the internal layout and extending the deadline across two phases, with the first phase in 2025.
• Epitome cost risk: The design change was client-driven, not RBM's fault. The value increase is negotiable, and any cost increase from steel or other inputs beyond the existing quantity will be agreed upon and paid separately.
• Malco Energy: The order book from this entity rose from ₹167 crore to ₹174 crore because Malco Energy went to NCLT; RBM is doing Met Coke work there, and revenue will start showing.
• Unbilled revenue: Work was completed and invoices raised, but the customer's commercial department takes almost 100 days for final bill approval, creating a timing mismatch between execution and recognized revenue.

Fundraise and Capital Allocation

• The instrument: The board approved 50 lakh fully convertible warrants at ₹580 each, raising ₹290 crore via preferential allotment. Of these, 30 lakh warrants go to the promoter group. Conversion must happen within 18 months.
• Pricing constraint: The ₹580 price is formula-driven under SEBI regulations, based on the average price of the last six months, not a discretionary choice.
• Use of funds: The first 25% of the raise is earmarked for working capital, primarily for ONGC and other EPC contracts across India. Management says this should be sufficient to accommodate all working capital needs.
• Timeline: Exchange and regulatory approval is expected by June; allotment follows within 10-15 days. The first tranche arrives then, with another 25% drawn in the year ending 2026.
• ONGC working capital: The initial investment requirement will be on the higher side, but the cycle should not exceed three months, depending on how fast workover is executed.

Sharma: "Mainly big funds which we are getting, the first 25%, we will be majorly required for the working capital."

Green Energy: Early and Unrushed

• Subsidiary formed: RBM Green Energy Private Limited was incorporated as a wholly owned subsidiary in December to house the green energy segment.
• Hydrogen research phase: The company is doing research on green hydrogen, including electrolyzer work for which it has secured some funds. Management is explicit that it is not rushing because the area is "totally new." No orders are in the pipeline.
• Solar EPC: Planning is underway for April 2025, but management declined to give specifics, saying it is still doing a deep dive and will inform once a final decision is taken.
• Land and investment: Roughly 8-10 acres and an investment of ₹50-100 crore were mentioned for a green hydrogen facility, but these are early-stage figures with no committed timeline.

Sharma: "We are not rushing through because that's totally new, green hydrogen."

Margins, Mix and Operational Detail

• Q3 margin drop: EBITDA margin fell 601 bps YoY, which management attributed to an "exceptional" Q3 last year due to a favorable sales mix. Nine-month margins remain in line with historical levels.
• Revenue mix shift: Currently 70-75% of revenue comes from ONGC. Going forward, the company plans to move more toward oil drilling rather than small EPC projects, a shift that will change the margin profile over time.
• Fuel price linkage: Realization is tied to international fuel prices: if fuel prices fall, margin rises; if fuel prices rise, margin also rises, creating an unusual dual-direction benefit.
• GST matters: A ₹10 crore GST demand arose from a supplier default but is recoverable and the supplier has already paid. A separate ₹4.3 crore demand from a supplier confirmation issue was paid by RBM and recovered from the concerned parties with no financial impact.
• Auditor resignation: The auditor resigned because, per management, "he was not being attentive to the work." When pressed for more detail, management said only that the reason has been given, without elaborating further.

Adithya: "But he was not being attentive to the work. So we have taken the call."

Guidance & Commitments

Key Metrics