Rites Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Flat revenue, richer mix: Top line grew just 1.5% YoY as a INR 90 crore turnkey decline was offset by higher-margin consultancy and the restart of export revenue, lifting EBITDA and PAT margins.
• Order book at an all-time high: The backlog reached INR 9,090 crore, a net addition of INR 300 crore in the quarter, keeping the INR 10,000 crore milestone within sight.
• Export engine restarts after a long hiatus: The first Mozambique locomotive deliveries broke a 1.5–2 year dry spell, and management now expects a steady quarterly export revenue stream.
• The turnkey revenue bump is a Q4/Q1 story: Two-thirds of the turnkey order book is young and still in design and approval stages; a material revenue lift is not expected until the fiscal year-end.
• What to watch next quarter: The pace of turnkey execution in Q3, progress on prototype coach approvals for the Bangladesh order, and whether the quarterly export revenue cadence holds.

The Mix Shift: Why Margins Improved on a Flat Top Line

• Turnkey decline was margin-accretive: The INR 90 crore YoY drop in the turnkey segment, which carries only 1–2% margins, shaved just INR 1–2 crore from the bottom line. The revenue was more than replaced by consultancy, which earns ~30% margins, and export, creating a powerful mix-driven margin lift.
• Consultancy grew ~12% YoY with quality assurance having one of its best quarters in six to seven periods. More than two-thirds of QA revenue now comes from non-Indian Railways clients, a diversification achieved over two years.
• Export revenue resumed at INR 60 crore after a gap of nearly two years, as the Mozambique locomotive order moved into the manufacturing and delivery phase. Two locomotives were dispatched in Q2, and two more shipped in October for Q3 recognition.
• Leasing is a quiet grower: The leasing fleet has crossed 100 owned locomotives plus O&M on client assets, and the segment is growing sequentially in both revenue and bottom-line contribution despite competitive pressure from new entrants.

Mithal: "We are very clear. We are not a construction company. We are purely a consultancy company. And the turnkey order book that you also see, it is because it's a method of accountal."

Order Book & Order Inflow

• The "one-order-a-day" discipline held: Rites won 150-plus orders worth INR 850 crore in Q2, a strike rate of 1.6 orders per day, a cadence maintained for roughly eight quarters. Management sets internal red lines on margin and ticket size to protect quality, not just count.
• The backlog reached INR 9,090 crore, an all-time high, with a net addition of INR 300 crore. The next milestone is INR 10,000 crore, targeted as early as possible, possibly by FY26-end.
• Export order win: A INR 160 crore nomination order for 10 in-service locomotives to South Africa was booked, keeping the target of one export order per quarter alive for the seventh or eighth straight quarter.

• Bidding pipeline is active across rail, infra, QA, and building verticals, with roughly 70% of bids on a competitive basis. Management declined to speculate on any single large upcoming tender, including the Delhi–Jammu high-speed rail corridor.

Segment Execution Timelines

• Turnkey revenue is back-end loaded: More than two-thirds of the INR 4,300 crore turnkey order book is less than a year old. Revenue booking normally begins near the end of the first year after initial designs, approvals, and agency fixing. A bump is expected from Q4 or Q1, with a substantial ramp in H2 FY27.
• Mozambique locomotives: Two of 10 dispatched in Q2, two more in October. Management aims to complete the order by Q1 FY27, with six to seven locomotives booked in FY26 and the balance in early FY27.
• Bangladesh coaches: The 200-coach order across seven prototype types is in the final design approval stage. The target is to manufacture and approve four prototypes by Q4, enabling bulk production. The first rake of 20 coaches is aimed for Q1 FY27, with a one-rake-per-quarter cadence thereafter.
• Export revenue smoothing: After a long blank period, management’s explicit goal is to avoid spikes and gaps, delivering a substantial export contribution every quarter going forward.

Mithal: "What we want to avoid is spikes in booking of the export revenue. ... And now our aim is that every quarter, you don't see a blank in the export revenue, you see a substantial contribution from the export revenue."

Margin Structure & Guardrails

• A four-segment blend with wide dispersion: Consultancy and leasing each earn ~30% EBITDA margins, export ~10%, and turnkey just 1–2%. Management actively manages the interblend to hold overall EBITDA at 20%-plus and PAT at 15%, calling these red-line minimums.
• Turnkey accounting inflates the top line without commensurate profit: A INR 106 crore turnkey project passes the full value through revenue, whereas the same scope executed as pure consultancy would show only the INR 6 crore fee. The scope and responsibility are identical; the accounting treatment is the only difference.
• Dividend payout stays generous: The company maintained a ~94% payout ratio this quarter. Management sees no reason to change, citing a debt-free balance sheet, low capex needs, and minimal working capital requirements.

Mithal: "the overall growth in the top and bottom line, while still securing our overall EBITDA margins at 20%-plus and PAT margins of 15% red line minimum, both these two 20% and 15%"

People & Partnerships

• Headcount growth is muted by superannuation: Net headcount rose only ~100 despite 300 inductions in H1, because a large cohort hired in the 1990s is now retiring after 30–35 years. This retirement wave is expected to plateau in a year to a year and a half, after which net additions should become more visible.
• Middle-East footprint expands: The MoU with Etihad Rail has already yielded work in Jordan, and Rites has set up an office in the UAE to partner on consultancy services across the region. A separate JV with DNV Italy for ISA certification of Vande Bharat coaches is progressing successfully.
• Naval projects entry: A new MoU with DG Naval Projects, Mumbai, was signed last week; Rites is already working with them on one or two projects and sees further potential.

Guidance & Commitments

Key Metrics