Patel Engineering Limited (PATELENG) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Patel Engineering Ltd. Q1F527 Earnings Conference Call hosted by Valorium Advisors. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Purwangi Jain from Valoram Advisors. Thank you, and over to you, Ms. Jain.

Thank you. Good morning, everyone, and a very warm welcome to you all. My name is Purwangi Jain from Valoram Advisors. We represent the investor relations of Patel Engineering Limited. On behalf of the company and Valoram Advisors, I would like to thank you all for participating in the company's earnings conference call for the quarter ended on June 30, 2026. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risk and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decision. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would now like to introduce you to the management team joining us on today's call. We have with us Ms. Kavita Shirvaykar, Managing Director, and Mr. Rahul Lagadwal, Chief Financial Officer. Without any delay, I request Ms. Kavita to start with her opening remarks. Thank you and over to you, ma'am.

Thank you, Purwangi. Good morning, everyone, and thank you for joining us today for Patel Engineering Q1, the 5.7 Army Corps. I would like to welcome all our shareholders, investors, and athletes, and thank you for your continued trust and confidence in Patel Engineering. We have uploaded our investor presentation and financial results on the stock exchange, and I hope you have had an opportunity to review them. I will take you through the key business and operational developments during the quarter, our industry outlook, and the opportunities we see ahead. Following this, our CFO, Mr. Rahul Agarwal, will take you through the financial performance in greater detail. Let me begin with the performance for the quarter. We have started F527 on a positive note, with continued momentum in both execution and profitability. For Q1 F527, our consolidated revenue stood at 1,281 Crore, representing a growth of approximately 4% year-on-year. More importantly, our profit after tax increased by 24.5% to 93.5 crores, compared with 75.1 crores in Q1 F526. The improvement in profitability reflects better operating performance and continued focus on execution and cost discipline, while the first quarter is seasonally relatively moderate for the infrastructure sector. We remain confident about the trajectory for the year, with a large contribution to growth expected in the second half. Coming to our order book and business development, as of June 30, 26, our consolidated order book stood at 14,636 crore. The order book remains well diversified, with hydropower contributing 62%, irrigation 17%, tunneling 4%. And roads and urban infrastructure accounting for the balance 17%. This mix provides us with a strong foundation for sustained execution while also giving us exposure to some of the infrastructure segments where we believe the medium to long-term opportunity remains particularly attractive. In addition to our existing order book, we currently have approximately 9,000 crore of bids under evaluation. And more importantly, we have identified a near-term opportunity pipeline of approximately 60,000 crores, which we intend to actively pursue over the coming months. Our approach remains focused on selective and disciplined bidding, with a clear emphasis on project quality, execution feasibility, and appropriate returns, rather than pursuing growth at the expense of profitability. We believe. The combination of our existing order book, Bits Under Evaluation, and Identified Opportunity Pipeline gives us good visibility for the coming years. Another important development during the quarter was the upgrade in our credit ratings. In June, our long-term credit rating was upgraded to A stable from A-, while our short-term rating was upgraded to A1 from A2. We view this as an important recognition of the improvement in our financial profile, balance sheet discipline, and overall business fundamentals. Let me now turn to execution, which remains the core of our business. During the quarter, we continue to make steady progress across our key projects with several important milestones. In hydropower, our execution at the Subhansari Lower Hydroelectric Project continues to progress well. With four units already operational, the project is currently contributing 1,000 MW of clean energy to the national grid. During this quarter, concreting most of Unit 7 comments, while execution across the remaining units continues to progress steadily. We remain on track for all eight units to become operational during this financial year, which will be an important milestone not only for the project, but also for Patel Engineering, given our long-standing involvement in its execution. In JNK, our Kiru and Quar HEP project also witnessed strong execution momentum. At Quar Dam, concreting has crossed the 50% mark. While we also achieved the interdependent milestone of handing over the draft-tube unit 1 to the E&M agency. At Parnei-HAP, we successfully completed the installation and erection of the roof truss structure for the powerhouse building. In Bhutan also, work has commenced at the door-healing hydropower project, further strengthening. Our presence in the region and creating opportunities for participation in the larger packages of the project. Another significant milestone was achieved recently at our Slimanabad tunnel in Madhya Pradesh, where we successfully completed the tunnel boring break road. The 11.95 km irrigation tunnel is currently the longest irrigation tunnel in India. The project involved highly challenging tunneling conditions and was executed using two massive TBMs. The successful breakthrough is a significant achievement for our tunneling capabilities and further demonstrates our ability to execute technically complex, large-scale underground infrastructure projects. Once completed, the project is expected to provide irrigation to approximately 2.4 lakh sectors across six districts, supporting agricultural development and improving water security in the region. Looking at, we remain constructive on the infrastructure opportunity in India. We believe the next phase of India's infrastructure development will be driven by Large, technically complex, and capital-intensive projects across hydropower, pump storage, tunneling, irrigation, and urban infrastructure segments where potential engineering has established capabilities and a strong execution track record. In hydropower and pump storage, the opportunity remains particularly significant. India has an estimated exploitable hydropower potential of around 133 gigawatts. of which approximately 50 gigawatts has been harnessed so far. This leaves a substantial opportunity for future development. Similarly, the government has set out an ambitious roadmap for 100 gigawatts of pump storage capacity by 2035, which we believe can create a sizable multi-year opportunity for EPC players with relevant capabilities. We have already seen several large projects moving forward. The union cabinet recently approved the 1,200 MW Kalaidu hydropower project in Harunachar Pradesh with an outlaw of approximately 14,000 crores, as well as the 1720 MW Kamala hydropower project with an outlay of approximately 26,000 crores. The 1,000 MW Naing ACP has also received a positive recommendation for environment clearance. In pump storage, the 1,100 MW Peli Malai pump storage project in Tamil Nadu has received clearance, further demonstrating the increasing focus on energy storage as part of India's evolving power mix. Bhutan also remains an important market for us. We believe this is an important development as it creates visibility for the larger packages of the project to move towards tendering. Internally, the expansion of high-speed rail infrastructure and the government's focus on improving all-weather connectivity in the Himalayas and northeastern regions should create substantial opportunities. Recently cleared 1198 crore Fortula Tunnel project for all-weather connectivity to Latak is one example of the scale of opportunities emerging in this segment. Similarly, in roads and urban infrastructure, we see a healthy pipeline of large projects. NHI has initiated preparation of the DPR for the proposed second Mumbai Pune Expressway. Estimated at approximately 15,000 crores. Maharashtra is also advancing several major urban and regional connectivity projects, including underground road infrastructure in Pune, and projects worth approximately 22,000 crores in the MMR region. In irrigation and water infrastructure, the proposed 64-kilometer dam across the Gulf of Khambat in Gujarat Currently estimated at approximately 1.2 lakh crore is another example of the scale and complexity of projects being contemplated. While these projects are at different stages of development, they demonstrate the depth and breadth of the opportunities pipeline available to companies with the capabilities to execute large and complex infrastructure projects. Alongside growth, we remain equally focused on strengthening our balance sheet and improving capital efficiency. As part of our stated strategy of monetizing non-core assets, during Q1 FY27, we completed the sale of a 27-cron land parcel in Telangana. We will continue to evaluate opportunities to unlock value from non-core assets with the objective of supporting our balance sheet and improving overall capital efficiency. To conclude, we believe Petal Engineering is entering F527 with a strong foundation. We have a healthy and diversified order book, a significant pipeline of opportunities, improving credit metrics, and continued execution momentum across our key projects. Our focus remains firmly on profitable growth, discipline building, timely execution, and prudent capital allocation. Based on the visibility we have today, we remain confident of achieving approximately 10% revenue growth in FY27 with a significant portion of this growth expected to come through in the second half of the financial year. More importantly, we believe the opportunities emerging across hydropower, pump storage, tunneling, irrigation, and urban infrastructure provide a strong basis for sustainable growth over the long term. We remain committed to building Patel Engineering as a stronger, more resilient, and increasingly value-focused infrastructure company. With that, I will now hand over the call to our CFO, Mr. Rahul Agarwal, who will take you through the financial performance in greater detail. Thank you.

Thank you, Kavita. Good morning, everyone, and welcome to the earnings call. I will now take you through the company's financial performance for Q1 FY27. On a consolidated basis, our revenue stands at Rs 1,281 crores, compared to Rs 1,233 crores in Q1 FY26. Operating EBITDA has improved with a margin of 14.02% compared to 13.4% in Q1 FY26. PAT has increased by 25% almost and stands at Rs 93.5 crores compared to 75.1 crores in Q1 FY26. On a standalone basis, the revenue is Rs. 1,274 crores compared to Rs. 1,224 crores in Q1 FY26. Operating EBITDA is Rs. 176 crores with a margin of 13.82% compared to Rs. 158.8 crores with a corresponding margin of 12.97% in Q1 FY26. Profit after tax is Rs. 82.74 crores compared to Rs. 69.48 crores in the corresponding period, last year up by 19.09%. When you break up sector-wise, hydropower contributed to 68%, irrigation 15%, tunneling 13%, roads, urban infrastructure, and others 4%. The consolidated debt as of June is around 1,293 crore, up by around 100 crores in the quarter, due to increase in account of utilization of additional working capital limits for new projects. Client advances. That concludes the financial overview. We are now happy to take any questions that you may have.

Now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The last question comes from the line of Rahul Shah with Eternal Capital. Please go ahead.

Yes. So, firstly, thank you so much for the opportunity, sir, and congratulations on the good set of numbers. So, on the numbers front only, I had my question. So, the PAT, I saw that grew by 25%, and compared to the revenue growth, that was just 4%. So beyond the operating leverage, how much of this divergence is coming from the, let's say, finance cost or taxation, and what should we as investors consider a normalized fast growth trajectory?

Finance costs have come down during the quarter, you know, compared to the corresponding quarter by almost 10 crores. So this is on account of reduction of debt in the last year. So we expect the finance costs to continue on a reduced level. And corresponding to that, you know, EBITDA margins are around the same, 13-14%, so no major change in that. So this is only majorly which has contributed to an increase in profits.

Correct. And on my second part, so back to the trajectory, how much can we expect on that?

See, our current year estimates, which is there, are around 10% growth with an EBITDA of 13 to 14% with similar interest costs every quarter.

And my second question is on the order book front. So, we have an order book of almost 14,500 crores. So, I would just like to know the execution timeline for this existing order book and how much of this order book can be converted into revenue over the next three years.

We are expecting to execute over three years. Yeah, almost. There's a book-to-bill ratio of around 3 only right now.

Okay, perfect. Got it. And one last, if I can just squeeze this one. Is the current order book sufficient to support a double-digit revenue growth without requiring a material acceleration from new order wins, or would you have to win a lot more?

So, see, we are targeting around 8,000 crore new orders this year, which, you know, with that, we are expecting a 10% growth. In the current year and 15% in the year corresponding. So for growth, we will obviously need new orders, which we are fairly confident to get.

No, that answers all my questions. Thank you so much.

A reminder to all the participants that you may press star and want to ask a question. Next question comes from the line of Viraj Mahathir. If it's money, please go ahead.

Congratulations, Mr. Vajkar and Rahul on the excellent results and the very helpful opening speech. You know, in the past quarters or past year, you had about 150 plus crores of exceptionals in the last two financial years. Can you give us a view of what those were exactly, and are they likely to occur in any way going forward, and especially in FY27?

We don't anticipate, you know, exceptional items coming this year. So, that was mostly on account of, you know, last year for Vivas Tavishwa settlements and some write-down of investments.

Right, okay, and no more exceptionals expected this year.

Yeah, we don't expect.

Okay, great. You mentioned the land parcel sale of 27 crores, is that right, in Telangar? Is this the 430 acres of land in Telangar?

No, no, it is 27 acres, sorry, and 26 crores.

Oh, 27 acres. So, you still have another 400 acres?

Yeah, we have some land parcels in Telangana.

Okay, and are there any other land parcels moving towards sale discussions? The electronic city, Panwe, Hill, Tamil Nadu, etc.?

Yeah, we are in discussion for other land parcels also.

Do you think you'd use the proceeds to become term loan debt-free by end of FY27?

This year, target for non-core is between 150 to 200 crores. That we are fairly competent to achieve.

Okay, great. I'll come back with more questions. Thank you.

Thank you for the opportunity. My first question was on the promoter pledge. Now that our rating has improved, so what update can we have on the promoter pledge? By what percentage will it get reduced going forward in the next three months, four months, six months?

So, Rajiv, we are, you know, the promoters and ourselves, we are all in, you know, discussion with the lenders, and, you know, we are hopeful that this year we will get a success.

Sir, I know that we are in discussion, but this has been since a long time. So we need clarity that by, let's say, in the next six months, what percentage will it get released?

I don't have an exact number, but right now, if I'm not mistaken, around 85-90% of the shares are played, so we expect that to come down by at least 15-20%.

Okay, that is helpful. And my next question was on that realistic project, Patel's Mondo. So, I think there are three towers, and so I would like to know, out of the three towers, is the OC being received, number one? How many flats have been sold in the two towers, and what about the third tower? Is it lying vacant, or what is to be done?

So, the OC is expected. There is some litigation which is there, so that we are expecting a closure very soon, and after that, the OC will be received. The third tower was a service apartment tower. As soon as the OC is received, that can be occupied. That is ready to be done, and just to be occupied once the OC is received.

So, sir, by when can we expect the OC to come, approximately? So, we are hopeful it should come in this financial year. Okay, but there are reports that despite non-OC, there are people staying in that two towers? Is it correct?

People have taken possession for fit-outs and all.

I am not sure about whether they are staying, but they have taken possession. Okay, and I wanted an update. This 27-acre which we have sold, so we had 430 acres in outskirts of Hyderabad. So out of that, this 27 acres have been sold. Am I correct? That's correct. Yeah, so sir, I think for 1 crore an acre we have sold, so is not the price too low? It was an out cut. Even when it's an out cut, I think the price, Hyderabad being an important destination and a lot of development going on, the price of 1 crore seems to be too low. I'm sorry, it is based on market value.

Thank you. Mr. Rupani, please rejoin the queue for more questions. Next question comes from the line of Rohit Joshi, an individual minister. Please go ahead.

Yes, I'm audible. Thank you for the opportunity. I just want to ask that, given the company's strong positioning in the hydropower segment, how are you balancing things between getting new or larger hydropower projects and the historically long execution timelines that come with it, along with all the clearances, risk, and everything?

See, there are, if you see the, you know, changes have happened a lot in the, you know, overall approval process and everything. The government is taking all approvals, MOEF clearances, land acquisitions, etc., before awarding the projects. So that's why you would have seen the projects getting awarded a bit delayed, but once it is awarded, the projects are not taking that time as it was taking earlier. For example, the Subhansiri project, a 2,000 megawatt project is... Near the words of completion in the last five, six years, which is unheard of. Okay, sir.

Thank you. And, sir, my next question was that what is the minimum margin and cash flow profile that you are targeting now when you are bidding for newer products in the future?

Sir, we expect to maintain EBITDA margins between 13 and 14.

Okay. Okay, sir. Yeah, that's all. Thank you.

Thank you. Next question comes on the line of Viraj Mahadevia. With Manigro, please call me.

Hi, Raghul. Q1, last year you all did 13.4% margins. That's moved up to about 14%. Do you think we'll get back to 15% anytime soon, given the operating leverage and greater scale likely over the next year or two?

Thank you very much. I cannot confirm on that because see the competition and etc has increased, if you have seen last year, a large project went down with the last, so we don't see the margins to improve that much. Obviously, we keep on working on various value additions and, you know, how to improve and reduce the cost and all, but still we were confident to maintain our existing margins.

Any plans given the company should be fairly close to net debt neutral by certainly 28 and even 27 year net debt to EBITDA will be very manageable. Given the promoter shareholding of 30 odd percent, any consideration to do buybacks using the spare cash and also give out ESOPs to senior management? Is that being contemplated at all at the board level?

See, buybacks we will consider once we close the debt. So, you know, it may take another maybe two years, three years to reduce the measure of debt. ESOP, we have an ESOP trust, so management will consider them.

Next question comes from the line of Ravi, an individual investor. Please go ahead.

Thank you for this opportunity. So, I have one question that, as execution accelerates across the existing order book, how much incremental working capital and project level capex will be required, and how does the management intend to fund it?

Right, right.

Okay, and should investors expect this to be funded primarily through internal accurals, asset monetization, project level debt, or additional corporate borrowing?

Yeah, yeah. So, it should be a one thing for that only, yeah.

Okay, okay. So, okay. And one last question, that Q1 operating margin improved to 14.02% from 13.40%. How much of this improvement is structural versus project mix or timing related?

It's mostly project mix only. See, our average margins will remain around 13-14, depending upon what a portion of work is executed.

Right, sir. Okay. And one last thing. So, as the larger hydropower projects move into more intensive execution, should we expect margins to remain around current levels or normal?

Competition pressure, but we are working because we have past experience, we are working towards optimizing various processes and hence we are confident to maintain these margins.

Okay. Okay. Right. Thank you.

The question comes from the line of Pija, an individual researcher. Please come in.

Thank you for the opportunity. My simple question is, we have been looking for a week, and we're also getting into new areas of work. The environment would be heard that a very large chunk of opportunity, where there are lesser people to execute, is dredging, dredging both on land as well as in water. So are we ever considering, because in any case we are so good at chunneling, it's getting more complicated from dredging, are we considering to get into dredging? And get a large pie, or some small pie also would be very significant with good margins. About the arbitration cases, which says more than 1,000 crores, which we have won. What is the fate of that? I would like you to get some of that. Thank you.

Thank you. So, we are dredging works. We are looking for those works. So, you know, whether either alone or with JV with other people. As far as arbitration is concerned, so we are consistently following up on the arbitrations and considering the arbitration and land sale only. We are considering 150 to 200 crore monetization in this year.

So, especially the ones that we have won, if they are not into prolonged litigation, especially with the public sector undertakings, we still have some of them which...

SQs generally will take it through litigation at all levels, so whether it is District Court, High Court, Supreme Court, unless there are some schemes. So last year and before that, there were some schemes.

So wherever there is a possibility, we are exploring the settlement. Otherwise, we'll have to go through the normal route, like through court.

Reminder to all the participants that you may have a star and one to ask a question. Next question comes from the line of Viraj Mahadevia with MoneyGiver. Please go ahead.

Hi, Ravul. What were the receivable days for Q1 of this year?

Receivable days are between 40 to 45.

And that continues to remain steady, including in all your new contracts, right? Because that's a marked improvement from your receivable days of 100 plus. What's the execution looking like in terms of revenues for Q2 so far, and has the erratic rains played any spoil spot in your revenue booking?

I think Q2 generally, because of monsoon, is a bit slower. It should be in line of the...

Okay, so no major... Can you highlight a little bit more detail on the cost optimization that you've talked about in the past? What's being done? Is it a pilot project? Has it been rolled out across multiple sites? What is likely to be the savings on an annualized basis starting this year and next year?

We are implementing IoT at various projects, which is helping us in controlling the consumption of diesel and other costs. We are also looking at various new equipment which comes with AI-enabled and IoT-enabled things so we can track. So, these are the steps. To give a number to them, it is difficult. That is why what we are saying is even though, you know, the competition is increasing and the otherwise markets may...

There are two large projects coming up in Arunachal, from what I understand. Are we likely to bid for that? Is that split into multiple packages? Are we likely to bid for all of it or part of the packages? At what value?

So see, what we have bid is around 9,000 and another 60,000 which is in pipeline. So this includes large packages in Arunachal and other states. And we would be bidding for the packages.

So Arunachal, we bid for 9,000 so far out of 20 times 2 or out of 20?

So 9,000 what we have bid so far is overall, I think maximum majority of that would be in Arunachal and the Northeast only.

Okay. And when are the outcomes of these bids likely by Diwali this year?

Hopefully, yes.

Okay. Great. Thank you. Thank you.

The question comes from the line of Raj Shah, an individual master. Please go ahead.

So I basically have questions on the verticals. So we have like verticals like hydropower, irrigation, tunneling, and all. So for FY27 and as well as 28, which exact vertical you see will be the good driver for the company? And what will be the revenue split overall?

Around 60% is hydro, 60-62% is hydro, so that will almost be the kind of split. Split between irrigation, tunneling, and others. Irrigation is around 15, tunneling is around 10, and roads and urban infrastructure as well. So, similar, you know, maybe quarter and quarter it may vary, but on a two-year basis, if we see it, similar mix may be there.

Okay, so what about the new water that we are going to get?

Hydro-PSP, so that will continue to be a large focus. Plus, there are projects in tunneling, also urban infrastructure, high-speed rail, everything. And we are looking at... I mean, it depends on which project comes first.

So, second question, actually, I have is on the JV. So, on the JV front, like, what kind of revenue are you seeing? Like, what kind of?

This is where we take our share of revenues and profits.

Okay. I mean, okay, sure. Thank you, sir.

Thank you. Next question comes from the line of Rohit Joshi, an individual minister. Please go ahead.

Yeah, hi, sir. Thank you for the follow-up opportunity. So, I just had one question that for the government and PSU projects that you have, how much capital is currently logged up in, you know, retention money, security deposit, and contractual balances?

So, see, we have retention almost 5% for every contract and almost 100, between 200 to 250 crores is there as retention. Okay. And what is the average timeline for its release? So we generally get it released at the end of the project, but some projects allow us to withdraw against bank guarantees.

Okay. Okay. Thank you. Thank you so much.

A reminder to all the participants, I do my best star and want to ask questions. Question comes from the line of Rajiv Rupani, an individual minister. Please go ahead.

Yeah, thank you for the opportunity again. Sir, so I had a follow-up question on the land bank monetization. So since we have sold partly and you have mentioned that up to 150 crores worth of land bank will be sold, so can we assume that the next lot of the land bank which will be sold will be from Hyderabad only to monetize the rest of the amount in this year?

No, no, we are working on various land parcels, so we are not, exactly cannot say which land parcel will happen.

Okay, so the balance amount which you tend to sell can be from other land banks also, is that what you are saying? Okay, and my next question was that in your presentation, you talked about the near-term opportunity of various projects, so... Last time you had mentioned that this year the following projects will come up, Savalcoat, Kalai, Tu, and Kamla. So have they opened up and have we bid for the same? No, no, bidding is still to happen. Bidding is still to happen for this. And what about the other four, that is Upper Karnali, Upper Subhansari, Kiritai, and Italian? So that is, when will these come up for bidding? So, see, these are at various stages of clearance

from government, so we expect that, you know, this should also come this financial year, but that depends upon various clearances, because NHPC will now take, you know, maximum clearances up front before coming out with the tender.

Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question and answer session. I now hand the conference over to the management for closing comments.

Thank you all for joining. Any follow-up questions, you can write to us or the Valorum Advisors, which are our...

That concludes this conference. Thank you for joining us. You may now disconnect your lines.