Welspun Enterprises Limited (WELENT) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to WellSpan Enterprises Ltd. Q1 FY27 Conscience Call hosted by 361 Capital Market. As a reminder, all participant clients 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 this conference call, please signal an operator by pressing star then zero on your touchstone phone. I now hand the conference over to Mr. Sailesh Radha. Thank you, and over to you, sir.

Yeah, good afternoon, everyone, and thank you for joining Welsman Enterprise Limited 1Q F827 Enix conference call. We thank the Welsman Enterprise team for giving 361 Capital the opportunity to host this interaction today. Without taking much time, I hand over the call to Mr. Harsh to introduce the management, following which we will begin the Q&A session. Yeah, over to you, Harsh.

Thank you, Salish, and good afternoon. On behalf of Wellspun Enterprises, I welcome you all to the Q1 earnings call. Alongside, I have the leadership team of Wellspun Enterprises, led by Mr. Sandeep Ghar, Managing Director of Wellspun Enterprises, followed by Mr. Soren Patel, who is Managing Director of Wellspun Michigan Engineers Limited, followed by Mr. Abhishek Chaudhary, who is the CEO of the Transportation Vertical at Wellspun Enterprises. Followed by Mr. Lalit Jain, who is CFO of Wellspun Enterprises, and Ms. Sangeeta Tirpati, who is lead investor relations at Wellspun Enterprises. I hope you had the opportunity to review the investor presentation that we filed with the exchanges yesterday. The same is also uploaded on our company website. During the discussions today, we may be making references to this presentation. Therefore, I would request you to take a moment to review the safe harbor statement in our presentation. As usual, we will start the forum with opening remarks by our leadership team, and then we will open the floor for your questions. Once the call gets over, should you have any further questions, please feel free to connect with any of us. With that, I hand over the floor to our Managing Director, Mr. Sandeep Kar. Over to you, sir. Thank you, Harsh.

Good afternoon, everyone, and thank you for joining us today. We are pleased to connect with you to discuss our performance for the quarter. The first quarter of FY27 and our outlook for the rest of the year. Before I get into the quarterly performance and business updates, let me briefly revisit the strategy and business model that we have consistently articulated over the past few years. Our approach is to selectively bid for and develop high-quality infrastructure assets. Create value through efficient execution under our asset-like subcontracting model and monetize these assets at an appropriate stage. It enables us to unlock capital from the mature assets and redeploy it into new high-growth, high-return opportunities without stretching our balance sheet, effectively transforming a linear build cycle into a compounding growth model. You recall that in 2022, we successfully completed the monetization of a portfolio of six road assets at a combined enterprise value of approximately 9,000 crore. I direct myself rupees 9,000 crore, validating this strategy in practice. Building on that track record, we are pleased to announce that we have signed a security subscription and purchase agreement for the divestment of our entire stake. The proposed transaction values the asset at an aggregate enterprise value of approximately Rs. 1,000 crore, subject to customary adjustments, approvals from NHAI and lenders, and the fulfillment of other conditions precedent. We expect to complete the transaction during Q2 FY27. Following which, we will be in a position to share additional details, including the valuation multiple and the project IRR. These transactions reaffirm the strength of our disciplined capital recycling strategy by systematically unlocking the value from mature assets and reinvesting the proceeds into new growth opportunities. We continue to enhance capital efficiency, maintain a strong balance sheet, and create sustainable long-term value for our stakeholders. As I promised, the first quarter was relatively soft, with execution impacted by a combination of several external factors. Firstly, we experienced supply chain disruptions arising from the ongoing geopolitical developments, resulting in a volatile and un- We have a piquant portion of our project portfolio. The temporary construction stoppage in Mumbai, which lasted for several weeks. Ebitda margins remaining resilient at 22.9% during the quarter. We are in line with our FY26 annual EBITDA margin of 22.8% and much above our guidance of 18. The strength of our execution model and As prospective business heads will discuss project-specific details in greater detail, I would like to highlight two important milestones. The Dharavi-Gaarkova tunnel project received all requisite approvals by the end of June, removing a key execution bottleneck and paving way for accelerated progress. We have also executed the subconcession agreement for the Pune-Shirur Road project. The start of the year has been slow, slower than anticipated due to factors I outlined earlier. With some of the key approvals and project milestones now behind us, we expect execution momentum to improve progressively over the coming quarters. At the same time, we remain mindful of the evolving external environment, including geopolitical developments, which could influence execution timelines. Our consolidated order book, as on June 30th, 2026, stands at over Rs.18,700 crores, providing healthy revenue visibility over the next few years. The order book remains well diversified across water, transportation, and tunneling segments. Balance Sheet continues to be a key strength. We close the quarter with close to rupees 1,800 crores cash and cash equivalents, providing us with significant room to pursue growth opportunities. Beyond our financial and operational performance, we continue to strengthen our talent practices and digitize our process systems. We are also making meaningful progress on our ESG agenda, reinforcing our commitment to sustainable growth and long-term value creation. With that, I would now like to invite Saren to take you through the operational updates on our water and Westford, Michigan businesses, following which Abhishek will cover developments in our transportation vertical. And Lalit will share a view of the financials. Over to Saren.

Let me now provide you a brief update of our key water project. Darabi Wastewater Treatment Facility, our 418 MLD wastewater treatment plant, a first-of-its-kind multi-level facility designed to address urban space constraints, continues to make encouraging progress. Physical completion has now reached approximately 70%, and the project remains on track for commissioning by July 2027. Upon commissioning, it will transition into a 15-year O&M phase, providing a stable and recurring annuity revenue stream. The Uttar Pradesh Jaljeevan mission, we have achieved over 80% physical progress across our projects and remain on track to complete the balance execution during FI 27. We have also commenced O&M activities on a number of completed schemes, marking the gradual transition of these projects from the execution phase to operations and maintenance. The Banduk 2000 MLD Water Treatment Plant. Construction works are progressing, and the civil contractor has been fully mobilized. The pace of execution has been relatively slower than initially envisaged due to delays caused by a temporary stoppage of all excavation debris transportation due to the severe AQI pollution in Mumbai City by the competent authority. Banjapur 910 MLD Water Treatment Plant. Since securing the project in December 2025, we have completed the initial mobilization activities and commenced execution. With statutory approvals now in place, we expect construction activity to accelerate meaningfully over the coming quarters. Now, turning to our subsidiary, Wellspun Michigan Engineers Limited. WMEL is steadily evolving into a technology-led specialized engineering platform, leveraging deep engineering expertise across tunneling, rehabilitation, pumping infrastructure, and smart ops. For Q1F527, WMEL posted a revenue of INR 179 crores, with an EBITDA margin of 21.3%. Moderation and performance is primarily attributable to the factors eluded by our MD in his opening remarks. There have been delays in the release of orders for certain projects that deferred execution and, consequently, revenue recognition. We are confident of receiving the LOIs for them in the coming weeks and expect execution activity to contribute positively over the coming quarters. The underlying business remains strong. As of June 30, 2026, WMEL's order book stood at 2,135 crores. Turning to our operational updates, as Sandeep highlighted earlier, the Taravi Gaat Koper Tunnel Project has now received all the requisite approvals, including the long-awaited High Court clearance on June 22nd. With all statutory approvals with Blakes, execution has commenced and shaft excavation is already At a level of 10 meters after completion of all piling and other support activities. In addition, we are currently executing three segmental tunnel boring machine projects along with a micro tunneling project in Mumbai, all of which will remain on track for completion during FY27. In our rehabilitation business, the 15.5 km Mumbai Stormwater Drain Rehabilitation Project remains on schedule for completion during FY27. In Baroda, the 2.5 km GRP-lined Mega Trunk Drain Project is nearing completion almost a year ahead of schedule. Under our SmartOps flagship business, we continue to execute two sewage treatment plant projects in Mathura and Odisha. Further strengthening our presence in the municipal water infrastructure segment. Technology and innovation remain central to WMEA's growth strategy. We continue to invest in digital solutions and advanced engineering capabilities that enhance productivity, optimize asset utilization, and strengthen execution across our projects. Looking ahead. We expect execution to accelerate meaningfully during the second half of the year, as recently awarded projects move into full-scale construction and ongoing projects progress into peak execution. With that, I would now like to invite Abhishek to take you through the transportation business. Over to you, Abhishek.

Thank you, Salim, and good afternoon, everyone. It is a pleasure to interact with you all once again. Let me begin with the key operational updates across transportation businesses. As highlighted by our managing director, the signing of the definitive agreements for the divestment of the Anta Samaria road asset marks another successful execution of our discipline, capital recycling, and asset light strategy. We intend to replicate the same approach across our future BOT hamsets. Including SNRB and Pune-Shiru, enabling efficient capital redeployment, strengthening returns, and supporting long-term growth. On our transportation projects room, I am pleased to share that we have successfully executed the subconcession agreement for the Pune-Shiru Road project. This was followed by a Bhumi Poojan ceremony in Pune in the presence of Honorable Minister for Road, Transport, and Highways. Honourable Chief Minister of Maharashtra and other dignitaries. Survey, investigation, and other pre-construction activities are progressing well. We expect construction activity to accelerate towards the end of the financial year, following financial closure and the declaration of the contract date. For our Waranasi Aurangabad Road project, we expect to receive the provisional completion certificate shortly. The Sanathana Kunam Nagrapattam Road project is in advanced stages of completion and progressing for achieving PCC in Q3 of FY27. As key projects move into active construction, we remain well positioned to deliver a strong execution profile over the coming quarters. On the digitalization front, we continued to advance our transformation roadmap through the rollout of eOffice. And the development of an integrated digital architecture, our eOffice platform will enhance governance, compliance, and operational oversight, while the transition to a unified enterprise application architecture will strengthen data security, improve internal controls, and enable seamless enterprise-wide integration, creating a robust digital foundation for future growth. Implementation of our supply chain management S2P platform is progressing well and expected to go live in Q3 FY27. In parallel, we are developing AI-based use cases across quality assurance, safety monitoring, logistics planning, and project progress monitoring to enhance operational efficiency and support data-driven decision making. With that, I will now hand over to Lalit Jain, our CFO, who will take you through the financials of the company. Over to you, Lalit.

Thank you, Abhishek. It is my pleasure to connect with you again. I will briefly take you through our financial performance for the first quarter of FY27. Console revenue stood at Rs.774 crore in this quarter. The business mix remains well diversified with water, transport, and tunneling contribution 41%, 35%, and 24% of revenue respectively. EBITDA margin was strong at 22.9%, which is well above our guidance of 18% plus. Profit after tax from continuing operation stood at Rs. 90 crore. During the quarter, loss from this continued operation stood at Rs. 34 crore. This is related to MCP project, which is national in nature. Consequently, reported pet for the quarter Coming to our asset monetization announcement, the signing of the definitive agreement to divest our entire stake in the Anta Samaria project marks another important milestone. This is the second instance of successful completion. Following the meditation, Upon completion, this transaction is expected to reduce... Strengthening of our financial position and enabling redeployment of capital into future growth opportunities. The call balance sheet continues to remain strong. Networks, as on 30th June 2000, 1,324 crore rupees. Cash and cash equivalent stood at 1,792 crore with net debt at Rs 109 crore. Great trading profile with crystal double A minus positive. Rating for our short term facilities. These ratings reflect the strength of our balance sheet, prudent financial management, and robust and are confident of delivering sustainable and profitable growth. Long-term value for ours.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2.

Participants are requested to use handsets while asking a question.

Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjay Shah from KSE Securities. Please go ahead.

Yeah, good evening, gentlemen, and thanks for the opportunity. So, my question was very clear what positives, what we have shown and what we have understood about the DGT regulatory overhang clearance, Punez Shirood moved forward. Ananta Simari also monetization in progress. UP, JJM, ONM now on card. Balance, it remains strong. But sir, what is missing always every quarter what we see? That revenue visibility is missing somewhere. So after all these clearances and all, how do, how one we as an analyst or investor can see our company henceforth from now, this year and next year on absolute earning side or growth on revenue side? Even order book is also declined in Q1. So can you highlight upon that, sir? Will be helpful to us.

Thank you, Sanjay. A lot, many questions in one, rolled up. Let me address the questions that I think. The first question that you have is about the revenue degrowth. So, as I said, these are extraneous factors in the business which nobody can forecast. The closing of construction and debris movement in... Mumbai, nobody could have talked about the impact of geopolitical situation on availability of various materials. Nobody could have forecast it. So business operates under a situation which is more environmental, environment which one does not control. However, as I said, We remain hopeful that these things which are more... Approvals, etc. are behind us, and we expect to be in the growth phase for overall FY27, the interim blip not withstand. In our business, we get large orders in one go, and we deplete it over a period of time. So every quarter, we can't be managing the orders. Thank you. The order book has been growing, and we are sure that even in the FY27, we will be able to aggregate another 8,000 to 10,000 crores of order. However, I must say that what we were expecting in H1 earlier, we may move on to H2 of FY27. I hope I have answered all your questions.

Yes, sir. Except that what is the growth trajectory for this year and next year for us?

See, next year is, in the scenario, difficult to say. As I said, we are going to be in the similar growth phase as we have forecasted earlier, and we will forecast for F by 28 based on how this whole year evolves. But I think internally we are targeting the growth rates of 15 to 20 percent on an annualized basis.

The question was for Mr. Saudine, sir. I would like to understand from you about the trajectory of WMEL and how do you see that going ahead? I don't want any numbers or anything, but what opportunity, what we have done till now and what we see as future for this, because we are very excited about that vertical.

Thank you very much for these encouraging words. Yeah, Michigan lies at the intersection of construction as it existed for decades and the future of construction as technology moves through the phase of improving productivities and enhancing the ability of this area to improve lives. So, as far as we are concerned, we are still maintaining a 15% to 20% growth rate for ourselves, and we feel that our excellence in the area of grey and white water, transportation and rehabilitation of existing assets, and the... Impacts of climate change on cloudbursts, etc., which cause flooding, and our experience in managing and construction pumping stations and holding ponds and tunnels to disperse flooding areas, etc., will hold urban areas in good stead for our business in the long, long term. So, coupled with that, our entire interest in the... The technological transformation of wastewater into usable water through our SmartOffs platform continues to make slow and steady progress towards a unique niche where we are able to apply that to the huge numbers of polluted water bodies all over the country. As well as provide unique solutions to places that require wastewater transformation, where geography does not aid and abet the fact that there is land shortages. So, we are, like you, quite excited about this area, and the substantial support that Wellspent Enterprises provides its subsidiary will allow us to make this a reality in the years to come.

Thank you, sir. Very helpful, and I'll come back in queue for more questions. Thank you very much.

Thank you. The next question is from the line of Jainam Jain from D.A.M. Capital. Please go ahead.

Thank you for the opportunity. My first question is, what sort of opportunity is I've seen in a wastewater treatment plant and a wastewater treatment plant in the top five minutes, especially in Maharashtra and outside Maharashtra.

Mr. Jainam, can you be a bit clearer? We are not able to hear you properly.

Yeah, I have an audible right now.

Yeah, you are much better now. Thank you.

Sir, my first question was, what sort of opportunities are we seeing in water treatment plants and reuse water treatment plants in terms of pipeline, especially in Maharashtra and outside in Maharashtra?

Okay. See, the opportunities in water treatment plant are among us in terms of, if you look at it from a spectrum of smallest to the largest, including the localities and the houses, etc., etc. It could be in the... Ranges of a few lakh crores at this point in time. The question is the centralized versus decentralized, what we can tackle, etc., etc. So, currently, what we are tracking in the treatment space are projects in the ranges of about 30,000 crores, which are on the annual or in various stages of... Now, our estimate of these treatment plants is about 40% of them are within Maharashtra. I hope I have answered your question.

So in the outside, Maristu, if we can find out 60% of that opportunity?

Yes, there are substantial opportunities available in the treatment. There are multiple states. Opportunities are across all states in India. Thank you.

Sorry to interrupt, Mr. Jainam, your voice is not clear.

Hello. Yeah. Why am I able?

Yes, it's better now.

Yeah. So, sir, my second question was that we made 20 to 25 percent sort of elite margins in water segment and on annual basis, which is pretty high compared to the peers in the water segment. So, what justifies that sort of margins? I just wanted to understand why I have a problem with that.

Mr. Jainam, it's all about technology play. We are not... As I said, we don't target every project, so we target projects which can offer some technology play, which allow us to be differentiated. In the run-of-the-mill water project, I'm not too very sure these margins are maintainable.

Okay, so just because of the technology component we have with us, which enables us to make a higher level of cubic margins, right?

That is good. We have associations and we have connects, which allow us to differentiate.

And we have a third party, right? And it's not enough.

We are developing long-term relationships on those specific elements. There's a business strategy behind it, which obviously you would not expect me to elaborate on an investor call.

Okay. Thank you so much.

Thank you.

Before we take the next question, we would like to remind participants that you may press star and want to ask a question.

Reminder for all participants, please press star and want to ask questions. The next question is from the line of Bart Thakkar from JM Financial. Please go ahead.

Thank you for the opportunity. I would just like to ask, when can we expect the AD for the Pune Shirol project, and what would be our expected revenue for this year and next year?

Appointed date to take place in Q3 of FY27 for Puneh Shroof. We are expecting a revenue recognition of somewhere around 500 crores in this financial year.

And for a FedD8?

I mean, I don't remember that, so can I request you, Ms. Patu? connect with the team.

Okay, no worries, sir. I'll do that. Thank you. That was my question.

Thank you. The next question is from the line of Anand Darshan from 361 Capital. Please go ahead.

Good afternoon, sir. Congrats on the inside. I have a question to Sourin, sir. Sir, could you please talk about the smart-off operations? What is the total order backlog? How many projects are we working on next? What if you have any estimate we can have for the current year and the next year and the potential revenue we can have in 3-4 years?

It's a very inventive and exciting play on biologically transformation of wastewater. We have not gone after the usual run-of-the-mill sewage treatment plant programs because we are not equipped to deal with competition in that area on a process basis. Our platform deals with areas of transformation which are not. Easily attacked by available technologies in an economical fashion. And so we have had substantial progress with coons and ponds and water bodies that are neglected and polluted and can be rejuvenated and brought back to life for enhancing the quality of the environment. We have had tremendous success with areas. Such as Nala's, which have turned into sewage streams and have no geographical space available on their banks. We offer treatment plants which require substantial space. We are quite excited about the fact that we may be able to transform even wastewater streams that industry has, which right now are not treatable in so many ways, for them to be made usable by the same industry in a collaborative manner. So, quite a few exciting areas of work for SmartOps. We are proceeding extremely slowly and cautiously because it's water and the well-spun brand is associated only when we have the safety of the larger population and the service that we serve at heart. So, yes, while it is exciting, we see a very cautious and slow, progressive way forward. And we'll keep you updated as we meet newer areas of work and successfully solve problems for different sorts of industries.

Sir, any revenue estimate numbers we can expect for the current year in the next year from the smart office?

No, I don't think. I think it can range anywhere from 50 crores to 100 crores, but we are not able to give you a couple of guidelines. Yes.

Okay, all right. So, and the next question is on the micro tunneling business. Are we exploring any opportunities in the overseas market or are we focusing only in the domestic market?

Right now, we are quite busy with the domestic market simply because our fleet of machines are 100% occupied. It's very easy to go overseas, but we have enough opportunity in India that we are not tempted as of now to venture far away from our home shore.

Right. So, we are focusing only on the domestic market, right, sir?

Yes.

Right, sir.

Thank you. Participants who wish to ask a question, please press star and 1. Reminders for all participants, please press star and 1 to ask a question. To ask a question, please press star and 1. Reminder to all participants, please press star and 1 to ask a question. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

I think there may be some questions. Would you want to take them?

Okay, so the next question is from the line of Avantika Jawad, an individual investor. Please go ahead.

Hi. So my question is on the top line growth. I know you've answered a few questions on this, but in the last five quarters, we've de-grown in about four. So given that the macro environment and the geopolitical environment will continue to remain volatile and difficult, Do we have confidence in delivering a 20% growth, or 15% to 20% growth in this financial year?

See, the confidence is there to deliver a growth for sure. It will be more closer to 15% than 20% is what my estimate at this point in time is. It will all depend upon how things span out and how the commodities... Availability and the associated challenges play out. The order book is healthy. All approvals are in place. It's only a question of how things beyond our control play out will determine as to how much the growth will be. But we are reasonably confident that we will be in growth phase of the company rather than a degrowth phase.

The next question is from the line of Ridesh Dham Gandhi from Discover Capital. Please go ahead.

Go ahead. Sir, just want to understand, you know, again, in the lines of just overall growth per se, we understand that a quarter or two anomalies could end up happening because of, you know, a whole host of issues which are... But I just wanted to understand, actually, what's giving us the confidence from a longer-term perspective?

See, there are three things which give us the confidence. Number one, the confidence comes out of that. So, if you look at the autobook versus our target to grow, we have an autobook of almost... Three, three and a half years, even if we were to, if we were to exclude the O&M, we should also start chugging in. So, we have a very strong audible. We, we have, the second thing which is very important for any revenue recognition is the hold points on, from the statutory stroke, you know, approval point of view, those Those are behind us in all the projects, other than the Pune Shur, which has got still the appointed date to be achieved, where we have signed the equivalents. We are in clear for the revenue recognition, so that gives us the confidence to meet the guidance that we have. I'm confident that the growth phase shall continue not only in this year, but in the years to come. So, I hope I have answered your question, Ridesh.

Sure, sir. Sir, and the other question was, you know, if you could just update us on what's happening with the oil and gas as well.

So, there are very positive developments that have taken place over the... Last few days. Thank you. and 2005 by 2, hopefully, if you get approved in the next four to six weeks, and then we are, we will be in a position to share everything based on the, that we are now getting the, you know, access to ONGC's platform and infrastructure to evacuate our gas from the block is a very positive decision the government has taken, and Once this revised FTP is approved, which we hope within the next four to six weeks we will have, we will be able to declare to you exactly where we are on the oil and gas development.

Sure. And just to understand on the oil and gas element of it is the, you know, I think on some of the earlier concours, what you indicated is that after the FTP is in place and everything is sort of aligned, we would potentially look to exit this as a business or is that all the intent to kind of continue to run it and have this as a vertical of the company?

So currently, as you know, there is a focus on oil and gas in the country. You must have seen some of the month on 84,000 crores commitment. And there is a clear guide, clear focus for the country. Given the situation that we foresee and the business opportunity that we foresee, there is a very high likelihood that we will develop the field and produce from there on. So that's something which is currently the thought process. However, it will all depend upon all this. All this is a matter of thought process right now until the FTP is approved. It will be very difficult for us to say which way we are headed. Got it. Understood.

And right now, just to understand, the stage we are in is that to sort of get a partner to sign off on the FTP, is it?

Not the partner. It is the DGH or MOPNG with sign off. We exactly know what needs to be done.

So we've already applied before it. We're just awaiting their approval.

Yes, that is correct.

Got it. And then after approval, how long typically would it take to actually produce?

About two years.

About two years. Got it. Understood. All right, sir. Thanks and all the best. That's all from me.

Thank you. Thank you, Radesha.

Ladies and gentlemen, we take that as the last question. I would now like to hand the conference over to the management for closing comments.

Thank you. I thank all of you for joining us today. To sum up, I would like to reiterate that we remain committed to creating long-term value for our stakeholders with a continued focus on improving return on equity and return on capital employed. We hope we have addressed all your queries. Should you have any further questions or feedback, please feel free to reach out to our CFO or the Investor Relations team. Thank you and good day.

On behalf of 361 Capital Market, that concludes this conference. Thank you for joining us and you may now disconnect your lines.