Concord Enviro Systems Ltd Q1 FY27 Earnings Call Summary

Event Participants

Moderator 1 Kanav Khanna, Ernst & Young

Executives

3 Prayas Goel, Chairman & Managing Director; Prerak Goel, Executive Director; Shleshank Laheri, Group Chief Financial Officer

Analysts

4 Disha, Sapphire Capital; Nikhil Gupta, Vayu Capital; Nikhil Tiwari, Time Wheel Investment; Subrata Sarkar, Mount Intra Finance

Financials & KPIs

Geographic & Segment Commentary

• Steel Sector / ZLD: Company secured one of the largest ZLD orders in the Indian market (₹1,260 million from India's largest steel manufacturer), reinforcing its leadership in this segment. Steel players are adopting ZLD at scale due to water scarcity for production targets, particularly in Odisha; management expects additional orders including conversion of demonstrated base treatment solution within two months.
• Europe / International: Achieved first ZLD order from Europe (~EUR 600,000, metal flake industry, value recovery project) marking entry into a strategically significant market; delivery expected in Q3 FY27 with better export margins than domestic. Prior European presence was limited to membrane systems.
• Solar Sector: First orders from solar segment now under execution; company is targeting larger players with innovative, energy-efficient solutions that address high operating costs of existing installations. Emerging as a key growth vertical alongside semiconductor and green hydrogen.
• Roserve (Water-as-a-Service): Platform performing well with marquee projects under execution; industry demand for asset-light, sustainable water management solutions is growing. Expected to play an increasing role in revenue mix, supporting annuity-style revenue objectives.
• WaHa Partnership / Atmospheric Water Generation: New partnership targets data center dehumidification, battery manufacturing, and atmospheric water generation markets; combined with company's existing product portfolio, positions Concord to address cooling and water needs of data centers.
• Extreme Heat Exchanger: Product launched last year gaining meaningful traction; offers up to 90% efficiency through sensible and latent heat recovery, lightweight design, and field-repairable architecture - with significant fuel savings for customers. Expected traction acceleration in thermal solutions, solar, green hydrogen, semiconductors, and carbon capture applications over coming quarters.

Company-Specific & Strategic Commentary

• Water-Energy Nexus Strategy: Management pivoting toward integrated solutions at the intersection of water treatment, energy efficiency, and carbon footprint reduction - driven by European client demand for lower carbon operations. New product developments (heat exchanger, process separation) are emerging from water treatment R&D but have cross-industry applications with existing clientele.
• REM Membrane Development: Successfully delivered first project with new Raw Effluent Membranes (REM), developed in partnership with Nala Membranes for textile and paper industry solutions - positioned as a game-changer in effluent treatment.
• Semiconductor Entry Strategy: Working through US partner with Micron collaboration to register products; initially targeting membrane replacement market before moving to project segment - recognizes standalone order challenges in ultra-pure water segment.
• Talent & Execution Investments: Management acknowledged temporary margin impact from investments in talent and execution capabilities for larger projects being pursued; expects margins to stabilize once revenue crosses a certain threshold.
• Carbon Capture Positioning: Company focused on biological (not chemical) carbon capture route, believing it will be the longer-term solution; management sees carbon as potentially larger than water industry over 3-5 year horizon given government mandates for steel, fertilizer, cement sectors.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Revenue Impact & Recovery

• Question: Can you quantify the revenue lost from supply chain disruptions? (Disha, Sapphire Capital)
• Answer: ~₹50-55 crores total impact: ~₹15 crores in trading segment and ~₹42-43 crores in manufacturing. Execution should normalize by end of Q2 FY27, with growth expected in Q2 subject to stability over next six weeks. (Prayas Goel)

FY27 Growth Outlook

• Question: How should we look at full-year growth with H2 improving? (Disha, Sapphire Capital)
• Answer: Order book stands at ₹699 crores with significant portion executable this year; at 80-85% conversion, company should deliver growth. Ability to maximize H2 execution depends on supply chain stability, but order book supports exceeding current-year growth. (Prayas Goel)

Europe ZLD Order Details

• Question: Can you quantify the European ZLD order and its margins? (Disha, Sapphire Capital)
• Answer: ~EUR 600,000 order for metal flake industry (value recovery project), quick delivery expected in Q3 FY27. Export margins are better than domestic; exact numbers premature. Entry into Europe expected to create additional opportunities. (Prayas Goel)

Order Intake Guidance

• Question: What's the conversion expectation from ₹3,200 crores pipeline and exit order book target? (Disha, Sapphire Capital)
• Answer: Targeting ~₹1,000 crores total order intake for FY27; ~₹200 crores achieved in Q1. Large orders in both domestic and international markets expected to convert over next 3-4 months. (Prayas Goel)

Margin Trajectory

• Question: What margin trajectory should we expect this year and next? (Disha, Sapphire Capital)
• Answer: Company maintains 14-16% EBITDA margin target, but talent/execution investments create temporary pressure. Expected to stabilize around that level once revenue crosses threshold (~2 financial years). Near-term guidance: 15-20% growth over next two years, with 20-25% growth and 12-15% EBITDA margins over next 2-3 years. (Prayas Goel)

WaHa Partnership Details

• Question: What is the stake and investment in WaHa, and what revenue potential exists? (Disha, Sapphire Capital; Nikhil Gupta, Vayu Capital)
• Answer: Investment of $575,000 for less than 2% stake; exclusive rights for India and UAE plus global manufacturing partnership for atmospheric water generation and dehumidification solutions. Revenue numbers not yet available; more details expected next quarter as data center and battery manufacturing opportunities develop. (Prayas Goel)

Order Book Industry Breakup

• Question: Can you provide industry-wise breakup of order book and pipeline? (Subrata Sarkar, Mount Intra Finance)
• Answer: Largest orders in alcohol beverage and steel sectors; pharma and chemical remain strong; first solar orders under execution. Detailed breakup to be shared offline. (Prayas Goel)

Steel & Solar Growth Drivers

• Question: What initiatives are driving incremental orders in steel and petrochemical industries? (Subrata Sarkar, Mount Intra Finance)
• Answer: Steel sector adopting ZLD at scale due to water scarcity; company's demonstrated installations give competitive edge - including base treatment solution conversion expected within two months. Solar sector: company conducted extensive market research, now providing innovative energy-efficient solutions to larger players, converting existing inefficient installations. (Prayas Goel)

Strategy for Semiconductors

• Question: Will you tie up with larger players for semiconductor ultra-pure water orders? (Subrata Sarkar, Mount Intra Finance)
• Answer: Working with US partner having Micron collaboration; targeting membrane replacement market initially, then moving to project segment. This route provides client comfort and entry pathway. (Prayas Goel)

Heat Exchanger Rationale

• Question: What's the strategic rationale for expanding into heat exchangers and related sectors? (Subrata Sarkar, Mount Intra Finance)
• Answer: Products emerged from water treatment R&D (non-corrosive heat exchangers for evaporators); address water-energy-carbon nexus that clients increasingly prioritize. Non-metallic FRP design eliminates corrosion issues of steel/deplex exchangers and enables quick maintenance. Company strategy: remain focused on existing clients, solving multiple problems (water + energy) rather than entering unrelated markets. (Prayas Goel)

Carbon Capture Outlook

• Question: How serious is India on carbon capture, and can it become a big market? (Subrata Sarkar, Mount Intra Finance)
• Answer: Government has mandated carbon capture for steel, fertilizer, cement industries; implementation mechanisms still being developed. Will take 3-5 years to become large market - likely larger than water. Company pursuing biological route (not chemical) as longer-term solution. India's water compliance journey (started 2004) suggests carbon adoption will be faster given urgency. (Prayas Goel)

Competitive Landscape

• Question: Who are our key competitors in ZLD? (Nikhil Tiwari, Time Wheel Investment)
• Answer: Top 5-6 players include Ion Exchange, Thermax, Spray Engineering, Permionics, Hyperfiltration; smaller players specialize in specific industries/regions. Arvind Envisol is also a Pan India player. Industry survey from ~2 years back placed Concord just below Ion Exchange in ZLD segment. (Prayas Goel)

Data Center Opportunities

• Question: Are products relevant for data centers and what's the market potential? (Nikhil Tiwari, Time Wheel Investment)
• Answer: Yes - data centers need both water recycling and dehumidification; sales teams are engaging with larger players. WaHa dehumidification product addresses cooling needs; company provides both cooling and water solutions to this segment. (Prayas Goel)

Key Takeaway

Concord Enviro Systems reported a challenging Q1 FY27 with revenue of ₹853 million (down ~17% YoY), negative EBITDA of ₹149 million, and net loss of ₹176 million, driven by Middle East conflict-related supply chain disruptions that caused ~₹50-55 crores of revenue loss across trading and manufacturing segments. Management expects execution to normalize by end of Q2 FY27 and maintains order intake guidance of ~₹1,000 crores for FY27, with the order book at ₹699 crores providing 80-85% conversion-based growth visibility. Strategic progress continued: first European ZLD order (EUR 600,000), record steel sector ZLD award (₹1,260 million), WaHa partnership for atmospheric water generation ($575,000 for <2% stake), and early traction for the extreme heat exchanger product. Management guides 15-20% revenue growth and 12-15% EBITDA margins over the next 2-3 years, with margins expected to normalize toward 14-16% once revenue reaches scale in ~2 financial years. Key watch points include supply chain stability, execution on larger projects, competition from Ion Exchange and Thermax, and development of carbon capture and semiconductor opportunities over a 3-5 year horizon.