Revenue
Margin
Demand
Guidance
Tone
Metrics cut 1
- KPM project EBITDA margin guidance cut to 10-11% (from 14% previously)
Event Participants
Executives
3 Nani Aravind (Chief Financial Officer), Rohit Sajjan (Executive Director), Sudha Kodandaramaiah (Director, Business Development)
Analysts
8 Abhinav Mandowara (Aequitas Investments), CA Bhagwat Nayak (Prosperity Wealth Management), Deepak Poddar (Sapphire Capital), Dhananjay Mishra (Centrum Broking), Madhu Sudan Agarwal (Agarwal Management Services), Mahesh Patil (ICICI Securities), Mudit Bhandari (IIFL), Suhas Naik (Creditwise Capital)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total Revenue | ₹1,632 crore | +26% YoY; driven by sustained execution across core verticals and ramp-up in civil infra, industrial EPC, O&M, and international projects |
| EBITDA | ₹176 crore (10.8% margin) | -3% YoY; margin impacted by Middle East conflict-driven material costs, higher royalty in KPM project, lower KVP mining margins from new seam opening, and lower other income |
| Standalone EBITDA Margin | 11.3% | Improved vs 10.2% in Q1 FY26, aided by new high-margin orders |
| PAT (before minority) | ₹89 crore | +11% YoY |
| PAT (after minority) | ₹80 crore | +53% YoY vs ₹53 crore in Q1 FY26; EPS at ₹25.23 vs ₹16.61 |
| Order Inflows | ₹1,864 crore | ~15.5% of annual target; diversified across industrial construction, civil infrastructure, and O&M |
| Total Order Backlog | ~₹55,398 crore (incl. MDO); ₹16,229 crore (executable ex-MDO) | Executable backlog +2% QoQ from ₹15,888 crore; civil segment +4.4% and O&M +11.8% QoQ |
Geographic & Segment Commentary
- O&M (Windham): Revenue of ₹431 crore, +8% YoY; secured US Mumbai Monorail O&M contract, marking entry into urban mobility segment; O&M order backlog at ₹3,322 crore (+11.8% QoQ); segment enjoys 18-20% EBITDA margins
- Civil (Roads, Railways, Water): Revenue of ₹796 crore, +28% YoY; driven by road, railway, and water distribution projects; order backlog boosted by railway maintenance depot specialization
- Industrial Construction & EPC: Industrial construction revenue of ₹270 crore (-13% YoY), offset by industrial EPC at ₹96 crore; clubbed together expecting 20-22% growth; EPC backlog from BHEL at ₹2,625 crore
- Mining (MDO): Revenue of ₹84 crore, +223% YoY; KVP mine ramping from November 2025; both KVP and Tastra targeting ₹500 crore revenue in FY27 with ramp-up to 3 MT (KVP) and 1.2-1.3 MT (Tastra) volumes
- ETC Business: Revenue declined from ₹250 crore to ₹217 crore due to Athena project accident (work restarted, recovery from Q2) and near-completion of FGD plants
- Geographic Mix: Domestic 96%, international 4% of revenue; power sector 54% of revenue, non-power 46%
Company-Specific & Strategic Commentary
- Capacity Addition Engine: Tracking ~58,000 MW of thermal power ordering (BHEL ~₹2.41 lakh crore, L&T ₹42,523 crore, JSW new entrants); mapped immediate opportunity of ₹25,000-30,000 crore (power ~₹20,500 crore, infrastructure ~₹8,500 crore) with historical strike rate of 60-65% in power bids
- MDO Ramp-Up: KVP targeting 3 MT production in FY27 (client-ready for up to 3 MT vs 1.5 MT agreement); Tastra washery commissioning by Nov-Dec 2026 unlocking full feed; combined ₹500 crore revenue FY27, ₹1,100-1,200 crore FY28
- Private Sector Wins: Secured ₹850 crore JSW Salboni civil infrastructure package; deep relationships with Adani (14 live orders, ₹2,400 crore value) and Vedanta (6 projects executed, ₹1,551 crore backlog); BHEL order book at ~₹5,300 crore across 5 major projects
- International Focus: Middle East conflict constrained international revenue to 4%; secured ~₹300 crore long-term O&M contracts in UAE/GCC and Nigeria (Danvota); EPC contractor tie-ups in West Africa/Middle East being pursued
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| FY27 Revenue | ₹7,300 crore (consolidated) | ~28% YoY growth from ₹5,760 crore base; management "on track" despite Q1 O&M seasonal dip |
| FY27 EBITDA Margin | 12.5% (consolidated) | Confidence from KVP ramp-up (350 crore revenue), Tastra production from Q4, and margin recovery in mining |
| FY27 Order Booking | ₹10,000-12,000 crore | Supported by ₹25,000-30,000 crore opportunity pool; power sector strike rate 60-65% |
| MDO Revenue | FY27: ₹500 crore; FY28: ₹1,100-1,200 crore | KVP 3 MT in FY27 (ramp to 4-4.2 MT in FY28); Tastra 1.2-1.3 MT after washery commissioning |
| MDO EBITDA Margin | FY28: 15-17%; FY29: 21-23% (peak capacity) | Blended weighted average when both mines reach rated capacity; peak achievable from FY29 |
| Group EBITDA Margin Trajectory | +50 bps annually to ~14% by FY30 | Mix shift toward O&M and mining drives steady margin expansion |
| KPM Project (ETC) | Revenue ₹700-750 crore; EBITDA margin 10-11% | Down from 14% due to government's 50% royalty sharing and new ₹10/MT royalty surcharge |
Risks & Constraints
| Risk | Context |
|---|---|
| KPM Royalty Structure Change | Government now retains 50% of royalty penalty; new ₹10/MT additional royalty and 5% MITF charge; EBITDA margin compressed from 14% to 10-11%, a ~400 bps structural downgrade for this ₹700+ crore revenue stream |
| Middle East Conflict & Input Costs | Elevated steel, alloy steel, LNG, and diesel prices due to regional conflict; PVC clauses provide partial protection but lag by one quarter and don't cover all escalation; private clients typically pay back but public sector requires claims/dispute resolution |
| KVP Mining Execution Risk | First-quarter OB removal costs high from new seams; stripping ratio within agreed limits but quarterly volatility certain; achievement of FY27 350 crore revenue assumes 3 MT client acceptance (vs 1.5 MT contractual minimum) |
| Dependence on Private Sector Award Concentration | Adani (₹2,400 crore) and BHEL (₹5,300 crore) represent substantial order backlog concentration; any delay/reshuffling in these clients' capacity plans directly impacts two-year revenue visibility |
| Thermal Power Pipeline Execution Capacity | Maxed at 14-15 boilers of 800-MW class simultaneously; growth in power construction limited to 5-7% annually unless additional crane/capacity capex (₹100-120 crore/year) sustained |
Q&A Highlights
Margin Outlook & Drivers
- Question: How should one look at overall annual EBITDA margins considering royalty, OB costs, and raw material cost escalation? (Deepak Poddar, Sapphire Capital)
- Answer: Q1 FY26 had exceptional ₹51 crore seized-quantity revenue which normalized; KVP mining seasonality (higher OB removal, lower coal) will correct in subsequent quarters; committed KVP margins of 15-16% stand; standalone margins improved to 11.3%; FY27 guidance of 12.5% EBITDA maintained. (Nani Aravind, CFO)
- Answer: PVC clauses compensate for most raw material increases but index updates lag; private clients (Adani/JSW) typically reimburse uncovered escalation, public sector requires claims management. (Rohit Sajjan, ED; Sudha Kodandaramaiah, Director BD)
MDO Trajectory
- Question: What sort of execution and margins are targeted from MDO in FY27 and FY28? (Deepak Poddar, Sapphire Capital)
- Answer: FY27: ₹500 crore (3 MT KVP + 1.2-1.3 MT Tastra post-washery commissioning in Nov-Dec); FY28: ₹1,100-1,200 crore; EBITDA margins 15-17% in FY28, rising to 21-23% from FY29 when both mines reach rated capacity, with minor dips during 7th/13th year conveyor capex. (Rohit Sajjan, ED)
KPM Royalty Impact
- Question: Can you quantify the KPM project's revenue and margin post-revised royalty structure? (CA Bhagwat Nayak, Prosperity Wealth Management)
- Answer: Revenue of ₹700-750 crore expected this year; Q1 EBITDA margin dropped from 14% to ~10% due to: (1) reduced seized-quantity income as violations decline, (2) 50% royalty penalty sharing with government, (3) new ₹10/MT royalty surcharge plus 5% MITF charges; 10-11% margin expected for remaining quarters. (Nani Aravind, CFO)
Order Booking Confidence & Opportunity Pool
- Question: Is the 12,000 crore order inflow target derived from the 25,000-30,000 crore opportunity pool, and what is the win rate? (Deepak Poddar, Sapphire Capital)
- Answer: Power sector opportunity of ~₹20,500 crore (installation, civil, structural, BOP packages) plus ~₹8,500 crore infrastructure; power sector strike rate historically 60-65%, hence capping bid pipeline at 30,000-35,000 crore to justify 12,000 crore booking target; BHEL tendering has been delayed due to packaging issues, while Adani/JSW private packages with integrated scope fit the company's execution strengths. (Sudha Kodandaramaiah, Director BD; Rohit Sajjan, ED)
Power Sector Pipeline & Project Targets
- Question: What is the history of NTPC/Adani project awards and which major projects are targeted in the next year? (Mudit Bhandari, IIFL)
- Answer: Out of 58,000 MW tracked, ~24,000 MW of tenders are currently in-flight; ~a dozen projects in pipeline from BHEL, Adani, JSW, L&T; specific targets include Adani Pirpanthi, JSW Alibaug, BHEL Durgapur BOP package; preference for Adani/JSW integrated packages over BHEL's vertical composite splits. (Sudha Kodandaramaiah, Director BD)
O&M Scale-Up & Margins
- Question: How will O&M scale over 2-3 years and what margins does the business enjoy? (Suhas Naik, Creditwise Capital)
- Answer: O&M contributes ~30% of revenue with 18-20% EBITDA margins; 8,000-10,000 MW/year capacity additions (public + private) translate to ₹800-1,000 crore annual O&M opportunity; 5 public-sector plants moving toward long-term O&M outsourcing is a positive signal; growth expected to sustain over next 5-6 years. (Sudha Kodandaramaiah, Director BD)
ETC Revenue Decline
- Question: ETC revenue fell from 250 crore to 217 crore with no order inflow; how is the segment tracking? (Dhananjay Mishra, Centrum Broking)
- Answer: Athena project accident halted work temporarily (restarted, recovery from Q2); FGD near completion to be closed in current quarter; some skilled resources diverted to BHEL BOP EPC work; clubbing ETC + power EPC together, growth of 20-22% expected; standalone power plant construction limited to 5-7% growth (14-15 boilers capacity ceiling). (Nani Aravind, CFO; Rohit Sajjan, ED)
Working Capital & Execution Capacity
- Question: What is the execution capacity based on current human capital and balance sheet strength? (Suhas Naik, Creditwise Capital)
- Answer: 4,000 engineers and ~50,000 workforce (up from 40,000); headcount expansion tied to O&M growth; 80-90% of heavy equipment owned in-house (cranes up to 500-700T hired only for exceptions); working capital supports revenue up to ₹10,000 crore at current limits; annual capex requirement of ₹100-120 crore for equipment additions. (Sudha Kodandaramaiah, Director BD; Nani Aravind, CFO)
Key Takeaway
Power Mech delivered ₹1,632 crore revenue (+26% YoY) with consolidated EBITDA margin of 10.8% (-3% YoY), pulled down by Middle East conflict material costs, KPM royalty restructuring (margin down from 14% to 10%), and KVP mining strip-ratio seasonality — yet standalone margins improved to 11.3% and PAT after minority surged 53% to ₹80 crore. Strategy centers on three levers: (1) thermal power capex cycle with ₹25,000-30,000 crore mapped opportunity and 60-65% strike rate, targeting ₹10,000-12,000 crore order booking for FY27; (2) MDO ramp-up with ₹500 crore revenue in FY27 scaling to ₹1,100-1,200 crore in FY28 as both mines reach capacity, lifting group margins by ~50 bps annually toward 14% by FY30; (3) O&M expansion (18-20% margins, ₹800-1,000 crore annual market) with new entries like Mumbai Monorail. Management reiterated FY27 guidance of ₹7,300 crore revenue and 12.5% EBITDA margin, contingent on KVP ramp-up, Tastra washery commissioning, and recovery of ETC business post-Athena incident. Watch points include raw material pass-through timeliness, KPM margin compression permanence, and concentration risk at Adani/BHEL.