Vascon Engineers Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

3 Santosh Sundararajan, Raveesh Rao, Somnath Biswas

Analysts

5 Chaitanyamundra, Himanshu Upadhyay, Kunal Shah, Saumil, Vedant Serkut

Financials & KPIs

Geographic & Segment Commentary

• EPC Segment: Revenue of ₹148 crore with EBITDA margin of 9% (vs 8% YoY), demonstrating stable project profitability despite lower volumes. Order book of ₹2,850 crore (external ₹2,531 crore) provides strong medium-term revenue visibility. Two government projects (Bihar Supol, Sindhudur) faced temporary cash flow constraints from the client side, now resolved with fund flows expected from August 2026. New wins include ₹295 crore CPWD order for RBI Colony Guwahati and ₹126 crore LOI from Maharashtra PWD for a 300-bed hospital at Varda.
• Real Estate Segment: Revenue of ₹4 crore with EBITDA loss of ~₹4 crore due to timing of revenue recognition. Bookings momentum strong with ₹66 crore in Q1 FY27 (vs ₹113 crore total FY26); Orchids contributed ₹38 crore (cumulative ₹87 crore). Tranquil Heights launched in Powai in mid-June; Prakash (Santa Cruz West) received RERA approval and launch is expected shortly. Pipeline of three projects (Prakash, Tower of Future, Ajanta redevelopment) represents 1.74 million sq ft saleable area with ~₹2,000 crore estimated sales value (₹1,000 crore attributable to Vascon).
• Mumbai Redevelopment Focus: Management concentrating on western suburbs (Bandra to Andheri) and central suburbs (Sion to JVLR) where delivery track record and trust from societies is established. Target projects of ₹250-300 crore GDV with 10-15% upfront investment, avoiding direct competition with large developers pursuing 500-750 crore projects.

Company-Specific & Strategic Commentary

• Real Estate Capability Building: Strengthened business development team for redevelopment and JV/JD opportunities; onboarded senior sales leadership to build consistent monthly momentum; appointed senior armed forces professional for quality control and customer experience. These investments expected to show full benefits over next few quarters.
• FY31 Real Estate Ambition: Targeting annual booking value of ₹1,200-1,500 crore by FY31 from a base of ₹113 crore in FY26; management notes doubling is minimum required for reasonable profitability given the low base.
• Adani Infra Engagement: Participating in 3-4 projects under early contractor engagement model (design stage input); revenue unlikely before Q4 FY27 or next year due to pending approvals; engagement viewed as strategic partnership rather than vendor relationship.
• Fundraise - ₹80 Crore Preferential Warrants: Strategic investor and promoter family subscribed; warrants have 18-month timeline with 25% upfront (already received); deployment ~60-70% for real estate, balance for EPC working capital and corporate purposes.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Real Estate Cash Flows & Project Economics

• Question: With pending collections of ₹116 crore and unsold inventory of ₹414 crore, what is the pending construction spend and what cash flows can be expected over 2-3 years? (Himanshu Upadhyay)
• Answer: Gross profit on real estate projects at 25-30%; ~₹300 crore of pending construction cost out of ~₹530 crore balance; ~₹220 crore free cash flows expected. (Santosh Sundararajan)

Debt Build-Up & Capital Deployment

• Question: Debt has increased materially despite flat order book - where has capital gone? (Himanshu Upadhyay)
• Answer: Working capital cycle stretched from 45 to 65-70 days; milestone-based projects require upfront funding before bill certification; real estate also absorbed capital for ongoing projects. Management notes debt-equity remains within limits and EPC ROI exceeds 15%; debts are short-term, rolling over in 6-8 months. (Somnath Biswas, Santosh Sundararajan)

EPC Execution Constraints - Specific Projects

• Question: Which two projects face cash flow issues? (Kunal Shah)
• Answer: Bihar Supol project (Bihar) and Sindhudur project (Maharashtra); issues now sorted, cash flows available with clients, immediate ramp-up expected. (Santosh Sundararajan)

Real Estate Revenue Recognition Timeline

• Question: When will pending revenue from near-completion projects be recognized? (Kunal Shah)
• Answer: Coimbatore and TOA Tower of Ascent OC targeted in Q3-Q4 FY27; Orchids (Santa Cruz) targeted in Q4 FY27. (Santosh Sundararajan)

Royal Ride Project Status

• Question: What is the status of the ₹225 crore Royal Ride order and how much revenue has been recognized? (Kunal Shah)
• Answer: Only ~₹15 crore recognized; project stalled as it is part of client's ₹2,000 crore ropeway BOT project where vendors are being tied up; order remains live - no cancellation - but zero revenue assumed for FY27. (Somnath Biswas, Santosh Sundararajan)

Reliance Order Cancellation

• Question: Why was the Reliance order cancelled? (Chaitanyamundra)
• Answer: Client changed construction method from non-MIV to MIV concept after awarding; quoted rates (e.g., concrete) no longer valid; mutual decision to exit. (Santosh Sundararajan)

FY27 Revenue Target & Margins

• Question: Is the ₹1,200 crore top-line target still valid after a weak Q1? (Chaitanyamundra)
• Answer: Yes - EPC ~₹1,000 crore (Q1-Q2 typically 40% of revenue, this year 30%; Q3-Q4 will deliver 70%) plus real estate ~₹200 crore from three project completions. Gross profit on EPC at 13-15%; PBD numbers will approach 8-9% at ₹1,000 crore execution. (Santosh Sundararajan, Somnath Biswas)

Adani Engagement Timeline

• Question: When will Adani projects contribute to financials? (Chaitanyamundra)
• Answer: 3-4 projects under early engagement (design stage); approvals pending; revenue unlikely before Q4 FY27, possibly slipping to next year. (Santosh Sundararajan)

Preferential Issue Deployment

• Question: What is the objective behind the ₹80 crore warrant issue and how will funds be deployed? (Saumil)
• Answer: Strategic investor bullish on company plus promoter holding increase; 18-month warrant schedule with 25% upfront (received); deployment ~60-70% real estate, balance EPC working capital and corporate. (Santosh Sundararajan, Somnath Biswas)

Thane Land Parcel

• Question: Status of Thane land acquisition and government corridor? (Vedant Serkut)
• Answer: Still under process; government corridor ~₹6 crore/acre with no decision in last 3-6 months (Vascon holds 45% of 150 acres, ~20-25 acres attributable); roadside parcel acquisition slower than hoped, timeline of at least a year-plus for continuous parcel. (Santosh Sundararajan)

Key Takeaway

Vascon Engineers reported a weak Q1 FY27 with consolidated revenue of ₹152 crore (down 31% YoY) and PAT of ₹2 crore, as temporary cash flow constraints in two large government EPC projects (Bihar Supol, Sindhudur) stalled execution; fund flows are expected from August 2026 with immediate ramp-up. The EPC segment remained profitable at 9% EBITDA margin despite lower volumes, supported by a ₹2,850 crore order book (3x FY26 revenue) and new wins including ₹295 crore CPWD order. Real estate bookings reached ₹66 crore in Q1 (vs ₹113 crore total FY26), led by Orchids momentum and the Tranquil Heights launch, with a pipeline of ₹2,000 crore GDV (₹1,000 crore attributable) from Prakash, Tower of Future, and Ajanta redevelopment. Management maintained its FY27 revenue target of ₹1,200 crore, back-loaded 70% into H2, and guided ₹1,500-2,000 crore EPC order intake. Key watch points include working capital normalization (cycle stretched to 65-70 days), Royal Ride project latency (₹225 crore order, zero revenue assumed), Adani project timing (likely FY28), and competitive Mumbai redevelopment dynamics. The ₹80 crore preferential warrant issue (60-70% earmarked for real estate) supports the FY31 real estate booking ambition of ₹1,200-1,500 crore; management expects progressive improvement through H2 FY27.