Markolines Pavem — Q1 FY26 earnings call

Currently, as of today, it is about Rs. 132 crores. ...particularly last year when because of we had worked a lot for the BMC and MMRD in Mumbai and because of the elections, we had some funds locked up, but which in my earlier presentation of the annual presentation also we had said that by April, we had recovered all the monies from the outsourcing money for the government projects.

Analyst questioned the increase in receivables despite flat revenue, and management clarified the current outstanding amount and reasons for past increases, linking it to government project payments and election-related delays.

Asked by Madhur Rathi

we do not work the state highways. I don't think there is any state highway project as of today. But in terms of the private and this thing, it keeps fluctuating from time to time since our projects are shorter. So as of now, if you have to tell, ask me or if I have to answer you, most of the projects which are running are on the national grid and there would be a 50-50 contribution in terms of private and government. But government also, when I say, it is not directly government, it could be around 70-30.

Clarified that the company primarily works on national grid projects with a mix of private and government-related clients, and specialized construction is mostly privatized, impacting working capital cycles.

Asked by Madhur Rathi

Definitely, we are expecting about 25%-30% growth in terms of revenue. And what was your second question? ... EBITDA margins would be more or less the same as last year. It is basically into the private sectors and the competitive market, our margins would remain same. The volume is there. I have always been saying that volume is the game. So we are increasing the size. That will only add to our revenue, the bottom-line.

Provided specific guidance for FY26 revenue growth (25-30%) and indicated stable EBITDA margins, emphasizing volume and scale as drivers for bottom-line growth.

Asked by Madhur Rathi

may be two reasons, that time we did not have these specialized constructions, this thing. As we said that we have added these specialized construction activities over the last 3-4 years only. And particularly, Microsurfacing, though we have been doing, but was for quite some years now, almost 9-10 years. But that was always in a small quantity. As we go in size, our ticket size increased, our project size increased, the specialized construction sector is also increasing and that is giving us the increase in the margin. And, of course, with this increase in the size, we are also looking at the cost optimization because of the consolidation.

Management explained that margin improvements are linked to the recent addition of higher-margin specialized construction activities, increased project sizes, and cost optimization efforts.

Asked by Madhur Rathi

I understand that. So slowly, if you have looked at our results, we have been increasing in terms of our margins also growing steadily over a few years. Now, FY '25 is close to 7.5%. But at the same time, as I said, in fact, I have been saying also earlier, if you had attended my earlier calls. So basically, till a particular time, we were only catering to the private players and major maintenance and to establish ourselves into the business has always been looking at the satisfaction, the transferred worksheets. And we have always operated on a costless basis.

Analyst challenged the company's PAT margins compared to larger infra players, prompting management to detail their strategic shift towards higher-margin specialized work and larger projects, and their unique position in the organized sector.

Asked by Arvind Deshpande

So initially we said, but then as a management decided that, now, Mr. Aravindji asked me a question on increasing the profitability. So we had clearly decided last year that rather than the revenue, let us focus on building the bottomline. And that is how we majorly focused on the bottomline, worked with the specialized constructions. And of course, there was one more reason, particularly in the first semester of the pronged monsoon. So we could not perform in spite of having the work order at hand. The last year's monsoons were really widespread almost more than close to 6 months. We had the weightest monsoon in, I suppose, 30 years.

Management clarified that the FY25 revenue target miss was a deliberate strategic choice to prioritize profitability and was also impacted by an unusually prolonged monsoon season.

Asked by Madhur Rathi

if I have to really talk on the potential, approximately for a major maintenances, which is generally done once in 5 years, the approximate cost is about Rs. 1 crore per kilometer, let us say. So that would approximately, how much? Rs. 150,000 crores divided by 5. That is the actual size, Rs. 1,50,000 crores, but divided. And then apart from that, there is operational maintenances, the regular maintenances, the specialized sections, but since we operate in the privatized space, we have to look at. As of now, if I look at only the privatized space, the market will go close to Rs. 10,000 crores per annum, per year on the major maintenances and Rs. 10,000 crores on the O&M.

Management provided a quantitative estimate of the large market potential for major maintenances and O&M services, especially within the privatized space.

Asked by D. A. Thakkar

So material price, which I have already answered in my presentation that every contract that we signed has escalation clause. Generally, a bitumen is the major component, which is directly related to the crude oil. So the prices are subject to fluctuations. But because of the escalation clause is mandatory, we have in every, so escalations are taken care of. Then delays, particularly, we always keep a balance on government and private sector, rather our first focus is always on the private sector, where the less, probably the margins could be a little lesser, but the payments for sure. And this is how we keep the balance in terms of mitigating the risk.

Management detailed its strategies for mitigating key industry risks, including using escalation clauses for raw material price fluctuations and balancing government and private sector projects to manage payment delays.

Asked by D. A. Thakkar