Detailed Narrative
Q2 FY25 Performance Overview and Margin Pressures
Ahluwalia Contracts reported a Q2 FY25 turnover of ₹1,011.48 crores, representing a 12.19% year-on-year growth. However, PAT declined significantly by 30.63% YoY to ₹38.36 crores. The EBITDA margin compressed to 7.25% from 9.96% in the prior year, and PAT margin fell to 3.79% from 6.13%. Management attributed this margin pressure to prolonged monsoons, labor shortages exacerbated by election season, and design/approval delays on large projects like CSMT, which impacted execution and increased fixed overheads.
Order Book and Inflow Dynamics
The company maintains a healthy net order book of ₹16,193.45 crores as of September 30, 2024, with an execution timeline of 2 to 2.5 years. Total order inflow for FY25 year-to-date stands at ₹7,794.37 crores. Management anticipates an additional ₹1,000 crores in order inflow for the remainder of FY25 and projects ₹5,000-6,000 crores in new orders for FY26. The current bid pipeline is approximately ₹5,000 crores, with a focus on industrial activity, airports, and government office buildings.
FY25 and FY26 Guidance
For FY25, Ahluwalia Contracts guided for approximately 15% revenue growth and an EBITDA margin of around 9%, a moderation from previous double-digit expectations. Looking into FY26, the company targets 15-20% revenue growth, aiming for 20%, and expects to cross the double-digit margin barrier as design-build projects gain full swing. This outlook is contingent on the resolution of current execution challenges like labor availability and NGT restrictions.
Working Capital and Debt Management
The company demonstrated improved working capital management, with net working capital days reducing from 117 in Q1 FY25 to 93 in Q2 FY25. Current trade receivables are ₹625 crores, with ₹525 crores expected within 6 months and ₹100 crores beyond. Gross debt remains low at ₹9 crores. Management noted improvements in working capital from states like Bihar, with dues certified and expected to be cleared in FY25.
Capex Revision and Cost Optimization
FY25 capex guidance was revised downwards to approximately ₹130 crores from an earlier estimate of ₹175 crores. This revision is part of a broader cost-cutting exercise, driven by lower margins and a conservative approach to new order inflows. The strategy involves reducing expenditure on equipment and shuttering, and increasingly utilizing rental options for fast-track projects where profitability will not be impacted, particularly for projects with a 1-1.5 year completion timeline.
Key Project Updates
The CST redevelopment project is targeted to achieve ₹300 crores in turnover for FY25 and approximately ₹800 crores for FY26, with an average run rate of ₹70-80 crores per month starting January/February. The DLF Arbour Project aims to increase its execution rate to ₹25 crores per month from the current ₹11-12 crores. The Jewellery Park project is expected to receive its notice to proceed in December, with revenues commencing in H2 FY26, targeting ₹30-50 crores/month initially, then ₹70-80 crores/month.