Ahluwalia Contracts (India) Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Ahluwalia Contracts reported a challenging Q3 FY25 with a 7.26% YoY decline in turnover and a 30.10% YoY drop in PAT, primarily due to the severe impact of NGT bans in the NCR region, affecting 33% of its order book. Despite this, 9M FY25 revenue grew by 7.10% YoY, though PAT declined by 32.64%. The company maintains a healthy order book of ₹16,258.44 crores and expects a strong recovery in Q4 FY25 and FY26, projecting over 15% revenue growth and double-digit margins for FY26, driven by the resolution of design issues in large projects and a robust bidding pipeline.

Highlights

  • Q3 FY25 Turnover of ₹951.95 crores, down 7.26% YoY

  • Q3 FY25 PAT of ₹49.39 crores, down 30.10% YoY

  • Q3 FY25 EBITDA Margin at 8.86%, compared to 10.90% in Q3 FY24

  • 9M FY25 Turnover of ₹2,882.79 crores, up 7.10% YoY

  • 9M FY25 PAT of ₹118.35 crores, down 32.64% YoY

  • Net Order Book as of December 31, 2024, stands at ₹16,258.44 crores

  • Total Order Inflow for FY25 (YTD) is ₹7,794.37 crores

  • FY25 Revenue Growth Guidance revised to 8.5%-9% from an earlier ~15%

  • FY26 Revenue Growth Target: 15% plus with double-digit margins

Concerns

  • NGT Ban / GRAP (Air Pollution Restrictions)

Key financials

4 periods

Headline

  • Net Order Book (as of 31/12/2024)
    ₹16,258.44 Cr
  • Cash Position
    ₹246 Cr
  • Total Debt
    ₹11 Cr

Q3 FY25

  • Turnover
    ₹951.95 Cr
    YoY -7.3%
  • PAT
    ₹49.39 Cr
    YoY -30.1%
  • EBITDA Margin
    8.9%
  • PAT Margin
    5.1%
  • EPS
    ₹7.37

9M FY25

  • Turnover
    ₹2,882.79 Cr
    YoY +7.1%
  • PAT
    ₹118.35 Cr
    YoY -32.6%
  • EBITDA Margin
    7.6%
  • PAT Margin
    4%
  • CAPEX
    ₹154 Cr

FY25 YTD

  • Total Order Inflow
    ₹7,794.37 Cr

What they filed

Q1 FY27: revenue up 12.0%, net profit down 78.4% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,011 952 1,216 1,005 1,177 +16%1,061 +11%1,322 +9%1,126 +12%
EBITDA73 84 124 86 129 +77%96 +14%124 +0%48 −44%
Net profit38 49 83 51 79 +108%54 +10%80 −4%11 −78%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

  • FY25 Revenue Growth Revenue · FY25 · Medium confidence 8.5%-9%

    Previously 10% (earlier guidance) → 8.5%-9%

    I had given guidance of about 10% growth. We should be around that, we would be about 8.5%-9%.

    — Shobhit Uppal

  • FY26 Revenue Growth Revenue · FY26 · High confidence 15% plus
    As far as the guidance for the next year is concerned, it would be about 15%.

    — Shobhit Uppal

Margin

  • Q4 FY25 Margin Margin · Q4 FY25 · Medium confidence about 10%
    the margins will definitely be better, and we feel that the topline at the end of the year would have grown by about 8.5%-9%.

    — Shobhit Uppal

Order Inflow

  • Next Year Order Inflow Order Inflow · FY26 · Medium confidence similar to ₹7,800 crores (FY25 YTD)
    Next year, our order inflow this year has been close to, I think it stands at about Rs. 7,800 crores. So, next year, we are looking at a similar number.

    — Shobhit Uppal

Project Revenue

  • CSMT Revenue Project Revenue · FY25 · High confidence ₹80-₹100 crores

    Previously ₹300 crores → ₹80-₹100 crores

    No, that will not happen. We are looking at anywhere between Rs. 80-Rs. 100 crores. That is something which is set us back in terms of our revenue guidance for FY25.

    — Shobhit Uppal

  • CSMT Revenue Project Revenue · FY26 · High confidence ₹750 crores
    FY26, we are looking at about Rs. 750 crores.

    — Shobhit Uppal

  • Gem & Jewellery Park Revenue Project Revenue · FY26 · Medium confidence ₹500 crores
    So, maybe it will be about Rs. 500 crores.

    — Shobhit Uppal

Capex

  • Next Year CAPEX Capex · FY26 · High confidence about ₹125 crores
    So, I think it should be about Rs. 125 crores.

    — Shobhit Uppal

Bidding Pipeline

  • Undecided Bids Value Bidding Pipeline · Current · High confidence ₹5,500 crores
    I think from the top of my head, the project that has been bid till now and not decided would be close to Rs. 5,500 crores.

    — Shobhit Uppal

  • Bids to be submitted Bidding Pipeline · by March (Q4 FY25) · High confidence at least ₹3,000 crores
    Yes, at least Rs. 3,000 crores.

    — Shobhit Uppal

  • Total Pipeline Value Bidding Pipeline · Next Year · High confidence about ₹25,000 crores
    Residential, healthcare, commercial and total pipeline should be in the region of about Rs. 25,000 crores.

    — Shobhit Uppal

Business Mix

  • Public vs Private Sector Mix Business Mix · Ongoing · High confidence 50:50 ratio
    we are equally divided between the two sectors now. We would maintain a 50:50 ratio.

    — Shobhit Uppal

Contract Structure

  • Fixed Price Contracts Contract Structure · Current · High confidence 13%
    13% of fixed price contracts.

    — Satbeer Singh

Market context

  • FY26 Margin Margin · FY26 · High confidence double-digit
    we are looking quite good to have not only a 15% plus growth and also a double-digit margin what I projected last time, but that will happen in FY26.

    — Shobhit Uppal

Risks & concerns

  • NGT Ban / GRAP (Air Pollution Restrictions)

    high

    The NGT ban in Delhi NCR significantly impacted Q3/9M revenue and margins, affecting 33% of the order book. Management hopes for better government management next year.

    Both acknowledged

  • Labor Availability and Cost

    medium

    Labor continues to be in short supply, contributing to higher costs, partly due to idle labor from NGT bans. Management sees it as a persistent problem requiring government intervention.

    Both acknowledged

  • Design Issues and Delays in Large Projects (e.g., CSMT)

    medium

    Design issues and complexity in large projects like CSMT led to slower execution and a downward revision of FY25 revenue guidance for CSMT, but are expected to resolve by Q4 FY25.

    Management acknowledged

  • Increased Working Capital Intensity

    medium

    Larger, more complex EPC projects and increased mechanization are leading to higher working capital requirements. The company aims to reduce finance costs by avoiding interest-bearing mobilization advances.

    Management acknowledged

Q&A highlights

3 direct
Impact of NGT ban on revenue growth and margins, and future recurrence. Direct
Shravan, while our order book continues to be very healthy as far as this quarter and this financial year is concerned, we have been hit as along with our other peers by the NGT bans in Delhi, 33% of our order book now comes from the NCR region and what I had mentioned in my last call also that we had expected that the NGT ban would hit us, but we had not expected that they would hit us so badly. That is the reason for this sort of degrowth.

Explains the revenue degrowth in Q3 and 9M, highlights a significant external risk (NGT ban affecting 33% of order book in NCR), and provides context for revised FY25 guidance.

Asked by Shravan Shah

Margins and working capital for larger, more complex projects. Direct
Conventional logic says that the larger projects should come with better margins. But in the short term, the projects because they are becoming larger, they are also becoming more complex. The timelines are getting shrunk and the skill set or the skill level in the labor force on which we continue to remain dependent to a large scale is dwindling, so it is a bit of a tightrope walk. In the long run, yes, the margin from the larger scale projects we feel would be higher, but in the short term I think that will not be the case. That has not been the case, and that will not be the case going forward.

Challenges the assumption that larger projects automatically mean better margins in the short term due to complexity, shrinking timelines, and labor skill issues. Also confirms higher working capital requirements for these projects.

Asked by Amit Khetan

Discrepancy between railway's reported project completion and company's revenue booking for CSMT. Direct
You see what is happening is that because now the designs are getting finalized, so a lot of fabrication work of structural steel is happening which is say about 40% is off site and 60% is on site. So, if you consider that which is actually the work not done, it is not being billed yet, it is a while to start billing it... And to add to what Vikas has said, 15% would tantamount to about Rs. 270 odd crores... we have already billed, acknowledged and agreed billed figure with client is close to Rs. 150-Rs. 60 crores and the rest of say Rs. 100 odd crores what Vikas has said is work done, but unbilled because a lot of fabrication has already happened.

Clarifies the accounting and billing process for large, complex projects like CSMT, explaining why physical progress might outpace revenue recognition due to off-site fabrication and unbilled work, which is crucial for understanding project execution vs. financial reporting.

Asked by Samir Jain

3 min read 6 chapters

Detailed narrative

Q3 & 9M FY25 Performance and NGT Impact

Ahluwalia Contracts reported a challenging Q3 FY25 with turnover declining by 7.26% YoY to ₹951.95 crores and PAT dropping by 30.10% YoY to ₹49.39 crores. The EBITDA margin for the quarter was 8.86%, down from 10.90% in Q3 FY24. For the nine months of FY25, turnover grew by 7.10% YoY to ₹2,882.79 crores, but PAT decreased by 32.64% to ₹118.35 crores. This degrowth was primarily attributed to the severe impact of NGT bans in the NCR region, which affects 33% of the company's order book, causing significant work stoppages from October to February.

FY25 & FY26 Revenue and Margin Outlook

The company revised its FY25 revenue growth guidance downwards to 8.5%-9% from an earlier expectation of around 10-15%, largely due to the NGT ban and project delays. However, management is bullish on FY26, projecting revenue growth of 15% plus and a return to double-digit EBITDA margins, expecting to exceed 10%. For Q4 FY25, margins are also anticipated to improve to about 10% as work picks up post-NGT ban lifting in February.

Order Book, Order Inflow, and Bidding Pipeline

As of December 31, 2024, the net order book stands at a healthy ₹16,258.44 crores, to be executed over the next three years. Total order inflow for FY25 year-to-date is ₹7,794.37 crores, and the company expects similar order inflows for FY26. The current bidding pipeline for undecided projects is approximately ₹5,500 crores, with an additional ₹3,000 crores expected to be bid by March. The total pipeline for next year is estimated to be around ₹25,000 crores, covering residential, commercial, and healthcare segments.

Project-Specific Updates: CSMT, Gem & Jewellery, DLF Arbour

Execution on the CSMT project has been slower than anticipated, with FY25 revenue guidance revised down to ₹80-₹100 crores from an earlier target of ₹300 crores due to design issues and complexity. However, management expects CSMT to contribute significantly in FY26, targeting ₹750 crores. The Gem & Jewellery Park project is expected to generate about ₹500 crores in FY26, with work commencing in the next 1-2 months. The DLF Arbour project is now well underway, with over ₹200 crores billed, and is expected to clock a healthy run rate in the coming quarters.

Working Capital, Debt, and CAPEX Management

The company reported a cash position of ₹246 crores and a total debt (including term loan) of ₹11 crores. Working capital requirements have increased due to larger, more complex EPC projects and higher mechanization costs. Mobilization advances stand at ₹621 crores, with 43% being interest-bearing. The company aims to reduce finance costs by strategically avoiding interest-bearing mobilization advances in the future. CAPEX for the first nine months of FY25 was ₹154 crores, with an estimated ₹125 crores for FY26, indicating a reduction as major project CAPEX is largely complete.

Labor Costs and Contract Structure

Labor availability remains a challenge, contributing to higher labor costs, exacerbated by idle labor during the NGT ban period. Management noted that 33% of their order book is in the NCR region, which was severely affected. In terms of contract structure, 87% of the company's order book comprises variable price contracts, with only 13% being fixed-price. Government contracts typically include escalation clauses for labor and material, while private contracts often cover volatile materials, with labor escalation paid in about 50% of cases.

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