Ahluwalia Contracts (India) Limited — Q4 FY26 earnings call

Sorry, come again, I've given you guidance for FY27, right? So you're saying that further on, you're asking me about FY28, is it? ... You can see that in the last 2 year or 3 years the guidance which I am giving is 10% to 15% and our order book which is there or because we are well stocked up and secondly the states in which we are working the stable government has come. So according to that we have increased the 5 percentage guidance and there are still lot of headwinds are there primarily due to what that is the big uncertainly. So because of that we don't think to give guidance is prudent.

Analyst challenged the 15-20% FY27 growth guidance as potentially too low, but management cited ongoing uncertainties (headwinds) as a reason for conservative guidance, implying higher potential but cautious outlook.

Asked by Shravan Shah

So, when the war began, sorry. The first impact, which was the immediate impact was the LPG prices or the lack of availability of LPG cylinders, which directly impacted the labor. The labor ran away to their native places because they use LPG to cook their food, so that was an immediate impact, and labor is a key resource today. ... Thirdly, supply chain is badly disrupted. A lot of materials or at least the component, say, to give you an example, electrical panel. Now switchgear is not available. So, the delivery of, say, a panel from the time like the order was placed if it used to be 2 months, now it is not less than 4 months. And so, there are delays everywhere on this account. That has an impact on our overheads, on our IDCs.

Management detailed specific direct and indirect impacts of the war on labor availability, supply chain disruptions, and project timelines, highlighting a significant external risk factor affecting operations.

Asked by Amit Khetan

So if you were to see, this is an industry-wide phenomenon, even if you were to -- all of you would have done a peer comparison, we have done it. Not only now, last few quarters we're doing, we are consistently in the higher bracket of the kind of results or margins that we are declaring, right? This is an industry-wide phenomenon. Part of the reason is that while the industry is growing, the capex is growing. The skill levels are actually deteriorating. Labor shortage is increasing that's why I mentioned that this industry is at an inflection point.

Management explained that margin compression is an industry-wide issue driven by increasing capex, deteriorating skill levels, and labor shortages, indicating structural challenges despite the company's relative outperformance.

Asked by Keshav Garg

Look, our industry has always been at the forefront of cycles. And the cycles at times, it's difficult to predict. 3 months ago, we were thinking that we were riding wave and all of a sudden, the war hit and the future is now quite uncertain. So, during such time, it's always better to have a war chest with you, which -- this is what our past experience has taught us. During the last downturn, when a lot of our peers fell by the wayside, we could survive the downturn. And we could continue to grow. So, at the moment, the share buyback is not in the offing. That's not even crossed our mind.

Analyst suggested a share buyback given the company's net cash position and low shareholder returns, but management firmly rejected the idea, prioritizing a 'war chest' due to market uncertainties and past downturn experiences.

Asked by Keshav Garg

I don't understand your question. So what I am saying is that to increase the capex that I'm doing, the rate of return on account of that capex will go up by about 7% to 10% savings. ... So I don't think there is any metric which we can use or a yardstick, which we can use to say, okay, we've invested INR20 crores in tower cranes and batching plants and concrete pumps and this will straightaway improve our EBITDA by 1 percentage point.

Analyst questioned the lack of immediate margin improvement despite significant capex, and management clarified that while capex leads to 7-10% savings, direct correlation to EBITDA percentage is hard to quantify and benefits accrue over 4-5 years.

Asked by Madhur Rathi

No. I think this project, as you yourself said, that, A, it was not impacted by NGT. B, Central Vista all projects, the government is extremely aggressive on the time line because they need these buildings. This particular building that we are doing or two buildings that we are doing this will House the Ministry of Finance as well as the Ministry of Defense. So, the government wants these buildings as of yesterday. Money, obviously, is not a problem for the Central Vista project. ... But the advantage that we have is that end-to-end, it's an EPC contract and a lot of activities on most of the items that go into executing this are going to be done by our in-house other than highly specialized items. So, we have greater control on the output on a month-to-month basis.

Management confirmed Central Vista is a smooth, high-priority project with strong government backing and in-house EPC capabilities, providing better control over execution and mitigating NGT risks.

Asked by Ankit Jambusaria

So, this is Vikas here. The project has been delayed for some administrative reasons, no other reason. Actually, there was a bit of a change in the SIR and all that for the agency, which now has been built in properly. The excavation work has started at site. We have already applied all the licenses and all. We are expecting to start work very soon after the Mumbai monsoon. We are gearing up now. And we are still awaiting a formal go-ahead from the client. But verbally the client has said that things in place. They have their own process because it's a quota government agency under the Ministry of Commerce. So whatever permissions they are awaiting, because the land is allotted by the government of Maharashtra. So, some administrative aligning is happening, which is going to happen.

Management clarified that IJPM delays were due to administrative reasons and changes in SIR, not client issues or trade deals, with work expected to ramp up post-monsoon after licenses are in place.

Asked by Ankit Jambusaria

You're right. H2 is always substantially higher than H1. But this time, it will be exceptionally slow moving because we had due to a confluence of various factors. A, I talked about elections, labor went away. And then there was there is a festival of Eid, nearly 70% of our skilled workforce is Muslim, especially carpenters and bar benders. So, they went away. And once they went away for elections, they didn't come back over for a prolonged period, they were at home. So Q1 is also impacted. But starting Q2, the numbers will ramp up significantly and H2 will be significantly higher than H1.

Management explained that Q1 FY27 would be exceptionally slow due to elections, labor migration (Eid, skilled Muslim workforce), but expects a significant ramp-up from Q2 onwards, with H2 FY27 being substantially higher, providing clarity on quarterly execution trajectory.

Asked by Ankit Jambusaria