DEE Development Engineers Limited — Q1 FY26 earnings call

Call held 12 Aug 2025

Management summary

DEE Development reported a strong Q1 FY26 with significant growth in operating income, EBITDA, and PAT, driven by operational efficiencies and a robust order book. The company is progressing with capacity expansions and has strategically entered the green hydrogen sector. While the cash conversion cycle increased and the biomass power plant tariff issue poses a potential margin risk, management remains confident in its growth trajectory and long-term value creation.

Highlights

  • Operating income grew 21.0% YoY to INR 2,238 million (₹223.8 crores), demonstrating strong top-line growth.

  • Operating EBITDA increased 44.7% YoY to INR 359 million (₹35.9 crores), with margins expanding by 263 basis points to 16.0%, reflecting operational efficiency.

  • Profit after tax (PAT) surged 314.3% YoY to INR 132 million (₹13.2 crores), with PAT margin reaching 5.8%.

  • Robust order book of INR 12,267 million (₹1,226.7 crores) as of July 31, 2025, providing healthy visibility.

  • Anjar facility expansion is ahead of schedule, with 15,000 metric tons capacity to be commissioned by end August 2025, increasing total capacity to 30,000 metric tons.

  • Strategic entry into the green hydrogen sector through a partnership and acquisition of Molsieve Designs Limited.

Concerns

  • Cash conversion cycle increased from 210 days in March 2025 to 247 days in June 2025, primarily due to higher inventory days.

  • Potential impact on EBITDA margins (down to 16-18%) if the biomass power plant tariff issue is not resolved favorably.

  • Uncertainty regarding the exact impact of US tariffs, though management believes it will be minimal.

Key financials

  1. Operating Income 2,238 Mn +21%YoY
  2. Operating EBITDA 359 Mn +44.7%YoY
  3. EBITDA Margin 16%
  4. PAT 132 Mn +314.3%YoY
  5. PAT Margin 5.8%
  6. Cash Conversion Cycle 247 days
  7. Inventory Days 243 days

What they filed

Q1 FY27: revenue up 31.3%, net profit up 23.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue194 162 286 224 270 +39%287 +77%362 +27%294 +31%
EBITDA30 6 64 36 44 +47%48 +700%64 +0%50 +39%
Net profit22 -13 32 13 18 −18%19 +246%28 −12%16 +23%
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.

Segment breakdown

  • Piping Division
    30.4% Revenue Growth86.9% Contribution to Total Revenue

Order book

high confidence

Total value

₹12,267 Mn

as of 2025-07-31 quantified

Inflow this quarter

₹3,200 Mn

Execution

Execution time for power segment orders ranges from 6 to 12 months, considering multiple units.

Composition

Mix 2 geographies
  • USA (from India) ₹230 Mn 41.8%
  • USA (from Thailand) ₹320 Mn 58.2%

Share of order book by geography, derived from disclosed amounts

Pipeline

deal pipeline tcv

Expected order inflow for FY26

Management expects a very good order book by March 2026, with significant contributions from the power and oil & gas sectors.

Source: Prepared remarks · Q&A

Capital allocation

high confidence
  • Capex ₹250 Mn this quarter · ₹1,000 Mn (FY26) planned
    • Planned capacities of process piping solution
    • High-wall thickness seamless piping solution
    • Small hydrogen plant for demonstration ₹100 Mn
    Around INR 25 crores to INR 30 crores of CAPEX we have already done in Q1. And going forward, within this financial year, our expected capital cost would be around INR 100 crores to reach out to the planned capacities of process piping solution as well as our high-wall thickness seamless piping solution.
  • Debt Debt disclosed
    So, sir, as far as the current cash conversion cycle is concerned, we are presently looking to have the needs fulfilled from our borrowings only.
  • M&A Molsieve Designs Limited Acquisition · Integrated

    Further enhances technical capabilities and capacity in the emerging green hydrogen sector.

    Our recent majority acquisition of M/s. Molsieve Designs Limited further enhances our technical capabilities and capacity in this emerging sector.
  • M&A International Clean-Tech Partner Joint venture · Announced

    Strategic entry into the green hydrogen sector to jointly develop, bid for and execute modular hydrogen production system projects.

    During the quarter, we also made a strategic entry into the green hydrogen sector through a partnership with International Clean-Tech Partner, a global leader in sustainable energy technology.

Guidance & targets

Order Inflow

  • Total Order Inflow Order Inflow · FY26 · High confidence INR 1,200 crores
    We are expecting almost around INR 1,200 crores orders.

    — Pankaj Agarwal

Revenue

  • Total Revenue Revenue · FY26 · Medium confidence INR 1,300 crores
    And will it have any impact on our guidance of INR 1,300 crores of revenue or 19%, 20% of margins?

    — Vaibhav Mishra (referencing management guidance)

  • Total Revenue (Impact) Revenue · FY26 · Medium confidence INR 50-100 crores impact

    Previously INR 1,300 crores → INR 50-100 crores impact

    But it can be maximum INR 50 crores to INR 100 crores, not more than that, maximum INR 50 crores is enough.

    — Krishan Bansal

  • Revenue Growth Revenue · next 3 to 5 years · Low confidence Threefold increase
    Yes Mam. [in response to 'does the company maintain its long-term guidance of threefold increase in revenue in next 3 to 5 years?']

    — Sameer Agarwal

Margin

  • Operating Margin Margin · FY26 · Medium confidence 19-20%
    And will it have any impact on our guidance of INR 1,300 crores of revenue or 19%, 20% of margins?

    — Vaibhav Mishra (referencing management guidance)

  • Operating Margin (Revised) Margin · FY26 · High confidence 16-18%

    Previously 19-20% → 16-18%

    If these rates do prevail, then definitely the EBITDA margin shall go downwards and our guidance, which we had given for 19% to 20% shall come down to 16% to 18% anywhere.

    — Sameer Agarwal

Capacity

  • Anjar Facility Total Capacity Capacity · by end August 2025 · High confidence 30,000 metric tons per annum

    From 15,000 metric tons per annum today

    This will increase the facility's total capacity, excluding heavy fabrication to 30,000 metric tons per annum.

    — Krishan Bansal

  • High-wall Seamless Pipe Plant Commercial Production Capacity · by January 2026 · High confidence Commercial production
    Our high-wall seamless pipe plant is also on track to commence commercial production by January 2026, making a significant step in our backward integration strategy to improve supply chain efficiency and cost competitiveness.

    — Krishan Bansal

Revenue Potential

  • Anjar Facility Revenue Potential Revenue Potential · Max utilization · Medium confidence INR 800-1,000 crores
    So, on a maximum utilization of our capacity, our Anjar unit can produce a revenue of INR 800 crores to INR 1,000 crores

    — Sameer Agarwal

  • Palwal Facility Revenue Potential Revenue Potential · Max utilization · Medium confidence INR 1,300-1,500 crores
    whereas our Palwal facility can produce a revenue of INR 1,300 crores to INR 1,500 crores.

    — Sameer Agarwal

  • Total Revenue Potential (Max Utilization) Revenue Potential · Max utilization · Medium confidence INR 2,500-3,000 crores
    So, overall, I can say with our total capacities till date, we can produce overall revenue somewhere from INR 2,500 crores to INR 3,000.

    — Sameer Agarwal

Depreciation

  • Annual Depreciation Depreciation · Post-Anjar full functionality · Medium confidence INR 60-65 crores
    So, if the overall capitalization, post this facility to be 100% functional, the overall depreciation per annum would be around INR 60 crores to INR 65 crores.

    — Sameer Agarwal

What to watch in Q2 FY26

Biomass Power Plant Tariff Resolution

August end or first week of September
Current Hearing completed, order reserved
Target Order pronounced and favorable resolution

Why it matters

Resolution will determine the impact on FY26 EBITDA margins and revenue guidance.

And we are expecting to get this revision done somewhere in the August end or maybe first week of September.

Risks & concerns

  • Biomass Power Plant Tariff Issue

    medium

    The ongoing legal action regarding downward revision of tariff for two biomass projects could impact profitability, potentially reducing EBITDA margins from 19-20% to 16-18% if not resolved favorably.

    Acknowledged

  • Increased Cash Conversion Cycle

    low

    The cash conversion cycle increased from 210 days to 247 days, primarily due to higher inventory levels for raw material procurement in anticipation of expanded order book execution.

    Management acknowledged

  • US Tariffs Impact

    low

    Analysts raised concerns about US tariffs impacting exports. Management clarified minimal direct exposure (2% of order book) and stated that their HSN codes are largely unaffected, with value addition mitigating risk.

    Analyst downplayed

Q&A highlights

6 direct
FY26 Order Inflow and US Exposure Direct
We are expecting almost around INR 1,200 crores orders. ... So, as far as the total orders to be shipped out of our current order book of INR 1,226 crores, INR 23 crores orders are in hand in India, which are to be shipped to USA. So, that is only 2% of our total order book.

Clarifies the expected order inflow for the full fiscal year and quantifies the minimal direct exposure to the US market, addressing concerns about tariffs.

Asked by Vaibhav Mishra

Biomass Power Plant Tariff Resolution and Margin Impact Direct
And we are expecting to get this revision done somewhere in the August end or maybe first week of September. ... If these rates do prevail, then definitely the EBITDA margin shall go downwards and our guidance, which we had given for 19% to 20% shall come down to 16% to 18% anywhere.

Provides a timeline for the resolution of a critical tariff issue and quantifies the potential negative impact on EBITDA margins if the resolution is unfavorable, revising previous guidance.

Asked by Vaibhav Mishra

Power Segment Order Timelines and Execution Direct
Sir, we are expecting these orders to come in next 2 to 3 weeks maximum. And the execution time prevail from 6 months to 9 months or 12 months considering the unit requirement because it's multiple units.

Gives specific timelines for the conversion of L1 bids in the power sector into firm orders and their subsequent execution, which is crucial for revenue visibility.

Asked by Tanay

Revenue Growth Drivers and Capacity Utilization Direct
Sir, again, we have been telling it time and again that our capacity just cannot be measured just in metric tons only. The drivers are how much value add we are doing it. ... The value addition or the metallurgy of the orders for this particular year is very helpful in doing all these things.

Explains that revenue growth is driven by value addition and metallurgy of orders, clarifying how they achieve growth despite seemingly flat capacity utilization in volume terms.

Asked by Kamlesh Bagmar

Hydrogen Business Strategy and Capex Direct
So, sir, on this front, I would like to state that there are multiple type of options are there in the market in terms of setting up of new hydrogen plant. ... So, that can cost somewhere to an extent of INR 10 crores to INR 15 crores.

Details the company's phased entry into the hydrogen sector, focusing on demonstrating ultra-pure hydrogen production with a modest initial capex, and partnering for electrolyzer technology, outlining the long-term growth potential.

Asked by Ankit Soni

Long-term Revenue Guidance Direct
Yes Mam. [in response to 'does the company maintain its long-term guidance of threefold increase in revenue in next 3 to 5 years?']

Reaffirms the ambitious long-term target of a threefold increase in revenue within 3 to 5 years, signaling strong strategic intent.

Asked by Shivani Parekh

Working Capital Funding for Growth Partial
So, sir, as far as the current cash conversion cycle is concerned, we are presently looking to have the needs fulfilled from our borrowings only. But going forward, depending upon the order inflow and depending upon the revenue prospects, we may see some other options as well by having our Board meeting and going forward with the support of the consultants and other people.

Addresses how the company plans to fund its increasing working capital requirements for future growth, indicating a reliance on borrowings currently but openness to other options.

Asked by Kamlesh Bagmar

2 min read 6 chapters

Detailed narrative

Strong Q1 FY26 Financial Performance

DEE Development reported a robust Q1 FY26, with operating income increasing 21.0% year-on-year to INR 2,238 million. Operating EBITDA grew significantly by 44.7% to INR 359 million, leading to a 263 basis points expansion in margins to 16.0%. Profit after tax (PAT) saw a sharp rise of 314.3% to INR 132 million, with the PAT margin reaching 5.8%.

Capacity Expansion and Operational Progress

The company's Anjar facility expansion is ahead of schedule, with an additional 15,000 metric tons per annum capacity expected to be commissioned by end August 2025, two months earlier than planned. This will increase the facility's total capacity to 30,000 metric tons per annum. Furthermore, the high-wall seamless pipe plant is on track to commence commercial production by January 2026, enhancing backward integration and cost competitiveness.

Robust Order Book and Future Visibility

DEE Development maintains a strong order book of INR 12,267 million as of July 31, 2025, providing healthy visibility for upcoming quarters. The company expects to book around INR 1,200 crores in new orders for the full FY26, with approximately 45% anticipated from the Oil and Gas segment. Execution timelines for power segment orders are estimated between 6 to 12 months.

Strategic Entry into Green Hydrogen Sector

During the quarter, the company made a strategic entry into the green hydrogen sector through a partnership with International Clean-Tech Partner and the majority acquisition of Molsieve Designs Limited. This collaboration aims to develop and execute modular hydrogen production systems, leveraging proven hydrogen technologies and DEE's expertise in ultra-pure hydrogen purification (up to 99.9999% purity). An initial capex of INR 10-15 crores is planned for a small demonstration plant.

Biomass Power Plant Tariff Issue and Margin Impact

The company is awaiting a resolution on the downward revision of tariffs for its two biomass projects, with a decision expected by August end or early September. Management expressed high hopes for a favorable outcome due to the environmental nature of the issue. However, if the current rates prevail, the FY26 EBITDA margin guidance would be revised downwards from 19-20% to 16-18%, and revenue could be impacted by INR 50-100 crores.

Working Capital Management and Funding

The cash conversion cycle increased from 210 days in March 2025 to 247 days in June 2025, primarily due to a rise in inventory days from 217 to 243 days. This increase is attributed to raw material procurement in anticipation of executing the expanded order book. The company plans to fulfill its working capital needs through borrowings but may explore other options depending on future order inflow and revenue prospects.

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