DEE Development Engineers Limited — Q3 FY25 earnings call

Call held 17 Feb 2025

Management summary

DEE Development faced a challenging Q3 FY25 with a 22.7% YoY decline in operating income and a net loss of INR13 crores, primarily due to project execution delays and underutilization of facilities. However, the company successfully commissioned Anjar facility 2 expansion and remains on track for further capacity additions and a new pipe plant. Management provided optimistic FY26 guidance of INR1,100 crores revenue with 19-20% EBITDA margins, expecting a strong recovery and improved profitability.

Highlights

  • Anjar facility 2 expansion of 9,000 metric tons successfully commissioned in January 2025, increasing total capacity to 15,000 metric tons.

  • On track to further increase capacity by an additional 15,000 metric tons by October 2025, reaching 30,000 metric tons.

  • High-wall seamless thickness pipe plant is progressing as planned, with commercial production scheduled for January 2026.

  • Provided FY26 revenue guidance of INR1,100 crores with an EBITDA margin target of 19% to 20%.

  • Strong order pipeline of INR1,700 crores for FY26, including INR600-700 crores from the power sector.

Concerns

  • Operating income declined by 22.7% year-on-year to INR162 crores in Q3 FY25.

  • Company incurred a net loss of INR13 crores in Q3 FY25 due to project delays and associated costs.

  • Significant delays in key projects, including a INR139 crores PDH plant order, a INR51 crores international order, and INR60 crores from the Assam plant, impacted Q3 revenue recognition.

  • Full year FY25 EBITDA margin is expected to be lower, in the range of 15-16%.

Key financials

2 periods

Headline

  • Operating Income
    ₹162 Cr
    YoY -22.7%
  • Net Loss
    ₹13 Cr

9M FY25

  • Operating Income
    ₹541 Cr
    YoY -0.8%

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.

Order book

high confidence

Total value

₹1,400 Cr

as of 2024-12-31 quantified

Execution

Normally, our cycle is between 6 months to 18 months for the order book to get executed.

Composition

Mix 2 client types
  • Oil and Gas (Dow + Numaligarh) ₹700 Cr 82.4%
  • Power Sector (Export) ₹150 Cr 17.6%

Share of order book by client type, derived from disclosed amounts

Pipeline

deal pipeline tcv

Pipeline for FY26

Cancellations & deferrals

  • deferred: INR139 crores order for PDH plant at Palwal delayed by 6 months due to drawing and material approvals, revenue shifted to next financial year.
  • deferred: International order valued at over INR51 crores delayed from Q3 FY25 to Q4 FY25 due to late revision in material specifications by the customer.
  • deferred: INR60 crores worth of orders from Assam plant delayed primarily due to late delivery of drawings from the client and stabilization issues.
Management attributes delays to unique project complexities and external factors, stating current order book is routine and future delays are not expected.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • Anjar facility 2 expansion (second phase) ₹55 Cr
    • High-wall seamless thickness pipe plant ₹90 Cr
    No, we will be spending around INR55 crores because some part of the expansion has already been shown under the capital work in progress.
  • Debt Gross ₹390 Cr · Net ₹425 Cr
    No, let me -- let me clarify -- let me clarify. The net debt is INR425 crores. That's -- it includes the INR21 crores of lease liability.

Guidance & targets

Revenue

  • Top line revenue Revenue · FY26 · High confidence INR1,100 crores
    We aim to achieve a top line of around INR1,100 crores in FY '26

    — Sameer Agarwal

  • Revenue generation Revenue · Q4 FY25 · High confidence INR260 crores to INR270 crores
    So around INR260 crores to INR270 crores of revenue we shall be generating.

    — Sameer Agarwal

  • Revenue increase Revenue · 3 to 5 years · Medium confidence threefold increase
    Yes, we stand by that. [Referring to a guidance of 3 to 5 years – threefold increase in our revenue]

    — Krishan Lalit Bansal

Profitability

  • EBITDA margin Profitability · FY26 · High confidence 19% to 20%
    with an EBITDA margin in the range of 19% to 20%.

    — Sameer Agarwal

  • EBITDA margin Profitability · Q4 FY25 · High confidence 15% to 16%
    So EBITDA margin shall be in the range of overall on an average basis in the range of 15%, 16%.

    — Sameer Agarwal

  • EBITDA margin Profitability · Full Year FY25 · High confidence 15% to 16%
    Yes. [Referring to 15% to 16% EBITDA margin on a full year basis]

    — Sameer Agarwal

Capacity

  • Total capacity Capacity · October 2025 · High confidence 30,000 metric tons
    We are on track to increase capacity by an additional 15,000 metric ton per annum by October 2025, taking total capacity to 30,000 metric tons.

    — Krishan Lalit Bansal

  • High-wall seamless thickness pipe plant commercial production Capacity · January 2026 · High confidence January 2026
    We remain on schedule to commence commercial production by January 2026.

    — Krishan Lalit Bansal

Order Book

  • Execution capability (both facilities operational) Order Book · by 31st of December '25 · High confidence INR2,500 crores worth of orders
    when both the facilities are operational, which we are saying that by 1st of January or by let us say, 31st of December '25, capability shall be that we shall be able to execute almost around INR2,500 crores worth of orders.

    — Krishan Lalit Bansal

What to watch in Q4 FY25

Q4 FY25 Revenue Realization

Next quarter
Current INR162 crores (Q3 FY25 Operating Income)
Target INR260-270 crores

Why it matters

To verify the company's ability to recover from Q3 delays and achieve its stated revenue target for the quarter.

So around INR260 crores to INR270 crores of revenue we shall be generating.

Risks & concerns

  • Project Execution Delays

    high

    Delays in Palwal PDH plant (INR139 crores), international order (INR51 crores), Assam plant (INR60 crores), and Anjar facility 2 commissioning impacted Q3 revenue and profitability. Management attributed this to the unique, pioneering nature of the PDH project and external factors like drawing delays and material unavailability, stating these issues are now resolved.

    Management acknowledged

  • Profitability Impact

    high

    The company incurred a net loss of INR13 crores in Q3 FY25 due to higher material handling costs, increased working capital (inventory buildup), reduced gross profit from lower revenue, and negative operating leverage from fixed overheads, all stemming from project delays. Management expects recovery and improved margins from Q1 FY26.

    Management acknowledged

  • Guidance Transparency

    medium

    An analyst raised concerns about the lack of timely guidance and the unexpected Q3 results. Management apologized for the Q3 event and committed to providing more timely and comprehensive information to stakeholders in the future.

    Analyst acknowledged

Q&A highlights

6 direct
FY26 Revenue Guidance Discrepancy Direct
No, sir. This is the guidance which we are giving first time. And this is INR1,100 crores after Q3. And as in Q2 earnings call time, we declared that we shall be giving the guidance for FY '26. So this is the guidance.

Clarified the official FY26 revenue guidance, correcting an analyst's reference to a higher figure from a media interview.

Asked by Saumil Shah

Net Debt Figure Clarification Direct
No, let me -- let me clarify -- let me clarify. The net debt is INR425 crores. That's -- it includes the INR21 crores of lease liability.

Provided a clear, consolidated net debt figure, resolving confusion from earlier partial disclosures.

Asked by Kamlesh Jain

Recurrence of Q3 Issues Direct
I will emphatically said no.

Management strongly assured investors that the specific project delays and resulting Q3 loss were an isolated incident due to a unique project and will not recur.

Asked by Subesh Singh

BHEL Thermal Order Inquiries Direct
Sir, we are expecting a the formal inquiry in the month of April. So that's what we have been discussing. I mean, very, very closely with all those people, who are to do this job. And now they have promised that the inquiry will be available with us in April.

Provided a clear timeline for potential new thermal power sector orders, indicating future growth drivers.

Asked by Shrikesh

Anjar Facility 2 Revenue Booking Direct
And again, I would like to tell you that for Anjar plant, the full revenue for the year is already booked from just one customer. So that revenue is assured that -- since we have an order from Dow for almost around INR350 crores on job work basis and another INR100 crores have been added for the material portion. So that shall get executed from that plant.

Confirmed significant revenue visibility for the newly commissioned Anjar plant from existing orders, providing confidence in its contribution.

Asked by Aashna

Margin Improvement Timeline Direct
Right from Q1. Yes. Right from Q1. [Referring to margins starting to materially improve]

Provided a specific timeline for when investors can expect to see material margin improvement, aligning with the start of the next fiscal year.

Asked by Aashna

Order Intake for 9M FY25 Partial
by and large orders, which we have booked during the fiscal '25 are from oil and gas sector. ... Dow order and Numaligarh order, which is basically cumulative to INR700 crores of order book. Besides that, we have other miscellaneous orders and around INR150-odd crores are from power sector where for the export orders.

After repeated questioning, management provided a breakdown of significant order intake for 9M FY25, clarifying the source of recent wins.

Asked by Vaibhav Shah

2 min read 5 chapters

Detailed narrative

Challenging Q3 FY25 Performance and Project Delays

DEE Development reported a challenging Q3 FY25, with operating income declining 22.7% year-on-year to INR162 crores, and the company incurring a net loss of INR13 crores. This performance was primarily due to significant project execution delays, including a INR139 crores PDH plant order at Palwal, a INR51 crores international order, and INR60 crores from the Assam plant. These delays were attributed to late drawing approvals, material specification revisions, and initial stabilization issues at the Assam plant, leading to underutilization of facilities and increased working capital.

Capacity Expansion and Strategic Investments

Despite the Q3 setbacks, the company successfully commissioned the 9,000 metric ton expansion of Anjar facility 2 in January 2025, increasing total capacity to 15,000 metric tons. Further capacity expansion of an additional 15,000 metric tons is planned by October 2025, aiming for a total capacity of 30,000 metric tons. Additionally, the high-wall seamless thickness pipe plant, a backward integration for power sector jobs, is progressing as planned and is scheduled to commence commercial production by January 2026, with an investment of INR90 crores.

FY26 Outlook and Margin Improvement

Management provided an optimistic outlook for FY26, targeting a top-line revenue of INR1,100 crores with an EBITDA margin in the range of 19% to 20%. This margin expansion is expected to be driven by operational leverage and the full commissioning of Anjar facility 2, which will primarily serve the oil and gas sector. For Q4 FY25, the company anticipates generating INR260-270 crores in revenue with an EBITDA margin of 15-16%, indicating a recovery from the Q3 performance.

Robust Order Book and Pipeline

As of December 31, 2024, the company's order book stood at INR1,400 crores, with approximately INR1,150 crores expected to be executed in FY26. The 9M FY25 order intake included significant orders such as INR700 crores from Dow and Numaligarh, and INR150 crores from export power orders. Furthermore, the company has a strong pipeline of INR1,700 crores for FY26, with INR600-700 crores expected from the power sector and the remainder from the oil and gas sector, ensuring future revenue visibility.

Debt Position and Management Assurance

The company reported a gross debt of INR390 crores and a net debt of INR425 crores, which includes INR21 crores of lease liability. Management emphasized that the Q3 issues were specific to a pioneering project and do not represent a recurring risk, emphatically stating that such delays will not be repeated. They also committed to improving transparency and providing timely information to stakeholders, reinforcing confidence in their long-term growth strategy.

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