EMS — Q4 FY25 earnings call

Call held 30 May 2025

Management summary

EMS Limited reported a robust performance for FY25, with over 21% revenue growth and 20% PAT growth, driven by its core water and sewage treatment business. While Q4 PAT saw a marginal dip due to project mix, the company maintains a strong unexecuted order book of ₹2,236 crores and a healthy tendering pipeline. Management has guided for continued strong growth of 25-30% for FY26, supported by a large opportunity size in the sector. However, the call was overshadowed by repeated and intense questioning regarding the acquisition of Brij Bihari Company, with analysts seeking clarity on the transaction value and use of IPO proceeds, which management struggled to answer clearly.

Highlights

  • FY25 Consolidated Revenue grew 21.74% YoY to ₹965.83 crores.

  • FY25 Consolidated PAT grew 20.38% YoY to ₹183.78 crores.

  • Q4 FY25 Consolidated Revenue was ₹272.07 crores, a 10.6% YoY increase.

  • Q4 FY25 Consolidated PAT was ₹46.92 crores, a slight decline of 0.97% YoY due to project mix.

  • Current unexecuted order book stands strong at ₹2,236 crores.

  • Management issued robust revenue growth guidance of 25-30% for FY26.

  • Tendering pipeline is valued at ₹4,500 crores with an expected conversion rate of 10-15%.

  • Significant corporate governance concerns were raised by analysts regarding the Brij Bihari Company acquisition, with management providing unclear and evasive answers.

Concerns

  • Corporate Governance on Brij Bihari Acquisition

Key financials

3 periods

Headline

  • Order Book
    ₹2,236 Cr
  • Tendering Pipeline
    ₹4,500 Cr

Q4

  • Revenue (Cons.)
    ₹272.07 Cr
    YoY +10.6%
  • PAT (Cons.)
    ₹46.92 Cr
    YoY -0.97%

FY25

  • Revenue (Cons.)
    ₹965.83 Cr
    YoY +21.7%
  • PAT (Cons.)
    ₹183.78 Cr
    YoY +20.4%

What they filed

Q1 FY27: revenue down 34.3%, net profit down 60.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue233 245 270 239 173 −26%200 −18%120 −56%157 −34%
EBITDA69 71 65 54 37 −46%31 −56%18 −72%26 −52%
Net profit50 51 47 38 28 −44%19 −63%6 −87%15 −61%
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

  • Order Book Composition
    ₹1,500 Cr Water Business (Capital Works)₹400 Cr Other Businesses (Capital Works)₹331 Cr Operation & Maintenance

Guidance & targets

Revenue

  • Consolidated Revenue Growth Revenue · FY26 · High confidence 25% to 30%
    And the growth target for the year is 25% to 30% and we will achieve this easily. Thank you.

    — Management

Profitability

  • PAT Margin Profitability · Future · Medium confidence above 20%
    we are planning to maintain the bottom line above 20% that is our guideline for future.

    — Management

Order Book

  • New Order Inflow Order Book · next 1-2 quarters · Medium confidence ₹600-700 crores
    we can easily procure the order of Rs. 600 crores, Rs. 700 crores in this quarter or in coming quarter.

    — H.K Kansal

  • New Order Inflow (from Delhi projects) Order Book · next one year · Medium confidence ₹1500 crore
    Like Rs. 1500 crore kind of opportunity you are seeing for EMS in next one year right from these kind of projects. Is that understanding correct? ... Yes sir.

    — Management

Market Share

  • Success Rate (Delhi Tenders) Market Share · coming time · Medium confidence around 15%
    Anywhere around 15% I think would be a fair target.

    — Management

Risks & concerns

  • Corporate Governance on Brij Bihari Acquisition

    high

    Lack of clarity on acquisition cost, use of IPO funds, and rationale for the transaction, with management providing confusing and contradictory answers.

    Analyst deflected

  • Working Capital Management and Negative Free Cash Flow

    medium

    High debtor days (90-100) and negative free cash flow could strain liquidity during a high-growth phase.

    Analyst acknowledged

  • Margin Compression

    medium

    EBITDA margins have contracted from ~31% to ~26% due to increased competition, suggesting the era of super-normal margins may be over.

    Analyst acknowledged

  • Dependence on Government Projects

    medium

    The business model's reliance on government funding carries inherent risks of payment delays and policy shifts.

    Both acknowledged

Areas of evasion (1)

  • Details of the Brij Bihari Company acquisition, including total consideration and the specific use of IPO proceeds.

Q&A highlights

1 direct, 1 evasive
Brij Bihari Company Acquisition & Use of IPO Funds Evasive
Sir, just listen. ICRA was telling Rs. 7.5 crore paid advance out of this corporate purpose. Rest amount was used next year. You are looking at one and a half year back ICRA report. Now CRISIL report is there.

Raises significant corporate governance concerns due to management's inability to clearly explain a major acquisition funded by IPO proceeds, contradicting their own disclosures.

Asked by Pankaj Motwani

Margin Decline and Future Trajectory Partial
It is a type of business as I have already said in which sometimes we have to take work on some strict competition basis... So, the margins will remain around 25% to 30% and PAT, we will try to maintain 20% to 22% type of things...

Indicates a potential structural shift in the company's margin profile from exceptionally high levels to a more competitive, albeit still healthy, range.

Asked by Aman Soni

Working Capital and Cash Flow Direct
Barely positive, it is not enough to sustain your business. You have to keep raising capital otherwise dilute it... your free cash flow is negative. You need to pay attention on that at operating level you turn positive.

Highlights a key business risk; while growth is strong, its conversion to free cash flow is weak, posing a potential liquidity risk.

Asked by Viraj Mahadeva

2 min read 6 chapters

Detailed narrative

Robust FY25 Growth with Strong Guidance for FY26

EMS Limited delivered a strong performance in FY25, with consolidated revenue growing 21.74% to ₹965.83 crores and PAT increasing by 20.38% to ₹183.78 crores. For Q4 FY25, revenue was ₹272.07 crores, up 10.6% YoY, while PAT saw a marginal 1% dip to ₹46.92 crores due to a less favorable project mix. The company is confident about the future, guiding for 25-30% revenue growth in FY26, supported by an unexecuted order book of ₹2,236 crores and a tendering pipeline of ₹4,500 crores.

Healthy Order Book Dominated by Water Projects

The company's current unexecuted order book stands at ₹2,236 crores. This comprises ₹331 crores for operation and maintenance (O&M) and approximately ₹1,900 crores for capital works. The core water business accounts for the majority, with around ₹1,500 crores of the capital works orders. Management confirmed that the business mix will remain focused on water, contributing 70-80% of revenue going forward.

Margin Normalization Amidst Competitive Bidding

Analysts questioned the decline in margins from the 30-31% levels seen during the IPO to the current levels. Management explained this is a result of bidding for some projects more competitively to maintain market share and win orders. They stated that their in-house engineering design team and efficient vendor management still give them a 6-7% PAT margin advantage over peers. The company aims to maintain PAT margins above 20% in the future.

Corporate Governance Questions Cloud Brij Bihari Acquisition

A significant portion of the Q&A was dominated by intense questioning about the acquisition of Brij Bihari Company. Analysts from Equirus Securities and Finsight repeatedly sought clarity on the transaction value, the use of ₹27 crores in IPO proceeds earmarked for it, and the current ownership structure. Management's responses were evasive and contradictory, failing to reconcile figures from their own public disclosures. This lack of transparency has raised serious corporate governance red flags for investors.

Working Capital Remains a Key Monitorable

The company's business model, which is reliant on government contracts, results in a long payment cycle of 90-100 days. While operating cash flow showed a significant improvement, turning positive at ₹33 crores for the year compared to a negative ₹115 crores last year, analysts highlighted that free cash flow remains negative. This indicates that the strong revenue growth is consuming cash, a critical risk factor that requires close monitoring.

New Growth Driver: Delhi Ganga Rejuvenation Projects

Management identified a significant upcoming opportunity in Delhi related to the conservation and rejuvenation of the Ganga river. They estimate the total opportunity size in this area to be around ₹10,000 crores, primarily in sewerage and industrial effluent treatment projects. Tenders have already started to be issued, and EMS is targeting a 15% success rate, which could translate into ₹1,500 crores of new orders over the next year.

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