Engineers India Limited — Q3 FY26 earnings call

First of all, let me clear, EIL is having revenue from the implementation of the project, where revenues are always fluctuating in nature because it depends on the execution of project and the status of the projects. However, as we have already told, we are the highest order book of the more than INR15,000 crores in the EIL history. And definitely, with this order book, we will cross the figure of INR4,000 crores at the end of financial year.

Analyst questioned the historical volatility in revenue and margins, and management clarified the project-based nature of revenue while reiterating confidence in achieving FY26 revenue targets based on the record order book.

Asked by Manish Ostwal

In this 9 months, we have got a change order from our client. In one of the major project, we were keeping provision for the penalty for the delay or you can say liquidity damage, but we have completed the project within the extended time period given by the client. So client have issued the mechanical completion -- mechanical completion certificate without levy of any sort of penalty to EIL. So we have reversed the provision. That's why there is an impact of around INR226 crores on the turnover and INR213 crores on profit side. But it is a routine business. It is a part of a routine business to EIL. We continue to get change order in the projects.

Analyst sought clarification on the significant margin boost from a provision reversal, and management explained it as a routine accounting practice for projects completed within extended timelines, not a one-off event.

Asked by Kaushal Sharma

It will go up till 2029, because 3 to 4 years of cycle is there of execution. ... No, no. The execution has already started. Execution means Consultancy services have already started. We have already started working on this project. Engineering is on, on this project. So the typical -- I think project cycle is around 36 to 42 months execution cycle.

Analyst inquired about the execution timeline for the large Dangote order, and management confirmed that execution has already commenced and will span 3-4 years.

Asked by Mohit Kumar

What we understand from the published reports is this Guyana refinery is a very small refinery and that country is looking for the investment in this refinery from various investors. So that is the initial stages of discussion. We don't have much information on this as of this point of time. But this is one of the prospective refinery, but it's a smaller -- 30,000-odd, 25,000 BPSD refinery that is sufficient for their country's requirement. But this is the initial conceptual stage. The government of Guyana is yet to take decision on this, and we have yet to hear from the Guyana side.

Analyst asked about a potential Guyana refinery project, and management provided details on its small scale and early conceptual stage, indicating no firm commitment yet.

Asked by Mohit Kumar

So the approach is -- the aggressive approach has been adopted in both the segments. So we are working towards it. It's not only the Middle East. It would be Nigeria also, Africa specifically. In Nigeria, we have been very successful in this business. We'll be targeting more projects in that zone and in that continent as well as in the Middle East region, it is Saudi, Oman, Kuwait, in all those regions we are working, as well as in the South America also we are working. So it is the continuous effort to increase our business and presence in these segments and try to get more business.

Analyst questioned the focus on overseas markets, and management outlined an aggressive strategy across multiple regions, including the Middle East, Africa, and South America, emphasizing their experience and capabilities.

Asked by Krushi Parekh

No, no, no. Not at all, not at all. You see the figures. Government has still -- there are a lot of capacity expansions, and petchem expansions has been lined up by government. Government has already indicated that they are going to increase the refining capacity as well as the petchem capacity by 2030. So you have a lot of projects in pipeline. But these are the cyclical projects. When they get revised, it will be taken. Many projects are there on the anvil.

Analyst asked if the Indian petchem and refinery pipeline was exhausted, and management strongly refuted this, highlighting significant government-backed expansion plans and upcoming projects.

Asked by Palash Jain

Actually, we always try to keep our Consultancy business list in the range of 55% to 60%. But this is hovering 45% to 55%. So sometimes Consultancy business is 55% and sometimes LSTK business is 55%. This is the general range for the last 3 years. But we always keep to [inaudible 0:54:57] more segment profit is there. ... I would like to add that in the LSTK business, we don't go into the regular LSTK business. We only take the open book estimate, OB kind of projects, which are more secured, less risk and the returns are confirmed.

Analyst questioned the changing mix between Consultancy and Turnkey, and management clarified their target mix and their strategy of focusing on less risky 'open book estimate' (OBE) LSTK projects for Turnkey.

Asked by Manoj Sah

Now we have changed the business model. As my colleague said, we are already targeting open book estimate, which is cost plus contracts only. So whatever cost is incurred, client is reimbursing that. And upon the cost reimbursed, we are charging our fixed margin fixed markup. So our markup is intact, and there is no escalation from our in the cost because escalation in the cost is borne by the client. So we are on the safer side.

Analyst asked about protection against cost escalations in LSTK projects, and management explained their new business model of 'cost plus contracts' where clients reimburse costs, ensuring their fixed markup is protected.

Asked by Manoj Sah