Fabtech Technologies Limited — Q4 FY26 earnings call

I would say firstly, in terms of balancing the order book, while we were exposed or concentrated in the Middle East as of last year, there is a lot of positive balance that has come in the order pipeline from Africa and other markets which have not been impacted with the war currently in the Middle East. With the scenario in the Middle East, be it Saudi Arabia, be it the projects ongoing in Iraq or in UAE, there has been a turbulent environment where our focus has been more on ensuring that we stand by our clients with the ongoing deliveries and installation commissioning ongoing.

Analysts probed on the impact of geopolitical tensions on current and future profitability, and management detailed mitigation strategies including diversification and localization.

Asked by Darshil Zaveri

So, something that we've learned throughout this journey of becoming public, Darshil, is that our investors want stable quarter to quarter understanding and growth in the market. Right? We have been reiterating that we are a very lumpy business, that our quarter four surpass all the quarters and that we are not a quarter-to-quarter story. QSQT, right? But we have realized that the order conversion timelines are more variable on the client side, dependent on civil infrastructure readiness. That is what impacts our side of the business. Now, the internal strategy has become, to control these timelines by controlling the pre-engineered building structures as well and bidding for these projects.

Analyst questioned the speed of converting the 200M USD pipeline and the company's policy on announcing new wins, leading to management explaining the lumpy nature of business and efforts to control timelines.

Asked by Darshil Zaveri

Just as an example, if we are finalizing the projects in 2025 at X dollar or X INR and this increases by, let's say, 50 to 60%, then we have a variation clause where we sit down with our clients and we explain the entire situation to them. Now, obviously, all of our clients have been in business for decades. They themselves understand that while they are also importing materials, freight prices have gone up absurdly.

Analyst inquired about the company's ability to pass on increased costs, and management clarified the use of variation clauses and client understanding in long-term relationships.

Asked by Ankit Gupta

So just to qualitatively answer that, it is split between UAE, Saudi Arabia, Iraq, Kenya, other parts of Africa as well as Northern Africa, which is Algeria, Morocco, some parts of Egypt, some parts of Ethiopia. So, there is a split of the exposure across the region. While we will give you the exact numbers in a minute, I hope that answers the geography issue.

Analyst sought a quantitative breakdown of the order book by geography, but management provided a qualitative list of regions without specific numbers.

Asked by Ankit Gupta

Number one, I would not say delay, it's an active call. The due diligence process is ongoing with our JBN acquisition in the West that has been under discussion. There are mitigations that were taking place while we're bidding for projects in this region. The acquisition has yet not gone through because we want to be sure of where we're deploying the money. Number 2, the talent acquisition is ongoing, right?

Analyst questioned the delay in utilizing IPO funds, and management explained the strategic reasons behind the phased deployment, including M&A due diligence and talent acquisition.

Asked by Bhavika

So RMC as a percentage of sales would be between 44 to 46 percent if you look at the material cost. Sorry, contribution margin, around 55 percent. The contribution margin will be between around 45 percent is what we target. ... Just to personally answer your last question, we never build up inventory. That's why the lean model always helps in executing the project. It is based on JIT system, just in time manufacturing, and it is based on procurement as per design and engineering VOQs. So, we don't face a challenge in terms of inventory stocking. So, the margins don't shrink on that aspect.

Analyst asked about the RMC percentage and potential margin impact from inventory, to which management provided targets and clarified their JIT inventory model.

Asked by Aniket Madhavani

India's side of the business, which is India focused cleanrooms, resides with Fabtech Technologies Cleanrooms Limited. So, we don't do projects in India personally as Fabtech Technologies Limited. So, I will not be able to address the order pipeline of FTCL. At the same time, I would love to say they're doing well. We know it, but we will not be able to address it right now. ... Just to one highlight when we talk about this one project, the reason that it has been undertaken as Fabtech Technologies Limited is because it is a vaccine product development facility in Mumbai. It's called GCMC. And that is helping us with a lot of international project referrals and influence. And it was a very strategic decision to execute this project in India.

Analyst inquired about the Indian order book, leading to clarification on the company's structure for domestic projects and the strategic rationale for a specific project in India.

Asked by Bhavika

You had given an FY27 revenue targets of like 530 to 600 crores, but right now you are seeing this 25% on the top line growth, so that is not, you know, matching the numbers you had given. And also, are you on track for your FY28 PAT guidance of 12 to 14% given we have just shrunk in this current year? ... Aman Anavkar: We're on track, I would say.

Analyst challenged the consistency of FY27 revenue guidance and sought confirmation on FY28 PAT targets, which management affirmed.

Asked by Rahil