Ircon International Limited — Q1 FY25 earnings call

Call held 9 Aug 2024

Management summary

Ircon faced a transitional quarter with revenue declining as major projects like the Dedicated Freight Corridor (DFC) and USBRL near completion. Despite this, the company maintained profitability through disciplined execution and higher other income from treasury products. Management is pivoting toward aggressive competitive bidding as nomination-based orders from Indian Railways have ceased, while also expanding into renewable energy with a 500MW solar project.

Highlights

  • PAT reported at ₹224 crores, representing a 20% YoY increase despite revenue headwinds.

  • Total revenue for Q1 FY25 stood at ₹2,385 crores, impacted by the completion of large projects and monsoon factors.

  • Order book as of June 30, 2024, stood at ₹26,000 crores, with a shift toward 51% competitive bidding orders.

  • Core EBITDA increased marginally to ₹259 crores from ₹251 crores in the previous year.

  • Earnings Per Share (EPS) rose to ₹2.38 from ₹1.99 in Q1 FY24.

  • Management expects order inflows of ₹10,000-12,000 crores for the full year FY25.

  • International order book remains low at 9.3% due to political turmoil in Bangladesh and Myanmar.

Concerns

  • Order Book Depletion

  • Transition to Competitive Bidding

Key financials

  1. Revenue ₹2,385 Cr
  2. PAT ₹224 Cr +20%YoY
  3. Core EBITDA ₹259 Cr +3.2%YoY
  4. EPS ₹2.38 +19.6%YoY
  5. Order Book ₹26,000 Cr

What they filed

Q1 FY27: revenue up 9.5%, net profit down 43.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,448 2,613 3,412 1,786 1,977 −19%2,119 −19%3,189 −7%1,956 +10%
EBITDA201 132 254 200 141 −30%158 +20%267 +5%192 −4%
Net profit206 86 212 164 137 −33%100 +16%191 −10%92 −44%
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.

Guidance & targets

Revenue

  • Annual Revenue Growth Revenue · FY25 · Medium confidence Similar level as FY24
    on an overall year basis -- FY '25 basis, we are fairly hopeful and comfortable that we should be able to do a similar level as FY '24 on an annual basis.

    — Ragini Advani, Director Finance

Other

  • Order Inflow Other · FY25 · Medium confidence ₹10,000-12,000 crores
    overall as we have been maintaining, we should be getting order book in the range of INR 10,000 crores to INR 12,000 crores for the full year.

    — Ragini Advani, Director Finance

Margin

  • PAT Margin Margin · Short-to-midterm · High confidence 7% to 7.5%
    we will have a PAT margin in the range of 7% to 7.5% on a short to-midterm perspective.

    — Ragini Advani, Director Finance

Capacity

  • Solar Capacity Completion Capacity · by September 2025 · High confidence 500-megawatt
    We hope to complete this entire 500-megawatt capacity by September 2025.

    — B. Mugunthan, ED Finance

Capex

  • Equity Investment Commitment Capex · FY25-FY26 · High confidence ₹1,100 crores
    we have a commitment of about INR 1,100 crores, which we still need to give in the form of equity loans, loans capacity to our SPVs. Out of that, I think 50% should be this year and the balance next year.

    — Ragini Advani, Director Finance

Risks & concerns

  • Order Book Depletion

    high

    Order book has fallen from a peak of ₹44,000-50,000 Cr to ₹26,000 Cr, reducing revenue visibility.

    Analyst acknowledged

  • Transition to Competitive Bidding

    high

    The cessation of nomination-based orders from Railways forces IRCON into high-intensity competition, potentially impacting future margins.

    Both acknowledged

  • Geopolitical Instability

    medium

    Political turmoil in Bangladesh and Myanmar has stalled international projects and funding from the Ministry of External Affairs (MEA).

    Management acknowledged

  • Execution Delays

    medium

    Land acquisition remains a critical bottleneck for infrastructure projects, alongside weather-related disruptions in hilly terrains.

    Management acknowledged

Areas of evasion (1)

  • Specific details on renegotiations of road sector projects were avoided due to sensitivity.

Q&A highlights

2 direct
Order Book Depletion and Margin Pressure Partial
the competition is increasing on a mid to long term perspective. And in order to get orders, we may have to go for some aggressive bidding. We immediately don't see the need for it.

Investors are concerned that the drop in order book from ₹50,000 Cr to ₹26,000 Cr will force IRCON to sacrifice margins to win new work.

Asked by Abhishek Maheshwari

International Footprint and Geopolitical Risks Direct
there has been some political turmoil in two of our projects, it is Myanmar as well as Bangladesh... international projects will be on a low side for some time.

Explains the stagnation in the international segment, which typically offers higher margins but is currently stalled by external factors.

Asked by Pratyush

Asset Monetization Progress Direct
four of our road projects are operational... we actually this needs to go through a full process and government approval that alternate mechanism may be required for this to happen.

Monetization of ₹2,200 Cr invested in assets is a key potential liquidity event that is currently awaiting DIPAM and Ministry approvals.

Asked by Vishal Periwal

2 min read 5 chapters

Detailed narrative

Revenue Headwinds and Project Lifecycle

IRCON reported a revenue of ₹2,385 crores in Q1 FY25, which management characterized as a weak quarter due to the cyclical nature of the infrastructure sector. The decline was primarily attributed to large-scale projects like the Dedicated Freight Corridor (DFC) and the USBRL project nearing completion. Additionally, heavy rainfall in hilly terrains during the April-June period diverted resources and slowed execution pace.

Strategic Pivot to Competitive Bidding

The company is navigating a major shift as the Indian government has largely stopped awarding railway projects on a nomination basis. Currently, 51% of the ₹26,000 crore order book is from competitive bidding, a figure expected to rise. Management acknowledged that while this increases competition, they aim to protect margins by targeting complex niche projects like tunnels and bridges where competition is lower.

Renewable Energy Expansion

IRCON is making significant progress on its 500MW Solar PV project, with 80% of land acquisition complete and 50MW already commissioned. The total project cost is estimated at ₹2,760 crores, funded through a mix of VGF (₹224 Cr), equity (₹416 Cr), and debt from Union Bank of India. The company has signed a PPA with Railways at ₹2.45 per unit and is seeking a revision to ₹2.57 due to GST changes.

Asset Monetization and Liquidity

The company has identified four operational road projects for strategic sale or monetization, representing an investment of roughly ₹2,200 crores. While board approval is in place, the process is currently awaiting clearance from the Ministry of Railways and DIPAM. Management expects this to be an 'open process' following Government of India guidelines once final approvals are secured.

International Market Stagnation

International operations, which constitute 9.3% of the order book, are facing significant hurdles due to political turmoil in Bangladesh and Myanmar. Funding from the Ministry of External Affairs (MEA) via grants or Lines of Credit (LoC) is currently under a 'wait and watch' status. Management does not expect an immediate turnaround in the international domain but remains hopeful for improvements by year-end.

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