KEC International Limited — Q2 FY25 earnings call

Call held 5 Nov 2024

Management summary

KEC International delivered a strong Q2 FY25 performance characterized by robust revenue growth in its core T&D business and a significant strengthening of its balance sheet via a ₹870 crore QIP. While margins saw modest expansion, execution was slightly hampered by labor shortages and heavy rains in key regions. Management is pivotally focused on debt reduction, aiming to bring net debt down to ₹4,000-4,500 crores by year-end while maintaining a 15% revenue growth target.

Highlights

  • Revenue reached ₹5,113 crores in Q2 FY25, a growth of 14% YoY, primarily led by the T&D segment.

  • Successfully completed a QIP raising ₹870 crores, which was oversubscribed 7x.

  • Net debt (including acceptances) reduced by ₹1,074 crores YoY to ₹5,265 crores as of September 30, 2024.

  • Order intake reached a record YTD high of ₹13,500 crores, up 50% YoY, with T&D accounting for 70%.

  • EBITDA margins expanded by 20bps YoY to 6.3% in Q2; management targets 9-10% exit margins for FY25.

  • PBT grew by 72% YoY in Q2 to ₹114 crores, while PAT reached ₹85 crores.

  • The Board approved the transfer of the Cable business to a subsidiary, KEC Asian Cables Limited, effective January 1, 2025.

  • Total order book plus L1 position stands at a record level of over ₹42,500 crores.

Key financials

2 periods

Headline

  • Revenue
    ₹5,113 Cr
    YoY +14%
  • EBITDA Margin
    6.3%
  • PAT
    ₹85 Cr
    YoY +53%
  • Net Debt
    ₹5,265 Cr
    YoY -16.9%
  • Interest Cost
    3.3%

YTD

  • Order Intake
    ₹13,500 Cr
    YoY +50%

What they filed

Q1 FY27: revenue down 3.3%, net profit down 98.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,484 4,758 6,048 4,030 4,949 +10%4,808 +1%5,260 −13%3,898 −3%
EBITDA230 281 352 197 308 +34%276 −2%273 −22%156 −21%
Net profit58 73 161 37 106 +82%39 −47%247 +53%1 −99%
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

Share of Revenue
₹5,019 Cr Total
  • T&D ₹2,831 Cr 56.4%
  • Civil ₹1,152 Cr 23.0%
  • Railways ₹503 Cr 10.0%
  • Cables ₹441 Cr 8.8%
  • Oil & Gas ₹92 Cr 1.8%

Guidance & targets

Revenue

  • Annual Revenue Growth Revenue · FY25 · High confidence 15%
    I think 15% will definitely happen because we have an order book of INR42,000 crores.

    — Vimal Kejriwal, MD & CEO

Margin

  • EBITDA Margin (Exit) Margin · Q4 FY25 · Medium confidence 9% to 10%
    we are confident of achieving the EBITDA margins of 9% to 10% by the exit of this financial year.

    — Vimal Kejriwal, MD & CEO

Debt

  • Net Debt with Acceptances Debt · March 2025 · High confidence ₹4,000 to ₹4,500 crores
    I think it should be somewhere around between INR4,000 crores to INR4,500 crores... by end of the year.

    — Rajeev Agarwal, CFO

Other

  • Working Capital Days Other · FY25 · High confidence 100 days

    Previously 130 days → 100 days

    So 100 days is what we are targeting by end of the year.

    — Vimal Kejriwal, MD & CEO

Profitability

  • Interest Cost as % of Sales Profitability · FY25 · High confidence 2.5%

    Previously 2.7-2.8% → 2.5%

    Now with the QIP having been done, I think we should be looking at somewhere around 2.5% interest cost for the full year.

    — Rajeev Agarwal, CFO

Volume

  • Order Inflow Target Volume · FY25 · High confidence ₹25,000 crores
    We are well positioned to exceed our order inflow guidance of INR25,000 crores for the year.

    — Vimal Kejriwal, MD & CEO

Risks & concerns

  • Labor Shortage

    medium

    Shortage of approximately 4,000 technicians/laborers remains, primarily impacting the Civil segment.

    Management acknowledged

  • Execution Delays due to Weather

    medium

    Heavy rainfalls in Gujarat and Rajasthan delayed high-margin T&D projects in Q2.

    Management acknowledged

  • Equipment Supply Chain Constraints

    medium

    Shortages in transformers, GIS, and conductors are easing but still lead to elongated delivery cycles.

    Both acknowledged

  • Stuck Receivables in Water Projects

    medium

    Payment delays from state agencies due to funding mismatches with the central government.

    Both acknowledged

Areas of evasion (1)

  • Vague on the exact win ratio for the ₹1.5 lakh crore pipeline, giving a broad 10-20% range.

Q&A highlights

3 direct
Margin expansion trajectory Direct
some of the newer projects in T&D, especially in Gujarat and Rajasthan, which are high margin, have got delayed because of severe rains... I think work on that has started, which is why we are saying that we'll have better margins in Q3, Q4.

Explains why current margins are lower than targets and provides a catalyst for H2 improvement.

Asked by Aditi, CD Equisearch

Railway business turnaround and legacy projects Direct
by March or so, we should be able to complete almost all of our old projects... all those [new] projects are at a decent margin, so execution of them is now starting.

Confirms the end of the drag from low-margin legacy railway projects by the end of the fiscal year.

Asked by Vivek Ramakrishnan, DSP Mutual Fund

Water project payment issues Direct
because of the budget, the central did not give money for 4-5 months... ultimately, NAL to JAL is a big government program... it is a matter of time that these differences will get resolved.

Identifies a specific working capital bottleneck in the water segment caused by state-central funding mismatches.

Asked by Saket Kapoor, Kapoor & Company

2 min read 5 chapters

Detailed narrative

T&D Segment Drives Growth and Margin Outlook

The T&D business remains KEC's primary growth engine, achieving 28% YoY revenue growth in Q2 FY25. Management highlighted a record order book and L1 position in T&D exceeding ₹26,000 crores. While Q2 margins were impacted by rain-related delays in high-margin projects in Gujarat and Rajasthan, these projects are now ramping up, supporting the company's target of 9-10% exit EBITDA margins by Q4 FY25.

Strategic De-leveraging via QIP and Working Capital Management

KEC successfully raised ₹870 crores through a QIP, which was utilized for debt repayment on the final day of the quarter. This, combined with improved collections (including ₹400 crores from Afghanistan), led to a ₹1,074 crore YoY reduction in net debt. Management targets further debt reduction to ₹4,000-4,500 crores by March 2025, supported by a goal to reduce working capital to 100 days.

Railway Business Transitioning to Quality Revenue

The Railway segment saw a 35% revenue decline as the company deliberately moved away from low-margin legacy EPC projects. Management expects to complete almost all old projects by March 2025. New orders of over ₹1,300 crores, including tunnel ventilation and Kavach safety systems, are being secured at better margins and improved payment terms, signaling a shift toward profitability over volume.

Cable Business Hive-off and Expansion

The Board has approved hiving off the Cable business into a separate subsidiary, KEC Asian Cables Limited, to drive focused growth. KEC is investing ₹90 crores in a new e-beam and elastomeric cable facility, expected to start production in Q4 FY26. Management targets Cable revenues of ₹2,800-2,900 crores by FY27 with improved EBITDA margins of 7.5% to 8%.

Civil Segment Selective Bidding Strategy

In the Civil business, KEC is being selective, focusing on projects with front-ended cash flows and shorter execution cycles (less than 24 months). The segment has an order book of over ₹10,000 crores but saw muted order intake recently as the company avoided large water projects with payment delays. Management expects annual order intake for Civil to be between ₹4,000 and ₹5,000 crores.

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