KEC International Limited — Q3 FY25 earnings call

Call held 4 Feb 2025

Management summary

KEC International delivered a strong operational performance in Q3 FY25, characterized by significant margin expansion and record order inflows, primarily driven by the T&D segment. While revenue growth was slightly tempered by execution moderation in the water segment and labor shortages, the company achieved its highest EBITDA margin in three years. Management is pivoting towards high-margin T&D projects in India and the Middle East while actively managing debt and working capital challenges in the civil and railway businesses.

Highlights

  • Revenue reached ₹5,349 crores, representing 7% YoY growth

  • EBITDA margin expanded by 80bps to 7.0%, the highest in three years

  • YTD order inflows hit a record ₹22,000 crores, up 70% YoY

  • T&D segment revenue grew 17% YoY to ₹3,175 crores

  • Net debt including acceptances reduced by ₹471 crores YoY to ₹5,574 crores

  • PBT grew 32% YoY in Q3 and 65% for the nine-month period

  • Total order book plus L1 position stands at over ₹41,000 crores

  • Interest cost as a percentage of revenue improved to 3.2% from 3.3% YoY

Concerns

  • Labor Shortage

  • Delayed Payments in Water Segment

Key financials

2 periods

Headline

  • Revenue
    ₹5,349 Cr
    YoY +7%
  • EBITDA Margin
    7%
  • PBT
    ₹160.47 Cr
    YoY +32%
  • Net Debt
    ₹5,574 Cr
    YoY -7.8%
  • Interest Cost
    3.2%

YTD

  • Order Inflow
    ₹22,000 Cr
    YoY +70%

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
₹5,684 Cr Total
  • T&D ₹3,175 Cr 55.9%
  • Civil ₹1,100 Cr 19.4%
  • Transportation (Railways) ₹456 Cr 8.0%
  • Cables ₹406 Cr 7.1%
  • SAE ₹309 Cr 5.4%
  • Renewables ₹238 Cr 4.2%

Guidance & targets

Revenue

  • Annual Revenue Growth Revenue · FY25 · Medium confidence 12% to 14%

    Previously 15% → 12% to 14%

    So, we are still hoping to do 15%, but I do not think the way things are happening... I think we could end up anywhere between 12% to 14%.

    — Vimal Kejriwal, MD & CEO

Margin

  • EBITDA Margin Band Margin · FY26 · Medium confidence 9% to 10%
    I think on the lower end, I think we are reasonably more confident than on the upper end today... But I think we should be okay.

    — Vimal Kejriwal, MD & CEO

Debt

  • Net Debt Level Debt · March 2025 · Medium confidence ₹4,500 to ₹5,000 crores
    So, that means our debt level for March will be around Rs. 5,000 crores. But in a best case scenario, I think we can go down to Rs. 4,500 crores.

    — Rajeev Aggarwal, CFO

Other

  • Working Capital Days Other · March 2025 · High confidence 110 days

    Previously 110-115 days → 110 days

    Yes, I think we are fully quite confident to maintain about 110 days of target for the year end.

    — Vimal Kejriwal, MD & CEO

Profitability

  • Interest Cost as % of Revenue Profitability · FY25 · Medium confidence 2.9%
    Interest cost I think we are at 3.2 right now... it should end up below 3... so around 2.9 we should be able to achieve.

    — Vimal Kejriwal, MD & CEO

  • Sustainable PAT Margin Profitability · FY26 · Medium confidence 4% to 5%
    Sustainable PAT margin, my view, could be anything around 4% to 5%.

    — Vimal Kejriwal, MD & CEO

Risks & concerns

  • Labor Shortage

    high

    Ongoing labor shortage is impacting execution in Civil and T&D segments, with attrition becoming a serious industry-wide issue.

    Management acknowledged

  • Delayed Payments in Water Segment

    high

    Over ₹500 crores in receivables are stuck in water projects due to funding delays between central and state governments.

    Both acknowledged

  • Currency Depreciation

    medium

    Steep depreciation of the Brazilian Real (>20%) has negatively impacted SAE revenue when translated to USD/INR.

    Management acknowledged

Areas of evasion (2)

  • Specific breakdown of 'Other Expenses' was referred to a separate offline discussion with IR.
  • Exact breakup of the ₹1.5 lakh crore tender pipeline by segment was not provided on the call.

Q&A highlights

3 direct
Working Capital and Debt Expansion Direct
There was a considerable sum, I think we have more than Rs. 500 crores of receivables in water which should not have been there... on the railway side, we are expecting a lot more faster settlement of our disputes.

Explains why debt levels remained high despite the QIP proceeds, highlighting specific payment delays in the Water and Railway segments.

Asked by Parikshit Kandpal, HDFC Securities

Impact of US Tariffs on SAE and Mexico Direct
If there is a duty imposition of 25% in Mexico, I think the India plant will definitely get much more orders... supplies from India are more profitable than the supplies from Mexico.

Management clarifies that potential US tariffs on Mexico could actually benefit Indian manufacturing exports, mitigating geopolitical risks.

Asked by Renu Baid Pugalia, IIFL Securities

Railway Segment Execution and Kavach Direct
Kavach is a much better I think contract in terms of cash flows... most of these contracts are for six months to 12 months.

Highlights a shift in the railway business towards shorter-cycle, better-cash-flow projects like Kavach, moving away from problematic legacy EPC contracts.

Asked by Teena Virmani, Motilal Oswal

2 min read 5 chapters

Detailed narrative

T&D Segment Drives Record Order Inflows

The T&D business remains the primary growth engine, contributing 70% of the record ₹22,000 crore YTD order inflows. Revenue for the segment grew 17% YoY to ₹3,175 crores in Q3, supported by strong execution in India and the Middle East. Management highlighted a robust tender pipeline of ₹1.5 lakh crores, with significant opportunities emerging in Saudi Arabia, UAE, and India's HVDC market.

Margin Expansion and Profitability Recovery

KEC achieved a 7% EBITDA margin in Q3, an 80bps expansion YoY and the highest in three years. This was driven by the completion of legacy low-margin orders and a higher share of T&D in the revenue mix (59% in Q3). Management is confident in reaching a 9-10% EBITDA margin in FY26, supported by a 150-200bps expansion and reduced interest costs, which are targeted to fall to 2.9% of revenue.

Working Capital Challenges in Water and Railways

Despite strong operational performance, working capital remains pressured by delayed payments in the water segment and unresolved disputes in railways. Management identified over ₹500 crores of excess receivables in water projects. However, recent budget allocations for the Jal Jeevan Mission and ₹150 crores in collections in January 2025 provide visibility for debt reduction to ₹4,500-5,000 crores by March 2025.

Strategic Pivot in Transportation and Cables

The company rebranded its railway business as 'Transportation' to reflect a broader infrastructure focus, including new entries into the ropeways segment. In the cables business, KEC successfully transferred the unit to a subsidiary, KEC Asian Cables Limited, and is diversifying into high-margin products like E-Beam and Elastomeric cables, with production expected to commence in Q4 FY26.

Geopolitical Resilience and SAE Strategy

Addressing concerns over US tariffs, management noted that their Mexico operations primarily serve the local market, with only $20-30 million in exports to the US. They suggested that tariffs on Mexico could pivot more profitable orders to their Indian facilities. Meanwhile, SAE is witnessing a 3.5x growth in order inflows (₹2,100 crores YTD), although revenue was impacted by Brazilian currency depreciation.

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