Detailed Narrative
FY26 Performance Highlights and Q4 Challenges
KEC International achieved its highest ever revenues, profitability, and order intake in FY26. Full-year revenue grew 8% to INR23,506 crores, with operating PBT increasing 21% to INR848 crores, and PAT rising 18% to INR650 crores. PBT and PAT margins expanded by 40 bps and 30 bps respectively. However, Q4 FY26 was impacted by geopolitical tensions in the Middle East, leading to an estimated INR380-400 crores in deferred revenue, alongside labor shortages and supply chain disruptions.
Robust Order Book and Strategic Order Intake
The company's closing order book stands robust at INR36,267 crores, with an additional INR3,000 crores in L1 positions, providing 6-7 quarters of revenue visibility. FY26 saw an all-time high order intake of INR25,280 crores, with 70% contributed by the T&D business. KEC is strategically shifting towards fewer but larger EPC orders, increasing average order size from INR350 crores to over INR500 crores, aiming for tighter cost control and improved working capital.
Debt Reduction and Working Capital Improvement Targets
Net debt, including acceptances, was INR6,722 crores, marginally lower than December '25. The company targets an overall debt reduction of INR1,000 crores in FY27, with INR500 crores by Q2 and another INR500 crores by year-end, aiming for INR5,500 crores. Working capital days are projected to reduce from the current 135 days to 120 days by H1 FY27 and further to 110 days by year-end, supported by expected releases of Saudi retentions and improved water project collections.
Segmental Performance and Outlook
The T&D business delivered an outstanding performance with INR15,883 crores revenue, growing 24%. Civil business revenue was INR3,823 crores, with a target of 30-35% growth in FY27 and INR8,000 crores in order intake. Cables and Conductor business achieved record revenues of INR2,217 crores, up 23%, with profitability improving. Renewables and Oil & Gas segments also contributed, with Renewables foraying into wind energy and Oil & Gas entering the GCC region.
Middle East and Supply Chain Challenges
While physical execution in the Middle East remains unhindered, supply chain and logistics disruptions, including increased freight costs and lengthened lead times, continue to pose challenges. Management is engaging with clients for reimbursement under Force Majeure🌐 clauses. The region, however, continues to show strong tendering activity with a pipeline of INR35,000 crores, driven by investments in grid expansion and rebuilding initiatives.
Labor Issues and Mitigation Strategies
Labor availability in India, particularly in the Civil segment, remains a persistent issue, exacerbated by fuel-related constraints and elections. KEC is addressing this through initiatives like providing better facilities, seeking permanent labor, mechanization (e.g., automatic plastering machines, robots for brick-laying), and substantial skilling and training programs to optimize labor utilization and efficiency.
Strategic Shift in Civil and Railway Businesses
The Civil business is expected to see a significant turnaround from Q2 FY27, driven by a robust order book of over INR10,000 crores and expansion into new urban infrastructure segments. The railway business, however, faced unexpected challenges as project execution shifted from PSUs to divisional railways, leading to increased client complexity and difficulties in commercial terms, necessitating a re-evaluation of strategy for this segment.