Konstelec Engineers Limited — Q4 FY25 earnings call

Call held 13 Jun 2025

Management summary

Konstelec Engineers Limited reported a challenging FY25 with a decline in both revenue and PAT, primarily due to execution-related issues, project delays, and fixed cost absorption. However, the company is strategically expanding into new geographies like Saudi Arabia and new sectors like T&D, securing new orders and expecting a strong turnaround in FY26 with a focus on improving execution efficiency and profitability.

Highlights

  • Entry into the T&D sector with a ₹25 crore AVVNL contract, expected to be completed in 18 months.

  • Established a foreign joint venture entity in Saudi Arabia, with a bid pipeline of $5-10 million and target of $3-5 million work in FY26.

  • Domestic bid pipeline of approximately ₹1,000 crores is in process.

  • Expects gross margins to return to the normal stage (10-15%) in FY26.

  • Anticipates 20-30% revenue growth over last financial year in the next 3 years.

Concerns

  • Total Income for FY25 decreased to ₹195 crores from ₹217 crores in FY24.

  • PAT for FY25 significantly declined to ₹4.74 crores from ₹8.92 crores in FY24.

  • Margins in FY24-25 were impacted by execution-related challenges, including stalled/cancelled projects and approval delays, leading to higher fixed costs and unbilled revenue.

  • Debtors days increased marginally from 118 to 126 days due to slight recovery delays, primarily from Q4 billing.

  • A write-off of ₹47 lacs related to the Konstelec Hitech JV was recorded in FY25.

Key financials

4 periods

Headline

  • Market Cap (as of May 21, 2025)
    ₹127 Cr

H2 FY25

  • Revenue
    ₹109 Cr
  • ROE
    4.9%
  • ROI
    9.1%

FY24

  • Total Income
    ₹217 Cr
  • PAT
    ₹8.92 Cr

FY25

  • Total Income
    ₹195 Cr
    YoY -10.1%
  • PAT
    ₹4.74 Cr
    YoY -46.9%

What they filed

Q4 FY26: revenue down 13.1%, net profit up 0.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY24Q4 FY24Q2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue93 122 84 109 105 +13%106 −13%
EBITDA7 11 8 5 7 +0%13 +18%
Net profit3 6 3 1 2 −33%6 +0%
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

  • Revenue by Industry
    60% Refinery13.7% Steel25% Other Industries

Order book

high confidence

Total value

₹389 Cr

as of 2025-06-13 quantified

Inflow this quarter

₹35 Cr

Execution

12 to 18 months

Composition

  • Oil and Gas (segment)
  • Steel (segment)
  • Cement (segment)
  • Paints (segment)
  • Other Industries (segment)

Pipeline

qualified rfp

Domestic bid pipeline in process

Cancellations & deferrals

  • cancelled: Few projects stalled and subsequently cancelled due to land acquisition problems and client approval bottlenecks, leading to fixed cost absorption without revenue realization.
  • deferred: Projects under LSTK mode faced approval delays from clients, leading to a dip in expected revenue.
  • deferred: Unbilled revenue and extended timelines for projects nearing completion (80-85% completed) led to higher input costs and pressure on margins.
Management acknowledges execution-related challenges in FY25 were temporary and not demand-based, expecting a rebound in FY26 with new project wins and improved execution.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • New office furnishing at Mumbai office
    And this is a summary of a balance sheet, where you can see we have a significant investment as a capital work in progress for our new office, furnishing at the Mumbai office.
  • M&A Foreign Joint Venture in Saudi Arabia Joint venture · Announced

    Regional expansion efforts, unlocking market opportunities in Saudi Arabia's thriving EPC sector, leveraging transformative developments under Vision 2030.

    Not yet consolidated, will be in H1 FY26. Expecting $5-10 million worth of bid pipeline, targeting $3-5 million work in FY26.

    Our global footprint has expanded steadily, beginning with our establishment in Nigeria, and more recently the incorporation of a foreign joint venture entity in the kingdom of Saudi Arabia. This move marks a significant step in our regional expansion efforts, unlocking market opportunities in Saudi Arabia's thriving EPC sector.
  • M&A Pristine Limited (Cameroon) Acquisition · Closed

    Entry into Central Africa.

    In line with this, we recently secured a prestigious international order from pristine Limited in Cameroon, marking our entry into Central Africa.
  • Liquidity Liquidity disclosed No additional funding required for new projects (Saudi JV, Cameroon order), will be funded internally. Unbilled revenue of 117 crores is recognized as current assets. Debtors days increased from 118 to 126.
    Mr. Amish Shah: Well as of now, we will not envisage any additional funding requirement for this. It will be funded by internal only, as of now.

Guidance & targets

Profitability

  • Gross Margin Profitability · FY26 · High confidence 10-15%
    So, we expect in this financial year for the gross margin to go back to its normal stage.

    — Mr. Amish Shah

Revenue

  • Revenue Growth Revenue · FY26 · Medium confidence 25-30%
    Mr. Amish Shah: So, looking at the time that we are talking, I mean, we still have 9 to 10 months of this financial year to where there's lot of potential order booking and execution yet to be done. So definitely, there will be a revenue growth which can be expected.

    — Mr. Amish Shah

  • CAGR Revenue · next 3 years · Medium confidence 20-30%
    Mr. Amish Shah: So, we are looking at a growth of around 20-30% over last financial year.

    — Mr. Amish Shah

Order Inflow

  • Saudi JV Work Order Inflow · FY26 · High confidence 3-5 million
    -we are targeting 5 to 10 million worth of bid pipeline is there, and where we are targeting 3 to 5 million of work which would come to us in this financial year.

    — Mr. Amish Shah

Reporting

  • Quarterly Financial Reporting Reporting · FY27 onwards · High confidence Quarterly

    From Half-yearly today

    Mr. Amish Shah: We are working with our compliance team. We are working with them to get this information out however, we see that this information would be happening quarterly from next year onwards, next financial year onwards.

    — Mr. Amish Shah

Bidding Eligibility

  • T&D Single Project Value Bidding Eligibility · High confidence up to 75 crores
    Our eligibility is to bid up to 75 crores in transmission and distribution

    — Mr. Amish Shah

  • Refinery Single Project Value Bidding Eligibility · High confidence 150-200 crores
    Our eligibility remains up from 150 to 200 crores eligibility. Single project of 150 to 200 crore in refineries.

    — Mr. Amish Shah

Strategic Focus

  • Transmission Segment Strategic Focus · years to come · Medium confidence 220 KV and above
    If you want to walk up the ladder you should get into segment is 220 KV and above. So that's where our aim still is to get into a 220 KV segment in the years to come.

    — Mr. Amish Shah

What to watch in Q1 FY26

Gross Margin Recovery

FY26
Current Impacted in FY25
Target 10-15%

Why it matters

Crucial for overall profitability and turnaround as guided by management.

Mr. Amish Shah: So, we expect in this financial year for the gross margin to go back to its normal stage.

Risks & concerns

  • Execution-related challenges and project delays

    high

    Stalled/cancelled projects due to land acquisition/client approvals, LSTK project delays, and extended timelines for nearing-completion projects led to fixed cost absorption and unbilled revenue, impacting FY25 margins.

    Management acknowledged

  • Lack of escalation clauses in PSU contracts

    medium

    PSU contracts lacked escalation clauses or damage recovery mechanisms, forcing the company to absorb full financial impact of delays.

    Management acknowledged

  • Impact of election years on project funding and decisions

    medium

    Election years cause deferrals in project funding and decisions, leading to delays in revenue recognition and profitability.

    Management acknowledged

  • Competition in large refinery projects

    medium

    The company faces strong competition from larger players like L&T, Sterling Wilson, and Bajaj in bigger refinery projects.

    Analyst acknowledged

  • Forex fluctuation risk for international projects

    low

    New international projects in Nigeria and Saudi Arabia expose the company to forex risks, though management states hedging is accounted for in bids.

    Analyst acknowledged

Q&A highlights

8 direct
Forex Hedging for International Projects (Nigeria, Saudi Arabia) Direct
Mr. Jigar Shah: When we bid for these projects, we have taken care of the hedging part where that contingency has been accounted in the bid, and whatever revenue realization will happen, will happen through the medium of secure payments from LCs.

Addresses risk management strategy for new international ventures and potential currency fluctuations.

Asked by Mr. Miten Shah

Increase in Debtors Days Direct
CA Hardik Sarvaiya: The debtor days that increased marginally during this financial year is mainly due to the slight delay on the recovery part. I would not say more, but slight delay, and the more of the billing is in the quarter 4 part.

Explains the reason for the increase in working capital metric, attributing it to temporary Q4 billing and recovery delays.

Asked by Mr. Miten Shah

Financial Impact of Konstelec Hitech JV Write-off Direct
CA Hardik Sarvaiya: See Konstelec Hitech, a JV has been incorporated in 2011 for a specific project; where Konstelec is being one of the JV part and Hitech is another JV part. So that work has been completed in 2018-19 itself... now any recovery is not possible in JV, so we write off those investment in the books in the financial year. ... 47 Lacs

Clarifies a specific one-time financial adjustment and its quantum, indicating closure of an old JV issue.

Asked by Mr. Miten Shah

Consolidation of Nigeria Operations and Revenue Contribution Direct
CA Hardik Sarvaiya: We don't do any consolidation of the Nigeria part because Nigerian company is our associate enterprise, not a subsidiary or a joint venture. ... Mr. Amish Shah: They are giving business from there to Konstelec India, so we do not have any direct holding.

Provides clarity on the accounting treatment and operational relationship with the Nigerian entity, explaining why its revenue is not directly consolidated.

Asked by Mr. Miten Shah

Reasons for High Unbilled Revenue and Impact on Profitability Direct
Mr. Amish Shah: Yeah, that is the reason, Sir. [referring to previous explanation about projects nearing completion, extended timelines, and delayed closure leading to higher input costs and pressure on margins]

Connects the high unbilled revenue to the broader execution challenges and margin pressure experienced in FY25.

Asked by Mr. Rohan Gupta

Measures to Improve Project Execution Efficiency Direct
Mr. Jigar Shah: Already it has been discussed and highlighted to everyone. I would like to point out few things here for everyone to know that the mitigation measure that we are looking at so that this unexecuted portion is completed on time, which will help us in deliver the project. So, one of them is, you know, accelerated closure of these projects.

Details specific operational steps being taken by the new CEO to address execution bottlenecks and improve project delivery, crucial for future revenue and margin recovery.

Asked by Mr. Amit Sagar

Order Inflow from New Saudi Arabia JV Direct
Mr. Jigar Shah: Just to answer your that question, in Saudi Arabia, right now we are quoting for various projects... So next 3 quarters we'll be seeing orders coming in from them which are right now in the bidding process.

Provides timeline and expectation for order wins from the newly established Saudi JV, indicating early traction in a new strategic market.

Asked by Mr. Niket Shah

Transition to Quarterly Financial Reporting Direct
Mr. Amish Shah: We are working with our compliance team... we see that this information would be happening quarterly from next year onwards, next financial year onwards.

Indicates a future change in reporting frequency, which will provide investors with more timely updates on operational and financial performance.

Asked by Finportal (suggestion)

3 min read 6 chapters

Detailed narrative

FY25 Performance and Margin Pressures

Konstelec Engineers Limited reported a challenging FY25 with Total Income decreasing to ₹195 crores from ₹217 crores in FY24, representing a 10.14% decline. PAT also saw a significant reduction to ₹4.74 crores from ₹8.92 crores in the prior year, a 46.86% drop. Management attributed these margin pressures to execution-related challenges, including stalled or cancelled projects due to land acquisition issues and client approval bottlenecks, as well as projects under Lump Sum Turn Key (LSTK) mode facing approval delays. These factors led to the absorption of fixed costs without corresponding revenue realization and higher input costs, impacting overall profitability.

Strategic Expansion into New Geographies and Sectors

The company made a significant strategic entry into the T&D sector by securing a ₹25 crore contract from AVVNL for 11 KV mixed feeder segregation, with an expected completion timeline of 18 months. Konstelec also expanded its global footprint by establishing a foreign joint venture in Saudi Arabia, aiming to capitalize on the region's infrastructure, energy, and industrial growth under Vision 2030. A bid pipeline of $5-10 million is in process for the Saudi JV, targeting $3-5 million in work for FY26. Additionally, an international order was secured from Pristine Limited in Cameroon, marking the company's entry into Central Africa.

Order Book and Future Growth Outlook

The unexecuted portion of the order book stands at ₹389 crores as of the call date, with new orders worth ₹35 crores received in Q1 FY26. The domestic bid pipeline is approximately ₹1,000 crores. Management expects the unexecuted order book to be completed within 12-18 months. The company anticipates a strong turnaround in FY26, projecting revenue growth in the range of 25-30% for the year and a 20-30% CAGR over the next three years, driven by new project wins and improved execution.

Operational Efficiency and Project Execution Initiatives

To address the execution challenges faced in FY25, management is implementing several measures. These include accelerating the closure of ongoing projects, proactively flagging extended delays to clients to seek compensation, and introducing a new monitoring dashboard for better project delivery. A new team infusion is also underway to enhance project execution and improve revenue recognition. The company aims to restore gross margins to the 10-15% range in FY26 by focusing on operational efficiency and strategically pursuing larger projects with less competition.

Financial Reporting and Transparency Enhancements

In response to analyst suggestions for more frequent updates, management confirmed that Konstelec is working with its compliance team to transition from half-yearly to quarterly financial reporting. This change is expected to be implemented from FY27 onwards. This move is aimed at providing investors with more timely insights into the company's operational progress, order inflows, and financial performance, thereby enhancing transparency.

Capital Allocation and Liquidity Management

The company stated that no additional funding is currently required for its new international projects in Saudi Arabia and Cameroon, as these ventures will be funded internally. A one-time write-off of ₹47 lacs was recorded for the Konstelec Hitech JV in FY25, following the completion of tax assessments. Debtors days marginally increased from 118 to 126, primarily due to slight delays in recovery related to the high billing volume in Q4 FY25, indicating a focus on improving working capital management.

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