MARKOLINES

Markolines Pavement Technologies Limited is a leading highway maintenance company, operating across three core verticals: highway maintenance, specialty maintenance services, and specialized construction services. The company was the first in the infra segment to be listed on BSE, providing services to infrastructure in India. Originating from road marking in 2002, Markolines has evolved into a comprehensive maintenance service provider, recognized as a preferred vendor by asset owners across India.

For FY25, Markolines reported a revenue of INR307 crores, a decrease from INR350 crores in the previous year, primarily due to the impact of a wet monsoon in H1. Despite the revenue drop, PAT grew significantly by 30.4% to INR22.56 crores from INR17.3 crores, and EPS increased by 11% year-on-year to INR10 from INR9. This improved profitability was driven by a strategic focus on the bottom line, enhanced operational efficiency, and a growing contribution from higher-margin specialized construction, resulting in a 381 basis point increase in net PAT margins.

The company currently holds a robust order book of INR432 crores, which includes recent wins of approximately INR50 crores in the last 1.5 months and an additional INR25 crores confirmed on the call date. This strong order book is further supported by a pipeline of over INR500 crores, indicating healthy future revenue visibility. Management noted that the order book is dynamic, with major maintenance orders continuously rotating and specialized construction projects contributing larger, longer-term contracts.

Markolines announced the merger of Markoline Infra with Markolines Pavement, a strategic move aimed at consolidating operations, optimizing size, and enhancing market representation. This merger, announced in April 2025, is projected to be completed within 6-9 months, ideally before the current financial year-end, subject to BSE and NCLT approvals. Concurrently, the company has applied for migration to the BSE Main Board, anticipating approval soon to further boost its visibility and access to capital markets.

The company's business currently comprises approximately 70% from specialized construction and 30% from highway maintenance. Management aims to achieve a 50-50 split between these two verticals within a year, driven by the higher profitability of specialized construction, which yields margins of around 18%. In contrast, major maintenance projects typically have thinner margins of about 12%. While specialized construction projects require more working capital, they offer better returns and larger contract sizes, aligning with the company's strategy for increased profitability.

Tunnelling is identified as a key growth vertical with significant potential, crucial for improving average road speeds across India. Markolines is currently engaged in two tunnelling projects: one in Maharashtra, valued at INR300-350 crores (with INR172-180 crores completed), and a long-term project in Jammu-Kashmir. The company aims to secure at least one more tunnelling project this year, with typical project sizes ranging from INR200-400 crores, which are substantially larger than traditional maintenance projects.

The company's receivable cycle temporarily increased to over 200 days, exceeding the normal range of 90-120 days, primarily due to significant execution in Q4 FY25. However, management reported a proactive approach to recovery, having already collected INR50-60 crores from outstanding receivables as of March in the subsequent one and a half months. The company expressed confidence in recovering all dues, including those currently in legal processes, indicating a focus on normalizing working capital.