Patel Engineering Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Patel Engineering reported a robust Q3 FY25, driven by strong project execution post-monsoon, achieving a 13.6% YoY revenue growth and a 14.5% increase in net profit. The company also made significant progress in non-core asset monetization, realizing ₹486 crores. With a healthy order book of ₹16,396 crores and an optimistic outlook for future order inflows, management guided for continued double-digit revenue growth in the coming fiscal years, emphasizing opportunities in hydropower and pumped storage projects.

Highlights

  • Q3 FY25 Consolidated Revenue of ₹1,205 crores, up 13.6% YoY.

  • Q3 FY25 Consolidated Net Profit of ₹80 crores, up 14.5% YoY.

  • Q3 FY25 Consolidated Operating EBITDA at ₹184 crores, an increase of 29.5% YoY, with margin at 15.3%.

  • 9M FY25 Consolidated Net Profit of ₹209.3 crores, up 48% YoY.

  • Total realization from non-core assets and awards for FY25 till date is ₹486 crores.

  • Order book stands at ₹16,396 crores as of December 31, 2024.

  • Targeting 10%-12% revenue growth for FY26 and over 15% for FY27.

  • Expected order inflow of ₹10,000-₹12,000 crores for the next year.

Key financials

3 periods

Headline

  • Consolidated Net Debt
    ₹1,422 Cr
  • Order Book
    ₹16,396 Cr

Q3 FY25

  • Consolidated Revenue
    ₹1,205 Cr
    YoY +13.6%
  • Consolidated Operating EBITDA
    ₹184 Cr
    YoY +29.5%
  • Consolidated EBITDA Margin
    15.3%
  • Consolidated PAT
    ₹80 Cr
    YoY +14.5%

9M FY25

  • Consolidated Revenue
    ₹3,482 Cr
    YoY +9%
  • Consolidated PAT
    ₹209.3 Cr
    YoY +48%

What they filed

Q1 FY27: revenue up 3.9%, net profit up 21.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,174 1,206 1,612 1,233 1,208 +3%1,239 +3%1,421 −12%1,281 +4%
EBITDA162 184 218 165 159 −2%145 −21%215 −1%180 +9%
Net profit73 82 38 81 73 +0%72 −12%44 +16%98 +21%
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

  • Hydropower (Standalone 9M FY25)
    43% Revenue Contribution
  • Irrigation (Standalone 9M FY25)
    21% Revenue Contribution
  • Tunneling (Standalone 9M FY25)
    9% Revenue Contribution
  • Roads (Standalone 9M FY25)
    25% Revenue Contribution
  • Others (Standalone 9M FY25)
    2% Revenue Contribution

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY25 · High confidence around 10%
    We are on target this year to grow around 10%

    — Kavita Shirvaikar, Managing Director

  • Revenue Growth Revenue · FY26 · High confidence 10%-12%
    we expect to continue the growth momentum in the next year as well where we may again grow at 10%-12%.

    — Kavita Shirvaikar, Managing Director

  • Revenue Growth Revenue · FY27 onwards · High confidence more than 15%
    27 onwards, we expect to more than 15% growth.

    — Kavita Shirvaikar, Managing Director

Order Inflow

  • Order Inflow Order Inflow · next year · High confidence Rs. 10,000-Rs. 12,000 crores
    So, see, we are targeting at least Rs. 10,000-Rs. 12,000 crores order inflow and accordingly similar inflow may happen in the next year as well.

    — Rahul Agarwal, Chief Financial Officer

  • Order Inflow Order Inflow · next one year (by December) · Medium confidence Rs. 10,000 crores
    what we are saying is next one year say by December, we are targeting Rs. 10,000 crores at least.

    — Rahul Agarwal, Chief Financial Officer

  • PSP projects from private sector Order Inflow · future · Medium confidence Rs. 3,000-Rs. 4,000 crores
    Eventually, we target to get out of Rs. 10,000, around Rs. 3,000-Rs. 4,000 crores from PSP also.

    — Kavita Shirvaikar, Managing Director

Asset Monetization

  • Non-core Asset Realization Asset Monetization · year-on-year · High confidence Rs. 200 crores
    cash flow wise we see that from non-core assets around Rs. 200 crores realization year-on-year.

    — Rahul Agarwal, Chief Financial Officer

Arbitration

  • Arbitration Awards in favor Arbitration · current · High confidence around Rs. 800 crores
    we have arbitration awards in our favor of around Rs. 800 crores.

    — Rahul Agarwal, Chief Financial Officer

  • Claims under arbitration Arbitration · current · High confidence around Rs. 3,000 odd crores
    there are under arbitration and various stages of claims of around Rs. 3,000 odd crores, all combined.

    — Rahul Agarwal, Chief Financial Officer

CAPEX

  • CAPEX requirement CAPEX · next two years · High confidence Rs. 150-Rs. 200 crores
    CAPEX for order inflow what we expect Rs. 150-Rs. 200 crores.

    — Rahul Agarwal, Chief Financial Officer

Profitability

  • EBITDA Margin Profitability · next year · High confidence around 13%-14%
    Yes, somewhere around that range only, 13%-14%.

    — Rahul Agarwal, Chief Financial Officer

Land Monetization

  • Total realization from land Land Monetization · next 3 years · Medium confidence Rs. 200-Rs. 300 crores
    if we have to look from land monetization, maybe Rs. 200-Rs. 300 crores.

    — Rahul Agarwal, Chief Financial Officer

Bidding

  • Success Ratio for Bids Bidding · general · High confidence around 20%
    Generally, are success ratio is around 20%, so we should get that.

    — Rahul Agarwal, Chief Financial Officer

Risks & concerns

  • Muted project awarding activity in the first three quarters of FY25

    medium

    Project awarding activity was muted, but management expects a strong flow of large-scale projects in the calendar year.

    Management acknowledged

  • Uncertainty in the timing of bid openings for new projects

    low

    Management noted that the timing of bid openings (before or after March) is difficult to predict, impacting current FY25 order inflow.

    Management acknowledged

  • Receivable cycle and payment delays from government entities

    low

    Management stated no major change in the receivable cycle and that central PSUs are cash-rich, so receivables are not an issue.

    Analyst downplayed

Q&A highlights

3 direct
Order Inflow for FY25 and the next year Direct
No No, I am not saying FY25. FY25, three quarters are already done. Only 1 to 1-1/2 months are left, so we are not sure when the bids open whether it will open before March or after March. That timing is little difficult to say, but what we are saying is next one year say by December, we are targeting Rs. 10,000 crores at least.

Clarifies the company's order inflow target timeline, distinguishing between the current fiscal year's low inflow and the more ambitious target for the next 12 months, highlighting timing uncertainties.

Asked by Narendra from RoboCapital

Arbitration claims and non-core asset monetization strategy Direct
See, we have arbitration awards in our favor of around Rs. 800 crores. And apart from that, there are under arbitration and various stages of claims of around Rs. 3,000 odd crores, all combined. So, we expect arbitration awards to start coming in, but cash flow wise we see that from non-core assets around Rs. 200 crores realization year-on-year.

Provides a clear picture of the potential value from arbitration claims and the expected annual cash flow from non-core asset monetization, crucial for debt reduction.

Asked by Narendra from RoboCapital

Litigation concerning the US subsidiary, Patel Engineering Direct
So, there is litigation, but we have already sold that entity so. ... We don't see any impact coming to us. ... So, it may be somewhere around $15-$20 million.

Addresses a potential concern regarding litigation, confirming that the company is insulated from any financial impact due to the prior sale of the subsidiary.

Asked by Abhishek, Individual Investor

2 min read 6 chapters

Detailed narrative

Strong Financial Performance in Q3 & 9M FY25

Patel Engineering delivered a robust performance in Q3 FY25, with consolidated revenue growing by 13.6% year-on-year to ₹1,205 crores. Net profit for the quarter increased by 14.5% to ₹80 crores, while operating EBITDA saw a significant 29.5% rise to ₹184 crores, improving the margin to 15.3% from 13.4% in Q3 FY24. For the nine months ended December 31, 2024, consolidated revenue from operations stood at ₹3,482 crores, up 9%, and net profit surged by 48% to ₹209.3 crores.

Optimistic Outlook for Revenue Growth and Order Inflow

The company is targeting a revenue growth of around 10% for FY25, with expectations to continue this momentum at 10%-12% in FY26 and accelerating to over 15% from FY27 onwards. As of December 31, 2024, the order book stands at a healthy ₹16,396 crores. Management anticipates a strong order inflow of at least ₹10,000-₹12,000 crores in the next year, with bids worth over ₹30,000 crores currently under evaluation.

Significant Progress in Asset Monetization and Debt Reduction

Patel Engineering has realized approximately ₹486 crores from non-core assets and awards in FY25 to date. This includes ₹36 crores from land monetization, ₹100 crores from the sale of a stake in its Michigan subsidiary, and ₹350 crores from arbitration awards. The company expects a year-on-year realization of ₹200 crores from non-core assets and arbitration awards. This strategy has significantly reduced consolidated debt by over ₹450 crores in FY25, bringing it down to ₹1,422 crores and improving the debt-equity ratio to 0.38 from 0.6 in March 2024.

Key Project Milestones Achieved

Several key projects achieved significant milestones during the quarter. The permanent integrated coy level building in Jammu and Kashmir was substantially completed in December 2024. At the Kwar Hydroelectric Project, dam concreting commenced. The Parnai project saw the completion of civil works for the barrage and bridge, and the Tunnel T-15 and Part Tunnel T-14 project completed its second stage concreting. Strong progress was also noted on the Tunnel T-7 rail line project, with overt lining completed for the first kilometer.

Strategic Focus on Hydropower, PSP, and Irrigation Sectors

The order book composition shows 64% from hydropower, 21% from irrigation, and 10% from tunneling. Management highlighted the Union Budget's focus on infrastructure, particularly the government's target of 500 GW non-fossil fuel energy by 2030, creating significant opportunities in hydro and pumped storage (PSP) sectors. The company aims to secure ₹3,000-₹4,000 crores from private sector PSP projects out of its ₹10,000 crore order inflow target, maintaining a traditional market share of around 25% in hydropower projects.

Working Capital and Capital Expenditure

The company's net working capital days, after adjusting for land claims, bank borrowings, and investments, stood at around 115 days. For capital expenditure, Patel Engineering expects to incur ₹150-₹200 crores over the next two years to support its order inflow and project execution. Management confirmed that the current employee levels are expected to be maintained for FY26, with potential increases in FY27 based on new project acquisitions.

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