RITES Q1 FY27 earnings call

RITES Limited reported a strong start to FY27 with a 9-10% YoY growth in revenue and approximately 8% YoY growth in its bottom line for Q1. The company expressed confidence in its roadmap, driven by the high order book from the previous year, which has begun generating revenue. Management aims for substantial YoY growth for the entire fiscal year, emphasizing sequential execution improvement in coming quarters to achieve this target. Consolidated EBITDA margins were maintained at 22% and PAT margins at 17% for Q1, consistent with Q4 FY26.

The total order book stands at INR 9,450 crores as of Q1 FY27, with new orders totaling INR 670 crores secured this quarter, reflecting a robust strike rate of 1.4 orders per day. The company targets reaching an INR 10,000 crore order book. The export and foreign consultancy order book is INR 2,100 crores, of which INR 1,775 crores is for rolling stock. The Bangladesh order for 200 coaches accounts for approximately INR 900 crores, with revenue recognition for the first rake expected in Q2 FY27. Deliveries for Mozambique locomotives are targeted to commence by the end of FY27, with more clarity expected by Q2 FY27.

Despite maintaining consolidated EBITDA margins at 22% and PAT margins at 17%, management acknowledged ongoing margin pressures. These pressures stem from approximately 70% of fresh orders being secured through competitive bidding, increased travel costs inherent to a consultancy business, and the anticipated impact of an impending pay revision. The company's strategy involves prioritizing higher-margin orders and ensuring that consolidated EBITDA margins do not fall below 20% and PAT margins do not fall below 15% on an annual basis.

Turnkey projects constitute about 50% of the current order book and contributed 30-33% of the revenue in Q1. These projects typically yield lower margins, ranging from 1.5-2%, compared to pure consultancy. Management clarified that while Turnkey orders are taken to maintain client relationships and offer single-entity solutions, RITES primarily identifies as a consultancy company. The balance of the order book, approximately INR 4,700 crores, comprises project consultancy and exporter rolling stock consultancy, which has grown substantially.

RITES saw a net increase of about 450 employees in Q1, growing its strength from 2,675 to 3,125. This strategic increase in bench strength was undertaken to support the execution of new orders and anticipated pipeline. Employee costs increased by approximately INR 10 crores YoY in Q1. For FY28, the company projects an 8-10% increase in employee costs, factoring in both continued hiring and the impending pay revision.

REMCL, a subsidiary, continued its strong performance, contributing a PAT of approximately INR 22 crores in Q1 FY27, with a dividend payout ratio of 91% to RITES, amounting to INR 10 crores. RITES highlighted REMCL's focus on diversifying into international renewable consultancy and domestic renewable consultancy. Initial headway has been made in Q1, and management expects these new ventures to contribute substantially to REMCL's top and bottom line by the end of FY27.