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    Rites

    RITESGood
    Construction·12 Nov 2025
    Management Summary

    RITES delivered a satisfying Q2 FY26, characterized by record-high order books and a successful pivot back to export revenue. While YoY revenue growth was muted at 1.5% due to execution lags in the turnkey segment, sequential performance showed double-digit improvement. The company is successfully diversifying its consultancy and quality assurance (QA) verticals toward non-Indian Railway clients while maintaining strict margin discipline.

    Highlights

    8

    • Order book reached an all-time high of ₹9,090 crores, up from ₹8,790 crores in the previous quarter

    • Revenue grew 1.5% YoY, but saw a strong sequential recovery of 12% over Q1 FY26

    • Secured 150+ orders in Q2 totaling ₹850 crores, maintaining a strike rate of 1.6 orders per day

    • Export segment revived with a ₹160 crore order for 10 locomotives for South Africa and ₹60 crore revenue booking

    • Consultancy segment margins remained robust at ~30%, with 12% YoY and sequential revenue growth

    • Maintained a high dividend payout ratio of approximately 94% for the quarter

    • Turnkey order book stands at ₹4,300 crores, though revenue was down ₹90 crores YoY due to the young age of projects

    • Management targets reaching a ₹10,000 crore order book by the end of FY26

    What Changed1

    vs Q3 FY26

    Guidance items6 → 5 (-1)

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue—+1.5%YoY
    2. 02EBITDA Margin20%
    3. 03PAT Margin15%
    4. 04Order Book₹9,090 Cr+3.4%QoQ
    5. 05Order Inflow₹850 Cr

    Segment breakdown

    MarginOrder Book
    Consultancy30%₹2,930 Cr
    Turnkey2%₹4,300 Cr
    Export10%₹1,540 Cr
    Leasing30%—
    Heatmap· 2 shared metrics

    Guidance & targets

    4
    CategoryTargetPriority
    Other
    Order Book
    ₹10,000 crores
    		High
    Margin
    EBITDA Margin
    20%+
    		High
    Volume
    Export Order Inflow
    1 order per quarter
    		High
    Volume
    Locomotive Deliveries (Mozambique)
    10 locomotives
    		High

    Risks & concerns

    3
    RiskSeverity

    Execution Lag in Turnkey Projects

    New turnkey orders take 12-15 months to start generating significant revenue, leading to temporary top-line pressure. — Management acknowledged

    medium

    Competitive Pressure in Quality Assurance (QA)

    Margins in the QA vertical are becoming tougher due to a more competitive environment, though revenue is growing through diversification. — Management acknowledged

    medium

    Employee Superannuation

    A large wave of retirements (superannuation) is offsetting new inductions, though management expects this to plateau in 1.5 years. — Analyst acknowledged

    low

    Q&A highlights

    3

    “normally, consultancy margins remain in the range of about ~30% odd. And we would like to maintain that.”

    Confirms that the high-margin consultancy business is not seeing significant margin erosion despite a competitive environment.

    asked by Parimal Mithani

    2 min read5 chapters

    Detailed Narrative

    01

    Order Book Hits Historic Peak

    RITES achieved an all-time high order book of ₹9,090 crores in Q2 FY26, adding ₹300 crores net during the quarter. The company secured over 150 orders totaling ₹850 crores, maintaining a robust 'one-order-a-day' strike rate. Management is confident of reaching the ₹10,000 crore milestone by the end of the current fiscal year, driven by a strong pipeline in both domestic consultancy and international exports.

    02

    Export Segment Revival

    After a prolonged hiatus, the export segment has begun contributing to the top line again, with ₹60 crores in revenue recognized in Q2. The company dispatched two locomotives to Mozambique and secured a new ₹160 crore order for 10 locomotives for South Africa. Management aims to deliver 6-7 locomotives in FY26 and complete the Mozambique order by Q1 FY27, ensuring a steady stream of export revenue every quarter to avoid previous years' volatility.

    03

    Turnkey Execution Cycle and Revenue Lag

    The turnkey segment, which accounts for ₹4,300 crores of the order book, saw a ₹90 crore YoY revenue decline. Management explained that two-thirds of this order book is less than a year old, and revenue booking typically starts after 12-15 months of design and site preparation. A significant 'bump' in turnkey revenue is expected starting in Q4 FY26 and Q1 FY27 as these projects move into the ground-level execution phase.

    04

    Consultancy and QA Diversification

    The consultancy business remains the company's high-margin engine, maintaining ~30% margins and growing 12% YoY. Notably, the Quality Assurance (QA) vertical has successfully diversified, with over two-thirds of its revenue now coming from non-Indian Railway clients. This strategic shift has allowed RITES to maintain growth despite a more competitive bidding environment and tougher margins in traditional rail sectors.

    05

    Asset-Light Model and Shareholder Returns

    Management reiterated RITES' identity as a debt-free, low-capex consultancy firm rather than a construction company. This capital-efficient model supports a high dividend payout, which stood at 94% this quarter. The company continues to grow its leasing business, which now features a fleet of over 100 locomotives and maintains high margins of approximately 30%.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.