Tara Chand InfraLogistic Solutions Q1 FY27 earnings call

Tara Chand InfraLogistic Solutions Limited reported Q1 FY27 revenue of INR67.6 crores, an 11% year-on-year increase, or 14% when adjusted for a INR1.86 crore write-off. EBITDA stood at INR21 crores, resulting in a margin of 30.7%, significantly below the company's medium-term target band of 37-38%. Profit after tax was INR1.7 crores, or INR3.3 crores adjusted for prior period items. Despite the lower reported profit, cash profit was INR17.6 crores, a modest 6% decline year-on-year, indicating strong underlying cash generation.

The Specialized Services business experienced a substantial margin decline, almost halving from its normal 18% to about 10% in Q1. This was primarily attributed to a specific, one-off^📎 client-led change in the scope of a project carried over from the previous quarter. This change resulted in idle equipment and manpower, additional demobilization costs, and no corresponding revenue, impacting the segment's profitability. Management is in active discussions with the client for a settlement, expected to conclude in the subsequent quarter, and has implemented phased mobilization for new projects to mitigate similar risks.

The Warehousing & Transportation segment also faced a challenging quarter, with revenue dropping to INR18.7 crores from INR29.5 crores in the prior year. EBITDA for this segment plummeted to 1% from 16% in the same period last year. This decline was largely due to subdued steel movement, influenced by higher fuel costs stemming from geopolitical reasons and a decrease in steel prices. The company handled 1.63 million tonnes of steel in the quarter, and expects recovery in this segment through the year, with main activity picking up in Q3 and Q4.

Despite the operational headwinds, Tara Chand maintained financial discipline. The company deployed INR42.8 crores in capital expenditure during Q1, primarily for two large 900-tonne crawler cranes and other higher capacity cranes. This investment increased the gross block to INR601 crores. Concurrently, net debt to equity improved to 0.87x from 0.92x, remaining well within the company's 1x ceiling. The full-year capex plan remains unchanged at INR80-100 crores, with most expected to be completed by November.

Management anticipates Q2 FY27 to remain seasonally soft, with margins below the medium-term target. However, they expect a strong recovery in H2 FY27 as affected equipment is redeployed, project disputes are settled, and new capex begins generating revenue. The company maintains its FY27 revenue growth guidance of 20-25% and a medium-term EBITDA margin target of 37-38%. The executable order book stands at INR205 crores as of July, and the company aims to reduce receivable days to below 80 by year-end. The fleet's focus has shifted, with renewable energy and power now contributing 57% of rental revenue, up from 24% last year.