Vascon Engineers Limited

Vascon Engineers reported a consolidated total income of INR242 crores in Q1 FY26, marking a 22% year-on-year growth from INR198 crores in Q1 FY25. Profit after tax (PAT) significantly increased to INR22 crores compared to INR9 crores in the same period last year. However, overall growth was tempered to 13% YoY due to early monsoons and weather-related disruptions, which affected the pace of execution.

The EPC segment's revenue stood at INR204 crores in Q1 FY26, achieving a 6.25% YoY growth. The order book for EPC as of June 30, 2025, was robust at INR2,902 crores, providing 2 to 3 years of revenue visibility, which is 2.9 times the FY25 EPC revenue. Management aims for 20-25% annual growth in this segment, targeting INR1,200 crores in FY26 and INR1,450-1,500 crores in FY27. Despite a dip in EBIT margin to 8% in Q1 due to a project write-down and revenue reversal, the company expects it to recover to 9% PBT for the year.

In Q1 FY26, the real estate segment achieved new sales bookings of 40,500 square feet with a total value of INR55 crores and collections of INR65 crores. Current projects under active development have a total saleable area of 0.77 million square feet, with 0.61 million square feet attributable to Vascon. The near-term pipeline includes projects with an estimated top line of INR1,100 crores. The company projects real estate revenue of INR175-200 crores for FY26 and targets an EBITDA margin of 15-17%.

Consolidated EBITDA (excluding profit from investment sale) was INR16 crores in Q1 FY26, down from INR18 crores in Q1 FY25. EPC EBITDA margins remained consistent at 9-10%, though EBIT was 8% due to a INR4-5 crores revenue reversal from a Goa project under arbitration. Real estate EBITDA margins declined due to higher marketing costs incurred for new sales, resulting in a marginal loss of about 5% in EBIT for the segment. Finance costs increased by 17-18% YoY, attributed to an increase in gross debt for real estate projects despite a reduction in net debt.

The EPC order book of INR2,902 crores provides strong visibility, with 73% from government-backed projects. However, management noted slower order inflows in the last 6 months, losing three large projects (INR700-750 crores size) due to intense competition and adherence to a 15% gross profit guideline. The company is concerned about the slow inflows and may consider slightly reducing margin expectations (1-2%) to secure more orders. While keen to increase private sector exposure, past negative experiences make them cautious about stringent terms.

Vascon Engineers continues its asset monetization efforts, having sold non-core assets like GMP (raising ~INR100 crores) and its stake in Ascent Hotels Private Limited (generating INR40 crores cash and INR17 crores profit in Q1 FY26). The company has no significant non-core assets left to sell. For new real estate projects, INR80-100 crores capital is needed, with two of the four projects already having capital tied up. Funding will involve short-term financing and project-level equity infusion, avoiding excessive NBFC borrowing.

The company holds a 45% stake in 150 acres of discontinuous land in Thane. Two key developments are underway: a government corridor acquisition affecting 30-40 acres of the parcel, and the company's efforts to accumulate an additional 3-4 acres to create a continuous 20-acre road-touch parcel. Once consolidated, decisions will be made on whether to develop or sell the land, with the process expected to take some time.