Karamtara Engineering Q1 FY27 earnings call

What moved the numbers, as management explained it

• Volume growth drove revenue: Q1 FY27 volumes were ~135,000 tons and revenue rose 72% YoY to ₹1,381 cr; international mix at 66% and renewables at 82% amplified scale.
• Elevated freight and US Section 232 tariff of ~₹250 cr in Q1 FY27 were passed through to customers but depressed reported EBITDA margin to ~11% versus 13% in Q1 FY26.
• Ramp-up of multiple new facilities meant fixed overheads for management teams and employees were already in P&L while assets were not yet fully utilised, weighing on margins. (one-off)
• Revenue mix shifted further toward international (66%) and renewable products (82%) as US demand absorbed the higher tariff without order impact.

Guidance on this call

By business

Balance sheet, capex and funding

• Capex: ₹900 cr incurred last year; significant capex continuing this year for new Vaisar, Bhuj, Vaisar stand-part and Saudi facilities.; capex
• Working capital cycle cut from 67 days to 43 days, with management targeting 36 days in Q1 FY27.; working_capital
• Interest cost down to 2.6% of revenue, expected to fall further as IPO proceeds are deployed.; debt
• FY26 cash conversion ~₹675 cr on EBITDA of ~₹500 cr; management aims to keep services/EPC work at 3-5% of revenue to avoid stretching the cycle.; cash
• Borrowings are partly term loans tied to capex; interest cost on these rose with capex deployment but is being offset by working capital efficiency.; debt

The industry, as management sees it

Management sees sustained multi-year demand out of India's renewable build-out (Green Energy Corridor Phase III outlay of ₹1.86 lakh cr, 2035 RE targets), with solar, wind and transmission all benefiting in parallel. Saudi Arabia cited as a long-cycle opportunity driven by 2030 and 2034 World Cup-related capex and a strong domestic renewables plan; Europe flagged as an emerging growth geography. US is characterised by structurally tight domestic supply (6-8 month lead times) supporting continued import flows despite the 50% Section 232 tariff.

Risks management named

• Elevated global shipping and freight costs pressuring near-term EBITDA margins
• Higher fuel/oil costs in Middle East and US inflating domestic delivery costs
• Term loan interest cost elevated due to ongoing capex; expected to ease post-IPO deployment
• Ramp-up risk on new facilities (Bhat, Vaisar, Saudi) — 12-18 months to optimum utilization
• Working capital sensitivity to ramp-up of new transmission and Saudi capacity

Not answered directly

• Precise FY27 EBITDA margin guidance
• FY28 revenue growth number
• Transmission revenue mix percentage target over 2-3 years
• TBC/PEB margin profile quantification

Asked for a number, answered without one

• FY27 EBITDA margin target: Management declined to give a percentage, saying Q1 margin was ~11% and that margin would improve as assets are sweated and fixed costs are spread.
• FY28 revenue growth: Management declined to give a number for FY28, citing capex ramps at Saudi, PV and transmission but said growth would continue.
• TBC / data-center PEB margin profile: Management declined to quantify, saying only that the margin profile should be similar to other businesses and 'really, really good'.
• Saudi / UAE revenue contribution: Management gave only the timeline — trials in December, galvanizing by Feb-March, 12-18 months to hit good numbers — and no revenue numbers.

Every question, with its answer

1. 1. Business mix and transmission outlook

   Avinav Dalal, ICICI Securities Limited10:46

   Question. Congratulated on the strong post-listing result. Asked about the medium-term strategy on the revenue mix, whether management plans to increase the share of transmission given the strong bidding outlook and favourable pricing, and on supply-demand dynamics for lattice towers.

   Answer, Rajiv Singh, Joint Managing Director. Acknowledged that transmission has been the traditional business and is set to be a key growth driver. Highlighted the large new facility at Vaisar that has just started manufacturing and fungible capacity in wind that can also build transmission towers. Flagged the very large transmission line tower investment in Saudi Arabia and reiterated strong demand visibility, saying they will mirror the five-year solar scaling journey in transmission.

   Follow-up. Asked for colour on how Q2 has panned out and any guidance for FY27 on revenue growth and EBITDA margins.

   Answer. Rajiv Singh: Q2 has been good and the company is on track with the 60-65% FY27 growth aspiration, with the historical pattern being 42% of revenue in H1 and 58-60% in H2. Sunil Rastogi added that Q1 EBITDA margin of ~11% should improve as revenue scales and assets/utilisation are spread.

2. 2. Contract structure and commodity pass-through

   Jimith Mehta, Unidentified (Institutional Investor)10:46

   Question. Asked how contracts with customers are structured — whether they are primarily cost plus, fixed price, or a combination.

   Answer, Rajiv Singh, Joint Managing Director. Explained that domestic solar contracts typically run 4-5 months with raw material booked upfront and 90-day mill credit covering steel and zinc; international contracts run 8-9 months and raw material is imported. Said pass-through is structured for nearly all contracts, with PVC clauses in some long-dated domestic transmission and select international contracts. Shipping on FOB basis is also pass-through for larger overseas transmission contracts.

3. 3. US tariff structure and competitive landscape

   Mihir Manohar, Cross Mutual Fund25:14

   Question. Sought understanding on US business given tariff uncertainty, particularly cost competitiveness for exporting to the US versus other geographies, and where EPC contractors are sourcing from. Asked for two-three key competitors and indicative cost differentials.

   Answer, Rajiv Singh, Joint Managing Director. Explained that steel and aluminium products fall under Section 232 at 50% globally, and incremental tariff discussions do not stack on top of this 50% baseline. Said the 0-25% and 25-50% tariff increases were fully absorbed by US buyers — a full pass-through — and 'change of law' clauses ensured even in-transit material was paid in full. On competition, said there is no major competing Indian supply at present and US-domestic supply is limited and 30-40% more expensive than Indian sourcing, with 6-8 month lead times.

4. 4. Margin levers and capacity ramp-up

   Gaurav Pugh, Marwadi Asset26:51

   Question. Asked about margin levers going forward — whether expansion is driven by gross margin/mix or operating leverage. Then asked when new transmission/lattice tower capacity in India and Saudi Arabia will reach optimum utilisation. Finally asked whether achieving ₹7,000+ cr revenue requires >75% utilisation or remains in the 55-60% historical range.

   Answer, Rajiv Singh, Joint Managing Director. Said Q1 11% margin was depressed by elevated shipping and trucking costs in Europe and the Middle East and that new contracts will embed these costs. Margin expansion will come from sweating newly added assets where fixed costs are already absorbed; local manufacturing in Saudi will deliver better margin percentage. Said Saudi trials in Dec, galvanizing by Feb-Mar with full ramp in 12-18 months; India Bhat facility should hit peak in 6-9 months. Rejected 75% utilisation requirement, explaining the historical 55-60% drag was due to facilities coming online late and that scaling is mirrored in revenue growth across quarters.

   Partly answered.

5. 5. Capital allocation and working capital

   Suresh Kela, Singularity AMC31:10

   Question. Asked about capital allocation beyond solar and transmission, how the company evaluates the size, scale, gross margins and EBITDA margins possible in newer segments such as PV.

   Answer, Rajiv Singh, Joint Managing Director. Walked through how the company redeployed capital — shutting down a Nagpur rolling mill to add fastener capacity — to chase maximum margin businesses. Said generation side covers solar, wind and power transmission with PV and Saudi as extensions. Transmission is in a 'second innings' mirroring solar's scale-up. Mentioned working capital cycle improvement and deferred to Mr Sudharsan for numbers. Sudharsan added that working capital cycle came down from 67 to 43 days, expected at 36 days this quarter; interest cost at 2.6% of revenue, expected to fall further once IPO proceeds are deployed against term loans.

6. 6. Freight costs and transmission mix

   Subhendu Basu, 3X Capital36:09

   Question. Asked whether delivery/shipping costs remain elevated recently and whether the EBITDA margin pressure from freight will sustain through H1/H2 FY27. Also asked what revenue mix is targeted from the transmission segment over the next 2-3 years.

   Answer, Rajiv Singh, Joint Managing Director. Confirmed global shipping and delivery costs have gone up due to fuel cost inflation even in oil-producing countries. On margins, said Q2 is already done and margins are 'far better' despite elevated oil/freight costs and revenue has grown, indicating decent EBITDA margin improvement. On transmission mix, said they would like to mirror the solar scaling trajectory and achieve similar scale in transmission and TBC businesses over time, without committing to a specific percentage.

   Not answered directly.

7. 7. TBC/PEB margin profile and FY28 guidance

   Arvind Arora, A2 Capital51:13

   Question. Asked how the TBC/PEB facility is differentiated versus existing players, what the margin profile could be, and whether FY27/FY28 guidance can be repeated. Also asked whether the 60-65% growth comes from renewable or non-renewable segments.

   Answer, Rajiv Singh, Joint Managing Director. Differentiated TBC on raw material procurement scale, global qualifications (Nordics etc.), and existing client pull from data centre demand. Did not quantify TBC margin but said it should be similar to other businesses. Reiterated 60-65% FY27 growth aspiration with seasonality skew, declined to give FY28 number but indicated strong growth across solar, wind, transmission and factories. On growth split, said all four segments are growing rapidly.

   Not answered directly.

8. 8. Return ratios, product vs EPC model, US expansion

   Sanjay Parekh, Sohum Asset Managers Private Limited53:11

   Question. Asked whether the strong return ratios (ROCE 25-27%) would continue as the company scales, and whether the product-company (not EPC) character would be preserved. Also asked about future US manufacturing setup plans.

   Answer, Rajiv Singh, Joint Managing Director. Said they hope the trajectory continues and that products are manufactured for India and global markets, including local content in countries like Saudi where exports are restricted. Confirmed focus on product company DNA — services would be only 3-5% of revenue to protect margins. Working capital cycle at 36 days with FY26 cash conversion of ₹675 cr on ~₹500 cr EBITDA cited as evidence. On US setup, said they will evaluate wherever real value is visible and have demonstrated ability to scale assets quickly (solar transmission as proof points).

9. 9. Tariff revenue quantum by quarter

   Pankaj Shah, Indus Jal Nivesh55:07

   Question. Asked how much Q1 revenue came from US tariffs and how this compares to the previous quarter and the same quarter previous year on a like-for-like basis.

   Answer, Sudharsan. Said the tariff rate has remained at 50% across all quarters, so the percentage pass-through has been stable. Q1 FY27 tariff pass-through in revenue was ~₹250 cr; Q1 FY26 was ~₹113 cr; prior quarter was ~₹196 cr. Tariff and freight are part of other expenses and are passed through to customers, hence no margin impact.

10. 10. Sales volume, Saudi outlook, other expenses

    Sidham Jain, IIFL Securities Limited55:56

    Question. Asked for sales in million tons for the current quarter. Then asked about UAE (Saudi) contribution this fiscal and next and any slowdown risk from ongoing regional conflicts. Finally asked why other expenses jumped to ~₹500 cr.

    Answer, Rajiv Singh, Joint Managing Director. Said total Q1 sales were ~135,000 tons across measurable products. On Saudi, trials expected around December with commercial production by year-end or early next year. Saw no slowdown risk from regional conflict; cited Saudi 2030 and 2034 World Cup as drivers of sustained investment alongside North Africa and UAE supply opportunities. Explained that other expenses were elevated due to ~₹250 cr US tariff plus elevated freight costs, with all other cost lines well controlled.

11. 11. No active question

    Rahul Shah, Axel Pro

    Question. Indicated his question had already been answered in the prior discussion.

    Answer, Moderator, Moderator. Thanked and moved to closing comments.

Topic by topic, in the order it was spoken

In their words