Vikran Engineering Q2 FY26 earnings call

What moved the numbers, as management explained it

• H1 FY26 typically contributes 25-30% of full year turnover due to seasonal and Government budgetary factors; fixed cost absorption like employee cost is weaker in H1
• H1 PAT more than doubled from ₹6.3 cr (H1 FY25) to ₹14.8 cr (H1 FY26) reflecting execution momentum and operating leverage
• Q2 revenue grew 10.7% YoY (after errata: was earlier stated as 13.6%) reflecting steady execution
• New ~₹1,997 cr solar orders not yet contributing to Q2 revenue; will start flowing in H2 FY26 per management
• Finance cost of ~10% on borrowings is a drag; A- rating upgrade expected to lower this going forward
• Order book mix shift to Solar (now ~50% from negligible) is expected to marginally impact margins by 1-2% per CFO

The numbers management led with

• Order book size: INR 4,000+ crore (doubled YoY)
• Bid pipeline: INR 3,000-4,000 crore already submitted
• Solar EPC order - Ellume: INR 355 crore (100 MW solar in Maharashtra)
• Solar EPC order - Carbonminus: INR 1,642 crore (single project)
• Private vs government order mix: 60% private / 40% government (corrected from 50:50 mid-call)
• IPO proceeds deployed for working capital: INR 541 crore

Guidance on this call

By business

Balance sheet, capex and funding

• IPO raised ₹541 cr; proceeds being deployed for working capital over ~1 year horizon
• India Ratings upgraded credit rating to A- (stable) post-listing; expected to lower finance cost
• Trade receivables ~₹613 cr; retention portion ~₹160-170 cr; ~10% of each bill is retention; no receivables beyond 1 year except retention
• H1 FY26 net cash outflow ~₹166 cr; paid trade payables early to avail cash discounts; positive operating cash flow expected from FY28
• Average borrowing rate ~10%; non-fund-based BG limit charges also booked in finance cost
• Contract assets (unbilled) ~₹400 cr; contract liabilities ~₹25-50 cr

The industry, as management sees it

Management views Indian infrastructure outlook as highly encouraging, supported by the 500 GW renewable energy target by 2030, RDSS, National Solar Mission, Swachh Bharat, high-speed rail corridor and continued electrification. The interplay between generation (Solar) and evacuation (765 kV/400 kV substations and transmission lines) is expected to drive strong EPC demand, with both government and private developer participation. The legacy bid cancellation by SECI/NTPC/NHPC/SJVN is seen as positive pipeline cleansing, not a demand headwind.

Risks management named

• Solar EPC segment typically runs 10-12% EBITDA margin vs other verticals
• Negative operating cash flow of ~INR 166 cr in H1 from accelerated trade-payable payments
• Receivables of INR 613 cr include ~INR 160-170 cr retention stuck till DLP
• Concentration risk: top 4 renewable agencies (SECI/NTPC/NHPC/SJVN) clearing legacy bids may temporarily slow tender flow
• Cost of borrowing at ~10% is high relative to upgraded A- rating
• Solar execution risk on INR 1,997 cr order book within 11-month timeline

Not answered directly

• Segment-wise margin disclosure (CFO deflected with 'we don't look at margins segment-wise, only project-wise')
• Specific FY26/FY27 revenue guidance figures (only directional commentary provided)

Asked for a number, answered without one

• Solar project EBITDA margin: the EBITDA margin is much better than what you are narrating now... this is the best in the industry — no specific number provided
• Segment-wise margin split for H1: we don't look at the margins specifically for a segment. We look at project-wise — declined to give split
• FY26/FY27 revenue and profitability numbers: we will also expand our revenues accordingly... we will increase our revenue targets — no specific number
• Solar project advance and payment terms: we are expecting some advance as well, but that will depend on what DG we are having availability and based on that we will decide — no specific number
• Solar revenue ballpark for FY26/FY27: next year definitely we can reach to the overall target where the working capital is invested and probably will be INR 2000 crore plus — overall turnover, not solar-specific

Every question, with its answer

1. 1. Solar EPC margins and execution

   Mihir Manohar, TRUST Mutual Fund

   Question. On the Solar EPC wins, industry expects 10-12% EBITDA margins and elongated payment terms. Can you clarify margins and payment terms for these two large orders, and how will you ensure execution of INR 2,000 cr of orders in 10-12 months?

   Answer, Rakesh Markhedkar, Promoter, Chairman & Managing Director. Management prepared for the project for 4-5 months with site surveys, due diligence, tie-ups with panel manufacturers and subcontractors. Land is government-provided under Maharashtra LIS scheme, modules are non-DCR, and pricing/margins are described as much better than industry. Margin profile is best-in-industry; expecting better profitability than 10-12% norm. CFO added that some advance is expected and payments tied to EPC milestone execution.

   Follow-up. Is this an unfinished/stuck project where we are now getting good margins, and what explains the margin premium? Also, are there any advance payments?

   Answer. Rakesh explained margins come from detailed costing, developer confidence, supplier tie-ups, and execution capability. Land is already available in Jalna, Dharashiv, Solapur; team already deployed. CFO confirmed some advance is expected depending on disbursement guarantee availability, with payments as per EPC milestone billing.

   Partly answered.

2. 2. Segment-wise revenue and margin split

   Aadarsh, Negen Capital

   Question. Can you provide segment-wise revenue and margin split for H1? Which segment is expected to contribute more going forward?

   Answer, Ashish Bahety, Chief Financial Officer. Three verticals: Power T&D, Water, Railway. H1 had more thrust on Power (~70-75% of execution/revenue), with balance ~25% from Water and Railway (Solar was new, only 1-1.5 months). Order book mix is now ~50% Solar, ~32% Power T&D, ~18% Water and Railway. Management does not look at segment margins - tracks project-wise margins; Railway/Infrastructure runs slightly lower but is small. Overall margins to remain in line with last 2-3 years.

   Follow-up. Any guidance for next 2 years on bidding pipeline and project inflow?

   Answer. Rakesh stated the internal discipline of focusing on profitable orders with better payment terms is the strategy. Solar focus is on private developers with better terms plus government clients like NTPC, NHPC; multiple bids in pipeline expecting better results in coming months.

   Partly answered.

3. 3. Margin trajectory and sustainability

   Divyansh Thakur, Finterest Capital

   Question. Margins were 17% in some earlier quarters, now down to 14%. Why have they fallen and what are sustainable margins going forward? What is H1 vs H2 split in percentage terms?

   Answer, Ashish Bahety, Chief Financial Officer. H1 typically contributes 25-30% of full-year turnover due to government budget cycles and monsoon; fixed costs like employee cost make H1 EBITDA margin appear lower. H2 turnover rises, fixed cost absorption improves, so H2 EBITDA margin looks better. Sustainable full-year margin expected to remain in the same range as last 3 years.

   Follow-up. You raised INR 541 cr for working capital. How much business can you support without further working capital raise?

   Answer. CFO: previously used INR 300-400 cr working capital for INR 900 cr of business. On similar lines, the IPO working capital can support up to ~INR 2,500 cr of turnover without further raise.

4. 4. Bid pipeline and voltage-wise order mix

   Naman Parmar, Niveshaay Investments

   Question. What is the order bid pipeline? Can you give a breakup of Power order book by voltage (765 kV vs 400 kV)? How long is the current INR 4,000 cr order book executable?

   Answer, Rakesh Markhedkar, Promoter, Chairman & Managing Director. Bid pipeline of INR 3,000-4,000 cr already bid; maintaining 20-22% win ratio. In T&D, quoting for 765 kV and 400 kV evacuations for mega solar plants with PowerGrid and private players. Roughly 50% of T&D order book is extra-high-voltage (765 kV) and 50% is sub-transmission 132 kV and lower. Current INR 4,000 cr order book executable in 18 months; new T&D orders 18-24 months. Clear visibility for this year and next year revenue.

   Follow-up. H1 saw negative cash flow of ~INR 166 cr, paying trade payables early. What was the reason and when do you get back to positive cash flow?

   Answer. CFO: working capital is now available and it has been a seller's market for some equipment, allowing cash discounts; this is why creditors dropped. Working capital deployment takes about a year to complete; positive cash flows expected from FY28 onwards.

5. 5. Trade receivables and retention

   Anuj Jain, Globe Capital

   Question. Trade receivables were INR 634 cr at March 2025 versus H1 top line of INR 340 cr and receivables INR 613 cr - this looks high. What is the retention portion? What receivable cycle are you comfortable with?

   Answer, Ashish Bahety, Chief Financial Officer. Receivables include retention portion; receivables came down by ~INR 20 cr from March 2025. Retention is ~10% of each RA bill against work done, not separately a debtor line. Government clients pay RA bills in 2-3 months; some delays are linked to activity completion and retention. No stuck receivables beyond one year except retention. Receivables typically rise by March (Q4 peak) and drop by December.

   Follow-up. Finance cost was INR 33 cr in H1 on INR 300 cr short-term borrowing - looks high for an A- rated company. What is the rate of interest?

   Answer. CFO: A- rating just received, impact will flow through. Finance cost includes non-fund-based bank guarantee charges which do not show in debt. Rate of interest from banking arrangement is ~10%. Bank guarantees required for project bids/utilisation are driving the cost.

6. 6. Retention receivables and segment margin impact

   Nishant Sharma, Nuvama PCG

   Question. What is the retention portion in receivables and within what timeframe is it recovered? Will margin profile change as Solar share rises?

   Answer, Ashish Bahety, Chief Financial Officer. Retention portion is ~INR 160-170 cr; recovery linked to project completion and DLP of 6-12 months. With 10-year track record of on-time or early completion, retention has historically come back on time. On margins, Solar industry trend is lower margins, but Vikran has chosen better-margin projects; impact may be 1-2% on portfolio but no major change. Margins expected to remain in line with past 3 years.

   Follow-up. Given the focus on profitable orders, will the bidding pipeline be smaller and win ratio higher?

   Answer. Rakesh: yes, bidding is highly selective - geography, competition, and project type are evaluated carefully. Win ratio consistently 20-22%. In Solar, they bid selectively on a few projects with detailed engineering and surveys to enter with less competition. Same approach for Northeast, J&K, and Industrial Corridor projects.

7. 7. Solar execution plan and contract assets

   Shrey Gandhi, CR Kothari and Sons

   Question. How many sites are in the recent Solar EPC order? How will you execute it? What is the unbilled revenue in H1? Any ballpark revenue from Solar this year/next?

   Answer, Rakesh Markhedkar, Promoter, Chairman & Managing Director. Three Maharashtra districts: Jalna, Dharashiv, Solapur. Site sizes range from 5 MW to 91 MW. Land government-provided and already acquired; ROW issues absent. Will deploy 35-40 project teams in parallel. Already deployed teams at site. Milestone-based revenue recognition tied to material supply, civil/erection work. CFO added: contract assets (unbilled) ~INR 400 cr; contract liabilities ~INR 25-50 cr. With overall working capital, can reach INR 2,000+ cr revenue next year.

8. 8. Private vs government order mix

   Pawan Kumar, Shade Capital

   Question. Are you looking at orders only from government sector? What is your bidding pipeline colour? What proportion of current order book is non-government?

   Answer, Rakesh Markhedkar, Promoter, Chairman & Managing Director. No, now targeting private customers in Power and Solar plus industrial development projects. Industrial Corridor-type 40-50 acre projects where multi-vertical competence can be deployed are being targeted. Current order book split is approximately 50-50 government vs private (corrected at end of call to 60% private, 40% government).

9. 9. Government renewable policy impact

   Pranjal Mukhija, GrowthSphere Ventures

   Question. Government has directed SECI, NTPC, NHPC, SJVN to close legacy renewable bids and cancel LoAs for projects without feasible PPA. Does this impact Vikran? What are sector implications?

   Answer, Rakesh Markhedkar, Promoter, Chairman & Managing Director. Government wants to clear pipeline of non-workable projects, sign PPAs or retender by end-November. Vikran's recent Solar wins are not part of these legacy lots; not affected. New DCR modules, government initiatives, and green energy momentum are driving fresh opportunity. India is far behind China in capacity utilisation - significant runway. ISTS also has no challenge; both central and state government plus private developers focused on evacuation infrastructure for 300+ GW renewable target.

   Follow-up. Do we foresee any challenges on the Interstate Transmission (ISTS) side given backlog?

   Answer. Rakesh: No, government focused on transmission, sub-transmission and revamping existing network. ~300 GW renewable generation requires evacuation; entire government machinery, private developers, business houses engaged. No challenge practically - this is the need of the hour and everyone must act.

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In their words