KEC International Ltd (NSE: KEC) Q3 2025 Earnings Call dated Feb. 04, 2025
Corporate Participants:
Vimal Kejriwal — Managing Director and Chief Executive Officer
Rajeev Agarwal — Chief Financial Officer
Analysts:
Parikshit Kandpal — Analyst
Renu Baid Pugalia — Analyst
Vaibhav Shah — Analyst
Samarth Khandelwal — Analyst
Bhoomika Nair — Analyst
Teena Virmani — Analyst
Shrinidhi Karlekar — Analyst
Ashwani Sharma — Analyst
Unidentified Participant
Sagar Gandhi — Analyst
Saket Kapoor — Analyst
Abhijeet Singh — Analyst
Uttam Kumar Srimal — Analyst
Harshal Mehta — Analyst
Presentation:
Operator
Ladies and gentlemen, good morning, and welcome to the KEC International Limited Q3 FY ’25 Earnings Conference Call.
Today on the call, we have with us Mr Vimal, Managing Director and CEO; and Mr Rajiv Agarwal, Chief Financial Officer.
As a reminder, all participant lines will remain in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchstone telephone. Please note that this conference is being recorded.
I now hand the conference over to Mr Vimal Kejriwal, Managing Director and CEO from KEC International Limited. Thank you, and over to you, sir.
Vimal Kejriwal — Managing Director and Chief Executive Officer
Thank you, Ryan. Good morning. We welcome you all to the Q3 earnings call of KEC. I will begin with an update on the key developments during the quarter and thereafter talk on the performance highlights for the quarter and nine months, along with the highlights of the respective business units. In-line with our strategy and targeted timelines, we are pleased to share the successful transfer of our cables business to KC Asian Cables Limited, a subsidiary of KC effective January 2025. This significant milestone reflects our commitment to unlocking growth opportunities and creating long-term value for the business.
As part of our efforts to diversify into high-potential products, we continue to make substantial progress on multiple fronts. During the quarter, we successfully commissioned the first phase of the aluminum conductor plant at our facility with the final phase on-track for commissioning by end March 2025. Additionally, the capital investment to produce EBIM and electromeric cables is advancing well with production for this facility expected to commence in Q4 next year. We are confident that this strategic realignment, coupled with our focus on product diversification will drive significant growth, strengthening both revenue and profitability for the cables business in the years to come. Thank you. With a robust order book and a sustained increase in tendering activities in the T&D segment, we initiated a debottlenecking program to enhance tower manufacturing capacities at some of our plants with low investment. After successfully completing capacity expansion at Dubai plant, we have now expanded the Jaipur plant and are currently working on increasing the capacity at our Jabalpur plant.
On completion of a Japarpur plant expansion, our total capacities would go up from 4,22,000 metric tons to 4,68,000 metric tons per annum. This strategic capacity enhancement positions us to effectively meet the growing demand across India as well as Middle-East. During the quarter, we rechrisened our railways business as transportation business. This change reflects our strategic vision to align with the global trends and positions us to strengthen our focus on delivering advanced and sustainable solutions in the transportation infrastructure sector. The name transportation better represents the breadth of our offerings and is in-line with other global EPC companies.
Thank you. Now coming on to the financial performance. We continue to witness strong momentum in order intake with YTD order inflows surpassing a record level of INR22,000 crores, an impressive growth of over 70% year-on-year. Notably, a substantial 70% of this order intake has been secured by our T&D business across India and international markets. Additionally, we hold an L1 position of over INR4,000 crores, primarily in the T&D sector, positioning us to exceed our order inflow guidance of INR25,000 crores for the year. And our order book remains healthy and well-diversified, standing at INR37,440 crores as on-date, combined with our L1 position, our total order book and L1 stands at over INR41,000 crores. In terms of revenue growth, we have achieved revenues of INR5,349 crores for the quarter, a growth of 7% vis-a-vis Q3 last year. With this, our revenue growth stands at 9% for nine months. We have delivered a strong growth in EBITDA of 22% in Q3 and 20% in nine months.
Our EBITDA margins for Q3 expanded by a solid 80 basis-points, reaching 7% compared to 6.2% in Q3 FY ’24. This is our highest quarterly EBITDA margin in the last three years. For nine months, margins improved by 60 basis-points, rising to 6.6% from 6% in the same-period last year. The revenues and margins could have been better, but for the deliberate moderation in the execution of water projects due to delayed payments from the clients, continued labor shortage, depreciation of the Brazilian currency and extended monsoon in certain regions of India. Water payments have started coming in, which should provide momentum to the ongoing projects.
Additionally, the Union budget announced has extended the mission until 2028 with an enhanced outlay of INR67,000 crores. This increased commitment is expected to fast-track project execution and unlock greater opportunities in this segment. During the quarter, we have successfully reduced our interest cost as a percentage of revenue by-10 basis-points in Q3 and 30 basis-points in nine months, bringing — bringing our interest cost-down to 3.2% for Q3 and 3.3% for nine months. We have significantly enhanced our bottom-line with PBT growth of 32% in Q3 and 65% in nine months. PBT margins expanded by 60 basis-points in Q3, reaching 3% compared to 2.4% in Q3 last year and by 90 basis-points in nine months, rising to 2.6% from 1.7% last year. We remain committed to managing our debt levels and maintaining a strong balance sheet. Our net-debt, including acceptances stands at INR5,574 crores as of 31st December ’24, a reduction of INR471 crores versus vis-a-vis December 31, 2023.
While our debt levels could have been lower, delays in collection from certain water and railway projects have impacted the pace of reduction. However, we remain confident in further optimizing our debt position by the end-of-the financial year. Now coming to the specific businesses, our T&D business has achieved revenues of INR3,175 crores in the quarter, a healthy growth of 17% vis-a-vis Q3 last year. The growth has been delivered on the back of strong execution across projects, especially in India. On the order intake front, the T&D business continues to experience exceptional momentum, achieving a remarkable growth of over two times with YTD new orders of over INR16,000 crores, secured across diverse geographies, including India, the Middle-East, Africas, the Americas, CIS and Australia. During the quarter, our India KNB business has secured several key orders and L1 positions for PGCI, including a prestigious order in the HVDC segment. This order further strengthens our presence in the HVDC market where we are already executing our HVDC terminal station project for a reputed private client.
On the international front, we have made notable strides securing substantial orders across diverse regions, including the Middle-East SARC and CIS. The order — the order in CIS has reinforced our presence in that region and further diversified our order book. In SAE, the business achieved profitable revenues of INR309 crores for the quarter, degrowing by 9%. The degrowth in revenue was primarily due to a steep depreciation of the Brazilian currency against US dollars by more than 20% over the last one year. The business is witnessing significant traction in order inflows with YTD inflows surpassing INR2,100 crores, an impressive growth of more than 3.5 times. These orders are for the supply of towers, hardware and poles and they span across the US, Mexico and Brazil. With this, the business boasts a strong order book and L1 position exceeding INR2,300 crores.
We have successfully managed to maintain our debt levels at INR300 crores, reflecting a reduction of INR100 crores from March 2024 levels. The overall tender pipeline in the T&D sector remains robust, both in domestic and international markets. We remain highly optimistic about the growth of our T&D business, driven by the increasing demand for power and the Government of India’s steadfast focus on expanding renewable energy projects. On the international front, we continue to see promising opportunities across regions such as Middle-East, Africa, CIS and the Americas. Notably, countries in the Middle-East, particularly Saudi Arabia are prioritizing investments in energy transition and T&D projects, further strengthening the outlook for the region. With a large order book and L1 position the P&D exceeding INR25,000 crores. Coupled with rising tendering activity across regions, we expect the business to maintain strong momentum and continue to grow in terms of both revenue and margins in the coming quarters. Our civil business achieved revenues exceeding INR1,100 crores during the quarter.
As mentioned earlier, the growth has been somewhat constrained by the ongoing labor shortage and the deliberate moderation in the progress of water projects, primarily due to delayed payments. However, the business has strengthened its order book with YTD orders totaling over INR2,100 crores spanning across industrial, residential and defense sectors from prestigious clients. During the quarter, the business has also diversified its customer-base, adding renewed clients in the industrial segment. Focus on moving up the value chain, focusing on moving up the value chain, the business is increasingly targeting EPC turnkey projects in the industrial segment and orders including MEP and finishing work-in the residential segment. The outlook remains positive across all segments with a strong order book and L1 position of over INR9,700 crores, we are confident that the civil business will continue to be a key growth driver for us.
Our transportation business has achieved a revenue of INR456 crores for the quarter, de-growing by 30%. The business continues to make strong progress on the completion of the existing projects with 15 projects successfully completed till-date. A notable milestone for the business is the in the segment securing an order in JV for the design, supply and construction of a passenger offway in the Northeast. Additionally, the business has secured new orders of over INR2,100 crores in the conventional technology-enabled areas of metros and other emerging areas. These include a significant order in the prestigious train collision awarding system TCAR segment under coverage, which aims to enhance the safety of Indian railways with world-class technology. We remain cautious in our approach to order intake in this sector considering the margin profile, working capital scenario and execution complexities of this business. Most of the orders secured during this year do not involve execution on mainline tracks that require blocks from the client, a challenge we are currently facing in the completion of some of our existing projects.
The government’s ongoing focus on strengthening infrastructure is expected to drive momentum in our railway business going-forward. We are strategically exploring select international opportunities also. Our cables business has achieved revenues of INR406 crores, a growth of 6% year-on-year. While revenue growth could have been higher, it was impacted by an unfavorable metal ratio skewed towards aluminium. The business continues to demonstrate strong order booking, momentum across diverse segments, including T&D, railways, metro, solar, metals and data centers. In renewables, the business delivered revenues of INR238 crores, a robust growth of more than 50%. The execution of existing projects is growing well, is progressing well with notable milestones achieved during the quarter. The business successfully commissioned the third phase of the 500 megawatt solar project in Karnataka, bringing the total capacity commissioned to 200 megawatt. Additionally, three solar sites were commissioned for a leading auto ancillary company in India.
Work has also commenced for the recently secured 500 megawatt solar project in Rajasthan, which will be commissioned in phases starting with March 2025. With a strong order book exceeding INR1,000 crores, the business is well-positioned for continued growth. In oil and gas pipeline, the business has delivered revenues of INR76 crores for Q3. Growth has been subdued primarily due to the slowdown in tendering activities. However, the business has widened its footprint by securing its first order in the composite space, including design, supply and build, looking ahead, the business remains focused on exploring international opportunities and strengthening the necessary pre-qualifications to increase the addressable market size. Two days ago, the Finance Minister presented the Union Budget 2025, reaffirming the government’s commitment to economic growth with a substantial boost in capital expenditure.
The budget allocates INR11.21 lakh crores for the infrastructure, reflecting a 10% increase from the previous year. If you add the capex by the public sector enterprises and also the grants which the central government gives to states for capital expenditure, it aggregates to over INR19 lakh crores, a robust 16% increase from last year. We welcome this forward-looking vision, which places a strong emphasis on power, transmission and distribution, renewables, water, water and urban infrastructure. This strategic focus not only strengthens the nation’s infrastructure landscape but also aligns seamlessly with our growth aspirations creating substantial opportunities for growth. In conclusion, I would like to emphasize that the outlook remains healthy across most of our businesses with a formidable and diversified order book plus L1 of over INR41,000 crore, improved execution visibility and a robust tender pipeline of over INR150,000 crores, we are well-positioned to deliver sustained growth in the coming quarters.
Thank you. We are now open to take questions.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Parikshit Kandpal from HDFC Securities. Please go-ahead.
Parikshit Kandpal
Yeah. Hi, sir. Congratulations on a decent quarter. So my first question is that this year has — the ordering has been driven by TND. So how do you see next year do you think this kind of performance can repeat there? Are there enough opportunities in the market, both in domestic and global? So if you can help us understand that the demand scenario on the T&D side in next three, four quarters.
Vimal Kejriwal
Thanks. I think we are very positive on the T&D scenario. And especially, I would have only said four countries, but right now it would be three, which would be India, Saudi, Arabia and Abu Dhabi. We were talking about Americas also, but I think with all the tariff wars going on, we’ll just wait-and-watch what happens, although we clearly see that there will be a lot of infra spend in America also. But primarily today, I think India, UAE and Saudi will drive the growth and we are very confident that the growth would continue. In fact, what is going to happen, Parikshit, is that this year we got a lot of orders. We also had legacy orders which we were working on and which were completed. Now that all that is getting over, we will be able to focus a lot more on the orders which we have secured in the last 12 months or maybe earlier, so which will also add a flip to our revenue and margin profile in transmission going-forward.
Parikshit Kandpal
Okay. Sir, out of this INR16,000 crores of inflows from TND, sir, do you have a number on how much will be the HPDC share in this?
Vimal Kejriwal
So equity in the order intake would probably be at about INR600 crore INR700 crores right now, but we also have L1s, okay, in that sector. So maybe we’ll cross INR1,000 crores or more overall. Right now, then we are bidding for a couple of more ones, then one which has been awarded to a private sector client also is talking to, you know, we are looking at that part also. So I don’t know where we’ll end-up, but I think it will be decent. In addition to that, correction is that there are some very large accuracy tenders which have come out in the Saudi Arabia also. But I think there we’ll be focusing on those also.
Parikshit Kandpal
This, are we — did we get anything from, sir the package?
Vimal Kejriwal
We are doing a lot of work there. Actually, I think about five or six projects in that area or maybe more.
Parikshit Kandpal
Is it part of or is it already part of your firm order?
Vimal Kejriwal
No, they are under execution. In fact, a part of that will get commissioned in this March.
Parikshit Kandpal
This power grid power package which power grid contract 25,000 crores I’m sorry about that.
Vimal Kejriwal
I’m not sure, but we have got three or four packages, one in KPS 4, then KPS 3, then there are extension fields and everything else. So we have got I think four or five packages from power grid, then we are doing a project for NTPC. We are doing a project for GIPCL. So we — I think as I said, I think there are six or seven or maybe eight projects and the new also coming there.
Parikshit Kandpal
Okay. Okay., the other question is on — if I see your revenue between Q1 and Q3, it has gone up almost by INR800 — INR3840 crores and your debt has also gone up by INR830 crores. If I minus the proceeds from the QIP, which is INR870 crore, that debt is almost flat from Q1 to Q3. So if you can help us understand, I mean, if this QIP would not have happened, the debt would have been substantially higher. So just give us a little more granularity on the working capital side on current asset and current liabilities, is it you are paying your payables down? So why is this — I mean, why the entire revenue growth has gone into working capital.
Vimal Kejriwal
So maybe Rajiv can talk in detail, but broadly if you look at it, I think we reduced our debt by around INR200 crores, okay? If you adjust the QIP. And as I said, the primary reason for that has been a few receivables, which we thought we will be able to liquidate like water, I don’t think anyone expected that till now water monies always used to come on-top and all that. There was a considerable. I think we have more than INR500 crores of receivables in water, which should not have been there. There. To me, that is one clear this. Secondly, on the railway side, we were expecting a lot more faster settlement of our disputes and issues with them, which has not happened.
So we have an ARR and also an impact on the margin. We would have loved to have a slightly higher-margin, but because of the slowdown on the — or I’ll say the delayed results of some of our arbitration or resolutions, etc. So some money did not come in. And I think lastly, although Afghanistan, we have received more than INR450 crores, we were hoping that we’ll get another INR100 crores INR200 crores from Afghanistan that quarter, but I think that has got delayed now to Q4. So I think these three or four things put together have put, I think almost a pressure around INR1,000 crores in a way on our collections, which should have happened in a normal-course and that would have been reflected in the numbers. I hope I’ve answered your question, Parikshit.
Parikshit Kandpal
Yeah. Just last question on revenue guidance and now nine months we have done a growth of 9%. So versus 15% guidance now, what kind of number you’re looking at for the year as a whole?
Vimal Kejriwal
So we are still hoping to do 15%, but I don’t think the way things are happening, depending upon how my supply-chain is able to push more numbers, I think we could end-up anywhere between 12% to 14%.
Parikshit Kandpal
Okay. Sure, sir. Thank you. That’s very clear.
Vimal Kejriwal
Thank you.
Operator
Thank you. The next question comes from the line of Renu Baid from IIFL Securities. Please go-ahead.
Renu Baid Pugalia
Yeah. Hi, good morning, sir. A few questions from my side. First, if you look on the revenues front, YTD growth in civils is flattish. SE also has seen a marginal drop and we have marginally downgraded our guidance from 15% to 12% to 14% range. So how should we look at these two businesses stacking towards 4Q? And given the order backlog, how is the outlook for FY ’26 for both the civil and the SAE piece of the business?
Vimal Kejriwal
Yeah. So I don’t have the exact number of guidance for the individual business for next year, but definitely civil will grow. SAE, I don’t see it growing too much because one is the currency depreciation is still continuing and it’s a finite business which is dependent upon the capacity of the plants. So SAE will keep on growing by 5%, 6% year-on-year. Provided the currency remains stable. If the currency stagnants, we can see a better growth. Civil, in my view will grow by almost, let’s say, 15% or so next year. And what you have not asked, but let me know, overall, I think we are still working out on numbers, but we will definitely have a growth of at least 15% for the company next year.
Renu Baid Pugalia
So among the downgrade, I think the big missing piece would be civil because we were initially expecting double-digit growth in civil revenue and YTD has been flattish. So the labor issue in your view has impacted this part of the portfolio more severely than the others?
Vimal Kejriwal
So Renu, there are two issues. One is clearly the labor issue which has impacted mostly the residential and the industrial part of the revenues. And secondly, as I said, water is part of our civil revenues. So water has been a disappointment in terms of the payments as a consequent, we tried to work on it, but I think after some time, most of us have had to slow-down the business, okay. So these are the two major reasons is we have an order book. So I don’t think it’s an issue. If you look at my numbers, what’s the order book, exhibition ratio is not our standard KC ratio. But then because of, what we are doing — we are trying to catch-up on that.
Renu Baid Pugalia
Got it. And secondly, if we see the growth in T&D orders have been pretty impressive, you’ve highlighted a very strong pipeline as well. So with that share increasing in the backlog, when do we expect the margin profile of our portfolio improving on a consol basis is still just about 7% on the margin side with respect to guidance. So when do we see those margins anything closer to double-digit levels?
Vimal Kejriwal
So if you look at it in transmission, we are almost — I think we are already at a double-digit, okay. But the issue has been on the non-P&D where especially on the railways where we have been seeing a much slower recovery in the margins. Hence also civil, we had planned, as you rightly said, a higher-growth than what we did. So we had built a much larger organization. So we are now having the reverse impact of leverage on the civil EBITDA as well as in real-estate. So that’s impacting us. But given that, as I said earlier that we expect our T&D ratios this quarter we are already at 59% revenue, nine months was 57%. Next year, I’m very sure we’ll cross 66 — maybe we may reach even 64%, 6%, I don’t have the exact number, but we should doing. Given that the margins will definitely go up. We had earlier been talking about 9% to 10%. I still don’t know where we’ll be, but I’m sure it will not be very different from the 9% at least baseline which we talked about.
Renu Baid Pugalia
Correct. And on the competitive intensity, you think given the way the market has come back on the growth side in the core T&D portfolio, both domestic and international, the current bid margins are turning to be much better than what would have been expected in the normal cyclical upturn or just still tight in terms of competitive pressures?
Vimal Kejriwal
No, I think the margins are in-line with this of FY ’25, whatever the margins we got, which was significantly higher than the earlier margins and we expect those levels to continue going-forward also looking at the volume of business both in India and as I said, Abu Dhabi and Saudi. On the competitive intensity, because of the amount of work which is there, clearly the competitive intensity has — has mellowed down a lot on the larger value orders, let’s say, orders above INR500 crores or so, okay. So clearly, I think we are seeing a benevolent sort of environment on the competitive intensity for larger PNB orders, especially from power grid, I will say.
Renu Baid Pugalia
Got it. And lastly, if I can, the impact of US tariffs war that we’ve seen as in on China, Brazil, Mexico, at this point in time, though it’s early, how do you assess its impact on SAE as well as the Dubai facility, which we have for tower supplies.
Vimal Kejriwal
So Dubai as of now does not service US, so it will not have any impact today. The servicing of the US orders are done from our Mexico plant and the India plant. And I think what we have done, one is, let me just — what we have done in the last few months is that we have converted all our orders through Xbox, both in Mexico as well as in India. So even if the duty — duty actually right now they have postponed the duty by one month, then it will still not impact our current orders. Going-forward, in any case, I think our India factory was not competing with Mexico or China was not supplying to US in any case. Our competition is more with Turkey. We’ll have to see how the geopolitical equations work-out between Americas and Turkey.
But if there is a duty impulsion of 25% in Mexico, I think the India plant will definitely get much more order than we have typically seen that supplies from India are more profitable than the supplies from Mexico. That’s one part. The second part is that — second part is that if you look at our current order book, I think almost half of the order book are for local supplies. In Mexico, we are seeing a lot more projects coming up on the back of the green energy where we are actually getting — since the last six months also, we have got a lot more local orders in Mexico. So in the — in unlikely event that we have to give up the US market for some time, I think today we have got enough orders either on ex-works basis or for the local supply. So I don’t see any impact and I don’t think this continue for a longer period, maybe three months, six months till Trump has his way. So I don’t think today, are we worried today? No, we are not worried today.
Renu Baid Pugalia
And if at all you see you see some positive tailwinds for the overall portfolio from India and Dubai facility for exports and impact on SA because of local opportunities.
Vimal Kejriwal
Absolutely, completely.
Renu Baid Pugalia
Done. Thanks much, sir. Best wishes. Thank you.
Operator
Thank you. The next question comes from the line of Vaibhav Shah from JM Financial Limited. Please go-ahead.
Vaibhav Shah
Sir, firstly on the revenue side. So for the civil segment, we have seen some weakness in the last couple of quarters. So Q4 also should also be a similar weakness we would see given the delayed payments in-the-water segment?
Vimal Kejriwal
No, I think water, as I said that some payments have started happening. We just got almost INR150 crores or more in this month January, okay. And hopefully with the announcement in the budget where for the — I think after last two budgets, I did not hear, but this time we heard a lot of judge mission and saying that we want to ensure that every house has a water connection. I think this will push the funding in the business. If that happens, there is enough of tailwind in this particular business. So I think going-forward, civil should show better numbers.
Vaibhav Shah
So Q4 also could be a flattish quarter in terms of revenue for civil.
Vimal Kejriwal
So Q4 will have some growth, definitely, okay. It will not be flat and that I’m very clear.
Vaibhav Shah
Okay. And sir, also we are open for future orders in GJM maybe over the next year.
Vimal Kejriwal
So I think what we will do — is we’ll have to wait-and-see how this — how this translates into actual cash-flow. Okay. I don’t think we’re going to jump. I don’t think we’re going to jump tomorrow. We will wait-and-see that whatever INR67,000 crores they have promised out of that, how quickly or does it have an impact of push and starts revenue and cash-flow starts happening, then we will decide. But I think we are optimist that from INR25,000 or whatever number they have gone back to INR67,000 and there’s a clear instatement of intent. So I think it should turn out to be good. And also what is happening is that the current tenders which have been talked about are from, I’ll say, reasonably decent states with good financial — financials of their own. So I think something should happen good.
Vaibhav Shah
What would be your JJM order book right now as of December?
Vimal Kejriwal
Because I think it’s roughly just about INR2,000 crores.
Vaibhav Shah
Okay. And sir, lastly, on the margin side, you said that we still maintain that 9% to 10% guidance for ’26, but we are confident to achieve the lower-end at 9%?
Vimal Kejriwal
Yeah, I think that’s what I was saying that we had earlier said 9% to 10%. Too early to right now do it. I think maybe at the end-of-quarter Q4, we should be able to do it. But I think on the lower-end, I think we are reasonably more confident than on the upper-end today, but maybe we’ll have a chat after the Q4 results by the time we’ll know also how things are panning out. We have a benevolent cost and cost environment today with metals and all being stable, steel — steel and cement being at a lower-end. So I think let’s wait for a couple of months, but I think we should be okay.
Vaibhav Shah
And lastly, working capital, we still maintain that 110, 115 days target for March?
Vimal Kejriwal
Yeah. I think we are quite confident to maintain about 110 days of target for the year end.
Vaibhav Shah
Okay. Thank you, sir. I’ll fall back in the queue.
Vimal Kejriwal
Thanks.
Operator
Thank you. The next question comes from the line of Samarth Khandelwal from ICICI Securities. Please go-ahead.
Samarth Khandelwal
Sir, congratulations on answering a good margin this quarter. Sir, my question is on the…
Vimal Kejriwal
We can’t hear you. I think it’s — you’re on the speaker or something.
Samarth Khandelwal
Am I audible, sir?
Vimal Kejriwal
Yeah, better.
Samarth Khandelwal
Yeah. I sir, congratulations on achieving a good set of margins in the TV segment and overall. My question is on the transmission distribution side, sir. Firstly, how is the order prospects coming in, specifically for the T&D? And are there any hiccups that we see in execution of the T&D order book that we have?
Vimal Kejriwal
So I think the order prospects are very good. We were discussing it earlier also and the way things are happening and now that government said from 500 gigawatt, they want to do 600 gigawatts in 2032 and the new NEP policy and all that, we are very clearly seeing and with our discussions with power grid and I think they will be having an investor me today or tomorrow and you can see the numbers which they are talking about. I think we are very positive on the P&D side. What was the second — you asked on the execution. Execution, I think I’ll say is improving on TND. We were having a lot of ROW issues both in Rajasthan and Gujarat. I think some of them have been resolved now. So that is something which will continue for some time. But the supply-chain is slowly easing out. We are seeing some more conductor supplies and some transfer, etc. happening, plus our own conductor manufacturing has started. So I think that will help us in on the revenue side in TNDs.
Samarth Khandelwal
Should put a number on the — out of INR150,000 crores, how much would be for the T&D point of pipeline?
Vimal Kejriwal
Well, out of that total INR5 crores. I think normally we have TND is around INR50,000 crores. I don’t have the exact number right now, but it’s broadly around that.
Samarth Khandelwal
Okay. Thank you. Sir, next question is on the balance sheet side. If you could help me understand what exactly is contract sense and how is it different from trade receivables.
Rajeev Agarwal
The contract assets, essentially there are two components to this. One is revenue which has been taken, which has not been billed to the client due to the milestones not having been achieved. So that’s one part. And second part is a margin adjustment as per the construction contract guidelines, which is AS7 guidelines, wherein you know whatever individual margins on the components gets towards the overall contract completion. So these are the — as per the ES7 methodology, the margin adjustment tool, which is prescribed by the accounting standards for construction companies. So these are the two components which are classified as a contract assets.
Samarth Khandelwal
Okay. Sir, last question if I may, squeeze in. On the coverage order, like what is the value of the coverage order and what is the scope of work that we’ll do? Is this with the that we have a tier?
Vimal Kejriwal
Yeah. Yeah, it’s broadly with. Some are EPC, some are on the supply-side. So we are doing some EPC work and we are also working with them on the supply part of it where they are doing the overall integration.
Samarth Khandelwal
Thank you.
Operator
Thank you. The next question comes from the line of Bhoomika Nair from DAM Capital. Please go-ahead.
Bhoomika Nair
Yeah, good morning, sir. Sir, we’ve seen a very strong nine-month order intake, particularly coming from T&D. Now as we move ahead, how do you see that trend kind of continuing both for international and domestic markets? And also if you can talk about the competitive intensity. So on T&D as also in terms of civil, because civil has seen a significant slowdown in the current year in terms of order intake. So these two-parts, if you can just talk about first?
Vimal Kejriwal
As far as civil is concerned, we have not seen any major increase in the competitive intensity or something, okay. I think what is happening is that based on our last five, six years experience, we have become much more selective on what orders we are taking, what clients we are working and the size of the orders. And that has slightly, I’ll say, narrowed down our universe of pipeline, which is the basic thing. I don’t think we have seen any change in the competitive intensity. It’s not very-high, okay. And especially if you look at orders beyond INR500 crores and all that, typically there will be three or four people. It’s only when you come down to INR300 crores and all, the number remains the same, but the quality of competition changes with a lot more local payers coming in, where then you don’t have — where you will not stand a significant chance of winning at your margin level. So civil, I think continues where it is. If you want to take more orders, we can take by dropping margins by 100 basis-points or I don’t think we are in that game right now with P&D doing very well. As far as-is concerned…
Bhoomika Nair
Sir, where do you see the order intake for the year and how is it kind of moving ahead? Which areas within civil are you seeing more ordering activity? Where you’re getting the comfort of the margins and payment terms that you’re looking for?
Vimal Kejriwal
So civil, I think the ordering or inquiries are coming more from the residential part and the industrial part of it, okay. And of it, we have seen some more coming on the hospitals, etc. But broadly it is residential and industrial and industrial also, I’ll say more or less it’s still metals and mining, okay. It’s all focused more on steel and aluminium and all that. So — and we are not seeing a widespread inquiry across all the businesses or all the verticals, but it’s more steel. Residential, there are a lot of inquiries. And residential is an area where your steel and cement are on actually on pass-through costs, etc. So where you can maintain the margins wherever they are if you are able to execute it well. And that has been a little bit of a challenge with us with the labor shortage and which is why we have been going a little bit slow. And as I said,, especially with the P&D growing at that level and all that, I think we are happy that we don’t take marginal orders.
Bhoomika Nair
Sure, sure. So on P&D, if you can talk about international and what is the pipeline like domestic, obviously the ordering pipeline is very strong. So how is the international pipeline and the competitive intensity as well out there?
Vimal Kejriwal
So international pipeline, especially on the Middle-East is very good, okay. As I said, Saudi and Abu Dhabi are two countries where we are very — two areas where we are very well focused and we are seeing a huge pipeline. Saudi has come out — had a 2030 project now they come out with 2040 and all that. So I think they are doing very well. Abu Dhabi, we are seeing a lot of work coming on the back of oil and renewables. And actually to me, Abu Dhabi has been a surprise because of all the recent orders which were announced in Madishala and Abu Gabi rather than in Saudi. But Saudi has a very, very strong pipeline. So as far as competitive intensity is concerned, I think Abu Dhabi on the larger orders like India has very little competition, hardly two or three people. And then because we have a factory in Dubai, we have some sort of inherent advantage in Abu Dhabi. Saudi depends upon contract to contract, but typically there are three or four serious bidders, the bidders keep on changing. But typically we have seen three or four serious bids in every tender. But clearly the intensity has come down the pressure on margins has come down while coating.
Bhoomika Nair
Right, right. Got it, sir. Sir, the last bit is on the working capital, which expanded because of water and all of that. Now with the government really talking of — giving more allocation towards water, do you think that the working capital will actually come down? And where do you expect the year-end debt and interest as a percentage of sales settling at both for this year and next year.
Vimal Kejriwal
So, we are expecting the debt to go-around at least INR500 crores, if not INR1,000, that’s what we have been discussing. But at least, we are very clear that we will be able to generate cash surpluses during Q4. The debt should definitely go down. I don’t think we have any doubt about that piece. Interest cost, I think they are at 3.29, 3.2. So I think we are still hopeful that — and because of our large revenue, which we’re expecting in Q4, it should end-up below 3, Rajiv. Yeah, actually. So I think it was about INR2.9 we should be able to achieve.
Bhoomika Nair
Got it, sir. Got it. Great. I’ll come back-in the queue. All the best.
Vimal Kejriwal
Thank you.
Operator
Thank you. The next question comes from the line of Teena Virmani from Motilal Oswal Financial Services. Please go-ahead.
Teena Virmani
Hi, sir. Thanks for taking my questions. Sir, my questions are related to railway and SAE. When we see the order inflow for both the two divisions, order inflow for nine-month period has been very good. On railways, you talked about the coverage related opportunity. So my first question is related to this coverage related execution. Will it also be having a relatively comfortable working capital or will it be similar to the previous railway related projects where working capital challenges were seen and you had slowed down on the execution side.
Vimal Kejriwal
So is a much better, I think contract in terms of cash flows. Also, most of these contracts clean-up for six months-to 12 months and what happens is that if you work on let’s say 10 locals or 20 locals and all that and you can get…
Operator
Ladies and gentlemen, we have lost the line of the management. Please stay connected. Thank you.
Vimal Kejriwal
Sorry, we got disconnected.
Teena Virmani
Yeah, no problem. So on, you were talking about the execution time-frame.
Vimal Kejriwal
So I said that Kavage is the projects are, I think, less than 12 months and the payment happens in blocks where the railways gives you certain material certain stations and all that and that happens pretty quickly. I think the lead-time is only on getting the basic equipments which have started coming in. So I think given the current orders, we will start getting in some revenue hopefully in this quarter itself and cash flows are pretty good for these projects.
Teena Virmani
Okay. So in this case, how would the revenue scale-up happen for the railway division given the way that order inflow has also been good and the payment cycle will also be better in this particular set of projects.
Vimal Kejriwal
So if you look at our order intake for this year-around INR2,000 crores. What we are generally seeing is that these are orders are large part of it is towards the metro part of it where we are doing power supply and track. Then we have picked-up very one, very large order on tunnel ventilation, which has a large component of supplies. So we think we’ll have some fast-tracking of revenues, but I don’t think it will be very fast. Okay, railways has its own style of working. So I think next year, again, our revenues in railways would be flat or at best maybe 5%, 10% growth, not more than that, but revenues from the new projects will start coming in quickly.
Teena Virmani
Yeah. Okay. So maybe a 5%, 10% kind of sustainable growth can still be seen in railway segment revenue.
Vimal Kejriwal
Sustainable with all Jaza Huna, but I think right now we are looking at seeing the problems where we are, we are first trying to close all the old projects, etc. So I don’t think we are pushing for revenue on railways right now or for the next year. But going-forward with the plans which the Government of India has on railways, et-cetera, the sustainable growth will be much more than that in the long-term.
Teena Virmani
Okay. Got it. And on SAE, sir, SAE inflow also has been very good for the nine-month period. So why is it that the revenue growth will only be to an extent of 5%, 6% for SAE going-forward?
Vimal Kejriwal
So what happens in SAE is that you get very lumpy orders and these orders have to be executed over two years and all. But typically in SAE the cycle from the — for the developer is four to five years. So they are similar to US, the orders you get is, I’ll say, at least with eight to nine months ahead of when you are supposed to start delivering. So these orders also will not get delivered in one year, number-one. Number two, obviously, since it’s a product supply order, it’s also constrained by the capacity of the plants. And right now, I don’t think we are expanding the power part of the plant. We have expanded the hardware plant. But so I think it will be constrained by that. I don’t think at the — at best probably go to 10%, but I don’t think — if I do think is a reasonable number to take.
Teena Virmani
Okay. So these inflows would be spread over a period of, let’s say, three, four years.
Vimal Kejriwal
Not three, four years. Now it will be — now we already started manufacturing. So I think next 24 months, these orders will get executed, especially in Brazil. Mexico is normally very quick, okay. But Brazil gets executed over a time. And we have also, so we’ll get some more orders, which will come for execution around Q3, Q4 of next financial year.
Teena Virmani
So I mean, my main question is, then the revenue growth should be slightly better than 5%, 6% if the prospect pipeline and inflows are good
Vimal Kejriwal
It depends upon how the currency also behaves. We are also factoring in that there could be a further depreciation of the currency. So in local-currency, maybe it may be higher, but when you translate into USD and all that, it may go down unless rupee also falls equally.
Teena Virmani
Got it, sir. And my last question is related to the debt levels. You talked about a reduction of somewhere around INR500 crore by Q4. But what would be your outlook for debt for, let’s say, in the coming years, FY ’26, ’27 and going-forward because your order inflows for the whole company as a whole have been very good and execution will also ramp-up in the quarters following quarter-four. So would the debt not move-up further from the current levels or maybe from the levels of quarter-four.
Rajeev Agarwal
So, Rajeev Agrawal. So basically what we are seeing on a conservative basis, we should go down at least by INR500 crores to INR600 crores. So that means the debt level for March will be around INR5,000 crores. But in a best-case scenario, I think we can go down to INR4,500 crores. In fact, the way we are looking at the collection and which has panned out in the month of January at least for the water rescue, we had collected almost INR160 odd crores from the water in January itself. So going by debt, probably we should be in a position to improve our debt level less than INR5,000, but let’s hope that spend continues in the remaining two months also. Plus there are other collections which are likely to be collected and some claims are yet to be settled in the railway business. If all of these come know get settled in the next couple of months, I think our debt levels will be better than 5,000 and probably we can reach to about INR4,50,000. So that is what we should expect the debt level between INR4.5 crores to INR5,000 crores for the — for the quarter-ending March.
Teena Virmani
And then in coming years, ’26, ’27?
Rajeev Agarwal
So for ’26, ’27, China, we are actually expecting the growth as has guided for 15% growth, although we are still working out on our budget for the next year. But we expect given the kind of an order book that we have, around 15% growth definitely next year. So I don’t think that we will be able to reduce the debt level significantly considering the growth level of 15% for the next year.
Teena Virmani
Okay. Understood, sir. Thank you. That’s it from my side. Thank you.
Rajeev Agarwal
Thank you.
Operator
Thank you. Ladies and gentlemen, in the interest of time, please restrict to two questions per participant. Thank you. The next question comes from the line of Srinidi from HSBC. Please go-ahead.
Shrinidhi Karlekar
Yeah, hi. Thank you for the opportunity. So you’re seeing strong order prospects pipeline in the Middle-East. Wondering would it be possible to compare and contrast the margin profile as well as working capital profile for the large projects in the T&D business?
Vimal Kejriwal
So if you look at the margin profile, I think margin profile would be virtually similar, okay, because all of both India and international now are on fixed prices, etc., timelines are similar from 18 to 24 months and all that. And I’ll see when competitive intensity is virtually similar. So the margin profile would be similar, I will say. As far as the working capital, et-cetera or the cash flows are concerned, typically — typically, I think India has better. If you look at the NWC also, the India NWC is half of or maybe even better than that of — of international.
The primary reason being a — at least in Saudi, there is a 20% retention. So that money you will get only once you complete the project, whereas in India, the retention is much lower and in many cases, you are allowed to draw the retention against bank guarantees. Also, what happens is that the — I’ll say the transit period and all that are much lower in India, you know our factories are or in and then you can build it, et-cetera. So in a way, you’ll have at least another one month or so additional timeline by which you can build and collect. So typically, in today’s scenario, at least India is significantly better than international, okay. But we are working on the international to see how do we bring it closer to India. I don’t think we can reach the India numbers, but it can — it will definitely improve. Rajiv said that debt levels will go down. One of the items was that we were really working on how to reduce the NWC in international.
Shrinidhi Karlekar
Understood. And sir, second question, you have seen strong orders on domestic PMD. Just wondering, one of your industry peers announced kind of indicated that there has been some deferral in awarding from both power grid as well as state transmission utilities. Just wondering, did you also see awarding deferrals because projects bidding are coming out higher than the budgets?
Vimal Kejriwal
So typically, we don’t bid for state transports via state transmission, so I’m not able to comment on that part of it. As far as power grid is concerned, I don’t think we have seen a difference. I think the only project which if I ask me, which I know of has been the HVDC in Rajasthan where the prices were very-high as compared with the. So that went for a rebid amongst the developers. Otherwise, I have not seen a single project which has been rebid on account of prices, okay. Delays, I have not seen — if you ask me, I don’t think we have seen any significant delays in the award of the projects. Sometimes what happens is that because of the availability of land and ROW, et-cetera, we have seen that the BPC and all that keep on changing the route or make some changes in the substation location, et-cetera, which may cause some deferral, but I don’t think it is significant. So I’m a bit surprised if someone has said that, at least we don’t subscribe to that view.
Shrinidhi Karlekar
Understood, sir. And sir, last one, there is a sharp jump-in JJM funding in budgets. Sir, just wondering, should we read that as a very strong order prospect or should we largely read it as a more payments to the contractors of already awarded projects and consequently better execution?
Vimal Kejriwal
So to me, it is both. And also let me clarify that the last year’s allocation in the budget was similar, but they did not spend the money. The spend was hardly — I think 40% of that, less than 40% of that. So they have just reiterated the same budget number as last year. But I think I did see a lot of — a large statement of intent saying we want to ensure that every house has a water connection. So I do presume that this has the backing of the PMO, etc. And so this money would actually start flowing into the states and to the contractors. So it would help us in the current execution and hopefully in getting new business, which we had actually gone.
Shrinidhi Karlekar
Thank you for answering my question and all the best. Thank you so much.
Vimal Kejriwal
Thank you.
Operator
Thank you. The next question comes from the line of Ashwini Sharma from Emkay Global. Please go-ahead.
Ashwani Sharma
Yeah, good morning and thanks for the opportunity. Sir, my question is again on the opportunities in the railway, more specifically to COVID coverage and the oil and gas pipeline. So out of this INR1.5 lakh crores that you mentioned, how much is oil and gas, how much is coverage, if you can just give us some sense?
Vimal Kejriwal
I don’t think I have the breakup right now with me and you can speak with Abhishek later on to get some breakup.
Ashwani Sharma
Yeah. Okay. And secondly, you know, there have been lot more talk on the railway — the labor issues. Can you just give us some more granular idea of what is the challenge that we are facing and when do you see this getting basically normalized?
Vimal Kejriwal
I don’t think anyone can tell when we get normalized. It’s a serious issue. And the basic problem still is not, I’ll say not of getting people, but of people. You know, typically what used to happen is once a labor or a technician came to a site, he would work for 11, 12 months and then go back for annual and then we’ll pray that he’ll come back. Now of late now, we are seeing that people are going back-in three months, not turning up and all that. So attrition of labor has become a serious issue across all the industries.
Also, one of the major reasons would be the money, which is are getting and also the freebies, etc. So I think the entire industry and everyone has been talking about it saying what needs to be done. So we are trying to take long-term steps of providing better incentives for them to continue to work for longer period retentions and other things which the industry as a whole is working. Hopefully, it should start improving with all these efforts, but when it will become zero, it’s difficult to answer.
Ashwani Sharma
And sir, lastly, just to confirm, you mentioned for FY ’25, revised guidance is 12% to 14% revenue, is that right?
Vimal Kejriwal
Yes.
Ashwani Sharma
But sir, in that case, our ask rate for Q4 will be around INR7,500 crore for number of — I mean, are we confident to achieve that, sir?
Vimal Kejriwal
That’s how we said that number based on that.
Ashwani Sharma
Okay. Okay. Thank you very much.
Operator
Thank you. The next question comes from the line of Subramanyam Yadav from SBI Life Insurance. Please go-ahead.
Unidentified Participant
Sir, can you just give some number on the legacy railway orders where the margins are lower, how much would that quantum be in our order book?
Vimal Kejriwal
So I think we still have around 15, 20 orders in the railways, which are I’ll say 95%, 97% complete or IFOP, Baki,,. So I think in the next maybe a quarter or two maximum, we should be able to physically complete all the legacy orders, okay. What will remain would be the commercial closures where a lot of them have got, I’ll say, disputes and which are related to some of them are in dispute resolution boards, some of them are in arbitration, etc. So commercial exposure of this probably will continue for one more year. So we’ll see definitely some issues continuing for one year-on the commercial side. Physical side, they’ll get over. The value physically — the balance value would be probably INR100 crore INR100 crores or maybe in that region. I don’t think the value of these orders, the balanced work to be done is very-high. It’s just the closure which is taking — which is causing a lot of pain and time.
Unidentified Participant
Okay. And sir, what would be kind of margin in this thing, our orders?
Vimal Kejriwal
Right. I don’t think these orders have any margin, which is why you can see I said that our T&D margins are close to our maybe double-digit and our overall margins are 7%. So these are — right now most of the legacy orders will not have any margin.
Unidentified Participant
Okay. And sir, what about the last two quarters — this quarter and last quarter, we have seen some traction in the railway orders. How are the margins there?
Vimal Kejriwal
So now whatever orders we take are normal margins whenever they range from 8% to 10%, 12%.
Unidentified Participant
Great. 3% to 10%, okay. And sir, how much would be coverage order in this
Vimal Kejriwal
? I don’t have the exact number, but it would be around INR700 crore INR800 crores or so.
Unidentified Participant
INR800 crores in last two quarters.
Vimal Kejriwal
In the INR2,000 crore order book, order intake which we set for railways this year, I think INR700 crores INR800 crores are the coverage orders.
Unidentified Participant
Okay, that’s fine. Okay, thank you, sir.
Vimal Kejriwal
Thank you so much.
Operator
Thank you. The next question comes from the line of Sagar Gandhi from Invesco Mutual Fund. Please go-ahead.
Sagar Gandhi
Sir, my question is again on the working capital side. So you highlighted that…
Operator
I do apologize to interrupt you there. Could you please speak up? Your audio is too low.
Sagar Gandhi
Yeah. Am I audible now?
Vimal Kejriwal
Yeah, yeah, go-ahead.
Sagar Gandhi
Yeah. So sir, I mean the amount which is under contention on the receivable side for the water and on the railway side, if you can quantify that, that will be great.
Vimal Kejriwal
And so on-the-water side is roughly about INR500 crore or so. And now railways is difficult to quantify because there are no few claims which are yet to be settled with them. But we do expect roughly about INR300 crores INR250 crores to INR300 crore amount to be received from settlement of new students.
Sagar Gandhi
Thank you, sir. And sir, of the finded water number, you said INR160 crores is already received in January.
Vimal Kejriwal
Yeah.
Sagar Gandhi
Yes. Okay. Thank you. Thank you so much.
Operator
Thank you. The next question comes from the line of Gaurav Uttrani from Axis Capital. Please go-ahead.
Unidentified Participant
Thank you for the opportunity, sir. Sir, just needed to ask on that like our order book is majorly composed of T&D now like 55% of the order book and we are very selective in taking orders on the civil side or say for any of the other non-T&T segments. So if that segment isn’t performing as per expectation in FY ’26 and challenges such as for labor and supply-chain challenges continue for power T&D. So are we positive on achieving our revenue guidance of 15% in FY ’26 if other segments are not performing in a slowdown in T&D segment if we see any sort of…
Vimal Kejriwal
And Gaurav, we have taken into account all that and that’s how we have talked about this number. I think we are very confident. But I said that actual numbers will probably will talk about more once we do the Q4, but with the current order book plus L1 of INR41,000 crores, I don’t see any challenge of achieving at least 15%.
Unidentified Participant
Okay, sir. Got it. And sir, specifically on the oil and gas segment, you mentioned about there has been some inquiry in the domestic market from steel manufacturers and all. So are we seeing any order conversion on that side? And apart from that, on the African region, you said about qualification of — second qualification on that region. So what is the progress on that part?
Vimal Kejriwal
I think we’re talking about four different things. One is the oil and gas business where we talked about getting some orders in Africa and doing composite work, et-cetera. So I think we are seeing some more tenders coming out-of-the oil BSUs in terms of India and a little bit in Africa. When we talk about metals and all that, that was for our civil business where we said that on the industrial front, we are seeing a lot of inquiries coming from the metals industry.
Unidentified Participant
Got it, sir. That’s all my question. Thank you, sir.
Vimal Kejriwal
Thank you all. Thank you.
Operator
Thank you. Thank you. The next question comes from the line of Saket Kapoor from Kapoor and Company. Please go-ahead.
Saket Kapoor
Yeah. Sir, when we look at our nine months business revenue breakup, the declines which we see in the transportation oil and gas segment, what should we outlined going ahead for the 4th-quarter and I missed your numbers or the revenue for — how are the revenue execution going to be as a whole for Q4, sir?
Vimal Kejriwal
So Sake, what we have said is that we were still hoping for a 15% increase overall, which right now looks a little bit difficult, challenging by a percent or so. So what we have now said is Bharash percent for the whole year, okay, which effectively means at least 2022, 22% or 23% in Q4. That’s the number we have been talking about now for the revenue in Q4?
Saket Kapoor
Right, sir. And taking these two segments in particular, as Apne, transportation and oil and gas, but I had to decline here, if this may — next year are the extension, sir. And sir, the key reason why oil and gas pipeline segment has shown a significant decline. And this is particularly to this per the company which we acquired, the business that we attribute from there?
Vimal Kejriwal
Just Saket, it’s made major issue here in last year may for whatever reason tenders both come by, right? So it is not a question, decline Q-over, decline is no orders, iron rate or took the order here for both. So I still have a job because your margins jump to margins come curtaining because I was spending so that is the reason why we are not getting orders. But as I said, now we are seeing some more tenders coming in. Hopefully it should improve. But I’m not sure, but I think you should also keep in mind one thing is it’s a very small portion of our revenue. So INR6 crore high or so overall numbers that may high, if international orders hanging, then these revenues may become larger. Material again.
Saket Kapoor
And lastly, sir, cable segment may capacity expansion inductor and all plant. It’s a revenue profile, no main is Bhara so flat, Bhara crore phase. So going ahead of utilization levels budget maybe sir, if the Praghand Dia get or Joel Dia get transmission segment pay.
Vimal Kejriwal
So cable outlook Bandra see cable outlook to a growth Salka helps me. Abhika, M&A,, because of the difference in price of copper and aluminium, most of the clients are shifting to aluminum. So after physical, like in the Hyja Dollar rather than. So which is why the revenue growth has shown very muted growth, okay.
Coming to aluminum conductor, we just commissioned the plant. So the revenues will now start coming in. Q1 — Q4 will get some revenue. Hopefully, Q1 onwards, we should start getting full revenue. Salbar, Chesau, conductor plants. So ugly quarter so croreta impact quarter-on-quarter conductor.
Saket Kapoor
Right, sir. And lastly, sir, from a forex impact, but at the quarter Kelly and nine months was the forex level?
Rajeev Agarwal
Quarter I don’t think significant number, but YTDA gain has been about INR21 crores.
Saket Kapoor
Okay. And sir, EBITDA one-off arbitration mentioned here. The book is quarterly booknet purchase INR?
Rajeev Agarwal
Quarter one may book.
Saket Kapoor
Yes, sir. Okay. Okay, sir. Thank you, sir and all the best to the team, sir.
Vimal Kejriwal
Thank you.
Operator
Thank you. The next question comes from the line of Abhijit Singh from ICICI Securities. Please go-ahead.
Abhijeet Singh
Yeah, thank you for the opportunity. Sir, my question is on our expectation of margin expansion in FY ’26 by about 150 bps to 200 bps. Sir, what is the incremental delta that will lead to such kind of expansion? And like we have mentioned, we are already about double-digit in TND and the other bigger piece in the order book is civil. So do we expect civil margins to catch-up or something else?
Vimal Kejriwal
So I think there are three or four things which will happen. One is obviously the T&D margins, as I said, we are almost at double-digit now. So — and with most of the legacy orders in T&D getting completed, we don’t see any negatives in TND happening. So that will obviously be the primary driver. Civil, I think we had a few large orders on metros where the margins have been not very great. And I think most of these orders are getting over this March. Out-of-the four lines which we are doing, I think three will hand over fully to the clients in Chennai and Delhi. So that part of it where the revenues were there, but we are not getting so much margin will come down.
So what will happen is next year, the civil EBITDA will also grow. And thirdly, I think on the railway side, because we have got new orders which are at a higher-margin and if we are able to execute them well, which we are confident, then the railway margins also should start showing something better than what they are. So I think these are the three this — and fourthly, which what we not discussed at least at the PBT level, we do expect that the interest cost will come down significantly. So if you go down further beyond the EBITDA, then we expect the PBT to improve much more and the other thing — Abhijit, other thing which Rajeev is saying is that today P&D is at 59% for the quarter, 57% for nine months. So we expect an extra profit should be around 65% or so, at least above 60% so that — and at a higher-margin. So I think that will in a way combined together to help us in bridging the margin gap which you’re talking about.
Abhijeet Singh
Right, sir. Sir, also on the railways side, like last two quarters, we have seen the order book inching up sequentially after a fall of about five to six quarters now and nine months order inflow has been dominated by the coverage orders. So what gives us confidence that these orders from railways are better in terms of the working capital profile compared to what we saw in the last two years.
Vimal Kejriwal
So Abhijit, what has happened is that in the last four years, most of the orders were on an EPC basis on electrification and speed upgradation, et-cetera. And most of them had required us to work on the, let’s say, the speed upgradation is on the Bombay Delhi track. So Bombay, Delhi track is a very, very — you hardly get five minutes, 10 minutes between two trains. But with the promise in the tender was that we’ll give you four hours, five hours of lock every day. Unfortunately, that is not materialized. That is the reason why we are losing money and with arbitration and all that is happening. What has happened is that now most of the orders, in fact, virtually all the orders which we have taken are either to set-up, let’s say, doubling of a line or gauge conversion where the existing line is shut-down or we are doing a tunnel ventilation, power supply or less in metro. So in short, most of them have got no dependence on getting a shutdown from the railway or a block from the railway. So once that is there, I don’t think execute is a challenge if you don’t — if you have an open field to work on, which is why I think we are very confident that whatever we are doing now would we executed well.
Abhijeet Singh
Right, sir. That would be it from my side. Thank you.
Vimal Kejriwal
Thank you.
Operator
Thank you. The next question comes from the line of Uttam Kumar from Axis Securities. Please go-ahead.
Uttam Kumar Srimal
Yes, sir, good morning and thanks for the opportunity. Sir, you have mentioned in your railway transportation business about. So just wanted to understand what kind of opportunity we are looking at in the segment and what would be the margin in this particular segment, particularly in.
Vimal Kejriwal
So with the margins, so at the time of bidding, we bid at a similar margin of not less than 8% to start with on all the businesses. So difficult to say this is a very small order, gas order overall. But I think the opportunity today, if you look at government has been talking and they have announced at least I have at least of what is, 15 20 projects in. The issue is that we’ll have to see in what format and how they come. They were — earlier they were supposed to be all on an EPC basis, then government converted some of them on HAM, etc. So it would depend upon the final model in which the projects will come. Right now, there is a very larger tender we are talking about in Himachal Pradesh, which is on EPC. So I think we’ll have to wait-and-watch the opportunity. We just wanted to put our foot in because the work is similar to what we do in transmission of setting up ports, etc., and stringing and all. And we have some good technology partners also. There are very few in the world. So we thought that let’s see it’s a new area. And now that it has been given to NHAI, we do expect that it should — it would be contractually good.
Uttam Kumar Srimal
Okay. And sir, in the civil segment, you have mentioned about some defense orders and all that. So what kind of defense orders we are trying to get?
Vimal Kejriwal
So what we have got is actually more-and-more civil in that defense. So there would be residential and office complexes and all that stuff. Yeah, and commercial parts of where they have the command centers and all that stuff. So, but it’s more or less civil, along with obviously some finishing and all that, but it’s primarily civil jobs.
Uttam Kumar Srimal
Okay. Now, sir, coming to the last question with regards to tariff, suppose the tariff is levied. So what kind of impact we will have on our primarily on our balance sheet and profitability moving ahead.
Vimal Kejriwal
Mr impact ca Mexico Pajas $1 million the turnover has may say almost more than half is consumed within Mexico. So what we are supplying to US is $20 million $30 million. We’re expecting to increase the supplies. Let us see what happens. Whatever supply will. It’s not — it’s not only for me. The positive part, which I was talking earlier is maybe that may divert a lot of orders to India. And typically, we have seen the India orders to US and all are more profitable. So I think we’ll have to wait-and-watch the impact. I personally do not see looking at our Mexico business into US being impacted much more heavily or Dusra, Mexico may come. So I think we are happy. The other thing for you to understand is Mexico may order is cash RX, Mexicum order RSA who clients who wanted to made in America as they Call-IT. You may have your government utility is high unkey. Oks have SABC, we were buying a lot of steel from America and then giving it back to the American market. So I think they will have to find a solution for that because allow America still export. So, Bhajaga, if you ask me, am I worried? Right now we are not worried. We’ll have to wait-and-see what happens. And the impact for us are the numbers are very small.
Uttam Kumar Srimal
Okay. Okay, sir. That’s all from my side and wish you all the best.
Vimal Kejriwal
Thank you.
Operator
Thank you. The next question comes from the line of Harshal Mehta from Smart Sync Services. Please go-ahead.
Harshal Mehta
Good morning, sir. Congratulations on good set of numbers.
Vimal Kejriwal
Thanks, Harshal.
Harshal Mehta
Thank you. Sir, so in last con-call, you mentioned that our existing project might be completed in next three or four months. So any update on that? Were we able to conclude that project?
Vimal Kejriwal
I don’t think we have completed finally. I think Station,. So I think. It’s not. So I thought gonna come, but have we completely closed? I don’t think so. I don’t have a clear update on it, but I don’t think so. But Hojay, so we issued a year.
Harshal Mehta
Okay. And the new projects that we have got on the coverage part, are they on the same lines as in related to railway tracks and stations or they are also related to wagons also?
Vimal Kejriwal
So it’s not related to wagons, but yes, related to locos. So a large part is also on the installation of the equipment and the software and the locos.
Harshal Mehta
Understood. And this is also in the JV with our JV partner. Right.
Vimal Kejriwal
We are working. Yeah, we are working with Karnex, yes.
Harshal Mehta
Okay. Thank you. Thanks a lot, sir. All the best. Thanks.
Vimal Kejriwal
Thank you.
Operator
Thank you. The next question comes from the line of Mayank from. Please go-ahead.
Unidentified Participant
Thanks for the opportunity. Sir, one clarification on the conductor part. Are we going into the AL-59 for the aluminum?
Vimal Kejriwal
Yes, we are already manufacturing, yes.
Unidentified Participant
Where we would be competing with the top two, three players, which is approved with the power.
Vimal Kejriwal
So to me, my — it’s not a question of competing, it’s just a short supply.
Unidentified Participant
And sir, on the renewables, just wanted to understand what would be on scope of work-in terms of per megawatt per.
Vimal Kejriwal
The scope of work may the Sarai Kam Karna except the, we don’t get into the module supply part of it, minus the module supply, we do everything. But module installation. So the scope includes our job with where the modules are free supplied by the client. Rest we do everything both on the AC side and the DC side.
Unidentified Participant
Okay, sir. Thank you.
Operator
Thank you. The next question comes from the line of Riya Shah from Investments. Please go-ahead.
Unidentified Participant
Hello. Thank you for giving me the opportunity. My first question is in terms of the water projects, the collection issues we are facing a major leap on the center or the state projects.
Vimal Kejriwal
So ma’am, the client is a state for us. But what happens is if you look at the funding of these projects, typically 40% 50% comes from center and the balance comes from the state. Depending on each state, the ratios are slightly different, but probably you can say half. So I do not know where the problem is sometimes when we talk to them, they say not given them center, they say another state is not ready to give equal, so we are not disbursing. So it’s a little bit of a cat and mouse game. I think it’s now, I think it’s improving because the work is suffering.
Unidentified Participant
Got it. Okay. And in terms of railway, you mentioned that we have a certain labor ratio. So typically, how do we employ these labors? So are there some agencies organized and organized labors, how do we go about it?
Vimal Kejriwal
So we did not talk about labor in railways. We are having a major problem of labor in civil and partly in T&D. But what happens is that we have two types of contracts. One is we employ a labor contractor and you give him on a piece rate basis saying this much foundation, this much cubic meter, whatever way it is and that’s the way it is. But wherever the work is sporadic and there are issues and there you know where it may not be economical for contractors to come in, we do a higher labor and technician against the contractors, but it could be on a time rate rather than a piece rate. So we are the two models which we follow.
Unidentified Participant
These are all organized players or we are local and organized players.
Vimal Kejriwal
Most of them would be — most of them would be unorganized, but now looking at the issues which we are facing, we are seriously looking at things should be more to some more organized players, which obviously would be more expensive and all that, but I think the continued shortage, we may have to do that.
Unidentified Participant
Got it. In terms of oil and gas, you mentioned we are seeing a little slowdown in orders. So typically, what kind of projects are we seeing slowdown.
Vimal Kejriwal
So these would be projects from, let’s say, linking from the port to the refinery or to consumption centers or wherever CGD is coming, then they may want to have gas by gas lines going-in from the refinery or the and all that. So say they are basically cross-country running across three or four states, etc. So getting the right-of-way approvals, etc., have been taking time. And I don’t know for some strange reason, we did see a slowdown in the overall market, okay. But now I think there’s a lot of talk saying that they — they had talked about the national grid of — national gas grid, et-cetera, which now they are again talking. So hopefully, we are hopeful that business will improve.
Unidentified Participant
So oil and gas would typically be for private capex led, right, not public capex.
Vimal Kejriwal
So most of it would be on the public capex, which would be, let’s Indian Oil, ONGC, Oil India, etc. But there are some which have been talking about in the port connectivity, etc., where private sector may come in. Also, what is the other piece which we are doing is the slurry pipelines, which are for steel production. So we are doing a very large slurry pipeline for one of the private players.
Unidentified Participant
Okay. Okay. And in terms of railways, you mentioned that coverage will be the new trigger for us. Going-forward, how do you see this sector apart from coverage growing? And what were the issues you currently faced? If you could just elaborate on that?
Vimal Kejriwal
Is the government even if this budget has allocated INR2,52,000 crores for railways, of which our addressable market we said was around INR1,11,000. So this is about it. The question of how the contract — contracts are executed. I think all the contractors are facing serious concerns, serious problems with the railways, railways are looking at it saying what do we do — need to do to improve it. If they do that, then I think it will become a big area. Otherwise, then you are picking-up selective orders where the contracts are much better, payments can be faster, not linked to very long milestones, etc. So I think that’s the reason why our order book at all has been going down because we have been very selective looking at the history and then the problems which you are facing today.
Unidentified Participant
Okay. Thank you so much.
Vimal Kejriwal
Thanks, thank you.
Operator
Thank you. The next question comes from the line of Saket Kapoor from Kapoor & Company. Please go-ahead.
Saket Kapoor
Great. Thank you, sir for the opportunity. Sir, when we look at our line of operation in the segment, our PAT margins, however, around this 1% to 2% the mark, sir. So what steps are — is the management taking or in the annual? And what should be a sustainable PAT margin sir, taking into account, we are leaders in the T&D segment. So if you could give us some color, sir, how should this PAT margin shape up going ahead? And also for equity raising, sir, are we looking further to raise cap — further equity?
Vimal Kejriwal
No, I don’t think we are looking at raising any further equity. A sustainable — sustainable PAT margin, my view could be anything around 4% to 5%. And on the steps, very clearly we’re talking about the EBITDA going up by at least 150 basis-points sort of next year. Then we talked about interest costs going down and a lot more revenues are coming from Middle-East where hopefully the tax rates are slightly more benign than India.
So I think below the EBITDA line both on the interest cost and also on the tax have some beneficial impact. So EBITDA, tax, so I think the FAT may be improvement, to me the improvement in FAT would be more than the improvement in EBITDA. Very clear.
Saket Kapoor
Significantly PBT significant increase year on year. It is a growth definitely other expenses line item. So that is also that has also shown a grown growth for chart key elements. If we take that other expense line item as a percentage of…
Vimal Kejriwal
It’s basket of at least 15, 20 items.
Saket Kapoor
Legal fees in the category of cables where we operate and ESG segment already. Last year government was unable to spend the allocated amount. So what could have been the reason on allocating 70,000 crore and spending only 29,000 and then creating a total ecosystem where all ECC players are facing issues. So what has resulted into these? Because the government revenues do not reflect in the same direction they have gone up significantly. So if you could explain?
Vimal Kejriwal
He will be able to tell you as to why why the money has not been spent when the contractors have done work.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Vimal Kejriwal for his closing comments.
Vimal Kejriwal
Thank you very much for your continued interest. And I think as I said that we have a large order book in L1. So I think we are very confident of delivering on growth in the coming quarters. Thank you so much. Thanks Ryan. Thank you.
Operator
Thank you. On behalf of KEC International Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.