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Welspun Enterprises Ltd

| Q2 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤12th Nov 25

Summary : Welspun Enterprises reported strong Q2 FY '26 results, securing new water and transport projects, maintaining a robust order book, and focusing on operational efficiency and strategic growth.

Management Perspective positive : "I'm pleased to welcome you all... I'm happy to share that we have received a new order.""Proud to have emerged as the L1 bidder in this marquee BOT project.""Our results demonstrate resilience and strengthening profitability with a solid balance sheet.""We are confident in our continued ability to generate sustainable growth and enhance value.""We believe that we still have a lot of room for improvement of margins going forward."

Concall Report Analysis & Insights

Business Overview

  1. Secured a new 910 MLD water treatment plant order in Panjrapur, Mumbai.
  2. Emerged as L1 bidder for the INR7,300 crore Pune-Shirur Elevated Highway BOT project.
  3. Consolidated order book stands at INR15,615 crores, including O&M contracts.
  4. Completed and inaugurated the Aunta-Simaria Road cable-stayed bridge project.
  5. Welspun Michigan reported 60% year-on-year revenue growth to INR169 crores.

Future Growth Prospects

  1. Anticipating strong traction in BOT toll and HAM projects at state and national levels.
  2. Expanding opportunities in the tunneling segment for transport and water projects.
  3. Raising INR1,000 crores through preferential warrants to capitalize on opportunities.
  4. Strengthening organizational structure and focusing on digitalization initiatives.
  5. Exploring new technologies for complex wastewater and sludge management solutions.

Management Insights

  1. On track to achieve the FY '26 revenue target of INR4,000 crores at consolidated level.
  2. Consolidated EBITDA grew 28% year-on-year to INR192 crores in Q2 FY '26.
  3. Maintained a strong financial position with INR1,043 crores in consolidated cash reserves.
  4. Committed to operational efficiency, margin resilience, and sustainable value creation.
  5. Awarded Wealth Creator Award 2025, reaffirming project management excellence.

Signs of Skepticism

  1. New BOT project not expected to contribute substantially to top line in FY '26.
  2. Management refrained from giving updated order book guidance for the next 5 months.
  3. Acknowledged a current slowdown in NHAI orders, despite strong targets.
  4. Timeline for oil and gas block monetization remains vague, pending agreements.

Risk Factors

  1. Project execution is subject to climate support and statutory approvals for new projects.
  2. Delays experienced in Varanasi-Aurangabad project due to work front availability and local disturbances.
  3. Current slowdown in NHAI order awards, though targets remain strong.
  4. Geographical diversification introduces country-specific risks.

Good To Know

  1. Welspun Michigan's order book is 60% tunneling, 22% pumping stations, and 14% rehabilitation projects.
  2. Dharavi wastewater treatment facility and Bhandup WTP are on track for completion by 2027 and 2029, respectively.
  3. SmartOps, a technology-driven JV, has four projects live across India.
  4. Successfully migrated to SAP RISE for S/4HANA, enhancing digital transformation.
  5. Aunta-Simaria project monetization efforts are underway, expected by Q4 FY '26 or Q1 FY '27.

Key Drivers

  1. Secured new 910 MLD water plant order.
  2. L1 bidder for large Pune-Shirur BOT.
  3. Strong consolidated order book of INR15,615 crores.
  4. Operational efficiency drives healthy EBITDA margin growth.

Key Analyst Discussions

Competitive Environment

  1. Company focuses on PPP, complex, and marquee projects to differentiate itself.
  2. Unique offerings in water through technology, strong project management, and digitization.
  3. Welspun Michigan's order book is heavily weighted towards tunneling projects.
  4. SmartOps JV provides modular, scalable, cost-effective water body rejuvenation solutions.

Market Trends & Consumer Behavior

  1. Anticipating strong market traction in BOT toll and HAM projects.
  2. Water segment is a basic necessity and a focus area for technology-led solutions.
  3. Tunneling is identified as one of the fastest-growing industries for the next decade.
  4. Government policies and funding opportunities support water treatment and infrastructure development.

Financial Highlights

  1. Margins improve towards project completion due to conservative accounting and contingency release.
  2. Overall sustainable EBIT margin guidance is around 18% for the company.
  3. New road projects will likely have lower initial margins during construction phases.
  4. Tunneling and rehabilitation segments show 20-22% margins, expected to improve with scale.
  5. Q2 FY '26 consolidated PAT increased 63% year-on-year to INR99 crores.

Product Composition

  1. Diversified across Transport, Water, and Tunneling/Rehabilitation segments.
  2. All major water projects include O&M components for long-term recurring revenue.
  3. Executing multiple rehabilitation projects using specialized techniques like glass reinforced polymers.
  4. Exploring new technologies for sludge management beyond SmartOps.

Strategic Considerations

  1. Raising capital to strengthen net worth for bidding on future PPP projects.
  2. Actively engaged in resolving oil and gas block evacuation and processing issues.
  3. Open to value-accretive acquisitions of projects or companies across verticals.
  4. Exploring tie-ups and collaborations for new sludge management technologies.