IRCON - IRCON International Ltd Share Price

Management's outlook for Ircon International Limited indicates cautious optimism for the future, despite recent challenges. The Chairman, Mr. Hari Mohan Gupta, acknowledged that the operational performance has faced pressure due to increased competition, but they are confident in improving performance going forward.

For FY'25, the company reported a total revenue of Rs. 11,131 crore, with a profit after tax (PAT) of Rs. 728 crore and a core EBITDA of Rs. 905 crore. The order book as of March 31, 2025, stands at Rs. 20,347 crore, composed of 58% competitive bidding and 42% nomination-based orders. Management noted that 90% of the order book is derived from domestic projects.

Moving forward, the company has secured an order inflow of Rs. 2,600 crore in FY'25, with Rs. 1,150 crore already received in FY'26. They are targeting FY'26 revenue to remain in the same range as FY'25, but anticipate a slight decline in margins from the current 4.7% due to increased competition"”guiding a decrease of 0.5% to 1%.

Notably, management is focusing on diversifying into new verticals, such as the Kavach train protection system"”which has a business potential exceeding Rs. 1 lakh crore across Indian Railways"”and signaling diagnostics. The first Kavach order amounts to Rs. 253 crore, and ongoing tenders are expected. Furthermore, they are pursuing opportunities in hydro power and have secured a Rs. 453 crore project in Arunachal Pradesh.

In terms of asset monetization, management expressed intent to expedite the realization of gains from completed projects, highlighting a proactive approach to enhance financial flexibility. Overall, the management remains committed to strengthening the order book through strategic bidding while ensuring profitability amid competitive pressures.

Q&A Section: Key Questions and Answers

1. Question: Ma'am could you quantify the one-off during the quarter which led to the lower margins?
   Answer: Yes, we have a provision for LD in our job on DFCC amounting to Rs.108 crores. Additionally, there were losses from jobs such as the Chennai metro amounting to Rs.40 crores. Consolidated-wise, we faced major maintenance issues in a road SPV and operational losses in a coal connectivity project in Chhattisgarh. These are one-off items impacting our P&L.

2. Question: From a medium-term perspective, how should one look at the growth from here on?
   Answer: Currently, we have an order book of Rs.20,500 crores. We expect to maintain turnover in FY'26 around this range, despite competitive margins. We've received Rs.1650 crores in bids during FY'25. We're diversifying into areas like Kavach and signaling diagnostics. We aim for strategic bidding without incurring losses, adapting to market conditions to grow.

3. Question: Is there an intention to hold on to strategic railway and road assets, or are we looking to monetize them?
   Answer: Our goal is to monetize completed projects quickly. We're already beginning this process. While Railway and DIPAM decisions are pivotal, we aim to monetize our operational PPP projects as soon as feasible. For mining, since we're a minority partner, the final call lies with coal companies.

4. Question: How do you intend to take the company from a de-growth phase to a growth phase for FY'27?
   Answer: We acknowledge the need for more orders to transition to growth. We're bidding aggressively across various sectors and focusing on successful entries into new verticals. We believe the market potential remains strong, and we are strategically choosing bidding opportunities to ensure a profitable trajectory forward.

5. Question: What are the opportunities in the segments like signaling diagnostics and Kavach?
   Answer: The Kavach system is aimed at enhancing safety across Indian Railways, targeting over a lakh kilometers of coverage, representing a potential business worth over a lakh crores. Diagnostic systems will progressively cover the railways, and fresh tenders are anticipated for projects like elephant crossings to prevent accidents.

6. Question: On a standalone basis, what is the projected margin considering ongoing losses?
   Answer: Excluding one-off items, we anticipate margins around 5.7-5.75%. For FY'26, our core EBITDA margins are expected in the range of 5-5.25%. While new opportunities like Kavach are beneficial, intense competition in our traditional EPC sector continues to put margin pressures.

7. Question: Can you provide order inflow numbers for FY'25?
   Answer: In FY'25, our order inflow was approximately Rs.2600 crores. As of April and May 2025, we've added around Rs.1100 crores to our order book for FY'26, maintaining a strong inflow trajectory despite market conditions.

8. Question: Why are we guiding for lower margins despite entering new segments?
   Answer: Although segments like Kavach are expected to add value, the predominant EPC projects continue to face stiff competition, leading to margin squeezes. Our guidance reflects a balanced view of these ongoing sector challenges against our new growth avenues.