RITES Ltd

Good morning, ladies and gentlemen. I am Karthikeyan, moderator for this conference.

Welcome to the conference call of RITES Limited to discuss its Q2 FY26 Results. We have with us today, Mr. Rahul Mithal, Chairman and Managing Director; Dr. Deepak Tripathi, Director (Technical) and Director (Projects)- (Additional Charge) and Mr. Krishna Gopal Agarwal, Director (Finance) and Chief Financial Officer.

At this moment, all participants are in listen-only mode. Later, we will conduct a question-and- answer session. At that time, if you have a question, please press * and 1 on your telephone keypad. Please note, this conference is being recorded and in the interest of time and fairness to all participants, you are requested to restrict yourself to one question per participant. Time permits, you may come back in the question queue.

Now, I would like to hand over the floor to Mr. Rahul Mithal, Chairman and Managing Director, RITES Limited. Thank you, and over to you, sir.

Good morning. Let me start with giving the Safe Harbor statement. The presentation and the press release, which we uploaded on our website and exchanges yesterday and discussions during the call today may have some forward-looking statements. These statements consider the environment we see as of today and obviously carry a risk in terms of uncertainty because of which the actual results could be different, and we do not undertake to update those statements periodically.

Let me give you a brief overview of the overall performance of Q2, and then I leave the floor open for questions. It's been a satisfying quarter for us. In terms of the roadmap that we have set for ourselves at the beginning of the FY, if I look at it, five key points.

margins, which as you see, the minimum baseline of about 20% in EBITDA margins and 15%- odd in PAT margins, we have been above that.

So in a nutshell, the direction which we had set, the key levers, the key operating points, we are moving in that direction. And the roadmap, as I said, which we have set ourselves in the beginning of the financial year, we are in line with that roadmap, moving to try and definitely surpass last year's performance.

So that, in a nutshell, are the opening comments, and I'll leave the floor open for specific questions.

Thank you, sir. Now, we begin with the question-and-answer session. If you have a question, please press * and 1 on your telephone keypad. In the interest of time and fairness to all participants, you are requested to restrict yourselves to one question per participant. Time permits, you may join back the question queue. We will wait for a moment while the question queue assembles. Ladies and gentlemen, to ask a question, please press * and 1 on your

The first question comes from the line of Parimal Mithani from Credential Investments. Please go ahead.

Thanks for the opportunity, and congratulations on a good set of numbers.

Thank you, Parimal. Good morning.

Yeah. So, I just wanted to know: in consultancy, the margin that you have grown, is it now steady state of margin that we'll have going forward from here?

So, you see, normally, consultancy margins remain in the range of about ~30% odd. And we would like to maintain that. In a particular quarter, some low margin orders or in some high

margin orders may contribute. But by and large, on an equalized basis, on a long-term basis, those are the range of margins in the consultancy stream that we would like to maintain, and we have been maintaining that. If you see in the last 3-4 quarters, even if in this competitive regime and tough competition and tough margin, on an average basis, if you see in the preceding quarter, we'll be maintaining about 30% margins in the consultancy.

And is it fair to assume that we'll have better execution and consultancy going ahead?

Yes. So, this quarter, in any case, consultancy and export are the two segments which have contributed to the overall performance. The turnkey is down by INR 90 crore YoY. And this INR 90 crore was compensated by consultancy & export. That's why you see the revenue nearly flat, about 1.5% growth only. But because of the change in mix, the INR 90 crore contributed to a higher margin mix, and that's why the EBITDA and PAT and margins have gone up.

So consultancy wise this quarter has seen good execution, there has been about a 12% growth both YoY as well as sequentially. We'll continue to see better execution.

Okay, sir. Thank you. I'll join back in the queue. Thank you, sir.

Thank you. Next question comes from the line of Raghav Maheshwari from Kanakia Wealth Management. Please go ahead.

Hi, Sir. Congratulations on a great set of numbers. Sir, we are seeing improvement in the margins. We are seeing good growth. Can you show some light upon the top-line guidance?

Yes. So, the top line has been flat, as I mentioned to Parimal, and that's primarily because the turnkey segment, which contributes to the top line, that about more than two-third of the order book is less than a year old. It's about eight, ten months old. And normally, the execution at the ground level and revenue booking starts nearly at the end of the year. So, Q3, Q4 by the time these orders reach a time of about a year, they will start contributing to revenue.

So, even more INR 90 crore have been the hit due to turnkey, but in terms of bottom line, it resulted in a hit of only about INR 1 crore to INR 2 crore because the turnkey margins are always in the range of about 1% or 2%. So, when turnkey grows that will add to the top line.

And with our continued stress on growth in the consultancy and exports, we will see the growth in the top line as we had laid down at the beginning of the FY.

And what percentage growth are we looking at, if you can share the number?

So, it depends on Q3, Q4 to what extent we are able to execute, but definitely aiming to see at least about trying to reach somewhere near a double-digit growth. Again, the coming months in terms of execution on the top line, on the turnkey projects, we'll see that.

Okay. And the last question, what is the average turnaround time for the order book if you can give a bifurcation?

It's a very difficult question to answer with one number because the four streams of revenue have different turnaround times.

What I'm asking for bifurcation.

Yes. So, a turnkey project takes about three to four years. An export project takes anything from two to two and a half years. Consultancy project could take anything from 90 days to about three years to four years if it is linked to the execution of the project.

Understood, sir. Thank you, sir, and all the best.

The next question comes from the line of Harshid Kapadiya from Elara Securities. Please go

Yes. Thanks for the opportunity. And sir, congrats on a recovery on the export side and stable consultancy growth. My few question starts with, sir, so you mentioned some INR 90 crore hit is what you have done in turnkey. So, that particular revenue would be then booked in Q3? Is that what we'll be able to see when we see the Q3 results?

Well, it may not be INR 90 crore exactly because, as I said, more than two-third of the turnkey order book of INR 4,300 crore is about eight, ten months old. And considering a lifespan of about three years to four years, the initial designs, approvals, etc. at the site level, including fixing of the executing agency, the revenue booking normally, we have seen starts by the end of the first year. So, I foresee a bump in the turnkey revenue beginning from Q4/Q1. So while the efforts will be there, and that was my answer to the previous question also. And the gentleman was asking regarding the guidance for the top line growth.

We'll see how to best possible we can extract the turnkey execution in Q3, Q4, which will give us a better idea over the end of Q3 where we are heading in terms of top line growth. But definitely, the emphasis on trying to make good to the extent possible from consultancy and export, which was the effort in Q2, would continue in Q3, Q4. While the order size are much smaller; and therefore, they may not be able to fully contribute in terms of equalizing the top line, but definitely being better margin contributor, they contribute better to the bottom line.

On domestic consultancy side, could you be able to share, sir, how has quality assurance grown within the consultancy for you? And within domestic consultancy, any specific area, whether it is related to housing or rail or airports or ropeways, what has seen the growth, sir?

Yes, Harshid. So, one very encouraging trend is that the quality assurance vertical has the tough times which we have seen in the last one and a half to two years but it has been steadily, sequentially improving, increasing and trying to garner new clients. And I must say that this has been one of the best quarters in the last six, seven trailing quarters in terms of reaching not only close to the levels which we were in terms of the revenue.

Yes, margins are definitely now tougher being more in the competitive environment. In fact, more than two-thirds of the revenue in the quality assurance vertical is coming from the non- IR client base, which shows the diversification, which we have been able to do in a span of about two years and now generating revenue from those clients. So, quality assurance is growing steadily.

Another very good area, which is contributing to the consultancy revenue is, yes, our strong point in terms of rail infra as well as the third party quality orders that we are doing across various sectors of infrastructure, whether it is the highways or the buildings, various infrastructure. As also, we are getting good PMC contribution for some of the building projects that we are doing. So across sectors, the consultancy revenue has contributing and growing.

And that's why you see about a 10% to 12% growth both YoY and sequentially in consultancy revenue.

Understood, sir. That's really encouraging. Just a question on exports, sir. So, now that we have started seeing exports, what has been the delivery for us? This is for how many locos that we have delivered and how many coaches we have delivered?

So, the first deliveries have started of the locomotives, the Mozambique order of 10 locomotives. So in quarter two, we could dispatch two locomotives. And that's when you see break in the hiatus for about nearly one and a half, two years. And now, export revenue has started generating revenue and it will be steady now in every quarter. In fact, subsequent to that, the next two locomotives have also been shipped out in the month of October, and they will contribute to the revenue in Q3. So, we continue to push three to four locomotives. We are hopeful that these 10 locomotives definitely by Q1 of next year, we should be able to complete this order.

The coaches order, as I said, had a slight gap in the middle of last year for about four, five months that we have picked up now. There are about seven types of coaches, for which the designs of prototypes are more or less in the final stage. So, we are hopeful that the prototypes will start getting manufactured. And the first rake, we are definitely aiming to send out by Q1 of next year.

Understood, sir. I have more questions. I'll join in the question queue.

Thank you. The next question comes from the line of Uttam Srimal from Axis Securities Limited.

Uttam Srimal

Yes sir. Very good morning, sir. And congratulations on good set of numbers. Sir, my question pertains to our export order book, which is currently around INR 1,541 crore. So, how much activation we are building on the next two quarters and in FY27?

Yes. Good morning. So, the three key elements of this order books are the Mozambique order, the Bangladesh coaches order and various orders of the in-service diesel locomotives to South Africa. We are definitely trying to complete the Mozambique order by the Q1. As I said, two locomotives, we have booked the revenue and see the booking of the revenue happens when the locomotives finally get the bill of lading. So even if they are ready, but only when they get loaded onto the vessel at the Mumbai Port, that's when we recognize the revenue.

The next two locomotives, which were shipped out in October, will figure in the revenue of Q3. We are trying to see that about six to seven locomotives get booked in this FY26 and the balance definitely by Q1 of FY26.

As I mentioned regarding the coaches’ export project order to Bangladesh, these are 200 coaches and seven different types of coaches. So the first rake, which Bangladesh Railways asked for, consists of four types of coaches, where we are at the final stages of getting the prototypes approved. And we are wanting to hoping that we can get the four prototype coaches manufactured and approved by them in Q4 so that the bulk manufacture starts in the first rake of 20 coaches moves out by Q1.

So, your specific question regarding FY27, once this first rake moves out and the prototype would have been got approved, then I think one rake per quarter would definitely be the aim for FY27 for the Bangladesh order.

U‚am Srimal

Okay, sir. I shall come back in a queue. Thanks.

Yes. Thank you.

Thank you. The next question comes from the line of Gaurav, an individual investor. Please go

Hi sir. Good morning. Congratulations on the good set of numbers and taking my questions.

Thank you so much for that. I just have one question. Can you just shed some light on the Bangladesh coaches order and the number of inductions in Q2?

So, I just mentioned in my reply to the previous question, in the Bangladesh order, there are 200 coaches and seven different types of coaches. The first shipment, we are aiming of a rake of 20 coaches by Q1 of FY27. The prototypes are in the stage of final approval and

manufacture by Q4. And once the prototypes are manufactured and approved, the bulk manufacturing will start.

So starting from Q1, definitely, the next FY, the rake consisting of 20 coaches will subsequently be exported. A rake consisting of 20 coaches would go at one time. So, about 10 rakes are the total order for about 200 coaches.

Okay. Thank you. Thank you so much, sir. That's all from my side. Thank you.

Thank you. The next question comes from the line of Viraj Mithani from Jupiter Financial.

Yes, thank you for the opportunity, sir. Sir, my question is the order book which we have, the 50% comes off the PMC business, right? So, are we changing our trend?

Good morning, Viraj. No. See, the breakup of the order book of INR 9,090 crore, there's about INR 4,300 crore turnkey, then INR 2,930 consultancy, export INR 1,540 crore and balance are leasing and REMC. So, we are very clear. We are not a construction company. We are purely a consultancy company. And the turnkey order book that you also see, it is because it's a method of accountal.

Our scope of work and everything remains same of a consultant design. For example, the most recent order, which you saw, we got last week only for the NIMHANS facility at Bangalore, which is about INR 373 crore, our role in that is of a consultant only.

It's a question of the accountal that the cost of the total project, including our consultancy fee flows through our top line, our balance sheet. Otherwise, we are very clear, we are a consultancy company, we are not a construction. So whether it is the turnkey order or the consultancy order, it's a question of only the method of financial accountal, our scope of work remains exactly the same.

Okay. And sir, so with this export order kicking in, we'll close the year more than the last year level? What will be the guidance for current year and the next year?

Yes, Viraj. With the export revenue now kicking in and building up and consultancy showing a steady growth of 10%-plus and as also the young order book in turnkey will start generating revenue definitely by end of the FY, we should be definitely a minimum be able to touch the levels of last year top and bottom line, but we are definitely aspiring to grow above that both in top and bottom lines.

Thank you so much, sir. Next, we have a follow-up question from the line of Parimal Mithani from Credential Investments. Please go ahead.

Sir, I just wanted to know if the MoU signed with parties in in Middle-East, any updates there?

And also, your JV with DNV, can you just highlight if anything meaningful is happening there, sir?

Okay. Yeah. So, first your first question first. The MOUs in Middle-East, those have, in a short period of time of less than one year, started giving us gains already. The MoU with Etihad Rail has got us work in Jordan, which we are doing with them. We are also now partnering with them in providing consultancy services by deploying our people and our expertise in their various projects in Middle-East and beyond. And we see in such a short time, we are able to capitalize on that, and we see huge potential moving forward. We've already set up an office in UAE. So, I see this grow moving forward.

The other question regarding the partnership with DNV, Italy was regarding the ISA certification, which we are doing for Vande Bharat coaches for the Indian Railways. And it's been moving successfully. And we are doing the ISA certification for manufacture of new Vande Bharat rakes.

Okay, sir. And sir, just last one, in terms of leasing business, do we see any traction going ahead more? Because we're seeing a good growth there, the first half.

Yes, leasing business has been substantially growing despite newer players trying to come in and trying to hit the margins. But we are growing sequentially. We've already reached the target of being more than 100-plus locomotives of our own, which we are leasing besides doing O&M of clients' locomotives.

So, the way we are getting orders in in leasing constantly, this is a growing segment both in terms of the revenue as well as the contribution to the bottom line.

Okay, sir. Thank you. Thank you very much.

We have a follow-up question from Viraj Mithani from Jupiter Financial. Please go ahead.

Yes, sir. My question was, we signed so many MOUs with so many companies. How is it going to help us? Like, anything materially happening there?

Yes, Viraj. All these MOUs in some way or the other, the umbrella MoUs and it'll differ, obviously, from case to case and geography to geography. But as I mentioned to Parimal in the last question, for example, the MoU with Etihad Rail has helped us already expand to new geographies where we were primarily operating in Africa, Southeast Asia, Latin America, now we have started getting work in the Middle-East geography.

So similarly, MoUs in the domestic sector with various entities. And one MOU, like I mentioned, in the inspection quality assurance vertical, which has helped us jointly do the ISA certification for Vande Bharat rakes. So similarly, in consultancy, our MOUs with various players depending on where we end up doing work in a particular bid, in a particular geography. Each one of them have different potential. And that's why we very carefully enter into strategic MOUs.

We recently entered into an MoU last week, you must have seen with the DG naval projects in Mumbai. So, we see a huge -- we're already working with them in in one or two projects, and we see that more potential in that sector.

Okay. And sir, my question is on our policy of exports now with this two orders kicking in. Have we made some goals for exports as a segment?

Yes. Our goal for export segment is, one, that we will continue to try and achieve one order a quarter, which we have been doing now for about seven, eight trailing quarters. We will continue to get that. And normally, the export order starts generating revenue after about one and a half, two years, about 18 months or so. And that's why you see the first order that we got in early 2024, that has got generated revenue in Q2 now.

So with this, you will see over a period of time. And one of the objectives is that once now we have a sufficient variety and number of export orders, what we want to avoid is spikes in booking of the export revenue. Like you saw it in the last two, three years, there was hardly any contribution by the export revenue. And now our aim is that every quarter, you don't see a blank in the export revenue, you see a substantial contribution from the export revenue. So, that's one objective, which we will definitely achieve. Now, you'll see that regularly in the coming quarters of revenue from export vertical.

Okay. That's it from my side. All the best, sir.

Thank you. Thank you, Viraj.

Thank you. Next, we have a follow-up question from Raghav Maheshwari from Kanakia Wealth Management. Please go ahead.

Yes. So sir, just a couple of follow-ups on the order intake. We have been maintaining one order per day track record for past many quarters now. To understand a bit upon the competitive landscape, how are we going to maintain that? First question. And second is, for that matter, what is the average ticket size of the order that we take?

So rather, the first question is that as the competitive scenario is evolving more and more, when we set this target about eight quarters back, we were in the range of about 0.6, 0.7 strike rate. And we had to do a lot of business reengineering to be able to reach that milestone. And we have set few boundary lines both in not sacrificing the margin beyond a certain point. And two, not picking up small ticket size orders just for getting number of orders. So, with those broad boundary lines in each of the 13 verticals that we have, various sectors, we have now been able to maintain that. So if you see, it's not only the number of one order a day, it's also the value.

For example, we got in Q2 about 150 orders totalling to INR 850 crore. And you could see a net addition in the order book from June 30 to September 30 of INR 300 crore. So, while the size of the order may vary depending on a particular sector or the nature of work, because as you see, we have four broad streams of revenue. But what we ensure is that we will not pick up, as I said, two red lines. One, ticket size of orders below a certain value just to increase the number of orders. And two, sacrifice the margin and unnecessarily dilute our level of quality in terms of the execution of order that we intend to do.

Can you share that, like, the minimum order average value that you would not go beyond?

You see, again, it varies from each of the different verticals. It varies on the four different streams of revenue where the size of order can be huge in terms of export or in terms of turnkey segment. But in terms of some consultancy, they could be small orders. In consultancy,

there are three, four different types of work that we do. We could do a DPR, which is, again, a smaller value order. It could be a PMC, where it's a percentage-based order, where your value depends on a percentage of the infrastructure work or it could be a third-party audit, TPI, third party inspection of a completed infrastructure project. So again, to give one number would be a misnomer. But yes, for each of the different verticals as well as for each of the different scopes of work, we have set some internal red lines for both in terms of the ticket size as well as the margins that we claim.

Understood, sir. Okay, sir. Thank you so much, sir. That's it from my side.

Thank you. Next, we have a follow-up question from Gaurav, an individual investor. Please go

Hi, sir. Thank you again for taking my question. I just wanted to know about the number of employees. Last year, it was around in the range of 2,700 and now increased to 2,800-plus. So, where do you see this number going? And what were the additions in H1?

So, yes, we are at about 2,800, and we are considering that our order size is constantly increasing. In H1, we have inducted about 300 people. And you would see that only there's a net increase of roughly about 100 because a large number of superannuations have also been happening because considering that we are about 51 years old, there was a huge induction in the company in its initial years in the '90s when the company was diversifying, growing in its 2-3 decade. And those are the large number of employees, which are now in the span of three years to four years superannuation after completing about 30, 35 years of service.

So, while there is a large number of superannuation, we are inducting in a big way so that net, you can see an increase. And this trend of superannuation will plateau down after about maybe a year or year and a half or so. However, our induction is going to continue both for our project-

based employees, which as we get more and more orders, we are inducting employees on a specific project. So, this number overall, which includes both our regular employees and project-based employees, will go on increasing as you see in every successive quarter.

Thank you, sir. Thank you. That's it from my side. Thank you.

Thank you. Next, we have a follow-up question from Harshid Kapadiya from Elara Securities.

Yes. Hi. Sorry, sir, I missed the call last time. So, just wanted to check where are we on the export order inflow, sir, which we have been targeting one order a year?

Yes. Harshid, in fact, it's one order a quarter. We have set ourselves a target of one order a quarter, eight quarters back, and we are maintaining that. And this quarter also, we got that one order. This is 10 in service locomotives to South Africa at about INR 160 crore.

So, we had set ourselves a target at the beginning of 2024 of trying to get one export order a quarter, and we are maintaining that successively for about seven, eight trailing quarters now.

Okay. And for, let's say, second half also, you expect some of the order announcements to come and our target is largely Middle-East and Africa as a market, sir?

In terms of export of rolling stock, it is primarily Africa and Southeast Asia. And as I said, all our efforts are on to maintain one export order a quarter. And that is the basic reason, as I mentioned a few questions back, is very important to have a diversified large number of orders in the export order book so that they are at different stages of execution. And despite of revenue generation from the export segment, which we suffered in the last two, three years, there was a gap, if you see, we will now be able to ensure, and that's the strategy that every

quarter, you see some contribution, this being the first quarter after a long gap that you saw an export revenue of INR 60 crore, that now on a regular basis, every quarter, we should be able to have a contribution from the export revenue.

And that is only possible if you have large number of export orders in different geographies at different stages of manufacture and execution.

And all these are competitive bidding, as in global competitive bidding, or are these on nomination business, sir?

Most of them were on competitive bidding, but some of these i.e. the South Africa in service locomotives orders, these were on nomination because we have -- this is a proprietary kind of work. We took a lot of initiative in trying to finalize the design to use the in-service locomotives, which Indian Railways has large number of diesel locomotives now and are available because of electrification. How best to modify them to the gauge and customize them to the requirement of South Africa and be able to get the designs modified and approved by them and export to them.

So, these are a very kind of a proprietary design-specific work, which we are working on, and we've got some orders on that from South Africa. But the bigger orders from Mozambique and Bangladesh were all competitive.

Fine, sir. I have few more questions. I'll join in the queue.

Yeah.

Thank you. The next question comes from the line of Anand B from Ksema Wealth. Please go

Good morning. I just wanted to know the margins that you earn differentiate between, let's say, margins that you earn from consultancy orders, margins that you earn from export, margins that you earn from turnkey. Can you just give a breakup of that?

Yes. So, the margins traditionally in the consultancy are the highest. They are in the range of 30%- odd. The turnkeys are always lower. They are about 1.2%, 1.1%. And export because this is the first order, the first quarter that the revenue has been booked. So, while this is in the range of about 10%, and this is the kind of range, maybe it'll be a better picture as revenues flow in over two, three successive quarters because the cost booking and the revenue, etc. will equalize and we'll be able to get a better idea of the margins.

In terms of leasing, our margins have always been in the range of about 30%-odd. So, these are the four broad segments of margins. As you see, the large range from turnkey to consultancy to export to leasing.

Okay. And final question, what sort of revenue division that you see between these four key segments this year and next year as well?

As I mentioned, the turnkey is they are all young order book. So while this quarter, you've seen a very low contribution from turnkey. This will start growing by Q4/Q1. And in terms of its contribution to the top line, it will definitely grow. Consultancy has been growing steadily at the rate of 10%, 12%, which we will aim that it continues growing.

Export, the revenue booking has started. And we definitely as the roadmap that I laid out for the Mozambique locos as well as the Bangladesh coaches, we will definitely see revenue coming in every quarter. So the mix between the various segments may differ from quarter to quarter, but that's the trend which you can see. And maybe a better picture would emerge of the total overall percentage of each of the segment over an annual basis. So in a particular quarter, it may vary depending on the deliveries.

Okay. So, I think to annual also, but just to get some clarification. So let's say, if the share of export revenue goes up, does that mean, like, the share of revenue, let's say, turnkey or leasing comes down because of that? Or how does it work? Like, what grows vis-a-vis to another?

No, they are not interlinked. You see, the point is that overall, there are two broad directives or two broad guardrails of the things that the overall things that we want to achieve. And that's the overall growth in the top and bottom line, while still securing our overall EBITDA margins at 20%-plus and PAT margins of 15% red line minimum, both these two 20% and 15%.

Now as I explained, the variation in margins across the four streams is so large, what we definitely try and achieve while we don't sacrifice or pull up one for the other, but we definitely keep an interblend mix between the four segments so that the overall, there is a growth in top line, bottom line with these two red lines having been maintained of 15% and 20% in EBITDA and PAT margins.

Okay. Thank you so much.

Thank you. Next, we have a follow-up question from Viraj Mithani from Jupiter Financial.

Yes, sir. Thank you for the opportunity. Sir, my question is what will be your OpEx and what will be our dividend policy? Would it the same as last year's or some change will be there?

Yes, Viraj. I have committed always in the last more than a number of quarters that you will not come up with any surprise of us suddenly putting our capital somewhere or doing something away from our basic business model or suddenly changing our colour from a consultancy company to some other company. So, we are very clear in our strategy and our business model, and we will continue to try and improve on that and give better performance.

So with that, our basic requirement of being a debt-free company, low-CapEx company, literally minimum working capital requirement, I don't foresee any reason of us not maintaining the healthy dividend payout ratio that we have been maintaining. And as you'll see this quarter also, we maintained about 94% dividend payout ratio.

Okay. Thank you, sir. Thank you.

Thank you. The next question comes from the line of Sahaj Arora, an individual investor. Please go ahead.

Hi. Good morning, sir. Thanks for the opportunity. I just wanted to check with you. Like you said, in the PMC business, due to the accounting policies, you have to, like, pass it through the revenue. What percentage of that revenue would be our consultancy income?

Not in the PMC business, in the turnkey business.

Sorry.

In the turnkey business, the revenue passes through us. So again, we get most of our orders on competitive basis. So for example, let's say, our consultancy fee for discussion is about 5% or 6%. Now, if we had got that as a consultancy order, our value of order would have been INR 6 crore. If we get it as a turnkey order, its value is INR 106 crore.

So, if it's a turnkey order, INR 106 crore passes through our balance sheet. If that order was a pure consultancy order, INR 6 crore would pass through our balance sheet. That's the only difference in accountal. Our scope of work and responsibility, everything remains identical.

And the margins also remain identical like the consultancy business?

No. Obviously, because the margins in a turnkey business, the denominator being much larger, they are in the range of 2%-odd, 1% to 2%. And consultancy, definitely, it is much larger, in the range of about 30%-odd.

Yeah, but like you said, INR 6 crore would be the consultancy income. On that, the margins would be what you guide for the consultancy business, is that correct understanding?

If it was a consultancy order, if the order was in the form of a consultancy order, if the value of the order was INR 6 crore, then it would be accounted in our consultancy order book and the margins would be higher. But if the order value would be INR 106 crore, then it would be accounted for in our turnkey order book and the margins and the contribution from the margins in the turnkey could be much lesser.

Okay. Thank you, sir.

Right.

telephone keypad. In the interest of time and fairness to all participants, you are requested to restrict yourself to one question per participant.

Next, we have a follow-up question from Harshid Kapadiya from Elara Securities. Please go

Yes. Thanks for the opportunity again, sir. Just wanted to check with you, since you mentioned that after first year, the turnkey construction generally started booking the revenue. So, when is the peak revenue expected from your INR 4,000 crore order book? Will it be like FY28-29? Is that correct?

I would see the revenue start picking up in a big way by latter part of FY27. Because as I mentioned at the outset, about two-thirds of this order book are young. They are about eight to ten months old, and I foresee them starting to generate revenue by Q4 or maybe Q1 of next FY.

But you would see a bump coming in from latter part of FY27.

Understood, sir. Thanks for the clarification. And just on consultancy, you had said that, is there any large order expectation which is there in the pipeline, like one we heard about, there's a high-speed rail corridor, which is where the consultancy work is out for Delhi connecting to Jammu?

So, are you guys participating in any other such large consultancy tender, which is out, which, if we win, could be a bump up for us?

Harshid, I would not like to speculate on orders which are in the pipeline, but I can only say maintaining one-plus order a day, we are bidding on large number of orders. And more than two-thirds of these, about 70% are on a competitive basis. So, whether it is domestic or international, we are bidding for a large number of consultancy orders across various sectors, including rail, infra, etc. And we will keep most recently, we got the IIM Bangalore PMC order in our building vertical, which was about 14 crore. So, we continue to get the orders.

In our QA vertical, we've got orders for various consultancy work in the QA. So, we will continue to bid, but it'll not be proper for me to speculate an order that are in pipeline.

Fair enough, sir. No problem. Thanks for answering all the questioning. Wish you all the best.

Thank you, Harshid.

Thank you. Next, we have a follow-up question from Anand B from Ksema Wealth Private Limited. Please go ahead.

Thanks for the opportunity again. I just want to know what would be like the seasonality of your business? I mean, I agree that export will be, is this a new what do you say, see one export a quarter as well. But for consultancy, turnkey and leasing, what will be the seasonality across the four quarters? Which quarter will do better? Which quarter will do not that great?

Yeah. So, I was saying, Anand, that in case you lost me, now we are getting revenue from each of these streams, for example, in export. The Mozambique order that we got in '24 early, early 2024, this was the first quarter that it started generating revenue because the locomotives have started getting manufactured and started getting exported. And now, we see that continuously, whether it's the Bangladesh order or the Mozambique order, the export stream will generate revenue continuously irrespective of the seasonality in every quarter.

Similarly, in the turnkey, the young order book, they are now in the stage that by Q1, latest of next year, you will see a substantial contribution from the young turnkey orders because they would be about 12 months to 15 months old and execution would start at the ground level.

Consultancy orders consist we have a large bouquet of consultancy orders, small and big. And they generate revenue regularly on every quarter irrespective of the particular quarter. So, that's why you see a steady growth of about 10% to 12%, both YoY and sequentially in the consultancy segment.

So, each of these segments in the coming quarters have a different time line of generating revenue, turnkey being the one which will start seeing substantial increase in the next FY.

Okay. Thank you.

Thank you. As there are no further questions, I would now like to hand over the call to management for their closing comments.

Thank you. Thank you all for taking our time and asking us about our performance. As I said at the outset, this has been a satisfying quarter for our team that we are moving in the right direction in the roadmap, in line with the roadmap that we had set at the beginning of the FY.

And I'm sure that we will continue our focus on improved execution in Q3, Q4, so that definitely not only touch the levels of last year, but try and exceed them both in top and bottom line while securing our margin, definitely exceed the top and bottom line by a substantial quantum.

Thank you very much.

Thank you, sir. Thank you all for being a part of the conference call. If you need any further information or clarification, please email at investors@rites.com. Ladies and gentlemen, this concludes your conference for today. Thank you.

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