Summary
KNR Constructions Limited - Q3 FY26 Earnings Call Summary Friday, February 06, 2026 12:30 PM
Event Participants
Executives 2 K. Jalandhar Reddy (Executive Director), K. Venkata Ram Rao (General Manager, Finance & Accounts)
Analysts 6 Bhavin Modi, Deepashri Joshi, Dheeraj Kripalani, Niteen S. Dharmawat, Ritesh Poladia, Shravan Shah, Vaibhav Shah, Vasudev
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Order Book | ₹8,849 crores | Split as Road (29%), Mining (40%), Irrigation (19%), Pipeline (12%); includes ₹3,500 crore mining project. |
| Revenue (Standalone) | ₹585 crores | Decelerated due to projects reaching the “fag end” and muted awarding in earlier quarters. |
| EBITDA (Standalone) | ₹30 crores | Margin at 5.2%; impacted by ₹20 crore additional viaduct cost and higher low-margin subcontracting. |
| PAT (Standalone) | ₹18 crores | Reflected the sharp decline in operational margins and execution slowdown. |
| Revenue (Consolidated) | ₹743 crores | Higher than standalone due to contributions from 100% owned HAM SPVs. |
| EBITDA (Consolidated) | ₹167 crores | Margin at 22.4%; bolstered by the inclusion of HAM asset operations. |
| PAT (Consolidated) | ₹104 crores | Healthy consolidated PAT despite standalone execution headwinds. |
| Working Capital Days | 82 days | Improved from 93 days in March 2025; management continues to focus on liquidating inventory. |
| Net Debt to Equity (Consolidated) | 0.5x | Increased from 0.41x in March 2025; expected to drop to ~₹500 crores post-asset monetization. |
Geographic & Segment Commentary
- Roads & Highways: Significant slowdown in execution as several projects (Ramanattukara, Valanchery, Chittor-Thatchur) have reached 97%-99% completion. Project awarding by NHAI/MoRTH remained muted in 9M FY26, but a pipeline of ₹1.5 trillion in bids has been invited for upcoming quarters. Strategic focus is shifting towards Railway and High-Speed Rail to diversify the portfolio.
- Irrigation: The segment faces significant receivables pressure from the Telangana Government totaling ₹1,430 crores (certified and unbilled). New starts in projects like Paleru Link Canal and Sitarama Lift Irrigation are delayed to Q1 FY27 due to land acquisition issues. Internal execution is currently focused on Package 4, where a revision in estimate (RE) was recently approved.
- Mining: The ₹3,500 crore project in Jharkhand is delayed by 8–10 months due to pending forest clearances and Gram Sabha approvals. Management expects physical execution and associated ₹350 crore capex to only commence by Q4 FY27 or early FY28.
Company-Specific & Strategic Commentary
- Asset Monetization: Executed Share Purchase Agreement (SPA) with Indus Infra Trust for 4 SPVs (Palani, Ramgiri, Guruvayur, Ramanattukara). The company expects ₹1,543 crores in total proceeds, which will significantly de-leverage the balance sheet and provide growth capital.
- Diversification: Actively hiring specialized personnel (e.g., retired PE officer Mr. Ashok) to form a new Railway and High-Speed Rail division. Management is also exploring Solar (BESS) tenders in Karnataka and Maharashtra and state-level EPC projects to mitigate NHAI concentration risk.
- Margin Management: To counter high market aggression, the company is prepared to dilute margins by 200–300 bps for select projects to rebuild the order book, targeting 9%–10% EBITDA in the transition year (FY27) before returning to 13%–14% in FY28.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Order Inflow Target | ₹10,000–₹12,000 crores | Target for the period ending September 2027; includes NHAI, Irrigation, and Rail. |
| Revenue (FY26) | ~₹2,000 crores | Standalone revenue curtailed by gaps in new project awards and project closures. |
| Revenue (FY27) | ~₹2,000 crores | Based on current order book; potential for upside if new EPC wins start quickly. |
| Standalone Debt | Net Cash / Zero Debt | Post-completion of SPV sales, standalone balance sheet will be debt-free. |
| Capex (FY27) | ~₹100 crores | Primarily for replacement and small-scale segment entry; mining capex pushed to year-end. |
Risks & Constraints
| Risk | Context |
|---|---|
| Receivables Risk | ₹1,430 crores is stuck with the Telangana Irrigation Dept; despite legal filings, recovery remains uncertain and dependent on state fiscal health. |
| Execution Delay | Land acquisition hurdles in Mysore-Kushalnagara (Package 4/5) and forest clearances in Mining are pushing revenue recognition into later years. |
| Competitive Intensity | High aggression in NHAI bidding is forcing the company to lower its traditional margin hurdles (from 13%+ down to 9%-10%) to secure work. |
Q&A Highlights
Execution & Revenue Outlook
- Question: What is the execution roadmap for the existing ₹8,849 crore order book? (Shravan Shah)
- Answer: Excluding the ₹3,500 crore mining order (delayed) and unbilled irrigation, only ~₹4,300 crores of “active” civil work remains. We expect ₹2,000 crores revenue in FY26 and approx. ₹2,000 crores in FY27 from this base. FY28 will be the “bright year” as new orders commence. (K. Jalandhar Reddy & Venkata Ram Rao)
Irrigation Receivables
- Question: What is the status of the ₹1,430 crore stuck in Telangana? (Ritesh Poladia)
- Answer: We have filed legal cases but are also negotiating. The CM has instructed the department to pay as they need water for Hyderabad. We hope to collect ~50% of the ₹677 crore certified bills by March 2026. (K. Jalandhar Reddy & Venkata Ram Rao)
EBITDA Margin Compression
- Question: Why did standalone EBITDA margins drop to 5.2%? (Bhavin Modi)
- Answer: Three factors: (1) ₹20 crore additional cost for a viaduct in Ramanattukara, (2) high portion of low-margin (3%-4%) pipeline work done through subcontractors, and (3) fixed costs remaining high while execution volumes dropped at projects nearing completion. (Venkata Ram Rao)
Asset Monetization Timeline
- Question: When will the ₹1,543 crore cash inflow realize? (Shravan Shah)
- Answer: We expect to close Palani and Ramgiri by March 2026 (approx. ₹500 crores). Ramanattukara and Guruvayur will follow in Q1 FY27. (Venkata Ram Rao)
New Segments (Rail/Solar)
- Question: What is the strategy for Railways and Metro? (Ritesh Poladia)
- Answer: We have recruited a dedicated team and a retired official from the department. We are targeting 26 upcoming railway bids and 1 metro bid. It is a natural civil engineering extension for us. (K. Jalandhar Reddy)
Key Takeaway
KNR Constructions reported a transition quarter characterized by muted execution and margin pressure as several flagship road projects reached completion. Standalone revenue slowed to ₹585 crores, while EBITDA margins compressed to 5.2% due to one-off costs and a higher mix of subcontracted work. Strategically, the company is pivoting to diversify its ₹8,849 crore order book—of which 40% is currently tied up in a delayed Jharkhand mining project—by entering the Railway and High-Speed Rail segments. The balance sheet remains a core strength, with the pending ₹1,543 crore asset monetization set to make the company standalone debt-free. While FY27 is expected to be a consolidation year with revenue guided at ₹2,000 crores and margins at 9%-10%, management anticipates a sharp recovery in FY28 as new orders and the mining project enter peak execution. Recovery of ₹1,430 crores in irrigation receivables remains the primary monitorable for liquidity.
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