Vascon Engineers Limited Q3 FY26 Earnings Call Summary

Summary

Vascon Engineers Limited - Q3 FY 2026 Earnings Call Summary Wednesday, February 11, 2026 11:00 AM

Event Participants

Executives 2 Dr. Santosh Sundararajan (Group CEO), Mr. Somnath Biswas (CFO)

Analysts 5 Himanshu Upadhyay (Steadfort Investment), Kanishk Shah (SK Capital), Mihir Vyas (9 Rays EquiResearch), Rishab Dugad (Finnovate Financial), Siddhesh (PL Capital)

Financials & KPIs

Geographic & Segment Commentary

• EPC Segment: Contributed 98%+ of quarterly revenue, primarily driven by government hospital and institutional projects. Execution was severely hampered in Bihar due to election-related payment delays at the Supaul site and client-side decision delays at the Capgemini Chennai project. The company is pivoting toward a 60:40 Government-to-Private mix to reduce political sensitivity risks.

• Real Estate (Ongoing): Active development of 0.78 million sq. ft. across four projects (Pune, Mumbai, Coimbatore). Sales velocity at the Orchids (Santacruz) redevelopment remains slow (13% sold) as buyers await visible construction progress beyond the current G+2 level. Management is avoiding price cuts, relying on current cash flows to maintain construction momentum.

• Real Estate (Pipeline): Future potential of 1.94 million sq. ft. with an estimated GDV of ₹2,360 crores. Key upcoming projects include Powai (JV), Baner (Commercial), and Prakash Housing (Redevelopment). Construction at Prakash Housing is slated to begin in Q1 FY2027 following receipt of all approvals.

Company-Specific & Strategic Commentary

• Working Capital Optimization: Secured a revised assessment from SBI reducing collateral coverage from 35% to 27% and BG margins from 25% to 15%. This unlocks liquidity to support an incremental ₹3,000 crores in EPC orders without additional security.

• Adani Strategic Alliance: Deep technical engagement is underway for four mid-sized projects, though material revenue is expected to be at least six months away. The tie-up focuses on design-and-build involvement for large-scale Mumbai developments, including potential Dharavi participation.

• Non-Core Asset Monetization: Continuing efforts to aggregate a contiguous 25-acre road-touch land parcel in Thane for monetization; currently at 17-18 acres. The Phase-2 land at the GoodLife project is being re-evaluated for commercial or hotel use rather than low-margin affordable housing.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Execution Delays

• Question: Why did execution slow down so significantly this quarter? (Kanishk Shah)
• Answer: Three major projects stalled: Supaul (Bihar) due to election fund freezes, Capgemini due to client CapEx re-evaluation, and Sindhudurg due to billing approvals. (Dr. Santosh)

Real Estate Sales Strategy

• Question: Why is the Orchids project only 13% sold despite a good market? (Himanshu Upadhyay)
• Answer: It is a first-time Mumbai redevelopment; buyers typically wait for ground-level visibility. We have 10+ unrecorded bookings and expect a surge by Gudi Padwa as construction hits G+3. (Somnath Biswas)

Adani Tie-up

• Question: Is the Adani alliance progressing beyond the initial 13 million sq. ft.? (Himanshu Upadhyay)
• Answer: Yes, we are discussing airport site developments and Ghatkopar projects. However, the massive Mumbai parcels (like Dharavi) have long lead times for tree-cutting and environmental clearances. (Dr. Santosh)

Order Inflow Miss

• Question: Why have you only achieved half your order target for the year? (Siddhesh)
• Answer: We refuse to bid at -30% margins like competitors in UP. We are now L1 for ₹1,300-1,500 crore in fresh tenders and expect to bridge the gap in early FY27. (Dr. Santosh)

Key Takeaway

Vascon Engineers reported a challenging Q3 FY2026, with total income declining 15% YoY to ₹254 crores and a sharp 88% drop in PAT due to a high base effect and zero real estate revenue recognition. Performance was hindered by external factors, specifically election-led payment freezes in Bihar and client-side delays in private EPC contracts, which forced a downward revision of the FY2026 revenue target from ₹1,200 crores to approximately ₹1,080 crores. Strategically, the company strengthened its balance sheet by optimizing bank limits with SBI, unlocking liquidity to support ₹3,000 crores in future execution. While order inflows lagged at ₹646 crores YTD, the company remains L1 for significant upcoming contracts and is shifting focus toward a 40% private-sector mix. Management maintains a positive medium-term outlook for FY2027, targeting ₹1,400 crores in revenue as construction resumes at stalled sites and high-value Mumbai real estate launches commence.