DEE Development Engineers Ltd
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Q3-2026 Earnings Call
AI Summary
Earnings Call on Feb 5, 2026
Strong Growth: DEE Development Engineers delivered a 77% year-on-year revenue growth in Q3, and 44.3% growth over nine months, driven by strong execution in its core business.
Margin Expansion: Operating EBITDA margin improved significantly to 16.6% in Q3 from 3.5% last year, reflecting better capacity utilization and operating leverage.
Power Segment Headwinds: The Power Generation division remained a drag, with tariff revisions contributing to substantial losses, but management expects this segment to become EBITDA neutral from FY '27.
Guidance Maintained: Management reiterated core business EBITDA margin guidance of 18% to 20% going forward, with strong order book visibility.
CapEx Nearing Completion: Major CapEx projects are almost complete, including the Anjar facility and a soon-to-be-commissioned seamless pipe plant, positioning the company for higher asset turns and revenue scalability.
Order Book Strength: The company reported an order book of INR 1,303 crores as of December, with INR 300–400 crores of new orders in the pipeline and strong domestic and export prospects.
Improving Cash Flow: With most growth CapEx behind, management expects stronger cash generation and a focus on debt reduction going forward.
Core business lines—process piping manufacturing solutions, heavy fabrication, and others—are the main contributors to value and margin improvements. These segments drove the substantial year-on-year growth in revenue, EBITDA, and margin, with management emphasizing the success of operational upgrades and enhanced execution.
Operating EBITDA margin jumped to 16.6% in Q3 (from 3.5% last year), and stood at 16.3% for nine months, up 11.1 percentage points year-on-year, due to higher capacity utilization, better execution, and operating leverage. Management confirmed that core business margins should remain in the 18% to 20% range moving forward.
The Power Generation division continues to post losses due to adverse tariff revisions, with a negative EBITDA impact of INR 14.6 crores reported. However, management expects this segment to become EBITDA neutral in FY '27 as biomass pellet operations ramp up and efforts to insulate the core business from further losses are implemented.
Major CapEx projects, including the fully operational Anjar facility and a seamless pipe plant nearing commissioning, are expected to boost capacity, efficiency, and revenue. The seamless pipe plant, with a 7,000-ton capacity and INR 90 crore investment, is projected to add INR 450 crores in annual peak revenue at optimal utilization.
The order book stands at INR 1,303 crores as of December, with further INR 300–400 crores of orders likely, supported by domestic infrastructure and energy sector investments as well as growing overseas demand. Management is confident in multi-year revenue visibility and strong order inflow, especially from the power sector.
Inventory levels remain high due to the project-driven and customized nature of the business, requiring advance procurement of materials for specific contracts. Management clarified that inventory should be considered in relation to the order book, not past sales, and that advances from customers for material procurement are limited.
With the CapEx cycle nearly complete, future investments will be limited mainly to maintenance. Management plans to reduce debt through regular repayments and expects improved cash flow and lower interest costs, without the need for additional debt unless there is a sudden large order influx.
DEE is increasingly segregating core and noncore businesses, with a strategic pivot in the noncore Power segment toward biomass pellets. The company is also positioning itself to capture opportunities in nuclear, semiconductor, and pharma sectors, leveraging its specialized capabilities and recent operational expansions.
Good afternoon, ladies and gentlemen. A very warm welcome to Quarter 3 and 9 Months FY 2026 Earnings Conference Call of DEE Development Engineers Limited.
From the senior management, we have with us today, Mr. Krishan Lalit Bansal, Promoter, Chairman and Managing Director; and Mr. Brham Yadav, Chief Financial Officer.
[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anand Venugopal from Adfactors PR. Thank you, and over to you, Anand.
Thank you, Michelle. Good afternoon, everyone. We welcome you to the Q3 and 9M FY 2026 earnings call of DEE Development Engineers Limited.
Before we begin the earnings call, I would like to mention that some of the statements made in today's call might be forward-looking in nature, and hence, it may involve risks and uncertainties, including those related to the future financial and operating performance. Please bear with us if there is a call drop during the course of the conference call. We would ensure the call is reconnected soon.
I will now hand over the call to Mr. Krishan Bansal, sir, to share his views. Over to you, Bansal, sir.
Thank you so much, Anand. Thank you so much. Good afternoon, everyone, and thank you for joining us. I hope all of you have had the opportunity to go through our investor presentation, which has been uploaded on the exchanges.
Over the past few quarters, we have been consciously strengthening our core engineering franchise, improving execution intensity and completing the major building blocks of our growth CapEx. This phase of investment is now nearing completion, and we are beginning to see its benefits reflecting -- benefits reflect in operating performance, capacity utilization and margin profile.
Importantly, our core business, process piping manufacturing solutions, heavy fabrication and others continue to be our main value accretive and margin-driving businesses, and this is clearly reflected in the improvement in our operating performance over the last 9 months.
In Q3 FY '26, we delivered healthy growth in revenue and EBITDA, driven by strong execution in the core business. While the CFO will walk through you through the detailed financials, I would like to highlight that core business EBITDA for 9-month FY '26 stood at INR 129.8 crores, representing a year-on-year growth of 175.5%, driven by better execution, improved utilization and operating leverage across our facilities.
This core business EBITDA excludes the losses from the noncore power segment, which are reflected at the consolidated level. From a broader perspective, the policy and investment environment remains supportive. As highlighted in the recent Union Budget '26-'27, the government has maintained a strong focus on capital expenditure with FY '27 CapEx budgeted to grow by about 11% to 12% over the revised estimate, along with sustained allocations toward infrastructure, transport, energy and industrial corridors.
This is complemented by encouraging trends in our overseas market as well, which form a meaningful part of our core business, where investments in energy, process industries and infrastructure are also gaining momentum. Together, domestic and international demand drivers are creating a strong multiyear opportunity set for complex core offerings across process piping manufacturing solutions, heavy fabrication and other businesses.
Strategically, during the quarter, we have further sharpened our focus by clearly segregating the business into core and noncore segments. Our core business comprises process piping manufacturing solutions, heavy fabrication and others, which includes our Molsieve acquisition. While the noncore business is the Power Generation division within the noncore segment, we are actively pivoting towards biomass pellet manufacturing and exploring the newer IT structure to house the additional pellet capacity with the objective of ring-fencing capital and limiting incremental cash outflow from the power segment.
This approach is aimed at improving capital efficiency, reducing cash burn in the power business, enhancing integration with our biomass platform and creating a more sustainable and scalable model over the medium terms. On the execution front, the Anjar facility is now fully operational and is contributing to revenue growth and operating leverage as utilization ramps up.
In parallel, our Seamless Pipe Plant is progressing well and is nearing commissioning. As approved by the Board, this facility will have an annual capacity of 7,000 tons with a CapEx of about INR 90 crores, of which INR 22.5 crores will be funded through internal accruals.
At optimal utilization, we expect this plant to generate peak annual revenue of around INR 450 crores with an IRR of approximately 30% to 35% given the high-alloy, thick-walled and application critical nature of the product mix. The plant will manufacture thick-walled seamless pipes up to 120 mm using alloy and stainless steel waste catering to critical applications such as large thermal power plants and subsea and other high-spec projects.
This is strategically important backward integration initiatives that will strengthen our capabilities in high-spec applications, improve supply security, support margins and reduce lead times. With the current CapEx cycle nearing completion, we expect better tax terms, stronger cash generation and a further improvement in return ratios going forward.
Looking ahead, we continue to see good demand visibility for our core business, particularly from the power sector, apart from opportunities in oil and gas and process industries, both in India and abroad. With a strong order pipeline, improving operating leverage and most of our growth CapEx behind us, we believe DEE is well positioned to combine -- to compound profitable growth and create sustained long-term value for our stakeholders.
Now I invite our CFO, Mr. Brham Yadav, to help us through the financial highlights of the quarter ended 31st December. Over to Mr. Brham Prakash Yadav, please.
Thank you, sir. Good afternoon to everyone on this call. I will now take you through our financial performance for Q3 and 9 months FY '26. During the quarter, we reported a strong growth on all our key performance parameters, like revenue from operations for the Q3 stood at INR 286.7 crores, registering a year-on-year growth of 77% and for 9 months stood at INR 780.4 crores, registering a year-on-year growth of 44.3%.
Our operating EBITDA for Q3 was INR 47.6 crores, up by 740.9% on a year-on-year basis, driven by a low base in the previous year and strong operating leverage this quarter. For the 9 months figures for the operating EBITDA stood at INR 127.6 crores, which is up by 111.7% year-on-year basis.
Operating EBITDA margin improved to 16.6% in Q3 FY '26 as compared to 3.5% in Q3 FY '25 and stood at 16.3% for 9 months as well, up 11.1% from corresponding period last year. Therefore, consolidated operating EBITDA is INR 127.57 crores for the 9 months, which is after adjusting onetime hit of INR 4.2 crores with respect to Labor Code impact and along with INR 14.64 crores operating EBITDA loss in the noncore business, which is Power Generation division.
If we exclude this impact, both of them, INR 18.84 crores, if we exclude, our operating EBITDA would have been INR 146.4 crores instead of INR 127.5 crores (sic) [ INR 127.57 crores ]. Similarly, the operating EBITDA margin improved to 19.6% for 9 months FY '26.
Now the overall picture, profit after tax is for Q3 FY '26, INR 18.6 crores, while 9 months FY '26 PAT stood at INR 49.5 crores, reflecting a return to profitability on a quarterly basis and a year-on-year growth of 308.2% for 9-month period. This performance was primarily driven by operating leverage, supported by higher execution momentum and improved capacity utilization.
Friends lastly, I want to highlight that our robust order book indicates strong multiyear revenue visibility. We remain committed to execute key projects to build a project portfolio that supports our profit and expanding our footprint across relevant markets.
With this, I would like to open the question and answer and look forward to receiving your questions. Thank you.
[Operator Instructions] The first question is from the line of Kamlesh Bagmar from Lotus Asset Managers.
Yes. Excellent performance over the last couple of quarters, sir. Just one question. Just wanted to understand that as we highlighted in our opening remarks that there was roughly around INR 14.5 crores of loss because of -- our EBITDA because of tariff revision in the power business.
Sir, if I see last year, so our revenue contribution from the power business was roughly around 10%, and it was operating at roughly around 20% EBITDA margin. So even if I see this 9 months, so like say, assuming 9% to 10% of revenue contribution, like assuming that there has been no tariff revision, even like 10% would have been the revenue contribution and 20% would have been the margin.
So on our overall margins, the impact would not have been more than 20 bps. So we have reported 17.4% margin core business, that is piping and fabrication. The impact has not been more than 20, 30 bps because the revenue contribution of the power business has only been around 10%.
And even in the EBITDA, the contribution was roughly around 8% to 9%. So why we are saying that the EBITDA impact is roughly around INR 14.6-odd crores. So just wanted to understand that.
Brham ji, can you answer or should I?
Yes, please, sir.
Yes. I mean if you can take it, it's good. Otherwise, I will go.
Sir, you can explain.
Thank you. Thank you, Kamlesh ji, for your question. I will simply -- I mean, I will not be able to comment on the exact numbers, but what I would like to say is that one of our plants was earlier operating at the rate of INR 8.57. And now we are operating it at INR 3.5. That means there is a loss of INR 5 per unit.
So that means further, if we are right now booking a revenue of INR 1.5 crores per month, it would have been around INR 4 crores in a normal circumstance. It would have been INR 4 crores.
So that means around INR 2.5 crores loss is coming every month, which will directly impact the EBITDA and the PAT only because all expenses we are incurring on that, except for the -- very little on the fuel savings because we are running it at slightly lower capacity. Otherwise, all other expenses, everything is going on. And hence it's a direct impact of almost around INR 3 crores or INR 2.5 crores every month, which is around INR 22.5 crores in terms of this thing.
And if we consider power sector, our Power division also, which is in the main company. So there also, we are getting a hit of almost around INR 1.5 to INR 2. So there also, it is the same impact. So net effect translates to actually [ INR 14.3 ], which is the exact working which we have done on paper.
And we can share with you if you want it. There is absolutely nothing hidden in that because it's very clear, as I have tried to explain that it is because the tariff revision has been downwards. So it is the direct impact.
No, I agree, sir. But let's say when we were guiding like around 19% to 20% margin before this hit. So...
At that time, full EBITDA was -- at that time, full tariff margin was taken. Yes.
Yes. Yes. So in the core piping business, we are making 17.4% margin. And even if we are making...
How much?
So in this 9 months, we have done 17.4% EBITDA margin. So one, I have doubt on this margin. So have we took that Labor Code impact in the EBIT -- operating EBITDA or it is below?
Operating EBITDA only.
No. So INR 4.5 crores...
Yes. Yes. Let me explain. INR 4.2 crores is already included in the operating EBITDA. Already that hit we have taken.
We have given INR 45.8 crores of EBITDA. Okay, sir. And if you see the overall EBITDA for this quarter, it is INR 47.6 crores. Yes. So I want to just ask that is this INR 45.8 crores EBITDA, which you have mentioned as the core operating EBITDA. So does it include INR 4.2 crores of Labor Code impact or not, sir? Because otherwise -- yes, sir.
Yes, it is already included.
So that's why the whole comparison becomes non-meaningful because when we compare with the EBITDA -- because overall EBITDA doesn't have the impact of Labor Code, while your core operating EBITDA has the impact of this INR 4.2 crores.
Pardon.
So when you have -- so you have given INR 45.8 crores of EBITDA, core business EBITDA.
Yes.
So does it include the Labor Code impact or not?
Just a minute. Yes, it includes.
Okay. So can you tell the figure what is the, sir, EBITDA -- core EBITDA before this Labor Code impact? Because sir, I would just ask my total question. Sir, if I have given the total EBITDA of INR 47.6 crores, which is before the impact of Labor Code. And you have given the core EBITDA for your, like say, piping and fabrication, which is INR 45.8 crores. And if I deduct this INR 45.8 crores from INR 47.6 crores, then the residual EBITDA, which is INR 1.8 crores, it is for the power business.
When we are saying that our power business is making losses, then how can there be the INR 1.8 crores EBITDA then, positive EBITDA? So that means that in INR 45.8 crores, we have took the impact of Labor Code. So it is not comparable. You should have given the EBITDA, which is before the Labor Code impact in the presentation.
Anyways, if there is any confusion, anyways -- Kamlesh ji, if there is any confusion, we will send the revised filing on the stock exchange. But again, let me make it very clear that our original guidance was 18% to 20%, I mean, without considering the impact of this tariff revision.
And at that time, there was no thought of that this Labor Code impact will also come. So even if we exclude this Labor Code impact, we are absolutely, absolutely, I'm saying as per the original guidance only, just considering the impact of the power division tariff. So we have given -- we have been giving the guidance in all our last 3 calls that we shall now be doing anything between 16% to 18%, considering this particular loss. And we are absolutely on track. As a matter of fact, we are much better than what we have projected in the last 2 calls on this particular subject.
No, no, I totally appreciate that. It's more of a, let's say, data presentation issue. There is nothing...
Data, sir, I mean, we will...
There's no question about your ability and -- because over the quarters...
No, no, we will rectify -- we will rectify that. We will rectify that since there is a change of team, there may be slight issues here and there. And we will rectify that and immediately send a revised filing on the stock exchange today itself.
And sir, secondly, on the -- now you have highlighted that your core business. So in this 9 months, we have done INR 17.4-odd crores (sic) [ 17.4% ] EBITDA margin. So now going forward, your seamless will come in and you will have a far better execution as the orders are coming from the power sector. So where do you see our margins, only on the core business?
Because power, as you had highlighted that a lot of things happening there. So going forward in FY '27, where do we see our...
18% to 20%, sir. As we have been telling, it will be 18% to 20% in this range. There's absolutely no doubt on that. 18% to 20%.
And lastly, sir, what is the commentary on the orders -- new order coming in? So what level of orders we are seeing or to book in this particular quarter, sir?
Sir, in this quarter, we are well on track to get many orders. I mean many bids have been opened, and we have been declared L1, and we are not able to disclose it till we get the formal order. But I can tell you that we -- whatever anticipations, whatever guidances we have given earlier, it stands true. And many, many tenders, I will say that have been opened, and we are quite -- we are L1 in many of those.
Okay. And sir, what would be the ballpark size of those orders? Like say...
Maybe INR 300 crores to INR 400 crores. Maybe INR 300 crores to INR 400 crores.
Okay. Where we are almost near to L1.
Yes.
Sir, I'm sorry to interrupt you. Mr. Bagmar, I will request you to kindly rejoin the queue for follow-up questions, please. There are others who are waiting for their turn.
No issues. No issues.
We'll take the next question from the line of Uttkkarsh Chanana from SMC Private Wealth.
Am I audible?
Yes, please.
Yes, sir. But there is a background noise from your end. I would request you to kindly move to the quieter place, please.
Congrats for a good performance, sir. I just wanted to ask that why is the current tax in this quarter so low? And for future estimates, can you guide what can be the tax we can assume for our estimates?
May I call -- Brham, could you get his question? I think it's related to tax or what?
Pardon.
The tax. The tax charge this quarter is of 8%.
There is a...
Brham, you have...
Just a minute. There is a deferred tax as well.
Yes, sir. So I just wanted to ask that what can be the normalized tax rate we can take for future estimates?
22% plus [ tax and ] surcharge. It is 25.17%.
[Operator Instructions] The next question is from the line of [ Darsh Baksh from Nexa Securities ].
So my question is regarding the pellet, which we are going to start from the next quarter. So can you just reiterate on the time line? And from FY '27, will it be EBITDA neutral? Or will it still be -- there will be some operating losses for the Power division?
It will be absolutely EBITDA neutral. It will be absolutely EBITDA neutral. Our pellet plant is about to get commissioned and the trials are going on. And we may make some sale in the month of March, but the full capacity sales will start maybe in the month of April, and it will be definitely EBITDA neutral. There will not be much gain.
There may be still very little gain, but whatever losses we have incurred in this particular year, which is almost -- which is going to be almost INR 36 crores will not be there in the coming year.
Okay, sir. Got it. So from quarter 1 '27, you can expect to be -- losses...
That's right. I mean this loss will not be there. You can assume just that this loss will not be there, but there may not be any gain also, much gain also.
The next question is from the line of [ Prisha Shah from RS Family Office ].
Am I audible?
Yes, please.
Yes, ma'am, please proceed.
Okay. So I have -- I have a couple of questions. First being with the 3x revenue growth target, which you have given for over 3 to 5 years, so what specific operational efficiencies are being implemented to ensure that our asset turn stays above 3x, 5x range?
The -- our major Anjar expansion is going to be responsible for that. We shall be doing a lot of revenue from that particular plant. And at the same time, this being very near to the port, we shall be having a lot of savings in terms of logistics cost, plus at the same time, this being an absolutely new setup, which has been set up considering all lean manufacturing principles, we expect a very huge operational leverage also, which is -- as a matter of fact, which has started showing in our present results also.
And this plant will be dedicated purely for oil and gas sector and seamless pipe manufacturing business and our Tatarpur plant, our earlier plant shall be dedicated to the power business. In power business, we get much higher revenue because of the nature of the work we perform, and that is the basis of reaching 3x level by '30.
Okay, sir. Understood. I have one more question pertaining to industry. So with the global interest now being focusing on nuclear energy, which is reviving, how is DEE utilizing its NPCIL qualified capabilities to secure the larger share of these international piping contracts?
We are already in advanced stage of discussions with NPCIL and some private players also who are setting up the plant right now. And that is our next focus on the business growth. Sometimes people ask that what -- after this present cycle of power sector finishes, then to answer that to everybody is that we are having a lot of focus on diversifying ourselves into nuclear business, into semiconductors business and pharma business.
That's going to be our next major line of diversification. Of course, in the piping manufacturing solutions only, nothing special, but our focus may shift to these particular sectors to a large extent.
[Operator Instructions] The next question is from the line of Ripunjay Aggarwal from Amar Alliance Equity Research Private Limited.
First of all, I want to congratulate you on an excellent result this quarter. I have a few questions pertaining to your business operations. If you may allow, I mean to understand the inventory holding, when we see and analyze the inventory holding comes to a greater period of time as compared to other businesses. Could you please put some light on it, sir, as per our total sales, how much inventory do we need to hold on our stock book? And how does this business operate?
Sir, this question is coming every time, and we are trying to respond it every time also. But again, I will just try to explain you once again. Since we are a project-driven company, so we have to do everything as per the requirement of the projects. It's all -- they are all 100% tailor-made items which we are making, and they are made as per the customer specs and we say that it's built to print.
It is not a standard product that we will manufacture it, store it and distribute it through our distributor network. So whenever we get an order, we have huge amount of specifications involved for each order, and there is a particular vendor list involved that we have to buy the material from a particular vendor only.
So all those things force us that as soon as we get the order, we have to immediately place our orders on our vendors because many of the items will come from import and [ the C time ] shipment and the manufacturing time, I mean, sir, most of the products will be manufactured against our requirements.
We are not sourcing practically anything which are available off the shelf. Our buying from the traders is hardly 1% to 2% of our total buying. Rest of the buying is coming from the manufacturing mills and 50% of it is import also. So this forces us that we have to place the orders immediately and that creates a situation where we have to hold the inventory as per our order booking.
Our order booking is, let us say, today is around INR 1,300 crores. So we have to have an inventory of almost INR 600 crores -- INR 500 crores to -- INR 500 crores of ours just for raw material and other things only. So that is the real cause for our inventory, and this is our nature of business because we have to follow all the specifications given by the customer. And we have to maintain all the items.
We have to get the items first and then only we can start manufacturing the spools or the skids, which we are manufacturing. That's the main cause for that. So you have to consider our inventory not from the previous year sales. You have to consider our inventory considering the present order book.
Got it, sir. So that means the moment we have more of orders in hand, unexecuted order also in hand, that means our inventory is ought -- inventories are ought to rise because we need to be ordering and we need to hold that specific inventory for that particular project or the order in the execution cycle.
Correct. Correct. Correct. Correct, sir. Absolutely, sir.
Okay. Okay. Okay. Fair enough, sir. Sir, I have another question on your existing debt cycle, sir. Sir, we understand that we brought in -- we came to public, the IPO came in 1.5, 2 years back. And now there was an expansion further. Is there -- since we have a good margins on our business, I see you are able to reduce our debt cost or interest cost, it would directly impact the bottom line per se of the business. Is there any vision of the management towards reducing the debt going forward?
Yes, yes, yes, definitely. Let me again answer that question. Sir, as I just said in my opening remarks that our CapEx cycle is almost at the finish line stage. So whatever CapEx needs to be done, I will say 95% to 98% CapEx will -- that happen within March of this financial year. And in the coming years, whatever new CapEx will be there, it will be primarily for maintenance purposes only, which may range between INR 10 crores to INR 15 crores or something like that.
So there is absolutely no new inflow of any term loan or something like that. And every year, we shall be paying almost around INR 40 crores towards repayment of the debt, which is definitely going to reduce our burden on the -- this interest cost and other things. Plus we anticipate that there will be huge improvement in interest costs because of positive cash flows, which we are expecting in the -- expecting in H1 of FY '27. So these 2 factors make us quite upbeat that we should be able to reduce our financial cost much lower than what we shall be having in this year.
I have just one last question, if you could allow me. And that is, sir, in our core business, that is customized piping solutions that we call in the investor presentation, also at the optimum utilization of our existing capacity, what should be our top line at that level once we achieve above 90% of the total production capacity, sir?
2,300 to 2,500, sir. 2,300 to 2,500 with the present facilities.
The next question is from the line of Ram Modi from Prabhudas Lilladher.
I'm sorry, just joined a little late. But I just wanted to check about our power plants in North. Sir, we have been -- I think we lost almost [ 15, 16 ] [Technical Difficulty] those power plants. So whether we see them getting resolved over the next 6 months or it will take a longer time on the litigation side?
Sir, I will say that -- I will talk -- first, I will talk about our older power plant, which is in the name of Malwa Power Private Limited, in which our tariffs got revised from almost INR 8.5 to INR 3.5. It's -- final hearing with the PSERC were held around 10, 15 days back, and we are expecting order at any given time.
And then again, I will say that in that order, we will not get -- definitely get 100% relief, but whatever relief we are expecting is that it should be at par with the tariff which we are getting at Power division, where it will become sort of a cash neutral thing. There will not be any further drainage of cash from the operation of the power plant if just by getting this new tariff order.
But again, as we have been telling to mitigate that situation, we have already put a pellet manufacturing unit for biomass pellets, and it's under commissioning, and we may be declaring its COD very shortly. So with that in place, definitely, whatever was the negative impact, that will be removed altogether. And we may not be earning very high income in that, but it will not be a cash drain.
Okay. And on the second power plant, sir?
Same situation, I'm telling you, because in the second system, the tariff was revised to INR 5.87 or something like that, for which we have already filed our appeal with the High Court. It is still to be heard. So we are not sure when that outcome will come. But what I'm trying to say is that with the tariff of this INR 5.8, and if we get a similar tariff of, let us say, INR 5.5 or something for the Malwa Power and with the commissioning of the pellet plant, so we shall be cash neutral or we shall be EBITDA neutral from this particular division. And whatever loss we are going to incur in this particular financial year, which is around INR 36 crores, will not happen in the FY '27 at all.
But -- and just lastly, sir, on this itself, sorry for extending this. But if suppose the husk or those prices move up or down, whether this INR 5.80 production cost will remain relatively stable for us because again, this would be a long-term PPA, which we will be signing with the Punjab Electricity Board?
Sir, we are practically not using any husk. We are using paddy straw for which the price is not likely to vary much. And that much escalation also we get in the PPA. So since we are not using paddy husk, so we are quite well insulated from the price escalation since we are using only paddy straw.
Okay. Because I think this year where our P&L actually got significantly drained because of this itself, power plant itself.
Yes, I'm telling you around INR 36 crores is the drain, right, this year. In full year, this will -- this much will be the total drain.
Okay. And sir, secondly, on our guidance on the year-end power, the order book still remains the same? Or are we still seeing some delays on that?
No, no. We are absolutely on track, sir. We are absolutely on track. Since you joined late, I tried to explain earlier that...
Yes, sure. I will take it from the transcript, sir. No need for reiterating it, sorry.
Yes, I have already told that. We are well on track, sir. I will just tell you we are well on track.
[Operator Instructions] The next question is from the line of [ Prashanth ], an individual investor.
Am I audible?
Yes, please.
Yes, you are audible.
Yes. I have a couple of questions. Actually, if I look at Slide #15 of your presentation, you have -- it is mentioned that the order book is INR 1,303 crores as of 31st December '25. And there is a domestic and an export split also given. If I -- could you please break it down into how much is PSU and how much is non-PSU split of this order book?
Sir, that is difficult to answer immediately. But in the coming year, a lot of PSU business will be there, which may be almost around -- domestic revenue, it might be around 40% to 60% of the domestic revenue may come from PSUs only in the coming year. But it's a ballpark figure. I mean, I'm just telling you from my mind. Otherwise, if detail is to be required, we have to work it out.
So is it that -- I mean -- and export, most of the orders is from private players?
Export is all private players only. Export is always from private players.
Okay. And to one of the earlier questions, sir, you had mentioned that inventory should be looked in relation to the order book on hand and not the past sales.
That's right. Yes.
Yes. So in that case, I mean -- my question is, I mean, would it be normal? Or would it -- is it an industry trend that we would also get -- since this involves a large amount of specific procurement, do we also get some advance for material purchase from the customer? Or it has to be...
Sometimes we get, sir. Sometimes we do not get, particularly from companies like BHEL, we do not get, but from others, we get it against bank guarantees. But it's very, very limited amount, sir. It's -- I mean, it doesn't fill our hunger. But whatever we get, that's good. And it's -- it's the problem of our business or whatever you call that.
Okay. Okay. And just from the -- I mean, we are manufacturing -- sorry, we are procuring pipes for fabrication. I mean, in terms of the feedback or the conference calls of the pipe manufacturers, they said that it is a very soft market, and they have to extend a good amount of credit to maintain sales. So other way around, since we are consumers, I mean, are we getting that benefit? How do you see the input cost trend and the credit terms? And how does it -- how will it help us in managing working capital?
As I'm telling you, when we are talking to the mills, we have to pay them upfront. They do not give any leverage. The maximum leverage they give us is the LC, which they can extend up to 30 days or something like that. But nothing beyond that. But if we are buying it from traders, we do get some credit 30 to 60 days. There's nothing beyond that actually.
But as far as the price trend is concerned, there is a little bit upward trend right now. But I don't know whether you have been attending the previous calls or not. Our stand on that is that we get -- we remain primarily insulated because we order the material almost immediately after receipt of the orders. So if we get the new order now, let's say, if it has -- if it was previously quoted, they have a very little impact, but it is not going to hurt us in the long run.
Okay. So just to understand, we may -- the moment we get the order, we -- in the back to that, we place an order for our inputs.
That's right.
But at the time of placing order, do we have to make the payment or do we make the payment at the time of when we take the delivery, which can be one quarter...
Against delivery only. That is against delivery only, but sometimes we have to pay the advance.
Okay. Okay. And on the fabrication side, one of your competitors has mentioned they are getting a large amount of business from heat exchangers. So is that a addressable segment for us or we are not focusing on that now?
No, no, no. We are not into that industry. It's a specialty industry. So we are not into that, absolutely. We are just -- our core business will remain piping manufacturing and piping solutions only. We are not into heat exchangers.
Okay. So the fabrication basically will address which -- piping markets only or anything on the -- any adjacencies?
All plants -- in any major plant, whether it's a power plant or it's a refinery, it's a petrochemical, it's a semiconductor industry, it's a nuclear plant, it's a pharma plant, you require almost 10% to 15% of the CapEx of any of these plants will go towards piping only.
Sir, I understood. My point was like in your presentation on Slide #12, you have mentioned that you do heavy fabrication, then you do tanks, storage vessels, silos, those kind of things. So those things...
Heavy fabrication, we are already doing in our subsidiary called DEE Fabricom. DEE Fabricom Private Limited, we are doing heavy fabrication. We are doing the wind tower fabrication. That's a separate subsidiary altogether, but our primary business remains in terms of pipes spools and skids only and pipe fittings. Pressure vessels, whatever we have shown is we are making it just for our in-house consumption only for our skids business.
Okay. Okay. And just last one on the power side. I mean, you have explained in detail. Just -- I mean, is it possible for us to get out of this PPA and go fully on merchant -- I mean merchant power or sell it through the power exchanges? Would that...
It's not viable -- it's not viable because we are into biomass power, so where we have a lot of fuel costs. But that's viable nowadays for people like wind and solar, where there is fuel power is involved into that. And we have lot -- many other operational expenses where those expenses do not come in picture for solar and wind. And hence, it's not viable. Our viable rate itself is around a little above INR 4.5 to INR 5. Just breakeven rate, I'm saying just breakeven rate.
Breakeven. Okay.
The next question is from the line of [ Sangeet Thakkar ], an individual investor.
Yes. Sir, we initially planned for an fundraising for incremental working capital, say, meeting for higher order appetite. Now in terms of, sir, next 2 years, let's say, we are at INR 1,300 crores order book in December and incremental INR 300 crores to INR 400 crores you mentioned is in pipeline. So basis closing March, we should be around INR 1,300 crores, INR 1,400 crores, right? But for FY '27, to be at, let's say, INR 2,000 crores order book, how we are planning to meet those funding, sir? And how that appetite will come?
It will come from our improved cash flow only. It will come from our improved cash flow only. We do not anticipate any new debt. If all of a sudden, let us say, orders worth INR 1,000 crores come or something like that, then we may have to. But otherwise, if the orders come progressively throughout the year, then we won't require anything because of our internal cash accruals only.
Okay. So immediate, let's say, 50% to increase the order book of 50% should not be a concern, right? Our balance sheet will allow that.
That's right. That's right, sir. That's right. That's very true.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Krishan Lalit Bansal, Promoter, Chairman and Managing Director of DEE Development Engineers Limited for closing comments. Thank you, and over to you, sir.
Thank you, everyone, for joining the call today. Our performance this quarter reinforces our confidence in the business and our strategy, and we remain focused on execution, capital efficiency and long-term value creation for our stakeholders. Thank you once again. Thank you, everyone, for all your questions. And we hope you are all satisfied with our answers. And if there is anything, we are always open for any -- we are always open for anything. Thank you so much.
Thank you, members of the management. On behalf of DEE Development Engineers Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.