RITES Ltd

NSE:RITES

Q2-2026 Earnings Call

[Operator]

Good morning, ladies and gentlemen. I'm Karthikeyan, moderator for this conference. Welcome to the conference call of RITES Limited to discuss its Q2 FY '26 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.

[Operator Instructions]. Please note this conference is being recorded. [Operator Instructions].

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.

[Rahul Mithal, executive]

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 road map that we have set for ourselves at the beginning of the FY, if I look at it, five key points. One, we will like to maintain a 1 order a day strike rate. And we did that. We got 150-plus orders totaling to INR 850 crores, which is about 1.6 orders a day. Two, we want to maintain 1 export order a quarter. We got -- we continued to maintain that. We got an order of INR 160 crores for 10 locomotives for South Africa in this quarter.

Three, we want to achieve an order book of INR 10,000 crores somewhere down the line, maybe as early as possible by end of this FY. We are heading in that direction. We added net to our order book by INR 300 crores and again, reached an all-time high of INR 9,090 crores. Four, we want to do a sequential growth for improved execution so that overall, on an annual basis, we surpassed the figures of last year, both top and bottom line. As you see, Q2 sequentially, it's about 12% better than the Q1 in revenue, and PAT and EBITDA are in any case, much higher. And five, we will like to secure our margins, which, as you see, the minimum baseline of about 20% in EBITDA margins and 15-odd percent 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 road map, as I said, which we had set ourselves in the beginning of the financial year, we are in line with that road map, 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.

[Operator]

[Operator Instructions] First question comes from the line of Parimal Mithani from Credential Investments.

[Parimal Mithani, analyst]

Congrats on a good set of numbers.

[Rahul Mithal, executive]

Thank you, Parimal.

[Parimal Mithani, analyst]

Sir, I just wanted to know this, in consultancy, the margins that we have grown, is it now steady state of margin that we'll have going forward from here?

[Rahul Mithal, executive]

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

[Parimal Mithani, analyst]

And sir, is it fair to assume that we'll have a better execution in consultancy going ahead?

[Rahul Mithal, executive]

Yes. So this quarter, in any case, consultancy and export are the 2 segments which have contributed to the overall performance. The turnkey is down by INR 90 crores. And this exactly INR 90 crores was compensated by consultancy and export. That's why you see the revenue nearly flat, about 1.5% growth only. But because of the change in mix, this INR 90 crores contributed to a higher margin mix, and that's why the EBITDA and PAT and margins have gone up.

So consultancy, while this quarter has also been good execution, there has been about a 12% growth both Y-o-Y as well as sequentially, we'll continue to see better execution.

[Operator]

Next question comes from the line of Raghav Maheshwari from [ Kanakia ] Wealth Management.

[Unknown Analyst]

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

[Rahul Mithal, executive]

Yes. So the top line, it's been flat, as I mentioned to Parimal, and that's primarily because the turnkey segment, which contributes to the top line, that about 2/3 -- more than 2/3 of the order book is less than a year old. It's about 8, 10 months old. And normally, the execution at the ground level with revenue booking starts by nearly the end of the year. So quarter 3, quarter 4, by the time these orders reach a time of about a year, they will start contributing to revenue. So even though INR 90 crores has been the hit due to turnkey, which -- but in terms of bottom line, it resulted in a hit of only about INR 1-odd crores, INR 1 crores to INR 2 crores because the turnkey margins are always in the range of about 1% or 2%.

So turnkey will grow, and that will grow further, 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.

[Unknown Analyst]

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

[Rahul Mithal, executive]

So we are definitely looking at -- I mean, this is -- it depends on quarter 2 -- quarter 3, quarter 4 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.

[Unknown Analyst]

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

[Rahul Mithal, executive]

It's a very difficult question to answer, give one number because the 4 streams of revenue have different turnaround times. A turnkey project takes...

[Unknown Analyst]

Yes, that's why I'm asking for bifurcation.

[Rahul Mithal, executive]

Yes. So a turnkey project takes about 3 to 4 years. An export project takes anything from 2 to 2.5 years. Consultancy projects would take anything from 90 days to about 3 to 4 years if it is linked to the execution of the project.

[Operator]

[Operator Instructions] Next question comes from the line of Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

Sir, congrats on a recovery on the export side and stable consultancy growth. My few questions start with, you mentioned some INR 90 crores 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?

[Rahul Mithal, executive]

Well, it may not be INR 90 crores exactly because, as I said, these 2/3 -- I mean, more than 2/3 of the turnkey order book of about INR 4,300 crores is about 8, 10 months old. And considering a lifespan of about 3 to 4 years, the initial designs, et cetera, approvals and 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 when 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 by the end of Q3, where we are heading in terms of top line growth. But definitely, the emphasis on trying to make good buy 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 contributors, they contribute better to the bottom line.

[Harshit Kapadia, analyst]

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

[Operator]

[Operator Instructions] We have a follow-up question from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

On domestic consultancy side, would you be able to share, sir, how high 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 roofs, what has seen the growth, sir?

[Rahul Mithal, executive]

Yes, Harshit. So one very encouraging trend is that the quality assurance vertical has the tough times which we saw in the last 1.5, 2 years. We have been steadily sequentially improving, increasing, trying to garner new clients. And I must say that this has been one of the best quarters in the last 6, 7 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 2/3 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 2 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 audits that we are doing across various sectors of infrastructure, whether it is the highways or the buildings, various infrastructure as also we are getting a good PMC contribution for some of the building projects that we are doing.

So across sectors, the consultancy revenue has been contributing and growing. And that's why you see about a 10% to 12% growth, both Y-o-Y and sequentially in consultancy revenue.

[Harshit Kapadia, analyst]

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?

[Rahul Mithal, executive]

So the first deliveries have started of the locomotives, the Mozambique order of 10 locomotives. So in quarter 2, we could dispatch 2 locomotives. And that's when you see the break in the hiatus for about nearly 1.5, 2 years, and now export revenue generated -- started generating revenue, the export orders, and it will be a steady now in every quarter. But subsequent to that, the next 2 locomotives have also been shipped out in the month of October, and they will contribute to the revenue in Q3.

So we will continue to push 3 to 4 locomotives. We are hopeful that these 10 locomotives definitely by quarter 1 of next year, we should be able to complete this order. The coaches are in -- there was, as I said, a slight gap in the middle last year, for about 4, 5 months, that we have picked up now. There are about 6 types of coaches, which now 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 quarter 1 of next year.

[Operator]

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

[Uttam Srimal, analyst]

Congratulations on good set of numbers. Sir, my question pertains to our export order book, which is currently around INR 1,541 crores. So how much estimation we are building on in the next 2 quarters and in FY '27?

[Rahul Mithal, executive]

So the 3 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 quarter 1. That is in FY '26, we should be able to -- as I said, 2 locomotives, we have booked the revenue. We were -- 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 on to the vessel at the Mumbai port, that's when we recognize the revenue. So the next 2 locomotives, which were shipped out in October, they will figure in the revenue of quarter 3. We are definitely trying to see that about 6 to 7 locomotives get booked in this FY '26 and the balance definitely by quarter 1 of FY '26.

As I mentioned regarding the coaches export project order to Bangladesh, these are 200 coaches and 7 different types of coaches. So the first rake, which Bangladesh Railway has asked for consists of 4 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 4 prototype coaches manufactured and approved by them in Q4 so that the bulk manufacture starts, and the first rake of 20 coaches moves out by quarter 1.

So your specific question regarding FY '27, once this first rake moves out and since the prototype would have been got approved, then I think 1 rake a quarter would definitely be the aim for FY '27 for the Bangladesh order.

[Operator]

The next question comes from the line of Gaurav, an individual investor.

[Unknown Attendee]

Congratulations on the good set of numbers. I just have one question. Can you just shed some light on the Bangladesh coaches order and the number of inductions in Q2?

[Rahul Mithal, executive]

Number of -- sorry? Sorry, Gaurav, I didn't get you.

[Unknown Attendee]

Number of coaches inducted in Q2, the spike in numbers.

[Rahul Mithal, executive]

No. So I just mentioned in the reply to the previous question, in the Bangladesh order, there are 200 coaches and 7 different types of coaches. The first shipment, we are aiming of a rake of 20 coaches by quarter 1 of FY '27. The prototypes are in the stage of final approval and manufactured by quarter 4. And once the prototypes are manufactured and approved, the bulk manufacture will start. So starting from quarter 1, definitely, the next FY, the -- every rake consisting of 20 coaches would 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.

[Operator]

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

[Viraj Mithani, analyst]

Sir, my question is, the order book which we have, 50% comes of the PMC business, right? So are we changing our trend?

[Rahul Mithal, executive]

No, no. See, the breakup of the order book of INR 9,090 crores, there's about INR 4,300 crores turnkey, then INR 2,930 crores consultancy, export INR 1,540 crores and balance is 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 the -- it's a method of accountal. The -- our scope of work and everything remains same of our consultant. And 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 crores. Now our role in that is of a consultant only. It's a question of the accountal that the cost of the total project, including a 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 company.

So whether it is the turnkey order or the consultancy order, it's a question of only the method of accountal, financial accountal. Our scope of work remains exactly the same.

[Viraj Mithani, analyst]

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

[Rahul Mithal, executive]

Yes, Viraj, we are definitely with the export revenue now kicking in and building up. And as I said, consultancy showing a steady growth of 10-plus percent. 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 line.

[Viraj Mithani, analyst]

And sir, what's our policy regarding exports now? Okay. I'll join the queue.

[Operator]

Next we have a follow-up question from the line of Parimal Mithani from Credential Investments.

[Parimal Mithani, analyst]

Hello? Can you hear me?

[Rahul Mithal, executive]

Yes, Parimal, go head.

[Parimal Mithani, analyst]

Sir, I just wanted to know the MoU that you have signed with parties in the Middle East, any certification there? And also your JV with DNV. Can you just highlight if anything meaningful is happening there, sir?

[Rahul Mithal, executive]

Yes. So first, your first question first, the MoUs in Middle East, those have, in a short period of time of less than 1 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 also in UAE. So I see this moving forward.

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

[Parimal Mithani, analyst]

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

[Rahul Mithal, executive]

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 touched the target of being more than 100-plus locomotives of our own, which we are doing leasing besides doing O&M and leasing of clients' locomotives. So the way we are getting orders in leasing constantly, this is a growing segment, both in terms of the revenue as well as the contribution to the bottom line.

[Operator]

[Operator Instructions] We have a follow-up question from Viraj Mithani from Jupiter Financial.

[Viraj Mithani, analyst]

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

[Rahul Mithal, executive]

Yes, Viraj. All of these MoUs in some way or the other under the umbrella MoU, and it will differ obviously, from case to case and geography to geography. But as I mentioned to Parimal in the last question, the -- for example, the MoU with Etihad Rail has helped us already expand to new geographies where we had not been -- we were primarily operating in Africa, Southeast Asia, Latin America. Now we have started getting work in the Middle East geography. So similarly, MoUs with -- 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 of Naval Projects in Mumbai. So we see a huge -- we are already working with them in 1 or 2 projects, and we see that more potential in that sector.

[Viraj Mithani, analyst]

Okay. And sir, my question is on our policy about exports now with these 2 orders kicking in. Have we made some goals for exports as a segment?

[Rahul Mithal, executive]

Yes. Our goal for export segment is, one, that we will continue to try and achieve 1 order a quarter, which we have been doing now for about 7, 8 trailing quarters. We will continue to get that. And normally, the export order starts generating revenue after about 1.5, 2 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, we will -- 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 in the last 2, 3 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.

[Operator]

Next, we have a follow-up question from Harshit Kapadia from Elara Securities.

Sir, there seems to be no response. I have a follow-up question from Raghav Maheshwari from [ Kanakia ] Wealth Management.

[Unknown Analyst]

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

[Rahul Mithal, executive]

So Raghav, the first question is that as the competitive scenario is evolving more and more, we had -- when we set this target about 8 quarters back, we were in the range of about 0.6, 0.7 strike rate. And we have to do a lot of business reengineering to be able to reach that milestone. And we have set a 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 1 order a day, it's also the value. For example, we got in quarter 2 about 150 orders totaling to INR 850 crores. And you could see a net addition in the order book from 30th June to 30th September of INR 300 crores. 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 4 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 our quality in terms of the execution of order that we intend to do.

[Unknown Analyst]

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

[Rahul Mithal, executive]

You see, again, that's a very difficult question to give one number because it varies from each of the different verticals. It varies on the 4 different streams of revenue where the size of orders can be huge in terms of export or in terms of turnkey segment. But in terms of some consultancy, there could be small orders. In consultancy, there are 4, 4 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, PPI, 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 scope of work, we have set some internal red lines for -- both in terms of the ticket size as well as the margins that we sacrifice.

[Operator]

Next, we have a follow-up question from Gaurav, an individual investor.

[Unknown Attendee]

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?

[Rahul Mithal, executive]

So yes, we are at about 2,800. And we are considering that our order size is constantly increasing. In H1 Q1, Q2 combined, 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 mid-80s when the company was diversifying, growing in its first decade. And those are the large number of employees which are now in this span of 3 to 4 years superannuating 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 see -- you can see an increase. And this trend of superannuations will plateau down after about a few -- maybe a year, 1.5 years 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've seen every successive quarter.

[Operator]

Next, we have a follow-up question from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

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, 1 order a year?

[Rahul Mithal, executive]

Harshit, in fact, it's 1 order a quarter. We had set ourselves a target of 1 order a quarter 8 quarters back, and we are maintaining that. And this quarter also, we got that 1 order. This is 10 locomotives to South Africa in-service locomotives at about INR 160 crores. So we had set ourselves a target at the beginning of '24, 2024, of trying to get export order a quarter, and we are maintaining that successfully for about 7, 8 trailing quarters now.

[Harshit Kapadia, analyst]

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?

[Rahul Mithal, executive]

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 1export 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 this spike of revenue generation from the export segment, which we suffered in the last 2, 3 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 in export revenue of INR 60 crores. But 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 a large number of export orders in different geographies at different stages of manufacture and execution.

[Harshit Kapadia, analyst]

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

[Rahul Mithal, executive]

Most of them were on competitive bidding, but some of these, which were the South Africa in-service locomotives, these were on nomination bidding because we have -- this is a proprietary kind of work. We took a lot of initiative in trying to finalize the design of trying to use the in-service locomotives, which Indian Railways has large number of diesel locomotives now, which are available because of electrification. How best to modify them to [ 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.

[Harshit Kapadia, analyst]

Fair enough, sir. I have a few more questions. I'll join in the queue.

[Operator]

Next question comes from the line of Anand B. from Ksema Wealth.

[Anand Bhaskaran, analyst]

I just want to know the margins that you earn differential between, let's say, margins that you earn from consultancy orders, margins that you earn from export, margins that you earn from turnkeys. Can you just give a breakup of that?

[Rahul Mithal, executive]

Yes. So the margins traditionally in the consultancy are the highest. They are in the range of 30-odd percent. The turnkeys are always lower. They are about 1.2%, 1.1%. And exports 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 will be a better picture as revenues flow in over 2, 3 successive quarters because the cost booking and the revenue, et cetera, will equalize, and we'll be able to get a better idea of the margins. But these are the broad -- and in terms of leasing, our margins have always been in the range of about 30-odd percent. So these are the 4 broad segments of margins as you see the large range from turnkey to consultancy to export to leasing.

[Anand Bhaskaran, analyst]

Okay. And final question, what sort of revenue division that you see between these 4 key segments this year and next year as well?

[Rahul Mithal, executive]

As I mentioned, the turnkeys, they are all young order book. So while they will -- this quarter, you've seen a very low contribution from turnkey. This will start growing by quarter 4/Q1. And in terms of its contribution to the top line, it will definitely grow.

Consultancy has been growing steadily at a rate of 10%, 12%, which we will aim that it continues growing. Exports, the revenue booking has started and we definitely -- as the road map 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 inter, say, 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 segments over an annual basis. So in a particular quarter, it may vary depending on the deliveries.

[Anand Bhaskaran, analyst]

I was referring to annual also. But just to get some clarification, sir, so let's say, 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, one grows vis-a-vis to another?

[Rahul Mithal, executive]

No, they are not interlinked. You see, the point is that overall, there are 2 broad directives or 2 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 4 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 inter blend mix between the 4 segments so that the overall, there is a growth in top line, bottom line with these 2 red lines having been maintained of 15% and 20% in EBITDA and PAT margin.

[Operator]

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

[Viraj Mithani, analyst]

Sir, my question is, what will be your OpEx? And what will be our dividend policy? It would be the same as last year or some change will be there?

[Rahul Mithal, executive]

Yes, Viraj, we are -- 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 color from a consultancy company to some other company. 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 capital -- 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 see this quarter also, we maintained about 94% dividend payout ratio.

[Operator]

The next question comes from the line of [ Sahar Arora ], an individual investor.

[Unknown Attendee]

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?

[Rahul Mithal, executive]

Not in the PMC business. In the turnkey business.

[Unknown Attendee]

Yes, sorry, sorry.

[Rahul Mithal, executive]

In the turnkey business, the revenue passes through us. So again, we get most of our orders on a competitive basis. So for example, let's say, our consultancy fee for discussion is about 5% or 6%. Now if we were -- if we had got that as a consultancy order, our value of order would have been INR 6 crores. If we get it as a turnkey order, its value is INR 106 crores. So the -- if it's a turnkey order, INR 106 crores passes through our balance sheet. If that order was a pure consultancy order, INR 6 crores would pass through our balance sheet. That's the only difference in accountal. Our scope of work and responsibility, everything remains identical.

[Unknown Attendee]

And the margins also remain identical, like the consultancy business?

[Rahul Mithal, executive]

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

[Unknown Attendee]

Yes. But like you said, INR 6 crores would be the consultancy income on that, the margins would be what you guide for the consultancy business. Is that the correct understanding?

[Rahul Mithal, executive]

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

[Operator]

[Operator Instructions] Next, we have a follow-up question from Harshit Kapadia from Elara Securities.

[Harshit Kapadia, analyst]

Just wanted to check with you, since you mentioned that after first year, the turnkey construction generally start booking the revenue. So when is the peak revenue expected from your -- the INR 4,000 crore order book? Will it be like FY '28, '29? Is that the correct understanding?

[Rahul Mithal, executive]

I would see the revenue start picking up in a big way by latter part of FY '27. Because as I mentioned at the outset, about 2/3 of this order book are young. They are about 8 to 10 months old. And I foresee them starting to generate revenue by Q4 or maybe Q1 of next FY. So maybe latter part of FY '27, say, Q3 onwards. H2 of FY '27, there should be a substantial bump from these young orders while you're continuing to get fresh orders, which, as I said, with a lifespan of about 3 to 4 years, will maintain that trend of turnkey revenue. But you would see a bump coming in from latter part of FY '27.

[Harshit Kapadia, analyst]

Understood, sir. 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 could be -- if we win, could be a bump up for us?

[Rahul Mithal, executive]

Harshit, I wouldn't like to speculate on orders which are in the pipeline. But I can only say maintaining the 1-plus order a day, we are bidding on large number of orders. And more than 2/3 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, et cetera. And we will -- if you keep -- most recently, we got the [ IIM ] Bangalore PMC order in our building vertical, which was about INR 14 crores.

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

[Operator]

Next, we have a follow-up question from Anand B. from Ksema Wealth Private Limited.

[Anand Bhaskaran, analyst]

Just want to know what would be like the seasonality of your business? I agree that export will be -- what do you say -- say, 1 export a quarter as well. But for consultancy, turnkey and leasing, what will be the seasonality across the 4 quarters, which quarter will do better, which quarter will do not as great?

[Rahul Mithal, executive]

I would, Anand, not be able to -- I mean, it's not fair for me to put any seasonality to any particular stream. It's more a question now of, in each of these segments, as you see, export orders having got the first order after a long gap in early '24, the Mozambique [Technical Difficulty]

[Operator]

I'm sorry to interrupt. Your voice went off, sir.

[Rahul Mithal, executive]

Yes. can you hear me now?

[Operator]

Yes, you're audible now, sir.

[Rahul Mithal, executive]

Yes. So I was saying, Anand, that -- in case you lost me, I was trying to say that you see now we are getting revenue from each of these streams. For example, in export, the Mozambique order that we got in '24, 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 quarter 1, latest of next year, you will see a substantial contribution from the young turnkey orders because they would be about 12 to 15 months old, and execution would start at the ground level.

Consultancy orders are -- 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 Y-o-Y and sequentially in the consultancy segment.

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

[Operator]

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

[Rahul Mithal, executive]

Thank you. Thank you all for taking out 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 road map, in line with the road map 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.

[Operator]

Thank you, sir. Thank you all for being a part of the conference call. If you need any further information or clarification, please e-mail at [e-mail].

Ladies and gentlemen, this concludes your conference for today. Thank you.