Engineering and construction company Kalpataru Projects International Ltd is bracing for the adverse impact of the Middle East conflict on its March quarter (Q4FY26) earnings. During a recent analyst meet, management noted that the Middle East accounts for 10-11% of its ₹63,300-crore order book. The power transmission & distribution (T&D) business is expected to see a potential revenue impact of ₹200-300 crore due to supply-related challenges. Kalpataru’s quarterly revenue run rate for the past three years has been ₹4,700 crore.
Still, management is upbeat on overall growth prospects. Recent gas shortages haven’t hurt its domestic manufacturing plants, which operate at 80-85% utilization levels. The total addressable market for the domestic T&D sector remains strong, with nearly ₹1 trillion of annual ordering expected over the next few years. The international pipeline also remains strong, with Africa too seeing a revival in funding-agency-backed projects, improving revenue visibility. However, with the closure of Brazil operations (Fasttel), Kalpataru is likely to recognize an impairment in the near term.
For FY27, it eyes around 20% revenue growth, aided by healthy execution and robust pipeline across T&D, buildings & factories (B&F) and international markets. FY27 profit before tax margin is expected to grow 50-70 basis points to 6%. The water segment, which was facing payment delays, has seen an improvement with around ₹500 crore received so far in Q4FY26 under the Jal Jeevan Mission 2.0. Outstanding receivables of ₹1,200-1300 crore are likely to be received by September.
In Q3FY26 Kalpataru had exited a non-core business with the sale of road asset Vindhyachal Expressway. It also identified Shree Shubham Logistics as non-core and is selling specific warehouses to reduce debt. Further, promoter pledges (for real estate business) have dropped significantly, thus addressing the overhang, said a JM Financial Institutional Securities report.
Risks remain
To be sure, despite a diversified revenue mix and order book, execution delays and slowing order inflows owing to prolonged disruptions in the Middle East could be dampeners. Also, as Motilal Oswal Financial Services pointed out, around 50% of the company’s order book has price variation clauses. While it is adequately hedged against price swings in aluminum, zinc and copper, a sudden spike in steel prices remains a risk to its medium-to-long-term performance. The stock has declined 10% over the past month.