Patel Engineering Bets On This Two-Pronged Strategy To Boost Net Profit

Patel Engineering Ltd. aims to achieve 20% year-on-year revenue growth from FY26 onwards, while keeping its debt levels in check to boost net profit, according to the company’s Managing Director, Kavita Shirvaikar.

In the quarter ended Sept. 30, 2024, the civil engineering and construction company reported a 95% rise in consolidated profit after tax to Rs 73.44 crore, against Rs 37.65 crore during the year-ago period, the company's stated in its regulatory filing.

Revenue from operations grew 15% to Rs 1,174.3 crore in the second quarter of the financial year 2024–25, from Rs 1,021.3 crore in the same quarter a year ago. Revenue from operations was higher than the guidance of 12%. However, margins were in line with the 14% guidance.

In an interview with NDTV Profit, outlining the way forward for her company in the upcoming quarters, Shirvaikar said, “Next year onwards, we are saying we will be targeting 15% to 20% growth year-on-year. But we will be able to maintain the debt level at the current level.”

According to the Patel Engineering MD, maintaining the current debt level will prevent an increase in interest payouts for the company.

“Our interest cost will not go up, but our revenue and margin will go up. So, absolutely, our net profit will increase. Over and above growth, our debt will be limited at the same time,” she said.

As of Sept. 30, 2024, Patel Engineering has managed to reduce its total debts by nearly 24% to Rs 1,437.7 crore from Rs 1,885.5 crore as of March 31, 2024.

“We are continuously monetising non-core assets and focusing on our core sector. So going forward also, we are fairly confident to maintain the growth and margin at the same level,” Shirvaikar noted.

While the company planned to monetise Rs 150–200 crore via sale of its non-core assets in the first half of FY25, the top executive pointed out that it surpassed the goal and achieved Rs 330 crore.

“Next half also, we are expecting around Rs 100 crore to Rs 150 crore (of non-core assets monetisation),” she added.

Patel Engineering’s order book at the end of this quarter was around Rs 17,000 crore. Shirvaikar said that the company is on track to complete orders totalling Rs 2,500 crore in the second half of the ongoing fiscal. 

She added that the company had already begun submitting bids for orders, which have started to come in after a subdued first half.

“Post Q2, orders started to come in for bidding. Bids worth Rs 10,000 crore are already under evaluation. Over and above this, we have shortlisted around Rs 40,000 crore worth of projects, which we will be bidding in the near future,” the top executive said.

Pointing to the company's large order pipeline, Shirvaikar said that maintaining the growth guidance was achievable. “With regards to the (growth) target of 15% to 20%, it is not a concern. We are fairly confident we'll be able to maintain that target.”

Shares of Patel Engineering Ltd. rose 5.5% to touch an intraday high of Rs 52.75 apiece on the NSE on Thursday. The stock was trading 2.1% higher at Rs 51.06 apiece on the NSE in comparison to the benchmark Nifty 50's dip of 0.09%.

The stock closed 2.18% higher at Rs 51.1 apiece on the NSE against the benchmark Nifty's dip of 0.11%.