RITES Q2 FY25 earnings call.
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Revenue
₹541 Cr
verified against source
Revenue YoY
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reported change
EBITDA
Pending
latest reported figure
Source
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Actual signal trajectory
Where this quarter sits.
Quarter read
What the record says.
RITES reported a challenging Q2 FY25 with execution impacted by monsoon conditions across geographies. Sequential revenue growth of 11-12% from Q1 to Q2 was achieved, but year-on-year performance declined approximately 7%. EBITDA margins contracted to just below 20% (versus 21% in H1), primarily due to the Quality Assurance business undergoing a structural shift—Indian Railways tendered QA work among four players, reducing RITES' market share to ~30% with rates falling to 20% of historical levels. Management clarified this hit would persist but diversify toward non-IR clients (now ~60%+ of QA revenue versus two-thirds IR previously). Export orders of ~INR 1,300 crore will only start revenue recognition from early FY26, making FY25 a "consolidation year." Order inflows remain robust with 90+ orders worth INR 700+ crore in Q2 alone. FY26 guidance points to double-digit revenue growth as export execution commences. Key risks include continued margin pressure from intensifying competitive bidding (now 70%+ of fresh orders on competitive basis) and pending Zimbabwe order (~INR 700-800 crore) awaiting Afreximbank funding clarity.
Colored figures show movement against the previous available record.
Guidance to track
- With export orders (~₹1,300 crore) starting revenue recognition from early FY26 and other streams (consultancy, turnkey) growing, management expects substantial healthy growth versus FY25.
- Despite competitive pressures and margin hit from QA business restructuring, management targets consolidated EBITDA margins in the 20-21% range going forward.
- With current order book at ₹6,580 crore (~2.5 years visibility) and continued aggressive order inflows (targeting one order per day), management aims to maintain 3-year forward visibility.
- Management targets securing at least one export order every quarter to sustain the export momentum broken after 3-4 years of hiatus, leveraging new business re-engineering for global tender participation.
Risks flagged
- IR QA business restructured to open tender among 4 players (RITES, TÜV SÜD, Bureau Veritas, Intertek). RITES now holds ~30% market share at rates at 20% of historical levels, causing permanent structural margin hit.
- ₹700-800 crore order not added to order book due to conditional clause pending Afreximbank funding. Management cautious—no liability exposure until clear funding letter received. Timeline uncertain.
- Traditional export margins of 25%+ unlikely to return. All recent export orders won through competitive global tenders (Bangladesh EIB-funded, South Africa), with margins 'well below 25%' but 'better than turnkey.'
- Despite revenue/margin pressures, net addition of ~200 employees (300 gross minus 100 superannuations) in one year increased employee costs. These engineers hired for future order execution visibility.
Key quotes
- This year was and will be the toughest year for us, as we had said at the beginning of the FY. It's a year of consolidation. We are trying to increase and improve the execution in Q3, Q4 to come as close as possible on an FY basis to the previous FY.
- The worst in export is in terms of the number that we have now, about INR 1,300-odd crores of order book... these will start generating in the coming FY. The strike rate of getting export orders is not only one order, which was in Q4, which was the first order after a gap of about three, four, four years.
- The current levels of EBITDA of about 20-odd% and PAT margins of about 15-odd%, that is the realistic levels of margin which we see a visibility, which is what we'll aim for.
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