Desco Infra. Q3 FY26 Earnings Analysis

- Desco Infratech aims to achieve INR 1000 crore revenue by 2030, with a growth sequence led by City Gas Distribution (CGD), followed by Compressed Biogas (CBG) units, and power and transmission sectors. - Current order book is strong, primarily in CGD, with INR 333+ crore in CGD, INR 6.6 crore in power and transmission, and the rest in water distribution. - The company sees 65%-70% revenue contribution from CGD in the near term; power and transmission distribution expected to contribute 30% or more moving forward. - CBG revenue is expected to start in FY 2027 through the wholly-owned subsidiary Desco Bio Green, with capacity expansion planned over next years. - Growth in power and transmission is expected to reach 18%-20% of revenue in the current year, scaling to 30%-35% over three years. - The company projects a consistent 90%-100% year-on-year revenue growth rate in the near term barring force majeure events.

- Desco Infratech aims to achieve INR 1000 crore revenue by 2030, driven mainly by City Gas Distribution (CGD), followed by Compressed Biogas (CBG) and power & transmission sectors. - Revenue growth projected at 90%-100% YoY for FY 2026 and FY 2027, with expected full-year revenue between INR 108-115 crores conservatively. - Operating cash flow currently negative due to strategic advances but expected to improve significantly in H2 FY 2026 and beyond. - EBITDA margin stable around ~21%, with PAT margin expected conservatively around 13% despite expansion into power transmission where margins are slightly lower. - Expansion into CBG through wholly-owned subsidiary expected to contribute from FY 2027 with a payback period of 3-4 years. - Power and transmission business expected to contribute 18%-20% revenue in FY 2026, growing to 30%-35% over next 2-3 years without compromising margins. - Overall, a steady and focused approach is planned to ensure sustainable margin growth and profitability improvements over medium to long term.

- Desco Infratech Limited is planning capex in its wholly-owned subsidiary Desco BioGreen Private Limited for compressed biogas (CBG) plants. - The company has signed MoUs in South Gujarat for land acquisition and is awaiting regulatory approvals expected in 2-3 months. - Revenue from CBG is expected to start from FY 2027 with initial output capacity of 3 to 5 tons per day. - Post initial CBG facility, the company plans to establish more CBG plants in states like UP and MP financed from generated revenue. - The company is exploring acquisition of ready CBG units from entities unable to manage them. - It plans to blend green hydrogen into city gas distribution pipelines, with execution expected within 12-18 months, based on MoU with KP Group. - Strategic advances have been made toward last-mile connectivity projects involving purchase of significant raw materials and premobilization payments to laborers and suppliers.

- Desco Infratech Limited is currently in final discussions with their existing bank for working capital loan facilities in the range of INR 20-30 crores. - The company is aiming to maintain a conservative debt-to-equity ratio below 0.22x to ensure financial prudence. - There is no explicit mention of new equity fundraising during the call. - The company is also exploring surety bonds as mandated by the Ministry of Finance and IRDAI to support their working capital requirements. - No other specific plans for fresh debt or equity issuance were disclosed. - Overall, the focus is on managing working capital through existing banking relationships and strategic debt syndication rather than new equity offerings.

- Current order book exceeds INR 345 crores. - Breakdown of current order book: - City Gas Distribution (CGD): INR 333+ crores - Power and Transmission Distribution: INR 6.6 crores - Water Distribution: Remaining portion - Additional pipeline tender orders: INR 431 crores (100% CGD segment), bids submitted, awaiting results. - Company has a healthy conversion ratio of 30%-40% for winning new bids. - L1 orders (approx. INR 20 crores) are not included in current order book as LOAs are yet to be received.