HEC Infra Q1 FY26: Can Rapid Growth Outweigh Working Capital Worries? Your Infra Stock Deep Dive
HEC Infra Projects Limited, an Ahmedabad-based EPC contractor specializing in extra-high-voltage transmission and distribution, has just unveiled its Q1 FY26 earnings. In a quarter where the broader Indian market, especially Nifty and Sensex, witnessed a correction despite a strong Q1 rally, HEC Infra appears to be navigating the currents with remarkable resilience. With domestic-growth themes like infrastructure and capital goods still favored by investors, how does HEC Infra’s performance stack up, and what does it signal for its future trajectory? Let’s dive into the details.
Understanding HEC Infra’s Growth Engine: Orders and Backlog
For an EPC (Engineering, Procurement, and Construction) player like HEC Infra, the order book is the lifeblood, providing a clear window into future revenue visibility. And Q1 FY26 has certainly brought good news on this front.
In the first quarter of FY26, HEC Infra Projects secured new orders worth ₹55.77 Crore. This influx is a testament to the company’s continued operational momentum and its ability to win diverse projects across various segments. Notable wins include significant EPC electrical works for Brixo Industries (₹15.68 Cr), a fast-track transmission line project for Blue Pine Energy (₹9.62 Cr), and multiple municipal corporation contracts for infrastructure augmentation and smart systems. The diversification across clients and project types is a healthy sign, reducing concentration risk.
Looking at the broader picture, HEC Infra’s total unexecuted order book stood at a robust ₹202.78 Crore at the end of FY25, a significant jump from ₹103.30 Crore in FY24. This nearly doubled unexecuted backlog provides strong revenue visibility for the next 12-18 months. The management, in its latest earnings call, indicated that the unexecuted order book is currently in the range of ₹220-230 Crore and is conservatively targeted to grow to ₹250-300 Crore by FY26 year-end. This continuous expansion of the order book, especially when compared to previous years, demonstrates management’s capability to secure new business and build a pipeline for future growth.
The company’s strategy to prioritize projects with 6-12 month execution cycles and high IRRs (Internal Rates of Return) is particularly interesting. While the average project cycle for HEC Infra is around 15-18 months, focusing on shorter-duration, high-return projects could accelerate cash conversion and boost overall profitability. The split between government (75%) and private (25%) projects in the order book, with a growing focus on faster-executing private projects, also plays into this strategy. The management highlighted the successful early completion of a Juniper Green Energy project as a case in point.
Sales Performance: A Strong Start to the Fiscal Year
The robust order inflows are clearly translating into strong sales performance.
HEC Infra reported total revenue of ₹27.91 Crore in Q1 FY26, marking an impressive 52.91% year-on-year growth compared to ₹18.25 Crore in Q1 FY25. This significant jump in the top line signals strong execution capabilities and effective conversion of their growing order book.
Q1 Financial Performance: Revenue & Profitability (YoY)
| Metric | Q1 FY25 (₹ Cr) | Q1 FY26 (₹ Cr) | YoY Change (%) |
|---|---|---|---|
| Total Revenue | 18.25 | 27.91 | 52.91 |
Looking at annual trends, HEC Infra has consistently grown its revenue:
Annual Financial Performance: Revenues (₹ Cr)
| Particulars | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenues | 51.73 | 73.79 | 112.10 |
The company’s annual revenue has more than doubled from FY23 to FY25, showcasing its “fast-grower” potential. This growth is largely driven by increased project volumes in key segments like transmission & distribution and water management, aligning perfectly with India’s ongoing infrastructure and clean energy push.
For FY26, management has provided a conservative revenue target of ₹175 Crore. Given the strong Q1 performance and the healthy order book visibility, achieving this target seems well within reach, and there’s potential for an upward revision if bank limits are enhanced. This ambitious but grounded forecast further reinforces HEC Infra’s position as a growth-oriented company.
Earnings Momentum: Profitability on an Upward Curve
While revenue growth is exciting, sustainable profitability is what truly matters. HEC Infra’s Q1 FY26 earnings performance indicates a healthy improvement in margins.
Q1 Financial Performance: Profitability (YoY)
| Metric | Q1 FY25 (₹ Cr) | Q1 FY26 (₹ Cr) | YoY Change (%) |
|---|---|---|---|
| EBITDA | 1.44 | 2.61 | 80.97 |
| EBITDA Margin | 7.90% | 9.35% | +1.45 pp |
| Net Profit | 0.84 | 1.33 | 59.37 |
| Net Profit Margin | 4.58% | 4.77% | +0.19 pp |
| EPS (₹) | 0.82 | 1.23 | 50.00 |
The EBITDA surged by 80.97% to ₹2.61 Crore, outpacing revenue growth and leading to a significant expansion in the EBITDA margin by 145 basis points. Net Profit also saw a robust 59.37% increase to ₹1.33 Crore, with a marginal improvement in Net Profit Margin. This indicates operational efficiencies being realized as the company scales.
Delving into the expenses, while raw material costs as a percentage of revenue significantly decreased in Q1 FY26 compared to Q1 FY25 (from ~67% to ~31%), “Other Expenses” saw a substantial proportionate increase (from ~22% to ~56%). Management noted that profitability and margins should be viewed on an annual basis rather than quarter-to-quarter due to variations in purchase and sales cycles. This suggests that the quarterly fluctuations in expense components might normalize over the full financial year. The fact that other income contribution was minimal (₹0.01 Cr) to earnings growth is a positive sign, indicating that growth is primarily driven by core operations.
Annually, HEC Infra has demonstrated impressive earnings growth:
Annual Financial Performance: Profitability (₹ Cr)
| Particulars | FY23 | FY24 | FY25 |
|---|---|---|---|
| EBIDTA | 4.65 | 8.61 | 15.00 |
| Net Profit | 0.79 | 4.72 | 9.24 |
Net Profit has grown almost twelve-fold from FY23 to FY25, classifying HEC Infra as a “Super Grower” based on its recent earnings trajectory. The company’s focus on high-margin, short-tenure projects, coupled with its strategic alignment with government infrastructure spending, bodes well for continued earnings expansion.
Working Capital: A Key Area to Monitor 👀
While the growth in orders and revenues is commendable, managing working capital efficiently is crucial for a capital-intensive EPC business.
A look at the balance sheet reveals some shifts. Total assets increased from ₹79.00 Cr in FY24 to ₹106.16 Cr in FY25. However, a significant change is observed in Trade Receivables, which jumped from ₹15.04 Cr in FY24 to ₹47.51 Cr in FY25. This represents a substantial 216% increase, far outpacing the 52% revenue growth during the same period. This led to a significant increase in Days Sales Outstanding (DSO) from approximately 74 days in FY24 to around 155 days in FY25. This suggests longer payment cycles or higher outstanding dues, which can put pressure on cash flow.
The impact is evident in the Cash Flow from Operations, which turned negative at -₹26.00 Crore in FY25, a stark contrast to positive cash flows in previous years. This implies that the company’s rapid growth is absorbing a significant amount of cash into working capital. To fund this, HEC Infra saw a notable increase in Current Borrowings, which surged from ₹5.59 Cr in FY24 to ₹37.57 Cr in FY25. This highlights that while the company is securing more orders and growing its top line, it is increasingly relying on short-term debt to finance its operational working capital needs.
Going forward, a close watch on the cash conversion cycle and the trend in trade receivables will be paramount to ensure that growth remains sustainable and doesn’t lead to undue financial strain.
Capital Expenditure & Future Funding
Historically, HEC Infra’s fixed assets have seen a slight decline, suggesting that past capital expenditure has been primarily for maintenance rather than large-scale asset additions. This might indicate a business model that relies heavily on subcontractors or efficient asset utilization rather than heavy fixed asset ownership.
However, the future outlook includes strategic CapEx initiatives. HEC Infra is actively exploring backward integration through selective acquisitions of low-voltage and medium-voltage transformer manufacturers. The aim is to secure critical inputs, improve cost efficiencies, and potentially offer premium expedited deliveries. A verdict on this expansion is expected by Q2 FY26. Additionally, the company is targeting Battery Energy Storage System (BESS) tenders, both under EPC and potentially BOOT (Build, Own, Operate, Transfer) models, which could entail significant future investments.
To fund its ambitious growth plans and address working capital needs, HEC Infra’s primary funding source is bank debt, particularly with Bank of India. They currently have a total limit of ₹44 Crore and are actively seeking enhancements, with a review expected in Q2 FY26. For long-term growth, the company plans to maximize its debt ceiling first, and then consider a preferential issue in the coming future, possibly next year, to support further expansion. This balanced approach to financing, combining debt optimization with potential equity infusion, indicates a prudent strategy for a capital-intensive industry.
The Road Ahead: Riding India’s Infrastructure Wave 🌊
HEC Infra Projects Limited is clearly positioned to capitalize on India’s robust power and infrastructure growth story. The country’s “One Nation – One Grid” initiative, coupled with ambitious targets like 500 GW non-fossil energy by 2030, is creating immense opportunities for EPC players. Government schemes like RDSS, PM-KUSUM, and the National Green Hydrogen Mission are acting as significant tailwinds, attracting substantial investment into the T&D sector.
HEC Infra’s strategic direction to deepen its core T&D and substation footprint, scale water treatment solutions, and align with national electrification initiatives (including BESS) is well-aligned with these macro trends. Its proven track record, diversified EPC expertise, and strong client relationships provide a competitive edge.
Key Takeaways for Investors:
- Robust Growth: HEC Infra delivered an impressive Q1 FY26, with strong revenue and profit growth. Its multi-year performance classifies it as a “Super Grower.”
- Order Book Visibility: The healthy and growing unexecuted order book provides significant revenue visibility for the next 12-18 months, with management targeting further growth.
- Strategic Initiatives: The company’s exploration of backward integration and BESS projects showcases a proactive approach to cost optimization, supply chain security, and tapping into emerging growth areas.
- Working Capital Watch: While growth is strong, the significant increase in trade receivables and negative cash flow from operations in FY25, funded by rising current borrowings, warrants close monitoring. Investors should observe if the company can improve its cash conversion cycle as it scales.
- Leverage Management: The reduction in Debt-to-Equity ratio in FY25 is positive, but the increase in current borrowings needs attention. Future funding plans, including potential equity issuance, indicate management’s long-term vision.
In conclusion, HEC Infra Projects Limited has had a strong start to FY26, effectively translating a growing order book into revenue and profit. The company is strategically aligning itself with India’s infrastructure and clean energy boom. While the working capital dynamics require careful observation, HEC Infra’s growth trajectory and proactive strategic moves make it an interesting play in the domestic-growth focused Indian market.
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