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Summary: KEC International's revenue and order book have grown sharply, but profit has barely moved and cash generation has remained weak. The story examines whether the stock's steep fall is justified by its debt, working capital and margin problems, or whether the ongoing repair can change the picture.
India’s infrastructure boom has taught investors to focus on the order book. After all, a large order book means an infra company is doing well, right?
Well, KEC International is an exception to this rule. Despite a fat order book and record inflows, its profit has remained stagnant for years. While the company says FY27 may mend things and first quarter results in, it’s time to test the promise.
About the company
KEC International, part of the RPG Group, is one of India's largest EPC (engineering, procurement and construction) companies, best known for its T&D (transmission and distribution) business, which builds the towers and lines that carry electricity across the country.
Over the past decade, it has added railways, civil construction, water, metros, pipelines and cables, which widened the runway but fundamentally changed what KEC is.
Bigger, not better
Although KEC’s numbers have improved, profit growth has gone nowhere
|
|
FY26 | FY20 |
|---|---|---|
| Revenue (Rs crore) | 23,506 | 11,965 |
| EBITDA margin (%) | 7.5 | 10.1 |
| Interest cost (Rs crore) | 872 | 403 |
| Profit after tax (Rs crore) | 606 | 566 |
| ROCE (%) | 16.4 | 25.3 |
Between FY20 and FY26, KEC’s numbers have no doubt gone up. Revenue has nearly doubled, yet profit after tax grew just 7 per cent. EBITDA (earnings before interest, tax, depreciation and amortisation) rose Rs 551 crore, but the interest cost also jumped Rs 469 crore, eating into most of the operating gains.
Net debt including interest-bearing acceptances also rose from Rs 4,558 crore in FY25 to Rs 6,722 crore a year later, even as revenue grew 8 per cent.
EBITDA margin slipped from 10.1 per cent to 7.5 per cent, and the reason lies in where KEC earns its money. T&D accounted for 67 per cent of FY26 revenue, with usual margins of around 10 per cent, generating an estimated Rs 1,590 crore of the Rs 1,760 crore group EBITDA. That leaves Rs 7,700 crore of revenue from the other businesses, which contributed almost nothing.
Railways used to be the counterweight, covering for T&D through its loss-making legacy contracts back in FY21, and is now a third of its FY22 size at Rs 1,527 crore after KEC walked away from tenders drawing 15-20 bidders. KEC also slowed execution in water projects when government funding was delayed, leaving fixed costs under-recovered, and four completed metro lines in Delhi and Chennai still await handover, costing up to Rs 240 crore a year to maintain while earning nothing.
The cash that never arrived
For an EPC contractor, booking revenue is not the same as collecting cash. That conversion is what matters.
Between FY20 and FY26, KEC converted just 17 per cent of its cumulative EBITDA into operating cash, with working capital absorbing most of the difference. That was not enough to cover the Rs 3,392 crore of interest paid over the same period, so the company borrowed to pay the interest on the borrowings that funded the work. FY26 makes the point most sharply because its best year ever still resulted in a negative operating cash flow of Rs 414 crore.
The pile that keeps growing
Trade receivables of Rs 6,474 crore look survivable against a revenue of Rs 23,506 crore, but billed invoices are only a third of what customers owe KEC. The rest is work already done that cannot yet be invoiced, plus retention money clients hold back until a project finishes. Saudi contracts, KEC's largest, retain 20 per cent, which is why retention has grown 86 per cent in two years.
A mounting backlog of receivables
KEC International’s receivables have steadily grown over the past three years
| Rs crore, consolidated | FY26 | FY25 | FY24 |
|---|---|---|---|
| Billed receivables | 6,474 | 5,051 | 4,137 |
| Unbilled revenue | 7,409 | 7,509 | 6,488 |
| Retention money | 4,923 | 3,670 | 2,644 |
| Total owed by customers, net of provisions | 18,602 | 16,095 | 13,225 |
Roughly nine months of sales are sitting with clients. Net working capital days measure the gap between spending on a project and getting the money back. As of Q1FY27, KEC closed at 134 days, compared with its peer Kalpataru's 80 days. This is not how the industry works. It is how KEC works.
A record order book, but a heavier one
None of this has slowed the order intake. FY26 brought record inflows of Rs 25,280 crore and a closing book of Rs 36,267 crore. On paper, nothing is broken.
The catch is in what kind of work is being won. To boost average order value, KEC raised its typical order size from Rs 350 crore to over Rs 500 crore. Larger, multi-year projects take longer to execute and can keep more cash tied up along the way, as billing is linked to project milestones and part of the payment can be retained until later stages. The order book is becoming a heavier machine to run, placing a greater drain on the resource KEC is short of: cash.
What is going right
There is real repair underway. KEC is scaling back lower-margin non-T&D segments. Non-T&D as a share of total revenue fell from 47 per cent in FY24 to 32 per cent in FY26 as the company stopped bidding for cash-negative work.
Money is in sight as well. Around Rs 1,000 crore is due across overdue water receivables, Saudi retentions, and railway arbitration awards already won. This could fund a Rs 1,000-1,200 crore debt reduction this year. While this resets working capital back to where it stood two years ago, it represents a simple reversion to past levels rather than a true improvement.
The first quarter of FY27 shows repairs underway, with debt down by Rs 154 crore and revenue flat at Rs 5,024 crore. That flat revenue line is the one to sit with, because retention alone grew Rs 1,253 crore during FY26. KEC is therefore trying to release cash from a balance that can refill whenever international orders run at pace. The flat quarter is the price of the repair: for now, KEC has chosen to get paid rather than chase growth.
The bottom line
So, has KEC’s de-rating gone too far? Not yet, and the price is the least of the reasons. At 22 times trailing earnings, KEC sits in line with Kalpataru Projects and below Skipper at about 27 times, priced where its peers are but on a profit; the interest bill has shrunk.
The market is not doubting the demand. Grid spending is real, and the record order book proves it. Instead, investors are punishing the company because seven years of record revenue produced barely any cash and none after interest.
The key signals to track are positive operating cash flow, contract assets growing slower than revenue, and recovering profit margins. Until those arrive, KEC faces a classic structural constraint: without steady cash collection, every new order requires additional debt to fund upfront costs, making future growth increasingly expensive to sustain.
Want more research like this?
Stocks like KEC International show why headline numbers. A record order book and rising revenue don't always tell the full story. Understanding what's really driving a company's cash flows, margins and balance sheet health is key to separating genuine turnarounds from value traps.
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