KILBURN ENGINEERING LTD.

Q&A

Q1: What is the plan for utilizing the ₹19 crores of subscription money raised during the quarter, and will it be used for organic growth, inorganic acquisitions, or working capital?

A1: The fundraise has strengthened our balance sheet, making the company net-debt free. The primary plan is to fund Capex to build capacity for catering to over ₹1,000 crores in revenue in the coming years. While we actively explore inorganic verticals adjacent to our business, we see strong organic opportunities in key sectors like fertilizer, nuclear, ferrous alloy, and data center infrastructure.

Q2: Given the ₹135 crore order inflow this quarter, what gives management confidence in reaching the targeted ₹800 crore order inflow for FY27, and what is the current exposure to the Middle East?

A2: Confidence comes from a strong overall enquiry pipeline of ₹4,000 crores, backed by traction in fertilizer, ferrous alloys, and data center infrastructure. Regarding the Middle East, we currently have zero order backlog from the region, though commercial negotiations for potential orders were delayed due to the conflict.

Q3: What is the update and timeline for delayed large-sized orders in waste heat recovery systems and the oil & gas/drying segments?

A3: Drying segment orders are expected to close by the end of this quarter or early next quarter. For ME Energy’s waste heat recovery segment, entry into the ferrous alloy space (including a Bhutan project) and expanding demand from steel sector expansions are generating multiple strong enquiries in the ₹10–15 crore range.

Q4: Are ongoing geopolitical issues and decision-making delays at the customer end also affecting the physical delivery and execution cycles of existing orders?

A4: Yes, execution cycles are extending because customers are delaying key milestones like drawing approvals and quality inspections. This pushes project completions over a quarter or more, making execution much heavier in the second half (H2) of the fiscal year.

Q5: Are raw material cost escalations impacting profitability and margins on these delayed or fixed-price orders?

A5: To mitigate risk, we procure 80% of our required raw materials within 48 to 72 hours of receiving an order. When customer-side delays cause cost escalations, we perform due diligence to request delay compensation, even on fixed-price contracts.

Q6: What is the current pending order book position following recent inflows?

A6: The opening order book was ₹467 crores, execution during the quarter was ₹117 crores, and quarter order intake was ₹134 crores. Including post-June order wins, total inflows reached ₹190 crores, taking the closing order backlog to around ₹485 crores.

Q7: Why has revenue growth guidance slowed down from 25% previously to 10–12% for FY27, and is the ₹1,000 crore revenue target for FY28 still achievable?

A7: Complex projects (like nuclear sector orders for NPCIL) require lengthy regulatory approvals compared to private sector jobs, causing timing shifts. We are confident in achieving ₹700+ crores in revenue this year while building capacity for ₹1,000+ crores going forward. The exact timeline to hit ₹1,000 crores depends on order booking pace through March.

Q8: Are project delays or holds occurring in other end-user sectors besides nuclear?

A8: Yes, certain greenfield projects such as orders in the carbon black sector are currently on hold due to external factors like environmental clearances and land acquisition delays at the customer's end, pushing execution cycles by 2 to 3 quarters.

Q9: Have profit margins taken a hit given the lower turnover at Kilburn standalone this quarter?

A9: No, despite modest turnover, we have maintained our 20%+ operating margin standard due to strict cost discipline and execution management on a consolidated basis.

Q10: What is the current status of working capital and operating cash flows post-Q4?

A10: Operating cash flows and collections have improved post-March, resulting in a healthier net working capital position compared to the end of Q4.

Q11: What is the rationale behind declaring Mr. Nitin Varadkar (Purchase Head) and Mr. Dinesh Nikam (Project Management Head) as Senior Management Personnel (SMP)?

A11: Per SEBI LODR rules, executives reporting directly one level below the CEO must be classified as SMPs. Both are long-standing key leaders who were recently elevated to report directly to the CEO; there are no immediate plans to induct them onto the Board.

Q12: Are there any plans for further equity fundraising, or is the current capital base sufficient to scale revenue to ₹1,000 crores?

A12: Equity fundraising is complete following the full conversion of warrants. The balance sheet is fully capitalized, and no additional equity dilution will be needed over the next two years to fund Capex or hit ₹1,000 crores in revenue.

Q13: What were the primary drivers behind the subdued financial performance in the current quarter?

A13: Performance was impacted by a dual lag: customer decision delays deferring new order inflows (partly due to global events) combined with execution milestone delays on active projects. These short-term delays are expected to normalize over coming quarters, resulting in a much stronger H2 performance.

Q14: Given how uncertain converting leads into confirmed orders can be, should management reconsider discussing the overall enquiry pipeline during concalls?

A14: We take note of the feedback regarding whether sharing enquiry numbers creates ambiguity versus reporting order backlog and intake figures, and we will evaluate how best to present this data going forward.

Strategic Outlook

1. Accelerating execution in H2FY27 is the immediate priority, as customer deliveries and deferred projects are expected to move into subsequent quarters. Management expects consolidated revenue of approximately ₹700 cr for FY27.
2. The Group is targeting EBITDA margins of around 20% for FY27, supported by disciplined project execution, cost management and a focus on maintaining margins while scaling the business.
3. Converting the approximately ₹4,000 cr enquiry pipeline into firm orders remains a key focus. The Group is targeting order inflows exceeding ₹800 cr during FY27, which could provide a strong foundation for growth in FY28.
4. Capacity expansion across the Group is expected to create annual revenue potential exceeding ₹1,000 cr over the medium term. Investments are aimed at supporting growth in existing and emerging end markets.
5. Monga Strayfield’s growing order wins from data-centre infrastructure companies are encouraging further fabrication capacity expansion. The company expects to benefit from the rapidly expanding AI data-centre infrastructure opportunity.
6. While geopolitical uncertainties have delayed certain customer decisions and project awards, management expects order conversion momentum to improve through the balance of FY27, creating a stronger platform for FY28 growth.

Business Strategy

1. Kilburn is pursuing growth through a combination of organic expansion, strategic acquisitions and balance-sheet strengthening, creating a broader engineering platform across industrial drying and process equipment.
2. The Group is expanding its addressable markets by targeting emerging growth sectors, including AI data-centre infrastructure and fertiliser-related opportunities. These sectors are supported by increasing customer enquiries and marquee global customer additions.
3. Capacity expansion is being undertaken across the Group to support higher order execution. Kilburn Engineering and M.E. Energy are enhancing manufacturing and execution capabilities, while Monga Strayfield is expanding fabrication capacity.
4. The company is focused on deepening customer relationships and building a larger, diversified customer base across sectors and geographies. Engagements with global fertiliser EPC leaders provide additional visibility for future growth.
5. Management is maintaining discipline on project selection, pricing and margins while converting its sizeable enquiry pipeline into firm orders. The strategy prioritises sustainable profitability alongside business expansion.
6. The Group is leveraging its strengthened balance sheet and net debt-free position to fund capacity expansion, working capital requirements and potential future growth opportunities.

Key Highlights

1. Kilburn Engineering reported Q1FY27 revenue from operations of ₹166.78 crs, down from ₹154.25 crs YoY due to customer delivery schedules and deferment of certain projects. EBITDA stood at ₹46.86 crs with a healthy 28.10% margin.
2. Despite lower revenue, operating profitability remained resilient, supported by disciplined cost management, operational efficiencies and a favourable project execution mix. PBT stood at ₹17.5 crs and PAT at ₹11.71 cr.
3. The Group has secured approximately ₹190 crs of order inflows in FY27 year-to-date. Management expects conversion of several larger opportunities to accelerate during H2FY27.
4. The Group maintains a robust enquiry pipeline of approximately ₹4,000 crs across sectors and geographies and is targeting order inflows exceeding ₹800 crs during FY27.
5. Capacity expansion is underway across Kilburn Engineering, M.E. Energy and Monga Strayfield. Monga Strayfield is significantly expanding sheet-metal fabrication capacity to cater to rising demand from the AI data-centre infrastructure sector.
6. The Group strengthened its balance sheet through conversion of 30.375 lakh warrants, receiving approximately ₹96.8 crs in balance subscription money. Along with the broader capital raise, this has positioned the Group as net debt-free.

Performance

Q1 FY27:

1. Revenue from operations: ₹116.99 crs (↓9.48% YoY)
2. EBITDA: ₹20.70 crs | EBITDA Margin: 17.69% (↓808 Bps)
3. PAT: ₹15.87 crs | PAT Margin: 13.57% (↓305 Bps)

FY26:

1. Revenue from operations: ₹628.80 crs
2. EBITDA: ₹147.14 crs | EBITDA Margin: 23.40%
3. PAT: ₹94.29 crs | PAT Margin: 14.99%