Enviro Infra cuts margin guidance, warns of 166-day cash drag
The company’s strategic pivot to renewables has lifted the order book to ₹6,814 crore, but government payment delays are now stretching the working capital cycle to five-and-a-half months.
What's new
- EBITDA margin guidance lowered to 21-22% due to raw material inflation.
- Working capital cycle stretched to 166 days from delays in schemes like AMRUT.
- Battery storage segment from Suyog Urja acquisition targets 10-12% PAT margins.
Why this matters
The earnings call framed a growth story but revealed a cash-flow problem. Enviro Infra is winning record contracts, but its clients are not paying on time. A 166-day cycle is a severe cash drain that could strain the balance sheet and force the company to borrow to fund its own projects.
What we're watching
- Whether government payment cycles normalise or the 166-day drag persists.
- Actual margin delivery on the new battery storage projects from NTPC.
- How the company manages a ₹6,814 cr order book against a conservative ₹2,000 cr FY27 revenue target.
The full read
Enviro Infra’s earnings call framed its renewable-energy pivot as a growth story, then revealed the bill. The order book hit an all-time high of ₹6,814 crore, providing roughly 24 months of revenue visibility. But the working capital cycle has stretched to 166 days because government clients, particularly under schemes like AMRUT, are paying late. That is a significant cash drain. Compounding the near-term pressure, management lowered EBITDA margin guidance to 21-22%, citing raw material inflation. The new battery storage business acquired via Suyog Urja and sourced from NTPC wins is expected to yield 10-12% PAT margins, but these projects are still in early stages. The company is guiding a conservative ₹2,000 crore revenue target for FY27. The core issue is now cash flow, not contracts. An order book of ₹6,814 crore is less useful when collecting on it takes over five months.
Questions answered
- Why did Enviro Infra lower its EBITDA margin guidance?
- Management cited raw material inflation as the key reason for reducing the guidance range to 21-22%.
- What is causing the working capital to stretch to 166 days?
- The primary cause is payment delays from government-sponsored schemes like AMRUT. This has significantly increased the company's cash conversion cycle.
- How large is the new order book, and what does it mean?
- The order book stands at an all-time high of ₹6,814 crore, providing roughly 24 months of revenue visibility based on the company's conservative ₹2,000 crore FY27 target.
- What are the expected returns from the new battery storage business?
- Management expects the new Battery Energy Storage Systems (BESS) projects, including those won from NTPC, to deliver 10-12% profit after tax (PAT) margins.