Patel Engineering - An Engineering Behemoth: IDBI Capital

IDBI Capital Report

Patel Engineering Ltd. founded in 1949, is into construction of complex civil infra work like hydro power plant, tunnelling, Urban Infra, irrigation and others. It has seen multiple capex cycle in India, and currently has an order book of Rs 191 billion (which is four times trailing twelve months revenue).

Up-cycle in its order inflow has started post Covid and in FY23 it has received highest ever annual order inflow of Rs 78 billion. Company is one the major beneficiary of Infra capex for hydro plant and it expect bidding opportunity of 30 giga watt plus in sector.

After reporting revenue compound annual growth rate in double digit at 18% over FY20-23, its year-to-date-FY24 revenue increased by 20% YoY.

Leverage in Patel Engineering has tapered off to 0.6x in 9M FY24 versus ~one time before Covid. This is led by internal accrual, non-core asset sale and equity raise in the last four years.

Key risk

• Opportunity is huge but if/any delay in award of orders could impact growth trajectory.

• Change in the order book mix away from high margin hydro work could impact margin.

• Stretch in working capital and increase in the short term debt, company will have to maintain leverage under control.

• Patel Engineering operates in a highly competitive environment and increase in competitive intensity can pose risk to growth.

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