This article first appeared on GuruFocus .
Release Date: November 05, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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RITES Ltd ( NSE:RITES ) maintains its FY27 guidance of double-digit top-line growth and expects H2 execution to accelerate with both export and turnkey segments contributing.
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The company has a robust order book with fresh order inflow of over one order per day and is targeting a Rs 10,000 crore order book.
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RITES Ltd ( NSE:RITES ) has secured a significant export order from Sri Lanka worth about USD 41 million (Rs 400 crore) and is the lowest bidder (L1).
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The quality assurance segment has shown strong revival with 15%+ YoY growth in revenue contribution, driven by expansion into non-railway clients and new inspection areas.
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The company is diversifying into renewable energy consulting through its subsidiary REMCL, signing an MOU with the International Solar Alliance and securing 7-8 orders worth about Rs 10 crore.
Negative Points
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RITES Ltd ( NSE:RITES ) reported muted Q2 FY27 performance with revenue growth of only 1.5% YoY and H1 growth of 5%, due to revenue milestones slipping into Q3.
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EBITDA margins have declined to 22% in Q2 and 17% in H1, and management indicated that returning to 25%+ margins is not possible due to a shift from nomination to competitive bidding.
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The 8th Pay Commission provisioning, effective from January 2027, will be a substantial hit to profitability starting Q4 FY27, with exact amounts still being worked out.
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Export revenue booking was zero in Q2 FY27, and the Bangladesh rake delivery was delayed by 10-12 days, impacting both top-line and bottom-line.
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The JV with NICC is not materializing and is currently on hold, which may delay overseas order opportunities.
Q & A Highlights
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Q: With H1 revenue up only about 5% and Q2 up just 1.5%, is the FY27 double-digit growth guidance still realistic, or does some of it shift to FY28? A: Chairman and Managing Director Rahul Mittal acknowledged that some revenue milestones slid by 1015 days into Q3, but said H2 planning gives confidence. Export rolling stock revenue is booked in lumpy fashion on full set delivery, and both export and turnkey execution are set to step up in H2. He maintained the guidance of double-digit consolidated operating revenue growth for FY27.
Q: Can EBITDA margins return to the 25%+ levels seen five years ago, or are we structurally at ~20%? A: The CMD said a return to 25%+ EBITDA margins is "not a possibility at all." The order book mix has reversed to about 60%+ competitive and ~37% nomination, with fresh inflows ~70%+ competitive, including global tenders like Bangladesh, Mozambique and Sri Lanka. The strategic focus is to protect the red lines of 1820% EBITDA margin and 1516% PAT margin.
Q: How will the 8th Pay Commission impact the books, and when does provisioning begin? A: The CMD said provisioning will start from Q4 FY27, effective 1 January 2027, covering the CDA pay scale (8th Pay Commission for PSUs) and the IDA pay scale (3rd Pay Commission). The amount is "quite substantial," still being worked out based on the 2017 pay revision trend and a significantly larger headcount. Provisioning will continue regularly until the commission's recommendations are approved.
Q: What is the delivery schedule for the Bangladesh coach order? A: The CMD said the first rake (18 coaches) has been delivered after third-party inspections, slipping 1012 days from Q2 and hurting Q2 revenue. Of 10 rakes, one is delivered, at least two more are targeted in Q4 FY27, and the balance seven (about 182 coaches) will be completed in FY28 as design and acceptance streamline.
Q: What is the status and timeline for the Mozambique locomotive order and other African export orders? A: The CMD said the Mozambique order for five locomotives (~INR 150 crores) is recent; the first locomotive is targeted for Q4 FY27, with the full order aimed to be completed by H1 of the next FY, ahead of the contractual outer limit. Separately, two developmental locomotives converted from broad gauge to cape gauge are ready for shipment, part of about 20 locomotives across African geographies that should become a steady flow next year.
Q: What is the update on the Sri Lanka export order? A: The CMD said RITES was declared L1 on the previous Monday for a ~USD 41 million (~INR 400 crores) order, disclosed to exchanges. It is expected to convert into a formal LOA soon. Delivery is contractually 12 months from LC opening, covering five sets of DMUs of seven coaches each, and preparatory planning has begun.
Q: What sustainable growth rate can the consultancy segment achieve, given mid-single-digit growth over five years? A: The CMD said consultancy has shifted heavily from nomination to competitive bidding across quality assurance, project consultancy and international work, with 70%+ of fresh order inflow now competitive. While upper double-digit growth is difficult immediately, he expects the segment to reach at least double-digit growth in the near future.
Q: Is RITES becoming a project execution company given turnkey is nearly half the order book, and how will EBITDA margins be sustained? A: The CMD clarified that RITES is not an EPC or construction company and will remain a consultancy company. The ~INR 4,500 crores turnkey order book consists of cost-plus contracts where the scope is PMC-like; the only difference is accounting, as clients such as educational institutions and hospitals prefer the full order value to flow through RITES' P&L. The larger denominator dilutes reported margins.
Q: How is the quality assurance segment performing, and what is the outlook? A: The CMD said quality assurance has recovered strongly after its shift from nomination to competitive mode, with Q2 revenue contribution to consultancy up 15%+ YoY. Expansion spans Indian Railways and non-railway clients, including renewable energy items, PCs and tablets, axle and rail safety inspections, and new AI-based rail inspection tools. The revival is expected to continue.
Q: What is the update on the JV signed with NICC, and what work will it bid for? A: The CMD said the NICC JV, which was in advanced negotiation, is not materializing as of now and is on hold. He added that RITES currently has only one subsidiary (REMCL) and one JV (with Saile Kulti); RITES Africa is being closed, and other arrangements such as the DMV tie-up are partnerships or MOUs, not incorporated JVs.
Q: What new initiatives is REMCL pursuing in renewable energy consulting and overseas work, and when will they be meaningful? A: The CMD said REMCL signed an MOU with the International Solar Alliance at the New Delhi renewable energy conference, opening international consultancy opportunities. REMCL has won 78 orders worth roughly INR 10 crores in the last six months, some already generating revenue in Q2, with substantial top- and bottom-line contribution expected by end-FY27 and FY28.
Q: Are you seeing any slowdown in railway tender awards due to elevated crude prices and macro trends? A: The CMD said RITES continues to receive a large number of orders across verticals, including alignment studies for new passenger and freight corridors, bridge and tunnel design, and quality assurance. The rail infra vertical also won fresh orders this quarter and in the past month, indicating no slowdown from RITES' perspective.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
