Va Tech Wabag Q2 FY27 Earnings Call: Order Book Crosses Rs. 20,000 Cr, Best-Ever Q2 PAT Tops Rs. 100 Cr

Va Tech Wabag Ltd held its Q2 FY27 earnings call on November 05, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Best-Ever Second Quarter; Profit Growth Outpaces Revenue

• Q2 FY 2026-2027 revenue crossed Rs.1,000 crore (+20% YoY) and PAT crossed Rs.100 crore (+20% YoY) — the highest-ever second quarter reported; EBITDA came in at Rs.145 crore with a ~14.5% margin.
• H1 FY 2026-2027 consolidated revenue was Rs.1,887 crore (+20.3% YoY), EBITDA Rs.261 crore (+~21%, ~14% margin), and PAT Rs.195 crore (+~30%), with PAT margin expanding to 10.3% from 9.6% in H1 FY 2025-2026.
• H1 FY 2026-2027 standalone revenue was Rs.1,587 crore (+19%), EBITDA Rs.227 crore (+20%), PAT Rs.169 crore (+~29%).
• Net cash excluding HAM exceeded Rs.1,100 crore vs Rs.950 crore at end of FY26; including HAM, net cash was Rs.1,036 crore — the 15th consecutive quarter of positive net cash. H1 FY 2026-2027 operating cash flow was Rs.225 crore (over 1.1x PAT).
• ROE improved to 16.3% and ROCE to 20.5% in H1 FY 2026-2027 (from 15.7% and 19.5% respectively at March 2026); net working capital improved to 101 days from 104 days at March 2026.
• Revenue mix in H1 FY 2026-2027 was International 54% / India 46% and EPC 82% / O&M 18%; management is building O&M toward a 20%-of-revenue objective as a high-margin, asset-light stream.

First-Ever Rs.20,000 Cr+ Backlog on Kuwait and Reliance Mega Orders

• Order book hit a lifetime high of Rs.20,207 crore at end of H1 FY27 — first time above Rs.20,000 crore — on H1 order intake of over Rs.5,200 crore; backlog is more than 4x annual revenue, with O&M backlog at a historic high of Rs.6,500 crore.
• Maiden Kuwait entry signed in H1 FY27 with the Ministry of Electricity, Water, and Renewable Energy, Kuwait, in partnership with Haisco — a 60 MIGD (~272 million liters/day) seawater RO desalination facility with a 5-year O&M term post-EPC; a large ~$400 million Kuwait project was signed with a consortium/JV partner in Q2 FY 2026-2027.
• Reliance Industries Limited wins included a Jamnagar desalination plant of ~201 million liters/day (expandable to ~302 million liters/day) plus a ~72 million liters/day remineralization plant, and a September (Q2 FY27) repeat order for an effluent treatment plant at the Dhirubhai Ambani Green Energy Giga Complex.
• Other H1 FY27 wins — O&M contract with Adani, UAE entry via the Ajman wastewater project (signed and execution started), a large Bangalore Water Supply and Sewerage Board order, a medium Delhi Jal Board order, and a waterworks expansion order in Vienna, Austria.
• Kuwait and Reliance wins were both EP-scope (everything except civil, done by customer or partner) and together nearly 80% of H1 FY 2026-2027 order intake; management would like at least 20-30% of orders from the EP mix on average (period unspecified).
• Backlog mix (Q2 FY 2026-2027) — Chennai projects (Kodungaiur, Chennai Ring Main, Perur balance) are well over 10% of the total book and ~15-20% of the EPC backlog; the Middle East is ~60-70% of the international mix, with the remainder from Europe, Africa, and the SEA and Sun regions.
• Order book gap query — Mudit Bhandari (IIFL Capital) flagged a difference between implied and reported order book; CMD Rajiv Mittal attributed it to forex-driven backlog restatement, which flows through the backlog only and is not counted as order intake.

Supply Headwinds Easing; Pipeline Slowed but Not Stopped

• Commodity price pressure and regional disturbance are disrupting Middle East supply chains, but management stated these have not made a big dent in Q2 FY 2026-2027 execution timelines or margins; clients have approved longer shipping routes and air freight for critical components.
• Deputy MD Bhupesh Choudhary said geopolitical disturbances that began about 1-1.5 years ago (around FY 2025-2026) are gradually reducing; majority of equipment for the Middle East project has reached site, with residual challenges expected to be overcome in H2 FY 2026-2027. Management will need a new equipment delivery strategy if conditions do not improve within the next 3-6 months (through ~Q1 FY 2027-2028).
• Al-Hayr STP (Saudi Arabia) civil works are over 80-85% complete with mechanical erection underway; commissioning is targeted for Q4 FY27. Ras Tanura is completed and awaiting pre-commissioning, with a hydro test targeted by end-November 2026 (Q3 FY 2026-2027).
• Saudi Arabia has been slower and more cautious; preferred-bidder projects have started moving and management expects advancement by around Q3 FY 2026-2027. Management said it is a fair assumption that Middle East pipeline conversion into orders will see some delay as governments await investment strategy decisions, while funded projects under execution continue.
• Sector shift to PPP — Middle East water authorities are relatively quiet on new tenders due to macro reasons; Wabag is engaging with developers investing in water assets (Aqua, Basics, and sovereign entities) as their EPC player, and management believes its competitiveness and local presence give it an edge over European and international EPC players.
• Bangladesh project (secured March 2023, World Bank-funded) — payment security fully assured and payments on time; the timeline has slipped by approximately 6 months due to the disturbance and change of government/bureaucrats, which management stated will not affect project margins. Engineering is largely complete, ordering 90% done, ~30-40% of material dispatched, and civil works ~30-40% complete.
• Indosol solar project (Andhra) — land reallocation after the change of government cost part of the site; Indosol has secured 90% of required land (900 of 1,000 acres) with the balance 100 acres expected within a quarter (around Q4 FY 2026-2027), after which Indosol plans to kickstart the mega project, committing the smaller 1 GW project first.

Structural Margin Improvement; Wage Code Cost Persists

• Q2 FY 2026-2027 gross margin elevation is "not a one-off" per CMD Rajiv Mittal but a structural improvement driven by project mix and execution quality; investors were advised to evaluate performance on an annual basis. The 13-15% gross margin guidance was reiterated (period unspecified), having held over the last 5-6 years.
• Employee expenses of Rs.99 crore in Q2 FY 2026-2027 contain no one-offs — reflecting annual increments, better performance pay, and the wage code change (PF, gratuity); management expects stabilization over coming quarters into FY 2027-2028, though the wage code impact alone will persist.
• Other expenses of Rs.60 crore in Q2 FY 2026-2027 are regular consolidated policy provisions with no abnormalities, expected to normalize over FY 2026-2027.
• Margin guidance already factors in commodity inflation — Indian contracts carry pass-through/escalation formulas; on international orders the company hedges immediately on order receipt and places major procurement early to lock in prices.
• Payment security policy — only cash-accretive projects with "full payment security": sovereign guarantees (Saudi projects backed by the Ministry of Finance or Ministry of Water; Namami Gange backed by the Government of India), multilateral backing (World Bank, JICA, ADB, KFW), and letters of credit on select projects; payment delays expected to be limited to a few weeks to a month.
• Execution risk mitigation — projects are distributed across geographies and currencies so no single geography can pull the company down; management noted the model has withstood COVID, Russia-Ukraine, and the Gulf situation.

Peak Bidding Activity; Semiconductors and Data Centers in Early Engagement

• Bidding activity is at a peak per CMD Rajiv Mittal, with a heavy pipeline of big-ticket inquiries; management is hopeful of a bumper order intake over the next 12-18 months and expects preferred-bidder status on a substantial-size pipeline within the next one or two quarters.
• Tamil Nadu announced a very large 400 MLD desalination plant at North Chennai — similar in size to the Perur project Wabag is executing — plus a river cleaning program; management called Tamil Nadu its home market where it fancies its chances. Domestic inquiries also flow from Bangalore, Delhi, Madhya Pradesh and Rajasthan, plus industrial inquiries (orders already secured from Reliance and BPCL in refineries/petrochem).
• Regional traction — strong inquiry flow from Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu across desalination, sewage treatment, reuse and sewerage; industrial wastewater demand is opening predominantly in Gujarat and central India, with large projects emerging in the power and steel sectors.
• Sunrise-sector engagement — management has started interacting with potential clients including Google, Adani and Reliance on reuse water for chilling and ultra-pure water for semiconductors and data centers; management noted a lot is happening in the segment but it is yet to physically take shape.
• Sunrise orders are modular and small-ticket — single orders will never be Rs.5,000 crore or Rs.1,000 crore — with a good chance of repeat orders within 1-3 years of an initial win; a dedicated vertical handles these orders, which have short gestation periods of generally 12 to 15 months and need turnaround in about 12 months.
• Data-center cooling thesis — management noted the prevailing air-cooled trend could shift to water-cooled systems, better on both capital and operating cost, conditional on a reliable and affordable water supply. On FY 2027-2028 order intake, management did not provide numeric guidance, framing the sunrise segment as "not a top line segment" but a strategic, high-tech opportunity.
• Sector ramp timelines — substantial PV solar activity is already visible in India; semiconductor demand is expected to pick up, while hydrogen may pick up only in a couple of years as production scale rises and costs come down.

Vriddhi 2.0 Slated for May 2027; Cash Flow Aspiration Soft

• Medium-term objectives reiterated (period unspecified) — revenue CAGR of 15-20%, EBITDA margin in the 13-15% band, ROCE above 20%, ROE above 15%, O&M progressing to 20% of revenue, and a sustained positive net cash position.
• Vriddhi 1.0 culminates in FY 2026-2027 with most targets achieved or exceeded (H1 FY 2026-2027 ROCE 20.5%, ROE 16.3% above thresholds; EBITDA margin 13.8% within range); Vriddhi 2.0 — the next 5-year strategy plan — is in advanced formulation and slated for unveiling at the annual investor meet in May 2027.
• Project milestones — Chennai Metro 400 MLD Perur desalination plant is ~90% through concreting (~1 lakh cubic meters poured, 7 million safe man-hours) and on schedule for completion in FY 2027-2028; Delhi Jal Board outfall pipeline supplies are expected to commence from November 2026 (Q3 FY 2026-2027); Nepal multilateral-fund projects expect liquid stream commissioning by end of FY 2026-2027; Zambia (Lusaka) Engware and Chunga STPs are progressing well.
• Geopolitical tailwinds — management said recent political developments in the Middle East and US are significantly helping movement of business opportunities, with a rise in inquiries; Africa is viewed as an underserved market expected to become much better in the years to come.
• On FY 2026-2027 cash flow — asked by Manish Maheshwari (Equity at Work Family Office) whether the company could exit FY 2026-2027 with consolidated pre-tax operating cash flow of about Rs.500-600 crores, CMD Rajiv Mittal said the company would "try our best" and replied "Why not?" to the Rs.500 crores level — a soft acknowledgment rather than formal guidance.
• Succession and knowledge management — HR and top management are fully focused on succession planning, combining homegrown talent with lateral entrants; Rohan Mittal (CMD's son), with the business for the last 9 years handling the Middle East, GCC and Africa region, is being groomed and is expected to take up a position in the coming years. The company is exploring AI platforms to capture and retrieve knowledge from its knowledge management software over the next few years.
• B2C remains exploratory — on retail bottled/mineral water, management said it has done assessments but remains comfortable and well positioned in B2B serving industrial and municipal clients globally, with no committed B2C entry announced.