Patel Engineering Limited Stock Analysis

Revenue growth maintained momentum with 9-month consolidated revenue at Rs. 36,813 million (5.7% YoY growth) driven by civil construction segment revenues of Rs. 36,779 million / Successful Rs. 3,990 million rights issue completed during the quarter (147.77 million shares at Rs. 27/share) significantly improving equity capital from Rs. 844 million to Rs. 992 million and reducing debt-equity ratio from 0.38 to 0.33 / Core civil construction segment maintained profitability with segment result of Rs. 3,235 million for 9 months versus Rs. 3,282 million prior year, demonstrating operational stability despite market challenges / Strong asset cover of 2.02x maintained for listed NCDs with A- stable credit rating, supported by secured asset base and 100% asset coverage as per valuation reports / Current ratio improved to 1.50 indicating healthy short-term liquidity with working capital adequately covered by current assets

Exceptional items of Rs. 431 million in Q3 (Rs. 740 million for 9 months) significantly eroded profitability, comprising Rs. 57.7 million for new labour code impact, Vivad Se Viswas settlement provisions, real estate customer compensation, and associate liability provisions / Associates dragged consolidated performance with loss of Rs. 217 million in Q3 and Rs. 125 million for 9 months compared to profit of Rs. 82 million in prior year, indicating stress in joint venture partnerships / Real estate division continued bleeding with loss of Rs. 177 million in Q3 and Rs. 494 million for 9 months, reflecting ongoing challenges in property business vertical / Debt service coverage ratio declined from 1.61 to 1.45 YoY and interest service coverage ratio fell from 2.19 to 1.96, indicating reduced cushion for debt servicing despite rights issue / Finance costs remained elevated at Rs. 2,171 million for 9 months (down marginally from Rs. 2,436 million YoY) consuming significant portion of operating profit and limiting net margin expansion / Operating margin compressed from 14.79% to 12.73% YoY for 9 months, reflecting pricing pressure and cost inflation in construction operations

9M FY26 revenue growth remained healthy: consolidated revenue from operations increased to Rs 36,812.67 million from Rs 34,815.00 million (+5.7% YoY), and standalone rose to Rs 36,527.88 million from Rs 34,238.33 million (+6.7% YoY). / Leverage improved with debt-equity ratio declining to 0.33 (consolidated) from 0.38 and to 0.31 (standalone) from 0.35. / Finance cost reduced on a YoY basis: standalone finance cost fell to Rs 2,123.50 million in 9M FY26 from Rs 2,426.92 million (~12.5% lower), and consolidated declined to Rs 2,170.61 million from Rs 2,435.71 million. / Net worth strengthened to Rs 43,595.23 million (consolidated) and Rs 43,716.04 million (standalone), supported by the rights issue of 14,77,65,820 shares raising Rs 3,989.68 million. / Credit and security profile for listed debt remained stable, with debt rating at A-(stable) and disclosed 100% asset cover for secured NCDs.

Operating profitability has weakened: operating margin fell to 12.73% from 14.79% (consolidated) and to 12.29% from 14.27% (standalone) in 9M FY26. / Large exceptional items (Rs 740.37 million in 9M) materially affect reported earnings comparability; these include labour-code impact, Vivad Se Vishwas settlement, real-estate customer compensation, and associate liability settlement. / Real estate segment is loss-making despite minimal revenue contribution: standalone real estate segment result was negative Rs 285.01 million in 9M FY26. / Associate drag increased: consolidated share of profit/(loss) from associates was Rs (124.86) million in 9M FY26, including Rs (217.00) million in Q3. / Auditors highlighted material uncertainty on going concern in two subsidiaries (Shreeanant Construction Private Limited and West Kameng Private Limited), which elevates group-level execution and balance-sheet risk.