HCC Navigates Transition with Strategic Deleveraging and Focused Growth

Hindustan Construction Company (HCC) has released its Q2 FY26 results, showcasing a period of strategic recalibration marked by significant deleveraging efforts and a disciplined approach to order acquisition. While the standalone turnover for the quarter saw a decline, the company maintained robust profitability and laid a clear roadmap for future growth, emphasizing specialized projects and private sector expansion.

For Q2 FY26, HCC reported a standalone turnover of ₹957.8 crore, a decrease from ₹1,203 crore in Q2 FY25. This anticipated tapering off in revenue is attributed to the completion of several key projects. Despite the lower top-line, the company's standalone net profit stood strong at ₹36.7 crore, with a healthy EBITDA margin of 16.1%. This performance underscores HCC's operational efficiency and cost management capabilities during a transitional phase. On a consolidated basis, the total income was ₹983.3 crore, with a net profit after tax of ₹47.8 crore and an EBITDA margin of 15.38%.

Deleveraging and Financial Strengthening

A cornerstone of HCC's current strategy is aggressive debt reduction. The company has made significant progress, prepaying ₹339 crore in FY26 and expecting an additional ₹450 crore repayment in Q3. Management projects a total standalone debt reduction of ₹1,000-1,200 crore by March 31st, which is anticipated to reduce annualized interest expenses by over ₹100 crore. This will have a substantial positive impact on the company's bottom line in subsequent fiscal years. Furthermore, HCC's corporate guarantee on the debt of Prolific Resolution Pvt. Ltd. has been reduced from 100% to 20%, a move approved by 97.4% of lenders, significantly de-risking the balance sheet. A ₹1,000-1,100 crore rights issue is also on track for completion in Q3, with proceeds allocated to both debt prepayment and general corporate purposes to fuel future growth.

Operational Milestones and Strategic Focus

Operationally, HCC continues to deliver on complex projects. The Mumbai Metro Line 3 (Pkg UGC02) was inaugurated by the Prime Minister, marking a significant achievement. Unit 7 of the Tehri Pumped Storage Project achieved synchronization with the Grid, and the Vishnugad Pipalkoti HEP saw 7.5 km of TBM mining completed out of 12.1 km. The Indore Metro project and Bhivpuri PSP are also progressing steadily.

Looking ahead, HCC is adopting a disciplined approach to order acquisition. The company aims for an order intake of at least ₹10,000 crore this year and targets a 20-25% CAGR in its order book over the next 4-5 years. Management is strategically focusing on fewer, larger projects, typically ranging from ₹1,000 crore to ₹2,500 crore, to ensure higher profitability and better control. This selective bidding strategy avoids highly competitive, low-margin areas.

Diversification and Future Opportunities

HCC is also actively pursuing diversification, aiming to increase its private sector exposure from the current ~10% to 30% within the next two to three years. This shift is expected to enhance margins and reduce reliance on government projects. The company is exploring new growth avenues, including data centers and AI-related power infrastructure, having been approached by third parties for collaborations in these emerging sectors. This proactive stance positions HCC to capitalize on evolving infrastructure demands.

Outlook

While FY26 is projected to be a flat year in terms of turnover, HCC is strategically positioning itself for accelerated growth from fiscal year 2027 onwards. The robust bid pipeline of ₹57,000 crore, coupled with significant deleveraging and a focused approach to high-margin projects, provides a strong foundation. The company's commitment to transparent communication and disciplined execution instills confidence in its ability to achieve sustained profitability and deliver long-term value to stakeholders.