Desco Infratech in FY26: Rapid scale-up, a large order book, and a new CBG chapter

Desco Infratech Limited ended FY26 with a sharp step-up in scale. Revenue from operations rose to INR 118.79 crore from INR 59.61 crore in the previous year, a 99.28% year-on-year increase. Profitability also improved. EBIT increased to INR 23.43 crore and profit after tax (PAT) rose to INR 16.38 crore. EPS for the year stood at 21.34.

The company’s narrative across the investor presentation and the May 2026 earnings call was consistent. The growth is being positioned as execution-led, supported by a reported order book of INR 345 plus crore, and expanded capabilities across CGD pipeline execution, power distribution, solar EPC, and a new entry into compressed bio gas (CBG) production.

FY26 performance and segment mix

The company disclosed a two-segment split for FY26 operations. City Gas Distribution (CGD) remained the largest contributor, while Power and Renewable EPC scaled meaningfully as the company entered these projects during the year.

CGD delivered INR 83.24 crore of revenue in FY26, while Power and Renewable EPC delivered INR 35.37 crore. The mix matters because margins differ. The company reported CGD PAT margin at 15.42%, while Power and Renewable EPC PAT margin was 10.01%.

Management attributed margin softness to the project mix shift, especially as power distribution and solar EPC ramped in H2. Management also said that while margins may fluctuate quarter to quarter, the company is not focused on chasing low-margin growth.

Order book visibility and what it implies

The investor presentation stated a total order book of INR 345 plus crore, along with a tender pipeline of INR 650 crore plus. The company indicated a 30% to 40% conversion ratio for the tender pipeline and execution visibility over the next 18 to 24 months.

In the earnings call, management provided additional granularity. Out of the INR 345 crore order book, management said around INR 330 to 332 crore is in the CGD segment. Management also stated that within CGD, an estimated INR 35 to 40 crore relates to O and M contracts with a 24-month timeline, while the balance CGD EPC work typically carries an 18 to 24 month timeline. Power distribution projects were described as roughly one-year execution cycles.

This disclosure helps explain two linked points from the call.

First, working capital pressure can rise during ramp-ups, especially when multiple new sites begin simultaneously and billing is under certification. Management specifically linked an increase in other current assets to unbilled revenue or work in progress, and GST receivables.

Second, the company’s choice to diversify into power distribution and solar EPC was partly explained as an effort to improve the cash conversion cycle. Management stated that CGD working capital days are around 30 to 35 days, while power distribution and solar EPC are about 10 to 15 days, though they also acknowledged the impact of retention amounts and defect liability periods.

Cash flow, funding costs, and the credibility test

Investors repeatedly asked about negative operating cash flow. Management’s explanation was that the negative cash flow is growth-led, driven by higher working capital deployment as revenues scale. Management compared the prior year and current year: operating cash flow was about INR 12 crore negative in FY25 on revenue of about INR 60 crore, while in FY26 it was about INR 18 to 19 crore negative on revenue of INR 118 crore.

Management also gave a forward statement that cash flow conversion should improve as projects mature, and indicated that the company may reach at-par or slightly positive operating cash flow by next year. Management further said it expects to report positive operating cash flow within the next two years.

The second area of investor focus was borrowing cost. Management said the company used NBFC loans at about 16% to 17% per annum to fund solar EPC projects with timelines of around 90 to 120 days. Management also stated that debt restructuring is expected after H1 of the current year and guided that the cost of debt could reduce to around 8.5% to 9.5%.

On leverage, the company reported debt to equity at 0.20 for FY26. Management said this could rise to a maximum of about 0.3 over the next 1.5 years as the company uses structured debt tools.

Together, these points define a clear investor checkpoint. The company is asserting that working capital stress is temporary, and that funding costs will structurally improve. Over the next few reporting cycles, the credibility of that claim will depend on whether cash generation and borrowing cost actually trend in the direction management described.

CBG entry: a new operating asset and an expansion plan

The company’s investor presentation highlighted a strategic acquisition in February 2026, where Desco acquired a 75% stake in Shri Green Agro Energies Pvt. Ltd. This was positioned as an entry into the CBG sector with faster execution and early revenue visibility.

In the earnings call, management said the company’s first CBG plant is expected to be commissioned in Q1 FY27. Management added that the commissioning was delayed by about 15 to 25 days because the company shifted from an initial plan of 1 ton per day to commissioning a 2 ton per day plant.

Management shared specific operational economics on the call.

• Capex for the 2 TPD commissioning was stated at about INR 3.5 to 4 crore.
• Revenue was indicated at not less than about INR 1.4 to 1.5 lakh per day for 2 TPD, with fortnightly billing.
• PAT margin was stated at about 22% to 23%, with payback of about 3.5 to 4 years.

The company also discussed a larger expansion plan. Management stated it is aiming to add a combined 15 to 18 TPD capacity over the next 18 months, supported by MOUs and discussions in South Gujarat and Madhya Pradesh (Dhar). Capex estimates shared were INR 12 to 15 crore for the South Gujarat project and about INR 9 crore for Madhya Pradesh, implying about INR 25 crore combined.

Management also addressed funding, stating that for these greenfield projects, the company is planning to raise funds through banks. Management did not comment on any equity raise.

International expansion: UAE subsidiary with early-stage intent

The company incorporated Desco Global FZ-LLC in March 2026 as part of an international expansion strategy. In the earnings call, management indicated the entity is intended to explore EPC opportunities in Ras Al Khaimah free zone. No financial contribution guidance was provided, so this remains a strategic step rather than a quantified near-term driver.

Takeaways

Desco Infratech’s FY26 documents highlight a company scaling quickly in an execution-heavy business. The reported order book and tender pipeline provide near-term visibility, and the segment disclosure offers a clearer view of where margins are stronger and where they are still maturing.

The next phase of the story hinges on three items management repeatedly emphasized: normalising operating cash flow as projects mature, lowering borrowing costs through debt restructuring, and delivering the first CBG commissioning in Q1 FY27 followed by capacity expansion.

If these milestones land on time and start showing up in reported cash flows and financing costs, the company’s shift from a pure EPC player to a broader energy infrastructure platform will look more credible. If not, investors are likely to remain focused on working capital discipline and the true economics of the new CBG build-out.