/** blogpostTitle: "Sattva Engineering FY26: Growth, a changing mix, and the working-capital test" */

Sattva Engineering FY26: Growth, a changing mix, and the working-capital test

Sattva Engineering Construction Limited closed FY26 with faster growth and a visible shift in what it executes. The company reported revenue from operations of ₹143.2 crore, up 32% year on year. EBITDA rose 19% to ₹22.1 crore, while profit after tax increased 43% to ₹13.1 crore.

The headline numbers look strong, but the quality of growth needs context. EBITDA margin moderated to 15.4% from 17.1% in FY25. Management attributed the margin reset to the commencement of the Water Treatment Plant segment, which remained in its initial ramp-up phase during FY26 and carried project start-up costs.

A sharper mix shift across water and wastewater

The company’s FY26 revenue mix moved away from Water Supply Scheme (WSS), which historically dominated the book. WSS revenue declined to ₹53.8 crore, contributing 38% of FY26 revenue versus 63% in FY25. At the same time, Under Ground Sewerage System (UGSS) revenue rose to ₹44.5 crore (31% share), and STP plus WTP revenue scaled to ₹30.6 crore (21% share) from a low base in FY25.

Management’s commentary framed this transition as intentional. The stated strategy is to scale toward larger and more complex water infrastructure opportunities, with an increasing share of EPC plus long-term O&M contracts. The company’s execution track record includes projects in the 12.5 to 50 MLD range, and FY26 marked a step-up in treatment-led execution.

Order book visibility improves, with Karnataka becoming meaningful

Sattva reported an unexecuted order book of ₹323 crore as of March 2026, which increased to ₹447 crore as of 15 May 2026, with execution expected over the next 24 to 30 months. In the concall, management indicated that out of the ₹447 crore order book, about ₹127 crore is from Karnataka and the balance is from Tamil Nadu.

A key milestone highlighted was the 47 MLD Water Treatment Plant project at Surapet, Chennai for CMWSSB, valued at about ₹106 crore and including 10 years of O&M. Management described it as the largest project in the company’s history and a showcase of EPC execution paired with recurring service revenue.

The company also discussed ongoing treatment and sewerage projects such as the Hosur City Municipal Corporation STP package comprising 12.5 MLD and 20.1 MLD capacity using SBR technology, valued at approximately ₹107 crore.

Order inflows, however, declined versus the prior year. The investor presentation reported FY26 order inflow of ₹163 crore versus ₹202 crore in FY25, and the book-to-bill reduced to 2.26 from 2.85. In the concall, management stated it had about ₹161 crore of tenders in pipeline under discussion.

Margins steady, but cash remains the key swing factor

Management guided that EBITDA margins in the 15% to 16% range are sustainable, and it also guided PAT margins of 9% to 10% through FY27 and FY28. The company’s stance is conservative, particularly after investor questions on why margins were well below an earlier 21% expectation. Management reiterated that scaling into new geographies and new segments involves initial costs and that the WTP business is still stabilising.

On the balance sheet, leverage improved meaningfully. Net debt to equity reduced to 0.2x in FY26 from 0.8x in FY25. Debtor days improved marginally to 105 days from 108 days, while inventory days reduced sharply to 29 days from 80 days. Cash conversion cycle improved to 72 days from 113 days.

Yet, FY26 also highlighted the key risk in government EPC: working capital absorption. Cash flow from operating activities was negative at -₹12.7 crore in FY26. Management linked this to working capital changes, and explained that billing is concentrated in the fourth quarter due to government execution timelines.

Two balance sheet lines matter most here:

1. Trade receivables increased to ₹49.5 crore as of March 2026. Management stated that about 33% of this had been collected by mid-May 2026, with the balance expected before the end of June 2026.
2. Other current assets rose to ₹57.9 crore. In the concall, management said the major part of this is unbilled revenue and retention money. It also stated that unbilled revenue is around ₹46 crore and is expected to convert into billing in about 90 to 120 days.

The company’s ability to maintain growth while normalising operating cash flow will likely depend on how quickly unbilled revenue gets converted into bills and how consistently those bills are collected.

New adjacencies: Odor control systems and building projects

Two business moves stood out in management commentary.

First is the re-entry into Odor Control System (OCS). During FY26, the company secured an odour control systems contract from CMWSSB worth about ₹40.5 to ₹40.6 crore, covering 46 sewage pumping stations in Chennai, including design, engineering, commissioning, and five years of O&M. Management also stated it won an initial odour control unit project at BWSSB in Karnataka. In the concall, it indicated OCS margins could be about 1% to 1.5% higher than other segments.

Second is the stated re-entry into Industrial and Utility Buildings. Management described this as adjacent to its execution capabilities and said the focus is on commercial, institutional, and factory projects across South India.

These adjacencies are still early, and the documents do not quantify revenue contribution from these new verticals yet. But they do signal a broader positioning beyond core water EPC, with the OCS opportunity particularly linked to regulatory compliance and sewage infrastructure upgrades.

What to track from here

Sattva has laid out an aggressive growth aspiration: a 60% revenue CAGR through FY28, implying about 2.5 times scale-up from current levels. The company also intends to fund growth primarily through internal accruals and disciplined working capital, with management stating it is not looking for new debt beyond existing banking limits.

For investors, the FY26 story is a blend of progress and test points. Progress is visible in the revenue growth, PAT expansion, reduced leverage, and the strategic shift toward treatment projects and EPC plus O&M structures. The key test is whether the balance sheet lines, particularly receivables and unbilled revenue, convert into cash without creating recurring operating cash flow deficits.

If execution remains steady and collections improve as management indicated, the company enters FY27 with a larger order book and a broader footprint including Karnataka. The next phase will be defined less by headline growth and more by how cleanly that growth turns into cash.