Enviro Infra: From Water to Renewables Surge

Enviro Infra Engineers, traditionally focused on water and wastewater treatment projects, is strategically diversifying into the renewable energy sector, including solar, wind, and battery energy storage systems (BESS). This shift is evident as renewables contributed 29% of revenue in Q1 FY27, a substantial increase from 11% in FY26. The company's order book has more than doubled to approximately Rs 6,700 crore as of June 30, 2026, providing significant revenue visibility for the coming years.

Despite robust revenue growth, operating profit margins saw pressure, falling to 21% in Q1 FY27 from 27% in the prior year. This is attributed to a changing business mix, rising raw material costs, and investments in new capabilities. Management projects water projects to yield 21-22% margins and renewables 15-18%. A critical challenge is the surge in working capital days, which increased to 137 in FY26 from 89 in FY25, with free cash flow turning negative at Rs 245 crore in FY26, necessitating efficient cash conversion.

The company's balance sheet shows increased borrowings to Rs 422 crore in FY26, though debt-to-equity remains moderate at 0.34. Return on capital employed has declined from 64% in FY22 to approximately 20% in FY26. Enviro Infra trades at approximately 18.3 times earnings, reflecting a market that is cautiously optimistic about its growth strategy and diversification into larger environmental infrastructure opportunities.