The agency has also reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities and other debt programmes of the company.

CRISIL said that the ratings are driven by the strong business risk profile of KPIL due to its established market position in the T&D segment, growing non-T&D business and strong order book.

Outstanding consolidated orders worth Rs 47,332 crore as on June 30, 2023, at a combined level, present adequate revenue visibility.

Operating income improved 15% year-on-year as on fiscal 2023 primarily due to better execution in the non-transmission and distribution (T&D) business. Earnings before interest, depreciation, tax and amortisation (EBIDTA) margin declined to 9.0% against 9.7% for the same period last year due to increase in material expenses, primarily steel and freight cost. Softening of commodity prices and synergy benefits from the amalgamation should help the margin improve over the medium term.

Financial risk profile is marked by increase in gross debt during fiscal 2023 to fund the high capital expenditure (capex) and increasing working capital requirement, which led to rise in gearing.

Steady debt levels, coupled with better profitability and cash accrual, should enhance debt protection metrics in fiscal 2024. Also, liquidity remains strong, supported by unencumbered cash and equivalent of around Rs 700 crore and an undrawn bank limit of around Rs 150 crore as on as on 30 June 2023.

The ratings continue to reflect the strong track record of KPIL in the transmission line tower (TLT) business, diversified revenue streams and healthy financial risk profile. These strengths are partially offset by the large working capital requirement given the inherent nature of the EPC business, and exposure to subsidiaries & Road SPVs.

KPIL plans to divest few non-core assets including road projects, real estate project in Indore and logistics over near to medium term. Additionally, the company plans to expedite project closures in order to improve its working capital cycle.

Kalpataru Projects International is a leading player in the domestic T&D sector. The company undertakes turnkey contracts for setting up transmission lines and substations for extra-high-voltage power transmission. Over the years, it has diversified into civil contracts, railways, and oil and gas pipeline construction.

The scrip fell 1.12% to currently trade at Rs 664 on the BSE.