CRISIL said that the ratings continue to reflect the company's strong financial risk profile supported by healthy capital structure with nil gearing and established market position.

These strengths are partially offset by susceptibility to cyclicality in demand from end-user sectors, strong competition and volatile input prices.

Operating income grew by 41% year-on-year to Rs 880 crore during the first nine months of this fiscal along with Earnings before interest, tax, depreciation and amortisation (EBITDA) margin improving to 13.4% as compared to 11.4% during fiscal 2022. The improvement in operating performance was driven by healthy demand for CNG gas compressors and other process gas systems, improved export sales and fixed costs absorption, despite high raw material prices.

KPCL's order book has been growing steadily and stood at more than Rs 1,300 crore as on December 31, 2022, thereby providing revenue visibility. Revenue growth is expected to be healthy at 25-30% during this fiscal while EBITDA margin is expected to improve to 12-13% this fiscal despite high raw material prices.

Sustenance of revenue growth while maintaining healthy EBITDA margins over the medium term, remains a key monitorable.

The road-railer operations are expected to ramp up over the medium term with addition of new routes and wagons. Furthermore, the financial risk profile remains robust, supported by debt-free balance sheet, strong debt protection metrics and healthy liquidity.

KPCL is a part of the Pune-based Kirloskar group. It has three divisions: air compressors, refrigeration and gas compressors, and transmission products. Manufacturing facilities of all divisions are integrated and three locations situated in and around Pune. End users include the oil and gas, pharmaceutical, steel, power, railways and defence sectors. KPCL entered into an agreement with the Indian Railways to operate road-railers, including the pilot project between New Delhi and Chennai, Tamil Nadu.

For the first nine months of fiscal 2023, revenue was Rs 880 crores and PAT was Rs 76 crore, against revenue of Rs 623 crore and PAT of Rs 31 crore in the corresponding period of the previous fiscal.

The scrip shed 0.35% to currently trade at Rs 559.85 on the BSE.