The credit rating agency has reaffirmed the company's long-term rating at "[ICRA] AA- (Stable)” and the short-term rating at "[ICRA] A1+”.

ICRA said that the reaffirmation of ratings for H.G. Infra Engineering' (HGIEL) factors in its healthy execution ramp-up in FY2023e resulting in estimated revenues of Rs. 4,300-4,500 crore and a sizeable order book (approximately Rs 12,600 crore as on 31 March 2023), which provides strong medium-term revenue visibility.

The ratings continue to favourably note the company's comfortable financial profile, as reflected in its stable and healthy operating margins (approximately 16%), low leverage and robust debt coverage metrics.

The ratings draw comfort from the promoters' long track record in the civil construction business and established relation with its key clientele, consisting of Government bodies like the National Highways Authority of India and the Ministry of Road Transport and Highways (MoRTH), and private road developers like Tata Projects, IRB, etc. Its consistent focus on quality construction and timely delivery resulted in repeat projects (from key clients) and early-completion bonus payments, which is an indication of its strong execution capabilities.

Given its healthy project pipeline, ICRA expects HGIEL to maintain a healthy revenue growth of approximately 18-20%, steady operating margins (approximately 16%) and comfortable leverage and coverage indicators in FY2024.

The company remains exposed to high segment and client concentration risks with approximately 90% of order book consisting of road works, mainly from the NHAI and Adani Road Transport (ARTL). With addition of new orders from the railway and metro divisions, the segment concentration risk will get mitigated to some extent.

Over the medium term, the company is planning to enter drinking water projects (under Jal Jeevan Mission), which should aid segmental diversification going forward.

The 'stable' outlook on the long-term rating reflects ICRA's opinion that the company would witness a sustained revenue growth over the medium term on the back of a healthy order book, strong execution capabilities and established relationship with reputed clientele.

H.G. Infra Engineering is primarily involved in the construction of roads and highways in Odisha, Telangana, Rajasthan, Delhi, Andhra Pradesh, Haryana, and Uttar Pradesh. HGIEL is accredited AA class by the Public Works Department (PWD) of the Government of Rajasthan (GoR) and is registered as an SS class contractor by the Military Engineer Services (MES).

The company's consolidated net profit rose 30.2% to Rs 130.89 crore on 23.7% jump in net sales to Rs 1,184.97 crore in Q3 FY23 over Q3 FY22.

The scrip fell 1.13% to currently trade at Rs 868 on the BSE.