ICRA said that the ratings continue to draw comfort from the extensive experience of the promoters of MTAR Technologies (MTL) and its track record in the precision engineering industry, which caters to various segments, including clean energy, nuclear, space, aerospace and defence.

Also, the established relationship with renowned clients, including the Indian Space Research Organisation (ISRO), Bloom Energy Corporation (Bloom), Nuclear Power Corporation of India (NPCIL) and Defence Research and Development Laboratory (DRDL), has ensured repeat orders from its customers over the years.

Further, the company is adding new products to its portfolio and adding new clients in all the segments, both of which are expected to augment the revenues. Moreover, as MTL has a strong technical capability and is the sole supplier for several products, it faces restricted competition.

The ratings also take into account MTL's healthy financial risk profile, led by strong earnings growth in FY2023 and healthy profit margins along with a comfortable capital structure and debt protection metrics.

The company's revenue grew 78% in FY2023 and the growth momentum is expected to continue in the near term, supported by a strong order book position of approximately Rs 1,173 crore as of March 2023 and new orders in the pipeline from domestic and international clients.

The ratings, however, are constrained by high customer concentration as the company derives a major share of its revenues from one client i.e., Bloom Energy Corporation. Further, the ratings consider the company's working capital-intensive operations owing to the long production and receivable cycle inherent to the industry.

The ratings also consider the vulnerability of its margins to the fluctuations in forex rates to the extent of the unhedged position and the margins vary, depending on the segment and customer mix.

The 'stable' outlook reflects ICRA's expectations that the company would continue to maintain its credit profile with an improvement in revenue, profit margins and overall liquidity position.

MTAR Technologies primarily manufactures various machine equipment, assemblies, sub-assemblies, precious tools and spare parts for the clean energy, nuclear, space, aerospace, defence and other engineering industries.

For the financial year ended 31 March 2023, MTL reported a profit after tax of Rs 103.4 crore on an revenue of Rs 573.8 crore against Rs 60.9 crore and Rs 322 crore, respectively, for the corresponding period of the previous fiscal.

The scrip rose 1.82% to end at Rs 1949.35 on the BSE on Friday.