Rationale

 The rating reaffirmation on the bank lines of GE Power India Limited (GEPIL) takes into account the company's improved performance in Q2,FY 2022, after its Q1,FY 2022 performance. In Q1, FY 2022, the company had incurred losses attributable to the cost overrun in National Hydroelectric Power Corporation Limited's (NHPC) Subansiri project, wherein GEPIL is a contractor, along with hardening of commodity prices, amid the Covid-19 pandemic-related disruptions. The rating also draws comfort from GEPIL's established position among the major players in thermal and hydro power plant equipment and services industry in India, supported by technological and financial benefits derived from its strong parentage, General Electric Company (GE1 ), and its strong technical/execution capabilities. Notwithstanding the lower order inflow in the current fiscal, the company's unexecuted order book provides revenue visibility for the medium term. However, timely execution of the same within the budgeted costs will be crucial for sustaining the profit margins. Moreover, the company's revenue stream remains diversified, given the wide product/service base offered and contribution from international orders (primarily from GE Group companies). The company's profitability is vulnerable to cost escalations and any delay in execution of its projects. Also, the working capital borrowings are likely to remain high which will keep the coverage indicators under pressure. Furthermore, the demand outlook for power equipment manufacturers remains subdued, given the limited fresh capacity additions in the thermal and hydro power industry. Future order inflows in the emission control systems segment [primarily flue gas desulphurisation (FGD) orders] are also likely to be deferred to some extent given the relaxation in timelines, in light of the adverse impact of the pandemic, supply chain challenges and financing challenges faced by the thermal power generation sector. Further GEPIL's profit margins remain susceptible to challenges in timely execution of orders and hardening of key raw material prices and bought out components, given the relatively long project-execution cycle and fixed-price nature of some contracts. The continued Negative outlook on GEPIL's rating reflects the subdued demand outlook due to deferment of projects, and elevated working capital borrowings which will keep the coverage indicators under pressure.