| DCX Systems Limited | ||||||
| Ratings downgraded to 'Crisil BBB+ / Stable / Crisil A2 ' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has downgraded its ratings on the bank facilities of DCX Systems Limited (DCXSL; part of DCX group) to ‘Crisil BBB+/Stable/Crisil A2’ from ‘Crisil A-/Stable/Crisil A2+’.
The downgrade reflects the deteriorating business risk profile, characterized by declining revenue and weakening operating profitability. The group’s revenue is expected to decline for the second consecutive year in fiscal 2026, with an estimated 20-25% decrease following a 24% drop to Rs 1,087 crore in fiscal 2025 from Rs 1,431 crore in fiscal 2024. Operating profitability has also declined significantly, from 6.47% to 2.11% and is expected to remain below 2% in fiscal 2026. The group recorded revenue of Rs 536 crore with an operating margin of (3.14%) for the nine months of fiscal 2026. This weaker performance can be attributed to the underwhelming performance of the group’s subsidiaries, the ongoing West Asia crisis leading to certain execution challenges, and changes in design by customers resulting in delivery extensions. Specifically, revenue from Israel declined significantly to Rs 57 crore in the nine months of fiscal 2026 from Rs 1,153 crore in fiscal 2024. The operating profitability is also weak due to the aforementioned reasons and lack of a price escalation clause, as extended execution results in increased input prices with limited pass-through ability to customers. However, the business risk profile continues to be supported by healthy outstanding order book of Rs 2,582 crore as of December 2025, providing moderate revenue visibility and certain measures to be undertaken to support the operating profitability, including building into price escalation clause and booking of the higher expenses in the form of bill of materials.
The ratings reflect the established market position of DCXSL, supported by the extensive experience of its promoter and his technical expertise, and strong financial risk profile. These strengths are partially offset by working capital-intensive operations and a muted operating margin. |
Analytical approach Crisil Ratings has combined the business and financial risk profiles of DCXSL, along with its wholly owned subsidiaries, Raneal Advanced Systems Private Limited and NIART Systems Limited. This is because these entities are in the same business and have strong management, financial and operational fungibilities.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers - Strengths Established market position, supported by the extensive experience of the promoter and technical expertise: The promoter – Dr. H.S Raghavendra Rao (Chairman and Managing Director) has experience of over three decades in the aerospace and defence equipment sector. Over the decades, DCXSL has developed strong engineering and execution capabilities, which has helped it to establish a reliable supplier of electronic components, especially in the defence segment. Furthermore, DCXSL has backward integrated to set up a PCB assembly (PCBA) segment and has received orders from reputed international clients. The management is also focusing on expanding the product line into other industries such as medical equipment, industry and other segments. Crisil Ratings believes the experience and expertise of the promoter, coupled with backward integration into PCBA, should support the revenue growth and operating margin over the medium term.
Strong financial risk profile: The financial risk profile is supported strong fund-raising ability through IPO (initial public offering) and QIPs (qualified institutional placements) in the recent past. Adjusted networth is estimated to be healthy at Rs 1,098 crore as on March 31, 2026, with nil debt and comfortable total outside liabilities to adjusted networth ratio estimated to be 0.48 time. Capital expenditure (capex) and inorganic growth plans over the medium term will be funded through equity and hence, reliance on external debt is expected to be minimal, leading to improvement in leverage. The debt protection metrics were robust, with adjusted interested coverage expected to be over 7.77 times in fiscal 2026. The metrics are likely to improve further over the medium term on the back of moderate profitability and lower reliance on debt. |
Key Rating Drivers - Weaknesses Working capital-intensive operations: Gross current assets were 326 days as on March 31, 2025, due to sizeable inventory and stretched receivables towards the fourth quarter of the fiscal. Working capital cycle is expected to remain stretched given the nature of end user industries and turnaround time required in the end-user projects.
Modest operating margin; likely to improve over the medium term: The margin has been 1-3% due to the nature of orders and low value addition. However, it is expected to improve over the medium term with ramp up in operations. Scaling up of the PCBA segment, expansion into obstacle detention systems and broader industry segments, and new orders from reputed clientele should support operating margin over the medium term. |
Liquidity Adequate Net cash accrual is expected to be over Rs 60-100 crore against nil term debt obligation over the medium term. Current ratio is estimated to be healthy at over 3 times as on March 31, 2026. Capex and inorganic growth plans over the medium term will be funded through equity. Bank limit utilisation is nil currently and the group has cash and liquid assets of around Rs 664 crore as of December 31, 2025, which provides strong liquidity buffer. Healthy leverage levels enhance financial flexibility and the group’s ability to raise funds in case of any exigency. |
Outlook Stable Crisil Ratings believes DCXSL and its subsidiaries will continue to benefit from their established market positions in the aerospace and defence equipment segment and strong financial risk profiles. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the company DCXSL (previously, DCX Cable Assemblies Private Limited) was incorporated in 2011 and is promoted by by Dr Raghavendra Rao Hosakote Shamarao (Chairman and Managing Director). The company, along with its subsidiaries, is the preferred Indian Offset Partner that specialises in manufacturing military and aerospace system integration, circuit board assemblies, cable and wire harness assemblies, critical defence products, including electronic assemblies, automatic missile detection radars, surveillance systems, electronic warfare systems, communication systems, unmanned aerial vehicles, medium-range maritime reconnaissance aircraft, and surface-to-air missile, and electronic sub-systems. The company caters to the defence and aerospace, and marine and related industries.
DCXSL is listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. |
Key financial indicators Consolidated numbers
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Status of non cooperation with previous CRA |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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Annexure: List of instruments and names of regulators of the instruments As required by SEBI CRA Circular dated Feb 10, 2026, a list of activities or instruments falling under the purview of various FSRs, along with the names of respective FSRs, is being disclosed below:
* Includes securitisation transactions involving assignee payout, acquirer's payout. ~ The rated instrument may involve issuance of different instruments such as debt securities (listed or otherwise), bank loans, commercial paper (listed or otherwise), etc. The regulator of the instrument may accordingly be SEBI, RBI or MCA and can only be determined upon issuance. In PRs subsequent to issuance(s), Crisil Ratings Limited shall separately capture the rated quantum details along with names of respective regulators. ^ Includes bank facilities such as liquidity facility, second loss facility that are part of securitisation transactions. # There is no instrument being rated and hence, Regulator of the Instrument is not applicable. The rating scale and definitions are being followed as stipulated in SEBI Master Circular for CRAs. @ These ratings were assigned during regulatory regime prior to introduction of SEBI CRA Circular dated Feb 10, 2026 and the investor side regulators have accordingly been included.
Note: Kindly note that for activities or instruments falling under the purview of FSRs other than SEBI, the grievance/dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available. |
Criteria Details
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