Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A1+’ rating on the commercial paper programme of KEC International Ltd (KEC).

 

The rating continues to reflect KEC’s leadership position in the transmission line tower (TLT) and transmission and distribution (T&D) engineering, procurement and construction (EPC) segment, the company’s diversified order book across geographies and segments, and strong liquidity position as well as financial flexibility as part of the RPG group. These strengths are partially offset by large working capital requirement and modest debt protection metrics.

 

Operating income of KEC is estimated to have grown ~10% in fiscal 2026, partly impacted because of the West Asia conflict as the company derives significant orders and revenue from the Middle East. Order book position is estimated ~Rs 40,000 crore as of March 2026, translating to an order book to revenue (fiscal 2026) ratio of 1.6–1.7 times. KEC is focusing on the domestic and overseas T&D business as the sector is seeing significant capital expenditure (capex). Overall, the management expects annual order inflow in FY27 to remain robust at ~Rs 30,000 crore, and the order book-to-revenue ratio at 1.5–2.0 times over the medium term. The company’s operating income is expected to grow 10–15% annually over the medium term as the overseas operations remain healthy despite the ongoing West Asia conflict, while the execution of the domestic order remains healthy. However, any significant impact of the West Asia conflict resulting in lower-than-expected order inflow and reduction in revenue visibility and growth will be monitorable.

 

In terms of profitability, KEC’s operating (earnings before interest, taxes, depreciation and amortisation) margin has improved over the past two fiscals, driven by completion of legacy orders and increasing share of overseas and newly bid T&D projects having higher margins. The operating margin is estimated ~7.75%-8% in fiscal 2026 (7.7% and 6.7% in fiscals 2025 and 2024, respectively), partly impacted by the loss of a part of the revenue for March 2026 due to the West Asia conflict. The margin is expected to remain steady over the medium term despite higher commodity and transportation charges, as KEC has a strong hedging policy for a large part of the material costs and foreign currency exposure as well as price variation clauses in some projects. However, any significant impact on the operating margin will be monitorable.

 

Working capital intensity remained high in fiscal 2026 with gross current assets (GCAs) estimated at 320–330 days (322 days as on March 31, 2025, and 285 days as on March 31, 2024) driven by slower collection from water and railway projects and certain overseas geographies as well as higher unbilled revenue and retention in overseas projects. The working capital cycle was also impacted by the delay in overseas collections in March 2026 due to the West Asia conflict. The increased working capital requirement is partly funded through creditors. The creditor days are expected to have remained steady at 290–300 days as on March 31, 2026 (294 days and 288 days as on March 31, 2025, and March 31, 2024, respectively). Working capital intensity is likely to ease as the company realised a significant amount of receivables in April 2026, and should recover further during fiscal 2027. O verall, the GCAs and creditors are expected to reduce below ~300 days and ~280 days, respectively, by the end of fiscal 2027. However, slower-than-expected improvement in the working capital cycle will remain a key rating sensitivity factor.

 

The high working capital cycle resulted in increase in net debt to Rs 6,500–7,000 crore as on March 31, 2026, from ~Rs 5,200 crore a year earlier. Debt protection metrics remained subdued with adjusted interest coverage estimated at 2.2–2.3 times for fiscal 2026 (2.1 times in fiscal 2025) and total outside liabilities to tangible networth (TOLTNW) ratio at 3.2–3.3 times as on March 31, 2026 (3.2 times a year earlier). With expected improvement in the working capital cycle, the net debt is expected to reduce to ~Rs 6,000 crore by September 2026 and Rs 5,500–6,000 crore by March 2027. Adjusted interest coverage and TOLTNW are expected to improve to 2.0–2.5 and 2.5–3.0 times, respectively, over the medium term and will remain monitorable.

 

Despite high working capital intensity, the liquidity is supported by cash and equivalents of Rs 522 crore (of which, Rs 422 crore is unencumbered), unutilised fund-based bank lines of ~Rs 2,686 crore and unutilised non-fund-based bank lines, including project specific limits,  of Rs 3,743 crore (a part of which is interchangeable with fund-based lines as well) as of March 2026. The company has been enhancing the bank lines in the past and is currently in the process of enhancing its bank lines by another Rs 1,835 crore which also includes project specific limits, which will support the liquidity. KEC benefits from being part of the RPG group, which supports access to funding and strong banking relationships.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of KEC and all its subsidiaries, as the companies are engaged in similar business.

 

Interest-bearing acceptances have been considered as debt.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Leading market position in the T&D business with strong execution capabilities: KEC has established its presence in the TLT and T&D EPC segment, backed by over five decades of experience. The company is among the largest global players, supported by installed capacity of 468,200 tonne per annum. It has a strong track record of executing large and complex T&D projects across geographies, backed by integrated manufacturing capabilities and established vendor relationships. In India, it has longstanding relations with reputed clients such as Power Grid Corporation of India Ltd (rated 'Crisil AAA/Stable/Crisil A1+') and state utilities, ensuring steady order inflow. KEC continues to benefit from strong demand in the domestic T&D sector and sustained opportunities in international markets, particularly in the Middle East. The relatively shorter execution cycle (~2 years) in T&D projects supports faster revenue conversion and better cash flow visibility. Continued strategic focus on T&D, where revenue has scaled up significantly over the past few years, is expected to support stability in the business risk profile.

 

Diversified orders across businesses and geographies: KEC has a diversified order book, estimated at Rs 40,000 crore as of March 2026, across business segments and geographies, mitigating concentration risks. As on December 31, 2025, ~64% of the orders were from the T&D segment, followed by civil (~27%), transportation (~7%) and others, with around 37% derived from international markets. KEC is focusing on the domestic and overseas T&D business given the substantial capex in the sector as reflected in 71% share of T&D in the order inflows during first nine months of fiscal 2026. Therefore, the share of T&D is likely to increase in the order book position over the medium term.

 

Healthy financial flexibility: As the flagship entity of the RPG group, KEC benefits from the group’s financial flexibility, strong reputation and longstanding relations with key stakeholders. The group has presence in diverse businesses such as tyres, pharmaceuticals, information technology, construction, healthcare and plantations. KEC’s financial flexibility is also supported by cash and equivalents of Rs 522 crore (of which Rs 422 crore is unencumbered), unutilised fund-based bank lines of ~Rs 2,686 crore and unutilised non-fund-based bank lines, including project specific limits,  of Rs 3,743 crore (a part of which is interchangeable with fund-based lines as well) as of March 2026.

Key Rating Drivers - Weaknesses 

Large working capital requirement: Operations remain highly working capital intensive due to the nature of EPC contracts, which involve milestone-based billing, retention money, and long execution cycles. The GCAs are estimated at 320–330 days as on March 31, 2026 (322 days as on March 31, 2025, and 285 days as on March 31, 2024) driven by slower collections from water and railway projects and certain overseas geographies as well as higher unbilled revenue and retention in overseas projects. The working capital cycle was also partly impacted by delay in overseas collections in March 2026 due to the West Asia conflict. A part of the increased working capital requirement is funded through creditors, which remained steady at 290–300 days as on March 31, 2026 (294 days and 288 days as of March 2025 and March 2024, respectively). The working capital intensity is expected to ease as the company realised a significant amount of receivables in April 2026 and is expected to recover further in fiscal 2027. The GCAs and creditors are expected to reduce to ~300 days and ~280 days, respectively, by the end of fiscal 2027. However, slower than expected improvement in the working capital intensity will remain a key sensitivity factor.

 

Modest debt protection metrics:

The debt protection metrics remain moderate with adjusted interest coverage estimated at 2.2–2.3 times for fiscal 2026 (2.1 times in the previous fiscal), and TOLTNW ratio at 3.2–3.3 times as on March 31, 2026 (3.2 times a year earlier) mainly driven by increase in the net debt to an estimated Rs 6,500–7,000 crore as on March 31, 2026, from ~ Rs 5,200 crore as on March 31, 2025. With expected reduction in the working capital intensity, the net debt is expected to reduce to ~Rs 6,000 crore by September 2026 and Rs 5,500–6,000 crore by March 2027. The adjusted interest coverage and TOLTNW ratio are expected to improve to 2.0–2.5 and 2.5–3.0 times, respectively, over the medium term and will remain key rating sensitivity factors.

Liquidity Strong

Liquidity is supported by total cash and equivalents of Rs 522 crore (Rs 422 crore unencumbered), unutilised fund-based bank lines of ~Rs 2,686 crore and unutilised non-fund-based bank lines, including project specific limits, of Rs 3,743 crore (a part of which is interchangeable with fund-based lines as well) as of March 2026. The company has a track record of enhancing the bank lines and is currently enhancing its bank lines by another Rs 1,835 crore which also includes project specific limits, which will support its liquidity. KEC also benefits from being part of the RPG group, which supports access to funding and strong banking relations.

Rating sensitivity factors

Downward factors

• Weakening business risk profile with decline in the order book to revenue ratio, revenue growth and profitability impacting the cash flow
• Lower-than-expected improvement in the working capital cycle resulting in debt and/or creditors remaining elevated impacting the credit metrics
• Interest coverage remaining below 2.5 times and TOLTNW ratio above 3 times on a sustained basis
• Significant debt-funded capex or acquisition weakening the financial risk profile

Environment, social and governance (ESG) profile

The ESG profile of KEC supports its already strong credit risk profile.

 

The EPC and power transmission sectors have significant impact on the environment because of risks linked to operations such as energy loss during transmission and waste generation. Also, due to the nature of operations, the sector affects the local community and has various occupational health hazards associated with it. In line with this, KEC is focused on mitigating its environmental and social risks to ensure minimal impact.

 

ESG highlights

• KEC aims to achieve net zero by 2040 and reduce greenhouse gas (GHG) emissions of manufacturing plants by 20% by fiscal 2026 from its fiscal 2021 baseline. In fiscal 2025, the intensity stood at 0.09 tCO2e per tonne, which was ~27% lower than the 2021 baseline, overachieving the target
• In fiscal 2025, share of renewable energy was ~5% of KEC’s overall energy mix.
• KEC’s manufacturing plants have achieved the status of ‘zero effluent discharge’ and fully recycle both, trade effluents and domestic wastewater
• Gender diversity of employees was ~7% in fiscal 2025 compared with ~5% in fiscal 2023. The company aims to increase gender diversity to 25% by fiscal 2026.
• Lost time injury frequency rate of workers was 0.06 in fiscal 2025, which was better than peers.
• The governance structure is characterised by over 70% of the board comprising independent directors with ~10% female directors and extensive financial disclosures.

About the Company

Incorporated in 1945, KEC is now the flagship company of the Harsh Goenka faction of the RPG group and is a global infrastructure EPC player. It has presence in the power T&D, cables, railways, civil infrastructure and solar verticals. The company has eight manufacturing facilities across India, Brazil, Mexico and Dubai, and is among the largest tower manufacturers globally with capacity of 372,200 TPA, railways structures manufacturing capacity of 38,000 TPA, telecom tower manufacturing capacity of 12,000 TPA and solar structures manufacturing capacity of 10,000 TPA.

 

In September 2010, KEC acquired 100% stake in US-based SAE Towers, the leading manufacturer of lattice transmission towers in the Americas with production capacity of ~1 lakh TPA across Mexico and Brazil.

 

For the nine months ended December 31, 2025, KEC, on a consolidated basis, reported profit after tax (PAT) of Rs 413 crore on total income of Rs 17,116 crore against Rs 303 crore and Rs 14,975 crore, respectively, for the corresponding period of the previous fiscal.

Any other information: Not applicable