Detailed Rationale

Crisil Ratings has downgraded its ratings on the bank facilities of Kabra Extrusiontechnik Limited (KEL) to ‘Crisil A-/Stable/Crisil A2+’ from ‘Crisil A/Negative/Crisil A1’.

 

The rating revision takes into account the estimated subdued operational performance of the company in fiscal 2026. For fiscal 2026, the overall revenue is estimated to have moderated by 4-5% on-year due to lower-than-expected execution in the extrusion division. The extrusion division revenue is estimated to have moderated by 13-14% on-year in fiscal 2026 due to low demand from PVC (polyvinyl chloride) pipe players amid elongated monsoon and weak progress under the Jal Jeevan Mission (JJM) project. However, the battery segment saw growth of 13-14% year-on-year in fiscal 2026 on the account of expansion of product offerings in mobility as well as in the energy storage system segment. The operating margin is estimated to have declined by 650-700 basis points (bps) in fiscal 2026 due to losses in the battery division despite stable margin from the extrusion division. The decline in profitability along with increased interest costs on the account of increased working capital debt led to moderation in debt protection metrics such as interest coverage ratio to 2.3-2.5 times in fiscal 2026 compared with 5.64 times in fiscal 2025.

 

The stable outlook reflects expectation of revival in the operating performance of the company from quarter one of fiscal 2027 especially in the battery division amid substantial orders in the battery energy storage segment, which is expected to continue over the medium term. This, along with steady order inflow in the mobility segment (e-2W, 3W), will aid revenue growth. Revenue from the extrusion division is also expected to improve with expected normalisation of capital expenditure (capex) schedule for PVC pipe players in fiscal 2027. The overall revenue is expected to grow to over 50% year-on-year in fiscal 2027 on the back of high growth in the battery division leading to increased contribution of over 50% to the overall revenue for the fiscal from 33-35% in fiscal 2026. The operating efficiency is also likely to improve with operating leverage benefits coming in from the battery division and turning the battery segment earnings before interest, taxes, depreciation and amortisation (Ebitda) positive, which is currently making losses. This, along with steady operating margin from the extrusion business, is expected to lift the overall margin by over 600 bps in fiscal 2027 to 10-11%. The working capital cycle, which remained elevated in fiscal 2026 at 330-340 days, is expected to improve to 270-280 days in fiscal 2027, driven by fast execution of orders in the battery as well in the extrusion division, leading to decline in overall inventory days. Execution of orders and ramp-up in the battery division will be monitorable and Crisil Ratings will continuously monitor the performance of the company.

 

The overall financial risk profile is expected to remain adequate, however, the overall debt is likely to increase to Rs 180-190 crore as on March 31, 2027, due to high working capital requirement and additional term debt for the capex plans. The capital structure, however, will remain adequate with gearing and total outside liabilities to tangible networth (TOLTNW) ratio remaining below 0.5 time and 1 time, respectively, over the medium term.  Debt protection metrics will improve with better operating profits with interest coverage ratio improving to 5-6 times during fiscal 2027 after moderating in fiscal 2026.

 

Crisil Ratings also notes that despite moderation in the business risk in fiscal 2026, the liquidity position of KEL remains adequate amid negligible long-term debt as on March 31, 2026, moderate capex for fiscal 2027 and free cash and equivalents of Rs 40-44 crore as on December 31, 2025, which will be sufficient to cater to the operational and incremental working capital requirement for the company.

 

The ratings continue to reflect KEL’s established market position in the extrusion machinery business. These strengths are partially offset by exposure to competition in the extrusion machinery segment, working capital-intensive operations, susceptibility to changes in government policies and continued losses in the battery division.

Analytical Approach

Crisil Rating has evaluated the business and financial risk profiles of KEL on a standalone basis.

Key Rating Drivers - Strengths

Established market position in the extrusion machinery business: KEL has an established track record of more than four decades in manufacturing and commissioning of extrusion machinery. The company is among the largest manufacturers of extrusion machinery in India with a market share of 30-40% in the organised space. KEL also caters to overseas market especially in Africa, West Asia and South-East Asia. The revenue growth in the extrusion division depends on the capex cycle of original equipment manufacturers (OEMs) and any improvement in private capex cycle over the medium term should continue to support this segment.

 

Adequate financial risk profile: The financial risk profile remained adequate despite moderation in debt protection metrics due to losses in the battery division. Total debt is estimated to have risen to Rs 140 crore as on March 31, 2026, mostly in the form of working capital short-term debt. Debt protection metrics such as interest coverage ratio is estimated to have moderated to 2.3-2.5 times in fiscal 2026 compared with 5.64 times in fiscal 2025 due to moderation in operating profitability. Over the medium term, with improvement in operating profitability, interest coverage ratio is expected to improve to above 5 times. The financial risk profile is expected to remain adequate over the medium term despite addition of moderate debt for working capital and capex. Total debt is expected to peak at Rs 180-190 crore as on March 31, 2027, including term debt for the capex plans. Leverage ratios such as gearing and TOLTNW are expected below 0.5 time and 1 time, respectively, (0.27 time and 0.70 time, respectively, as on March 31, 2025), driven by healthy networth of Rs 440-500 crore (Rs 462 crore as on March 31, 2025) over the medium term.

Key Rating Drivers - Weaknesses

Slower-than-expected ramp-up in the battery business division and competition in the extrusion division: Due to slower-than-expected ramp up in the battery division, the company continues to make operating losses due to upfront expenditure incurred for employees and sales and marketing expenses. The major revival in the segment is expected in fiscal 2027, driven by substantial orders in hand for the battery energy storage segment (BESS). This will lead to improvement in operating leverage and overall improvement in operating profitability from the segment.
 

In the extrusion division, KEL faces competition from domestic players as well as imported extrusion machinery. This segment is technology-intensive and is susceptible to the risk of technological obsolescence. However, this risk is mitigated by KEL’s technological tie-ups and strategic collaborations with international players such as Battenfeld-Cincinnati (Germany) and Mecanor Oy (Finland). The demand for extrusion machinery is linked to the capex cycle of PVC and plastic products manufacturers, rendering KEL vulnerable to investment plans of its customers, especially during an economic slowdown when many companies defer or postpone their capex plans.
 

Working capital-intensive operations: The networking capital (NWC) cycle of the company stretched to 230 days as on March 31, 2025, and estimated to have remained elevated a year later due to high inventory holding period. However, it is expected to moderate to less than 200 days as on March 31, 2027, driven by fast execution of orders, both in the battery as well as the extrusion division, leading to some moderation in inventory holding period during the year. The high inventory is due to high gestation period of 6-8 months for the complex & high-end extrusion machinery. Majority of the inventory (60-65%) is towards the extrusion division. Receivables remained in line with previous level and are expected at 70-80 days over the medium term. However, ~38% of receivables as on September 30, 2025, were from one customer facing liquidity challenges. Any provisioning towards this outstanding and further stretch in the working capital cycle will be monitorable.

Liquidity Adequate

KEL ad free cash and equivalent of Rs 44 crore as on December 31, 2026, and negligible long-term debt as on date. It has moderate annual capex plans of Rs 20-22 crore in fiscal 2027, which will be largely funded through internal accrual. The company has access to fund-based working capital limit of Rs 160-180 crore, which is utilised at 84% on average for the six months through February 2026.

Outlook Stable

Crisil Ratings expects revival in the operating performance of KEL from quarter one of fiscal 2027, especially in the battery division amid substantial orders in the BESS, which is expected to continue in the medium term leading to stabilisation in the business risk profile.

Rating sensitivity factors

Upward factors:

• Increase in scale of operations through business diversification with sustained operating margin sustained at 11-12% and improvement in the overall networking capital cycle
• Sustenance of strong financial risk profile.
   

Downward factors:

• Decline in overall revenue with operating margin falling below 7% with continued losses in the battery division, impacting overall cash generation
• Slower-than-expected ramp-up in revenue and operating profitability in the first half of fiscal 2027
• Any large, debt-funded capex or major liability arising from warranty claims or sizeable stretch in the working capital cycle, constraining the debt protection metrics or adjusted gearing from the current level

About the Company

Incorporated in 1982, KEL is a part of the Kolsite group of companies. It manufactures plastic extrusion machinery and mono and multilayer blown film plants used in industries such as pipes and packaging. Its manufacturing facilities are in Daman. During fiscal 2020, KEL also entered the EV battery packs segment with a new manufacturing facility in Pune. The company has technological tie-ups with Battenfeld Extrusiontechnik GmbH, Germany, which is valid till 2026. KEL also has an R&D division, which enables the launch of new models and upgrade of existing models.

 

For the nine months ended December 31, 2025, the operating income was Rs 331 crore and loss was Rs 10 crore as against Rs 337 crore and profit after tax of Rs 22 crore, respectively, during the corresponding period of the previous fiscal.

Any other information: Not applicable