Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA/Stable/Crisil A1+’ ratings on the bank facilities and other debt programmes of Kalpataru Projects International Ltd (KPIL).
 

The ratings continue to be driven by the strong business risk profile of KPIL on the back of its established market position in the Transmission and Distribution (T&D) and Buildings and Factories (B&F) segment, diversification into other engineering, procurement and construction (EPC) segments and strong growth in order book. Outstanding consolidated orders worth Rs 65,475 crore as on June 30, 2025 provides a strong medium-term revenue visibility with order book to revenue ratio of 3.5 times. Operating income, on a consolidated basis, improved 13% year-on-year (y-o-y) to Rs 19,004 crore for fiscal 2025 owing to better execution levels in the T&D, Buildings and Factories (B&F), Oil & Gas and Urban Infrastructure segments. Crisil Ratings-adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) margin remained steady at 9.4% in fiscal 2025 (9.2% in fiscal 2024), owing to steady execution of the company’s order book.
 

In the first quarter of fiscal 2026, revenues, on a standalone basis, saw a strong growth of 35% on-year owing to sustenance in execution activity and healthy order backlog in the T&D and B&F segments, while the Ebitda margins remained marginally improved at 8.5% (8.4% as of June 2024). Operating income is expected to grow by over 20% in current fiscal with strong order book position and the profitability is expected to improve, backed by better profitability of new projects, healthy business mix and expected stable commodity prices. The current order book comprises 40% of international orders across different countries.

 

The financial risk profile is characterised by reduction in net debt in fiscal 2025 mainly driven by qualified institutional placement (QIP) of Rs. 1000 crores in December 2024 and improvement in operating performance despite elongated receivables from Water business. Overall, adjusted interest coverage ratio improved moderately to 3.3 times in fiscal 2025 from 3.1 times during fiscal 2024 and total outside liabilities to tangible net worth (TOL/TNW) ratio improved to 2.18 times as on March 31, 2025, as against 2.21 times, as on the end of fiscal 2024. The adjusted interest coverage is expected to improve to 3.5-4.0 times and the TOL/TNW is expected to remain around 2.0-2.25 times by end of current fiscal despite annual capex of Rs 600-700 cr and incremental working capital requirements. This factors expected divestment of its road asset Vindhyachal Expressway Private Limited (VEPL; rated Crisil BBB+/Watch developing) in the current fiscal at an enterprise valuation of Rs 775 crore, which includes bank loan of around Rs.208 crore . Liquidity remains strong, supported by unencumbered cash and cash equivalent of more than Rs 845 crore and undrawn bank limits of around Rs 863 crore as on June 30, 2025.

 

The ratings continue to reflect the strong track record of KPIL in the transmission line tower (TLT) and B&F business, diversified revenue streams and a healthy financial risk profile. These strengths are partially offset by large working capital requirement owing to the inherent nature of the EPC business, and exposure to subsidiaries and road SPVs (special-purpose vehicles).

Analytical Approach

To arrive at its ratings, Crisil Ratings has combined the business and financial risk profiles of KPIL and its subsidiaries, Shree Shubham Logistics Ltd (SSL), and Energy Link (India) Ltd (EnergyLink) — collectively referred to as the Kalpataru group. Crisil Ratings has moderately integrated the business and financial risk profiles of the road SPVs as the projects have been funded through debt without recourse to KPIL. However, Crisil Ratings has factored in the commitment made to the SPVs in the form of equity, cost overruns and guarantees.

 

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 in the TLT and B&F business: The Kalpataru group has a strong track record in the T&D EPC and B&F business. KPIL is one of the leading players in the domestic market with reputed customers such as Power Grid Corporation of India Ltd (‘Crisil AAA/Stable/Crisil A1+’), private real estate developers and select state transmission utilities. Consolidated order book worth Rs 65,475 crore as on June 30, 2025, with an order book to revenue ratio of 3.5x provides a strong medium-term revenue visibility. Favorable prospects for the international and domestic T&D, building and factories, Oil & Gas and Urban Infrastructure space should continue to support the business going forward.

 

• Diversified revenue streams: The order book is fairly diversified with the T&D segment contributing ~41% of the order book as on June 30, 2025, followed by buildings and factories (25%), water projects (14%), oil and gas (11%), railways (5%) and urban infrastructure projects (4%). Furthermore, 40% of the order book is made up of orders from the international markets and the company aims to maintain a healthy order pipeline from the higher margin in domestic and overseas projects as well. The company also has a vast presence overseas, with turnkey projects in Latin and South America, Africa, the Middle East, Commonwealth of Independent States, Asia and Europe. Diversified revenue streams both in terms of segments and markets, reduce susceptibility to downturns in any one business or geography.

 

• Healthy financial risk profile Financial risk profile remained healthy with adjusted interest coverage ratio improving moderately to 3.3 times in fiscal 2025 from 3.1 times during fiscal 2024 and total outside liabilities to tangible net worth (TOL/TNW) ratio improving to 2.18 times as on March 31, 2025, as against 2.21 times, as on the end of fiscal 2024. The adjusted interest coverage and the TOL/TNW is expected to improve in the medium term on back of steady cash accruals and optimised working capital. The net working capital cycle has improved with decline in unbilled revenue.

 

Net debt for KPIL’s standalone books is around Rs 1940 crore as on June 30, 2025 (Rs 1,107 crore as on March 31, 2025 and Rs 2,907 crore as on June 30, 2024), on account of higher capex and working capital requirements. The debt levels are expected to moderate during the remaining quarters of fiscal 2026, aided by steady cashflows from strong execution, realization of sale proceeds from VEPL stake sale and better collections from Water business. Sustained growth in cash accruals and reduction in leverage, leading to stronger debt protection metrics, will be key monitorable.

Key Rating Drivers - Weaknesses 

• Working capital-intensive operations: The EPC business inherently involves large working capital requirement, and the project execution cycle of 2.0-2.5 years leads to higher reliance on short-term debt. Sizeable retention money remains blocked in projects till the end of the performance guarantee period. Receivables (including net unbilled revenue) remained high around 264 days as on March 31, 2025, against 255 days as on March 31, 2024. Though KPIL has a practice of maintaining net working capital cycle of around or below 100 days, improvement in working capital management remains a monitorable in line with the expected growth in business operations of KPIL.

 

• High exposure to group companies: Standalone exposure to subsidiaries and SPVs remained high at around Rs 1,989 crore as on March 31, 2025, excluding assets held for sale (as against Rs 1,948 crore as on March 31, 2024). Road projects required net infusion of Rs 86 crore in fiscal 2025 largely due to skewed debt profile leading to mismatch in cash flow, no significant infusion is expected in fiscal 2026. The investments are unlikely to constrain the cash flow and financial risk profile of the group, which will be cushioned by the healthy performance of KPIL’s EPC segments and efficient working capital management. The exposure to group companies is expected to decline with proceeds from sale of VEPL Road asset and Indore real estate project under Saicharan Properties Ltd. Nonetheless, any additional exposure in these entities would be closely monitored.

Liquidity Strong

Cash and cash equivalents were more than Rs 845 crore as on June 30, 2025. Bank limit of around Rs 863 crore remained unutilised as on June 30, 2025. The available liquidity and expected annual cash accrual of over Rs 1,500 crore and additional realization from divestment of VEPL in current fiscal should comfortably cover debt obligations of around Rs 150-200 crore and capex of around Rs 600-700 crore planned for fiscal 2026.

 

Environment, social and governance (ESG) profile

The ESG profile of KPIL 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, KPIL is focused on mitigating its environmental and social risks to ensure minimal impact.

 

Key ESG highlights

• KPIL plans to achieve carbon neutrality by 2040 and water neutrality by 2032. Also, the company achieved carbon neutrality for its international T&D electrical business in fiscal 2025.
• KPIL’s share of renewable energy stood at ~23% in fiscal 2025, largely similar to previous fiscal. This was aided by the commissioning of 3.0-megawatt peak (MWp) solar photovoltaic project at Uniara
• KPIL had reported a lost time injury frequency rate (LTIFR) of 0.08 time, similar to previous fiscal. The employee attrition rate stood at ~20% for fiscal 2025.
• The governance structure is characterised by 50% of independent directors, with one woman board director and extensive financial disclosures.

 

There is growing importance of ESG among investors and lenders. The commitment of KPIL to ESG principles will play a key role in enhancing stakeholder confidence, given the high share of market borrowing in its overall debt and access to both domestic and foreign capital markets.

Outlook Stable

KPIL should continue to benefit from its established market position in the TLT and civil construction industry and its healthy order book with a diversified revenue profile.

Rating sensitivity factors

Upward factors

• Sustenance of strong operating performance with healthy order book to revenue ratio above 2.5-3 times, diversified order book position and healthy Ebitda margin
• Improvement in the financial risk profile due to improvement in the operating performance and/or sustained reduction in working capital cycle; adjusted interest coverage ratio going above 4.0 times; TOL/ TNW going below 2 times on a sustained basis

 

Downward factors

• Weakening of operating performance marked by reduction in order book to revenue ratio going below 2 times and moderation in revenue growth and Ebitda margin leading to lower cash accruals
• Continued high support extended to SPVs, and/or any significant debt-funded capex or acquisition, and/or any further stretch in the working capital cycle weakening the financial risk profile; adjusted interest coverage ratio going below 2.5 times; TOL/ TNW going above 3.0 times on a sustained basis

About the Company

Incorporated in 1981 by Mr. Mofatraj P Munot, KPIL is a leading player in the T&D sector. The company undertakes turnkey contracts for setting up transmission lines and substations for extra-high-voltage power transmission. Over the years, it has diversified into construction contracts for infrastructure projects (including bridges, flyovers, highways and captive power plants), industrial projects, buildings, residential, railways and water projects.
 

SSL offers end-to-end logistical solutions in west India in the agricultural sector, spanning warehousing, cold storage and collateral management.
 

EnergyLink is in the real estate business in Indore through its wholly owned subsidiary, Saicharan Properties Ltd.

Any other information: Not applicable