Rating Rationale
June 26, 2025 | Mumbai
Krishna Defence and Allied Industries Limited
Ratings upgraded to 'Crisil BBB/Stable/Crisil A3+'; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.69 Crore (Enhanced from Rs.52 Crore)
Long Term RatingCrisil BBB/Stable (Upgraded from 'Crisil BBB-/Stable')
Short Term RatingCrisil A3+ (Upgraded from 'Crisil A3')
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 upgraded its ratings on the bank facilities of Krishna Defence and Allied Industries Ltd (KDAIL) to ‘Crisil BBB/Stable/Crisil A3+’ from 'Crisil BBB-/Stable/Crisil A3'.

 

The rating upgrade factors in the improvement in the business risk profile of the company, supported by higher revenues and sustenance of operating margins, resulting in better-than-expected net cash accruals. Revenue grew to Rs 195 crore in fiscal 2025 from Rs 106 crore in fiscal 2024, supported by continued product additions and timely execution of orders. A healthy order book of Rs 250 crore as of May 2025 to be executed over the next 12-18 months further provides near-term revenue visibility. Operating margins were healthy at 15.9% in fiscal 2025, owing to stable profitability maintained while bidding for contracts as well as benefits of economies of scale amid increasing scale of operations, and is expected at similar range over the medium term. Consequently, net cash accruals increased to Rs 24 crores in fiscal 2025 from Rs 12 crores in fiscal 2024 and will likely continue to grow on a sustained basis over the medium term. The financial risk profile and liquidity remain adequate with controlled debt levels and no debt repayment obligation.

 

The ratings reflect the established presence in the defence segment, the healthy order book of the company providing revenue visibility, its niche and diversified product basket, and a healthy financial risk profile. These strengths are partially offset by moderate scale of operations and working capital-intensive operations.

Analytical Approach

Crisil Ratings has evaluated the standalone business and financial risk profiles of KDAIL.

 

Corporate guarantee of Rs 9 crores given to the associate company, Waveoptix Defence Solution Pvt Ltd, has been treated as debt.

Key Rating Drivers & Detailed Description

Strengths:

  • Established presence in the defence segment and healthy orderbook: The promoters have experience of over three decades in the defence and dairy industries. This has given them an understanding of the market dynamics and enabled them to establish relationships with suppliers and key customers. Customers include marquee players in the defence industry, including Hindustan Shipyard Ltd, Mazagaon Dock Shipbuilders Ltd, Ministry of Defence, Cochin Shipyard Ltd and Armoured Vehicles Nigam Ltd. Backed by new product launches and track record of timely and efficient execution of orders, revenues increased to Rs 195 crores in fiscal 2025 from Rs 63 crores in fiscal 2023. Furthermore, the company has orders worth Rs 250 crores as on May 2025, to be executed over the next 12–18-month period, across varied products and counterparties. This provides near-term revenue visibility and along with the continued flow of incremental orders should enable the company to further scale up its operations. Crisil Ratings believes that the extensive experience of the promoters and their established relationships with customers will continue to support the business risk profile over the medium term.

 

  • Diversified and niche product basket: Armed with the technical expertise of the promoters, the company has been able to diversify its product offerings from dairy equipment to defence equipment, which have critical applications in the defence industry. The company has its own product development team, which is focused on undertaking dedicated product development efforts for indigenously developed products, primarily in the defence segment. Niche and specialised product basket, with more than 90% of revenue coming from the defence segment and lesser number of players offering similar products, supports the business risk profile and has resulted in steady revenue growth.

 

  • Healthy financial risk profile: Networth is healthy estimated at Rs 131 crore as on March 31, 2025 (increased from Rs 106 crore a year earlier), due to steady accretion to reserves and equity infusions. Capital structure is comfortable, as reflected in total outside liabilities to adjusted networth ratio and gearing of 0.24 time and 0.07 time as on March 31, 2025 (0.25 time and 0.09 time, respectively, as on March 31, 2024), owing to controlled reliance on external debt. Debt protection metrics are robust as indicated by interest coverage and net cash accrual to adjusted debt ratios of 21.7 times and 2.5 times, respectively, in fiscal 2025 (9.92 times and 1.27 times, respectively, in fiscal 2024). The financial risk profile will remain healthy over the medium term backed by stable profitability and absence of any major debt-funded capital expenditure (capex).

 

Weaknesses:

  • Moderate scale of operations: Though the company’s revenues significantly increased to Rs 195 crore in fiscal 2025, compared with Rs 64 crores in fiscal 2023, the scale of operations continues to remain moderate. Moderate scale of operations limits the company’s operating efficiencies and benefits from economies of scale. Significant scaling up of operations through healthy order execution of orders along with ramp up of new capacities will be a key monitorable over the medium term.

 

  • Working capital-intensive operations: Gross current assets (net of cash) were at 183 days as on March 31, 2025, compared with 207 days as on March 31, 2024, due to large receivables and inventory. The company has to extend credit of around 30 days to defense customers and 90-120 days to dairy customers. Though receivables improved due to uniformity in sales in fiscal 2025, compared to concentrated revenues in the fourth quarter during the previous fiscals, they continue to be sizeable. Furthermore, inventory remains large due to higher processing time and approval processes of inventory. Management of the working capital cycle amid increasing scale of operations remains monitorable.

Liquidity: Adequate

Bank limit utilisation was moderate at 36% on average for the 12 months through May 2025. Cash accruals, expected at Rs 26-28 crore per fiscal, will be sufficient against no term debt obligation over the medium term. Unencumbered cash and bank balance of around Rs 12 crore as on March 31, 2025, further supports liquidity. Current ratio was healthy at 3.91 times as on March 31, 2025. Low gearing and moderate networth support financial flexibility and will cushion any adverse conditions or downturns in the business. 

Outlook: Stable

Crisil Ratings believes KDAIL will continue to benefit from the extensive experience of the promoters and established relationships with clients, along with a strong financial risk profile.

Rating sensitivity factors

Upward factors:

  • Increase in revenues or operating margins leading to net cash accrual above Rs 30 crores
  • Improvement in the working capital cycle and sustenance of financial risk profile aiding the  liquidity profile

 

Downward factors

  • Significant decline in revenue or operating margins leading to cash accruals below Rs 8 crores
  • Any large debt-funded capex or further stretch in the working capital cycle weakening the liquidity or financial risk profile

About the Company

KDAIL, formerly known as Krishna Allied Industries Ltd, was incorporated in 1997 as a partnership and reconstituted as a public limited company in 2013. The company undertakes design, development and manufacture of a wide range of equipment for defence, security and diary industries. Its manufacturing facilities are at Kalol and Halol in Gujarat. It is listed on the SME platform of the National Stock Exchange, NSE Emerge. The operations of the company are managed by promoter Mr. Ankur Shah and is well supported by an established line of professional management.

Key Financial Indicators

As on / for the period ended March 31

Unit

2025

2024

Operating income

Rs crore

194.87

106.43

Reported profit after tax (PAT)

Rs crore

21.92

9.79

PAT margins

%

11.25

9.20

Adjusted Debt/Adjusted Net worth

Times

0.07

0.09

Interest coverage

Times

21.72

9.92

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 39.00 NA Crisil A3+
NA Cash Credit NA NA NA 12.00 NA Crisil BBB/Stable
NA Letter Of Guarantee NA NA NA 15.00 NA Crisil A3+
NA Letter of Credit NA NA NA 3.00 NA Crisil A3+
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 12.0 Crisil BBB/Stable   -- 16-04-24 Crisil BBB-/Stable   --   -- --
      --   -- 28-03-24 Crisil BBB-/Stable   --   -- --
Non-Fund Based Facilities ST 57.0 Crisil A3+   -- 16-04-24 Crisil A3   --   -- --
      --   -- 28-03-24 Crisil A3   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 22 Axis Bank Limited Crisil A3+
Bank Guarantee 17 Axis Bank Limited Crisil A3+
Cash Credit 8 Axis Bank Limited Crisil BBB/Stable
Cash Credit 4 Punjab National Bank Crisil BBB/Stable
Letter Of Guarantee 15 Punjab National Bank Crisil A3+
Letter of Credit 3 Axis Bank Limited Crisil A3+
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

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