Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA-/Stable/Crisil A1+’ ratings on the bank loan facilities and commercial paper programme of Mishra Dhatu Nigam Ltd (MIDHANI).

 

The ratings continue to reflect the strategic importance of MIDHANI to the Government of India (GoI) and the support provided by the government. The ratings also factor in the established market position of the company in the super alloys segment and its strong financial risk profile. Outstanding orders of Rs 2,220 crore as of November 2025 to be executed over the next 15-18 months, provides healthy revenue visibility. These strengths are partially offset by exposure to volatility in raw material prices, changes in product mix, foreign exchange (forex) rates and large working capital requirement.

 

Revenue declined by 11% on year in the first half of fiscal 2026 after growing 1% on year in fiscal 2025. The decline is due to delay in the processing of raw material leading to spill over in booking of revenue to the second half of the financial year. Revenue is expected to grow 4-6% in fiscal 2026 as the company ramps up deliveries in the second half of the fiscal, which typically generates over 60% of the topline for the company. Orders from defence continue to dominate the order book at more than 70%, followed by orders from the space segment, which comprise 20% and the remaining 10% are from energy and other segments including exports. Operating margin stood healthy and improved 60 basis points (bps) to 17.6% in the first half of fiscal 2026 after improving 270 bps to 21.7% in fiscal 2025 owing to increased execution of higher margin defence orders and continued cost control measures implemented by the company, which included saving on sub-contracting cost.  For the full fiscal 2026, operating profit margin is expected to remain steady at 21-22% owing to stable product mix. 

 

Financial risk profile remains strong, driven by debt reduction from Rs 234 crore as on March 31, 2025, to Rs 219 crore as on September 31, 2025. Capital structure will continue to be healthy driven by range bound debt of Rs 220-250 crore and healthy networth of ~Rs 1500 crore expected by the end of fiscal 2026. Moderate debt should keep leverage ratios low with gearing and total outside liability to adjusted networth (TOLANW) ratio remaining below 0.2 time and 1.2 times, respectively, over the medium term. Debt protection metrics remained strong with interest coverage ratio of ~7 times in the first half of fiscal 2026, which is expected to improve to over 10 times for the full fiscal year 2026 with improvement in profitability.  The financial risk profile will remain strong with gearing remaining low and interest coverage ratio expected to remain above 10 times over the medium term. Liquidity is expected to remain strong, with annual net cash accrual (post dividend) expected to remain above Rs 150 crore in the near-to-medium term, which will be sufficient for the annual debt repayment obligation of Rs 20 crore through fiscal 2028 and capital expenditure (capex) of Rs 80-100 crore over the medium term.

 

Gross current assets (GCAs), however, continue to be high, though reduced to ~600 days as on March 31, 2025 from over 700 days in previous years. The improvement is led by a reduction in the inventory levels aided by rationalisation of value of production, which has been reduced and aligned to the revenue of the company since fiscal 2024. Sustained reduction in GCAs going ahead will remain a key monitorable. However, despite improvement in GCAs, the operations will remain working capital intensive due to the nature of the industry. Nonetheless, debt is expected to remain stable as incremental working capital requirements will be managed largely through internal resources.

Analytical Approach

Crisil Ratings has considered the criteria for notching up standalone ratings of entities, based on government support. The joint venture, Utkarsha Aluminium Dhatu Nigam Ltd, has been moderately consolidated as MIDHANI is likely to infuse equity to support the project over the medium term. 

 

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

Key Rating Drivers - Strengths

Strategic importance to, and support from, the government: GoI set up MIDHANI mainly to achieve self-reliance in manufacturing special metals and super alloys critical to the growth of defence, space and atomic energy segments. The government has complete control over the board and can also appoint its members. The Miniratna status given by GoI provides the company greater autonomy in operations and discretion to set up projects. Strong funding support from the government is likely to continue in times of need, though timeliness and extent of support, in case of any exigency, remains a rating sensitivity factor.

 

Established market position in manufacturing super alloys for strategic sectors: Over the past four decades, the company has established its position as a leading supplier of a wide range of super alloys to sectors such as defence, space and atomic energy. It has the capability to manufacture a wide range of advanced products across the value chain, which includes smelting, forging, rolling, wire drawing, investment casting, machining and quality testing segments. Longstanding presence and strong capabilities have led to healthy customer relationships and patronage from key clients in the defence and space research sectors. Government initiatives such as the Atmanirbhar Bharat and import embargo on many defence items have boosted manufacturing of defence and other heavy equipment in India and thus, benefit the company. The company also intends to cater to sectors, such as oil and gas, mining, power, railways and medical equipment. Demand from the defence sector remained strong and MIDHANI remains one of the primary suppliers for most crucial projects of the Ministry of Defence such as its Mk-II project for development of Tejas fighter jets and the space programme of Indian Space Research Organisation (ISRO). Demand from the defence sector will remain strong, which has more than 70% share in the total order book of the company as of November 2025.
 

Strong financial risk profile: The financial risk profile is marked by moderate debt of Rs 219 crore as on September 30, 2025 (Rs 234 crore as on March 31, 2025) and healthy networth of ~Rs 1500 crore expected by the end of fiscal 2026. Financial risk profile has remained strong historically due to its low dependence on external debt despite higher working capital requirement. Gearing has averaged below 0.3 time over the past five years. Large customer advances and grants kept the total outside liabilities to tangible networth (TOLTNW) ratio moderate at 1.06 times as on March 31, 2025 (1.21 times a year earlier). Debt protection metrics were healthy, with net cash accrual to total debt and interest coverage ratios of 68% and ~8 times, respectively, for fiscal 2025 (26% and ~6 times, respectively, in fiscal 2024). For the first half of the fiscal, interest coverage ratio stood healthy at 6.97 times. The financial risk profile will remain strong, in the absence of any large debt-funded capex and stable working capital debt. With growing operating profits in absolute terms, interest coverage is expected to remain above 9 times over the medium term. Gearing will continue at less than 0.3 time in the near-to-medium term and TOLTNW ratio at 1.0-1.2 times as working capital is supported by customer advances.

Key Rating Drivers - Weaknesses

Susceptibility to volatility in raw material prices and forex rates: The company imports 50-60% of raw materials, such as nickel, cobalt, molybdenum, pure iron and titanium, the prices of which are volatile. Owing to a change in the product mix since fiscal 2024, the company has been executing orders, which require a higher proportion of virgin raw materials such as nickel and molybdenum. A sharp rise in the prices of these raw materials impacted profitability adversely during fiscal 2024. However, in the past 9-12 months raw material prices have remained stable and accordingly operating profitability too remained stable during the period and even improved in the first half of fiscal 2026. However, profitability remains susceptible to fluctuations in raw material prices and forex rates.

 

Large working capital requirement: The operations of MIDHANI are highly working capital intensive due to the higher gestation period of inventory. Generally, GCAs remained higher than 650 days on average in the past fiscals through 2023 but have improved to ~600 days since fiscal 2024. As on March 31, 2025, GCAs remained stable at 597 days and are expected at 590–620 days over the medium term. The company has aligned its value of production with revenue, resulting in a reduction in inventory to ~550 days, which has helped reduce overall GCAs since fiscal 2024. As on March 31, 2025, inventory was stable at 547 days. The company will further improve its GCAs through continuous monitoring of its value of production, keeping it in line with revenue. Consequently, GCAs are expected to remain under 600 days in the near-to-medium term, with inventory remaining stable at 520–550 days. This will keep the working capital requirement stable for the near-to-medium term; any incremental working capital requirement can be managed through internal resources. Sustenance of GCAs below 600 days will be a key monitorable for the medium term.

Liquidity Strong

Liquidity is supported by healthy net cash accrual, low debt obligation and strong funding support from the government. Annual cash accrual is expected above Rs 150 crore in the near-to-medium term, which will be sufficient to meet the yearly debt obligation of Rs 20 crore through fiscal 2028. The company is expected to incur annual capex of Rs 80-100 crore over the medium term, which would be funded largely through internal accruals. Cash and bank balance stood around Rs 18 crore as on September 30, 2025. The fund-based working capital limit of Rs 350 crore was utilised 48% for the six months through November 2025.

Outlook Stable

MIDHANI will maintain its strong market position as a key manufacturer of super alloys and will continue to benefit from the government’s focus on strategic sectors such as defence and space programme. MIDHANI will continue to enjoy the patronage of key customers.

Rating sensitivity factors

Upward factors:

• Sustained healthy revenue growth and operating profitability (over 25%), leading to a healthy cash generation
• Steep reduction in working capital requirement, especially inventory (GCAs at 550-600 days), and prudent capex spending
   

Downward factors:

• Sluggish business performance and moderation in operating profitability, impacting cash generation
• Significant increase in debt due to higher capex, increase in funding support to associate, and sustained high working capital intensity (GCAs over 700 days)
• Change in stance of support from the government or steep decline in shareholding by GoI

About the Company

MIDHANI is majority owned by GoI. The company manufactures a variety of super alloys, titanium and titanium alloys, special-purpose steels, controlled-expansion alloys, soft magnetic alloys, electrical-resistance alloys, molybdenum products, and other special products made as per customer specifications. The company also offers metallurgical testing, evaluation and consultancy services. Its quality control is recognised by the National Accreditation Board of Laboratories. MIDHANI is under the administrative control of the Ministry of Defence's Department of Defence Production.

 Utkarsha Aluminium Dhatu Nigam Ltd, incorporated in 2019, is a 50:50 joint venture between MIDHANI and National Aluminium Company Ltd. The company was to set up a 60,000 tonne per annum high-end aluminium alloy production plant in the Nellore district of Andhra Pradesh. This is to meet requirement of high-end aluminium alloy products in defence, aerospace and other critical sectors.
 

In the first six months of fiscal 2026, the company reported profit after tax (PAT) of Rs 26 crore (Rs 29 crore in corresponding quarter of fiscal 2025), on net revenue of Rs 380 crore (Rs 426 crore).

Any other information: Not applicable