Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facilities of Oswal Pumps Ltd (OPL; part of the Oswal group) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘Crisil A’. The short-term rating has been reaffirmed at ‘Crisil A1’.

 

The revision in outlook reflects Crisil belief that the business risk profile of the group will continue to improve over the medium term driven by its expected improvement in scale, amidst healthy order book position, and steady operating efficiencies. Operating income has recorded compound annual growth rate (CAGR) of around 54% over three fiscals through 2025, with revenue estimated at ~Rs 1,430 crore in fiscal 2025 along with improvement in operating profitability estimated at 27% in fiscal 2025 (20% in fiscal 2024); driven by improved penetration in the solar pump segment, increased direct participation in government projects, backward integration, and economies of scale. However, debtor days has increased around 180 days in fiscal 2025 (120 days in fiscal 2024) due to significant increase in revenue concentration towards the government authorities (earlier through private EPC players), resulting in high working capital debt. Going forward moderation in the debtor days along with efficient management of working capital amidst increasing scale of operations will remain key monitorable.

 

The ratings also factor in the group’s strong financial risk profile, driven by sizeable networth and moderate reliance on external debt. While the debt is likely to increase for working capital requirement, strong networth shall result in comfortable gearing of ~0.75 time as on March 31, 2025 (0.42 time as on March 31, 2024). Also, substantial improvement in profitability will enhance debt protection metrics, with interest coverage and net cash accrual to total debt ratios projected at ~11.15 times and ~0.84 time, respectively, for fiscal 2025. Liquidity, on the other hand, remains healthy too, backed by sizeable net cash accrual against maturing debt, and cushion in bank limit.

 

The ratings reflect the Oswal group’s established market position in the water pumps industry, sound operating profitability and healthy financial risk profile. These strengths are partially offset by the working capital intensive operation and moderate scale of operations.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of OPL and its wholly owned subsidiaries, Oswal Solar Structure Pvt Ltd (OSSPL). This is because both these companies, together referred to as the Oswal group, are in the same business and have common promoters and significant operational linkages and fungible cash flows.

 

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

Key Rating Drivers & Detailed Description

Strengths:

• Established market position: The promoters’ experience of over three decades in the water pumps industry has helped the Oswal group build a strong product portfolio, which includes solar submersible pump, stainless steel submersible pumps, motors, monoblock pumps and solar module panels. The promoters have forged relationships with more than 2,000 distributors, apart from original equipment manufacturers, which has helped to garner regular orders over the years. The group has also started manufacturing solar module panels and has become among the few fully integrated suppliers of all agri-solar pumps under PM Kusum Yojana. Resultantly, the group registered a CAGR of around 54% in revenue in the three fiscals through 2025, with revenue estimated at ~Rs 1,430 crore in fiscal 2025. The revenue is likely to grow further by 20-25% during fiscal 2026 amidst strong order book of around Rs 800 crore as on March 2025 and continuous government initiatives under the PM Kusum scheme to replace grid pumps with solar pumps. The operating profitability has improved to an estimated 27% in fiscal 2025 (20% in fiscal 2024) and is likely to remain at 26-27% over the medium term. The established market position of the group will continue to strength its business risk profile over the medium term.

 

• Sound operating profitability: The operating profitability has increased over the past few fiscals, driven by improved penetration in the solar pump segment (which has higher realisations), increased direct participation in government projects (earlier though private EPC players), backward integration, and economies of scale. The operating margin improved to an estimated 27% in fiscal 2025 (20% in fiscal 2024), with sustained business growth. The established market position in the agri-solar pumps under PM Kusum Yojana and continuous steps towards backward integration are likely to maintain operating profitability at 26-27% over the medium term.

 

• Healthy financial risk profile: Networth is estimated to be strong at Rs 440 crore as on March 31, 2025 (~Rs 180 crore during previous fiscal). Though working capital debt has increased during the fiscal, but steady accretion to reserve and lower dependence on term debt has resulted in comfortable capital structure, with estimated total outside liabilities to tangible networth ratio of ~1.41 times as on March 31, 2025 (1.84 times during previous fiscal). Debt protection metrics also remained robust due to healthy profitability, with estimated interest coverage and net cash accrual to total debt ratios projected at ~11.15 times and ~0.84 time, respectively, for fiscal 2025. Crisil Ratings believes the group's financial risk profile will remain stable over the medium term, supported by healthy accrual and the absence of large debt funded capital expenditure (capex).

 

Weaknesses:

• Working capital-intensive operations: Gross current assets deteriorated to an estimated 235 days as on March 31, 2025, from 190 days as on March 31, 2024, driven by rise in receivables from 120 days to around 180 days due to significant increase in revenue concentration towards the government authorities wherein credit period is higher compared to private EPC players that the group used to serve earlier. The working capital requirement further increases on account of inventory of 60-70 days, though it is partly supported by similar credit from the suppliers. Resultantly, the group’s reliance on working capital limit also remains high, as reflected in bank limit utilisation of ~81% on average for the 6 months through March 2025. Working capital requirement remains supported by the timely enhancement in bank limit. The GCAs are estimated to be 240-250 days over the medium term owing to the receivables of 170-180 days and inventory holding of 60-70 days. Given the working capital-intensive operations, increase in revenue is likely to lead to higher dependence on the working capital debt, which could shrink the cushion in bank limit. With steady growth in the business, the group’s ability to efficiently manage the working capital, thus keeping the reliance on bank limit moderate, will remain a key rating sensitivity factor.

 

• Moderate scale of operations: Despite steady growth in the past few fiscals, the revenue remains moderate estimated at Rs 1,430 crore during fiscal 2025, (Rs 758 crore during fiscal 2024) thereby constraining cost efficiency. The growth is supported by strong participation under the PM Kusum Yojana wherein the group is among the largest supplier directly/indirectly of agri-solar pumps. The management is consistently taking steps to penetrate into geographies such as Haryana, Maharashtra, and Utter Pradesh and expand the product mix, as evident from the commencement of solar module panels manufacturing. Though the business growth will be supported by the healthy order book around Rs 800 crore as of March 2025, the Oswal group’s ability to consistently increase the order book while maintaining its operating profitability will remain monitorable. The group’s ability to further tackle the expected increase in competition from both organised and unorganised players, resulting in an improved business risk profile, will remain a key rating sensitivity factor over the medium term.

Liquidity: Strong

The Oswal group will maintain its strong liquidity, driven by expected cash accrual of Rs 270-300 crore per annum over the medium term against annual debt obligation of Rs 4-5 crore, which will help cushion strategic investments and capex. The group has access to a fund-based bank limit of Rs 335 crore, which was utilised 73%, on average, over the 12 months through March 2025. The current ratio is 1.30 times as on March 31, 2024. Strong gearing and moderate networth support the group’s financial flexibility to withstand adverse conditions or downturn in the business.

Outlook: Positive

Crisil Ratings believes that the group’s business risk profile will continue to improve over the medium term backed by expected improvement in scale, supported by outstanding order book, and steady operating profitability.

Rating sensitivity factors

Upward factors:

• Sustained revenue growth along with operating profitability at 25-27% leading to more than expected net cash accruals.
• Efficient working capital management, with gross current assets ranging between 230-250 days and thus, further improvement in liquidity profile.
   

Downward factors:

• Decline in revenue to below Rs 800 crore or fall in the operating margin, resulting in lower net cash accrual
• Further stretch in the working capital cycle leading to increase in external debt, thereby impacting the financial risk profile and liquidity

About the Group

OPL was incorporated in 2003 as a private limited company. It was reconstituted as a closely held limited company in January 2007. Promoted by Mr Padam Sain Gupta and his sons, Mr Rajeev Gupta and Mr Vivek Gupta, Haryana-based OPL manufactures solar submersible pumps, grid submersible pumps, monoblock pumps and electric motors, which are sold in the domestic as well as overseas markets. The company also trades in agricultural equipment.

 

OSSPL is a 100% subsidiary of OPL and manufactures solar panels, cast iron and photovoltaic (PV) modules for solar panels. The company was incorporated in January 2022, but commenced commercial operations in January 2024.

Key Financial Indicators

As on / for the period ended March 31	Unit	2024	2023
Operating income	Rs crore	758.57	385.36
Reported profit after tax (PAT)	Rs crore	95.37	33.88
PAT margin	%	12.87	8.87
Adjusted debt/adjusted networth	Times	0.42	0.75
Interest coverage	Times	10.69	9.91

 

Status of non cooperation with previous CRA

OPL has not co-operated with Acuite Ratings and Research Limited and Brickwork Ratings India Private Limited which has classified it as 'non-cooperative' vide release dated 26th July 2019, and 1st Feb 2023, respectively. The reason provided by them was non-furnishing of information for monitoring of ratings.

 

Any other information: Not Applicable