Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AA/Stable’ rating to the non-convertible debentures (NCDs) of Tata Projects Ltd (TPL) and has reaffirmed its 'Crisil AA/Stable/Crisil A1+' ratings on the existing NCDs and commercial paper programme of the company.

 

The ratings centrally factor in the strong managerial and financial support to TPL from Tata Sons Pvt Ltd (Tata Sons; ‘Crisil AAA/Stable/Crisil A1+’), which held 73.25% equity stake in TPL as of September 2025. In fiscal 2025, the company offered rights shares amounting to Rs 2,500 crore. Tata Sons fully subscribed to the issue and infused Rs 1,500 crore in fiscal 2025 while the remaining is available and is yet to be called by the company. The ratings also factor in the company’s established market position in the construction industry, large-scale operations and diversified orderbook of complex projects. These strengths are partially offset by modest operating performance along with large working capital requirement and average financial risk profile.

 

The operating performance is expected to remain modest with operating income remaining steady at Rs 17,500-18,000 crore in fiscal 2026 (Rs 17,495 crore in fiscal 2025) and earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin remaining at 1-2% (1.7%). This is mainly due to execution and completion of its old and legacy projects with significant cost and time overruns. The orderbook position also remained steady at Rs 41,249 crore as of September 2025 (Rs 43,493 crore as of March 2024) as the company is focused in completing the execution of the legacy projects, which are expected to be completed by the first half of fiscal 2027. This, along with new initiatives taken by the company in terms of bidding strategy, is expected to improve the operating performance over the medium term. Though the operating income is expected to see modest growth, the operating profitability is likely to improve to mid-to-high single digit over the medium term. Lower-than-expected recovery of operating performance will remain a key rating sensitivity factor.

 

The financial risk profile remains average as indicated by high leverage and weak debt protection metrics. Large working capital requirement continues to exert pressure on the capital structure, resulting in elevated net debt and overall liabilities position. Total outside liabilities to tangible networth (TOLTNW) ratio is expected to remain at 7-8 times as on March 31, 2026 (6.0 times a year earlier). The company is expected to receive sizeable funds blocked in the form of contract assets, retention money and claims made to the customers from scope/rate variations among other grounds. This, along with some of the other initiatives with respect to billing and collection cycle, is likely to reduce the overall working capital cycle and the overall TOLTNW ratio   is expected to moderate over the medium term. The adjusted interest coverage ratio, which is expected to be below 0.5 time in fiscal 2026 (0.4 time in fiscal 2025), is also likely to improve over the medium term with better operating performance. Lower-than-expected improvement will remain a key rating sensitivity factor.

Analytical Approach

Crisil Ratings has applied its parent notch-up framework to factor in the extent of support available from Tata Sons. Crisil Ratings has combined the financials of TPL with its subsidiaries to reflect the operational and financial linkages with these entities.

 

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

Key Rating Drivers - Strengths 

Strong managerial and financial support from Tata Sons, lending substantial financial flexibility

TPL, part of the Tata group, has gained prominence due to its increasing scale of operations, execution of complex and prestigious projects, size of the addressable market in the engineering, procurement and construction (EPC) industry and ability to generate healthy returns in the long term. The company is jointly held by several Tata group companies with Tata Sons being its largest shareholder with 73.25% stake as of September 2025 and has senior Tata group executives on its board In fiscal 2025, the company offered rights shares amounting to Rs 2,500 crore. Tata Sons fully subscribed to the issue and infused Rs 1,500 crore in fiscal 2025 while the remaining is available and is yet to be called by the company.  Being part of the Tata group, TPL derives significant financial flexibility and access to low-cost funds from banks and capital markets. Crisil Ratings expects Tata Sons to continue providing need-based support to TPL, including support to strengthen the balance sheet in the near term, which along with the sustenance of Tata Sons’ ownership share in TPL, will remain key rating sensitivity factors.

 

Established pan-India position with a healthy, diversified orderbook

TPL is a large and diversified player in the EPC space with presence across urban built form, metros and tunnels, bridges, airports and ports, environment, power and metals, transportation, oil and gas hydrocarbon, transmission and distribution, and international business.

 

Orderbook of around Rs 41,249 crore (as of September 2025) is well-diversified across different counterparties comprising ~54% with government entities, ~21% with private sector players, ~23% with Tata group entities and the balance from overseas entities. In terms of segments, the orderbook consists of 38% in urban spaces, 25% in Mobility and Strategic infrastructure, 22% in energy and transmission and distribution while the remaining in other segments such as advance technology facilities. 

 

TPL has executed complex projects such as the freight corridor, metros and heavy civil projects through joint ventures with strong partners, aiming to build execution capabilities in new segments. The company has undertaken more independent projects in the past 2-3 years and bagged several large projects in the refinery, industrial and power segments. It maintains a prudent bidding strategy and has improved its pre-bid risk management practices with focus on cash flow management, execution and profitability. The large share of projects from private and Tata group entities, along with focus on high-margin projects, should improve profitability over the medium term.

Key Rating Drivers - Weaknesses 

Modest operating performance and working capital-intensive operations

TPL’s operating performance is likely to remain modest with operating income remaining at Rs 17,500-18,000 crore and operating profitability expected to remain at 1-2% in fiscal 2026, reflecting pressure from the execution of large legacy projects and additional costs arising from scope and rate variation and project prolongation. Though the operating performance is expected to improve over the medium term with completion of legacy projects by the first half of fiscal 2027 and benefits from new operational initiatives, it will be a key rating sensitivity factor.

 

The working capital cycle remains stretched, driven by sizeable funds blocked in retention money, contract assets and claims receivables arising from scope and rate variations and other contractual grounds. GCA days (excluding cash & equivalents) stood high at 412 days as on March 31, 2025. Though the working capital cycle is likely to reduce over the medium term due to the expected receipt of the claims and other initiative taken by the management, it will remain monitorable.

 

Modest financial risk profile

TPL’s financial risk profile remains modest as indicated by high leverage and weak debt protection metrics. Overall gross debt increased substantially from Rs 6,365 crore as on March 31, 2025, to ~Rs 7,221 crore as on September 30, 2025, primarily to fund incremental working capital requirement, arising from slow billing and collections. Large working capital requirement continues to exert pressure on the capital structure, resulting in elevated net debt and overall liabilities. TOLTNW ratio is expected to remain at 7-8 times as on March 31, 2026 (6.0 times a year earlier).  The adjusted interest coverage ratio, which is expected to be below 0.5 time in fiscal 2026 (0.4 time in fiscal 2025), is also likely to improve over the medium term with better operating performance. Lower-than- expected improvement in the credit metrics will remain a key sensitivity factor.

Liquidity Strong

Unencumbered cash balance of around Rs 529 crore as on December 31, 2025, and expected annual cash accrual of approximately Rs 500-600 crore during fiscal 2027 should be adequate to meeting the debt obligation of Rs 750-800 crore and funding the planned capital expenditure of Rs 200-250 crore during the next fiscal. The fund-based bank limit was moderately utilised at 51% on average for the six months through November 2025 and it will be adequate to meet any incremental working capital requirement for the company. Financial flexibility is strong from being a part of the Tata group as reflected in the past instances of timely refinancing of long-term debt and ability to call Rs. 1000 crore of equity infusion from Tata Sons.

Outlook Stable

Crisil Ratings believes TPL will continue to benefit from its established market position in the EPC industry and receive strong managerial and financial support from the parent, Tata Sons.

Rating sensitivity factors

Upward factors

• Sustained improvement in operating performance with increase in orderbook position, diversification and operating profitability
• Better financial risk profile with adjusted interest coverage and TOLTNW ratios going above 3 and below 2.0 times, respectively
• Significant reduction in the working capital cycle and substantial receipt of claims, leading to improvement in the liquidity position

 

Downward factors

• Diminution in support philosophy or reduction in shareholding below 50% or downgraded of credit rating of Tata Sons by one or more notches
• Lower-than-expected improvement in the operating performance, especially operating profitability impacting the business and financial risk profiles, especially the leverage and other credit metrics
• Any further stretch in the working capital cycle, impacting the liquidity position

About the Company

TPL, incorporated in 1979, is one of India's leading EPC companies. It operates through three strategic business groups: energy and industrial infrastructure, urban infrastructure and services. A brief profile of TPL’s business segments:

Strategic business group	Description
Energy and industrial	Energy and resources
	Transmission and distribution
	Advanced tech facilities
	Services
Buildings and infrastructure	Urban spaces
	Mobility and strategic infra

 

TPL is held by several Tata group companies. The largest shareholder is Tata Sons, which holds 73.25% of the subscribed equity shares of TPL. Other stakeholders include The Tata Power Company Ltd ('Crisil AA+/Stable/Crisil A1+'; 19.31%), Tata Chemicals Ltd ('Crisil AA+/Stable/Crisil A1+'; 3.86%), Voltas Ltd (2.69%) and Tata Industries Ltd ('Crisil AAA/Stable'; 0.89%).

 

The Tata group is a global enterprise, headquartered in India, comprising over 100 independent operating companies.

Any other information: Not applicable