Ceigall India Limited Gets Rating Upgrades on Short, Long-Term Debt

New Delhi, December 10, 2024: Ceigall India Limited (CIL) has received an upgrade on its long term by Ind-Ra (India Ratings, a Fitch Group Company), to ‘IND AA-’ from the previous ‘A+’ assigned by CRISIL, driven by an improving scale of operations, strong credit profile, healthy accruals, robust credit metrics, and ample liquidity. The company’s bank loans have also been assigned a stable outlook.

Additionally, Ind-Ra has upgraded Ceigall India’s short-term rating to ‘A1+’ from ‘A1’ assigned earlier by CRISIL, reflecting its enhanced creditworthiness and operational excellence.

“The ratings reflect CEIGALL INDIA’s improving scale of operations as well as its strong credit profile, backed by healthy cash accruals, strong credit metrics and liquidity,” said India Ratings. “The ratings are constrained due to the presence of concentrated order book, some of the orders in which is yet to start execution. However, Ind-Ra draws comfort from the company’s moving order book and also expects the projects which were awarded in 2QFY25 to begin from 4QFY25,” the ratings agency added.

India Ratings expects Ceigall India’s revenue to grow 15%-20% during FY25-26 and anticipates EBITDA margin to remain stable at 14-15% after factoring the dominance of HAM projects in the company’s order book and most of these projects have price escalation clauses for a pass-through of any increase in material prices.

“The successful execution of the orders received in FY22 had enabled the company to achieve sustainable growth over FY23- FY24, and it is likely to support revenue in FY25,” said India Ratings. “While there is adequate revenue visibility until FY26, revenue growth in the subsequent period would depend upon the company achieving financial closures of its HAM projects and start its execution from the roads segment.”

According to India Ratings Ceigall India’s credit metrics shall remain comfortable over the medium term, supported by the company’s healthy operating performance. The credit metrics improved in FY24 due to lower term debt. The company’s total outside liabilities (TOL)/EBITDA improved to 2.5x in FY24 (FY23: 3.4x; FY22: 2.0x).

To arrive at the ratings, Ind-Ra continues to consider Ceigall India’s standalone financials while adjusting the outstanding debt of those special purpose vehicles for which a corporate guarantee has been provided by the company. The agency also continues to factor in the equity commitments of Ceigall India’s under construction hybrid annuity model (HAM)-based projects, the ratings agency said.

The FCF is likely to remain positive over the near-to-medium term, backed by a continued efficient working capital cycle. Ind-Ra believes, the company shall be able to meet its repayment obligations and equity commitments over 2HFY25-FY27 from internal accruals.