Dilip Buildcon advanced 2.98% to Rs 445.70 after CRISIL Ratings revised its outlook on the long-term bank facilities and non-convertible debentures of the company to 'positive' from 'negative' while reaffirming the rating at 'CRISIL A'.
The rating on the short-term facilities has been reaffirmed at CRISIL A1.
CRISIL Ratings stated that the revision in outlook reflects a strong improvement in the financial risk profile, driven by deleveraging of around Rs 800 crore in fiscal 2024 supported by issue of Rs 133 crore of warrants to Alpha Alternatives (the fund will also partner with DBL in its proposed InvIT), approximately Rs 130 crore cash inflow from 26% stake of three HAM assets to Alpha Alternatives, upstreaming cash of nearly Rs 370 crore from three HAM SPVs, cash inflow from sale of remaining assets to Shrem InvIT, dividend income from Shrem InvIT units, partial sale of Shrem InvIT units and improved cash accruals.
As a result debt protection metrices have improved. Liquidity and financial risk profile of the company may further improve, with continued monetisation of assets and higher cash accrual, while the business risk profile remains healthy, backed by established market position and strong project execution capability of a diverse orderbook.
In the medium term, debt will likely reduce further, with issue of warrants of Rs 400 crore to Alpha Alternatives, sale of 26% stake in the remaining 15 hybrid annuity mode (HAM) assets to Alpha Alternatives, and dividend income from Shrem InvIT units.
As a result, adjusted interest coverage is expected to be around 3.8 times in the medium term and is estimated at 3.2 times in fiscal 2024, an improvement from 2.3 times in fiscal 2023.
Revenue, on the other hand, is expected to grow by 4-5% in fiscal 2025, aided by steady execution of orders worth Rs 21,843 crore as of December 2023, as the management focuses on steadily growing with more focus on improving the bottom line.
Revenue risk remains low, as orders are diversified across roads (40%), mining work (19%), irrigation (18%), water supply (15%) and balance related to metro and urban development.
These strengths are partially offset by the large inventory levels resulting in high working capital requirement, capital expenditure (capex) intensive business model, and susceptibility to volatility in raw material prices and cyclicality inherent in the construction industry. Any further stretch in inventory levels will remain a key monitorable.
Dilip Buildcon undertakes EPC work for urban development and mining, and road development on build-operate-transfer (BOT) basis and MDO work in mining.
The company posted revenue of Rs 7,606 crore for the first nine of fiscal 2024, on profit of Rs 298 crore, compared with revenue of Rs 7,262 crore on loss of Rs 164 crore for the corresponding period of the previous fiscal.
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