Transrail Lighting edges higher after CRISIL Ratings upgrades ratings to 'A+'

The agency has reaffirmed its 'CRISIL A1' rating on the short-term bank facility of the company.

CRISIL Ratings stated that the upgrade in the long-term rating factors in the improving business risk profile due to increasing scale of operations supported by strong order book, and healthy operating profitability.

Earnings before interest, tax, depreciation and amortization (EBITDA) is expected to remain healthy over the medium term with EBITDA margin expected to be maintained in the similar range as observed in recent fiscals.

The business risk profile will also continue to benefit from the strong technological capabilities of Transrail, its increasing market presence and established clientele, and the favourable prospects for the international as well as domestic transmission and distribution (T&D) and domestic non-T&D business.

The ratings continue to reflect the established position of Transrail in the engineering, procurement and construction (EPC) business catering to the power sector, strong order pipeline and improving financial risk profile.

The strengths are partially offset by exposure to intense competition, operational and legal risks, working capital-intensive operations and a high share of international business exposing Transrail to risks including geo-political, currency etc.

The agency further said that double digit growth in scale of operations over the medium term led by healthy order execution and sustenance of operating margins at approximately 13%, leading to strong annual cash generation and strengthening of financial risk profile, supported by better working capital management, also leading to improved debt metrics, especially interest cover, could lead to positive rating action. However, moderation in operational performance with steady decline in operating margin, impacting cash generation and higher than expected debt levels due to acquisitions, support to group companies or elongation in working capital cycle, or adverse court rulings impacting debt metrics could lead to downward rating action.

Transrail Lighting is one of the Largest EPC companies providing turnkey solutions globally in areas of transmission, distribution, substations and rural electrification, railways, provides solutions for outdoor lighting, since more than 38 years.