Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 144.00 ACUITE BBB+ | Stable | Assigned -
Bank Loan Ratings 308.50 ACUITE BBB+ | Stable | Upgraded -
Bank Loan Ratings 65.00 - ACUITE A2 | Assigned
Bank Loan Ratings 85.00 - ACUITE A2 | Upgraded
Total Outstanding 602.50 - -
Total Withdrawn 0.00 - -
 
Rating Rationale

­Acuité has upgraded its long-term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus) from ‘ACUITE BBB’ (read as ACUITE triple B) and short-term rating to 'ACUITE A2' (read as ACUITE A two) from 'ACUITE A3+ ' (read as ACUITE A three plus) on the Rs.393.50 Cr. bank facilities of Apollo Micro Systems Limited (AMSL). The outlook remains 'Stable'.

Also, Acuité has assigned its long-term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus)  on the Rs.144.00 Cr. and short-term rating to 'ACUITE A2 ' (read as ACUITE A two) on the Rs. 65.00 Cr. bank facilities of Apollo Micro Systems Limited (AMSL). The outlook is 'Stable'.

Rationale for upgrade:

The rating upgrade reflects the significant improvement in the company's scale of operations in FY2025. Over the past four years ending in FY2025, the company's earnings profile, including operating income, EBITDA, and PAT, has achieved a CAGR of 30 percent, driven by better execution of the order book. Additionally, the rating is supported by an equity infusion of Rs. 742.24 Cr. in FY2026 by both non-promoters and promoters on a preferential basis, for expansion of existing business and to manage increasing working capital requirements aligned with expected increase in scale of operations which will be enhancing the company's capital structure, liquidity, and financial risk profile. The operating margins have ranged between 22.99 and 22.57 percent over the last two years ending FY2025. The rating also considers the healthy order book position of Rs. 600.00 crore as of March 2025. It also factor's in the acquisition of IDL Explosives Ltd by it's subsidiary company which brings together over a century of specialized expertise in the niche and growing sector — 64 years in energetics and commercial explosives, and over 40 years in integrated weapons systems, AMSL will become fully integrated Tier-1 defence OEM. The acquisition not only enhances the manufacturing capabilities but also broadens the solutions portfolio across critical areas of India’s defence supply chain. Furthermore, the rating benefits from the promoters' extensive experience of over 30 years in the aerospace and defense industries.

However, the rating remains constrained by its intensive nature of working capital operations and susceptibility to risks inherent in tender-based business and long gestation period of projects.
 

About the Company

Incorporated in 1985, Apollo Micro Systems Limited (AMSL) is promoted by Mr. Karunakar Reddy. The company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). AMSL is an electronic, electromechanical, and engineering design, manufacturing, and supplies company. It designs, develops, and sells high-performance, mission-critical, and time-critical solutions to Aerospace, Defence, Space, and Homeland Security for the Ministry of Defence, government-controlled public sector undertakings, and the private sector. It offers custom-built COTS (Commercially off-the-shelf) solutions based on specific requirements to defence and space customers. The company’s manufacturing unit is located in Hyderabad, with its lab area conforming to electrostatic discharge requirements, featuring ESD-safe furniture and a controlled environment. AMSL is an ISO 9001:2015 and CEMILAC (Centre for Military Airworthiness and Certification) certified organization.
 
Unsupported Rating
­Not applicable
 
Analytical Approach
­­Acuité has considered the standalone business and financial risk profiles of AMSL to arrive at the rating.
 
Key Rating Drivers

Strengths
  • ­Experience of the management team; established relationships with reputed clientele
AMSL has been an established player since 1985 in the electronic system design manufacturing (ESDM) segment with the significant experience of its promoter, Mr. B Karunakar Reddy in the aerospace and defence industries spanning over 30 years. AMSL has a strong R&D team focused on developing new products. The company works with the DRDO for research on strategic defence missions, developing commercially off the shelf solutions, which are the proprietary products of AMSL. It focuses on R&D as reflected by the increasing spend on the same over the years. Mr. C V S Prasad, one of the directors, has over 20 years' experience in defence electronic systems manufacturing, particularly critical systems and has worked with organizations like the Indian Space research Organization (ISRO) and Semi- Conductor Laboratory (SCL) in research department. The company provides electric and electronic hardware and software solutions for mission-critical applications to defence, aerospace, navy, and home land security among others. AMSL derives significant benefit from its promoter experience and has established strong relationships with its customers as well as suppliers for repeated business. The major customers include the Ministry of Defence (MoD), Defence Research and Development Organisation (DRDO), BrahMos Aerospace Private Limited, Bharat Electronics Limited (BEL), Hindustan Aeronautics Limited (HAL), and units operated by the Indian Space Research Organisation (ISRO) among others. Acuité believes that similar growth trajectory is likely to continue over the medium term backed by experienced management and an established longstanding relationship with reputed clientele.
  • Improvement in operating revenue
The company has reported a year-on-year (YOY) significant growth of 51.24 percent in FY2025 compared to the previous year, largely attributed to the execution of the order book. The revenue of the company stood at Rs. 562.07 Cr. in FY2025 as against Rs. 371.63 Cr. in FY2024. The operating margin stood at 22.99 percent in FY2025 as against 22.57 percent in FY2024. The company has an unexecuted order book position of Rs. 600.00 Cr. as of March 31st, 2025. Additionally, the capex of Rs. 149.05 Cr. in Electronic City is expected to be completed in the current year (Q2FY2026), which is expected to result in an increase in the scale of operations over the medium term. Acuité believes that the company will continue to sustain its order book position and maintain its business risk profile over the medium term.
  • Healthy  financial risk profile
The company’s financial risk profile is healthy with  low gearing and moderate debt protection metrics. The net worth of the company stood at Rs.603.64 Cr. as of March 31, 2025 against Rs.517.56 Cr. as on March 31, 2024, and Rs.383.70 Cr. as of March 31, 2023. The net worth is improved due to the Premium on fresh issue of Rs. 131.50 Cr. in FY2024. The gearing of the company stood at 0.40 times as on March 31, 2024, against 0.37 times as on March 31, 2023. The estimated gearing for FY2025 is around 0.49 times. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 2.85 times and 2.33 times as on March 31, 2024, respectively as against 2.78 times and 1.37 times as on March 31, 2023, respectively. TOL/ TNW stood at 0.84 times as on March 31, 2024, as against 0.80 times as on March 31, 2023. The estimated ICR and DSCR for FY2025 is around 4.02 times and 2.54 times. The estimated TOL/TNW for FY2025 is around 1.08 times. The debt to EBITDA of the company stood at 2.40 times as on March 31, 2024, as against 2.31 times as on March 31, 2023 and estimated to be around 2.21 times as on March 31st 2025. Acuité believes the financial risk profile to remain healthy over the medium term on account of the company's healthy capital structure and stable operations.
  • High Entry barriers and moderate order book position

AMSL operates in a niche segment of the high entry barrier Defence and Aerospace industry. The company is ‘Centre for Military Airworthiness and Certification (CEMILAC)’ certified, making it an approved design house for the design and development of software and equipment for military aircraft applications. This certification is based on technical experience and the past record of such authorized design houses. AMSL deals with reputed clientele like Bharat Dynamics Limited, Bharat Electronics Limited, and the Defence Research and Development Organisation (DRDO), among others. As of March 25, AMSL has an unexecuted order book position of Rs. 600.00 Cr. Acuité believes that the high entry barrier, coupled with the long-term nature of the contracts in the order book, provides revenue visibility over the medium term. Further, AMSL's growth prospects remain healthy, supported by the Indian Government’s focus on indigenization in the defense sector amid the Make in India thrust.


Weaknesses
  • ­Working capital intensive nature of operations marked by high GCA Days

AMSL's working capital cycle remains significantly elongated, with Gross Current Asset (GCA) days increasing to 740 days in FY2024 from 661 days in FY2023, primarily driven by stretched receivables and elevated inventory levels. Notably, there has been an improvement in receivables in FY2025, which declined to 155 days, supported by the execution of commercial orders during the year. The high inventory as of March 31, 2024, is attributed to pre-emptive stocking of critical raw materials. Additionally, systems supplied by the company are subject to post-delivery testing by customers, and payments are released only upon successful completion, contributing to elevated debtor days—231 days in FY2024, up from 180 days in FY2023. To partially fund its working capital needs, the company stretches creditor payments, though these are secured through Letters of Credit (LCs). AMSL’s solutions are integrated within broader delivery systems assembled by other system integrators, with final deployment by the Ministry of Defence (MoD), further extending the operating cycle. Acuité notes that while operational improvements are expected over the medium term, the company’s ability to moderate its working capital intensity will remain a key sensitivity for its credit profile.

  • Susceptibility to risks inherent in tender-based business and long gestation period of projects

The business depends on success in bidding for tenders invited by defence public sector undertakings and research establishments. Establishments such as the Defence Research and Development Organisation (DRDO) invite tenders from qualified vendors for their R&D requirement and commence bulk production on successful completion of product development. Long-term revenue visibility is driven by the success of R&D projects and mass production.

Rating Sensitivities
  • ­Sustained improvement in scale of operations supported by healthy order inflows along with improvement in its profitability
  • Further stretch in the working capital cycle leading to an increase in working capital borrowing and weakening of financial risk profile
 
Liquidity Position: Adequate
AMSL’s Liquidity is adequate with adequate NCAs to its repayment obligations. It generated cash accruals of Rs.42.96 Cr. in FY2024, while its maturing debt obligations stood at  Rs.0.80 Cr. during the same period. Going forward, the company is expected to generate adequate net cash accruals against maturing repayment obligations. However, the reliance on working capital limits stood high marked by average 92 percent utilization of the fund-based limits used over the past six months ending in Mar 2025. The Company has maintained unencumbered cash and bank balances Rs.0.19 Cr. and the current ratio stood at 1.98 times as on March 31, 2024. Acuité expects that the liquidity of the company is likely to remain adequate over the medium term on account of expected healthy cash accruals to its maturing debt obligations.
 
Outlook: Stable
­
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 25 (Actual) FY 24 (Actual)
Operating Income Rs. Cr. 562.07 371.63
PAT Rs. Cr. 58.23 31.67
PAT Margin (%) 10.36 8.52
Total Debt/Tangible Net Worth Times 0.49 0.40
PBDIT/Interest Times 4.02 2.85
­FY2025 is based on abridged financial statement
­
 
Status of non-cooperation with previous CRA (if applicable)
­Not applicable
 
Any other information
­None
 
Applicable Criteria
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
Note on complexity levels of the rated instrument

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
30 Mar 2024 Bank Guarantee/Letter of Guarantee Short Term 50.00 ACUITE A3+ (Reaffirmed)
Letter of Credit Short Term 35.00 ACUITE A3+ (Reaffirmed)
Cash Credit Long Term 57.50 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 77.50 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 24.50 ACUITE BBB | Stable (Assigned)
Working Capital Demand Loan (WCDL) Long Term 24.00 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 110.00 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 15.00 ACUITE BBB | Stable (Reaffirmed)
06 Jul 2023 Letter of Credit Short Term 35.00 ACUITE A3+ (Reaffirmed)
Bank Guarantee/Letter of Guarantee Short Term 40.00 ACUITE A3+ (Reaffirmed)
Bank Guarantee/Letter of Guarantee Short Term 12.50 ACUITE A3+ (Reaffirmed)
Proposed Bank Guarantee Short Term 1.00 ACUITE A3+ (Reaffirmed)
Proposed Bank Guarantee Short Term 9.00 ACUITE A3+ (Assigned)
Cash Credit Long Term 52.50 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 60.00 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 30.00 ACUITE BBB | Stable (Reaffirmed)
Working Capital Demand Loan (WCDL) Long Term 24.00 ACUITE BBB | Stable (Reaffirmed)
Proposed Cash Credit Long Term 5.00 ACUITE BBB | Stable (Reaffirmed)
Proposed Long Term Loan Long Term 100.00 ACUITE BBB | Stable (Assigned)
02 Sep 2022 Letter of Credit Short Term 35.00 ACUITE A3+ (Reaffirmed)
Bank Guarantee/Letter of Guarantee Short Term 25.00 ACUITE A3+ (Reaffirmed)
Bank Guarantee/Letter of Guarantee Short Term 12.50 ACUITE A3+ (Reaffirmed)
Cash Credit Long Term 42.50 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 25.00 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 30.00 ACUITE BBB | Stable (Reaffirmed)
Working Capital Demand Loan (WCDL) Long Term 15.00 ACUITE BBB | Stable (Reaffirmed)
Proposed Long Term Bank Facility Long Term 25.00 ACUITE BBB | Stable (Reaffirmed)
Proposed Long Term Bank Facility Long Term 20.00 ACUITE BBB | Stable (Assigned)
Proposed Term Loan Long Term 30.00 ACUITE BBB | Stable (Assigned)
05 Aug 2022 Letter of Credit Short Term 35.00 ACUITE A3+ (Upgraded from ACUITE A3)
Bank Guarantee/Letter of Guarantee Short Term 25.00 ACUITE A3+ (Upgraded from ACUITE A3)
Bank Guarantee/Letter of Guarantee Short Term 12.50 ACUITE A3+ (Upgraded from ACUITE A3)
Cash Credit Long Term 42.50 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Cash Credit Long Term 25.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Cash Credit Long Term 30.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Working Capital Demand Loan (WCDL) Long Term 15.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Proposed Long Term Bank Facility Long Term 10.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Proposed Long Term Bank Facility Long Term 15.00 ACUITE BBB | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
State Bank of India Not avl. / Not appl. Bank Guarantee/Letter of Guarantee Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 50.00 Simple ACUITE A2 | Upgraded ( from ACUITE A3+ )
State Bank of India Not avl. / Not appl. Bank Guarantee/Letter of Guarantee Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 25.00 Simple ACUITE A2 | Assigned
State Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 57.50 Simple ACUITE BBB+ | Stable | Upgraded ( from ACUITE BBB )
HDFC Bank Ltd Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 102.00 Simple ACUITE BBB+ | Stable | Upgraded ( from ACUITE BBB )
HDFC Bank Ltd Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 50.00 Simple ACUITE BBB+ | Stable | Assigned
State Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 90.00 Simple ACUITE BBB+ | Stable | Assigned
State Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 35.00 Simple ACUITE A2 | Upgraded ( from ACUITE A3+ )
State Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 40.00 Simple ACUITE A2 | Assigned
State Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 30 Sep 2031 110.00 Simple ACUITE BBB+ | Stable | Upgraded ( from ACUITE BBB )
Bajaj Finserv Limited Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 05 Jan 2027 15.00 Simple ACUITE BBB+ | Stable | Upgraded ( from ACUITE BBB )
Indian Overseas Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 08 Oct 2027 4.00 Simple ACUITE BBB+ | Stable | Assigned
Bajaj Finserv Limited Not avl. / Not appl. Working Capital Demand Loan (WCDL) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 24.00 Simple ACUITE BBB+ | Stable | Upgraded ( from ACUITE BBB )

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