Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Rating Rationale
Acuité has reaffirmed its long-term rating of 'ACUITE A' (read as ACUITE A) on the Rs.47.50 crore bank facilities and its short-term rating of 'ACUITE A1' (read as ACUITE A one) on the Rs.18.00 crore bank facilities of Diffusion Engineers Limited. (DEL). The outlook is 'Stable'.
Rationale for rating
The rating reaffirmation considers DEL’s improving operating performance, low leverage, strong debt protection metrics, and liquidity supported by healthy cash accruals and equity infusion through IPO in FY2025. The rating also factors in long-established presence in engineered solutions, diversified and forward-integrated product portfolio catering to core industries, and improving scale of operations. However, the working capital–intensive nature of operations, timely completion and ramp-up of ongoing capex and susceptibility to fluctuations in raw material prices remains key monitorable, though expected capacity expansion and economies of scale are likely to support growth and margin improvement over the medium term.
About Company
Incorporated in 2000, DEL is engaged in welding maintenance and repair solution services for industries like cement, power and steel, among others. The Nagpur-based company manufactures welding consumables like electrodes, flux cored wire, etc. and also offers solutions for reconditioning/repair. The present directors of the company are Mr. Prashant Garg, Mr. Nitin Garg, Ms. Sherry Samuel Oommen, Ms. Deepali Sameer Bendre, Mr. Anil Kumar Trigunayat and Ms. Chitra Narendra Garg.
About the Group
The group is engaged in the business of providing engineering solutions to customers both in domestic and international market. The group provides a wide range of products and services including manufacture of special welding consumables, wear plates and heavy engineering equipment for core industries and provide special and customized repairs and reconditioning services of heavy machinery and equipment. The group is also involved in trading of anti-wear powders and welding and cutting machinery. They also provide super conditioning process at their manufacturing facilities, a surface treatment solution for machine components that greatly improves wear resistance, eliminates stress and increases their repair ability leading to extended life of industrial parts resulting in smoother functioning and economy in production costs.
Unsupported Rating
Not Applicable
Analytical Approach
Extent of Consolidation
•Full Consolidation
Rationale for Consolidation or Parent / Group / Govt. Support
Acuite has considered consolidated financial and business risk profile of DEL to arrive at the rating as all the subsidiaries and JV’s deals in the same/related line of business. The group has 6 subsidiaries and 2 joint ventures (JV) which are considered in the consolidation. The six subsidiaries are - Diffusion Super Conditioning Services Private Limited, Diffusion Hernon Adhesive and Sealant Private Limited, Nowelco Industries Private Limited, Diffusion Engineers Singapore Pte Ltd, Diffusion Wear Solutions Philippines Inc. and Diffusion Eurasia Mühendislik Sanayi Ve Ticaret Anonim Sirketi (Turkey) and the two JV's are LSN Diffusion Limited and Mecdiff Sdn Bhd.
Key Rating Drivers
Strengths
Long track record of operations supported by experienced management
DEL has been in the business of welding consumables since past more than four decades. The current managing director, Mr. Prashant, has around 14 years of experience. Besides manufacturing welding consumables like electrodes, flux cored wires, etc., the group also offers solutions for reconditioning/repair of critical equipment used in manufacturing plants of cement, power, and steel, among others. The long-standing industry experience of the promoters has enabled DEL not only to maintain good relationship with customers and suppliers, but also to diversify the product/service offerings. In terms of geographic revenue distribution, around 85% of revenue is derived from the domestic market, while 15% comes from exports.
Acuite believes that DEL’s established track record and experienced management would continue to support its growth going ahead.
Improving revenue along with stable profitability The revenue of the group improved in FY2025 and stood at Rs. 336.60 Cr. against Rs. 279.78 Cr. in FY2024. The improvement in the revenue is primarily attributable to increase in the sales volume during the year. The operating profit margin stood stable at 14.59 per cent in FY2025 against 14.58 per cent in FY2024. The PAT margin marginally moderated to 10.71 per cent in FY2025 against 11.01 per cent in FY2024.
The 9MFY2026 revenue stood at Rs. 265.06 Cr., operating profit margin stood at ~17.50 per cent and PAT margin stood at ~12.41 per cent.
Going forward, the revenue and the profitability is expected to improve over the medium term with the materialisation of the capex, which remains a key monitorable.
Healthy financial risk profile
The financial risk profile of the group is healthy marked by healthy net worth, low gearing, and strong debt protection metrics. The net worth of the group stood at Rs. 368.84 Cr. as on 31 March 2025 against Rs. 190.59 Cr. as on 31 March 2024. The net worth has improved on account of accretion of profits into reserves and the issue of the IPO of Rs. 157.96 Cr. during the year. The infusion is majorly utilised towards capex spends (~Rs.19 Cr. incurred in FY2025, ~Rs. 65 Cr. in FY2026 and balance planned in FY2027) and meeting working capital requirements. Therefore, with low reliance on external debt, the gearing of the group stood low at 0.06 times in FY2025. The debt protection metrics are also strong with interest coverage ratio at 23.95 times in FY2025.
Going forward, the financial risk profile of the group is expected to remain healthy over the medium on account of expected improvement in the operating profitability and no planned debt funded capex over the medium term.
Weaknesses
Intensive working capital operations
The working capital operations of the group are intensive in nature with gross current asset days increasing to 209 days in FY2025 against 190 days in FY2024. The increase is due to elevation in debtor and inventory levels and reduced credit period from suppliers. The inventory days stood at 87 days in FY2025 against 81 days in FY2024. The debtor days stood at 106 days in FY2025 as compared against 100 days in FY2024. The group typically received around 70% of its receivables within 90 days. The creditor days stood at 56 days in FY2025 against 72 days in FY2024.
Susceptibility to fluctuations in raw material prices
DEL’s profitability is susceptible to fluctuations in prices of key raw material, i.e., steel. DEL’s inability to pass on sudden rise in steel prices to its consumers could impact the group's overall operating performance.
Rating Sensitivities
Potential triggers (individual or collective) for an upward rating action:
Improvement in operating performance with revenues reaching above ~Rs 600 Cr. at stable profitability margins.
Improvement in the working capital cycle.
Potential triggers (individual or collective) for a downward rating action:
Deterioration in operating performance with revenues falling below ~Rs 250 Cr. or decline in operating margins.
Significant increase in debt levels or any adverse change in capital structure impacting financial flexibility.
Significant elongation in the working capital.
Liquidity Position
Strong
The group has a strong liquidity position marked by healthy cash accruals of Rs. 41.32 Cr. against no repayment obligation during the same period. Going forward, the accruals of the group is expected to be in the range of Rs. 50 Cr. - Rs. 60 Cr. in FY26 & FY27 with no due repayment obligations. The reliance on the working capital limits stood low at ~23.81% for the last 06 months ending Dec 2025 and the current ratio stood healthy at 4.31 times as on 31 March 2025. This is mainly due to the year-end cash balance (proceeds from IPO), which ultimately will get use in capex and incremental working capital needs. Going forward, timely ramp-up of benefits from ongoing and proposed capex is expected to further support liquidity, although utilisation levels of bank limits will remain a key monitorable.
Outlook: Stable
Other Factors affecting Rating
None
Particulars
Unit
FY 25 (Actual)
FY 24 (Actual)
Operating Income
Rs. Cr.
336.60
279.78
PAT
Rs. Cr.
36.04
30.80
PAT Margin
(%)
10.71
11.01
Total Debt/Tangible Net Worth
Times
0.06
0.18
PBDIT/Interest
Times
23.95
26.99
Status of non-cooperation with previous CRA (if applicable)
ACUITE A | Stable
(Upgraded from ACUITE A- | Stable)
Cash Credit
Long Term
20.00
ACUITE A | Stable
(Upgraded from ACUITE A- | Stable)
Cash Credit
Long Term
5.00
ACUITE A | Stable
(Upgraded from ACUITE A- | Stable)
Cash Credit
Long Term
15.00
ACUITE A | Stable
(Upgraded from ACUITE A- | Stable)
Proposed Long Term Bank Facility
Long Term
0.50
ACUITE A | Stable
(Upgraded from ACUITE A- | Stable)
Bank Guarantee (BLR)
Short Term
3.00
ACUITE A1
(Upgraded from ACUITE A2+)
Bank Guarantee (BLR)
Short Term
10.00
ACUITE A1
(Upgraded from ACUITE A2+)
Letter of Credit
Short Term
5.00
ACUITE A1
(Upgraded from ACUITE A2+)
17 Oct 2023
Cash Credit
Long Term
20.00
ACUITE A- | Stable
(Reaffirmed)
Cash Credit
Long Term
5.00
ACUITE A- | Stable
(Reaffirmed)
Proposed Long Term Bank Facility
Long Term
0.50
ACUITE A- | Stable
(Reaffirmed)
Cash Credit
Long Term
10.00
ACUITE A- | Stable
(Reaffirmed)
Cash Credit
Long Term
7.00
ACUITE A- | Stable
(Reaffirmed)
Bank Guarantee (BLR)
Short Term
10.00
ACUITE A2+
(Reaffirmed)
Letter of Credit
Short Term
5.00
ACUITE A2+
(Reaffirmed)
Bank Guarantee (BLR)
Short Term
5.00
ACUITE A2+
(Reaffirmed)
Bank Guarantee (BLR)
Short Term
3.00
ACUITE A2+
(Reaffirmed)
Lender’s Name
ISIN
Facilities
Listing Status
Regulated By
Date Of Issuance
Coupon Rate
Maturity Date
Quantum (Rs. Cr.)
Complexity Level
Rating
H D F C Bank Limited
Not avl. / Not appl.
Bank Guarantee (BLR)
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
10.00
Simple
ACUITE A1 | Reaffirmed
ICICI BANK LIMITED
Not avl. / Not appl.
Bank Guarantee (BLR)
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
3.00
Simple
ACUITE A1 | Reaffirmed
DBS Bank Ltd
Not avl. / Not appl.
Cash Credit
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
15.00
Simple
ACUITE A | Stable | Reaffirmed
ICICI BANK LIMITED
Not avl. / Not appl.
Cash Credit
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
7.00
Simple
ACUITE A | Stable | Reaffirmed
H D F C Bank Limited
Not avl. / Not appl.
Cash Credit
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
20.00
Simple
ACUITE A | Stable | Reaffirmed
YES BANK LIMITED
Not avl. / Not appl.
Cash Credit
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
5.00
Simple
ACUITE A | Stable | Reaffirmed
H D F C Bank Limited
Not avl. / Not appl.
Letter of Credit
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
5.00
Simple
ACUITE A1 | Reaffirmed
Not Applicable
Not avl. / Not appl.
Proposed Long Term Bank Facility
Unlisted
RBI
Not avl. / Not appl.
Not avl. / Not appl.
Not avl. / Not appl.
0.50
Simple
ACUITE A | Stable | Reaffirmed
Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)
Sr. No.
Company name
1
Diffusion Super Conditioning Services Private Limited
2
Diffusion Hernon Adhesive and Sealant Private Limited
3
Nowelco Industries Private Limited
4
Diffusion Engineers Singapore Pte Ltd
5
Diffusion Wear Solutions Philippines Inc.
6
LSN Diffusion Limited
7
Mecdiff Sdn Bhd.
8
Diffusion Engineers Limited
Contacts
List of instruments and names of regulators of the instruments
