Experienced management and long track record of operation and association with reputed clientele
The promoter of the company Mr. Soumya Ranjan Samal along with Mr. Manoj Ranjan Samal, Mrs. Archana Samal, have more than three decades of experience in the mining industry. The other directors Mr. James Joseph, Mr. Bijay Kumar Otta and Mr. Ramesh Chandra Mohanty also have experience of more than five decades in the mining industry. The company has long presence in this sector and has established healthy relationship with the companies like Orissa Mining Corporation, Steel Authority of India, Tata Steel Ltd, NTPC etc. Acuité believes that the company will continue to benefit from its promoters' extensive industry experience and  healthy relationship with Principals over the long term.
Healthy revenue with improved profitability margins and strong orderbook position
The operating income of the company has been improving sequentially over the years and stood at ~ Rs. 1779.84 Cr. in FY2023 against Rs.1150.53 Cr. in FY2022 marking a significant revenue growth of nearly 55% in FY2023. The improvement in revenues is mainly on account of increase in work order execution. The company had an unexecuted orderbook of ~Rs. 28000 Cr. as on September 2023 giving a long term revenue visibility. Acuité believes the revenue of the company will increase going forward based on the healthy order book, however timely execution of the same will remain a key rating sensitivity. Further, the operating margins of the company stood healthy at 23.50 per cent in FY2023 against 21.99 per cent in FY2022. Acuité believes that KCCL will sustain its profits at similar levels backed by in-built price escalation clause that provides cushion for covering the increased input cost which insulates the company from any large variation in the raw material prices, as reflected in the sustainable increase in the operating margins over the years. The operating margins for 6MFY2024 have further improved to ~28%. Additionally, despite increased finance cost the net profitability margin of the company stood improved at 11.47 per cent in FY2023 from 9.94 per cent in FY2022. Acuité believes the profitability margin of the company will be sustained at healthy levels over the medium term on account of availability of adequate price escalation clause with the counter party.

­Large Capital expenditure in near future
Mining industry is a capital-intensive business and requires constant innovation and technology change to ensure lesser risks to environment, improved safety records while execution of orders within stipulated timelines. KCCL has made additions to its Gross Block of around ~Rs. 750 Cr. during FY2023, which majorly pertain additions to Plant & Machinery. Further, it has a planned capex to the tune of Rs. 680 Cr. during FY2024 for which it would avail additional debt of around Rs. 300-400 Cr. The total debt including lease liabilities of KCCL as on March 31, 2023, stood at ~Rs. 1014 Cr. which is expected to further increase to ~Rs. 1400 Cr. during FY2024. Also, with greater capex, the immediate debt obligations for the company are expected at Rs. 250 Cr. for FY2024, while ~Rs. 330 Cr in FY2025. However, company has a huge outstanding order value close to Rs. 28,300 Cr. to be completed over a period of 10 years which gives a healthy revenue visibility. Also, considering KCCL’s ability to pass on the pricing to its clients’ while sustaining own profitability will ensure adequate cushion between the accruals and repayments. The NCA for FY2024 and FY2025 are expected at ~Rs. 390 Cr. and ~Rs. 500 Cr. against repayments of Rs. 250 Cr and Rs. 330 Cr. respectively. However, Acuite believes timely execution of orders and its collections will remain critical for the maintenance of healthy financial risk profile of KCCL. 

Tender based and competitive nature of operat ions and highly regulated industry
Mining industry is marked by presence of many small and large players. Entire business of KCCL is majorly concentrated in Orissa region, the largest iron ore producing state in India. The company undertakes tender based operations which pose a risk of uncertainty in the awarding of tenders as it faces competition from the other players while bidding for tenders. Further, the mining industry is highly regulated by the government ranging from licensing, extraction quantum, and export, amongst other. There have been continuous regulatory changes in terms of state governments' policies towards mining activity. Any adverse change in the regulations can affect its business risk profile, and consequently, affect credit risk profile of the company.