Experienced management and long track record of operation
The promoter of the company Mr. Soumya Ranjan Samal along with Mr. Manoj Ranjan Samal, Mrs. Archana Samal, with more than three decades of experience in the mining industry. The other directors 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 customers like Orissa Mining Corporation for more than a decade. Acuité believes that the company will continue to benefit from its promoters' extensive industry experience and healthy relationship with customers over the long term.

Increasing revenue coupled with healthy profitability margin
The revenue of the company has increased significantly to Rs.1146.33 crore in FY2022 (Prov.) as compared to Rs.781.77 crore in the previous year. This improvement in revenue is mainly on account of increase in work order execution during the period along with strong execution capability of the company. The company has booked Rs.616.77 crore till 31st August 2022 (Prov.). Acuité believes the revenue of the company will continue to increase going forward based on the healthy unexecuted order book of Rs.16347.01crore in hand as on 15th August 2022 imparting revenue visibility over the medium to long term.

The operating profitability margin of the company stood healthy at 21.71 per cent in FY2022 (Prov.) as compared to 22.72 per cent in the previous year. However, this slight contraction in operating profitability margin is on account of increase in the raw material price during the period. Acuité believes that the profitability margin of the company will sustain at the same level backed by in-built price escalation clause that provides cushion for covering the increased input cost. This helps the company from any large variation in the raw material prices, thus protecting the operating margins to a certain extent. The net profitability margin of the company stood healthy at 9.91 per cent in FY2022 (Prov.) as compared to 9.74 per cent in the previous year. 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.

Strong financial risk profile
The financial risk profile of the company is marked by strong net worth, comfortable gearing and healthy debt protection metrics. The net worth of the company stood strong at Rs.395.55 crore in FY 2022 (Prov.) as compared to Rs. 274.89 crore in FY2021. This improvement in networth is on account of retention of profit by the company during the period. The gearing of the company stood comfortable at 0.79 times as on March 31, 2022 (Prov.) when compared to 0.94 times as on March 31, 2021. Interest coverage ratio (ICR) of the company stood strong at 9.41 times in FY2022 (Prov.) as against 7.28 times in FY 2021. The debt service coverage ratio (DSCR) of the company stood comfortable at 1.66 times in FY2022 (Prov.) as compared to 1.67 times in the previous year. The net cash accruals to total debt (NCA/TD) stood at 0.59 times in FY2022 (Prov.) as compared to 0.50 times in FY2021. Going forward, Acuité believes the financial risk profile of the company will improve on account of increase in net cash accruals and no major debt funded capex plan over the near term.

Moderate working capital management
The moderate working capital management of the company is marked by comfortable gross current asset days of 110 days in FY2022 (Prov.) and 105 days in the previous year. The inventory days of the company has been comfortable at 14 days in FY2022 (Prov.) as compared to 19 days in the previous year. The debtor days of the company is also comfortable at 58 days in FY2022 (Prov.) as compared to 49 days in the previous year. Further, the GCA days is also emanates from the high other current asset of Rs.87.81 cr. in FY 2022 (Prov.), which mainly consists of EMD deposits, advance to suppliers, balance with statutory authorities among others.

Tender based nature of operation along with highly competitive and fragmented industry-
Mining industry is marked by presence of many small and large players. KCC 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.

Highly regulated industry-
The entire business of KCC is concentrated in Orissa region, the largest iron ore producing state in India. 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.