| Established track record of operations led by extensive management experience
KMC Constructions Limited (KMCCL) established in 1970 as a partnership firm was subsequently converted into a public limited company in 1994. The company has over five decades of experience in executing infrastructure projects such as roads, highways, airport runways, and bridges using Build- Operate-Transfer (BOT), Design-Build-Finance-Operate-Transfer (DBFOT), and Engineering Procurement & Construction (EPC) models. KMCCL secures contracts from government and public sector organizations including National Highway Authority of India (NHAI), Kerala State Transport Project (KSTP), Bangalore Development Authority (BDA), Ministry of Nepal etc. The company’s long operational track record has helped it establish healthy relationships with customers and suppliers. Acuité believes that the management’s extensive industry experience will support the company’s performance and growth over medium term.
Moderation in revenues albeit comfortable profitability margins and order book position
The operating income of the company moderated to Rs. 874.94 Cr. in FY2026 (prov.) compared to Rs. 1124.07 Cr. in FY2025 and Rs. 1070.31 Cr. in FY2024. The decline in revenue is primarily due to slower order inflows and lower contribution from own-book projects amid continued intense pricing competition in the road EPC segment. Further the EBITDA margin improved to 8.13 per cent in FY26 (prov.) from 7.53 per cent in FY25, supported by relatively lower operating and related expenses. PAT margins improved marginally to 3.80 per cent in FY26 (prov.) from 3.29 per cent in FY25, while absolute PAT remained broadly at similar levels. The improvement was primarily driven by a significant reduction in finance costs over the last two years due to reduced reliance on external debt. In Q1FY27, the operating income stood at Rs. 171.46 Cr. with EBITDA margin of 8.95 per cent and PAT margin of 4.34 per cent. Further, the company has comfortable order book position of Rs. Rs. 2997.85 Cr, which provides revenue visibility for near to medium term. Acuite believes, the operating performance would remain stable backed by comfortable order book position.
Moderate financial risk profile with low reliance on bank debt
The financial risk profile of the company stood moderate, marked by healthy net worth, moderate gearing (debt-equity) and moderate debt protection metrics. The tangible net worth increased to Rs. 750.52 Cr. as of March 31, 2026 (prov.), as against Rs. 717.26 Cr. on March 31, 2025, due to accretion of profits to reserves. The total debt of the company stood at Rs. 944.68 Cr. which includes liability related to SREI of Rs. 225.94 Cr. (the related NCLT petition has since been withdrawn), USL from related entities and promoters of Rs. 625.03 Cr. and short-term loans (in terms of CC) of Rs. 93.72 Cr. as on 31 March 2026 (prov.) The gearing (debt-equity) ratio stood at 1.26 times as on 31 March 2026 (prov.) as compared to 1.25 times as on 31 March 2025. Further, adjusted debt-equity stood at 0.43 times as on 31 March 2026 (prov.) as against 0.56 times as on 31 March 2025. The debt protection metrics stood moderate with interest coverage ratio (ICR) at 2.37 times for FY2026 (prov.) as against 2.20 times for FY2025. Debt Service Coverage Ratio (DSCR) stood at 2.06 times in FY2026 (prov.) as against 1.91 times in FY2025. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 2.00 times as on 31 March 2026 (prov.) as against 1.95 times as on 31 March 2025. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.04 times for FY2026 (prov.) as against 0.05 times for FY2025. Total debt to EBITDA stood high at 10.91 times in FY2026 (prov.) as compared to 8.42 times in FY2025. However, adjusted bank debt to EBITDA stood low at ~ 1.00 times in FY2026 (prov.) as against 1.45 times in FY2025. Acuite believes, that the financial risk profile of the company will remain moderate backed by steady accruals and no major debt funded capex plans.
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| Working capital intensive operations
The working capital operations of the company remained intensive marked by high gross current assets (GCA) of 593 days in FY2026 (prov.) as against 377 days in FY2025. The high GCA days are attributed to other current assets which comprise of amount due from related parties, amount due from companies and advances to suppliers and sub-contractors aggregating to Rs. 421 Cr. The debtor’s collection period increased to 161 days in FY2026 (prov.) from 74 days for FY2025, primarily account of final billing raised towards the Calicut project in March 2026, which is realised in April 2026,. The creditor days stood at 91 days in FY2026 (prov.) as compared to 48 days in FY2025. The inventory days also stood at 157 days in FY2026 (prov.) as against 146 days in FY2025. Further, the KMCCL’s reliance on working capital borrowings remained moderate marked by average utilization of fund based working capital limits of ~45.12 per cent and that of non-fund based working capital limits of ~98.10 per cent during the last six months period ended June 2026. Acuite believes the working capital operations of the company would remain intensive on the back of elongated debtor days and exposure to subsidiaries and related parties.
Exposure to subsidiaries and related parties
The company has exposure to subsidiaries and related parties through investments, loans, advances and other receivables. While such exposures have contributed to the elongation of its working capital cycle, a significant portion of the funding extended to KMCIL is routed back to KMCCL through borrowings (post sale of project executed in the SPV) and is subsequently deployed in its operations. As on March 2026, KMCCL has invested Rs. 501.23 Cr in its subsidiary i.e. KMCIL and extended loans and advances of Rs. 252.96 Cr to related parties which are higher than the company’s net worth. While the recovery of dues from Calicut Expressway Private Limited in April 2026 has improved liquidity, any further increase in such exposure or delays in recoveries could exert pressure on cash flows. Acuité believes that the timely recovery of these amounts and the company’s ability to restrict incremental support to group entities will remain a key rating monitorable.
Susceptibility of profitability to volatility in raw material prices, tender based business amidst competitive construction sectors.
KMCCL operates in a highly competitive industry, characterised by the tender based nature of project awards and exposure to fluctuations in raw material prices. Most of the company’s EPC projects have gestation period ranging from 12 to 36 months, during which profitability remains vulnerable to changes in input costs. While the presence of price escalation clauses in the majority of contracts provides a degree of protection against such volatility the risk is not fully eliminated. Further, the company secures projects through a competitive bidding process wherein contracts are typically awarded to the lowest bidder meeting the prescribed eligibility criteria. This competitive pressure can lead to aggressive bidding which in turn may impact the company’s profitability margins.
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