| Strong Customer Base
KEL has a long track record of more than three decades in the industry and has built healthy relationships with its customers and suppliers, ranging from 5 to 30 years. The strong relationships with customers, who have a very strong credit profile, ensure regular orders and low counterparty credit risk. Further, in February 2024, KEL acquired 100% of the equity share capital of MEEPL. This acquisition is expected to augment the organizational prowess, as MEEPL specializes in the production of thermal engineering and heat recovery systems, which are expected to complement Kilburn Engineering’s existing drying systems. Furthermore, on January 28, 2025, KEL acquired 100% of the equity share capital of Monga Strayfield Private Limited, which is engaged in radio frequency drying and heating technologies and specializes in sheet metal fabrication. This acquisition is expected to further strengthen Kilburn’s market position and expand its offerings in key industrial sectors. The synergy of both acquisitions is expected to help tap into the existing client bases of all three entities,while also providing a bundled solution.
Revenue growth and improvement in the profitability
The group’s operating income stood at Rs. 329.48 Cr. in FY2024. Further, in H1FY2025, the group reported operating income of Rs. 189.39 Cr. The group’s EBITDA margin stood at 23.31%, while the PAT margin stood at 15.34% in FY2024. Further, on a standalone basis, KEL’s operating income improved by ~32% to Rs. 293.21 Cr. in FY2024, compared to Rs. 221.53 Cr. in FY2023 and Rs. 122.75 Cr. in FY2022, mainly driven by an increase in contract execution. KEL’s standalone EBITDA margin improved to 22.33% in FY2024 from 15.78% in FY2023, and the PAT margin stood at 13.53% in FY2024, compared to 13.60% in FY2023.
Acuité believes that the revenue of the group is expected to improve further due to the healthy order book position.
Moderate financial risk profile
The group’s financial risk is moderate, with a healthy net worth, below-unity gearing, and healthy debt protection metrics. The tangible net worth stood at Rs. 175.93 Cr. as of March 31, 2024. The group's gearing is comfortable at 0.47 times as of March 31, 2024. The healthy coverage indicators are reflected by the Interest Coverage Ratio (ICR), which stood at 8.29 times, and the Debt Service Coverage Ratio (DSCR), which stood at 6.59 times as of March 31, 2024. Further, on a standalone basis, KEL’s tangible net worth stood at Rs. 243.28 Cr. as of March 31, 2024, compared to Rs. 105.26 Cr. as of March 31, 2023. The company’s gearing improved to 0.30 times as of March 31, 2024, compared to 0.61 times as of March 31, 2023. Additionally, on a standalone basis, KEL’s coverage indicators improved, as reflected by the Interest Coverage Ratio (ICR), which improved to 7.10 times in FY2024 from 6.08 times in FY2023, and the Debt Service Coverage Ratio (DSCR), which stood at 5.46 times in FY2024 compared to 5.02 times in FY2023.
Acuite believes that, going forward, the financial risk profile of the group will continue to remain healthy over the medium term due to healthy profitability and the absence of debt-funded capex.
Orderbook position
The group has an unexecuted order book position of around Rs. 488.81 Cr. as on date, of which Rs. 446.11 Cr. pertains to KEL. The group’s order book position remains moderate, providing revenue visibility for the near to medium term. Further, the order book includes an order that KEL has recently been awarded — an export order from Jessa for the supply of rotary dryers to be installed at OCP Morocco, the largest producer of rock phosphate. This is the single largest order ever awarded to KEL. The value of the order is around $15 million (i.e., Rs. 126 Cr.) and is expected to be completed in 12-15 months. Further, to support the improving order book position, KEL has acquired a factory in Ambernath, Mumbai, for Rs. 22 Cr. on January 14, 2025, and is also in the process of expanding the production facilities of MEEPL, which is expected to be completed by March 2025.
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| Working capital intensive nature of operations
The working capital-intensive nature of the group’s operations is marked by high Gross Current Assets (GCA) of 326 days as of March 31, 2024, primarily due to unbilled revenue of Rs. 132.22 Cr. as of March 31, 2024. The inventory days stood at 45 days, and the debtor’s days stood at 87 days in FY2024.
Further, on a standalone basis, KEL’s working capital operations remained intensive marked by high Gross Current Assets (GCA) of 308 days as of March 31, 2024, compared to 294 days as of March 31, 2023 on account of unbilled revenue of Rs. 115.72 Cr. as of March 31, 2024. KEL’s inventory days stood at 32 days in FY2024, compared to 56 days in FY2023, and the debtor’s collection period stood at 77 days in FY2024, compared to 74 days in FY2023.
Acuité believes that the working capital operations of the group will remain intensive, as evidenced by its debtor levels. Due to the time taken to execute the orders, the operating cycle takes between 2 to 6 months, resulting in a large working capital requirement and staggered deliverables.
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