­­Acuité has considered the consolidated financial statements of MEIL factoring in its subsidiaries and associates in India and overseas, owing to strong business and financial linkages and substantial equity commitments by MEIL to its group companies.

­Established market position with healthy execution track record 
MEIL is the second-largest EPC player in terms of revenue and the largest EPC player in irrigation and drinking water works in India. The company has been dealing in execution of diverse projects for nearly two decades spread across sectors like irrigation, drinking water, roads, power generation & transmission, hydrocarbons, buildings, railways, airports and others. Nearly 80% of the contracts are related to government and balance through private partners. The projects are spreads across nearly 25 countries across the globe and 24 states at domestic level. The group has a historical track record of executing large and complex projects. While majority of the contracts are at domestic level, the company has also expanded its horizon to some international locations such as Tanzania, Jordan, Rwanda, Kuwait and Mongaoia. 

Robust & diversified orderbook  
On a standalone basis, the company had an outstanding orderbook of Rs 2,28,134 Cr. as on November 30, 2024, which translates to 7.15 times of FY24 revenue. The company received an order inflow of Rs 21,592 Cr. till December 2025. While traditionally MEIL was majorly involved into irrigation and drinking water projects (52% of total orderbook), it has now diversified its operations to various other segments like hydrocarbons (11%), power (13%), roads (18%) and others which has opened avenues for revenue growth. Further, the work orders are spread across both domestic (~96.8%) and international levels (~3.2%).
Acuite believes that growth in the orderbook and timely execution of existing order is expected to provide healthy revenue visibility over the medium term.

Healthy growth in the operating performance supported by incomes from diversified streams
At a consolidated level, the company recorded a strong revenue growth from Rs 31,766.45 Cr. in FY23 to Rs 42,442.06 Cr. in FY24. This is majorly attributable to the growth in the EPC business of MEIL (Standalone) which grew from Rs 25,837.68 Cr. in FY23 to Rs 31,904.29 Cr. in FY24. Moreover, on a consolidated basis, the EBITDA margins of the company are seen declining on an y-o-y basis from 15.80% in FY23 to 12.86% in FY24 due to the downtrend in the EPC business with rising raw material prices and  stabilisation of some of new segments such as road, drilling, etc. However, going forward the group is expected to generate margins in the 14-15% over the medium term driven by growth in segments such as power transmission business, hydrocarbon, electric bus business. 
Acuite believes that improving revenue booking at healthy operating margins shall be a key rating sensitivity.

Moderate financial risk profile supported by healthy cash accruals
The financial risk profile of MEIL group remains moderate supported by a strong networth of Rs 24,676.91 Cr. as on March 31, 2024 which is expected to increase to ~Rs 27,000 Cr. as on March 31, 2025. The increase in debt in FY24 is on account of capex spends in the newer segments due to which the gearing ratio increased to 0.42 times in FY24 as against 0.25 times in FY23. Also, the Debt/EBITDA increased to 1.56 times in FY24 as against 1.02 times in FY23. Further, considering the group's capex plans over the medium term, while the debt profile shall be elevated it is expected to remain comfortable with gearing of 0.7-0.9 times and Debt/ EBITDA of 2.0-3.0 times. This shall be supported by strong cash generating ability of the group in the range of ~Rs 4,300 -4,400 Cr. on an annual basis.

­Significant capex commitments warranting equity infusions by MEIL
The group has an overall capex plan of Rs 15,000 - 17,000 Cr. for next couple of years spread majorly across the road projects, solar projects and the transmission assets. This capex spend shall be supported through a mix of equity contributions by MEIL (in the range of Rs 8,000 -9000 Cr), debt tie ups and internal cash accruals. Further, the group is also exploring of monetising its road projects which will provide them with additional liquidity. MEIL' s investments in its subsidiaries and group companies is ~ Rs 5,423.96 Cr. as on March 31, 2024 which forms nearly ~22 % of the consolidated networth.
While MEIL has had a healthy track record of executing irrigation and drinking water projects, however, these newer segments do not form part of its core capabilities. Hence, adequate fund availability, cost overuns, timely completion of capex and materialisation of the same shall be a key monitorable.

­Working Capital Intensive Operations
The group has high working capital requirements driven primarily by the EPC business. The GCA days stood high at 251 days as on March 31, 2024 as against 248 days as on March 31, 2023. This is due to elevated other current assets which includes advances to customers/ sub-contractors, retention money, unbilled revenue and unencumbered cash balances. The debtors primarily include the project receivables which are government dues expected to be settled over the medium term.  The payment to creditors is linked to the receipt of revenues from debtors. Therefore, the creditors days remained high at 119 days in FY24, reduced from 130 days in FY23. Going ahead, the management’s intention to focus on collection and judicious bidding for new projects with lower working capital intensity should keep the overall working capital requirements under control. With this, GCAs are expected to decline gradually over the medium term.

Susceptibility to intense competition and cyclicality in the construction industry
MEIL is exposed to cyclicality inherent in the EPC industry and volatility in profitability amid intense competition in the EPC segment.  With the increasing focus of the central government on the infrastructure sector, MEIL is expected to reap benefits over the medium term. However, most of its projects are tender-based and face intense competition, which may require it to bid aggressively to get contracts. Also, given the cyclicality inherent in the EPC industry, the ability to maintain profitability margin through operating efficiency becomes critical.