­Long track record in civil construction with GoK as the major stakeholder
ULCCS was formed in 1925, undertakes civil construction work in Infrastructure development in Kerala and is involved in construction of roads, bridges, buildings and allied infrastructure. Government of Kerala has increased its share holding by additional 10 percent in ULCCS in FY2024. Currently, major shareholder of the Society is Government of Kerala which owns 84.7 per cent of the issued shares and the rest are held by the members of the society. Major clients of the Society include National Highways Department for Highway projects, Public Works Department of Govt. of Kerala for State Road Development, Central Ministries such as Ministry of Panchayat Raj for rural roads under Pradhan Mantri Gram Sadak Yojana (PMGSY), several state government ministries such as Local Self Government, Co-operation, Tourism etc., and a host of reputed private enterprises.

Preferential treatment from Government of Kerala:
The Kerala government provides certain types of support and preferences to labour contract societies. This includes direct financial support as share capital contribution, loan or subsidy, concessions and preferences while awarding public works tenders. Further, in cases when the lowest tender is from a Private Contractor, Labour Contract Cooperative Society will be awarded the work at up to 10 per cent above the lowest tender rates and over and above this, cooperative societies will be exempted from payment of Security Deposit and Earnest Money Deposit. They also benefit from advance payment of up to 20per cent of the cost of work depending on the projects. Acuite believe that the referential status from the Government of Kerala will support the ULCCS over the medium term.

Stable operating performance:
ULCCS registered revenue of Rs.1992.35 Cr. in FY2025 (Prov.) against Rs.2011.42 Cr. registered in FY2024. The marginal decline in revenue was due to slower execution. During 9MFY2026, ULCCS registered revenue of ~Rs.1658 Cr. and is expected to close the year in the range of Rs.2500-2600 Cr, primarily supported by an unexecuted order book of Rs. 5235 Cr. The operating profit margins have improved to 22.52 percent in FY2025 (Prov.) from 20.37 percent in FY2024. The improvement in operating profit is on account of execution of works which yielded better margins and lower subcontracting expenses. However, benefits accruing from this collective labour are largely divided among the worker members of the Society, resulting in thin PAT margins in the range of 0.18-0.25 percent over the past 3-4 years.
Acuite expects the revenue of ULCCS to show a steady improvement owing to the presence of strong order book.

Access to funding from quasi government bodies and public in form of Fixed deposits:
The Society receives large amounts of funding in form of fixed deposits and project support fund from Kerala government. As on March 31, 2025 (Prov.) ULCCS has FD’s of Rs.2500.64 Cr. from Primary Agriculture credit cooperative societies (PACS), which is regulated as per the byelaws of the Co-operative Societies Department of Government of Kerala. ULCCS is, therefore, able to access funds at competitive rates in the form of fixed deposits from Service Co-operative banks and deposits from general public, which are usually lower than the bank borrowing rates. 

Below-average financial risk profile:
Financial risk profile of ULCCS is below average marked by its leveraged capital structure and weak coverage indicators. The net worth of the society stood at Rs.683.94 Cr. as on March 31, 2025 (Prov.) against Rs.642.40 Cr. as on March 31, 2024. Improvement in net worth is mainly due to additions in the depreciation fund reserves during the year. The leverage structure of the society is marked by high gearing and high total outside liabilities to tangible net worth (TOL/TNW) at 6.38 times and 7.36 times respectively, as on March 31, 2025 (Prov.) against 6.34 times and 7.42 times respectively as on March 31, 2024. Marginal deterioration in leverage indicators is due to increase in overall debt levels to Rs.4360.91 Cr. (Comprising long-term loans of Rs.527.25 Cr, deposits from members of society of Rs.2500.61 Cr, short-term debt of Rs.1216.88 Cr. and current maturities of long-term debt of Rs.116.14 Cr.) as on March 31, 2025 from Rs.4070.37 Cr. as on March 31, 2024. The debt protection metrics are weak with interest coverage ratio and debt service coverage ratio at 1.09 times and 0.40 times as on March 31, 2025 (Prov.) respectively. Despite a increase in total debt, debt to EBITDA improved marginally to 9.59 times as on March 31, 2025 (Prov.) compared to 9.85 times as on March 31, 2024, due to increase in operating profit. DSCR is low primarily due to the high portion of short term deposits collected by ULCCS from general public. As per discussions with the management, the interest accrued and 90 per cent of the principle amount had been reinvested by the depositors in the past few years, further to this, the FDs have increased over time providing low cost funding for the operations. As a cooperative society, ULCCS distributes the profits to its member labourers in the form of bonuses every year and maintains minimal operating margins. 
Acuité believes that financial risk profile of ULCCS will remain below average with presence of large amounts of deposits from public.
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Working capital intensive nature of operations:
The society 's operations are working capital intensive in nature as reflected by its Gross Current Asset (GCA) days of 740 days during FY2025 (Prov.) compared to 685 days in FY2024. The stretch in GCA days is due to high debtor and inventory days given the nature of its operations. The GCA underpins the high inventory levels of 220 days and high debtor days of 175 days during FY2025(Prov.). The high inventory levels are on account of high amount of work in progress. Additionally, the high proportion of unbilled revenue in form of other currents assets has further elongated the GCA days in FY2025 (Prov.). Acuité believes that the working capital operations of the company will remain intense on account high inventory levels and debtor days.

Dependence on labour - intensive execution and cost pressures:
ULCCS remains exposed to execution risks inherent in labour-intensive EPC operations, given its cooperative structure with large employee base. ULCCS's cost profile is vulnerable to fluctuations in labour costs, wage revisions and productivity variations, which may exert pressure on operating margins, particularly in fixed price contracts. The society's dependence on timely mobilization of manpower for multiple concurrent projects can also affect execution efficiency, potentially leading to time and cost overruns.