Hindustan Construction Company has successfully completed its rights issue with an exceptional response from investors, achieving a subscription rate of 200%. The infrastructure company's capital raising initiative has garnered significant market interest, reflecting strong investor confidence in its growth prospects.

Rights Issue Performance Overview

The rights issue demonstrated remarkable market appeal, with investor applications substantially exceeding the company's expectations. The overwhelming response indicates robust market sentiment towards the infrastructure sector and Hindustan Construction Company's strategic positioning.

Management Commentary and Strategic Impact

Commenting on the successful completion of the rights issue, Mr. Arjun Dhawan, Vice Chairman Managing Director, expressed gratitude to shareholders for their continued support. He emphasized that the response to the rights issue strengthens the company's balance sheet while supporting ongoing deleveraging and long-term growth strategy.

The company has retained proceeds equivalent to the issue size, with the balance amount to be refunded to investors in accordance with applicable regulations. Equity shares will be allotted to eligible applicants based on the allotment criteria finalized in consultation with the designated stock exchange.

Equity Structure Transformation

The successful completion of this rights issue will result in a significant expansion of the company's equity base. The substantial increase in share capital is expected to strengthen Hindustan Construction Company's financial foundation and provide additional resources for business operations and growth initiatives.

Market Response and Investor Confidence

The 200% subscription rate reflects strong investor confidence in Hindustan Construction Company's business model and future prospects. The infrastructure sector has been witnessing renewed interest from investors, and this rights issue success demonstrates the market's positive outlook towards established players in the construction and infrastructure development space.

The significant oversubscription also indicates that investors view the company's plans favorably and are willing to participate in its growth journey. This capital infusion is expected to provide Hindustan Construction Company with enhanced financial flexibility to pursue strategic initiatives and strengthen its market position in the infrastructure development sector.

Hindustan Construction Company Limited has received a credit rating reaffirmation from ICRA Limited, maintaining its long-term rating at ICRA JBB (Stable) for Non-Convertible Debentures worth ₹823.90 crores. The rating agency issued its assessment on December 18, 2025, highlighting both strengths and challenges in the company's financial profile.

Rating Reaffirmation Details

ICRA Limited's rating committee took the following action for the company's debt instruments:

The rating remains valid throughout the life of the programme until withdrawn, though ICRA reserves the right to review and revise the rating based on new information or changing circumstances.

Key Rating Drivers

Credit Strengths

The rating reaffirmation reflects several positive factors supporting the company's credit profile:

Adequate Order Book Position: The company maintains a robust order book of ₹13,152 crores as of September 30, 2025, representing an order book to construction income ratio of 2.8 times. This provides healthy near-term revenue visibility and demonstrates the company's ability to secure new contracts.

Diversified Portfolio: The outstanding order book is well-diversified across multiple dimensions:

• Geographic spread: Pan-India presence with international operations in Bhutan
• Sector diversity: Transportation (63% of unexecuted order book), hydropower, water, and nuclear projects
• Client diversification: Top three clients contribute 39% and top five orders constitute 48% of unexecuted order book

Operational Improvements: ICRA noted improvement in operating margins from the core EPC business in FY2025, driven by price escalation clauses in most contracts and reduced sub-contracting dependence.

Credit Challenges

Despite the positive factors, the rating faces several constraints:

High Leverage: The company's Total Outside Liabilities to Tangible Net Worth ratio stood at 3.4 times as of September 30, 2025, compared to 3.5 times in FY2025. While expected to improve over the medium term, leverage remains elevated in the near term.

Working Capital Pressures: Receivables and work-in-progress inventory remain elevated due to ongoing arbitration and claims pending with clients. The company manages working capital requirements partly through extended credit periods from suppliers and mobilisation advances from clients.

Execution Risks: Approximately 15% of the order book as of September 30, 2025, is in preliminary or early stages of execution with less than 25% progress, presenting moderate execution risks.

Financial Performance Indicators

The company's recent financial metrics demonstrate mixed performance:

Liquidity Position and Future Outlook

ICRA characterises the company's liquidity position as "stretched" but notes several mitigating factors. The company maintains unencumbered cash and bank balance of ₹473.20 crores as of September 30, 2025, and is expected to sustain cash and liquid investments of over ₹200 crores to support working capital requirements.

The rating agency draws comfort from available cushions including unutilised arbitration/court bank guarantees of ₹723 crores as of September 2025. During the eight months of FY2026, lenders permitted the company to utilise ₹135 crores of court bank guarantees to access arbitration money for debt prepayment.

Rights Issue and Debt Management: The company is in the process of completing a rights issue expected to raise ₹1,000 crores (gross proceeds) by the end of December 2025. These funds are crucial for debt repayments scheduled for March 2026.

Rating Sensitivities

ICRA outlined specific factors that could influence future rating actions:

Positive Factors: Sustained improvement in cash flow from operations while maintaining margins, along with successful realisation from non-core asset sales and awards, could lead to rating upgrades.

Negative Factors: Execution slowdown, sustained earnings pressure, delays in award realisation, or worsening working capital cycles that materially impact liquidity would be credit negative.

The Stable outlook reflects ICRA's opinion that the company will improve its operating performance and benefit from its satisfactory order book position and strong execution capabilities, supported by nearly ten decades of operational experience in the civil construction sector.