CRISIL Ratings Limited has revised the outlook on Kirloskar Brothers Limited (KBL) long-term bank facilities to 'Positive' from 'Stable', while reaffirming the rating at 'CRISIL AA'. This upgrade reflects the company's improving financial profile and business prospects.

Key Highlights of the Credit Rating Action

• Long-term rating reaffirmed at 'CRISIL AA' with a revised outlook to 'Positive'
• Short-term rating reaffirmed at 'CRISIL A1+'
• Total bank loan facilities rated: Rs. 1,700 crore

Breakdown of Rated Facilities

The upgrade in outlook signifies CRISIL's expectation of a potential rating upgrade over the medium term, subject to KBL maintaining its improved financial and operational performance.

Company Performance and Outlook

Kirloskar Brothers Limited, a leading manufacturer of pumps and valves, has been focusing on strengthening its market position and operational efficiency. The company's recent financial results and order book suggest a positive trajectory:

• Consolidated revenue for Q2 stood at Rs. 1,028.00 crores
• Order book (excluding small pumps business) at Rs. 2,127.00 crores, showing a 13% year-on-year growth
• Domestic subsidiaries registered 14% year-on-year revenue growth

The company is actively pursuing growth opportunities in various sectors, including power, urbanization, and data centers. KBL's Chairman and Managing Director, Sanjay Kirloskar, expressed confidence in meeting the company's growth targets, citing a strong order book and ongoing plant improvements.

International Business Performance

KBL's international operations have shown mixed results:

• US operations: 21% year-on-year growth (constant currency)
• Thailand: 158% year-on-year growth (constant currency)
• South Africa: 27% growth (constant currency)
• UK operations: Facing temporary softness due to order delays

The international order book has expanded by 25% year-on-year to Rs. 1,289.00 crores, indicating strong global demand for KBL's products and services.

Future Outlook

With a diversified portfolio and focus on operational excellence, Kirloskar Brothers Limited appears well-positioned for sustainable growth. The company is actively pursuing opportunities in emerging sectors such as data centers and is optimistic about the power sector's growth potential, including both thermal and nuclear power stations.

The positive outlook from CRISIL reflects the expectation of continued improvement in KBL's business and financial risk profile. Investors and stakeholders will be keenly watching the company's performance in the coming quarters to see if it can capitalize on its strong order book and translate it into robust financial performance.

Kirloskar Brothers Limited (KBL) has reported a stable performance in the second quarter, with consolidated revenue holding steady at Rs 1,028 crores year-on-year. The company faced headwinds from an extended monsoon and delays in Jal Jeevan Mission fund releases at the state level, despite central fund allocations.

Financial Highlights

• Q2 consolidated revenue: Rs 1,028.00 crores
• H1 revenue: Rs 2,007.00 crores (down 3% year-on-year)
• Q2 EBITDA: Rs 124.00 crores with 12% margins
• Standalone order book (excluding small pumps): Rs 2,127.00 crores (up 13% year-on-year)

Operational Performance

KBL's performance was marked by a mix of challenges and growth across various segments:

• Domestic Market: The company faced temporary setbacks due to an extended monsoon and delays in Jal Jeevan Mission fund releases at the state level.

• International Operations: Showed strong performance with significant growth in key markets:

  • US: 21% growth (constant currency)
  • Thailand: 158% growth (constant currency)
  • South Africa: 27% growth

• Domestic Subsidiaries: Registered 14% revenue growth and 26% PAT improvement year-on-year.

Strategic Developments

1. PetroTurbo Pump Set Order: KBL has secured an order from Indian Oil Corporation Limited (IOCL) for PetroTurbo pump sets, marking its entry into a new product segment dominated by international players.

2. Data Center Focus: The company is actively pursuing opportunities in the growing data center market, particularly in the US, providing fire and cooling systems for these facilities.

3. Service Business Expansion: KBL is working on expanding its service business, especially in the UK and Europe, to offset challenges in certain industrial sectors.

4. AMP8 Program: The company has started receiving orders under the AMP8 program in the UK, which is expected to drive growth in the water infrastructure segment.

Management Commentary

Sanjay Kirloskar, Chairman and Managing Director, expressed confidence in meeting growth aspirations in the second half, citing healthy order inflows and a strong pipeline across segments. The management highlighted urbanization and the power sector as key growth drivers for the company.

Outlook

Despite near-term challenges, KBL's management remains optimistic about the company's growth trajectory. The diversified business model, robust order book, and strategic initiatives in new markets and product segments position the company well for future growth.

Credit Rating Update

CRISIL Ratings Limited has revised its outlook on KBL's long-term bank facilities to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL AA'. The short-term rating has been reaffirmed at 'CRISIL A1+'. This revision reflects the company's improving financial profile and business prospects.

As Kirloskar Brothers navigates through market challenges and capitalizes on emerging opportunities, the company appears poised for growth in the coming quarters, supported by a strong order book and strategic initiatives across various business segments.