Lokesh Machines' Credit Rating Downgraded Amid US Sanctions Impact
Acuite Ratings & Research Limited has downgraded Lokesh Machines Limited's (LML) credit ratings due to its inclusion in the US Treasury's OFAC sanctions list. Long-term rating lowered to 'ACUITE BBB-' from 'ACUITE BBB', and short-term rating to 'ACUITE A3' from 'ACUITE A3+' on bank facilities of Rs. 208.42 crore. The downgrade reflects deteriorating operating performance since Q3 FY2025, with disrupted supply chains and reduced production. LML's operating income decreased by 22.22% in FY2025 compared to FY2024, with EBITDA and PAT margins also declining. The company has an unexecuted order book of Rs. 116 Cr as of October 16th, 2025, and is working to address the sanctions issue.
*this image is generated using AI for illustrative purposes only.
Lokesh Machines Limited (LML), a prominent player in the machine tools industry, has faced a significant setback as Acuite Ratings & Research Limited downgraded its credit ratings. This development comes in the wake of the company's inclusion in the US Treasury's Office of Foreign Assets Control (OFAC) sanctions list, which has disrupted its supply chain and impacted production.
Credit Rating Downgrade
Acuite Ratings has lowered LML's long-term rating from 'ACUITE BBB' to 'ACUITE BBB-' and its short-term rating from 'ACUITE A3+' to 'ACUITE A3' on bank facilities totaling Rs. 208.42 crore. The outlook has been revised to 'Stable,' and the ratings have been removed from 'Under Watch with Negative Implications.'
Key Factors Behind the Downgrade
The downgrade reflects a deterioration in LML's operating performance, which began in Q3 FY2025 and continued into H1 FY2026. The primary reasons for this decline are:
- Disruption in the supply of electronic components from a key supplier
- Adverse impact on production
- Decline in scale of operations
Financial Performance
The impact of these challenges is evident in LML's financial performance:
| Metric | FY2025 | FY2024 | Change |
|---|---|---|---|
| Operating Income | 228.32 | 293.54 | -22.22% |
| EBITDA Margin | 12.51% | 13.88% | -1.37% |
| PAT Margin | 0.24% | 4.72% | -4.48% |
The company's H1 FY2026 operating revenue moderated to Rs. 98.48 Cr, compared to Rs. 137.84 Cr in H1 FY2025.
Current Status and Outlook
As of October 16th, 2025, LML has an unexecuted order book position of Rs. 116 Cr. The company has initiated steps to address the sanctions issue and anticipates a favorable outcome in the near term. However, Acuite notes that the scale of operations is likely to remain subdued in the short term as proceedings are ongoing.
Company Background
Lokesh Machines Limited, founded in 1983, is a well-established player in the machine tools industry with over four decades of experience. The company specializes in designing and manufacturing custom-built special purpose machines, CNC machines, and components for various industries, including automotive and defense.
Strengths and Challenges
Despite the current setbacks, LML maintains some positive aspects:
- Healthy financial risk profile with a net worth of Rs. 212.36 Cr as of March 31, 2025
- Low gearing at 0.63 times
- Long-standing presence and expertise in the machine tools segment
However, the company faces challenges such as:
- Working capital intensive operations with high inventory days
- Intense competition in the industry
- Concentration risk in the auto segment
As the situation evolves, stakeholders will be closely monitoring LML's efforts to resolve the sanctions issue and its impact on the company's financial and operational performance in the coming quarters.
Historical Stock Returns for Lokesh Machines
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +2.38% | -1.27% | +6.34% | -19.53% | -35.14% | +350.27% |
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