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The rating remains valid throughout the life of the programme until withdrawn, though ICRA reserves the right to review and revise the rating based on new information or changing circumstances.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

Hindustan Construction Company has announced a major contract win from the Northeast Frontier Railway (NFR), securing a project worth ₹901 crores for tunnel construction on the Tupul-Imphal new Broad Gauge railway line. The company will hold a majority 65% stake in the HCC-VCCL Joint Venture, establishing its dominant role in the project execution.

Project Specifications

The contract involves the construction of New Tunnel-28, a 3.5-kilometer main tunnel on the strategically important Tupul-Imphal railway line. This project forms part of the ongoing expansion and modernization of India's railway network, particularly in the northeastern region.

Comprehensive Scope of Work

The project encompasses comprehensive design, engineering, and commissioning services beyond the tunnel construction. The scope includes design and proof-checking of Broad-Gauge ballast-less track, followed by supply, installation, testing, and commissioning of all related systems and structures required for railway operations.

Strategic Significance

This contract win adds substantial value to Hindustan Construction Company's order book and reinforces the company's position as a key player in India's railway infrastructure development. The project also covers design, supply, erection, and commissioning of tunnel ventilation systems, along with complete electro-mechanical works and construction of approach roads necessary for integration with surrounding infrastructure.

With nearly 100 years of engineering heritage, Hindustan Construction Company has executed a majority of India's landmark infrastructure projects, including over 402 km of complex tunneling work. The 65% majority stake ensures that HCC will have significant control over project execution and will capture the majority of revenues generated from this strategically important northeastern railway infrastructure contract.