Vishnu Prakash R Punglia Limited has received a credit rating downgrade from CARE Ratings Limited, with the rating agency revising its assessment of the company's financial position due to persistent working capital challenges. The downgrade reflects ongoing operational difficulties in the company's water supply project segment, which constitutes a significant portion of its business portfolio.

Rating Revision Details

CARE Ratings has implemented comprehensive changes to VPRPL's credit ratings across its banking facilities. The revision encompasses both long-term and short-term facilities, with the total exposure amounting to ₹960.00 crores.

Key Rating Drivers

The rating revision primarily stems from continued high working capital intensity in the company's operations during H1FY26. CARE Ratings highlighted that the company faces challenges with elongated collection periods and inventory holding, resulting from delays in work certification and payment releases from water supply projects where VPRPL maintains sizeable exposure.

The rating agency also noted promoters' significant stake dilution and pledge of shareholding during the current year. However, these funds have been invested as interest-free unsecured loans to support company operations, external debt reduction, and liquidity management.

Financial Performance Overview

VPRPL's operational scale shows mixed trends, with total operating income declining to ₹1,237.42 crores in FY25 from ₹1,473.87 crores in the previous year. The company's H1FY26 performance shows revenue of ₹572.09 crores, with expectations of achieving approximately ₹1,200.00 crores for the full year FY26.

Order Book and Business Diversification

Despite the rating challenges, VPRPL maintains a robust order book of ₹5,000.00 crores as of September 30, 2025, providing revenue visibility of approximately 4x FY25 total operating income. The order book demonstrates geographical diversification across 11 states, with major concentrations in Rajasthan (48%), Uttarakhand (16%), and Uttar Pradesh (9%).

Water supply projects continue to dominate the portfolio at 57% of the outstanding order book, while the company focuses on sectoral diversification into railway (33%) and road & civil segments (10%). The majority of orders originate from government entities, maintaining low counterparty credit risk.

Working Capital Challenges

The construction segment's inherent working capital intensity has been exacerbated by specific operational challenges. Gross current assets days and working capital cycle have extended to 510 days and 323 days respectively in FY25, compared to 204 days and 104 days in FY23. This elongation primarily results from delays in work certification and payment releases, particularly from Jal Jeevan Mission projects.

Outlook and Rating Sensitivities

CARE Ratings has revised the outlook from Negative to Stable, reflecting expectations of sustained operations backed by the healthy order book and continued promoter support. The stable outlook factors in the rating agency's expectation that promoters will continue supporting business operations until working capital intensity eases.

Positive rating factors include potential reduction in working capital intensity through completion of work certifications and realization of long-pending receivables, improvement in debt coverage ratios, and substantial growth in operating income with sustained profit margins above 12%.

Vishnu Prakash R Punglia Limited has announced strong operational performance with a robust order book of approximately ₹5,000 crore, demonstrating the company's solid market position in the infrastructure sector. The engineering, contracting and design company reported achieving a turnover of approximately ₹570 crore in the first half of the financial year, with expectations of improved performance in the second half.

Diversified Order Book Portfolio

The company's order book reflects a well-balanced portfolio across multiple infrastructure segments, reducing dependency on any single sector and ensuring operational stability.

Water supply projects constitute the largest segment at 57.27% of the total order book, followed by railway projects at 32.53%, while road and civil projects account for 10.20% of the portfolio.

Railway Project Termination Update

The company received a termination notice from North Western Railway regarding the Jaipur-Sawai Madhopur Doubling Project contract. In response, Vishnu Prakash R Punglia Limited has filed a writ petition before the High Court of Rajasthan, Jaipur, seeking revocation of the termination.

The company maintains that it has been fully committed to project execution and attributes delays to pending inputs, approvals, and infrastructure support from the department. The matter is currently sub judice, with the company expressing optimism for a favorable outcome.

Financial Impact Assessment

The terminated project represents an insignificant portion of the company's overall order book at just over 3%. Management expects no significant adverse impact on the company's financial position, operational performance, or execution pipeline due to this termination.

Strategic Focus Areas

The management has outlined key focus areas for continued growth and value creation:

• Timely execution of existing projects
• Operational efficiency improvements
• Maintaining financial discipline
• Sustainable value creation for stakeholders

The company continues actively bidding for new projects aligned with its growth objectives and remains confident in its long-term strategy and execution capabilities. With strong revenue visibility from the diversified order book, Vishnu Prakash R Punglia Limited is positioned to deliver consistent performance across multiple infrastructure segments.