Desco Infratech received an IND BBB- rating with a stable outlook. The company reported a 99.5% revenue jump to ₹118.61 crore in FY26, driven by CGD and power projects. However, liquidity remains stretched, and order book concentration is a concern.

Desco Infratech Gets IND BBB- Rating Amidst Strong Growth and Stretched Liquidity

FY26 Revenue: ₹118.61 crore
FY26 EBITDA: ₹23.57 crore

Reader Takeaway: Strong revenue growth and order book visibility are positives, but stretched liquidity and customer concentration pose risks.

What Just Happened

Desco Infratech Ltd has been assigned a credit rating of IND BBB- with a stable outlook and IND A3 for its banking facilities by India Ratings and Research. This comes as the company reported a significant 99.53% year-on-year increase in revenue for FY26, reaching ₹118.61 crore. EBITDA also saw a substantial rise in absolute terms to ₹23.57 crore.

Why This Matters

The rating acknowledges Desco Infratech's robust growth and strong order book, providing 2.86 times revenue visibility for FY26. However, the 'Stable' outlook is tempered by concerns over stretched liquidity and increasing concentration in its order book, which are key areas for investors to monitor.

The Backstory

Desco Infratech operates in the infrastructure sector, focusing on city gas distribution (CGD) and expanding into power and renewable EPC projects. The company has over three decades of industry experience, leveraging this to diversify its service offerings.

What Changes Now

The credit rating provides a benchmark for the company's creditworthiness. While it supports access to finance, the 'BBB-' rating suggests moderate credit quality. Investors will look for management's strategies to address the identified liquidity and concentration risks, which could impact future performance and borrowing costs.

Risks to Watch

Stretched Liquidity: Average month-end utilization of fund-based limits stood at 89.13% in FY26, with cash and equivalents dropping sharply to ₹0.69 crore. This high utilization could limit operational flexibility.

Concentration Risk: The CGD segment dominates the order book (74%). Furthermore, the top five customers now account for 71% of the order book, a significant increase from 41% in FY25, raising dependence on key clients.

Working Capital: The net working capital cycle has elongated to 77 days from 61 days, primarily due to higher debtor days, tying up operational cash.

Peer Comparison

Information on specific peers and their current ratings or financial metrics is not available in the filing. However, companies in the infrastructure and EPC space often face similar challenges related to project execution, working capital management, and client concentration.

Context Metrics (Time-Bound)

• Revenue Growth: 99.53% YoY in FY26.
• Order Book: ₹339.72 crore as of FY26.
• Revenue Visibility: 2.86x FY26 revenue.
• EBITDA Margin: Moderated to 19.87% in FY26 from 22.45% in FY25.
• Interest Coverage: Improved to 15.35x in FY26 from 11.18x in FY25.
• Net Leverage: Turned positive at 0.57x in FY26 from -1.48x in FY25.
• Liquidity: Fund-based utilization at 89.13%; cash at ₹0.69 crore in FY26.
• Working Capital Cycle: 77 days in FY26 vs. 61 days in FY24.

What to Track Next

Investors should closely monitor Desco Infratech's ability to manage its working capital efficiently, reduce debtor days, and navigate the concentration risks within its order book. Successful execution of projects and improvements in liquidity will be crucial for sustained growth.