Dhruv Consultancy Services Limited — Credit Ratings, 13-01-2025: Credit Rating- Revision

Dhruv Consultancy Services Limited's consolidated financials reflect a steady operational performance, with total operating income at ₹81.50 crore, slightly up from ₹81.18 crore year-over-year. The modest growth comes amidst fluctuations in demand for consultancy services in the infrastructure sector, with contributions from expanding order book and successful project completions.

Net profit rose to ₹5.89 crore, translating to an Earnings Per Share (EPS) of approximately ₹1.90, up from ₹4.82 crore previously. Profitability was supported by improved PBILDT margins, rising to 16.98% for FY24 compared to 11.28% for FY23, thanks to higher ticket-size orders and better realisations. However, in H1FY25, the PBILDT margin moderated to 12.79%, signaling potential seasonality in project completions impacting earnings.

Operational costs increased in alignment with growing project engagements, reflected in a rise in the company's working capital requirements, indicated by a collection period elongating to 273 days. This was driven by slower debtor realisations typical of large government contracts with phases of payment tied to project completion milestones.

The balance sheet shows an improved overall gearing ratio of 0.18x as of September 30, 2024, down from 0.31x a year prior, suggesting strengthened financial stability. Following an equity infusion of ₹33.24 crore, liquidity has improved, bolstering cash reserves and enhancing the company’s ability to manage working capital effectively.

Looking forward, Dhruv Consultancy appears poised to focus on strategic expansion and refining operational efficiencies, with a robust order book of ₹303.52 crore providing good revenue visibility. Consequently, based on sustained efforts in liquidity management and operational profitability, stakeholders might consider a buy or hold approach, taking into account potential risks linked to market competitive pressures and project dependency dynamics.