Hindustan Construction Company Limited — Credit Ratings, 20-12-2024: Credit Rating

Hindustan Construction Company Limited (HCC) reported consolidated financial metrics for FY2024, recording operating income of ₹5,016 crore, a decrease from ₹5,201 crore in the previous year. The company reported a net profit of ₹144 crore, reflecting a year-over-year decrease of over 33%. This translates to an Earnings Per Share (EPS) of approximately ₹0.54, compared to ₹0.81 in FY2023.

HCC's operational efficiency has seen improvement, with the operating margin stabilizing at 12.5% for FY2024, recovering from 12.6% in the prior year, aided by improved project execution and reduced subcontracting reliance. The total outside liabilities to tangible net worth ratio stood at 7.2 times, an indication of high leverage, although a drop to 5.1 times as of September 2024 suggests gradual improvement.

The company's cash flow position remains under pressure due to high working capital needs and a significant amount of receivables linked to ongoing arbitration claims. However, HCC is actively monetizing non-core assets and has already realized ₹395 crore in FY2024 to enhance liquidity.

HCC's order book remains robust at ₹9,773 crore, presenting solid revenue visibility. The outlook remains cautiously optimistic given ongoing efforts in operational improvements and capital infusion strategies, albeit significant risks from market competitiveness and input cost pressures remain.

Based on these factors, maintaining a hold stance appears prudent, balancing the potential for recovery against persistent high debt levels and execution risks.