Rating Action and Facility Details

CARE Ratings Limited (CareEdge Ratings) upgraded the credit ratings for Investment & Precision Castings Limited's (IPCL) bank facilities on July 09, 2026. The specific rating actions are:

  • Long-term Bank Facilities (Term Loan): ₹23.76 crore (reduced from ₹24.24 crore) upgraded to 'CARE BBB; Stable' from 'CARE BBB-; Stable'
  • Long-term/Short-term Bank Facilities (Cash Credit): ₹57.00 crore upgraded to 'CARE BBB; Stable / CARE A3+' from 'CARE BBB-; Stable / CARE A3'
  • Long-term/Short-term Bank Facilities (BG/LC): ₹14.00 crore (enhanced from ₹7.00 crore) upgraded to 'CARE BBB; Stable / CARE A3+' from 'CARE BBB-; Stable / CARE A3'

Total rated bank facilities amount to ₹94.76 crore.

Rationale for Upgrade

The rating upgrade reflects IPCL's improved operational and financial performance:

Financial Performance (FY26 vs FY25)

  • Total Operating Income (TOI): Increased 14% YoY to ₹189.20 crore (from ₹165.47 crore)
  • PBILDT Margin: Expanded 288 bps to 16.80% (from 13.92%)
  • Profit After Tax (PAT): Increased to ₹11.77 crore (from ₹6.07 crore)
  • Interest Coverage: Improved to 5.04x (from 3.36x)
  • Total Debt/Gross Cash Accruals: Improved to 3.40x (from 4.34x)
  • Tangible Net Worth: Increased to ₹103 crore (from ₹91 crore)
  • Overall Gearing: Remained comfortable at 0.70x (from 0.71x)

Operational Strengths

  • Experienced promoters with five decades of operations in investment castings
  • Established manufacturing facility in Bhavnagar, Gujarat with 3,060 MTPA capacity (including 100 MTPA vacuum casting capacity)
  • Long-standing relationships with major customers including Maruti Suzuki, Mahindra & Mahindra, Tata Motors, and Royal Enfield
  • Gradual diversification of end-user industry exposure (automobile segment reduced to 64% in FY26 from 78% in FY22)

Key Risk Factors

Customer and Industry Concentration

  • Top 5 customers constituted ~50% of TOI in FY26 (47% in FY25)
  • 64% of revenue derived from cyclical automobile industry (66% in FY25)
  • 88% of sales from domestic market, making it vulnerable to domestic auto industry slowdown

Raw Material and Operational Risks

  • Exposure to volatile prices of iron scrap, steel scrap, and ferro alloys
  • ~33% of cost of sales comprises job work charges, indicating high dependence on job work arrangements

Liquidity Position

IPCL's liquidity position is adequate:

  • Cash Flow from Operations: ₹28 crore in FY26 (₹20 crore in FY25), representing 88% of PBILDT
  • Net Cash Accruals: ₹21 crore in FY26, expected ₹23-30 crore from FY27-FY29
  • Unencumbered cash and bank balance: ₹2.22 crore as of March 31, 2026
  • Operating cycle improved to 133 days in FY26 (from 150 days in FY25)
  • Working capital limit utilization remained high at ~90% for 12 months ended April 2026

Rating Sensitivities

Positive Factors

  • Significant reduction in customer and end-user industry concentration
  • TOI exceeding ₹250 crore while maintaining healthy PBILDT margins

Negative Factors

  • TOI declining below ₹150 crore with significant margin moderation
  • Total Debt/PBILDT exceeding 4x on sustained basis
  • Operating cycle elongation beyond 150 days impacting liquidity

Company Background

Investment & Precision Castings Limited (CIN: L27100GJ1975PLC002692) was incorporated in April 1975 and is primarily engaged in manufacturing investment castings for automobile, pumps, defence, aerospace, electrical and instrumentation industries. The company has an installed capacity of 3,060 MTPA at its Bhavnagar, Gujarat plant as of June 30, 2026.