Rationale

 The rating reaffirmation considers Federal Engineers’ healthy financial profile, characterised by strong return metrics, capitalisation and debt coverage indicators with sufficient liquid investments owing to healthy cash flow from operations and minimal borrowings. The ratings also draw comfort from the firm’s strong liquidity position, supported by healthy free cash and bank balance of ~Rs. 90 crore as on December 31, 2025. The ratings also continue to factor in the extensive experience of the promoters in the electrical overhead travelling crane manufacturing business and a geographically diversified reputed customer base. ICRA also notes the healthy revenue growth demonstrated by the firm over the last two years. The revenue, although is expected to witness slight degrowth in FY2026 owing to stuck order deliveries to Iraq due to the ongoing West-Asia conflict. The ratings, however, remain constrained by the firm’s modest scale of operations over the years and its susceptibility to the cyclicality in investments in the steel sector, which drives majority of its total revenues. Further, the firm’s profitability is susceptible to raw material price fluctuations, given its long operating cycle and fixed-price contracts. FE also remains susceptible to foreign exchange risk. ICRA also notes the high client concentration risks as majority of the revenues are derived from a small set of customers as of now. Further, ICRA takes note of the ongoing conflict in West-Asia and its potential impact on the execution of pending orders and order inflows from the Middle East. ICRA will continue to monitor the developments on this front and the impact on the credit profile of Federal Engineers. The Stable outlook on the [ICRA]BBB+ rating reflects ICRA’s expectation that the firm will continue to maintain a comfortable financial profile, supported by a healthy liquidity buffer, absence of any aggressive debt-funded capex plans and adequate profitability levels, given the customised product profile.