Credit Rating- Revision

Date: October 09, 2026 Press Release HBL Engineering Limited October 09, 2026 Name of the Facilities/Instruments Amount (₹ crore) Rating2 Rating Action Regulator1 CARE AA-; Upgraded from CARE A+; Long-term bank facilities RBI 149.00 Stable Positive Long-term bank facilities RBI - - Withdrawn 846.00 Short-term bank facilities RBI CARE A1+ Reaffirmed (Enhanced from 646.00) Details of instruments/facilities in Annexure-1. Rationale and key rating drivers The upgrade factors in significant transformation in HBL Engineering Limited's (HBL) business profile in the last few years, with the company's revenue mix gradually shifting from the traditional batteries business towards the higher-growth railway electronics segment. This transition supported a substantial increase in scale of operations, driven primarily by successful execution of orders relating to indigenous Kavach automatic train protection system for Indian Railways. The railway electronics segment has emerged as a key growth driver for HBL, benefiting from the company's established technological capabilities and approved vendor status for Kavach deployment. The company is expected to continue benefitting from the sizeable market opportunity presented by large-scale rollout of Kavach across the Indian railway network. As of July 2026, Kavach had been installed on over 6,000 locomotives, while installation was underway on another ~7,300 locomotives. Trackside implementation has been taken up across over 21,800 route kilometres, indicating substantial headroom for future order inflows. The opportunity is supported by favourable industry dynamics, given the limited number of vendors approved by the Research Designs and Standards Organisation (RDSO) for supply and installation of Kavach systems, creating significant entry barriers and enhancing revenue visibility for established players such as HBL. Against this backdrop, HBL reported a considerable improvement in its operational and financial performance in FY26, with revenue growing by ~68% over FY25 and profitability remaining healthy. Growth was primarily driven by execution of the Chittaranjan Locomotive Works (CLW) order for supply of Kavach Version 4.0 systems, following receipt of approval from RDSO, and higher contributions from exports and defence businesses. The positive momentum continued in Q1FY27, reflecting sustained demand across the company's key business segments. Ratings continue to draw strength from extensive experience of promoters and management team, HBL's diversified product portfolio in battery segment comprising largely in-house developed technologies, and its diversified revenue profile spanning telecom, railways, data centres, defence, and aviation sectors. The company also benefits from a healthy financial risk profile characterised by negligible dependence on external debt funding, strong debt protection metrics, strategic investments in associate entities and favourable industry prospects. HBL maintains a strong liquidity profile, supported by sizeable, unencumbered cash and liquid investments, healthy operating cash flow generation and low debt repayment obligations. The company is expected to maintain positive momentum business scale and improve its operational and financial performance in coming years backed by healthy demand for defence and industrial batteries segments. However, ratings are partially offset by exposure to raw material price volatility, working capital intensive operations, an elongated operating cycle, foreign exchange fluctuation risks, environmental risks and competition across its operating segments. Ratings also factor in the company's ongoing capital expenditure plans towards establishment of a lithium-ion battery division, infrastructure for electronic fuses, charging hubs and IT infrastructure, apart from regular maintenance and growth capex. These investments are expected to be largely funded through internal accruals and are therefore not envisaged to materially impact the company's credit profile. 1SEBI: Securities and Exchange Board of India; RBI: Reserve Bank of India; MCA: Ministry of Corporate Affairs; IRDAI: Insurance Regulatory and Development Authority of India; PFRDA: Pension Fund Regulatory and Development Authority. 2Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE Ratings Limited’s publications. 1 CARE Ratings Ltd. Press Release CARE Ratings Limited (CareEdge Ratings) has withdrawn the rating assigned to the bank facilities (term loans) of HBL with immediate effect, as the company has repaid this term loan in full and there is no amount outstanding under the facility as on date. Rating sensitivities: Factors likely to lead to rating actions Positive factors • Improved total operating income (TOI) over and above ₹4500 crore and its profit before interest, lease rentals, depreciation, and taxation (PBILDT) margin at current levels, while maintaining a healthy financial risk profile. Negative factors • Large debt-funded capex or acquisition impacting credit metrics, specifically debt to earnings before interest, taxation, depreciation, and amortisation (EBIDTA) exceeding 1x. • Significant decline in TOI and profitability on a sustained basis. Analytical approach: Consolidated Consolidated financials of HBL and its subsidiaries have been considered owing to financial and operational linkages between parent and its subsidiaries. These entities are commonly referred to HBL in the analysis. Consolidated entities are listed under Annexure-5. Outlook: Stable The ‘Stable’ outlook on HBL’s ratings reflects CareEdge Ratings’ expectation to maintain its healthy financial risk profile amidst steady cash flow generation and absence of large debt-funded capital expenditure (capex). Detailed description of key rating drivers Key strengths Change in business profile marked by increasing contribution from railway electronics segment HBL's business profile has undergone a gradual shift from being predominantly battery-focused to a more diversified engineering and technology company with an increasing contribution from the railway electronics segment. While industrial, defence and aviation batteries continue to provide a stable revenue base, the company has reduced its dependence on the telecom battery segment and increased its focus on higher-value businesses such as railway electronics, Ni-Cd batteries, defence batteries and exports. The railway electronics segment has emerged as a key growth driver, supported by large-scale execution of Kavach (TCAS) projects and a healthy order book comprising Kavach and Train Management System (TMS) projects. Going forward, growth prospects remain favourable, driven by the ongoing nationwide rollout of Kavach, increasing investments in railway safety and signalling infrastructure, and the expansion of Vande Bharat trains. Limited number of vendors approved by the Research Designs and Standards Organisation (RDSO) for Kavach implementation provides strong entry barriers and enhances revenue visibility for established players such as HBL. Diversification through electronic fuzes, defence electronics and lithium-ion battery solutions is expected to support the company's long-term growth prospects. Significant improvement in scale and profitability driven by strong execution of railway electronics orders In FY26, HBL reported a significant improvement in its operating performance, with TOI increasing by ~68% y-o-y to ₹3,326.41 crore from ₹1,977.63 crore in FY25. The growth was driven primarily by strong execution of railway electronics orders, particularly under the Kavach programme, which led to a sharp increase in Electronics segment revenue to ₹1,626.25 crore in FY26 from ₹298.38 crore in FY25. At the same time, the batteries business continued to provide a stable revenue base, with the Industrial Batteries segment maintaining revenue of over ₹1,400 crore and reporting healthy profitability. Growth in nick [Showing first 8,000 characters — download PDF for full document]