CREDIT RISK UPDATESCapital Goods

Bharat Heavy Electricals Ltd. sees a credit rating action

Bharat Heavy Electricals Ltd.BHEL

TL;DR

The weighted average cost of debt and the exact portion of borrowings subject to floating interest rates are not separately disclosed in BHEL’s available financial filings or recent credit rating communications following the upgrade by India Ratings to 'IND AA'. While the precise repricing sensitivity and cost of debt breakdown are not publicly reported, underlying debt figures and rating developments provide context on the company's financial position: Total and Net Debt: Total consolidated debt stood at Rs 8,186.9 Crores as of Q4 FY26 (reported by rating agencies as approximately INR 79.8 billion at fiscal year-end 2026), down from Rs 10,969.3 Crores in Q3 FY26.

Following the upgrade by India Ratings, what is the current weighted average cost of debt for BHEL’s outstanding long-term and short-term borrowings, and what portion of this debt is subject to floating interest rates that could see immediate repricing benefits?

The weighted average cost of debt and the exact portion of borrowings subject to floating interest rates are not separately disclosed in BHEL’s available financial filings or recent credit rating communications following the upgrade by India Ratings to 'IND AA' [1].

Available Debt and Rating Context

While the precise repricing sensitivity and cost of debt breakdown are not publicly reported, underlying debt figures and rating developments provide context on the company's financial position:

  • Total and Net Debt: Total consolidated debt stood at Rs 8,186.9 Crores as of Q4 FY26 [2] (reported by rating agencies as approximately INR 79.8 billion at fiscal year-end 2026 [3]), down from Rs 10,969.3 Crores in Q3 FY26 [2]. Net debt stood at Rs 6,751.5 Crores after accounting for cash and equivalents of Rs 1,435.5 Crores [4].
  • Credit Rating Upgrades: India Ratings upgraded BHEL’s long-term bank loan facilities to 'IND AA' [1], aligning with similar upgrades by CARE Ratings (to CARE AA with a Stable outlook) [5] and ICRA [6]. Rating agencies note that these upgrades reflect a strengthened financial risk profile, improved interest coverage (reaching 4.22x in FY26), and enhanced borrowing flexibility [7], which typically facilitates more favorable terms on both fixed and floating credit facilities.

The rating rationale typically highlights improvements in liquidity or working capital; based on the latest quarterly filings, what is the current status of BHEL's 'Trade Receivables' and 'Working Capital Cycle' (in days), and how do these metrics compare to the levels that previously constrained the credit rating?

As of the latest reported quarterly filings (Q4 FY26), BHEL's consolidated Trade Receivables stood at Rs 6,796.3 Crores [8], with Receivable Days at 66.00 days [9]. The net working capital cycle (derived as inventory days plus receivable days minus payable days) stood at 81.20 days [10]. Specific historical working capital thresholds or constraints from earlier rating rationales are not detailed in the provided credit rating disclosure text [11].

Working Capital and Liquidity Metrics (FY26 Consolidated)

  • Notes: † Q1 FY26 trade receivables figure sourced from latest reported fields [8]; net working capital cycle derived as (Inventory Days + Receivable Days - Payable Days).*

Analytical Context

  • Credit Rating Status: India Ratings & Research upgraded BHEL's long-term credit rating to IND AA from IND AA-, revising the outlook to Stable, while reaffirming the short-term rating at IND A1+ [11].
  • Receivables Trajectory: After peaking at 82.50 days in Q2 FY26 [9], receivable days compressed back to 66.00 days by Q4 FY26 [9], aligning closely with the opening levels of the fiscal year.
  • Disclosure Limit: While rating upgrades typically reflect improving financial flexibility and liquidity management, the exact historical quantitative thresholds that previously constrained the rating are not explicitly disclosed in the provided rating filing text [11].*
MetricQ1 FY26Q2 FY26Q3 FY26Q4 FY26Source
Trade Receivables (Rs Cr)5,884.4†6,969.2 [8]6,969.2 [8]6,796.3 [8][8]
Receivable Days65.20 days [9]82.50 days [9]79.20 days [9]66.00 days [9][9]
Inventory Days152.60 days [10]171.70 days [10]161.20 days [10]170.50 days [10][10]
Payable Days172.40 days [12]164.80 days [12]154.70 days [12]155.30 days [12][12]
Net Working Capital Cycle (days)†45.40 days89.40 days85.70 days81.20 daysDerived

How does BHEL’s current debt-to-equity ratio and interest coverage ratio compare to other major domestic power equipment manufacturers, and does this rating upgrade align with the leverage profiles of peers currently rated in the same category?

BHEL carries noticeably higher financial leverage and lower interest coverage than its major domestic power equipment and electrical manufacturing peers, all of whom operate with zero debt and net cash positions. Despite carrying higher leverage, BHEL's upgrade to an 'AA' rating (by CRISIL and India Ratings in mid-2026) reflects structural improvement in its cash generation, a massive order book, and sharply reduced borrowings rather than peer-equivalent pristine balance sheets [13].

Leverage and Coverage Comparison (Q4 FY26)

  • Notes: Metrics reflect Q4 FY26 reported figures.*

Analytical Takeaways

  • Higher Leverage Profile: While ABB, Hitachi Energy, Siemens, Siemens Energy, and CG Power maintain virtually zero debt with negative net debt-to-equity ratios indicating net cash buffers, BHEL operates with a consolidated gross debt-to-equity of 0.31x and total debt of Rs 8,186.9 Crores as of Q4 FY26 [14].
  • Coverage Disparity: BHEL's TTM interest coverage ratio of 3.75x [17], while improved from historical troughs (1.40x in FY25) [7], trails far behind peers whose TTM coverage ratios range between 50x and 140x due to negligible interest expenses.
  • Rating Alignment Context: The upgrade of BHEL to CRISIL AA and IND AA [13] does not signal balance-sheet parity with its AAA or cash-rich AA peers. Instead, rating agencies have factored in BHEL's robust revenue visibility backed by an order book of Rs 2,39,057 Crores as of March 31, 2026, a shift toward net cash generation of Rs 3,680 Crores (excluding mobilization advances), and lower net-debt-to-EBITDA improving to 2.58x [7]. The rating migration recognizes operational turnaround and state backing rather than strict adherence to the ultra-conservative leverage metrics typical of multinational-backed peers.*
CompanyDebt-to-Equity (Consolidated)Net Debt-to-EquityInterest Coverage (Quarterly)TTM Interest Coverage Ratio
BHEL0.31 x [14]0.26 x [15]10.11 x [16]3.75 x [17]
CG Power (CGPOWER)0.00 x [18]-0.04 x [19]144.18 x [20]139.58 x [21]
Siemens Ltd (SIEMENS)0.00 x [22]-0.12 x [23]38.60 x [24]71.24 x [25]
Siemens Energy India (ENRIN)0.00 x [26]-0.06 x [27]74.55 x [28]50.75 x [29]
Hitachi Energy India (POWERINDIA)0.00 x [28]-0.91 x [30]137.69 x [31]104.36 x [32]
ABB India (ABB)0.00 x [33]-0.20 x [34]133.34 x [35]109.25 x [36]

Sources

  1. [1]BHEL receives upgrade in credit ratings for LT bank facilities — Business Standard, 2026-08-12T00:00:00
  2. [2]Total Debt
  3. [3]Affirms CP at 'IND A1+' — Indiaratings, 2026-08-12T00:00:00
  4. [4]Net Debt
  5. [5]BHEL Credit Rating Upgraded to CARE AA with Stable Outlook by CARE Ratings; A1+ Short-Term Rating Reaffirmed - https://indianmasterminds.com — Indianmasterminds, 2026-06-12T00:00:00
  6. [6]Ratings upgraded to [ICRA]BBB+ (Stable)/[ICRA]A2 — Icra, 2026-03-03T00:00:00
  7. [7]Bharat Heavy Electricals Limited — Careratings, 2026-06-16T00:00:00
  8. [8]Latest Trade Receivables
  9. [9]Receivable Days
  10. [10]Inventory Days
  11. [11]BHEL Credit Rating Upgraded by India Ratings & Research — 2026-08-12T05:45:25.983000, p.2
  12. [12]Payable Days
  13. [13]BHEL: Credit Rating Upgraded to 'IND AA / Stable' by India ... — Investywise, 2026-08-12T00:00:00
  14. [14]Debt Equity Ratio
  15. [15]Net Debt to Equity
  16. [16]Interest Coverage Ratio
  17. [17]TTM Interest Coverage Ratio
  18. [18]Debt Equity Ratio
  19. [19]Net Debt to Equity
  20. [20]Interest Coverage Ratio
  21. [21]TTM Interest Coverage Ratio
  22. [22]Debt Equity Ratio
  23. [23]Net Debt to Equity
  24. [24]Interest Coverage Ratio
  25. [25]TTM Interest Coverage Ratio
  26. [26]Debt Equity Ratio
  27. [27]Net Debt to Equity
  28. [28]Interest Coverage Ratio
  29. [29]TTM Interest Coverage Ratio
  30. [30]Net Debt to Equity
  31. [31]Interest Coverage Ratio
  32. [32]TTM Interest Coverage Ratio
  33. [33]Debt Equity Ratio
  34. [34]Net Debt to Equity
  35. [35]Interest Coverage Ratio
  36. [36]TTM Interest Coverage Ratio

Keep digging

Following the upgrade by India Ratings, what is the current weighted average cost of debt for BHEL’s outstanding long-term and short-term borrowings, and what portion of this debt is subject to floating interest rates that could see immediate repricing benefits?

Ask Copilot
Logo

Unlock financial AI for your firm

Log in