Shares of VA Tech Wabag rose 5% to Rs 342 on the BSE in intraday trade on Tuesday, having climbed as much as 10% in the past two sessions on a steady outlook. Shares of the water supply and management company were trading near the 52-week high of Rs 350.40 on December 3, 2021.

On November 24, rating agency India Ratings and Research (Ind-Ra) affirmed VA Tech Wabag’s long-term issuer rating at “IND A+” with a stable outlook and upgraded its short-term debt rating from “IND A1” to “IND A1+”.

In its rationale, the rating agency said the short-term rating upgrade reflects the likelihood that VA Tech Wabag’s liquidity position will continue to improve in the medium term, supported by a healthy outlook for its profitability and a stable working capital cycle.

With an order backlog of around Rs 9,200 crore as on September 30 2022 (FY22: Rs 9,800 crore), the company has high revenue visibility of around 3x its FY22 annual revenue. The company also has framework contracts worth Rs 1,100 crore.

Operations and maintenance contracts account for about 35% of the order. These contracts tend to last for several years. Engineering, procurement and construction (EPC) order accounted for approximately 2x revenue. Most of VA Tech Wabag’s projects are funded by central government agencies such as Namami Gange Mission, Atal Mission for Rejuvenation and Urban Transformation, and multilateral agencies, reducing the risk of default by any client. Ind-Ra said that between FY18 and FY22, the company’s liquidated damages averaged just 0.2% of its revenue.

Meanwhile, on Friday, November 25, VA Tech Wabag signed an agreement with the Asian Development Bank (ADB) to raise Rs 200 crore through non-convertible debentures (NCDs), with a tenure of 5 years and three months tenure, which was higher than ADB 12-12. Month duration will subscribe. This will be ADB’s first investment in an Indian water sector company. This continues the company’s ongoing debt optimisation efforts through long-term and low-cost funding sources.

VA Tech Wabag said the funds raised through this NCD offering will be used to meet working capital needs and will be within the current borrowing limit so as not to increase the company’s debt level.