USK - Udayshivakumar

📊 NSE: USK 🏢 Construction 📅 Last Updated: 12/14/2025 14:38

💰 Financial Performance

Revenue Growth by Segment

Total revenue for FY23 reached INR 286.96 Cr, representing a significant growth of 54.5% compared to INR 185.70 Cr in FY22. For the quarter ended September 30, 2025 (Q2 FY26), revenue was INR 57.71 Cr, a marginal decrease of 0.78% from the previous quarter's INR 58.16 Cr. Revenue is derived from civil construction (roads, bridges, canals) and Ready-Mix Concrete (RMC) manufacturing, though specific segment percentage splits are not disclosed.

Geographic Revenue Split

The company is primarily based in Davangere, Karnataka, with operations focused on projects for the Karnataka State Government and local civic bodies. While a specific percentage split is not disclosed, the historical focus indicates a high concentration in the Karnataka region.

Profitability Margins

PAT margins declined from 6.66% in FY22 to 5.56% in FY23. Operating margins are sensitive to raw material costs, with a drop below 5-7% triggering negative rating actions. The company aims to sustain margins above 10% for a rating upgrade.

EBITDA Margin

EBITDA for Q2 FY26 stood at INR 5.96 Cr, showing a massive recovery of 104.56% compared to an EBITDA loss of INR 5.70 Cr in the preceding quarter. This volatility is linked to the cyclical nature of construction and supply of materials/services which decreased by 9.48% to INR 49.75 Cr in the same period.

Capital Expenditure

The company maintains a comfortable capital structure with a gearing of 1.0x as of March 31, 2025. Management has indicated an absence of significant debt-funded capital expenditure in the near term to allow gearing to improve through internal accruals.

Credit Rating & Borrowing

CRISIL assigned a 'Negative' outlook in late 2025 due to profitability deterioration and working capital stretch. Bank limit utilization averaged 53% to 63% over 12-month periods. Term debt obligations are estimated between INR 10-14 Cr over the medium term.

⚙️ Operational Drivers

Raw Materials

Key raw materials include cement, aggregates, bitumen, and steel for civil construction and RMC production. Specific percentage of total cost for each material is not disclosed, but raw material price volatility is cited as a primary risk to the 7-10% operating margin target.

Import Sources

Not disclosed; typically sourced domestically within India/Karnataka for infrastructure projects.

Key Suppliers

Not disclosed, though the promoter maintains established relationships with a network of suppliers developed over 20 years.

Capacity Expansion

Operational capacity is reflected in the order book of INR 1,475 Cr as of October 31, 2025, which provides revenue visibility for the next 12-24 months. This is a slight decrease from the INR 1,598 Cr order book reported in October 2024.

Raw Material Costs

Supply of materials and services for Q2 FY26 was INR 49.75 Cr. Fluctuations in these costs directly impact the ability to maintain the 7% operating margin threshold required by credit agencies.

Manufacturing Efficiency

Operating efficiency is characterized as 'sound' by credit ratings, marked by a healthy Return on Capital Employed (RoCE) driven by economies of scale in road and canal projects.

📈 Strategic Growth

Expected Growth Rate

30-40%

Growth Strategy

Growth is targeted through the execution of the INR 1,475 Cr outstanding order book over the next 24 months. The strategy involves aggressive bidding for government tenders in road development, smart city projects, and irrigation/canal works while maintaining operating efficiency to protect margins.

Products & Services

Civil construction services (roads, bridges, canals, irrigation works) and manufactured Ready-Mix Concrete (RMC).

Brand Portfolio

Udayshivakumar Infra Limited (USK).

New Products/Services

Recent focus includes Smart City Road Development and specialized Canal Constructions, though specific revenue contribution percentages for these sub-segments are not provided.

Market Expansion

The company is focused on strengthening its position within Karnataka and government civic bodies, leveraging its status as a listed entity since 2023 to access broader project scales.

🌍 External Factors

Industry Trends

The construction industry is currently characterized by intense competition and cyclicality. There is a trend toward larger-scale integrated infrastructure projects (Smart Cities), and USK is positioning itself to bid for these higher-value contracts.

Competitive Landscape

Intense competition from other civil construction firms leads to aggressive bidding, which is a primary factor restricting operating margins to moderate levels.

Competitive Moat

The company's moat is built on the promoter's 20-year track record and established relationships with government clients. This 'long track record' acts as a pre-qualification barrier for many large-scale government tenders.

Macro Economic Sensitivity

Highly sensitive to government infrastructure spending and budgetary allocations for Karnataka state projects.

Consumer Behavior

Not applicable as the primary customers are government entities.

Geopolitical Risks

Low direct impact as operations are domestic; however, global oil price fluctuations can indirectly affect bitumen and fuel costs for construction machinery.

⚖️ Regulatory & Governance

Industry Regulations

Operations must comply with State and Central Government tender norms, civil engineering standards, and local municipal regulations for RMC manufacturing.

Legal Contingencies

The company declared no significant fraud or transactions violating the Code of Conduct. Statutory auditors issued a Limited Review Report with an unmodified opinion for the period ended September 30, 2025.

⚠️ Risk Analysis

Key Uncertainties

The primary uncertainty is the 'Negative' outlook on credit ratings, which could increase borrowing costs if profitability does not recover above 7%. There is also a risk of margin compression if raw material costs rise by more than 200 bps.

Geographic Concentration Risk

Significant concentration in Karnataka, making the company vulnerable to state-specific political or budgetary shifts.

Third Party Dependencies

100% dependency on government tender awards for revenue pipeline.

Technology Obsolescence Risk

Low risk in civil construction, though adoption of modern RMC technology and efficient project management software is necessary for margin protection.