CRISIL has revised its rating outlook on the long-term bank facilities of Technofab Engineering (TEL) to 'Negative' from 'Stable', while reaffirming the rating at 'A-'; the rating on the company's short-term facilities has been reaffirmed at 'A2+'.

The outlook revision reflects CRISIL's expectation of continued pressure on TEL's business risk profile leading to a decline in the company's operating margin, and its expected stretched liquidity on account of large working capital requirements. The company's operating margin declined to 7 per cent in 2013-14 (refers to financial year, April 1 to March 31) and for the nine months through December 2014 from 14% over the earlier four years, limiting its cash accruals. TEL's operating performance has been impacted by the challenging business environment resulting in sluggish demand and hence lower pace of order execution.

CRISIL believes that TEL's operating margin will remain under pressure in the medium term on account of intense competition in the engineering, procurement, and construction (EPC) business, resulting in moderation in its cash accruals.

CRISIL believes that TEL's liquidity position will remain stretched over the medium term on account of its large working capital requirements and volatility in its operating profitability. CRISIL believes that TEL will maintain its market position in the EPC business, supported by established relationships with customers and diversified customer base. The ratings may be downgraded in case of further deterioration in the company's liquidity with continued stretch in its working capital cycle, or decline in its operating profitability, or significant delays in order execution adversely impacting its cash accruals. Conversely, the outlook may be revised to 'Stable' if TEL efficiently manages its working capital requirements, or reports sustained healthy operating profitability and cash accruals, leading to an improvement in its liquidity.

Shares of the company gained Rs 10.8, or 6.79%, to settle  at  Rs 169.80.  The total volume of shares traded  was  41 at  the BSE (Thursday).