SLC PROJECTS PRIVATE LIMITED

Brickwork Ratings has assigned a Long-Term rating of BWR BBB- with a Stable Outlook to the bank loan facilities of Rs. 70.00 Crore for SLC Projects Private Limited (SLCPPL).

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	18.00	Long Term	BWR BBB - /Stable Assignment
Non Fund Based	52.00	Long Term	BWR BBB - /Stable Assignment
Grand Total	70.00	(Rupees Seventy Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
Note: The bank guarantee facilities permit the issuance of instruments with tenors reaching 60 months, well beyond the conventional 12-month boundary. Consequently, a long-term rating scale has been adopted, as short-term ratings are strictly reserved for instruments with a maturity of one year or less. RATING ACTION / OUTLOOK

Brickwork Ratings has assigned a Long-Term rating of BWR BBB- with a Stable Outlook to the bank loan facilities of Rs. 70.00 Crore for SLC Projects Private Limited (SLCPPL).

The rating assignment reflects the company's extensive promoter experience, long track record, and strong management succession; its robust order backlog providing exceptional revenue visibility; a sovereign counterparty profile with minimal default risk ensuring strong payment security; and a healthy financial profile alongside an ongoing balance sheet de-leveraging cycle. The ratings are, however, constrained by severe counterparty, contractual, and geographic concentration risks; intensive working capital requirements; and a fragmented and highly competitive industry governed by tender-driven pricing.

The Stable outlook reflects expectations that SLCPPL will sustain its performance, anchored by a multi-year unexecuted order book and secure payment cycles from sovereign defense counterparties. While mobilizing new portfolios will temporarily expand working capital demands, the company’s conservative capital structure and low financial leverage provide an exceptional buffer to absorb these operational pressures without credit degradation.

KEY RATING DRIVERS

Credit Strengths:

• Extensive Promoter Experience, Long Track Record, and Strong Management Succession :

  SLCPPL benefits significantly from the four-decade industrial background of its founding promoter and Managing Director, Mr. P. Subba Raju (co-promoting alongside Mrs. P. Yasodha, Mr. P. Srinivasa Raju, and Mr. P. Ramana Kumar Raju). Mr. P. Subba Raju has over thirty years of specialized experience in executing heavy civil contract works and defense-related projects. This long-standing tenure has enabled the company to build deep technical competency and maintain established relationships with key sovereign clients and industrial suppliers. Furthermore, management risk is strongly mitigated by a technically qualified second generation of directors who hold advanced Master of Science (MS) degrees in Structural Engineering and Mechanical Engineering. This specialized academic and operational background reduces execution risks across highly technical civil, piling, and industrial asset segments.

• Robust Order Backlog and Exceptional Revenue Visibility :

  As of June 20, 2026, the company possesses an active unexecuted order backlog of Rs. 661.70 Crore. This provides exceptional medium-term operational visibility, translating into an order-book-to-sales multiple of 5.78x relative to its FY2026 revenue base. Consequently, the firm needs to bill-certify only about 21% to 24% of its current active pipeline annually to achieve near-term growth targets. This solid baseline is further reinforced by a substantial lowest-bidder (L1) pipeline totaling Rs. 1,299.79 Crore across highly secure public sector tenders. The formal materialization of these contracts is expected to scale operations drastically while extending geographic diversification into new territories such as Odisha and Chhattisgarh.

• Sovereign Counterparty Profile with Minimal Default Risk :

  The company's client portfolio consists entirely of established central public sector undertakings, premier academic institutions, and strategic military divisions. Key counterparties include the Director General Naval Projects (DGNP), Military Engineer Services (MES), Hindustan Aeronautics Limited (HAL), and NBCC India Ltd. Sourcing contracts exclusively from these high-credit, sovereign-backed government entities practically eliminates private-sector bad debts, counterparty credit risks, and transactional billing shortfalls. This secure composition provides structural protection over the long term, ensuring highly stable and predictable terminal cash flows immediately upon the certification of project milestones. Furthermore, because these institutional clients operate under dedicated central budgetary allocations, the company benefits from strong payment security, which insulates its liquidity profile even during challenging macroeconomic phases.

• Healthy Financial Profile and Ongoing Balance Sheet De-leveraging :

  The company's Total Operating Income expanded by 14.0% in FY2026 to reach Rs. 114.50 Crore, up from Rs. 100.44 Crore in FY2025, driven by accelerated execution milestones for core defense accounts. The operating profit margin (OPBDIT) remained stable at 10.50% in FY2026 (compared to 10.67% in FY2025), yielding absolute OPBDIT values of Rs. 12.02 Crore in FY2026 (Rs. 10.72 Crore in FY2025). This operational stability reflects predictable raw material procurement costs of Rs. 62.60 Crore in FY2026 (Rs. 46.67 Crore in FY2025). Net Profit Margin (NPM) improved steadily to 6.17% in FY2026 (5.38% in FY2025), yielding a Profit After Tax (PAT) of Rs. 7.06 Crore (Rs. 5.40 Crore in FY2025).

  Concurrently, the capital structure strengthened through continuous profit retention, which expanded Tangible Net Worth (TNW) to Rs. 28.43 Crore in FY2026 (Rs. 21.37 Crore in FY2025). Total outstanding debt fell sharply to Rs. 21.55 Crore in FY2026 (Rs. 36.49 Crore in FY2025), primarily due to the repayment of short-term working capital borrowings. As a result, the gearing ratio (Total Debt / TNW) improved significantly to a conservative 0.76x in FY2026 (1.71x in FY2025). Furthermore, the Total Outside Liabilities to Tangible Net Worth (TOL/TNW) ratio exhibited a similar positive trajectory, strengthening to a comfortable 1.07x in FY2026 (2.09x in FY2025), reflecting an overall reduction in total external liabilities and creating substantial unutilized debt capacity to back future projects. 

Credit Risks:

• Severe Counterparty, Contractual, and Geographic Concentration Risks :

  SLCPPL exhibits a high concentration of revenue, with the Director General Naval Project (DGNP), Visakhapatnam, acting as its primary anchor client. DGNP single-handedly contributed 92.99% of total operating income in FY2024, 73.67% in FY2025, and 71.31% in FY2026. This heavy client dependency exposes the firm's billing pipeline and order inflow to potential policy amendments, administrative delays, or sudden budget shifts within a single government department. Furthermore, despite technical asset diversification across structural systems, roadworks, marine stabilization, and electrical installations, physical project execution remains heavily centered within the Visakhapatnam region (primarily the Rambilli defense zone). This sharp geographic focus leaves site operations vulnerable to regional supply-chain shocks, localized labor shortages, or severe coastal weather anomalies (such as cyclonic activity along the eastern coast) that can halt work and trigger project execution delays.

• Working Capital Intensive Operations :

  The company operates in a working capital-intensive segment, though its reliance on fund-based bank limits has decreased over the recent fiscal year. The Gross Current Asset (GCA) days improved to 124 days in FY2026 (compared to 165 days in FY2025), driven by a more efficient asset turnaround. The inventory holding period shortened to 9 days in FY2026 (compared to 17 days in FY2025), reflecting optimized material consumption across active project sites. Similarly, debtor efficiency was enhanced with debtor days declining to 99 days in FY2026 (compared to 115 days in FY2025), as the company accelerated collections and liquidated its outstanding receivables from sovereign defense counterparties. The creditor days stood at 50 days in FY2026 (compared to 65 days in FY2025), matching the faster operational cycle.

• Fragmented and Highly Competitive Industry Governed by Tender-Driven Pricing :

  The infrastructure and heavy civil construction sector operates within an intensely competitive and highly fragmented environment, featuring a dense mix of large pan-India corporations and specialized local contractors. Because the procurement of public-sector and defense engineering contracts is heavily structured around strict competitive bidding processes, tender requirements, and lowest-quoted-bidder (L1) selection criteria, it frequently drives aggressive and thin-margin pricing behaviors among qualified bidders. This competitive intensity places continuous pressure on operating profit margins during the active execution phases of any given project. Additionally, because these complex infrastructure works are long-term contracts spread over multiple fiscal years, any unhedged or unexpected volatility in primary raw material commodity pricing—such as structural steel, concrete, bulk cement, and heavy electrical cabling—leaves project profitability margins highly vulnerable to cost overruns. This risk is further intensified since public-sector defense contracts often provide fixed or limited price-escalation clauses, requiring the company to manage procurement efficiency internally to prevent any material erosion of its baseline profitability. 

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive Sensitivity Factors

• Operational Scaling & Territory Diversification: Sustained growth in Total Operating Income (TOI) above Rs. 150.00 Crore, driven by the timely physical execution and milestone billing of the company's ongoing unexecuted order book of Rs. 661.70 Crore.
• Profitability Accretion & Financial Discipline: Maintenance of stable operating profit margins (EBITDA) above 11.0%, alongside a disciplined capital structure characterized by keeping the gearing ratio below 0.50x and the TOL/TNW ratio below 1.10x through continuous profit retention.

Negative Sensitivity Factors

• Execution Delays & Revenue Contraction: A significant decline in operating performance with revenues falling below Rs. 110.00 Crore or EBITDA margins weakening below 7.50% on a sustained basis, primarily due to prolonged physical handover delays in expiring legacy contracts or slow site mobilization across newly won multi-year portfolios.
• Leverage & Liquidity Stress: Deterioration of the financial risk profile characterized by the gearing ratio exceeding 1.50x, the TOL/TNW ratio rising above 2.00x, or the Interest Coverage Ratio falling below 2.0x, resulting from aggressive debt-funded capital expenditures or a severe stretch in receivables beyond 120 days.

LIQUIDITY INDICATORS - Adequate

SLCPPL maintains an adequate liquidity profile, supported by robust internal cash generation and extensive fund-based banking headroom. The company generated an improved Net Cash Accrual (NCA) of Rs. 8.09 Crore in FY2026 (up from Rs. 6.38 Crore in FY2025), providing a strong cushion against upcoming fixed debt repayment obligations where the Current Portion of Long-Term Debt (CPLTD) is projected to hover between a manageable Rs. 1.15 Crore and Rs. 1.18 Crore over the near term. This financial flexibility is underscored by unencumbered cash balances of Rs. 0.20 Crore and a significantly enhanced current ratio of 2.34 times as on March 31, 2026 (compared to 1.50 times as on March 31, 2025). Furthermore, the company maintains a substantial buffer runway with its combined overdraft facilities, which recorded a low average monthly utilization of just 46.83% over the 13 months ending June 2026. This leaves an unutilized buffer of over Rs. 8.24 crore to comfortably absorb the upfront site mobilization and working capital requirements of its newly won multi-year portfolios. While a conservative capital structure and clean banking track record reinforce the liquidity floor, the timely certification and realization of receivables from sovereign defense authorities remain critical monitorables.

ABOUT THE ENTITY

Originally established as a family partnership firm in 1966 under the name Sree Venkateswara Constructions, the entity was reconstituted as Sree Lalitha Constructions in 1976 and subsequently incorporated as SLC Projects Private Limited (SLCPPL) in 2006. Headquartered in Visakhapatnam, Andhra Pradesh, and managed by Managing Director Mr. P. Subba Raju, the company specializes in turnkey civil engineering and infrastructure construction. SLCPPL executes diversified projects including heavy industrial structures, multi-storied buildings, pile foundations, and low-tension/high-tension (LT/HT) electrical electrification works. The company has completed over 90 projects, with a strong operational focus on government defense agencies and public sector undertakings. It maintains an "SS" Class enlistment with the Military Engineer Services (MES) and holds specialized contractor registrations with the Defence Research and Development Organisation (DRDO), Director General Naval Project (DGNP), and Visakhapatnam Port Trust. Its track record includes the execution of high-magnitude infrastructure such as technical accommodations, military aircraft hangars, and heavy civil works for industrial clients like Rashtriya Ispat Nigam Limited (RINL).

ESG Profile

The company’s ESG profile is assessed as Evolving, reflecting developing systems and processes aligned with its scale and regulatory requirements. While statutory compliance is maintained, formal ESG disclosures and structured sustainability frameworks are still at a nascent stage. Currently, ESG factors do not materially constrain the credit profile but remain an area for progressive strengthening.

Environmental: Environmental risks arise mainly from construction activities, including resource consumption and construction and demolition (C&D) waste generation. The company complies with applicable environmental regulations and contractual norms, with no reported material violations. However, quantified disclosures on energy usage, water consumption, emissions, and carbon reduction strategies remain limited.

Social: Social exposure is linked to the labour-intensive nature of EPC operations, particularly workforce health and safety. The company adheres to statutory labour laws and maintains site-level supervision to support safe execution practices. Formal reporting on safety metrics, employee diversity, and structured community engagement initiatives is limited.

Governance: Governance is promoter-led, with active oversight of operations, finance, and risk management by experienced management. Financial reporting and statutory compliance are in line with regulatory requirements for a private limited company. However, board independence, formal ESG oversight mechanisms, and structured sustainability reporting frameworks are still evolving.

Overall, the ESG framework is at a developmental stage. Continued strengthening of formal policies, internal controls, and transparent reporting mechanisms would enhance long-term sustainability alignment and improve the assessment of ESG-related credit risk.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 23 - 24 (Audited)	FY 24 - 25 (Audited)	FY 25 - 26 (Provisional)
Operating Revenue	Rs.Crs.	102.05	100.44	114.50
EBITDA	Rs.Crs.	11.26	10.72	12.02
PAT	Rs.Crs.	4.29	5.40	7.06
Tangible Net Worth	Rs.Crs.	15.97	21.37	28.43
Total Debt / Tangible Net Worth	Times	2.42	1.71	0.76
Current Ratio	Times	1.38	1.50	2.34

KEY COVENANTS OF THE FACILITY RATED

The terms of the sanction include standard covenants typically required for such facilities. 

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating  (2026)			2025		2024		2023
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	18.00	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	LT	52.00	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		70.00	(Rupees Seventy Crores Only)

Hyperlink/Reference to applicable Criteria

• General Criteria
• Approach to Financial Ratios
• Short Term Debt
• Engineering Procurement and Construction

Analytical Contacts
Shreekant Digambar Kadere Senior Rating Analyst shreekant.dk@brickworkratings.com	Niraj Kumar Rathi Senior Director Ratings niraj.r@brickworkratings.com
Media Contact | media@brickworkratings.com	Client Support | clientsupport@brickworkratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	Axis Bank Ltd.	Bank Guarantee - Sanctioned	13.50	_	13.50	Simple##
2	Axis Bank Ltd.	Overdraft - Sanctioned	1.50	_	1.50	Simple##
3	Bank of India	Overdraft - Sanctioned	14.00	_	14.00	Simple##
4	Bank of India	Bank Guarantee - Sanctioned	20.00	_	20.00	Simple##
5	Un tied portion	Bank Guarantee - Proposed	18.50	_	18.50	Simple##
6	Un tied portion	Overdraft - Proposed	2.50	_	2.50	Simple##
Total			70.00	0.00	70.00
TOTAL (Rupees Seventy Crores Only)

## BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.