RATING RATIONALE
20Dec2021
Shyam Indus Power Solutions Pvt. Ltd.
Brickwork Ratings assigns rating for the Bank Loan Facilities of Rs. 135 Crs. of Shyam Indus Power Solutions Pvt. Ltd.
Particulars| Facilities** | Amount(Rs.Crs.) | Tenure | Rating# | |
|---|---|---|---|---|
| Fund Based | 40.00 | Long Term |
BWR BBB -
/Stable Assignment |
|
| Non Fund Based | 95.00 | Long Term |
BWR BBB -
/Stable Assignment |
|
| Grand Total | 135.00 | (Rupees One Hundred Thirty Five Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK
RATING ACTION / OUTLOOK
The ratings assigned to the bank loan facilities of Shyam Indus Power Solutions Pvt Ltd (SIPS or the company) factors in past experience of the promoters, its established track record of operations as EPC contractors, and robust order book position. While operating revenues declined in FY21 due to covid related disruptions, the same is expected to improve to Rs.260 crs in FY22, on the back of an order book of Rs.600 crs, with an expectation of booking operating profit to the tune of Rs. 20 crs . The company has already booked operating revenues of Rs.155 crs in 8MFY22 on a provisional basis. The company builds up its order book position by bidding for tenders floated by the Indian Railway electrification and civil works departments, besides other government entities, and also bids for these tenders through wholly owned subsidiaries and joint-ventures(JVs). The company's analysed tangible net worth (TNW) and TOL/TNW ratio improved from Rs.149.17 crs and 1.57x respectively in FY21 to Rs.169 crs and 1.36x respectively in FY21. Working capital cycle of the company remains elevated due to higher retention money of the past years classified as receivables and un-billed work classified as inventory and works-in-progress.
RATING OUTLOOK
BWR believes Shyam Indus Power Solutions Pvt Ltd’s business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.
Credit Strengths:
-
Experienced Management: :
Major Satyapal Sindhu, engineer with a degree in management, is the chief promoter and Managing Director of the company with over 15 years of business experience. The company's operations are supported by well qualified and experienced professionals who look after critical functions in finance, technology and operations.
-
Established track record of the company: :
The company has been in this business since 2004 and has executed a large number of EPC contracts in the railways and power sector pan India. The company has executed projects floated by reputed entities such as various state discoms, warehousing, various divisions of the Indian Railways, Central Organisation for Railway Electrification, RVNL amongst others.
-
Robust Order book position: :
The company has pending work orders worth Rs.531 crs as on 31 Oct 2021, that are to be executed within the next 18 months. Besides these, work orders worth Rs.250 crs are at various stages of tendering and in the pipeline.
Existing work orders are from various divisions of Railways, Jaipur Development Authority, Himachal Pradesh Power Transmission Company Limited, Power Grid Corporation, Central Organisation for Railway Electrification, Tata Power Delhi Distribution Ltd., DMRC, TPCODL and TPSODL. Work orders are fairly well distributed across various locations of the country. Existing works are at various stages of execution and are expected to be completed within the next 12 to 18 months.
-
Decline in Revenues and Operating margins: :
Revenues of the company declined from Rs.480 crs in FY19 to Rs.379 crs in FY20 and Rs.223 crs in FY21 primarily due to covid led disruptions owing to which worksite inspection could not be conducted by the concerned government officials. Operating margins of the company declined from a peak of 7.97% in FY19 to 6.09% in FY20 and recovered to 6.68% in FY21. However, going forward, the revenues and operating margins are expected to improve on the back of a robust order book position and reduction in non-essential operating expenses.
-
Elongated working capital cycle: :
Working capital cycle of the company remains elevated at 149 days and 219 days during FY20 and FY21 respectively owing to rise in inventory holdings from 102 days in FY20 to 229 days in FY21 and rise in receivable days from 164 days in FY20 to 184 days in FY21. Rise in inventory holding is on account of classification of completed and un-billed work under inventory and WIP, whereas rise in receivables days is owing to a substantial chunk of past year’s retention money being classified under receivables. The company has been obtaining higher credit periods with paybles holding periods increasing from 116 days in FY20 to 196 days in FY21 to support growing working capital requirements.
-
Risks inherent in tender based business and intense competition :
Businesses based on tenders floated by government departments, generally suffer from the risks of delayed payments. Also, since the contracts are awarded to lowest bidders, profitability margins are generally thin and face the risk of cost and time overruns due to non-cooperation by principal. Such businesses are also characterised by the presence of a large number of small and medium players creating intense competition for others.
For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the Rating Criteria detailed below
RATING SENSITIVITIES
Upward: Substantial growth in scale of revenues, profit margins, debt coverage ratios and improvement in liquidity indicators would support upward rating action.
Downward: Decline in revenues, profit margins, debt coverage ratios and liquidity indicators would attract downward rating action.
Liquidity in the company is adequate as indicated by NWC, cash accruals and cash and bank balances. NWC of the company is Rs.192.80 crs as on 31 March 2021 and the company has generated cash accruals of Rs.15.67 crs during FY21 against debt obligations of Rs.7.03 crs. The company has cash and bank balances of Rs.14.30 crs as on 31 March 2021. The company is expected to generate adequate cash accruals of Rs.9.33 crs and Rs.10.20 crs during FY22 and FY23 respectively to meet debt obligations of Rs.8.95 crs and Rs.6.77 crs respectively and NWC of the company is expected to remain comfortable at Rs.234 crs during FY22 and Rs.238 crs during FY23.
Shyam Indus Power Solutions Pvt Ltd., incorporated in June 2004, with its current registered office at 129, Transport Centre, Rohtak Road, Punjabi Bagh, New Delhi, is engaged in executing Engineering, Construction and Procurement (EPC) works related to Railways and Power Distribution and Transmission and other services. Mr. Satya Pal Sindhu is the chief promoter of the business and Mrs. Saroj Sindhu and Mr. Saurabh Sindhu are the other director in the company. The company is an ISO 9001:2008 certified company for its quality management.
SIPS is also operating as a Power Distribution Franchise through its step down subsidiaries - Riverside Utilities Pvt Ltd and Seaside Utilities Pvt Ltd - operating in Odisha. Further, two entities, Paramitra Smart Infra Pvt Ltd., and Paramitra Smartinfra SNA Pvt Ltd are incorporated under SIPS and undertakes real estate projects in Bhubaneshwar, Odisha.
| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 223.16 | 379.42 |
| EBITDA | Rs.Crs. | 14.91 | 23.12 |
| PAT | Rs.Crs. | 13.27 | -12.02 |
| Tangible Net Worth | Rs.Crs. | 266.88 | 242.27 |
| Total Debt/Tangible Net Worth | Times | 0.47 | 0.49 |
| Current Ratio | Times | 1.97 | 1.68 |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
NIL
ANY OTHER INFORMATIONNIL
RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 40.00 |
BWR BBB-/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Non Fund Based | LT | 95.00 |
BWR BBB-/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Grand Total | 135.00 | (Rupees One Hundred Thirty Five 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.
Hyperlink/Reference to applicable Criteria- Approach to Financial Ratios
- Engineering Procurement and Construction (EPC) Companies
- General Criteria
- Short Term Debt
- Consolidation of Companies
| Analytical Contacts | |
|---|---|
|
Saurabh Agarwal Assistant Manager - Ratings Board : +91 11 2341 2232 saurabh.a@brickworkratings.com |
Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | IndusInd Bank | Cash CreditSanctioned | 40.00 | _ | 40.00 | |
| 2 | IndusInd Bank | Bank GuaranteeSanctioned | 95.00 | _ | 95.00 | |
| Total | 135.00 | 0.00 | 135.00 | |||
| TOTAL (Rupees One Hundred Thirty Five Crores Only) | ||||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| N.A | 0 |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| SIPS Utilities Pvt Ltd | 51.04 | Full | Subsidiary |
| Shyam Indus Solar Power Pvt Ltd | 99.99 | Full | Subsidiary |
| Paramitra Smartinfra SNA Private Limited | 100 | Full | Subsidiary |
| Paramitra Smart Infra Private Limited | 85 | Full | Subsidiary |
| Paramitra Hotels N Resorts Private Limited | 95.99 | Full | Subsidiary |
| Cobra Instalaciones Y Serv Sa - Sips (Jv) | 97.5 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Shyam Indus Power Solutions JV Shreeji | 75 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Sips - Cec (Jv Core 173-A) | 99 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS-MCPL-Cec (Jv Core 164) | 98 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS-Umesh Bros and Shree Ji | 50 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Sips-Umesh Bros 136 & 137 | 80 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| ARSS Infrastructure | 49 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS - CEC (JV CORE 200) | 49 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Sips-Ubc-Cec (JV Core 203) | 29 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS-SIL JV CORE 231 | 75 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
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