RATING RATIONALE
18Jan2021
Gopal Enterprises
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.7.50 Crs. of Gopal Enterprises
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||||
|---|---|---|---|---|---|---|---|
| Fund Based | |||||||
| Cash Credit Sanctioned | 02.00 | Long Term | BWR | ||||
| Sub Total | 2.00 | ||||||
| Non-Fund Based | |||||||
| Bank Guarantee Sanctioned | 05.50 | Short Term | BWR | ||||
| Sub Total | 5.50 | ||||||
| Grand Total | 7.50 | (Rupees Seven Crores and Fifty lakhs Only) | |||||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK
BWR believes that Gopal Enterprises business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERSBWR has essentially relied upon the audited financial statements of Gopal Enterprises and of FY18,FY19,FY20 and projected financial statements of FY21,FY22, FY23 publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the Experienced and qualified promoter,Moderate Gearing, Moderate Coverage,Moderate Profitability,Moderate Liquidity Healthy Work orders.The rating is constrained to Risk Related to Tender Based Business, Geographical Concentration, Stretched GCA, High client concentration,risk related to Constitution of Business.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Credit Strengths:
- Experienced Management :
Gopal Enterprises is managed by Mr. Rajendra Gupta, Govind Agrahari, Radhika Gupta, Sweta Gupta, Sarla Agrahari .The promoter have experience of more than 2 decades in this business and the partners have rich experience .Gopal Enterprises is engaged in Civil Construction Of Road, Box, Culverts & Transportation of Coal.
- Moderate Gearing :
The gearing in FY20 stand with total debt/ TNW and TOL/TNW standing at 0.39x and 0.84x as compared to 0.50x and 1.00x in FY19. Whereas, the analysed gearing stands at 0.34x in FY20 owing to unsecured loans.
- Moderate Coverage and Moderate liquidity :
Moderate debt protection metrics in FY20 with the ISCR and DSCR standing at standing 2.76x and 2.40x respectively in FY20 however as against ISCR and DSCR at 2.03x and 1.94x in FY21. Moderate liquidity profile with the current ratio standing at 1.91x in FY20 as against 1.90x in FY9.
- Moderate Profitability :
Moderate profitability with NPM and OPM standing at 5.23% and 11.64% in FY20 as against 3.61% and 7.91% in FY19.
- Healthy order flow providing revenue visibility :
The firm has booked only Rs. 5.19crs till November 2020, the firm has work orders of Rs. 26.39crs in hand out of which orders of Rs. 5.00crs have been completed and orders of Rs. 19.43crs to be completed by April 2021 and also one order of Rs. 3.37crs to be completed by March 2021 and hence shows medium term financial visibility due to work orders.
Credit Risks:
- Risk Related to Tender Based Business :
Tender based Business carries Element of Uncertainty in getting/awarding of Contracts & carries Potential Risk in timely implementation of various contracts.
- Geographical Concentration :
The company has geographical concentration as it is based out and mainly operates in Madhya Pradesh this makes it vulnerable to any administrative, political, economical, legal changes in the state.
- Stretched GCA :
Stretched working capital GCA stand at Rs. 10.47crs as against Rs. 9.72crs (107.72 %)in FY20.
- Client Concentration :
There is high client concentration of Gopal Enterprises as total revenue comes from top 2 clients only.
- Constitution of Business :
Constitution of business being Partnership firm there is risk related to Withdrawal of the capital from the firm for any contingency may adversely affect the capital structure.
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
Going forward, the ability of the Entity to accelerate & execute its project timely, increase its profit margins, Compliance of Bank's sanction terms, efficiently manage its working capital and cash flows for timely servicing of interest/debt obligations and strengthening of overall financial risk profile shall be the key rating sensitivities.
Positive: The rating will be upgraded if the company is able to achieve significant growth in revenue and improvement in profitability backed by a favourable industry scenario.
Negative : The rating may be downgraded in case the revenues of the company and profits substantially plunge from the current levels and gearing and debt service metrics deteriorates.
LIQUIDITY INDICATORS -
The average CC utilization for the last 6 stands at 96.26% . The cash and cash equivalents stand at Rs. 0.06 crs in FY20 as compared to Rs. 0.01crs in FY19 and the projections shows cash and cash equivalents at Rs. 0.06crs in FY21. The current ratio stands at 1.91x in FY20 as it improved from 1.90x in FY19 and projections shows improvement at 1.99x in FY21. The Net Cash Accruals to Long term debt stand at 1.66x in FY20 as compared to 0.82x in FY19 and projections shows improvement at 3.20x in FY21. ISCR and DSCR stand at 2.76x & 2.03x respectively in FY20 as compared to 2.03x & 1.94x in FY19 and it shows improvement in FY21 projections at 3.31x and 3.67x respectively.
ABOUT THE ENTITYGopal Enterprises a proprietary concern formed in 1986 and was converted into partnership concern on 1st April 2001 . It is Sigrauli, Madhya Pradesh based firm. It is managed by Mr. Rajendra Gupta, Govind Agrahari, Radhika Gupta, Sweta Gupta, Sarla Agrahari .The partners have experience of more than 2 decades in this field. Gopal Enterprises is engaged in Civil Construction Of Road, Box, Culverts & Transportation of Coal.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 9.22 | 12.34 |
| EBITDA | Rs.Crs. | 1.07 | 0.98 |
| PAT | Rs.Crs. | 0.48 | 0.45 |
| Tangible Net Worth | Rs.Crs. | 6.72 | 6.85 |
| Total Debt/Tangible Net Worth | Times | 0.39 | 0.50 |
| Current Ratio | Times | 1.91 | 1.90 |
NA
NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY ANY OTHER INFORMATION RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended) COMPLEXITY LEVELS OF THE INSTRUMENTS -
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| Analytical Contacts | |
|---|---|
|
Shweta Vinayak Manohar Ratings Analyst Board : +91 22 2831 1426 shweta.m@brickworkratings.com |
Sushil Kumar Chitkara Associate Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 2.00 | _ | 2.00 |
| 2 | Bank GuaranteeSanctioned | _ | 5.50 | 5.50 |
| Total | 2.00 | 5.50 | 7.50 | |
| TOTAL (Rupees Seven Crores and Fifty lakhs Only) | ||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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