Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 23.00 Crs. of USK Construction Company DP (erstwhile Udaya Shetty)
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (08 Jul 2020) |
Present | ||
Fund Based | 7.00 | 9.00 | Long Term |
BWR B
/Stable Downgraded (ISSUER NOT COOPERATING) |
BWR BB -
/Stable Upgrade |
(0.00) | (4.00) | ||||
Non Fund Based | 10.50 | 14.00 | Long Term |
BWR B
/Stable Downgraded (ISSUER NOT COOPERATING) |
BWR BB -
/Stable Upgrade |
Grand Total | 17.50 | 23.00 | (Rupees Twenty Three Crores Only) |
BWR believes that USK Construction Company DP (erstwhile Udaya Shetty ) 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 DRIVERSCredit Strengths:
The managing partner of the firm Mr. Udaya Shetty has about one decade of experience in undertaking construction contracts for public works departments at Karnataka, Established relations with the public works departments, and has the order book position of Rs. 88.11 Crs as a direct contract, and Rs. 301.60 Crs as sub contracts.
The Firm is located in Udupi cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost-effective.
Despite the decreased revenue, the Profit of the firm increased to Rs. 5.79 Crs in FY20 as against Rs. 2.59 Crs due to decrease in operating expenses, NPM & OPM increased to 5.82% & 9.55% for FY20.
Credit Risks:
Financial risk profile is low with decreased revenue of Rs. 99.45 Crs in FY20 as against Rs. 127.57 Crs in FY19. Low capital structure, Partner’s Capital, gearing, interest service coverage ratio, and debt service coverage ratio were around Rs. 8.00 Crs, Rs. 2.30 times, 3.87 times and 2.07 times respectively as on 31st March 2020.
Firm: The firm was established on 21st March 2017, and is in business for only 4 years to date.
Entry barriers in the industry are low on account of limited capital and technology requirements and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.
Tender based nature of Operations also working capital intensive nature of operations; Withdrawal of capital by the partners for any personal contingency would adversely affect the capital structure of the firm.
As it is a firm, a standalone approach has been adopted and BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
BWR has essentially relied upon the audited financial statements of USK Construction Company DP (erstwhile Udaya Shetty) of FY18, FY19, & FY20, provisional financials of FY21, and projected financial statements of FY21, FY22, publicly available information and information/clarifications provided by the entity’s management.
The ability of the company to increase revenues, improve its profitability margins, strengthen its credit risk profile and manage its working capital efficiently would remain the key rating sensitivities.
Positive:
Negative:
The current ratio was adequate at 1.68 times as on 31st Mar 2020. The firm's net cash accruals are Rs. 8.00 crore for FY20. While working capital facilities were utilized 95% over the last year, which gives an adequate cushion on its liquidity.
ABOUT THE ENTITYKey Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 99.45 | 127.59 |
EBITDA | Rs.Crs. | 9.50 | 5.97 |
PAT | Rs.Crs. | 5.79 | 2.59 |
Tangible Net Worth | Rs.Crs. | 8.00 | 1.63 |
Total Debt/Tangible Net Worth | Times | 2.30 | 8.20 |
Current Ratio | Times | 1.68 | 1.01 |
Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 9.00 |
BWR BB-/Stable
(Upgrade) |
08Jul2020 |
BWR B/Stable
(Downgraded (Issuer Not Cooperating)) |
11Feb2019 |
BWR BB -/Stable
(Downgrade) |
NA |
NA
|
FB SubLimit | LT | (4.00) |
BWR BB-/Stable
(Upgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
Non Fund Based | LT | 14.00 |
BWR BB-/Stable
(Upgrade) |
08Jul2020 |
BWR B/Stable
(Downgraded (Issuer Not Cooperating)) |
NA |
NA
|
NA |
NA
|
Grand Total | 23.00 | (Rupees Twenty Three 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 CriteriaAnalytical Contacts | |
---|---|
Kovvuru Yeshwanth Kumar Reddy Rating Analyst kykumar.r@brickworkratings.com |
Nagaraj K Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@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 | Open Cash Credit / Cash Credit (Hypothecation/Pledge)Sanctioned | 7.00 | _ | 7.00 | ||
Sub-Limit (Sublimit ODBD under OCC) Sanctioned | (4.00) | |||||
2 | GECLSanctioned | 1.68 | _ | 1.68 | ||
3 | Covid -19 Emergency Line CreditSanctioned | 0.32 | _ | 0.32 | ||
4 | Bank GuaranteeSanctioned | 14.00 | _ | 14.00 | ||
Total | 23.00 | 0.00 | 23.00 | |||
TOTAL (Rupees Twenty Three Crores Only) |
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About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
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