RATING RATIONALE

24Aug2021

Agrawal Infrabuild Pvt. Ltd.

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 137.00 Crs. of Agrawal Infrabuild Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (11 Aug 2020)	Present
Fund Based	32.00	35.14	Long Term	BWR BBB- (Stable) Reaffirmed (Removal from INC)	BWR BBB /Stable Upgrade
Non Fund Based	149.00	101.86	Short Term	BWR A3 Reaffirmed (Removal from INC)	BWR A2 Upgrade
Grand Total	181.00	137.00	(Rupees One Hundred Thirty Seven 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

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) upgrades the ratings of Agrawal Infrabuild Pvt Ltd (AIPL or the company), factoring in the company’s increasing scale of operations in FY21 along with its comfortable gearing, profitability and debt coverage metrics. The company has high revenue visibility for FY22 supported by its unexecuted order book position of Rs 504 Crs, largely coming from a high value EPC contract for constructing a six lane highway in the state of Orissa. The ratings also derive comfort from adequate liquidity with the company and long experience of its promoters in executing road construction projects.The ratings are, however, constrained by the delay in its flagship project, susceptibility to risks inherent in tender-based business and project concentration risks as the projected revenues are contingent upon successful execution of a single project, time and cost overrun risks arising from delayed implementation of this project.

Covid Impact:

The company’s operations have been impacted due to nationwide lockdown announced by GoI in March 2020. The company’s first milestone of its flagship project was delayed by ~7 months with Covid-19 pandemic being one of the reasons. However, the operations re-started successfully in May 2020 and the company does not foresee any major project implementation challenges in the medium term. The company has taken a Term Loan of Rs 2 Crs under the Emergency Credit Line Guarantee Scheme (CECL) and Rs 5.64 crs under Guaranteed Emergency Line of Credit (GECL) to support the liquidity in the short term.

OUTLOOK: STABLE

BWR believes the business risk profile of AIPL. will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term. The rating outlook may be revised to Positive in case revenues and the profit show a sustained improvement. The rating outlook may be revised to Negative if revenues go down, and profit margins show lower-than-expected figures.

KEY RATING DRIVERS

Credit Strengths:

Healthy order book position :
The company has an unexecuted order book of ~Rs 504 Crs as of June 30, 2021 which is to be executed in next 12 months. The company has entered into a LOA, and subsequently an EPC sub-contract, with Punj Lloyd Ltd. (PLL) for constructing the six lanes of NH5 in the state of Orissa for the National Highway Authority of India (NHAI). The company has completed Rs 308 Cr worth of work on this project out of the total project cost of Rs 767 Crs. Other than this, the company has got a project worth Rs 80.19 Crs, with unexecuted order book position of Rs 44.19 crore for upgradation of Mangla Bhaisajhar Road in Chhattisgarh state.
Increasing scale of operations :
The scale of operations of the company witnessed an increasing trend as the total operating income of the company increased at a healthy growth rate of ~206% on a year on year basis to Rs.213.60 crore in FY21 (as compared to Rs.69.73 crore in FY20) due to higher orders executed during the period. The company reported total operating income of Rs.70.55 crore in Q1FY22 (Prov.).
Comfortable financial risk profile :
The company’s profitability stood comfortable, though operating profit margins (OPM) deteriorated from 28.77% in FY20 to 17.58% in FY21 mainly due to execution of higher orders having relatively lower margins. The net profit margin (NPM) of the company also stood comfortable marked by 5.60% in FY20 (PY: 6.06% in FY20). The same, however, slightly deteriorated due to lower operating profits as well as due to higher interest expenses incurred. The capital structure of the company also stood comfortable marked by gearing of 0.58x for FY21. The same, however, marginally deteriorated due to additional term loan taken for the purchase of hydraulic excavators, cranes and generators in line with higher order execution. The total debt of the company stood at Rs. 54.58 Crs for FY21 (Rs 36.81 Crs for FY20) against a large net worth of Rs 93.73 Crs for FY21 (PY: Rs. 81.75 Crs). The company has robust debt coverage metrics with an ISCR of 4.69x and DSCR of 2.46x for FY21 compared with that of 3.98x and 2.39x respectively for FY20. It has a maturing debt of Rs 13.68 Crs in FY22 against the projected internal accruals of Rs ~30 Crs in FY22, although the accruals are subject to timely achievement of project milestones. The company’s TOL/TNW ratio of 1.03x (FY21) and 0.90x (FY20) depicts low leverage despite the fact that the company gets a good amount of mobilisation advances for executing the projects.
Established track record of operations :
The company has operated in the construction business since 2005. It is a Class I contractor with the PWD department of Chhattisgarh and has executed a range of projects for the government agencies such as NHAI, Chhattisgarh Road Development Corp. Ltd., Bilaspur Municipal Corp. etc. in the past. The promoters are seasoned businessmen with interests in diverse businesses through different associate companies.

Credit Risks:

Delays in the Flagship Project :

The NH 5 six laning project of NHAI comprises ~90% of the company’s order book. The project’s first milestone (~10% in value) was achieved in May 2020 against the original scheduled date of 7th Oct 2019. The project’s second milestone (~30% in value) was achieved in December 2020 against the original scheduled date of 8th April 2020. The company had requested for extension of 3rd and 4th milestone from original scheduled dates of 14 December 2020 and 08 April 2021 to 05 September 2021 and 05 October 2021, respectively. The same is already obtained from competent authority (NHAI). The project’s completion date of 05th October 2021 will most likely be extended further given the current status of the project.
Project concentration risk :

The current order book of the company consists of only two projects which exposes it to client concentration risks associated with the smooth execution of the projects. Any delay/ cancellation of the projects is expected to have a strong impact on the income and profitability of the company going forward.
Susceptibility to risks inherent in tender-based business :
Since the company’s business model is tender-based, revenue depends on the company’s ability to win tenders successfully. Going ahead, revenue and profitability are expected to remain susceptible to inherent risks in tender-based operations. Furthermore, the slowdown due to COVID-19 in construction work may affect project completion within the stipulated time frame.

ANALYTICAL APPROACH - Standalone

The ratings of Agrawal Infrabuild Private Ltd. are arrived at on a standalone basis after independent evaluation of its financial risk profile. For arriving at its ratings, BWR has applied its rating methodology as detailed in the rating criteria detailed below.

RATING SENSITIVITIES

Positive: The rating may be upgraded if the company achieves the projected revenues, while maintaining the existing debt coverage metrics, a healthy liquidity profile besides other factors favouring an upgrade.

Negative: The rating may be downgraded if the company’s revenues declines from present levels due to delay in execution of projects, its financial risk profile deteriorates significantly, resulting in, say an ISCR of less than 2x and a DSCR of less than 1x; or a significant deterioration is noted in its liquidity profile.

LIQUIDITY INDICATORS - Adequate

Adequate liquidity indicated by moderate utilisation of credit lines ~58% on an average for the last six months, low gross current assets days due to low receivables (~ Rs 39 Crores) and inventory of ~ Rs 22 Crs for FY21. The company had sufficient cash & cash equivalents of Rs 4.70 Crs as on FY21. It has a current maturity of long term debt of Rs 5.67 Crs in FY21, while the cash accruals stood at ~ Rs 26 Crs in FY21. Net cash accruals to total debt stood comfortable at 0.47x in FY2. The current ratio stood moderate at 1.26x in FY21.

ABOUT THE ENTITY

AIPL, incorporated in 2005 by Agrawal family, based in Bilaspur undertakes civil works, particularly road construction. It has executed road construction and maintenance projects for various state government departments and schemes such as the Public Works Department, Pradhan Mantri Gram Sadak Yojana and for the National Highway Authority of India in Chhattisgarh. The company majorly worked for Chhattisgarh Road Development Corporation Limited (CGRDCl), Bilaspur Municipal Corporation, National Highway Authority of India (NHAI), Chhattisgarh Rural Road Development Agency (CGRRDA) and Public Works Department Chhattisgarh etc. Company has completed work of more than ~ Rs. 700 Crs worth of projects as on December 2020.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	213.99	69.73
EBITDA	Rs.Crs.	37.61	20.06
PAT	Rs.Crs.	11.98	4.23
Tangible Net Worth	Rs.Crs.	93.72	81.73
Total Debt/Tangible Net Worth	Times	0.58	0.45
Current Ratio	Times	1.26	1.33

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

N.A

ANY OTHER INFORMATION

Nil

RATING HISTORY FOR THE PREVIOUS 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	35.14	BWR BBB/Stable (Upgrade)	11Aug2020	BWR BBB- (Stable) (Reaffirmed (Removal from INC))	07Jan2019	BWR BBB (Stable) (Reaffirmed)	28Jun2018	BWR BBB (Stable) (Upgraded)
		NA	NA	22May2020	BWR BBB- (Stable) (Issuer Not Cooperating) ((Issuer Not Cooperating) (Downgrade)))	NA	NA	NA	NA
Non Fund Based	ST	101.86	BWR A2 (Upgrade)	11Aug2020	BWR A3 (Reaffirmed (Removal from INC))	07Jan2019	BWR A2 (Reaffirmed)	28Jun2018	BWR A2 (Upgraded)
		NA	NA	22May2020	BWR A3 (Issuer Not Cooperating) ((Issuer Not Cooperating) (Downgrade))	NA	NA	NA	NA
Grand Total		137.00	(Rupees One Hundred Thirty Seven Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
Gaurav Gupta Senior Rating Analyst gaurav.g@brickworkratings.com	Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Agrawal Infrabuild Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	State Bank Of India (SBI)	Cash Credit - Sanctioned	20.00	_	20.00
2	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	80.00	80.00
3	State Bank Of India (SBI)	Term Loan - Out-standing	5.14	_	5.14
4	State Bank Of India (SBI)	Bank Guarantee - Proposed	_	21.86	21.86
5	State Bank Of India (SBI)	Cash Credit - Proposed	10.00	_	10.00
Total			35.14	101.86	137.00
TOTAL (Rupees One Hundred Thirty Seven Crores Only)

ANNEXURE-II

INSTRUMENT DETAILS

Instrument	Issue Date	Amount (Rs.Crs)	Coupon Rate (%)	Maturity Date	ISIN Particulars
N.A		0

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
Nil

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