Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 101.30 Crs. of Asian Construction Company
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (05 Aug 2020) |
Present | ||
| Fund Based | 42.57 | 46.30 | Long Term |
BWR BBB/Stable
Reaffirmation |
BWR BBB
/Stable Reaffirmation |
| Non Fund Based | 55.00 | 55.00 | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation |
| Grand Total | 97.57 | 101.30 | (Rupees One Hundred One Crores and Thirty lakhs Only) | ||
Brickwork ratings has reaffirmed the Long term rating to BWR BBB with a stable outlook and short term rating to BWR A3+.
The reaffirmed ratings, inter alia, factor the experienced partners, Central and State government departments being the primary customers, comfortable gearing and debt protection metrics, healthy order book position and efficient working capital management. The ratings, however, are constrained by the risk associated with the tender based business and timely execution of contracts, volatility in raw material prices and inherent risk associated with the constitution of the firm.
The outlook of the company is stable as the company has adequate orders in hand which provides revenue visibility in the medium term.
Credit Strengths:
Asian Construction Company (ACC) was established in 1989 as a partnership firm by Mr. Ajit Singh Yadav, Mr. Surender Kumar Yadav and Mr. Daya Yadav. The partners have experience of more than 30 years in the field of civil construction and have executed various projects for the Government entities.
The firm has executed various projects for Government entities such as Central Public Works Department (CPWD), Military Engineer Services (MES), and Public Works Department (PWD) in regions of Madhya Pradesh, New Delhi, Bihar etc. The entity has been primarily working with Central and State Government Departments which reduces the counterparty risk for the firm.
ACC had orders in hand of Rs. 257.04 Crs, as on Jul 31 2021, which provides revenue visibility for the medium term. Apart from that, the firm has also placed its bids for certain contracts, for which final allotment is expected to be made in the next few months. rm.
The entity has a satisfactory Gearing Ratio marked by TOL/TNW of 1.68 times as on FY21 (Provisional), since the major portion of the bank debt is in the form of non-fund based limits. Working capital cycle remained at 32 days as on Mar 31, 2021 due to efficient working capital management. The firm also had comfortable debt protection metrics with ISCR and DSCR at 2.82x and 1.47x respectively for FY21 (Provisional).
The firm is involved in the construction of college buildings, hostels, hospitals, Border Security Force (BSF) and Central Reserve Police Force (CRPF) quarters. It uses raw materials such as steel, concrete, wood, tiles etc based on its availability. The prices of these raw materials are highly volatile in nature which causes a threat to the operating margins of the firm, especially in contracts where an increase in raw material prices could not be passed on to the counterparties.
Since revenue depends on success in winning tenders in a competitive bidding process, there is limited bargaining power. The firm has not acquired any new orders since Dec 2020 which can affect the topline in going concern and shall remain a key rating monitorable going forward.
Constitution of the entity being a partnership concern, it is exposed to the risk of withdrawal of funds in case of personal exigencies. In FY21 (Prov.), the partners withdrew net capital of Rs. 7.89 Crs, for personal uses.
For arriving at its ratings, BWR has applied its rating methodology as debited in the Rating Criteria detailed below ( hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Positive: The rating may be revised upward in case the revenues and profit show sustained improvement backed by healthy liquidity.
Negative: The rating may be revised downward in case revenue of the company deteriorates substantially from the current level or the company is not able to maintain its order book at a reasonable level. Rating may also be adversely affected in case of adequate deterioration in gearing and debt coverage ratios.
ACC has a Cash Credit limit of Rs. 35 crs and its average utilization of the fund-based limits stood at ~74% in the six month period (from April 2021 till Sep 2021). The firm has a long-term repayment obligation of Rs.3.11 Cr. in FY22, which is projected to be repaid from the internal accruals. The firm generated cash profit of Rs.11.42 cr. in FY21 (Prov.), against Rs. 13.82 Crs in FY20. ACC does not have any major capex plans going forward.
Asian Construction Company was established in 1989 as a partnership firm involved in civil construction business by Mr. Ajit Singh Yadav, Mr. Surender Kumar Yadav and Mr. Daya Yadav. The partners have significant experience in the field of civil construction and have implemented various projects for Government entities such as Central Public Works Department (CPWD), Military Engineer Services (MES), and Public Works Department (PWD). The firm secures orders from public sector enterprises or their subcontractors through tender participation and precures orders mainly of Delhi, Uttar Pradesh and Madhya Pradesh.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 249.11 | 216.97 |
| EBITDA | Rs.Crs. | 18.57 | 16.89 |
| PAT | Rs.Crs. | 10.69 | 9.57 |
| Tangible Net Worth | Rs.Crs. | 43.24 | 37.73 |
| Total Debt/Tangible Net Worth | Times | 1.32 | 0.71 |
| Current Ratio | Times | 2.80 | 2.42 |
| Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 46.30 |
BWR BBB/Stable
(Reaffirmation) |
05Aug2020 |
BWR BBBStable
(Reaffirmation) |
16May2019 |
BWR BBBStable
(Assignment) |
NA |
NA
|
| Non Fund Based | ST | 55.00 |
BWR A3+
(Reaffirmation) |
05Aug2020 |
BWR A3+
(Reaffirmation) |
16May2019 |
BWR A3+
(Assignment) |
NA |
NA
|
| Grand Total | 101.30 | (Rupees One Hundred One Crores and Thirty lakhs 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| Analytical Contacts | |
|---|---|
|
Neha Wahi Ratings Analyst Board : +91 11 2341 2232 nehawahi@brickworkratings.com |
Sudeep Sanwal Associate Director - Ratings sudeep.s@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 | Bank of Baroda | Term LoanSanctioned | _ | _ | 0.00 | |
| 2 | Bank of Baroda | Term LoanSanctioned | _ | _ | 0.00 | |
| 3 | Bank of Baroda | Term LoanSanctioned | _ | _ | 0.00 | |
| 4 | Bank of Baroda | Term LoanSanctioned | 1.60 | _ | 1.60 | |
| 5 | Bank of Baroda | Over DraftSanctioned | 35.00 | _ | 35.00 | |
| 6 | Bank of Baroda | Bank GuaranteeSanctioned | _ | 55.00 | 55.00 | |
| 7 | Bank of Baroda | Gold CardSanctioned | 3.50 | _ | 3.50 | |
| 8 | Bank of Baroda | GECLSanctioned | 6.20 | _ | 6.20 | |
| Total | 46.30 | 55.00 | 101.30 | |||
| TOTAL (Rupees One Hundred One Crores and Thirty lakhs Only) | ||||||
The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.
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.
Disclaimer
Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, 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. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.
BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).
BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.
The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.
BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.
BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.
Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.
BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.
BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.
This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.
BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.