Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 41.00 Crs. of Arrow Constructions Ltd
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (04 Sep 2020) |
Present | ||
| Fund Based | 9.00 | 9.00 | Long Term |
BWR BB+/Stable
Upgrade |
BWR D
Downgrade |
| Non Fund Based | 32.00 | 32.00 | Short Term |
BWR A4+
Upgrade |
BWR D
Downgrade |
| (0.00) | (2.00) | ||||
| (0.00) | (2.00) | ||||
| (2.00) | (0.00) | ||||
| Grand Total | 41.00 | 41.00 | (Rupees Forty One Crores Only) | ||
BWR has essentially relied upon the audited financials upto FY20, provisional financials of FY21, projected financials upto FY23, publicly available information and information/clarifications provided by the company's management.
The ratings draw constraints from the declined revenue in FY21, stressed liquidity position, moderate order book position, high geographic concentration in the revenue stream, presence in highly competitive industry and sub contract/tender- driven nature of business and working capital intensive nature of operations. However, the ratings are supported by the experienced promoter, moderate financial risk profile and moderate profitability margins
Credit Strengths:
The promoters have more than a decade of experience in the civil construction industry. ACL has developed a long standing relationship with clients in various government departments in Karnataka, Andhra Pradesh and Telangana and gained significant experience in the tender bidding process which helps in continuous receipt of orders
Moderate financial risk profile with moderate capital structure and debt service coverage metrics. Tangible net worth, gearing, TOL/TNW, interest service coverage ratio and debt service coverage ratio were around Rs.26.57 Crs, 1.00 times, 2.68 times, 3.03 times and 1.07 times respectively, as on 31st March 2020 as against Rs.21.73 Crs, 1.01 times, 1.92 times, 2.67 times and 1.86 times, as on 31st March 2019. On a provisional basis, it is around Rs.29.61 Crs, 0.84 times, 2.31 times, 2.53 times and 0.86 times respectively, as on 31st March 2021.
On a provisional basis, the company has reported the revenue of Rs.54.44 Crs for FY21. It decreased by around 46% against Rs.101.Crs in FY20. The bills payments are pending with Govt. of Karnataka/A.P. & Telangana since 30.06.2020, due to COVID-19 pandemic. The company has reported the revenue of around Rs.8.10 Crs for 7MFY22. Moderate profitability margins marked by net profit margin and operating margins of 4.80% and 5.58% and 10.81% and 17.51 % in FY20 and FY21 (prov) respectively.
Presently, the company has an unexecuted order book position of around Rs.167 Crs as of October ended 2021 and expected to be completed by next 18 - 24 months. The outstanding order book is equal to 3 times for FY21 revenue approximately.
The construction industry is highly fragmented with the presence of many organized and unorganized players. Further, the tender - driven nature of business places pressure on the profitability of the company. The company executes more than 100% contracts received through the tender based from the government bodies.
The liquidity position of the Company is stressed as its observed delays in the accounts and the account was moved to SMA category during the month of October 2021.
As it is an entity, 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).
Upward - Sustained improvement in scale of operations with improved profitability margins, capital structure and timely debt servicing. Specific credit metrics that could lead to an upgrade of the company's rating include (1) Total Debt/Tangible net worth below 1.00 times on a continuous basis, (2) DSCR and ISCR greater than 3.0 times on a continuous basis. (3) Timely completion of order book position.
The liquidity position of the Company is stressed as its observed delays in the accounts and the average CC utilisation for the last 12 months is 95%. The working capital cycle of the company deteriorated to 106 days in FY20 and 469 days in FY21 (prov) from 77 days in FY19, due to increase in inventory days. Though, the company is expected to generate the net cash accruals of Rs.8.41 Crs and Rs.12.98 Crs respectively in FY22 and FY23 as against the CPLTD of Nil respectively and the current ratio as on March 31, 2020 and 2021 is moderate at 1.24 times and 1.41 times respectively.
ABOUT THE ENTITYArrow Construction Ltd (ACL) was incorporated in December 1995 as a public company, with its registered office at Hyderabad, Telangana. ACL is engaged in the construction of buildings, hospitals and irrigation projects mainly Canals and Bridges. The company executes the projects (Both building works and irrigation works) majorly for Government projects on a tender basis. The company is a special class contractor registered in Andhra Pradesh and Telangana and both were valid in March 2026 and September 2025 respectively. The company is a special class contractor registered in Karnataka also.
Mr. S Vijaya Kumar, Mr. DVKV Prasad, S V Prabhakar and Thinesh Ganesh Kumaran are the directors of the company.
| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 101.00 | 74.85 |
| EBITDA | Rs.Crs. | 10.92 | 5.82 |
| PAT | Rs.Crs. | 4.85 | 3.48 |
| Tangible Net Worth | Rs.Crs. | 26.57 | 21.73 |
| Total Debt/Tangible Net Worth | Times | 1.00 | 1.01 |
| Current Ratio | Times | 1.24 | 1.21 |
India Ratings & Research has downgrades ratings to IND C/A4 from IND BB/A4+ and continue to 'Issuer not cooperating' category on 7th September 2020 for the bank loan facilities Rs.10.00 Crs of Arrow Constructions Ltd
| 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 D
(Downgrade) |
04Sep2020 |
BWR BB+Stable
(Upgrade) |
13Feb2019 |
BWR BB+Positive
(Reaffirmation) |
NA |
NA
|
| NA |
NA
|
28Aug2020 |
BWR C
(Downgrade) |
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 32.00 |
BWR D
(Downgrade) |
04Sep2020 |
BWR A4+
(Upgrade) |
13Feb2019 |
BWR A4+
(Reaffirmation) |
NA |
NA
|
| NA |
NA
|
28Aug2020 |
BWR A4
(Downgrade) |
NA |
NA
|
NA |
NA
|
||
| NFB SubLimit | ST | (2.00) |
BWR D
(Downgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (2.00) |
BWR D
(Downgrade) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Grand Total | 41.00 | (Rupees Forty One 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| Analytical Contacts | |
|---|---|
|
Prashanth Boorala Ratings Analyst Board : +91 40 2331 0161 / 2331 0071 prashanth.b@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. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | HDFC Bank | Cash CreditSanctioned | 7.00 | _ | 7.00 | |
| 2 | HDFC Bank | Bank GuaranteeSanctioned | _ | 17.00 | 17.00 | |
| Sub-Limit (Bidbond Bank Guarantee) Sanctioned | (2.00) | |||||
| Sub-Limit (Financial Bank Guarantee) Sanctioned | (2.00) | |||||
| Sub-Limit (ILC) Sanctioned | (0.00) | |||||
| 3 | Karur Vysya Bank | BG/ILCSanctioned | _ | 15.00 | 15.00 | |
| 4 | Karur Vysya Bank | Cash CreditSanctioned | 2.00 | _ | 2.00 | |
| Total | 9.00 | 32.00 | 41.00 | |||
| TOTAL (Rupees Forty One Crores 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.