Sunil Kumar Agrawal

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 85.00 Crs. of Sunil Kumar Agrawal

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (10 Dec 2021)	Present
Fund Based	13.75	24.00	Long Term	BWR BBB+ /Stable Upgrade	BWR BBB + /Stable Reaffirmation
Non Fund Based	28.25	61.00	Short Term	BWR A2 Upgrade	BWR A2 Reaffirmation
Grand Total	42.00	85.00	(Rupees Eighty Five 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) has reaffirmed the ratings on the Bank Loan Facilities of SKA to 'BWR BBB+/Stable/BWR A2'

The reaffirmation of ratings assigned to the bank facilities of SKA continue to derive strength from the company’s established track record and experienced promoters, a diversified & growing customer base, established relations with reputed clientele and above average financial risk profile marked by healthy profit margins, comfortable capital structure and debt coverage indicators. These rating strengths are partially offset by the modest scale of operations and moderate order book position, intense competition inherent in the industry and sole proprietorship nature of the entity.

Outlook: Stable

BWR believes that SKA’s business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Experienced management & established track record :

SKA benefits from its established track record, supported by the extensive experience of the promoters of more than three decades in diversified sub segments of the construction industry along with other group associates. With the technical expertise gained over the years, the entity has been able to establish itself as the preferred player in the Chhattisgarh region and maintain healthy relations with various government departments, as well as suppliers.
Comfortable Financial Risk Profile :

The financial risk profile remains comfortable, supported by improving operating margin and increasing cash accrual. Proprietor’s capital is moderate at Rs 161.22 crore for FY21 Provisional (FY20: Rs 131.22 crore) while adjusted gearing stood at 0.66 times (FY20: 0.40 times). Furthermore, with the conversion of unsecured loans from promoters' friends and family into capital, the capital structure and tangible networth has further improved in FY21.
Efficient working capital management :
The entity mainly caters to government departments in the engineering, procurement, and construction sector, and payment is received within a 30 days time period. The receivables cycle is very lean; with efficient execution of work, and payments from authorities being received in time which supports the working capital management.
Strong debt protection metrics :

The debt coverage indicators marked by ISCR & DSCR stood at comfortable levels in FY21 mainly on account of healthy accruals however these have deteriorated in FY21 as against FY20 due to increased interest and finance cost during FY21. The interest & finance cost has increased due to increase in long term borrowings of the entity to fund its regular CAPEX for upcoming projects as on March 31, 2021.

Credit Risks:

Modest scale of operations :

The total operating income of the company has been largely stable between FY18 and FY21 (Provisional) and was lower than BWR projections for FY21 mainly on account of Covid-19-induced lock downs. . Furthermore, during 9MFY22 the entity has registered total operating income of Rs. 221.56 crore despite a second covid wave and would need to pick up pace in Q4FY22 to achieve the projected financial performance.
Moderate order book coupled with geographical concentration risk :

SKA has a moderate order book position comprising 16 open contracts aggregating to about Rs.758.25 crore as on Sep. 30, 2021 which is about 2.40 times of its FY21 Provisional construction revenue reflecting moderate revenue visibility. Also, BWR understands from the management that it is declaredL1 for orders of Rs. 400 crores
Geographical and Order Concentration :
Though SKA has diversified in terms of geography, Orders have been mainly concentrated in Chhattisgarh. Also, the top five orders constitute more than 65% of the overall order book thus elevating concentration risk. Nonetheless, sustained diversification and the ability to sustain healthy growth amid intense competition will be key monitorable.
Susceptible to tender-based nature of business :
Most of the projects are tender-based and hence, the entity's ability to bid successfully is crucial. The entity is susceptible to any slowdown in tenders floated in specific states or changes in the state government policies. The entity’s performance is exposed to economic downturn, input cost fluctuation and supply chain disruption
Proprietorship nature of constitution :
SKA is exposed to inherent risk of proprietor capital being withdrawn in case of any exigency. Due to the proprietorship nature of the constitution, it has restricted access to external borrowing where net-worth as well as credit worthiness of the proprietor are the key factors affecting credit decision of lenders.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied upon the standalone audited financials of the company up to FY20, provisional financials for FY21, projections up to FY23, publicly available information and information/clarifications provided by the management.

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

Positive:

Significant improvement in revenues whilst sustaining profitability along with improvement in working capital management, leverage, and change in constitution from sole proprietorship

Negative:

Decrease in profitability or a stretch in the working capital cycle or an increase in non current-investments, weakening the liquidity position and / or non improvement in Order Book could lead to a negative rating action.

LIQUIDITY INDICATORS - Strong

Liquidity is marked by strong accruals of more than Rs.60 crores against repayment obligations of Rs. 15-17 crore.Unencumbered cash and bank balances were at over Rs 3.70 crore and Rs. 20.73 crore as on March 31, 2021 and Oct 31, 2021 respectively. Bank limit utilisation is however lower, averaging below 50% for the past 12 months through October 31, 2021. Current ratio stood at 7.20x in FY21 as against 7.44x in FY20.

ABOUT THE ENTITY

Sunil Kumar Agrawal was established in the year 1994 by the father of Mr. Sunil Kumar Agrawal. The entity undertakes construction of canals, dams, bridges, anicuts and roads, mainly through contracts awarded by the Public Works Department (PWD), Tribal Development Programme (TDP), Water Resources Department (WRD), Chhattisgarh Government Road Development Corporation (CGRDC) and NHAI. Civil works also includes construction of labour colonies, Housing Colonies, Industrial Buildings, Culverts, C D works, Mass Concreting Works, Bridges, Dams, Canals etc., Mass Earth Excavation Work, Rock Excavation for canals, dams and any type of mass development work, Foundation Excavation, Earth work & site grading, Construction of Roads and Dealing in land and providing Land to industries. The entity is registered in class ‘A’ contractor of the Engineer-in-Chief PWD, Chattisgarh and other departments at Jharkhand & Orissa wherein there is no upper limit for participating in a bid

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	315.89	311.82
EBITDA	Rs.Crs.	49.03	45.38
PAT	Rs.Crs.	50.55	45.74
Tangible Net Worth	Rs.Crs.	131.22	105.72
Total Debt/Tangible Net Worth	Times	0.40	0.35
Current Ratio	Times	7.44	5.28

KEY COVENANTS OF THE FACILITY RATED

Nil

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

India Ratings vide its press release on 10th July 2020 has put the ratings on issuer Non-Co-operation on account of non-submission of information

ANY OTHER INFORMATION

Nil

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	24.00	BWR BBB+/Stable (Reaffirmation)	11Jun2021	BWR BBB- Stable (Downgrade/ISSUER NOT COOPERATING*)	20Feb2020	BWR BBB+ Stable (Assignment)	NA	NA
		NA	NA	10Dec2021	BWR BBB+ Stable (Upgrade)	NA	NA	NA	NA
Non Fund Based	ST	61.00	BWR A2 (Reaffirmation)	11Jun2021	BWR A3 (Downgrade/ISSUER NOT COOPERATING*)	20Feb2020	BWR A3+ (Assignment)	NA	NA
		NA	NA	10Dec2021	BWR A2 (Upgrade)	NA	NA	NA	NA
Grand Total		85.00	(Rupees Eighty Five 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
Roma Gupta Ratings Analyst roma.g@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Sunil Kumar Agrawal

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	Bank of Baroda	Over Draft - Sanctioned	6.50	_	6.50
2	Bank of Baroda	Bank Guarantee - Sanctioned	_	8.50	8.50
3	HDFC Bank	Bank Guarantee - Sanctioned	_	14.00	14.00
4	HDFC Bank	Cash Credit - Sanctioned	6.75	_	6.75
5	Karnataka Bank Ltd	Bank Guarantee - Sanctioned	_	24.00	24.00
6	Karnataka Bank Ltd	Bank Guarantee - Proposed	_	14.50	14.50
7	Karnataka Bank Ltd	Overdraft - Sanctioned	10.75	_	10.75
Total			24.00	61.00	85.00
TOTAL (Rupees Eighty Five Crores Only)

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