TPS Infrastructure Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 169.34 Crs. of TPS Infrastructure Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (04 Dec 2020)	Present
Fund Based	66.12	60.84	Long Term	BWR BBB /Stable Upgrade	BWR BBB /Stable Reaffirmation
Non Fund Based	108.50	108.50	Short Term	BWR A3+ Upgrade	BWR A3 + Reaffirmation
Grand Total	174.62	169.34	(Rupees One Hundred Sixty Nine Crores and Thirty Four lakhs 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 long-term rating at BWR BBB (Stable) and short term rating at BWR A3+ for the bank loan facilities of TPS Infrastructure Ltd. (TPSIL or the company).

The reaffirmation of rating continues to factor in extensive experience of the promoter in the business along with the company's established track record of operations, geographically diversified client base with completely customized tailor made product portfolio and moderate financial risk profile during FY21, good order book position, comfortable debt protection metrics, decent profit margins although declined in FY21. The raing is however constrained by highly working capital intensive operations due to stretched receivables, nascent stage of industry, and volatility in revenues by the virtue of tender-based business.

The Outlook is Stable considering adequate work orders in hand which provides revenue visibility in the medium term. The company registered net revenue of Rs 146.23 Crs in 9MFY22 and likely to have improved revenue in FY22 considering approximately 35%-40% of the revenue realized in the last quarter.

KEY RATING DRIVERS

Credit Strengths:

Experienced promoter :
Promoter ,Mr. Virendra Oberoi, is a graduate in mechanical engineering with more than 30 years of experience in the field of engineering equipment and environment control products. With a strong track record of quality and delivery, the company has established relationships with a number of customers.
Healthy order book position :
The company holds an order book position of Rs. 292.99 Crs as on 31st Jan 2022 which needs to be executed till FY29, includes operations & maintenance order book of approximately Rs 179.31 Crs for customers like Bruhat Bangalore Mahanagara Palike (BBMP) - Bangalore, Vadodara Mahanagar Sewa Sadan & Vadodara Smart City Development Ltd – Vadodara, provide stable revenue visibility in the medium term. Although Total operating income (excludes other income) of the company has declined from Rs 249.95 Crs in FY20 to Rs 213.65 Crs in FY21 but the same was due to Covid 19 impact. Currently, the company registered revenue of Rs 146.23 Crs in 9MFY22 and expected to have improved revenue in FY22 considering approximately 35%-40% of the revenue realized in the last quarter, besides the company is having a good order book position.
Gearing, current ratio and Debt/EBITDA :
Gearing (Total Debt/TNW) of the company is comfortable 0.53x in FY21 (0.56) and Total Debt analyzed(includes off balance sheet non fund based limits @ 67% utilization)/TNW ratio also is below 1x in FY21 owing to good net worth of Rs 142.26 Crs in FY21. Current ratio is comfortable at 1.55x in FY21 (1.53 in FY20). Debt/EBITDA is 3.17x in FY21 (1.73x in FY20) while total debt analyzed/EBITDA stands at 5.83x in FY21 (3.21x in FY20).
Profit margins :
Net profit and operating profit margins declined from 8.10% and 15.64% in FY20 to 4.24% and 10.23% in FY21 respectively. Company’s products are made to order, which has led to operating margins at around 10 per cent over the years, but for FY20, which was an exceptional year due to sale of higher margins products, thus had a good margin in FY20. Profit margins in FY21 are in line with the provided projections.
Debt protection metrics :
Interest service coverage ratio (ISCR) and debt service coverage ratio (DSCR) is moderate at 2.29x in FY21 (3.69x) and 1.83x in FY21(2.50x) respectively.
Geographical diversification and niche segment :
The company operates in a very niche segment of manufacturing of engineering equipment for municipal bodies and & other private customers and caters to orders throughout India. With the rapid urbanization as well as formation of numerous new urban local bodies / municipalities / authorities along with government initiatives of smart cities & ‘Swachh Bharat Mission’, the company is expected to capitalize on the growing opportunity. The company’s primary focus is on mechanized waste management.

Credit Risks:

Highly working capital intensive operations due to stretched receivables :
The average cash conversion cycle for the last 3 years has been of around 230 days owing to large receivable periods from various government municipalities. Conversion cycle is elongated to approximately 257 days in FY21 (200 days in FY20) mainly due to high debtor period of approximately 264 days in FY21 186 days in FY20). However, it is an intrinsic nature of this business where debtors are mainly government entities and average receivable period has been 228 days over the last 3 fiscal years.
Nascent stage of industry :
The industry is in the initial growth stage and due to low barriers, entry of other organized and unorganized players, including importers may result in intense competition in the sector.
Volatility in revenues by the virtue of tender-based business :
The company has to participate in tenders to procure orders. New business is, therefore, dependent on success achieved in the tenders and the company may face volatility in revenues owing to the tender based nature of the business which can affect the total operating income and profitability margins during the coming years owing to uncertainty associated with new order inflows, risks of delays in execution etc.

ANALYTICAL APPROACH - Standalone

BWR has factored in the standalone business parameters and financial risk profile of the company to arrive at the rating. Reference may be made to the detailed Rating Criteria hyperlinked.

RATING SENSITIVITIES

Upward: BWR may revise the ratings upwards if there is a sustained increase in the scale of operations, along with an improvement in liquidity, working capital cycle and overall credit metrics.
Downward: BWR may revise the rating downward, in case of significant reduction in the operating income, deterioration in debt protection metrics ,further elongation of working capital cycle, thereby impacting the credit profile of the company.

LIQUIDITY INDICATORS - Adequate

TPSIL has an adequate liquidity position marked by sufficient cash accruals (profit after tax + depreciation) of Rs 10.99 Crs against current portion of long term debt (CPLTD) for Rs 1.69 Crs for FY21. The company is expected to achieve more than Rs 10 Crs against CPLTD of Rs 2.43 Crs for FY22. The company’s fund based and non fund based utilization is below 85% and 70% respectively for the last 6 months till Dec, 2021. Company’s current ratio is also comfortable at 1.55x in FY 21 and interest service coverage ratio (ISCR) is above 2.29x in FY21 and expected to be above 2x for FY22.

ABOUT THE ENTITY

TPS Infrastructure Limited (TPSIL) was incorporated in 1985 under the name of TPS manufacturing and Construction Co. (P) Ltd. Its Managing Director is Mr. Virendra Oberoi. In August 2006, the name of the company was changed to TPS Infrastructure Limited. TPSIL manufactures a wide range of equipment for industrial and municipal applications including industrial vacuum cleaning and recovery systems, road/runway sweeping machines, refuse compactors and compatible bins, sewer cleaning machines, bulk carriers, dust control systems,etc. It also manufactures special purpose machines for various applications. The company also provides spares and after-sales services to clients. The company’s corporate office is in New Delhi, where the design activities are carried out with its manufacturing unit located in Ghaziabad (Uttarpradesh) and Bhiwandi (Rajasthan). It also has marketing/sales/service offices in multiple other locations across India – Mumbai, Jamshedpur, Bengaluru, Chennai, Kolkata and Bhubaneswar.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	213.65	249.95
EBITDA	Rs.Crs.	21.86	39.09
PAT	Rs.Crs.	9.06	20.24
Tangible Net Worth	Rs.Crs.	129.86	120.04
Total Debt/Tangible Net Worth	Times	0.53	0.56
Current Ratio	Times	1.55	1.53

KEY COVENANTS OF THE FACILITY RATED

ANY OTHER INFORMATION

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	60.84	BWR BBB/Stable (Reaffirmation)	NA	NA	04Dec2020	BWR BBB Stable (Upgrade)	15Nov2019	BWR BBB- Stable (Assignment)
Non Fund Based	ST	108.50	BWR A3+ (Reaffirmation)	NA	NA	04Dec2020	BWR A3+ (Upgrade)	15Nov2019	BWR A3 (Assignment)
Grand Total		169.34	(Rupees One Hundred Sixty Nine Crores and Thirty Four lakhs 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
Raman Thakur Senior Rating Analyst Board : +91 11 2341 2232 raman.t@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

TPS Infrastructure 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	Bandhan Bank	Bank Guarantee - Sanctioned	_	21.00	21.00
2	Bandhan Bank	Working Capital (CC) - Sanctioned	10.00	_	10.00
3	HDFC Bank	Working Capital (CC) - Sanctioned	2.00	_	2.00
4	HDFC Bank	Letter of Credit - Sanctioned	_	25.00	25.00
5	HDFC Bank	Term Loan - Out-standing	4.34	_	4.34
6	HDFC Bank	Bank Guarantee - Sanctioned	_	5.00	5.00
7	Standard Chartered Bank	Bank Guarantee - Sanctioned	_	7.00	7.00
8	Standard Chartered Bank	Letter of Credit - Sanctioned	_	8.00	8.00
9	Standard Chartered Bank	Working Capital (CC) - Sanctioned	2.00	_	2.00
10	State Bank Of India (SBI)	Working Capital (CC) - Sanctioned	42.50	_	42.50
11	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	42.50	42.50
Total			60.84	108.50	169.34
TOTAL (Rupees One Hundred Sixty Nine Crores and Thirty Four lakhs Only)

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