Techno Power Enterprises Pvt Ltd

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 154.46 Crs. of Techno Power Enterprises Pvt Ltd

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (15 Jan 2021)	Present
Fund Based	32.14	26.46	Long Term	BWR BBB/Stable Reaffirmation	BWR BBB /Stable Reaffirmation
Non Fund Based	131.00	128.00	Short Term	BWR A3+ Reaffirmation	BWR A3 + Reaffirmation
	(32.50)	(32.50)
	(5.00)	(5.00)
	(5.00)	(5.00)
	(10.00)	(17.00)
Grand Total	163.14	154.46	(Rupees One Hundred Fifty Four Crores and Forty Six 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

BWR has reaffirmed the rating for the long term bank loan facilities of Rs.26.46Crs (reduced from Rs.32.14 Crs) of Techno Power Enterprises Pvt Ltd. at BWR BBB with a ‘Stable’ outlook, and the rating for its short term bank loan facilities of Rs.128Crs (reduced from Rs.131.00 crs) at BWR A3+ (aggregate rated amount reduced to Rs.154.46Crs from Rs.163.14Crs).

The rating reaffirmation is based on TPEPL's ,improved financial and credit profile in FY22 (provisional) with increased execution of work orders and release of funds by the government after the pandemic conditions started improving since the 3QFY22 and its diversification into the Water Transmission and Distribution line business under the central goverment's Jal Jeevan Mission which has good prospects given the substabtial bugetary allocations. The ratings continues to benefit from the long experience and track record of the management in this industry  and the Company’s ability to bag new orders in the prevailing pandemic conditions and to sustain a healthy current order book position imparting strong revenue visibility. The ratings are, however, constrained by the Company’s inability to meet the business estimates and conitnued high receivables.The Company's ability to bag new orders and successful execution of the same as well as sustaining the total order book position with orders both in the Power and Water divison will remain the key moniterables going forward. 

The rating has been assigned a ‘Stable’ outlook as the business risk profile of the Company is stable and growth in business and profitability is expected to be maintained in the medium term.The rating outlook may be revised to 'Positive' in case there is an improvement in the revenues and profit margins along with favourable debt protection metrics. The rating outlook may be revised to 'Negative' if there is any significant deterioration in the financial position and profitability margins of the Company.

BWR has essentially relied upon the audited financials of TPEPL for FY21, key provisional figures for first eleven months of FY22 and full year provisional net sales, and projections for FY22 & FY23 other information as available in the public domain, as well as information / clarifications provided by the Company and its bankers, to arrive at the present ratings.

KEY RATING DRIVERS

Credit Strengths:

• Foray into Water Transmission and Order Book Position :

   TPEPL has forayed into water transmission and distribution under the Jal Jeevan Mission scheme of the Central Government. It has bagged orders of value Rs.21.23Crs on 21.10.2021 and further orders of Rs.22Cr on 14 Mar. 2022 from Executive Engineer (PHE) DHUBRI Division Assam(PBG) for setting up of pipelines in the Dhurbi district of Assam. The projects are to be executed by March 2023. The Company anticipates to bag further orders in the area after substantial budgetary allocations to the scheme and limited contractors in the industry to execute these projects. Total outstanding work order book as on 31.03.2022  was Rs. 240Crs which stands ~1.5x of the provisional net sales for FY22. The Company also has orders in pipeline of Rs.145Crs. Of this, ~70% is to be completed and realised in FY23.Out of the total orders in pipeline, Rs.50Crs of orders are expected from PHE JJM Assam.

• Improved Financial Performance :

  TPEPL clocked net sales of Rs.175Crs in FY22 (Provisional) as against Rs.116Crs in FY21and  operating margin of ~15% during FY22 (Provisional) better than 14% in the previous year. The Company's EBIDTA was  impacted by the rise in raw material prices (Aluminum and Steel) however price variation clause in  about 50% of the Company's contracts helped it maintain growth in the margins. Also, the Company has been focussing on execution of work orders which has higher margins particulalry in the Supply Division. Sales and profitability are expected to be sustained at the present level with the current order book in hand. 

• Total Gearing and debt protection metrics :

  Total Debt/TNW improved to 1.85x in FY22 from over 2.0x in the past. The Company has repaid a substantial portion of the term loans and CECL from SBI. ISCR for FY22 was 1.6x  in FY22 against 1.9x in FY21. The Company is incurring higher interest costs on the short term unsecured loans availed from the open market to meet working capital requirements. It also bears high costs on the discounting of letter of credit by the suppliers as well as high BG & LC charges. However, ISCR and DSCR has remained at an acceptable level due to sustained operating profitability. 

• Long operational track record :

  Techno Power Enterprises Pvt Ltd. is well established with a presence of nearly two decades in the EPC industry. TPEPL is headed by Mr. Saroj Agarwal, Mr. Raunak Agarwal and Mrs. Prachi Agarwal. The promoter, Mr. Saroj Agarwal is professionally skilled and has an experience of over three decades in the EPC industry.  The promoters have extended support by way of equity infusions as and when required.  

Credit Risks:

• Underachievement of Estimates :

  The Company underperformed projections and booked total net sales of Rs.175crs in FY22 as against projections of Rs.190Crs  owing to operations being impacted by the pandemic which led to slower realisations.However, execution of work orders and improved revenue booking along with a strong order book position shall trigger revenue growth in FY23.  

• High Receivables :

  Total receivables of the Company have historically remained high due to the government entities as their clientele. The flow of payments from these entities are slow. Although the majority of the payments for work executed in FY21 from the government pending owing to the pandemic has been recovered in FY22, total debtors for FY22 are still high. This is on account of higher retention money held back by the Government Departments against higher orders executed which is recoverable only after completion of the project as well as slower release of funds from the central government agencies. Debtors are likely to continue to remain high in the near term due to the aforementioned reasons. The Company makes payments to the creditors as and when funds are available from the Government.

• Sustainablity of Order book :

  Since the Company has entered into a new area of operations, its performance going forward will depend to a large extent on the successful bagging of new orders and implementation of the projects in the new area, ie under the water transmission and distribution lines. The Company’s ability to sustain its order book position with orders in both the Power as well as Water transmission industry will remain a key monitorable.

RATING SENSITIVITIES

Positive: Improvement in revenue along with sustained liquidity and sustained gearing of below 2.0x and ISCR at above 2.25x, may traigger a positive rating action.

Negative: Fall in revenues owing to low orders in hand leading to deterioration in operating profitability, resulting in ISCR of below 1.5x, and deterioration in the overall liquidity position alongwith deterioration in total gearing to above 3.0x may trigger a positive rating action.

LIQUIDITY INDICATORS - Adequate

The liquidity position of the Company stands adequate on account of low utilisation of fund based limits. The Company does not have any major schdeuled  debt obligations. Repayments of Rs.3.38Crs in FY23 are likely to be met by the expected cash accruals of Rs.18Crs during the year. Working capital cycle is stretched and is around 214days in FY21(reduced from 262 days in FY20)  due to a high collection period and a high payment cycle. High collection period is due to the government clientele flow funds is slow. As per the arrangement, the Creditors are paid as and when debtors release funds which results in a high payment cycle.  However, the Company has started receiving payments from the government and a considerable amount was released in FY22 easing out liquidty pressuers. As per the management,the surplus was used for reducing unsecured loans which the Company availed in the past from the open market to meet liquidty requirements. Moreso, receivables have not stretched further which indicates that the Company has managed to recover debtors to the extent of sales reported as on date. 

ABOUT THE ENTITY

Incorporated on 02 Feb., 2000, Techno Power Enterprises Pvt Ltd. (TPEPL) is into Engineering, Procurement and Construction (EPC) services for the Power Utilities in India. It provides turnkey services for Survey, Design and Construction of Transmission & Distribution Lines, Substations, Rural Electrification, Civil Works for Power Projects and Engineering. Although TPEPL’s registered office is in Shillong, all the activities are managed from their Corporate Office in Kolkata. TPEPL is one of the leading EPC contractors in the North East market for power transmission solutions. It has extended its activities to executing major transmission contracts to Bihar, Jharkhand, Sikkim etc. It has major contracts of electrification under the Deen Dayal Upadhyay rural electrification schemes.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	115.84	111.05
EBITDA	Rs.Crs.	16.66	14.76
PAT	Rs.Crs.	4.35	4.82
Tangible Net Worth	Rs.Crs.	60.50	51.16
Total Debt/Tangible Net Worth	Times	1.88	2.52
Current Ratio	Times	1.65	1.55

KEY COVENANTS OF THE FACILITY RATED

Standard

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Crisil B,Stable/ A4, Issuer Not Cooperating as per rationale dated 29 Mar. 2022 based on non receipt of requisite information/documents for conducting the review.

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	26.46	BWR BBB/Stable (Reaffirmation)	15Jan2021	BWR BBBStable (Reaffirmation)	29Jun2020	BWR BBBStable (Reaffirmation)	06Jun2019	BWR BBBStable (Upgrade)
Non Fund Based	ST	128.00	BWR A3+ (Reaffirmation)	15Jan2021	BWR A3+ (Reaffirmation)	29Jun2020	BWR A3+ (Reaffirmation)	06Jun2019	BWR A3+ (Upgrade)
NFB SubLimit	ST	(32.50)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
		(5.00)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
		(5.00)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
		(17.00)	BWR A3+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
Grand Total		154.46	(Rupees One Hundred Fifty Four Crores and Forty Six lakhs Only)

Rating Advisory, as on 17Jan2022
Press Release, as on 17Jan2022
More than 12 months have elapsed since the last rating, it has not been possible to review the rating within the stipulated time, mainly due to the delay in receipt of essential information / documents required for review from the client.

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

• General Criteria
• Approach to Financial Ratios
• Engineering Procurement and Construction (EPC) Companies

Analytical Contacts
Madhu Sonthalia Senior Rating Analyst Board : +91 80 4040 9940 madhusonthalia@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@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	Axis Bank Ltd.	Cash Credit - Sanctioned	0.50	_	0.50
2	Axis Bank Ltd.	Bank Guarantee - Sanctioned	_	23.50	23.50
	Sub-Limit (Letter of Credit) - Sanctioned		(5.00)
3	Canara Bank	Cash Credit - Sanctioned	4.50	_	4.50
4	Canara Bank	Bank Guarantee - Sanctioned	_	22.50	22.50
	Sub-Limit (Letter of Credit) - Sanctioned		(5.00)
5	Canara Bank	CECL - Sanctioned	0.15	_	0.15
6	Canara Bank	GECL - Sanctioned	0.78	_	0.78
7	Karnataka Bank Ltd	GECL - Sanctioned	0.67	_	0.67
8	Karnataka Bank Ltd	Bank Guarantee - Sanctioned	_	17.00	17.00
	Sub-Limit (Letter of Credit) - Sanctioned		(17.00)
9	Karnataka Bank Ltd	Over Draft - Sanctioned	4.00	_	4.00
10	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	65.00	65.00
	Sub-Limit (letter of credit) - Sanctioned		(32.50)
11	State Bank Of India (SBI)	Term Loan - Sanctioned	1.40	_	1.40
12	State Bank Of India (SBI)	Cash Credit - Sanctioned	12.00	_	12.00
13	State Bank Of India (SBI)	GECL - Sanctioned	2.26	_	2.26
14	State Bank Of India (SBI)	CECL - Sanctioned	0.20	_	0.20
Total			26.46	128.00	154.46
TOTAL (Rupees One Hundred Fifty Four Crores and Forty Six lakhs Only)