Annu Projects Pvt. Ltd. (erstwhile Annu Infra Construct India Pvt Ltd)

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 85.00 Crs. of Annu Projects Pvt. Ltd. (erstwhile Annu Infra Construct India Pvt Ltd)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (23 Mar 2021)	Present
Fund Based	10.00	10.50	Long Term	BWR BBB- /Stable Reaffirmation	BWR BBB - /Stable Reaffirmation
Non Fund Based	75.00	74.50	Short Term	BWR A3+ Reaffirmation	BWR A3 + Reaffirmation
Grand Total	85.00	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

BWR has reaffirmed the long term rating of BWR BBB- with Stable outlook and the short term ratings of BWR A3+ for the bank loan facilities of Annu Projects Pvt. Ltd. (APPL). The reaffirmation of ratings takes into account the stable financial performance in FY22 whereby the company has achieved an operating income of Rs. 110.85 Cr. upto 31st March 2022. The rating factors in the extensive experience of the promoter in the business along with the company's established track record of operations, reputed client base, geographically diversified projects and healthy financial risk profile during FY21. However, the ratings are constrained due to decline in total operating income, EBITDA & net profits during FY21 and inherent risk associated with tender based business.

In FY21 the turnover of the company declined from Rs 124.71 Crs in FY20 to Rs. 100.80 Crs. in FY21, with an Y-o-Y decline of 19.17%, owing to the operations and billing being significantly impacted due to nationwide lockdown which continued until Q2FY21. Post Q2FY21, the company has expedited the pace of completion of construction projects. However, in spite of a decline in total operating income in FY21, the financial parameters of the company remained healthy with operating and net profit margins standing at 10.76% and 5.66% respectively. The company had a moderate tangible net worth of Rs. 42.02 Cr. and overall gearing of 0.17x in FY21. Debt protection metrics in FY21 remained healthy with ISCR (interest service coverage ratio) of 11.48x, DSCR (debt service coverage ratio) of 2.36x and current ratio of 1.55x. Each of these parameters have remained healthy in FY21 and is estimated to be in the healthy range in FY22 and FY23 as well as per the analyst estimates. The Outlook is Stable on account of revenue visibility for next 2-3 years led by orderbook to revenue ratio of 5.88x as on 31 Mar 2022 and comfortable credit profile.

For assigning the rating, BWR has relied upon the last 3 years of audited financials till FY21, Management approved key financials of FY22 and projections of FY23 and FY24, publicly available information and clarifications provided by management.

KEY RATING DRIVERS

Credit Strengths:

Long experience of promoters :
Mr. Sanjay Kumar Sarraf, the key promoter of the company, holds over 60% stake in the company and has an experience of around 2 decades in executing infrastructure and telecom related projects. The promoter has thorough knowledge of the market.
Adequate order book position :
The execution of progressively sizable orders over time has made APPL eligible to bid for higher-value orders by meeting the stipulated technical and financial eligibility criteria. As on 31.3.2022, the entity has reported an order book of Rs. 652.37 Crs. The ratio of the outstanding order book to total operating income (TOI) as on 31st Mar'22 was healthy, at 5.88 times, indicating revenue visibility for the next two-three years. The company regularly bids for new projects to boost its order book position. The total turnover of the company as on 31st Mar'22 stood at Rs. 110.85 Cr. with an EBITDA of Rs. 14.75 Cr. as per the company estimates.
Stable credit risk profile :
The turnover of the company declined from Rs 124.71 Crs in FY20 to Rs. 100.80 Crs. in FY21, with an Y-o-Y decline of around 19.17%, owing to the Covid-19 lockdown which hampered project execution. However, the financial risk profile of the company remained healthy in FY21 where operating and net profit margins stood at 10.76% and 5.66% respectively. In FY21, the company had a moderate tangible net worth of Rs. 42.02 Cr. on account of accumulated profits. In FY21, the company had a gearing of 0.17x, ISCR (interest service coverage ratio) of 11.48x, DSCR (debt service coverage ratio) of 2.36x and current ratio of 1.55x, each of these parameters have remained healthy in FY21 and are estimated to be in the healthy range in FY22 as well.

Credit Risks:

Tender-based nature of business, project execution risk, susceptibility of profitability to volatile raw material prices :
The company procures orders through tenders, wherein revenue and profitability are expected to remain susceptible to volatility in raw material prices to some extent. The company is also exposed to project execution risk in terms of time and cost overrun as the projects of government entities frequently get stalled/delayed because of issues such as difficulties in land acquisitions, environmental clearances and political interference.
Intense competition in industry :
The EPC industry is highly fragmented, with the presence of both organised and unorganised players providing similar services. Hence, the company faces competition from regional players, leading to intense competition and pricing pressures, which in turn can affect the company’s profitability margins.

ANALYTICAL APPROACH - Standalone

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: BWR may revise the ratings upward in the case there is substantial improvement in scale of operations and overall financial risk profile.

Negative: BWR may revise the rating downward in the case there is substantial decline in revenues, profitability and overall liquidity profile of the company.

LIQUIDITY INDICATORS - Adequate

Liquidity position of the company is adequate, marked by net cash accruals of Rs. 9.55 Cr. against a fixed repayment obligation of Rs. 1.92 Cr. and an EBITDA of Rs. 10.84 Cr. against an interest cost of Rs. 0.94 Cr. in FY21. In FY22, the company is expected to generate a net cash accruals of Rs. 10.50 Cr. against a fixed repayment obligation of Rs. 1.89 Cr. and an EBITDA of Rs. 12.31 Cr. against an interest cost of Rs. 1.22 Cr. In FY23 the company is estimated to generate net cash accruals of Rs. 10.52 Cr. against a fixed obligation of Rs. 1.98 Cr. and an EBITDA of Rs. 14 Cr. against an interest cost of Rs. 2.04 Cr. as per the analyst estimates. In FY22 the liquidity also gets cushion from the unutilized credit lines, as the average cash credit limit utilization in the last six months was approx 50%. The current ratio in FY21 stood at Rs. 1.55x which is above the ideal benchmark. For procuring new work orders, the company has the proposed enhancement of limits of Rs. 19.50 Cr. with HDFC Bank, which would further ease the liquidity in FY23.

ABOUT THE ENTITY

Incorporated in 2003, Annu Infra Construct India Pvt. Ltd. was formed to provide high quality Telecom Construction turnkey project execution for leading Indian telecom companies and laying sewer pipe lines by mechanized process. During FY-20, the company changed its name to Annu Projects Private Limited (APPL). APPL’s directors have over 20 years of experience in building civil infrastructure. The Company is also specialized for OFC laying, Trenching and Ducting through HDD method, construction of Mobile Tower and all Electrical & Electronics Equipment, and electrical wiring earthing etc.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	100.80	124.71
EBITDA	Rs.Crs.	10.84	13.76
PAT	Rs.Crs.	5.71	6.87
Tangible Net Worth	Rs.Crs.	42.02	36.31
Total Debt/Tangible Net Worth	Times	0.17	0.16
Current Ratio	Times	1.55	1.51

KEY COVENANTS OF THE FACILITY RATED

N/A

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

N/A

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	10.50	BWR BBB-/Stable (Reaffirmation)	23Mar2021	BWR BBB- Stable (Reaffirmation)	NA	NA	03Apr2019	BWR BBB- Stable (Assignment)
		0.00	NA	NA	NA	NA	NA	18Dec2019	BWR BBB- Stable (Reaffirmation)
Non Fund Based	ST	74.50	BWR A3+ (Reaffirmation)	23Mar2021	BWR A3+ (Reaffirmation)	NA	NA	03Apr2019	BWR A3+ (Assignment)
		0.00	NA	NA	NA	NA	NA	18Dec2019	BWR A3+ (Reaffirmation)
Grand Total		85.00	(Rupees Eighty Five Crores Only)

Rating Advisory, as on 28Mar2022
Rating Advisory published stating reasons for the delay in rating review.

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
Arjun Gupta Ratings Analyst arjun.g@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Annu Projects Pvt. Ltd. (erstwhile Annu Infra Construct India Pvt 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	Axis Bank Ltd.	Cash Credit - Sanctioned	1.00	_	1.00
2	Axis Bank Ltd.	Bank Guarantee - Sanctioned	_	14.00	14.00
3	HDFC Bank	Bank Guarantee - Sanctioned	_	24.00	24.00
4	HDFC Bank	Bank Guarantee - Proposed	_	14.50	14.50
5	HDFC Bank	Cash Credit - Sanctioned	2.50	_	2.50
6	HDFC Bank	Cash Credit - Proposed	5.00	_	5.00
7	Union Bank of India	Bank Guarantee - Sanctioned	_	22.00	22.00
8	Union Bank of India	Cash Credit - Sanctioned	2.00	_	2.00
Total			10.50	74.50	85.00
TOTAL (Rupees Eighty Five Crores Only)

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