Nila Infrastructures Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 188.84 Crs. of Nila Infrastructures Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (19 Mar 2021)	Present
Fund Based	111.29	129.42	Long Term	BWR BBB+ /Stable Reaffirmation	BWR BBB + /Stable Reaffirmation
Fund Based	(2.00)	(2.00)	Long Term	BWR BBB+ /Stable Reaffirmation	BWR BBB + /Stable Reaffirmation
Non Fund Based	94.42	59.42	Short Term	BWR A2 Reaffirmation	BWR A2 Reaffirmation
Grand Total	205.71	188.84	(Rupees One Hundred Eighty Eight Crores and Eighty 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 has reaffirmed 'BWR BBB+/Stable/A2' rating for the bank facilities of Nila Infrastructures Limited.

The ratings continue to draw strength from its operational track record, experienced management, healthy order book position, established clientele-majorly government bodies/PSUs and its comfortable financial risk profile. However, the ratings continue to be constrained by the moderate scale of operations, exposure to project execution risks, uncertainty in revenue streams emanating from the tender based nature of business, susceptibility to economic downturns, its exposure to changes in regulatory framework related to PPP models and working capital intensive nature of operations. BWR also notes Covid 19 impact on the company’s FY21 performance which has an impact across the sector and revival of the industry resulting in the normalization of business operations from H2FY22 onwards.

The ‘Stable’ outlook indicates BWR’s opinion that the Company will continue to benefit from its long track record of operations and the experience of its management and promoters. BWR expects that NIL’s business risk profile will be maintained over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Experienced management & established track record :
The Company is promoted by Mr. Manoj Vadodaria and Mr. Kiran Vadodaria, who have over three decades of experience in this industry. The Company has established strong relationships with reputed corporates and government agencies. NIL has developed a reasonably sustainable business model of the construction of affordable housing projects and the development of various infrastructures.
Established track record and healthy order book position indicating medium-term revenue visibility :
The projects are well diversified in terms of Affordable Housing Projects, Slum Rehabilitation Projects, Multi-level Parking, Medical College Campus, BRTS Stations, Office/Commercial Complexes etc. The Company also constructs low-complexity civil structures for meritorious civic authorities and reputed corporates. The company’s client portfolio majorly comprises various government and semi-government entities resulting in low counterparty credit risk. NIL has a healthy unexecuted order book of around Rs. 659.26 Crs as on March 31, 2022 against Rs. 555.84 Crs as on March 31, 2021 providing medium-term revenue visibility. The company is focusing on the affordable housing segment which is evident as 92% of its orders are for the affordable housing segment. Further, the company has transitioned from the EPC to a better-margined PPP mode where PPP orders are around 92% orders out of total unexecuted order book of Rs 659.26 crs.
Comfortable financial risk profile :
Inline with the overall industry scenario, the performance of the company was severally impacted during the Covid period. Further, the heavy monsoon and reverse migration have also caused delays in project completion. However, the Company was able to achieve pre covid levels performance from H2FY22. The company has booked revenue of Rs. 106.13 Crs in FY22 against Rs. 111.11 Crs in FY21. Despite the marginal decrease in revenue, the company was able to record a higher profit margin in FY22 due to reduced input costs and reduced financial costs. The company has booked net profit of Rs. 2.51 Crs in FY22 against net profit of Rs. 0.49 Crs in FY21. Net worth of the company is increasing Y-O-Y due to the retention of profits. Tangible Net Worth stood at Rs. 146.47 Crs in FY22. Gearing has marginally improved in FY22 to 0.74 times compared to 1.01 times in FY21 due to significant debt prepayment during FY22.

Credit Risks:

Project execution risks :
The business is cyclic in nature and prices are mainly driven by the demand and supply factors. Timely supply of raw materials like cement, steel, bricks are essential for timely completion of the projects. Shortage of labour (unskilled and skilled/technical personnel), raw material and lack of timely funding may delay the execution of projects of the Company. Further, the approval process and time for projects are generally uncertain which may delay the execution and thereby affect the performance of the Company.
Susceptible to tender-based nature of business :
There is considerable competition in the business, which leads to aggressive bidding. This may lead to loss of contracts or place pressure on margins. However, the company is focusing on Slum Redevelopment and Rehabilitation on PPP basis segment of the Affordable Housing where the competition is relatively low which gives scope for reasonable margins. The segment may witness growing competition in the times to come. Most of the projects of the company are tender-based and hence, the Company's ability to bid successfully is crucial. Currently, NIL is executing projects in Gujarat and Rajasthan. The Company is susceptible to any slowdown in tenders floated in these regions or changes in the state government policies. Further, owing to the tender-based nature of the business, the Company is also susceptible to uncertainty in revenue streams. The company’s performance is exposed to economic downturn, input cost fluctuation and supply chain disruption.

ANALYTICAL APPROACH - Standalone

While assigning the Ratings, BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: Upgrade in rating is unlikely in the near term. BWR may upgrade NIL’s rating if the company demonstrates a significant improvement in its liquidity position with a healthy cushion in Fund Based limits and if the interest coverage improves to more than 4.0 times on a sustained basis.

Negative : Negative pressure on the ratings could also arise if the execution is lower than expected, or there is an increase in the working capital cycle. Pressure on the ratings could also materialize if the financial risk profile weakens due to a slowdown in the execution pace, moderation in profitability, and elongation of working capital cycle leads to a significant increase in the working capital requirement and impacts the cash flows.

LIQUIDITY INDICATORS - Adequate

NIL has an adequate liquidity profile. Working capital utilization is average at around 80% for the last 12 months. Net cash accruals to total debt was 0.05 times and the Current ratio was 1.36 times as on 31 Mar 2022. Further, it is noted that despite the adverse economic conditions due to pandemics, the Company has significantly reduced the overall debt by ~Rs. 34.00 crore during FY22.

ABOUT THE ENTITY

Incorporated in February 1990 at Ahmedabad, Nila Infrastructures Limited (NIL) is the flagship company of the Ahmedabad-based Sambhaav Group. NIL started operations as a real estate developer in Gujarat and presently the Company is a diversified infrastructure entity operating in Gujarat and Rajasthan. It is listed on BSE and NSE. Mr. Manoj Vadodaria is the Chairman & Managing Director and Mr. Kiran Vadodaria is the Director of the Company. The Company is also engaged in turnkey urban infrastructure development and the main focus is on Affordable Housing projects. In addition, the Company also undertakes construction works for selected reputed corporate developers.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	93.35	101.12
EBITDA	Rs.Crs.	7.52	9.07
PAT	Rs.Crs.	2.51	0.49
Tangible Net Worth	Rs.Crs.	146.47	143.90
Total Debt/Tangible Net Worth	Times	0.74	1.01
Current Ratio	Times	1.36	2.20

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	129.42	BWR BBB+/Stable (Reaffirmation)	19Mar2021	BWR BBB+ Stable (Reaffirmation)	13Jan2020	BWR BBB+ Stable (Reaffirmation)	NA	NA
FB SubLimit	LT	(2.00)	BWR BBB+/Stable (Reaffirmation)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	59.42	BWR A2 (Reaffirmation)	19Mar2021	BWR A2 (Reaffirmation)	13Jan2020	BWR A2 (Reaffirmation)	NA	NA
Grand Total		188.84	(Rupees One Hundred Eighty Eight Crores and Eighty Four lakhs Only)

Advisory for the delay in the periodic review was issued on 30 Mar 2022

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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
Priya Depala Senior Rating Analyst priya.d@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Nila Infrastructures 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	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	12.00	_	12.00
2	Bandhan Bank	Line of Credit - Sanctioned	80.00	_	80.00
3	Punjab National Bank	Bank Guarantee - Sanctioned	_	13.00	13.00
4	Punjab National Bank	Over Draft - Sanctioned	2.00	_	2.00
5	Shinhan Bank	Over Draft - Sanctioned	8.80	_	8.80
6	State Bank Of India (SBI)	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	1.85	_	1.85
7	State Bank Of India (SBI)	Dropdown OD - Sanctioned	11.14	_	11.14
8	Union Bank of India	Bank Guarantee - Sanctioned	_	19.42	19.42
9	Union Bank of India	Over Draft - Sanctioned	2.00	_	2.00
10	Yes Bank	Term Loan - Sanctioned	9.80	_	9.80
11	Yes Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	1.83	_	1.83
12	Yes Bank	Bank Guarantee - Sanctioned	_	27.00	27.00
	Sub-Limit (Over Draft ) - Sanctioned	(2.00)
Total			129.42	59.42	188.84
TOTAL (Rupees One Hundred Eighty Eight Crores and Eighty Four lakhs Only)

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