Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 103.70 Crs. of Asian Construction Company.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (03 Nov 2021) |
Present | ||
| Fund Based | 46.30 | 45.70 | Long Term |
BWR BBB/Stable
Reaffirmation |
BWR BBB
/Stable Reaffirmation |
| Non Fund Based | 55.00 | 58.00 | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation |
| Grand Total | 101.30 | 103.70 | (Rupees One Hundred Three Crores and Seventy lakhs Only) | ||
Reaffirmation in the ratings of bank loans of Asian Construction Company (ACC or the firm) factors in moderate financial risk profile of the company as indicated by gearing, debt coverage ratios and liquidity amidst stagnant revenues, low profitability and decline in current ratio of the company. Gearing ratios, Total Debt/TNW and TOL/TNW, have improved from 1.32x and 1.81x respectively in FY20 to 0.56x and 1.38x respectively in FY22. Debt coverage ratios DSCR and ISCR have remained stable at 2.25x and 3.65x respectively during FY22 against 2.35x and 3.14x respectively during FY20. The revenues of the company have remained stagnant during the previous three years (FY20 through FY22) and the current ratio of the firm has declined from 2.80x in FY20 to 1.78x in FY22 and has been projected by the firm to decline further during FY23 and FY24. Although, the firm has projected an improvement in revenues, the firm has achieved revenues of Rs.68.40 crs during 7MFY23 (i.e upto October 2022). Accordingly, BWR expects that the company would only be able to reach previous years revenue levels given the provisional performance till date. Operating profit (EBITDA) margins have been between 7.31% to 7.55% during previous three years and have been projected to remain in the same range during FY23 and FY24.
KEY RATING DRIVERSCredit Strengths:
Asian Construction Company (ACC) was established in 1989 as a partnership firm by Mr. Ajit Singh Yadav, Mr. Surender Kumar Yadav and Mr. Daya Yadav. The partners have experience of more than 30 years in the field of civil construction and have executed various projects for the Government entities.
The firm has executed various projects for Government entities such as Central Public Works Department (CPWD), Military Engineer Services (MES), and Public Works Department (PWD) in regions of Madhya Pradesh, New Delhi, Bihar etc. The entity has been primarily working with Central and State Government Departments which reduces the counterparty risk for the firm.
ACC had orders in hand of Rs. 1080 Crs, as on 31 Oct 2022, which provides revenue visibility for the medium term. Apart from that, the firm has also placed its bids for certain contracts, for which final allotment is expected to be made in the next few months.
Businesses based on tenders floated by government departments, generally suffer from the risks of delayed payments. Also, since the contracts are awarded to lowest bidders, profitability margins are generally thin and face the risk of cost and time overruns due to non-cooperation by principal. Such businesses are also characterized by the presence of a large number of small and medium players creating intense competition for others.
The entity being a partnership firm is vulnerable to risks arising from changes in business structure and risk of withdrawal of capital in case of personal exigencies.
The revenues of the company have remained stagnant during the previous three years (FY20 through FY22) and the current ratio of the firm has declined from 2.80x in FY20 to 1.78x in FY22 and has been projected by the firm to decline further during FY23 and FY24. Although, the firm has projected an improvement in revenues, the firm has achieved revenues of Rs.68.40 crs during 7MFY23 (i.e upto October 2022). Accordingly, BWR expects that the company would only be able to reach previous years revenue levels given the provisional performance till date. Operating profit (EBITDA) margins have been between 7.31% to 7.55% during previous three years and have been projected to remain in the same range during FY23 and FY24.
For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the Rating Criteria detailed below
RATING SENSITIVITIES
Positive: The rating may be revised upward in case the revenues and profit show sustained improvement backed by healthy liquidity.
Negative: The rating may be revised downward in case revenue of the company deteriorates substantially from the current level or the company is not able to maintain its order book at a reasonable level. Rating may also be adversely affected in case of adequate deterioration in gearing and debt coverage ratios.
The average utilization of fund based working capital from banks is approx. 88.99% during six months ending Nov'2022. The current ratio of the company is moderate at 1.78x during FY22. The debt protection metrics are moderate with ISCR at 3.65x and DSCR at 2.25x in FY22.The company has projected the ISCR at 3.74 times and DSCR at 3.18 times in FY23.The net cash accruals were Rs 12.95 crs against debt obligation of Rs 2.70 crs.The company is expected to generate cash accruals of Rs.17.52 crs and 20.27 crs during FY23 and FY24 respectively against term debt obligations of Rs.2.17 crs and Rs.2.58 crs respectively.
Asian Construction Company was established in 1989 as a partnership firm involved in civil construction business by Mr. Ajit Singh Yadav, Mr. Surender Kumar Yadav and Mr. Daya Yadav. The partners have significant experience in the field of civil construction and have implemented various projects for Government entities such as Central Public Works Department (CPWD), Military Engineer Services (MES), and Public Works Department (PWD). The firm secures orders from public sector enterprises or their subcontractors through tender participation and precures orders mainly of Delhi, Uttar Pradesh and Madhya Pradesh.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 21-22 (Audited) |
FY 20-21 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 222.59 | 222.01 |
| EBITDA | Rs.Crs. | 16.80 | 16.23 |
| PAT | Rs.Crs. | 10.68 | 9.06 |
| Tangible Net Worth | Rs.Crs. | 53.43 | 44.29 |
| Total Debt/TNW | Times | 0.56 | 0.79 |
| Current Ratio | Times | 1.78 | 2.06 |
ICRA has downgraded the rating of Asian Construction Company under Issuer non cooperation on 28th April 2022.
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 | 45.70 |
BWR BBB/Stable
(Reaffirmation) |
03Nov2021 |
BWR BBBStable
(Reaffirmation) |
05Aug2020 |
BWR BBBStable
(Reaffirmation) |
16May2019 |
BWR BBBStable
(Assignment) |
| Non Fund Based | ST | 58.00 |
BWR
(0) |
03Nov2021 |
BWR A3+
(Reaffirmation) |
05Aug2020 |
BWR A3+
(Reaffirmation) |
16May2019 |
BWR A3+
(Assignment) |
| Grand Total | 103.70 | (Rupees One Hundred Three Crores and Seventy lakhs Only) | |||||||
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 | |
|---|---|
|
Moni Sharma Ratings Analyst moni.s@brickworkratings.com |
Saurabh Agarwal Manager - Ratings saurabh.a@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 | Bank of Baroda | Term LoanSanctioned | _ | _ | 0.00 | |
| 2 | Bank of Baroda | Over DraftSanctioned | 35.00 | _ | 35.00 | |
| 3 | Bank of Baroda | Bank GuaranteeSanctioned | _ | 58.00 | 58.00 | |
| 4 | Bank of Baroda | Gold CardSanctioned | 3.50 | _ | 3.50 | |
| 5 | Bank of Baroda | GECLSanctioned | 4.10 | _ | 4.10 | |
| 6 | Bank of Baroda | GECL 2.0Proposed | 3.10 | _ | 3.10 | |
| Total | 45.70 | 58.00 | 103.70 | |||
| TOTAL (Rupees One Hundred Three Crores and Seventy lakhs Only) | ||||||
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About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 12,000 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
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