RATING RATIONALE
09 Jun 2021
Apoorva Construction Co.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.50.00 Crs. of Apoorva Construction Co.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Secured Overdraft against Hypothecation Sanctioned | 25.00 | Long Term | BWR BB (Stable) |
| Sub Total | 25.00 | ||
| Non-Fund Based | |||
| Bank Guarantee Sanctioned | 25.00 | Short Term | BWR A4 + |
| Sub Total | 25.00 | ||
| Grand Total | 50.00 | (Rupees Fifty Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
The ratings assignment draw strength from the established business experience of the partners, established track of operations and moderate financial risk profile. However, the ratings are constrained concentration risk, execution risk and constitution of the firm.
BWR believes that Apoorva Construction Co. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' if the firm execute & complete its unexecuted work orders in a timely manner and revenue, profitability and financial risk profile, especially Tangible Net Worth show substantial improvement. The rating outlook may be revised to 'Negative' if there is a significant deterioration in the business and financial risk profile of the firm from its current level.
KEY RATING DRIVERS
BWR has principally relied upon the audited financial results up to FY20, provisional FY21 figures, projections of FY22 of Apoorva Construction Co., publicly available information and information/clarification provided by the firm’s management.
Credit Strengths:
- Experienced Partners :
The Partners, Mr. B Palakshiah and Mrs. S G Shashikala have around two decades of experience in construction industry. ACC was initially established as a proprietorship firm in the year 1997 and was promoted by Mr. B. Palakshaiah in the name and style of M/s. Mahindra Construction. The firm is expected to benefited from the established relationship of the partners with the customers and suppliers.
- Moderate financial risk profile :
Financial profile has been moderate in the past marked by Debt/TNW of 1.89 times as on 31 March 2021 and 31 March 2020. Total Debt majorly consist of working capital loan. Moderate debt service coverage ratio, marked by ISCR and DSCR of 3.65 and 2.00 times, respectively in FY21. Operating profit margins were also moderate at 9.44% and 9.65%, respectively in FY21 and FY20. However, the moderate financial is constrained on account of modest net worth due to capital withdrawal in the past. ACC recorded revenue of Rs 85.43 Crs in FY21 (Provisional), Rs 6.56 Crs in 2MFY22 and is expected to clock revenue ~Rs 100Crs in FY22on the back of outstanding order book.
Credit Risks:
- Concentration Risk :
The firm is exposed to customer concentration risk as top five customers contributed more than 85% in total revenue in FY19 and FY20. ACC is also exposed to geographical concentration risk as the business operation is confined to states of Karnataka. The firm is mainly engaged in construction of buildings, however it has diversified its business operation since last year by executing road contracts (< Rs 10 Crs in FY20). ACC is exposed to order book concentration risk as five of its major projects consist of ~ 69% of its total outstanding orderbook (Rs.189.59 Crs).
- Constitution of the firm :
Being a partnership firm, it is exposed to risks of continuity and withdrawal of capital (TNW decreased to Rs 8.49 Crs as on 31 March 2020 from Rs 9.64 Crs as on 31 March 2019 due to capital withdrawal of Rs 4.97 Crs in FY20).
- Execution risk :
The firm’s operations are susceptible to many external factors such as timely clearances from various regulatory bodies, the handover of sites, the mobilization of funds, the change in governments policies and directives, cost escalation due to departmental delays, and labour unrest . The effect of any of these could be substantial on the firm's timeline of the completion of projects, working capital utilization level and overall profitability.
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).
1. General Criteria (link - http://www.brickworkratings.com/download/Criteria-GeneralCriteria.pdf)
2. Approach to Financial Ratios (link - http://www.brickworkratings.com/download/Criteria-FinancialRatios.pdf)
3. Infrastructure Sector (link - https://www.brickworkratings.com/download/Criteria-Infrastructure.pdf)
4. Short Term Debt (link - https://www.brickworkratings.com/download/Criteria-ShortTermDebt.pdf)
RATING SENSITIVITIES
Positive: The ratings may be upgraded if the firm execute & complete its unexecuted work orders in a timely manner and revenue, profitability and financial risk profile, especially Tangible Net Worth show substantial improvement.
Negative: The rating may be downgraded in case there is a significant deterioration in the business and financial risk profile of the firm from its current level.
LIQUIDITY POSITION
Liquidity of the Company is adequate marked by low working capital loan utilization level of 54.68% in the past five months ended May 2021. Current ratios were moderate at above 1.0 times, in the past. Negative conversion cycle in the past on account of higher creditor days and low receivable days. Net Cash Accruals/Total Debt of 0.33 times and 0.32 times, respectively in FY21 and FY20. However, Cash and cash equivalents stood low at Rs 0.31 Crs and Rs 0.49 Crs , respectively as on 31 March 2020 and 31 March 2021. The Company has not availed the Covid 19 related RBI moratorium package. The Net Cash Accruals/Long Term Debt is expected to be more than 1 times in FY22 and working capital utilization is expected to be moderate in FY22.
PROFILEEstablished in 2010 as a partnership in Tumkur, Karnataka, Apoorva Construction Co. (ACC) is engaged in construction of buildings for various government departments like Karnataka Residential Educational Institution Society (KREIS), Karnataka State Police Housing (KSPH), Karnataka State Road Transport Corporation (KSRTC), Karnataka Public Works Department (KPWD) & Infrastructure Development Corporation Ltd (IDCL). Mr. B Palakshiah and Mrs. S G Shashikala are the promoter of the firm. The firm is registered as “Class 1 PWD Contractor & Engineer’s, Karnataka”.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 66.61 | 75.10 |
| EBITDA | Rs.Crs. | 6.43 | 6.96 |
| PAT | Rs.Crs. | 4.32 | 4.85 |
| Tangible Net Worth | Rs.Crs. | 8.49 | 9.64 |
| Total Debt/Tangible Net Worth | Times | 1.89 | 1.31 |
| Current Ratio | Times | 3.08 | 2.46 |
NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| CRISIL | 03 Feb 2021 | 42.00 | CRISIL B+/Stable/CRISIL A4; ISSUER NOT COOPERATING; Withdrawn |
| ICRA | 12 May 2021 | 11.00 | ICRA B+/Stable; ISSUER NOT COOPERATING; Withdrawn |
| S.No | Current Rating (2021) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2020 | 2019 | 2018 | ||||
| Fund Based | ||||||||||
| 1 | Secured Overdraft against Hypothecation - Sanctioned | Long Term | 25.00 | BWR BB(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Bank Guarantee - Sanctioned | Short Term | 25.00 | BWR A4+ | NA | NA | NA | |||
| Total | 50.00 | (Rupees Fifty Crores 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.
For More Information Contact:| Analytical Contacts | |
|---|---|
|
Thakur Trinath Prasad Pani Rating Analyst thakur.tp@brickworkratings.com |
Nagaraj K Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Secured Overdraft against HypothecationSanctioned | 25.00 | _ | 25.00 |
| 2 | Bank GuaranteeSanctioned | _ | 25.00 | 25.00 |
| Total | 25.00 | 25.00 | 50.00 | |
| TOTAL (Rupees Fifty Crores Only) | ||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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