Chatterjee Engineering

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.9.75 Crs. of Chatterjee Engineering

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Proposed	09.75	Long Term	BWR BB - (Stable)
Sub Total	09.75
Grand Total	09.75	(Rupees Nine Crores and Seventy Five lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable

BWR has essentially relied on Audited financials upto FY18, provisional financials for FY19, projected financials for FY20 and FY21, publicly available information and information & clarifications provided by management.

The rating draws comfort from experienced management, established track record in fabrication business with long standing established relationships with reputed clients ensuring repeat business. However the rating is constrained by relatively modest scale of operations, volatility in revenues and profitability depending upon the renewal of work contract and working capital intensive nature of operations.

BWR believes that Chatterjee Engineering 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' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down further and profitability is lower than envisaged impacting debt protection metrics.

KEY RATING DRIVERS

Credit Strength:

• Established track record: Firm is having established track record in the business for more than 3 decades. The partners have maintained long standing established relationships with reputed clients ensuring repeat business. Firm is also ISO 9001-2015 certified.

• Experienced Partners and management: Firm is managed by its two partners Mr. Rebati Chatterjee and Mr. Tushar Chatterjee who are having strong experience in the field of construction piping and equipment erection. They also have experienced management and team members having expertise in respective field.

• Reputed and established clientele: Firm executes contracts primarily for established clients like Reliance Industries Ltd., Vedanta Ltd., Larsen & Toubro Ltd., SES energy services, etc.

Credit Risk:

• Moderate scale of operation: Total Operating Income (TOI) showed fluctuating trend. TOI in FY18 increased by 53% from Rs. 40.34 Crs. in FY17 to Rs. 61.71 Crs. in FY18 and decreased by 63% in FY19 to Rs. 38.68Crs. 

• Revenue vulnerable to fluctuation in order composition: Firm’s revenue is dependent on the ability of the company to win new contract. It is vulnerable to cyclical nature of its business. Industry is highly fragmented resulting in stiff competition. Firm’s profitability is vulnerable to fluctuation in raw material prices and labour costs.

• Moderate financial risk profile: The firm’s gearing reduced to 1.50 times in FY18 from 1.77 times in FY17. On account of elongated receivable days the firm’s working capital requirement is very high.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

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

Going forward the firm’s ability to repay the debt obligation in a timely manner, increase the scale of operations and efficient working capital management will be the key rating sensitivities.

Positive:

• Substantial growth in revenue and profitability.

• Efficient working capital management and improving overall liquidity.

Negative:

• Decline in revenue and deterioration in profit margin.

• Stretch in working capital cycle impacting near term liquidity.

LIQUIDITY POSITION

Liquidity Position - Stretched

The current ratio of the firm for FY18 remained low at 0.26 times. On account of elongated receivable days the firm’s working capital requirement is very high.

PROFILE

Formed business entity in 1987 at Vadodara, Chatterjee Engineering is engaged in the business of fabrication, installation and commissioning of various types of industrial piping, structures and installation of static and rotary equipment.The firm is having Reliance industries limited and Vedanta limited as its major client.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 17-18	FY 16-17
Operating Revenue	Rs.Crs.	61.71	40.35
EBITDA	Rs.Crs.	4.06	3.49
PAT	Rs.Crs.	5.25	3.88
Tangible Net Worth	Rs.Crs.	17.42	13.50
Total Debt/Tangible Net Worth	Times	1.50	1.77
Current Ratio	Times	0.26	0.04

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
Fund Based
1	Cash Credit - Proposed	Long Term	9.75	BWR BB- (Pronounced as BWR Double B minus) (Outlook: Stable)	NA	NA	NA
Total			09.75	(Rupees Nine Crores and Seventy Five lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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

For More Information Contact:

Analytical Contacts	Investor Contacts
Siddharth Shah Lead Analyst siddharth.s@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Noman Agashiwala Associate Director-Ratings D : +91 22 6745 6630 B : +91 22 2831 1426, +91 22 2831 1439 noman.a@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Proposed	9.75	_	9.75
Total				9.75
TOTAL (Rupees Nine Crores and Seventy Five lakhs Only)