RATING RATIONALE
21 Nov 2019
Sree Builders
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.7.00 Crs. of Sree Builders
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Over Draft Sanctioned | 02.00 | Long Term | BWR B + (Stable) |
| Sub Total | 02.00 | ||
| Non-Fund Based | |||
| Bank Guarantee Sanctioned | 05.00 | Short Term | BWR A4 |
| Sub Total | 05.00 | ||
| Grand Total | 07.00 | (Rupees Seven Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that Sree Builders 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 revisd to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERS
BWR has essentially relied upon the audited financial statements of Sree Builders of FY17,FY18,FY19, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the proprietor, established track of operations and above average financial risk profile. However, the rating is constrained by the scale of operations, constitution of the entity and high competition from other established players in the market.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Credit Strengths:
- Locational Advantage :
The company/Firm is located in Bangalore cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost effective.
- Company’s Existence :
The company is in existence for 9 years and has seen complete business cycle.
- Debt Protection Metrics :
DSCR and ISCR of the company stand at 3.07 and 3.66 respectively in FY indicating company’s adequacy to meet its debt obligations.
- Account Receivables :
The company’s Account Receivable days of 12 is better than the average.
Credit Risks:
- Competition in the Industry :
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.
- Customer Concentration :
The customer concentration is high as top 3 customers contribute 77 % of sales.
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 ability of the entity to achieve growth in revenues, profits, profitability margins, effectively manage liquidity position and improve scale of operations would be key rating sensitivities.
Positive: Rating may be upgraded in case of substantial improvement in the scale of operations, revenue, profits, gearing ratios and profitability margin.
Negative: Rating may be downgraded in case the revenues of the company and profits substantially plunge the current level. Rating may also be downgraded if the company is not able to manage the liquidity risk.
LIQUIDITY POSITION
Current ratio of the company is 1.07 for FY19 which indicates that company can meet short term obligations.
PROFILECommenced business entity in 2009 at Bangalore,Sree builders is engaged in construction of Buildings. The registered office is located at New No. 10, Ground Floor, 9th Cross, Lakshmi Narayanapuram, Bangalore city, Bangalore district,Karnataka State. Mr. Muraliswamy the Proprietor of the entity,has to his credit 10 years’ experience in this business. Sree Builders posses Class 1 license of Karnataka state public works department.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 16.79 | 17.93 |
| EBITDA | Rs.Crs. | 1.57 | 1.58 |
| PAT | Rs.Crs. | 1.25 | 1.32 |
| Tangible Net Worth | Rs.Crs. | 5.34 | 3.75 |
| Total Debt/Tangible Net Worth | Times | 0.91 | 0.96 |
| Current Ratio | Times | 1.07 | 1.49 |
The terms of sanction include standard covenants normally stipulated for such facilities.
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 | Over Draft - Sanctioned | Long Term | 2.00 | BWR B+(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Bank Guarantee - Sanctioned | Short Term | 5.00 | BWR A4 | NA | NA | NA | |||
| Total | 07.00 | (Rupees Seven 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 | Investor Contacts |
|---|---|
|
Sanagapalli Mohana Krishna Chaitanya Lead Analyst mkchaitanya.s@brickworkratings.com |
Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com |
|
K Nagaraj Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
|
| 1-860-425-2742 | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Bank GuaranteeSanctioned | _ | 5.00 | 5.00 |
| 2 | Over DraftSanctioned | 2.00 | _ | 2.00 |
| Total | 7.00 | |||
| TOTAL (Rupees Seven 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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Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter 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.
Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.