Kailash Construction Co.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.20.00 Crs. of Kailash Construction Co.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	03.00	Long Term	BWR B + (Stable)
Sub Total	03.00
Non-Fund Based
Bank Guarantee - Sanctioned	17.00	Short Term	BWR A4
Sub Total	17.00
Grand Total	20.00	(Rupees Twenty Crores 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 assigned a long term rating of BWR B+ and short term rating of BWR A4 and a Stable outlook for the bank loan facilities of Kamla Construction. 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 and profit margins show lower than expected figures.

KEY RATING DRIVERS

Credit Strengths:

• Proprietor Experience :

  The proprietor Mrs Ramila Pravin Shah has an experience of more than two decades in the industry. The proprietor experience provides much-needed sustainability and consistency in operations.

• Moderate Profitability and Coverage Ratios :

  The profit margins of the firm are moderate.The NPM and OPM being 4.06% and 7.69% in FY19(A).ISCR and DSCR are at 2.13x in FY19 are adequate and on an increasing trend indicating the adequacy of the firm to service interest obligation. The current ratio is within acceptable limits and stands at 1.29x in FY19(A).As on 31st August 2019 the company's book order book stood at Rs 34.14 Crs . Kailash Construction is a part of Shah Group which consists of 5 other entities involved in a similar line of business which gives the much-needed group support.

Credit Risks:

• Tender based operations :

  Tender based operations exhibit an inherent risk of uncertainty of revenue due to the nonavailability of information from competitors. This affects the cyclicality of the orders. Further, the business remains exposed to fluctuations in profit due to the volatile nature of the cost of inputs like cement, iron. Any adverse fluctuation may impact the profitability of the business.

• Geographical & Customer Concentration :

  The sales of the firm are geographically constrained. It has operations only in Mumbai, MH, thus restricting the geographical boundaries for revenue. 100% of revenue is derived from projects of MCGM. The sales are highly susceptible to any socio-economic, political or administrative changes.

• Constitution :

  An inherent risk of withdrawal of capital by the partners as it is a Proprietorship Firm. The firm is exposed to the withdrawal of Capital, which would adversely affect the capital structure of the firm.

• Low Tangible Net Worth and High Gearing Ratio :

  The firm's tangible net worth is low at Rs 2.19Crs In FY19. The total debt levels in FY19 stand at Rs 6.68 Crs thereby resulting in higher gearing ratio of 3.05x in FY19.

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 ability of the Company to accelerate its scale of operations, increase its profit margins, achieve its financial projections, efficiently manage its working capital and cash flows for timely servicing of interest/debt obligations and strengthening of overall financial risk profile shall be the key rating sensitivities.

Positive: The ratings may be upgraded in case the revenue, profitability and capital structure of the company show significant improvement.

Negative: The rating may be downgraded in case there is a significant deterioration in the business revenue and financial risk profile of the company.

LIQUIDITY POSITION

ADEQUATE 

The liquidity profile of the company is adequately driven by a moderate current ratio of 1.29x in FY19. The cash and cash equivalents in FY19 are Rs 0.87Crs and average CC utilization is 20%.

PROFILE

Kailash Construction was established in 1995 as a proprietorship firm.The proprietor Mrs Ramila Pravin Shah is well experienced.Successful implementation of these projects has helped the group to establish good relationship with its key clients. The management risk is minimal as daily operations are managed by experienced proprietor.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	14.50	11.56
EBITDA	Rs.Crs.	1.11	0.50
PAT	Rs.Crs.	0.59	0.19
Tangible Net Worth	Rs.Crs.	1.21	0.59
Total Debt/Tangible Net Worth	Times	6.23	2.28
Current Ratio	Times	1.27	1.06

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 - Sanctioned	Long Term	03.00	BWR B+ (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned	Short Term	17.00	BWR A4	NA	NA	NA
Total			20.00	(Rupees Twenty Crores 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
• Approach to Financial Ratios
• Short Term Debt

For More Information Contact:

Analytical Contacts	Investor Contacts
Nagesh K Ratings Analyst B : 202267456 Ext : 619 nagesh.k@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Sushil Kumar Chitkara Associate Director - Ratings B : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@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 - Sanctioned	3.00	_	3.00
2	Bank Guarantee - Sanctioned	_	17.00	17.00
Total				20.00
TOTAL (Rupees Twenty Crores Only)