RATING RATIONALE
28 Jan 2020
Advance Infrastructures Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.23.00 Crs. of Advance Infrastructures Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Cash Credit Sanctioned | 11.50 | Long Term | BWR BB (Stable) |
| Sub Total | 11.50 | ||
| Non-Fund Based | |||
| Bank Guarantee Sanctioned | 11.50 | Short Term | BWR A4 |
| Sub Total | 11.50 | ||
| Grand Total | 23.00 | (Rupees Twenty Three Crores Only) | |
**Details of Bank facilities are provided in Annexure-I KEY RATING DRIVERS
The rating draws strength from the business experience of the director's, established track of operations, healthy book order position and moderate financial risk profile aided by converting liability into compulsory conversion of preference shares. Rating, however is constrained by regulatory risks and delays in the project execution, relatively moderate scale of operation, working capital intensive nature of business, inherent risks related to gas distribution/ cross country pipeline construction Industry and high dependence upon sub contractors etc.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities. The Rating Outlook is expected to be stable, as the Company has a healthy order book position, which provides revenue visibility for FY20.
Credit Strengths :
Experienced promoters: The Company is being managed by Mr. Surendrakumar Sharma,having extensive experience in the said line of industry. The Company's longstanding existence since 2006 and established a track record of operations, has helped to develop strong relationships with suppliers and customers providing near term revenue visibility.
Moderate financial risk profile aided by converting liability into compulsory conversion of preference shares: The Company’s financial risk profile is characterized by improved gearing from 1.74x in FY18 against 1.42x in FY19 on account of moderate capital structure and low long-term debts. As on 31st March, 2019, the tangible net worth is Rs. 10.58 Crs and debt protection metrics have remained comfortable with ISCR at 2.78x and DSCR at 1.87x due to improved scale of operations and healthy profit margins. Additionally, the rating also draws comfort from the company's fund raising ability and established relationship with its investors.The Company is in advance stage to convert the liability to the tune of Rs. 14 Crores into compulsorily convertible preference shares (CCPS) from an existing investor VMN Buildcon Private Limited. Following the conversion of the company's financial risk profile is expected to improve with leverage further reducing and interest expense declining.
Healthy book order position: The Company has work orders on hand amounting to Rs. 588.48 Crs as on 31st October, 2019. As per the provisional financials of 7MFY20, total achieved revenue is Rs. 56.38 Crs. With large orders received and the Company ability to successful execution of projects will provide the revenue visibility in the current year.
Credit Risks:
Moderate Scale of Operations: The operating income of the company has remained moderate however it has witnessed healthy growth in past years on account of timely execution of orders. It has achieved the TOI of Rs. 59.22 Crs in FY19 against Rs. 40.81 Crs in FY18. Operating and net profit margins are comfortable with 12.06% and 4.25% respectively as on 31st March, 2019. Modest operating income has restricted the company's ability to gain economies of scale.
Inherent risks related to Industry: The Company is exposed to the risks inherent in the construction sector including slowdown in economy, volatile prices, risks of regulatory and delays in the project execution etc. The construction business is highly fragmented in nature and is characterised by intense competition among a large number of players. However, the competitive risk is partly mitigated by the company’s demonstrated track-record of gaining large size projects.
High dependence upon sub-contractors: At present, 15% of the total project value being executed, which signifies that the Company’s most of the ongoing projects are in nascent stage. Further, 70% of the overall order book consists of work which is largely sub-contracted, hence the dependence upon sub-contractors to timely execute the order book remains high..Going ahead the company’s ability to manage its subcontractor effectively so as to complete the projects as per schedule will be key monitorable.
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
Positive: The rating may be upgraded if the company is able to achieve significant growth in revenue and profitability backed by timely execute the contracts, sustained improvement in capital structure, coverage indicators and working capital management.
Negative: The rating may be downgraded, on account of lower than expected growth in revenues and profitability coupled with increase in the working-capital requirements of the company adversely impacting the liquidity position of the company.
LIQUIDITY POSITION
The Company's liquidity is comfortable ; supported by healthy profitability, ability to raise the funds and steady cash accrual generations from the business operation. Net cash accruals are Rs. 3.60 Crs and Rs. 3.66 Crs in FY18 & FY19 respectively. AIPL's utilization of fund based working capital facilities is ~90% over the last 6 months, reflecting the working capital intensity of operations. The company has current investments worth Rs. 2.85 Crs and Cash and Cash Equivalent were Rs. 0.87 crores providing near term liquidity cushion. Current ratio was 1.58 times as on 31st March 2019. Timely recovery of receivables improving overall liquidity and efficient management of its working capital requirements will be critical.
PROFILEAdvance Infrastructures Private Limited (AIPL) was incorporated in September-2006 by Mr. Surendrakumar Sharma at Vadodara, Gujarat. The Company is engaged into laying cross country EPC hydrocarbon pipeline projects, City gas distribution network, and Construction/erection services in Oil & Gas, Civil & Infrastructures, Telecom & Power Transmission sectors and urban development works. It is an ISO 9001:2015 & OSHAS 18001 : 2007 Certified Company and executes around 50% of the work on sub-contact basis.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 59.22 | 40.81 |
| EBITDA | Rs.Crs. | 7.14 | 6.47 |
| PAT | Rs.Crs. | 2.52 | 2.24 |
| Tangible Net Worth | Rs.Crs. | 10.58 | 8.13 |
| Total Debt/Tangible Net Worth | Times | 1.42 | 1.74 |
| Current Ratio | Times | 1.58 | 1.40 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2020) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - Sanctioned | Long Term | 11.50 | BWR BB(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Bank Guarantee - Sanctioned | Short Term | 11.50 | BWR A4 | NA | NA | NA | |||
| Total | 23.00 | (Rupees Twenty Three 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.
Hyperlink/Reference to applicable Criteria : For More Information Contact:| Analytical Contacts | Investor Contacts |
|---|---|
|
Kunjal Dabhi Ratings Analyst B : +91 79 66174046 / 47 kunjal.r@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 CreditSanctioned | 11.50 | _ | 11.50 |
| 2 | Bank GuaranteeSanctioned | _ | 11.50 | 11.50 |
| Total | 23.00 | |||
| TOTAL (Rupees Twenty Three 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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