Ajay Associates

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.11.00 Crs. of Ajay Associates

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	05.00	Long Term	BWR BB - (Stable)
Sub Total	05.00
Non-Fund Based
Bank Guarantee - Sanctioned	06.00	Short Term	BWR A4
Sub Total	06.00
Grand Total	11.00	(Rupees Eleven 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

Brickwork Ratings has assigned the long term rating of BWR BB-/Stable and short term rating of BWR A4 to the bank loans of Ajay Associates. the rating takes into account the extensive experience of the promoter, association of entity with government departments and comfortable financial risk profile. However the rating is constrained by tender driven nature of business, high competition, low revenue visibility, wide fluctuations in revenue and constitution risk.

KEY RATING DRIVERS

Credit Strengths:

• Extensive experience of the promoter :

  The proprietor Mr. Ajay Kumar Singh is into this business for over a decade and has experience in executing tender based government projects.

• Association with government departments & projects :

  The firm carries out road construction & maintenance work for government agencies only which safeguards the firm from payment default risks.

• Comfortable Financial Risk Profile :

  The revenue of the entity increased from INR 11.21 Crores in FY18 to INR 93.88 Crores in FY19. Debt service metrics is above average, ISCR & DSCR stood at 6.73x & 3.32x in FY19 against 2.06x & 1.50x in FY18. Profit after tax stood at INR 5.26 crores in FY19 against INR 0.87 crores in FY18. The Entity is low geared, reflected by Total Debt/TNW of 0.33x in FY19 as against 0.78x in FY18 and TOL/TNW of 0.39x in FY19 as against 0.87x in FY18. Net cash accruals to total debt was 1.08 times in FY19 against 0.15 times in FY18.

Credit Risks:

• Constitution risk :

  Withdrawal of capital by the proprietor for any personal contingency would adversely affect the capital structure of the firm as there are limitations of proprietorship constitution in terms of capital and management.

• Tender driven nature of business and High Competition :

  Execution risk for newly awarded projects in a timely manner will be key to achieving growth in revenues and profits. Business certainty is dependent on the firms ability to successfully bid for the tenders as entire business is tender based and firm's topline depends on the successful bidding. The industry is highly competitive and characterized by the large number of players in the organised and unorganised segment.

• Low revenue visibility and wide fluctuations in revenue :

  Residual value of the orders in hand with entity is INR 17.34 Crores, which are to be executed within next 4-6 months. Currently entity has filed one new tender but there is uncertainty on successful bidding of the same. The revenue of the entity has been fluctuating over the last 3 years i.e. from INR 47.07 crores in FY17 to INR 11.21 crores in FY18. In FY19, Entity reported revenue of INR 93.88 crores.

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 entity to achieve projected revenue, ability to bid for new tenders, and manage liquidity would be key rating sensitivities.

• Positive :
  The outlook may be revised to positive if the entity's scale of operations, Net Profit, EBITDA improves as compared to the present level.

• Negative :
  The outlook may be revised to negative if entity's scale of operations, cash flow from operations, Net Profit and EBITDA margins deteriorates.

LIQUIDITY POSITION

1. The Entity has Cash & Bank balance of INR 3.37 crores in FY19. Net cash accruals for FY19 is INR 5.89 crores.

2. The CC utilization of last 6 months was around 100%.

3. The Entity has a current ratio of 3.91x in FY19.

4. Entity is having above average debt protection metrics, DSCR & ISCR of 3.32x & 6.73x in FY19 against 1.50x & 2.06x in FY18.

5. The Entity has a conversion cycle of 47 days in FY19.

The Overall Liquidity appears to be adequate.

PROFILE

Established in 1995 at Gorakhpur, Uttar Pradesh, as a proprietorship concern owned and managed by Mr. Ajay Kumar Singh who is a 50 year old graduate carrying rich experience of almost 2 decades in the same line of business. Ajay Associates is engaged in civil work construction through government tender and other allied activities for several government and public works departments in Uttar Pradesh.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	93.88	11.21
EBITDA	Rs.Crs.	6.22	2.64
PAT	Rs.Crs.	5.26	0.87
Tangible Net Worth	Rs.Crs.	16.45	13.49
Total Debt/Tangible Net Worth	Times	0.33	0.78
Current Ratio	Times	3.91	2.57

NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY

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	05.00	BWR BB- (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned	Short Term	06.00	BWR A4	NA	NA	NA
Total			11.00	(Rupees Eleven 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
• Infrastructure Sector
• Short Term Debt

For More Information Contact:

Analytical Contacts	Investor Contacts
Deepak Kumar Ratings Analyst deepak.k@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Satvinder Kumar Gakhar Associate Director - Ratings B : +91 11 2341 2232 satvinder.g@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	5.00	_	5.00
2	Bank Guarantee - Sanctioned	_	6.00	6.00
Total				11.00
TOTAL (Rupees Eleven Crores Only)