Ajay Kumar Sood Engineers & Contractors

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.12.27 Crs. of Ajay Kumar Sood Engineers & Contractors

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	04.47	Long Term	BWR B + (Stable)
Sub Total	04.47
Non-Fund Based
Bank Guarantee - Sanctioned	07.80	Short Term	BWR A4
Sub Total	07.80
Grand Total	12.27	(Rupees Twelve Crores and Twenty Seven 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 believes that Ajay Kumar Sood Engineers & Contractors 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 and profit margins show lower than expected figures.

BWR believes that Ajay Kumar Sood Engineers & Contractors 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 there is any deterioration in the financial risk profile of the firm.

KEY RATING DRIVERS

Credit Strengths:

• Experienced Management :

  The firm is being managed by Mr. Sanjay Kumar Sood and other partners combined having experience of more than 3 decades in the line of activity. BWR believes the long experience of the partners will assist the firm in maintaining healthy relations with the stakeholders in medium term.

• Moderate Financial Risk Profile :

  The firm had Tangible Net Worth of Rs. 4.67 Cr as on 31.03.2019. Gearing of the firm has improved with TD/TNW at 1.22 times in FY19 (2.27 times in FY18) and TOL/TNW at 1.60 times in FY18(2.50 times in FY18). Coverage ratio improved with ISCR at 2.43 times for FY19 (1.21 times in FY18). Current Ratio as on 31.03.19 stood at 1.63 times.

Credit Risks:

• Tender Based Business :

  The firm acquires orders mainly by bidding for tenders foated by government authorities. The firm's scale of operations is hence susceptible to its ability to successfully bid for new tenders and timely completion of projects. Moreover, the firm is totally dependent on timely payments by government to the firm for the work undertaken.Delay in payments can have a negative impact on the business.

• Low Scale of Operations and weak order book :

  The firm has low scale of operations. The operations of the firm are also restricted to the state of Himachal Pradesh. For FY19 the firm achieved the revenue of Rs.17.96 Cr. Orders in hand as on date stood approximately at Rs. 16.80 Cr.

• Susceptibility to Withdrawal of Capital :

  Being a firm, there is always a risk of withdrawal of capital by the partners from the firm at the time of personal contingencies.

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 firm to increase its revenue, profitability and order book along with improvement in financial risk profile would be key rating sensitives.

Positive: The ratings may be upgraded if the revenue and profitability show sustained growth along with increase in order book.

Negative: The ratings may be downgraded if their is any deterioration in the financial risk profile of the firm.

LIQUIDITY POSITION

Stretched
1. The firm had cash & cash equivalents of Rs. 0.10 Cr as on 31.03.2019.

2. Long term Loans/limits availed from banks as on 31.03.2019 stood at Rs. 4.72 Cr. The firm had also outstanding Non Interest bearing unsecured loans of Rs. 0.60 Cr from family/friends as on .31.03.2019.

3. Current Ratio as on 31.03.2019 stood at 1.63 times.

4. Average utilization of the Cash Credit limit for the last 6 months was almost 100%.

5. Coverage Ratio was moderate with ISCR at 2.43 times for FY19.

6. Conversion cycle of the firm reduced from 59 days in FY18 to 7 days in FY19 with days receivable reducing from 105 days to 54 days in FY19 and inventory days reducing from 37 days in FY18 to 15 days in FY19.

7.  The firm had NIl subsidiary/associate concerns as on 31.03.2019.
 

PROFILE

Ajay Kumar Sood Engineers & Contractors is a partnership firm having its registered office at Sanjay Sadan, Shimla, Himachal Pradesh. The firm has three partners Mr. Sanjay Kumar Sood (40%), Mr. Jay Kumar Sood (30%) and Ms. Rama Sood (30%). The firm is engaged in Civil Construction works such as construction and maintenance of roods, walls buildings etc. The firm majorly undertakes government contracts from the government of Himachal Pradesh.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	17.96	12.45
EBITDA	Rs.Crs.	2.00	1.43
PAT	Rs.Crs.	1.01	0.16
Tangible Net Worth	Rs.Crs.	4.67	4.09
Total Debt/Tangible Net Worth	Times	1.22	2.27
Current Ratio	Times	1.63	1.78

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	04.47	BWR B+ (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned	Short Term	07.80	BWR A4	NA	NA	NA
Total			12.27	(Rupees Twelve Crores and Twenty Seven 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
• Approach to Financial Ratios

For More Information Contact:

Analytical Contacts	Investor Contacts
Gunsahib Singh Ratings Analyst B : +91 172 5032 295 / 6 Ext : 104 gunsahib.s@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
V.K.Kukreja Associate Director - Ratings B : +91 11 2341 2232 kukreja.vk@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank Guarantee - Sanctioned	_	7.80	7.80
2	Cash Credit - Sanctioned	4.47	_	4.47
Total				12.27
TOTAL (Rupees Twelve Crores and Twenty Seven lakhs Only)