Central India Engineering

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.36.02 Crs. of Central India Engineering

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Cash Credit - Sanctioned	00.20 05.50	Long Term	BWR BB (Stable)
Sub Total	05.70
Non-Fund Based
Bank Guarantee - Sanctioned Bank Guarantee - Sanctioned	09.00 21.32	Short Term	BWR A4 +
Sub Total	30.32
Grand Total	36.02	(Rupees Thirty Six Crores and Two 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 Central India Engineering 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.

KEY RATING DRIVERS

Credit Strengths:

• Established track record backed by experienced management leading to reputed clientele base :

  CIE enjoys reputed clientele base in the form of government and semi government departments. This is due to established track record of the Concern backed by good business acumen of management in the present line of business.

• Debt protection metrics ratios :

  The concern has reported moderate ISCR at 3.00x in FY19 as against 2.45 x in FY18 and DSCR at 1.96x in FY19 as against 1.75x in FY18. However, it has reduced marginally ISCR 2.05x and DSCR 1.34x in FY20.

• Moderate Proprietor,s Capital & capital structure :

  TNW stood moderate at Rs. 10.14 Crs and Rs. 7.59 Crs respectively in FY19 and FY18. However, it is an unsecured loan of Rs. 9.04 Crs in FY19 which will be kept in the business for the medium term. Capital Structure is indicated by gearing of 1.07x in FY19 from 1.59x in FY18. It is further expected to increase to 1.73x in FY20 on a provisional basis. However TNW analyzed stood moderate at 0.77x in FY18, 0.43x IN FY19, and 0.68x in FY20 on provisional basis.

• Moderate profitability margins :

  OPM moderate to 11.59% in FY19 from 10.41% in FY18 and NPM also stood at 8.07% in FY19 from 6.80% in FY18. However, on provisional basis OPM has increased to 17.64% and NPM has reduced marginally to 7.52% in FY20.

• Moderate liquidity position :

  Liquidity remained moderate was observed in the current ratio to 3.34x in FY19 from 1.65x in FY18. It appears to reduce to 2.27x in FY20 on a provisional basis.

Credit Risks:

• Susceptibility to risks inherent in tender based business :

  Susceptibility to risks inherent in tender based business: Since the entire operations are tender based, the business depends on the ability to bid for tenders successfully. Also, the majority of orders are from Government agencies, resulting in high dependence on timely clearances for tenders and payments. Revenue and profitability are expected to remain susceptible to risks inherent in tender based operations.

• Fluctuating Revenue & profitability :

  The revenue is in the fluctuating trend from Rs. 34.89 Crs in FY18 to Rs. 43.01 Crs in FY19 to Rs. 28.69 Crs in FY20 on a provisional basis. Fluctuating profitability from Rs. 2.37 Crs in FY18, Rs. 3.47 Crs in FY19 to Rs. 2.16 crs in FY20 on a provisional basis.

• High Working capital management :

  It is marked by GCA/ sales of 105% in FY20 on a provisional basis. It is due to accumulated retention money, mobilization advance & money paid for performance security for the new orders.

• Intensely competitive nature of the industry :

  The industry is characterised by numerous small and big players in the EPC business segment resulting in intense competition for the Company.

• Effects of COVID-19 :

  The Company’s business is correlated with the overall economic activity level of the country. Given the current lockdown, the country's economic activities have come to an almost standstill. The broad picture regarding the fallout of the pandemic is yet to emerge. But, this is most likely to bring down the growth rate of the Indian economy and affect the Company’ business operations due to delay in execution, a possible increase in labour cost due to migrant laborers’ exodus to their native places, the possibility of a decline in new projects and an increase in raw materials’ cost due to supply chain disruptions

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

BWR has factored in the standalone business parameters and financial risk profile of the entity to arrive at the rating. Reference may be made to the Rating Criteria hyperlinked detailed below (hyperlinks provided at the end of this rationale). 

Going forward, the ability of the entity to accelerate its scale of operations, increase its profit margins, compliance of bank's sanction terms, 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 over short to medium term.

Positive: The rating outlook may be revised to positive or rating may be upgraded if the company is able to sustain its growth and profit margins.  Any additional infusion of share’s capital would help to improve its capital structure of the company.

Negative: The rating outlook may be revised to negative or rating may be downgraded if the entity achieves lower revenue and profit margins than projected. 

LIQUIDITY POSITION

The liquidity position of Central India Engineering (CIE) is adequate The cash and cash equivalents stood at Rs. 0.09 Crs  in FY19. The current ratio of the company stands at 3.34x in FY19. The average utilisation of the working capital stood at 85 %. The entity does not have any term loan facility.

PROFILE

M/S Central India Engineering (CIE) was founded in 1998 as a proprietorship concern. It is located at Nagpur, Maharashtra. Mr. Dilip Rathi is the proprietor of the concern. He has over two decades of experience in executing infrastructure construction projects on EPC, turnkey projects, and PPP projects. It is engaged in Engineering, Procurement, Survey, design, construction automation, testing, commissioning, and trial run of water supply projects.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	43.07	34.93
EBITDA	Rs.Crs.	4.99	3.64
PAT	Rs.Crs.	3.47	2.37
Tangible Net Worth	Rs.Crs.	10.14	7.59
Total Debt/Tangible Net Worth	Times	1.07	1.59
Current Ratio	Times	3.34	1.65

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 Cash Credit - Sanctioned	Long Term	00.20 05.50	BWR BB (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned Bank Guarantee - Sanctioned	Short Term	09.00 21.32	BWR A4+	NA	NA	NA
Total			36.02	(Rupees Thirty Six Crores and Two 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
• Short Term Debt
• Infrastructure Sector

For More Information Contact:

Analytical Contacts	Investor Contacts
Ushadevi V Dogra Ratings Analyst D : +91 22 6745 6650 B : +91 22 2831 1426, +91 22 2831 1439 ushadevi.d@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	5.50	_	5.50
2	Bank Guarantee - Sanctioned	_	21.32	21.32
3	Cash Credit - Sanctioned	0.20	_	0.20
4	Bank Guarantee - Sanctioned	_	9.00	9.00
Total				36.02
TOTAL (Rupees Thirty Six Crores and Two lakhs Only)