RATING RATIONALE
27 May 2022
Shree Guru Infracon Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.24.70 Crs. of Shree Guru Infracon Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Cash Credit Sanctioned | 10.00 | Long Term | BWR BB - (Stable) |
| Sub Total | 10.00 | ||
| Non-Fund Based | |||
| Bank Guarantee Sanctioned | 14.70 | Short Term | BWR A4 |
| Sub Total | 14.70 | ||
| Grand Total | 24.70 | (Rupees Twenty Four Crores and Seventy lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR has principally relied upon the Audited Financial statements of 9 months as a proprietorship concern and 3 months as a private limited company for FY21, Management Certified Provisional financials for FY22 & Projected Financials for FY23, and information/ clarification provided by the firm's management.
The rating assignment factors in the modest scale of operation, healthy work orders on hand, and adequate liquidity position. However, the company is exposed to the risk related to delay in the execution of work orders, timely collection from respective government departments, and vulnerability in the profit margins due to fluctuation in the raw material prices. This is partially offset by experienced promoters in the civil construction business and established relations with customers.
BWR believes that Shree Guru Infracon Pvt. Ltd. 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:
-
Extensive track record of Promotors in civil construction industry :
Promotors of the company have more than 10 years of experience in the construction business which helps the company to forge a healthy relationship with both suppliers and the customers i.e. various government agencies, resulting in better execution and implementation of projects. The experience of the Promotors shall help the firm in bagging new orders over the medium term.
-
Modest scale of operation and and healthy work orders :
Shree Guru Infracon Pvt. Ltd. has been catering to reputed government clients such as projects for Ex Eng R&B Division, RITES LTD, Radhe Associate, Apex Tarmac Pvt Ltd, etc. As a proprietorship firm, Guru Infracon Co. reported the total operating income (TOI) of Rs. 42.91 Crores as on 31st December,2020 and as a Private Limited company Shree Guru Infracon Pvt. Ltd. recorded the TOI of Rs. 13.35 Crores for the three months ending on 31st March 2021. On a consolidated basis, the operating income remained at a modest scale i.e Rs. 56.26 Crs for FY21. On a provisional basis, the revenue remained at Rs. 52.33 Crs as on 31st March, 2022. . The company has healthy work orders on hand worth Rs. 130.94 crs as on 25th March 2022, which shows the revenue visibility in the medium term since the construction work of multiple projects is in progress.
-
Susceptibility to tender-based operations :
Revenue and profitability entirely depend on the ability to win tenders. Also, entities in this segment face intense competition, thus requiring them to bid aggressively to get contracts, which restricts the operating margin to a moderate level. Also, the cyclicality inherent in the construction industry and volatilities in the prices of raw materials adversely pressure the profit margins of the company.
-
Exposes to execution risk :
The company’s operations are susceptible to many external factors such as timely clearances from various regulatory bodies, the handover of sites, labor unrest, and other factors. Any delays in the execution of work orders may impact the timely collection, cost overrun, and liquidity profile of the company.
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:
- Substantial and sustained growth in revenue and profitability.
- Timely completion of project without cost overrun.
- Ability to bag fresh new projects.
Negative:
- Decline in revenue and deterioration in profit margins.
- Delay in project execution with a cost overrun.
Liquidity: Adequate
The company generated adequate cash accrual against the current maturity of debts. Net cash accruals stood at Rs. 1.40 crs before the takeover (business transfer) and after the takeover (Business Transfer) net cash accruals stand at Rs. 0.80 crs in FY21. Average Cash credit utilization remained high being a working capital intensive nature of the operation, however, the liquidity is supported with additional availment of Adhoc limits of Rs. 3.50 Crs for two months during FY22 and covid line of emergency. Going further, timely collection of receivables and efficient management of working capital facilities will remain a key rating sensitivity.
PROFILEShree Guru Infracon Pvt Ltd was incorporated on 11th Nov, 2020. Later on, the company took over (Business transfer ) the Business and Business Asset of "Guru Infracon Co." - a sole proprietorship as going concern firm on 1st Jan 2021 by execution of a business transfer agreement that is engaged in a similar business of civil construction. Currently, the company is managed by its 2 major directors namely Mr. Pareshkumar R Patel and Mr. Chetankumar D Patel with more than 10 credit years of experience in this line of business. The company is engaged in the business of Civil construction like roads and buildings, bridges, etc. The company is recognized and approved as an "AA" Class Government contractor under Special category III - Bridge works and Special category II - Building works.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 13.35 | 25.32 |
| EBITDA | Rs.Crs. | 1.49 | 0.69 |
| PAT | Rs.Crs. | 0.53 | 0.85 |
| Tangible Net Worth | Rs.Crs. | 1.53 | 3.18 |
| Total Debt/Tangible Net Worth | Times | 15.31 | 4.77 |
| Current Ratio | Times | 1.08 | 1.14 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2022) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2021 | 2020 | 2019 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - Sanctioned | Long Term | 10.00 | BWR BB-(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Bank Guarantee - Sanctioned | Short Term | 14.70 | BWR A4 | NA | NA | NA | |||
| Total | 24.70 | (Rupees Twenty Four Crores and Seventy lakhs 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 | |
|---|---|
|
Mistry Jinal Lead Analyst mistry.j@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|---|
| 1 | The Mehsana Urban Co-operative Bank | Cash CreditSanctioned | 10.00 | _ | 10.00 |
| 2 | The Mehsana Urban Co-operative Bank | Bank GuaranteeSanctioned | _ | 14.70 | 14.70 |
| Total | 10.00 | 14.70 | 24.70 | ||
| TOTAL (Rupees Twenty Four Crores and Seventy lakhs 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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