RATING RATIONALE
26 Aug 2020
D D Builders Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.30.00 Crs. of D D Builders Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Cash Credit Sanctioned | 15.00 | Long Term | BWR BB + (Stable) |
| Sub Total | 15.00 | ||
| Non-Fund Based | |||
| Bank Guarantee Sanctioned | 15.00 | Short Term | BWR A4 + |
| Sub Total | 15.00 | ||
| Grand Total | 30.00 | (Rupees Thirty Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that D D Builders 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
BWR has essentially relied upon the audited financial statements of D.D.Builders Ltd. and of FY17,FY18,FY19, Provisionals of FY20 and projected financial statements of FY21, FY22, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the promoters, healthy order book, moderate networth, healthy gearing, healthy coverage, .The rating is constrained to risk related to the type of business, geographical concentration, delays in completion of the project, low current ratio, high gross current assets level, moderate profitability, effects of Covid-19.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Credit Strengths:
- Experienced Management :
The Management has vast experience of more than 3 decades in these areas of operation including irrigation, road, canal projects etc. and they have a successful track record of execution of the projects.
- Healthy Order book and moderate levels of revenues :
The company has moderate levels of revenues with Rs. 241.53crs in FY19 and Rs. 184.13crs in FY20. The company has work orders of approx Rs. 790crs in hand for FY21 and FY22. The company shows projections of Rs. 457.33crs in FY21 The company has projected the revenues on conservative approach and is expected to achieve the projections.
- Moderate Net Worth- :
There is improvement in TNW at Rs.80.45crs in FY20 as against Rs. 76.79crs in FY19 and it improved as compared to 68.47crs in FY18 due to capital infusion and also due to ploughing back of profits. TNW(A) stand at Rs. 81.68crs in FY20 as against Rs. 79.23crs in FY19 and it comprises of short term loans availed from Friends and Family.
- Moderate Gearing :
There is improvement in gearing with Total debt/ TNW in FY20 (Prov) standing at 0.32x as compared to 0.39x in FY19. It has further improved from 0.66x in FY18. The improvement is due to a decrease in long term debt obligation.
- Moderate Coverage :
Moderate coverage ratios as FY20 (Prov) shows Coverage with ISCR and DSCR standing at 6.80x and 1.68x, but moderate. ISCR standing at 7.54x in FY19 although it decreased from 8.48x in FY18 but adequate and DSCR standing at 4.76x in FY19 as compared to 1.24x in FY18. Further, the company shows improvement in ISCR and DSCR standing at 16.71x and 12.80x respectively in FY21.
Credit Risks:
- Risk related to Tender based business and Execution of Projects :
Tender based Business carries Element of Uncertainty in getting/awarding of Contracts & carries Potential Risk in the timely implementation of various contracts, although the client has a good tender allotment ratio. The EPC contractors specializing in Dams and irrigation face a wide range of risks such as project implementation & execution risk, delays in the project due to clearance issues from the Government for which the company gets extensions.
- Geographical Concentration :
The company has geographical concentration as it is based out and mainly operates in Odisha and Chhattisgarh this makes it vulnerable to any administrative, political, economical, legal changes in the state. However the company is trying to tap different states in the future like putting up tenders in Maharashtra etc.
- Low Current Ratio and high High Gross current Assets Level :
Current ratio shows slight improvement in FY20 (Prov) at 1.28x. Low current ratio with 1.17 x in FY19 as it decline compared to 1.21x in FY 18. In FY20, GCA of Rs. 170.37crs comprises of 92.53% of total revenues of Rs. 184.13crs creating risk of funds getting blocked in receivables and inventory as compared to Gross current assets ie of Rs. 159.78 crs comprises of 66.15% of total revenues of Rs. 241.53crs in FY19.
- Moderate Profitability :
Moderate Profitability standing at 10.57% in FY20 (Prov) with OPM slight improvement at 11.03% in Fy19 as compared to 10.40% FY18.NPM sees decline at 1.99% in FY20 as compared to 2.59% standing at FY19 which declined from 3.81% in FY18.
- Covid Impact :
There is a general decline in overall macroeconomic scenario and effects of COVID-19 on infrastructure sector.Given the current lockdown, the country's economic activities have come to an almost standstill. The broad picture regarding fallout of the pandemic is yet to emerge. But, this is most likely to bring down the growth rate of Indian economy and affect the Company’ business operations.he work halted from 22nd March till 15th April 2020, and post 15th April work has started, so the work is not much hampered but projects will delayed a bit and since due to pandemic, extensions will be granted to the company from government.
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
Key Rating Sensitivities: Going forward, the ability of the Entity to accelerate & execute its project timely, 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.
Positive: The rating will be upgraded if the company is able to achieve significant growth in revenue and improvement in profitability backed by a favourable industry scenario.
Negative : The rating may be downgraded in case the revenues of the company and profits substantially plunge from the current levels and gearing and debt service metrics deteriorates.;
LIQUIDITY POSITION
The average CC utilization for the last 6 months stands at 74.04% . The cash and cash equivalents stand at Rs. 61.89 crs in FY19 as compared to Rs. 75.68crs in FY18 and it shows further improvement in FY20(Prov) at Rs. 88.58 crs . The current ratio stands at 1.17x in FY19 as it improved against 1.21x in FY18, Further it shows at 1.21x in FY20(Prov) . The Net Cash Accruals to Long term debt stand at 0.75x in FY19 as compared to 0.62x in FY18, in FY20(Prov) at 0.75x. ISCR and DSCR stand at 7.54x & 4.76x respectively in FY19 as compared to 8.48x & 1.24x in FY18, however FY20(Prov) stand at 6.80x & 1.68x respectively.
PROFILED.D Builders Limited was incorporated in August 1994 .The company was promoted by Mr. Dambarudhar Agarwal. It is now under management of Mr. Trilochan Agarwal,Mr. Ghasiram Agarwal, Chirag Agarwal, Smt. Saraswati Agarwal. It has executed construction work for Government of Odisha and Public Work Department(PWD) .It is engaged in construction of Roads, dams,bridges, canals, Structure work, improvement and widening of Roads, etc.It has contracts from States like Odisha, Chattisgarh .
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 241.53 | 326.83 |
| EBITDA | Rs.Crs. | 26.63 | 33.98 |
| PAT | Rs.Crs. | 6.25 | 12.46 |
| Tangible Net Worth | Rs.Crs. | 76.79 | 68.47 |
| Total Debt/Tangible Net Worth | Times | 0.39 | 0.66 |
| Current Ratio | Times | 1.17 | 1.21 |
NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| CRISIL | 14 Nov 2019 | 19.75 | Crisil B+(Stable)/A4 (INC) |
| CRISIL | 17 Aug 2018 | 19.75 | Crisil BB-(Stable)/ A4+ (INC) |
| S.No | Current Rating (2020) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - Sanctioned | Long Term | 15.00 | BWR BB+(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Bank Guarantee - Sanctioned | Short Term | 15.00 | BWR A4+ | NA | NA | NA | |||
| Total | 30.00 | (Rupees Thirty 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 |
|---|---|
|
Shweta Manohor Ratings Analyst B : +91 22 2831 1426 Ext : 653 shweta.m@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 | Bank GuaranteeSanctioned | _ | 15.00 | 15.00 |
| 2 | Cash CreditSanctioned | 15.00 | _ | 15.00 |
| Total | 30.00 | |||
| TOTAL (Rupees Thirty 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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Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.