S. Ravi Works Contractor

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.5.33 Crs. of S. Ravi Works Contractor

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Over Draft - Sanctioned Over Draft - Proposed Term Loan - Out-standing	00.90 00.60 00.83	Long Term	BWR B (Stable)
Sub Total	02.33
Non-Fund Based
Bank Guarantee - Proposed Bank Guarantee - Out-standing	02.57 00.43	Short Term	BWR A4
Sub Total	03.00
Grand Total	05.33	(Rupees Five Crores and Thirty Three 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 S. Ravi Works Contractor 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:

• Locational Advantage :

  The company/Firm is located in Davanagere cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge and vendors making the company more efficient and cost effective.

• Revenue from Operations :

  The company`s revenue from operations has grown substantially by 29.03 % in the FY 19.

• Debt Protection Metrics :

  DSCR and ISCR of the company stand at 2.21 and 3.85 respectively in FY indicating company’s adequacy to meet its debt obligations.

• Account Receivables :

  The company’s Account Receivable days of 37 is better than the average.

• Experience of promotor :

  The proprietor is having 15 years of experience in the same line of business and existence of the firm since 2010 with satisfactory business history.

Credit Risks:

• Competition in the Industry :

  Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability.

• Constitution of firm :

  Limitations of Proprietorship constitution in terms of capital and management. Withdrawal of capital by the proprietor for any personal contingency would adversely affect the capital structure of the firm. Also, the sole management decision is upon the proprietor.

• Volatility of Profitability :

  The firm's net profit margin has almost decreased by 7% i.e. to 6.75% in FY 19 and further to 6.06% in FY 20 on a provisional basis. The operating profit margin has slightly increased to 12.27% in FY 19 but it has reduced to 9.31% in FY 20 on a provisional basis due to increase in operating expenses.

• Net- worth :

  Low net worth of the company i.e. Rs. 2.7Crs resulting in high gearing ratios as total debt/ TNW stands at 2.26 times and TOL/TNW stands at 3.18 times in FY 19.

• Exposure to risk inherent in tender-based business :

  Since majority of business is tender-based, revenue depends on ability to bid successfully. Any delay in floating of tenders, finalization of contractors, or unsuccessful bidding could constrain business risk profile. Moreover, the firm is exposed to high geographical and customer concentration.

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 revenues, profitability margins, manage liquidity and further increase its scale of operations will be the key rating sensitivities.

Positive: The ratings may be upgraded if profitability, gearing and overall credit profile show substantial improvement.

Negative: The rating may be downgraded in case there is a significant deterioration in business and financial risk profile of the company from its current level.

LIQUIDITY POSITION

The company has a stretched liquidity profile, driven by a current ratio of 1.17 times in FY19 as compared to 1.22 times in FY 18. The working capital utilization is high at approximately 95% for the last six months.

PROFILE

Mr. S Ravi is the Proprietor of the firm and has 15 years’ of experience in this line of business. S Ravi Works Contractor is civil contractor firm engaged in construction activities like construction of roads, bridges, tanks, barrages, etc. The firm has class I contractor certificate. They mainly receive work contract orders from government departments. The works contracts are mainly concentrated in and around Davanagere and Shimoga region. Presently, the firm has appointed approx. 18 employees (temporary and permanent) to carry out the civil works.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	17.15	13.29
EBITDA	Rs.Crs.	2.10	1.62
PAT	Rs.Crs.	1.16	0.97
Tangible Net Worth	Rs.Crs.	2.26	1.59
Total Debt/Tangible Net Worth	Times	2.26	2.34
Current Ratio	Times	1.17	1.22

KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED

NA

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	Over Draft - Sanctioned Over Draft - Proposed Term Loan - Out-standing	Long Term	00.90 00.60 00.83	BWR B (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Proposed Bank Guarantee - Out-standing	Short Term	02.57 00.43	BWR A4	NA	NA	NA
Total			05.33	(Rupees Five Crores and Thirty Three 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
• Infrastructure Sector
• Short Term Debt

For More Information Contact:

Analytical Contacts	Investor Contacts
Muskan Agrawal Lead Analyst muskan.a@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
K Nagaraj Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Over Draft - Sanctioned	0.90	_	0.90
2	Over Draft - Proposed	0.60	_	0.60
3	Term Loan - Out-standing	0.83	_	0.83
4	Bank Guarantee - Proposed	_	2.57	2.57
5	Bank Guarantee - Out-standing	_	0.43	0.43
Total				5.33
TOTAL (Rupees Five Crores and Thirty Three lakhs Only)