Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.37.00 Crs. of Armstrong India Constructions
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Cash Credit Sanctioned | 07.00 | Long Term | BWR BB (Stable) |
| Sub Total | 07.00 | ||
| Non-Fund Based | |||
| Bank Guarantee Sanctioned | 30.00 | Short Term | BWR A4 |
| Sub Total | 30.00 | ||
| Grand Total | 37.00 | (Rupees Thirty Seven Crores Only) | |
BWR has assigned the long term rating of BWR BB with a Stable outlook and short term rating of BWR A4 to bank loan facilities of Armstrong India Constructions (AIC or the company).BWR believes that the firm's 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 Armstrong India Constructions of FY18, FY19, 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, established track record of operations, adequate coverage ratios, healthy profit margins and order book position. However, the rating is constrained by capital structure and tender based nature of operations.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Credit Strengths:
Incorporated in the year 1998 , AIC is managed by Mr. Raju Solanki having experience of 3 decades in civil construction works.Over the years of existence in the market, the promoter has established long term relationships with its customers, suppliers.
The scale of operations has increased by 41.70 % to Rs 41.11 Cr in FY20 Vs Rs 29.01 Cr in FY19 on account of an increase in work order execution. The firm clocked sale of Rs 15.95 Cr for the period 1 April to 26 November 2020.
Coverage ratios have improved in FY20 Vs FY19 with DSCR and ISCR at 1.22 x and 2.75x respectively in FY20. The profit margins in FY20 have declined compared to FY19 however the same are healthy with OPM at 13.15% and NPM at 7.40%. The current ratio reported at 3.10x, in FY20 is adequate.
AIC has an order book of Rs 70.72 Cr as of 26 November 2020 which are to be executed over the next 2 years which gives medium-term visibility in terms of revenue.
Credit Risks:
The capital structure is leveraged with gearing at 2.33x in FY20 and modest TNW at 8.66 Cr. However, considering the unsecured loans from related parties the TD/TNW(Analyzed) is low at 0.59x.
The operations are tender based which exhibits an inherent risk & also carries potential risk in the timely implementation of various contracts.
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 company to improve its scale of operations, overall financial risk profile, and maintain its liquidity position will be the key sensitivities.
Positive: The ratings may be upgraded with improvement in scale of operations, capital structure, profit margins, and tangible net worth.
Negative: The ratings may be downgraded in case revenues of the company and profit substantially plunge from the current levels and gearing and debt service metrics deteriorate.
LIQUIDITY POSITION
Adequate
The liquidity is adequate as the net cash accruals in FY20 are Rs 3.65 Cr Vs 1.20 Cr debt obligations. The current ratio as of 31st March 2020 is 3.10 x, cash and cash equivalents at Rs 2.69 Crs and current investment at 3.11 Cr. The cash credit facility utilization is low at 6.33.%
PROFILEArmstrong (India) Construction (AIC) was established in the year 1998 by Mr. Raju Surajmal Solanki and is engaged in civil construction works. The entity is primarily engaged in the construction, repairs & maintenance of buildings, hospitals, pipes. The entity works as a civil contractor for government and semi-government organizations across Maharashtra (MCGM Mumbai)and Gujarat(Surat Municipal corporation).In Oct 2020 the firm was converted into a partnership concern.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 41.11 | 29.06 |
| EBITDA | Rs.Crs. | 5.40 | 5.05 |
| PAT | Rs.Crs. | 3.04 | 2.35 |
| Tangible Net Worth | Rs.Crs. | 8.66 | 6.08 |
| Total Debt/Tangible Net Worth | Times | 2.33 | 5.12 |
| Current Ratio | Times | 3.10 | 2.19 |
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| ACUITE | 15 Jan 2020 | 25.00 | ACUITE B/A4 |
| S.No | Current Rating (2020) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - Sanctioned | Long Term | 07.00 | BWR BB(Stable) | NA | NA | NA | |||
| Non-Fund Based | ||||||||||
| 2 | Bank Guarantee - Sanctioned | Short Term | 30.00 | BWR A4 | NA | NA | NA | |||
| Total | 37.00 | (Rupees Thirty Seven 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 | |
|---|---|
|
Nagesh Sudhir Kadu Ratings Analyst B : 202267456 Ext : 619 nagesh.k@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 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 7.00 | _ | 7.00 |
| 2 | Bank GuaranteeSanctioned | _ | 30.00 | 30.00 |
| Total | 37.00 | |||
| TOTAL (Rupees Thirty Seven 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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