P.C. Patel Infra Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the bank loan facilities of Rs. 153.00 Crs. of P.C. Patel Infra Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (05 May 2020)	Present
Fund Based	18.00	18.00	Long Term	BWR BBB /Stable Assigned	BWR BBB /Stable Reaffirmation
Non Fund Based	135.00	135.00	Short Term	BWR A3+ Assigned	BWR A3 + Reaffirmation
Grand Total	153.00	153.00	(Rupees One Hundred Fifty Three Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) reaffirms the ratings for the bank loan facilities of P.C. Patel Infra Private Limited (PCPIPL or the company).The rating has, inter alia, factored in the company’s operational track record and promoters’ vast experience in the lignite excavation business, healthy growth in revenues in the last three years, moderate financial profile, reputed client base and unexecuted orders of Rs. 4936.71 Crs (approximately eight times that of FY20 revenues), thus giving medium-term revenue visibility. However, the rating is constrained by a high gearing. The timely execution of the order book with a commensurate increase in cash flows and net worth remains critical for deleveraging the balance sheet. The rating is also constrained by the mining business being exposed to regulatory and contractual risks and intense competition in the industry.

KEY RATING DRIVERS

Credit Strengths:

Operational track record and promoters’ experience :
The promoters of PCPIPL have been in the lignite excavation business since 1996 and have industry experience of over two decades. Additionally, their understanding of the dynamics of the industry will continue to support the business risk profile.
Strong unexecuted order book position and reputed client base :
PCPIPL has a strong unexecuted contract value of Rs. 4936.71 Crs (approximately eight times that of FY20 revenues), which is to be executed in the next 4 to 5 years. This gives good medium-term revenue visibility for the company. The order book consists of orders from reputed clients, such as Gujarat Industries Power Company Limited (GIPCL), Gujarat Mineral Development Corporations (GMDC), South West Mining Limited (SWML), Western Coalfields Limited (WCL) and Singreni Collieries Coalfields Limited (SCCL). Repeated work orders from these reputed clients mitigate counterparty risks and recovery risks significantly.
Moderate financial risk profile :
PCPIPL’s financial profile is moderate, marked by an increase in the topline, decent profit margins, and comfortable debt protection metrics and cash conversion cycle. The company has reported a steep increase in the turnover, by 30.71%, in 2020 as compared to the previous year. The company’s topline increased at a CAGR of > 50% from FY17 to FY20. The company has, however, reported a dip in revenues in FY21 to Rs. 550.64 Crs on a provisional basis. Profit margins were at 6.84% for FY20. The debt protection metrics were at the ISCR and DSCR of 6.01 and 2.15 times, respectively, in FY20. The company's liquidity is supported by a comfortable cash conversion cycle, with receivable days of 38 and payable days of 59.

Credit Risks:

Gearing on the higher side :
The company’s total debt increased to Rs. 380.28 Crs as of FY19 owing to the debt-funded capex, but reduced to some extent in FY20 to Rs. 357.78 Crs. The company’s gearing remained on the higher side, at 2.01 times, in FY20. It may be noted that the company has to borrow as and when it gets new contracts to purchase equipment.
Risks associated with timely execution of work orders :
The company has the majority debt-funded capex towards purchasing machinery and a vehicle fleet for executing outstanding work orders. Hence, the company is exposed to risks associated with the timely execution of orders as per expected operating parameters.
Business exposed to regulatory risks and presence of penalty clauses in contract :
The rates for overburden removal, and lignite excavation and transportation are predefined and dependent on depth. Penalty charges may be levied on the company in the case of a shortfall in achieving monthly targets. Mining operations are also exposed to regulatory risks.
Intense competition owing to tender based nature of the contract mining business :
Intense competitive pressures from various organised and unorganised players in the industry could depress margins. However, the presence of price escalation clauses in the majority of contracts protects the margins in case of delays.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied on P.C. Patel Infra Pvt. Ltd.’s audited financial results of FY18 to FY20, provisional financials of FY21 and projected financials until FY23, and publicly available information and clarification/information provided by the company.

BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Upward: The rating may be upgraded if the company’s capital structure improves with an expansion in the scale of operations and increase in profitability, supported by the timely execution of work orders and the infusion of equity capital and the deleveraging of the balance sheet.

Downward: The rating may be downgraded if there is a delay or slowdown in order execution, leading to penalty/liquidation damages being charged or decline in revenues and/or profitability margins, higher-than-anticipated debt-funded capex in the near to medium term or any stretch in the working capital cycle weakening the company’s liquidity profile.

LIQUIDITY INDICATORS - Adequate

The company’s EBITDA is sufficient to cover interest and finance charges, as reflected in the comfortable debt protection metrics, with the ISCR and DSCR of 5.68 and 1.93 times, respectively, in FY21 on a provisional basis. The company has reported net cash accruals of Rs. 123.92 Crs. in FY21(Prov.). The cash and cash equivalents stood at Rs. 62.32 Crs, which includes cash balance (Rs. 10.04 Crs.) and fixed deposits with banks (Rs. 52.28 Crs) as of 31 March 2021. The current ratio stood at 2.91 times in FY20 and further increased to 3.63 times in FY21 (Prov.). Based on BWR estimates for FY22, the company will be able to achieve an EBIT of Rs. 67.38 Crs and net cash accruals of Rs. 130.62 Crs, which is sufficient to cover the interest and finance charges of Rs. 30.04 Crs and the CPLTD of Rs. 13.5 Crs for FY22.

ABOUT THE ENTITY

P.C. Patel Infra was established as a partnership firm in 1996. Subsequently, it was converted to a private limited company as P C Patel Infra Pvt Ltd in July 2016. The company is promoted and managed by the Dholu family and is headed by Mr. Prabhulal Mulji Dholu and Mr. Chhaganlal Mulji Dholu. It is engaged in turnkey mining activities concentrated in lignite mining. The contract involves for overburden/interburden removal, the excavation and/or loading of lignite from mines face and ancillary activities, and the combined work of transportation and unloading lignite mines face to stackyard on the ground surface level and the re-loading of lignite from stockyard on the ground surface level at lignite mines. It is an ‘AA’ class government-registered contractor and has been providing mining services in various states of India.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	628.00	480.48
EBITDA	Rs.Crs.	189.39	162.78
PAT	Rs.Crs.	42.98	43.10
Tangible Net Worth	Rs.Crs.	178.23	135.25
Total Debt/Tangible Net Worth	Times	2.01	2.81
Current Ratio	Times	2.91	2.86

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	18.00	BWR BBB/Stable (Reaffirmation)	05May2020	BWR BBB /Stable (Assigned)	NA	NA	NA	NA
Non Fund Based	ST	135.00	BWR A3+ (Reaffirmation)	05May2020	BWR A3+ (Assigned)	NA	NA	NA	NA
Grand Total		153.00	(Rupees One Hundred Fifty Three Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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

Analytical Contacts
Umang Pardasani Rating Analyst Board : +91 80 4040 9940 umang.p@brickworkratings.com	Vipula Sharma Director - Ratings Board : +91 80 4040 9940 vipula.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

P.C. Patel Infra Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank of Baroda	Cash Credit - Sanctioned	15.00	_	15.00
2	Bank of Baroda	Bank Guarantee - Sanctioned	_	115.00	115.00
3	Federal Bank	Term Loan - Out-standing	3.00	_	3.00
4	ICICI Bank	Bank Guarantee - Sanctioned	_	20.00	20.00
Total			18.00	135.00	153.00
TOTAL (Rupees One Hundred Fifty Three Crores Only)

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