RATING RATIONALE
17Jan2022
Shyam Indus Power Solutions Pvt. Ltd.
Brickwork Ratings reaffirms the ratings for the enhanced Bank Loan Facilities of Rs. 328.00 Crs. of Shyam Indus Power Solutions Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (20 Dec 2021) |
Present | ||
| Fund Based | 40.00 | 65.50 | Long Term |
BWR BBB- (Stable)
|
BWR BBB -
/Stable Reaffirmation |
| Non Fund Based | 95.00 | 262.50 | Long Term |
BWR BBB- (Stable)
|
BWR BBB -
/Stable Reaffirmation |
| Grand Total | 135.00 | 328.00 | (Rupees Three Hundred Twenty Eight Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
RATING ACTION / OUTLOOK
Bank loan facilities of Rs.135 crs of Shyam Indus Power Solutions Pvt Ltd (SIPS or the company) were last rated on 20 December 2021. The present reaffirmation in the ratings is for the enhanced bank loan facilities of Rs.328 Crs and the same has been updated in Annexure I below. All other factors, including the rating criteria and rating drivers remain unchanged. The last rationale was published on 20 December 2021 and can be viewed at the following link: http://bcrisp.in///BLRHTML/HTMLDocument/ViewRatingRationaleInitial?id=43645
RATING OUTLOOK
BWR believes Shyam Indus Power Solutions Pvt Ltd’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.
Credit Strengths:
-
Experienced Management: :
Major Satyapal Sindhu, an engineer with a degree in management, is the chief promoter and Managing Director of the company with over 15 years of business experience. The company's operations are supported by well qualified and experienced professionals who look after critical functions in finance, technology and operations.
-
Established track record of the company: :
The company has been engagd in this business since 2004 and has executed a large number of EPC contracts with the Indian Railways and the power sector, pan India. The company has executed projects floated by reputed entities such as various state discoms, warehousing corporations, various divisions of the Indian Railways, Central Organization for Railway Electrification, RVNL amongst others.
-
Robust Order book position: :
The company has pending work orders worth Rs.531 crs as on 31 Oct 2021, which are to be executed within the next 18 months. Besides these, work orders worth Rs.250 crs are at various stages of tendering and in the pipeline.
Existing work orders are from various divisions of the Indian Railways, Jaipur Development Authority, Himachal Pradesh Power Transmission Company Limited, Power Grid Corporation, Central Organization for Railway Electrification, Tata Power Delhi Distribution Ltd., DMRC, TPCODL and TPSODL. Work orders are fairly well distributed across various locations in the country. Existing works are at various stages of execution and are expected to be completed within the next 12 to 18 months.
-
Decline in Revenues and Operating margins: :
Revenues of the company declined from Rs.480 crs in FY19 to Rs.379 crs in FY20 and Rs.223 crs in FY21, primarily due to covid led disruptions owing to which worksite inspection could not be conducted by the concerned government officials. Operating margins of the company declined from a peak of 7.97% in FY19 to 6.09% in FY20 and recovered to 6.68% in FY21. However, going forward, the revenues and operating margins are expected to improve on the back of a robust order book position and reduction in non-essential operating expenses.
-
Elongated working capital cycle: :
Working capital cycle of the company remains elevated at 149 days and 219 days during FY20 and FY21 respectively owing to rise in inventory holdings from 102 days in FY20 to 229 days in FY21 and rise in receivable days from 164 days in FY20 to 184 days in FY21. Rise in inventory holdings is on account of classification of completed and un-billed work under inventory and WIP, whereas rise in receivables days is owing to a substantial chunk of past year’s retention money being classified under receivables. The company has been obtaining higher credit periods with paybles holding periods increasing from 116 days in FY20 to 196 days in FY21 to support growing working capital requirements.
-
Risks inherent in tender based business and intense competition :
Businesses based on tenders floated by government departments, generally suffer from the risks of delayed payments. Also, since the contracts are awarded to lowest bidders, profitability margins are generally thin and face the risk of cost and time overruns due to non-cooperation by principal. Such businesses are also characterised by the presence of a large number of small and medium players creating intense competition for others.
For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the Rating Criteria detailed below
RATING SENSITIVITIES
Upward: Substantial growth in scale of revenues, profit margins, debt coverage ratios and improvement in liquidity indicators would support upward rating action.
Downward: Decline in revenues, profit margins, debt coverage ratios and liquidity indicators would attract downward rating action.
Liquidity in the company is adequate as indicated by NWC, cash accruals and cash and bank balances. NWC of the company is Rs.192.80 crs as on 31 March 2021 and the company has generated cash accruals of Rs.15.67 crs during FY21 against debt obligations of Rs.7.03 crs. The company has cash and bank balances of Rs.14.30 crs as on 31 March 2021. The company is expected to generate adequate cash accruals of Rs.9.33 crs and Rs.10.20 crs during FY22 and FY23 respectively to meet debt obligations of Rs.8.95 crs and Rs.6.77 crs respectively and NWC of the company is expected to remain comfortable at Rs.234 crs during FY22 and Rs.238 crs during FY23.
Shyam Indus Power Solutions Pvt Ltd., incorporated in June 2004, with its current registered office at 129, Transport Centre, Rohtak Road, Punjabi Bagh, New Delhi, is engaged in executing Engineering, Construction and Procurement (EPC) works related to Railways and Power Distribution and Transmission and other services. Major Satya Pal Sindhu is the chief promoter of the business. Mrs. Saroj Sindhu and Mr. Saurabh Sindhu are the other directors in the company. The company is an ISO 9001:2008 certified company for its quality management.
| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 223.16 | 379.42 |
| EBITDA | Rs.Crs. | 14.91 | 23.12 |
| PAT | Rs.Crs. | 13.27 | -12.02 |
| Tangible Net Worth | Rs.Crs. | 266.88 | 242.27 |
| Total Debt/Tangible Net Worth | Times | 0.47 | 0.49 |
| Current Ratio | Times | 1.97 | 1.68 |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
NIL
ANY OTHER INFORMATIONNIL
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 65.50 |
BWR BBB-/Stable
(Reaffirmation) |
20Dec2021 |
BWR BBB- (Stable)
() |
NA |
NA
|
NA |
NA
|
| Non Fund Based | LT | 262.50 |
BWR BBB-/Stable
(Reaffirmation) |
20Dec2021 |
BWR BBB- (Stable)
() |
NA |
NA
|
NA |
NA
|
| Grand Total | 328.00 | (Rupees Three Hundred Twenty Eight 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- Approach to Financial Ratios
- Engineering Procurement and Construction (EPC) Companies
- General Criteria
- Short Term Debt
- Consolidation of Companies
| Analytical Contacts | |
|---|---|
|
Saurabh Agarwal Assistant Manager - Ratings Board : +91 11 2341 2232 saurabh.a@brickworkratings.com |
Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@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 | HDFC Bank | Cash CreditSanctioned | 20.50 | _ | 20.50 | |
| 2 | HDFC Bank | Bank GuaranteeSanctioned | 107.50 | _ | 107.50 | |
| 3 | IndusInd Bank | Cash CreditSanctioned | 40.00 | _ | 40.00 | |
| 4 | IndusInd Bank | Bank GuaranteeSanctioned | 95.00 | _ | 95.00 | |
| 5 | Karnataka Bank Ltd | Cash CreditSanctioned | 5.00 | _ | 5.00 | |
| 6 | Karnataka Bank Ltd | Bank GuaranteeSanctioned | 60.00 | _ | 60.00 | |
| Total | 328.00 | 0.00 | 328.00 | |||
| TOTAL (Rupees Three Hundred Twenty Eight Crores Only) | ||||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| N.A | 0 |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| SIPS Utilities Pvt Ltd | 51.04 | Full | Subsidiary |
| Shyam Indus Solar Power Pvt Ltd | 99.99 | Full | Subsidiary |
| Paramitra Smartinfra SNA Private Limited | 100 | Full | Subsidiary |
| Paramitra Smart Infra Private Limited | 85 | Full | Subsidiary |
| Paramitra Hotels N Resorts Private Limited | 95.99 | Full | Subsidiary |
| Cobra Instalaciones Y Serv Sa - Sips (Jv) | 97.5 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Shyam Indus Power Solutions JV Shreeji | 75 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Sips - Cec (Jv Core 173-A) | 99 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS-MCPL-Cec (Jv Core 164) | 98 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS-Umesh Bros and Shree Ji | 50 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Sips-Umesh Bros 136 & 137 | 80 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| ARSS Infrastructure | 49 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS - CEC (JV CORE 200) | 49 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| Sips-Ubc-Cec (JV Core 203) | 29 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
| SIPS-SIL JV CORE 231 | 75 | Share of Profit/Loss to the extent of Shareholding | Joint Venture |
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About Brickwork RatingsBrickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.
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