Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 154.46 Crs. of Techno Power Enterprises Pvt Ltd
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (15 Jan 2021) |
Present | ||
Fund Based | 32.14 | 26.46 | Long Term |
BWR BBB/Stable
Reaffirmation |
BWR BBB
/Stable Reaffirmation |
Non Fund Based | 131.00 | 128.00 | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation |
(32.50) | (32.50) | ||||
(5.00) | (5.00) | ||||
(5.00) | (5.00) | ||||
(10.00) | (17.00) | ||||
Grand Total | 163.14 | 154.46 | (Rupees One Hundred Fifty Four Crores and Forty Six lakhs Only) |
BWR has reaffirmed the rating for the long term bank loan facilities of Rs.26.46Crs (reduced from Rs.32.14 Crs) of Techno Power Enterprises Pvt Ltd. at BWR BBB with a ‘Stable’ outlook, and the rating for its short term bank loan facilities of Rs.128Crs (reduced from Rs.131.00 crs) at BWR A3+ (aggregate rated amount reduced to Rs.154.46Crs from Rs.163.14Crs).
The rating reaffirmation is based on TPEPL's ,improved financial and credit profile in FY22 (provisional) with increased execution of work orders and release of funds by the government after the pandemic conditions started improving since the 3QFY22 and its diversification into the Water Transmission and Distribution line business under the central goverment's Jal Jeevan Mission which has good prospects given the substabtial bugetary allocations. The ratings continues to benefit from the long experience and track record of the management in this industry and the Company’s ability to bag new orders in the prevailing pandemic conditions and to sustain a healthy current order book position imparting strong revenue visibility. The ratings are, however, constrained by the Company’s inability to meet the business estimates and conitnued high receivables.The Company's ability to bag new orders and successful execution of the same as well as sustaining the total order book position with orders both in the Power and Water divison will remain the key moniterables going forward.
The rating has been assigned a ‘Stable’ outlook as the business risk profile of the Company is stable and growth in business and profitability is expected to be maintained in the medium term.The rating outlook may be revised to 'Positive' in case there is an improvement in the revenues and profit margins along with favourable debt protection metrics. The rating outlook may be revised to 'Negative' if there is any significant deterioration in the financial position and profitability margins of the Company.
BWR has essentially relied upon the audited financials of TPEPL for FY21, key provisional figures for first eleven months of FY22 and full year provisional net sales, and projections for FY22 & FY23 other information as available in the public domain, as well as information / clarifications provided by the Company and its bankers, to arrive at the present ratings.
KEY RATING DRIVERSCredit Strengths:
TPEPL has forayed into water transmission and distribution under the Jal Jeevan Mission scheme of the Central Government. It has bagged orders of value Rs.21.23Crs on 21.10.2021 and further orders of Rs.22Cr on 14 Mar. 2022 from Executive Engineer (PHE) DHUBRI Division Assam(PBG) for setting up of pipelines in the Dhurbi district of Assam. The projects are to be executed by March 2023. The Company anticipates to bag further orders in the area after substantial budgetary allocations to the scheme and limited contractors in the industry to execute these projects. Total outstanding work order book as on 31.03.2022 was Rs. 240Crs which stands ~1.5x of the provisional net sales for FY22. The Company also has orders in pipeline of Rs.145Crs. Of this, ~70% is to be completed and realised in FY23.Out of the total orders in pipeline, Rs.50Crs of orders are expected from PHE JJM Assam.
TPEPL clocked net sales of Rs.175Crs in FY22 (Provisional) as against Rs.116Crs in FY21and operating margin of ~15% during FY22 (Provisional) better than 14% in the previous year. The Company's EBIDTA was impacted by the rise in raw material prices (Aluminum and Steel) however price variation clause in about 50% of the Company's contracts helped it maintain growth in the margins. Also, the Company has been focussing on execution of work orders which has higher margins particulalry in the Supply Division. Sales and profitability are expected to be sustained at the present level with the current order book in hand.
Total Debt/TNW improved to 1.85x in FY22 from over 2.0x in the past. The Company has repaid a substantial portion of the term loans and CECL from SBI. ISCR for FY22 was 1.6x in FY22 against 1.9x in FY21. The Company is incurring higher interest costs on the short term unsecured loans availed from the open market to meet working capital requirements. It also bears high costs on the discounting of letter of credit by the suppliers as well as high BG & LC charges. However, ISCR and DSCR has remained at an acceptable level due to sustained operating profitability.
Techno Power Enterprises Pvt Ltd. is well established with a presence of nearly two decades in the EPC industry. TPEPL is headed by Mr. Saroj Agarwal, Mr. Raunak Agarwal and Mrs. Prachi Agarwal. The promoter, Mr. Saroj Agarwal is professionally skilled and has an experience of over three decades in the EPC industry. The promoters have extended support by way of equity infusions as and when required.
The Company underperformed projections and booked total net sales of Rs.175crs in FY22 as against projections of Rs.190Crs owing to operations being impacted by the pandemic which led to slower realisations.However, execution of work orders and improved revenue booking along with a strong order book position shall trigger revenue growth in FY23.
Total receivables of the Company have historically remained high due to the government entities as their clientele. The flow of payments from these entities are slow. Although the majority of the payments for work executed in FY21 from the government pending owing to the pandemic has been recovered in FY22, total debtors for FY22 are still high. This is on account of higher retention money held back by the Government Departments against higher orders executed which is recoverable only after completion of the project as well as slower release of funds from the central government agencies. Debtors are likely to continue to remain high in the near term due to the aforementioned reasons. The Company makes payments to the creditors as and when funds are available from the Government.
Since the Company has entered into a new area of operations, its performance going forward will depend to a large extent on the successful bagging of new orders and implementation of the projects in the new area, ie under the water transmission and distribution lines. The Company’s ability to sustain its order book position with orders in both the Power as well as Water transmission industry will remain a key monitorable.
Positive: Improvement in revenue along with sustained liquidity and sustained gearing of below 2.0x and ISCR at above 2.25x, may traigger a positive rating action.
Negative: Fall in revenues owing to low orders in hand leading to deterioration in operating profitability, resulting in ISCR of below 1.5x, and deterioration in the overall liquidity position alongwith deterioration in total gearing to above 3.0x may trigger a positive rating action.
LIQUIDITY INDICATORS - Adequate
The liquidity position of the Company stands adequate on account of low utilisation of fund based limits. The Company does not have any major schdeuled debt obligations. Repayments of Rs.3.38Crs in FY23 are likely to be met by the expected cash accruals of Rs.18Crs during the year. Working capital cycle is stretched and is around 214days in FY21(reduced from 262 days in FY20) due to a high collection period and a high payment cycle. High collection period is due to the government clientele flow funds is slow. As per the arrangement, the Creditors are paid as and when debtors release funds which results in a high payment cycle. However, the Company has started receiving payments from the government and a considerable amount was released in FY22 easing out liquidty pressuers. As per the management,the surplus was used for reducing unsecured loans which the Company availed in the past from the open market to meet liquidty requirements. Moreso, receivables have not stretched further which indicates that the Company has managed to recover debtors to the extent of sales reported as on date.
ABOUT THE ENTITYIncorporated on 02 Feb., 2000, Techno Power Enterprises Pvt Ltd. (TPEPL) is into Engineering, Procurement and Construction (EPC) services for the Power Utilities in India. It provides turnkey services for Survey, Design and Construction of Transmission & Distribution Lines, Substations, Rural Electrification, Civil Works for Power Projects and Engineering. Although TPEPL’s registered office is in Shillong, all the activities are managed from their Corporate Office in Kolkata. TPEPL is one of the leading EPC contractors in the North East market for power transmission solutions. It has extended its activities to executing major transmission contracts to Bihar, Jharkhand, Sikkim etc. It has major contracts of electrification under the Deen Dayal Upadhyay rural electrification schemes.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 115.84 | 111.05 |
EBITDA | Rs.Crs. | 16.66 | 14.76 |
PAT | Rs.Crs. | 4.35 | 4.82 |
Tangible Net Worth | Rs.Crs. | 60.50 | 51.16 |
Total Debt/Tangible Net Worth | Times | 1.88 | 2.52 |
Current Ratio | Times | 1.65 | 1.55 |
Standard
Crisil B,Stable/ A4, Issuer Not Cooperating as per rationale dated 29 Mar. 2022 based on non receipt of requisite information/documents for conducting the review.
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 | 26.46 |
BWR BBB/Stable
(Reaffirmation) |
15Jan2021 |
BWR BBBStable
(Reaffirmation) |
29Jun2020 |
BWR BBBStable
(Reaffirmation) |
06Jun2019 |
BWR BBBStable
(Upgrade) |
Non Fund Based | ST | 128.00 |
BWR A3+
(Reaffirmation) |
15Jan2021 |
BWR A3+
(Reaffirmation) |
29Jun2020 |
BWR A3+
(Reaffirmation) |
06Jun2019 |
BWR A3+
(Upgrade) |
NFB SubLimit | ST | (32.50) |
BWR A3+
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
(5.00) |
BWR A3+
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
(5.00) |
BWR A3+
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
(17.00) |
BWR A3+
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
Grand Total | 154.46 | (Rupees One Hundred Fifty Four Crores and Forty Six lakhs Only) |
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Hyperlink/Reference to applicable CriteriaAnalytical Contacts | |
---|---|
Madhu Sonthalia Senior Rating Analyst Board : +91 80 4040 9940 madhusonthalia@brickworkratings.com |
Anuradha Gupta Director - Ratings anuradha.g@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 | Axis Bank Ltd. | Cash CreditSanctioned | 0.50 | _ | 0.50 | |
2 | Axis Bank Ltd. | Bank GuaranteeSanctioned | _ | 23.50 | 23.50 | |
Sub-Limit (Letter of Credit) Sanctioned | (5.00) | |||||
3 | Canara Bank | Cash CreditSanctioned | 4.50 | _ | 4.50 | |
4 | Canara Bank | Bank GuaranteeSanctioned | _ | 22.50 | 22.50 | |
Sub-Limit (Letter of Credit) Sanctioned | (5.00) | |||||
5 | Canara Bank | CECLSanctioned | 0.15 | _ | 0.15 | |
6 | Canara Bank | GECLSanctioned | 0.78 | _ | 0.78 | |
7 | Karnataka Bank Ltd | GECLSanctioned | 0.67 | _ | 0.67 | |
8 | Karnataka Bank Ltd | Bank GuaranteeSanctioned | _ | 17.00 | 17.00 | |
Sub-Limit (Letter of Credit) Sanctioned | (17.00) | |||||
9 | Karnataka Bank Ltd | Over DraftSanctioned | 4.00 | _ | 4.00 | |
10 | State Bank Of India (SBI) | Bank GuaranteeSanctioned | _ | 65.00 | 65.00 | |
Sub-Limit (letter of credit) Sanctioned | (32.50) | |||||
11 | State Bank Of India (SBI) | Term LoanSanctioned | 1.40 | _ | 1.40 | |
12 | State Bank Of India (SBI) | Cash CreditSanctioned | 12.00 | _ | 12.00 | |
13 | State Bank Of India (SBI) | GECLSanctioned | 2.26 | _ | 2.26 | |
14 | State Bank Of India (SBI) | CECLSanctioned | 0.20 | _ | 0.20 | |
Total | 26.46 | 128.00 | 154.46 | |||
TOTAL (Rupees One Hundred Fifty Four Crores and Forty Six lakhs Only) |
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