RATING RATIONALE
04Jul2022

M. Venkatarama Reddy

Brickwork Ratings downgrades the ratings for the Bank Loan Facilities of Rs. 31.00 Crs. of M. Venkatarama Reddy

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(14 Dec 2021)
Present
Fund Based 14.28 14.00 Long Term BWR BB-/Stable
Downgrade/ISSUER NOT COOPERATING*
BWR D
Downgrade
Non Fund Based 17.00 17.00 Short Term BWR A4
Downgrade/ISSUER NOT COOPERATING*
BWR D
Downgrade
Grand Total 31.28 31.00 (Rupees Thirty One 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
Note: *Issuer did not cooperate; based on best available information.


RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has downgraded the long term rating and short term rating to "BWR D " for the bank loan facilities amounting Rs 31.00 Crores of M. Venkatarama Reddy.
 
The rating downgrade takes into account the recent slippage of the firm's SOD limit to substandard category due to non servicing of interest charged in the account which has also been confirmed by the banker, Union Bank of India. The firm has been facing liquidity issues due to delayed receipt of payments from the government departments due to which the firm is unable to meet its debt service obligations.
 
The scale of operations of the firm had been impacted due to the Covid 19 pandemic and the firm is still grappling with the effects of the same and is yet to recover completely. The payments are severely delayed from the government departments which in turn effects the ability of the firm to successfully improve the scale of operations. The firm also faces high geographical concentration risk since the firm is concentrating only on projects based in Karnataka which impacts the revenue generation capacity of the firm. 

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has adopted a standalone approach and applied its rating methodology as detailed in the Rating criteria below.
 
1. General Criteria (link - http://www.brickworkratings.com/download/Criteria-GeneralCriteria.pdf)
 
2. Approach to Financial Ratios (link - http://www.brickworkratings.com/download/Criteria-FinancialRatios.pdf)

RATING SENSITIVITIES

Going forward the ability of the firm to generate increase in the scale of operations and to sustain the momentum in the same will be a key rating sensitivity. The firm's ability to successfully book government tenders and to receive timely payment of the same will also remain a key monitoring factor since the SOD account of the firm is frequently slipping into substandard category due to non servicing of debt obligations in a timely manner which is mainly due to delayed receipt of payments from the government departments. 
 
The firm currently exhibits a healthy financial risk profile. However, the healthy risk profile of the firm is offset by the frequent slippages of the firm's account into substandard category which has been confirmed by the banker, Union Bank of India.

LIQUIDITY INDICATORS - Stretched

Liquidity remains stretched although the current ratio remains reasonable at 1.80 times as on 31 March 2021 and is continuing to remain at a relatively comfortable value of 1.78 times as on 31 March 2022 (provisional). The debt protection metrics ISCR and DSCR remain moderate at 1.73 times and 1.38 times in FY21 indicating stretched repayment capacity of the firm. Cash and Bank Balance remains low at Rs 0.08 Crores in FY21. NCA are stretched and insufficient to cover the interest and finance charges incurred by the firm.

ABOUT THE ENTITY

M. Venkatarama Reddy is a proprietorship concern which began its operations in 1998 in Bangalore. It is a registered Class I Contractor with PWD. The Concern undertakes construction of roads and maintenance works for BBMP, BDA, NHAI, KRRDA and PWD. The nature of works undertaken by the concern mainly includes improving, widening, strengthening and asphalting of roads. The Concern over the years has executed many major projects as prime contractors. 

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 26.51 24.22
EBITDA Rs.Crs. 5.11 5.45
PAT Rs.Crs. 1.75 1.82
Tangible Net Worth Rs.Crs. 31.77 34.26
Total Debt/TNW Times 0.81 0.55
Current Ratio Times 1.80 1.69
KEY COVENANTS OF THE FACILITY RATED

Nil


NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

CRISIL Ratings continues at 'CRISIL B/Stable/CRISIL A4; Issuer not cooperating' as per recent press release dated 13 May 2021 for facilities amounting Rs 18.00 Crores of M Venkatarama Reddy.

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)
Facilities Current Rating  (2022) 2022 (History) 2021 2020 2019
Type Tenure Amount
(Rs.Crs.)
Rating Date Rating Date Rating Date Rating Date Rating
Fund Based LT 14.00
BWR D
(Downgrade)
NA
NA
14Dec2021
BWR BB-Stable
(Downgrade/ISSUER NOT COOPERATING*)
30Sep2020
BWR BB Stable
(Reaffirmation)
04Jul2019
BWR BBStable
(Assignment)
Non Fund Based ST 17.00
BWR D
(Downgrade)
NA
NA
14Dec2021
BWR A4
(Downgrade/ISSUER NOT COOPERATING*)
30Sep2020
BWR A4
(Reaffirmation)
04Jul2019
BWR A4
(Assignment)
Grand Total 31.00 (Rupees Thirty One 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

Nimmy Anand

Ratings Analyst nimmy.a@brickworkratings.com

Nagaraj K

Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
M. Venkatarama Reddy
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 Union Bank of India Term LoanOut-standing _ _ 0.00
2 Union Bank of India Bank GuaranteeSanctioned _ 17.00 17.00
3 Union Bank of India Secured ODSanctioned 14.00 _ 14.00
Total 14.00 17.00 31.00
TOTAL (Rupees Thirty One Crores Only)
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