RATING RATIONALE
30Nov2022

Om Sakthi Constructions

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 102.98 Crs. of Om Sakthi Constructions

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#@
Previous Present Previous
(22 Jul 2022)
Present
Fund Based 15.50 17.48 Long Term BWR BB- /Stable
ISSUER NOT COOPERATING* /Downgrade
BWR BBB - /Stable
removal from ISSUER NOT COOPERATING* category/Upgraded
Non Fund Based 97.02 85.50 Short Term BWR A4
ISSUER NOT COOPERATING* /Downgrade
BWR A3
removal from ISSUER NOT COOPERATING* category/Upgraded
Grand Total 112.52 102.98 (Rupees One Hundred Two Crores and Ninety Eight lakhs 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
@This rating pertains to an existing assignment received prior to 6 October 2022


RATING ACTION / OUTLOOK

The rating action by Brickwork Ratings (BWR) for Om Sakthi Constructions ("The Firm" or "OSC") reflects the significant improvement in the firm’s financial performance in FY22, backed by new order accretion and efficient execution of the unexecuted order book. The firm's operating income grew by ~161% in FY22 on a YOY basis along with an improvement in its profitability metrics resulting in an improvement in the financial risk profile. BWR believes that the business and financial profile shall continue to be maintained over the medium term supported by the adequate order book position and YTD achievement of a topline of ~Rs.212 Crs till 30 Sep 2022.

The ratings continue to be supported by the promoter's extensive experience in the civil construction industry, the firm’s established operational track record, and established clientele comprising government bodies with low counterparty risks. The ratings, however, remain constrained by exposure to risks arising from the tender-based nature of the business, the geographical concentration of operations, constitutional risks associated with partnership firms and the fragmented and highly competitive nature of the industry. BWR also takes note of the need for regular enhancement of the working capital limits to augment the envisaged growth in FY23 and FY24.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR expects that the business risk profile will be maintained over the medium term. The outlook may be revised to Positive if the fim reports significantly better-than-estimated growth in its operations, profitability, and sustained improvement in order accretion while maintaining its credit risk profile. The outlook may be revised to Negative if any significant delays in the execution of key orders or slowdown in new order inflows adversely impact the firm’s revenues and profitability or if there is a deterioration in its working capital cycle, leverage, or liquidity position.

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). BWR has adopted a stand-alone approach as the firm does not have any subsidiaries.

RATING SENSITIVITIES

The firm’s ability to increase its scale of operations significantly, improve profitability, improve its capital base, efficiently manage its working capital requirements and strengthen its liquidity and overall credit profile would be the key rating sensitivities.

Upward: 

Downward:

LIQUIDITY INDICATORS - Adequate

The firm’s liquidity position is considered adequate taking into account adequate net cash accruals and EBITDA. EBITDA at Rs.25.39 Crs for FY22 was sufficient to cover the interest and finance charges of Rs.2.75 Crs for FY22. The liquidity is further supported by the undrawn credit lines with the Average working capital utilization being at ~50%-60% for the last six months. The firm did not have any meaningful debt obligations in FY22. BWR notes that the firm has availed a GECL loan of Rs.1.48 Crs from Indian Bank during the current fiscal. The net cash accruals in the range of Rs.25-29 Crs in FY23 and FY24 are adequate to cover the debt obligation in the range of Rs.0.00-0.40 Crs in FY23 and FY24. The current ratio remains adequate at 1.71 times on 31 Mar 2022. Cash and cash equivalents were adequate at Rs.18.61 Crs (Unencumbered) as on 31 Mar 2022. 

ABOUT THE ENTITY

Om Sakthi Constructions (OSC) was set up in 2011 as a partnership firm at Puducherry.  OSC undertakes civil construction in the roads segment in Tamil Nadu and Puducherry. The firm is promoted by Mr. V Kannan along with his family members. The firm is engaged in the construction and improvement of roads, bridges, state highways, and maintenance of dams, tunnels, etc. 

The firm is a class one contractor approved by the Tamil Nadu Government and Public Works Department. The firm has been executing the tender allotted by agencies of the Tamil Nadu Government and Central Government.

Mr. V Kannan, Mr. S. Jeevarathinam, Mr. S. Sathish Kumar, and Mr. K. Velmurugan are the partners of this firm

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 21-22
(Audited)
FY 20-21
(Audited)
Operating Revenue Rs.Crs. 327.62 125.50
EBITDA Rs.Crs. 25.39 5.62
PAT Rs.Crs. 13.26 4.55
Tangible Net Worth Rs.Crs. 51.51 50.35
Total Debt/TNW Times 0.27 0.23
Current Ratio Times 1.71 1.67
KEY COVENANTS OF THE FACILITY RATED

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


NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

CRISIL has migrated its ratings of the bank loan facilities of the firm in the ISSUER NOT COOPERATING* category w.e.f. 29 Sep 2018 as the firm has not provided the requisite information needed to conduct the rating exercise

* Issuer did not cooperate; Based on best available information

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 17.48
BWR BBB-/Stable
(removal from ISSUER NOT COOPERATING* category/Upgraded)
22Jul2022
BWR BB- Stable
(ISSUER NOT COOPERATING* /Downgrade)
04Aug2021
BWR BB Stable
(Upgrade)
27May2020
BWR BB- Stable
(Reaffirmation)
25Feb2019
BWR BB- Stable
(Assignment)
Non Fund Based ST 85.50
BWR A3
(removal from ISSUER NOT COOPERATING* category/Upgraded)
22Jul2022
BWR A4
(ISSUER NOT COOPERATING* /Downgrade)
04Aug2021
BWR A4+
(Upgrade)
27May2020
BWR A4
(Reaffirmation)
25Feb2019
BWR A4
(Assignment)
Grand Total 102.98 (Rupees One Hundred Two Crores and Ninety Eight lakhs 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

Jithin K.

Ratings Analyst jithin.k@brickworkratings.com

Saakshi Kanwar

Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
Om Sakthi Constructions
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 Federal Bank Cash CreditSanctioned 5.00 _ 5.00
2 Federal Bank Bank GuaranteeSanctioned _ 40.00 40.00
3 HDFC Bank Bank GuaranteeSanctioned _ 10.50 10.50
4 HDFC Bank Cash CreditSanctioned 1.50 _ 1.50
5 Indian Bank Over DraftSanctioned 9.50 _ 9.50
6 Indian Bank Bank GuaranteeSanctioned _ 35.00 35.00
7 Indian Bank GECLSanctioned 1.48 _ 1.48
Total 17.48 85.50 102.98
TOTAL (Rupees One Hundred Two Crores and Ninety Eight lakhs Only)
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