Mastek Engineering Pvt. Ltd.

Brickwork Ratings assigns the ratings for the long-term and short-term Bank Loan Facilities of Rs. 49.73 Crs. of Mastek Engineering Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	10.73	Long Term	BWR BB /Positive Assignment
Non Fund Based	39.00	Short Term	BWR A4 + Assignment
	(7.00)
Grand Total	49.73	(Rupees Forty Nine Crores and Seventy Three 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 RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) Assigns ratings for the long-term and short-term ratings of bank loan facilities of Mastek Engineering Pvt. Ltd.  (MEPL or the Company) considering factors such as the extensive experience, a healthy order book ensuring revenue visibility, the company's improved financial risk profile and a well-established reputed client base with minimal counterparty risk all of which are considered as key strengths. However, the ratings remain constrained by risks associated with the company’s working capital-intensive nature of operations, intense competition from established market players, susceptibility to tender-based operations, and volatility in raw material prices.
The ratings could improve if there is a significant enhancement in the scale of operations leading to higher profitability, consistent receipt of fresh orders and the maintenance of the order book at a stable level along with satisfactory debt protection metrics, debt servicing track records at current levels, improvement in TNW and gearing ratio.
The outlook may be revised to Stable if there is a decline in fresh order acquisitions, deterioration in the capital structure due to debt-funded expenditures, delays in receivables which could create working capital gaps and weaken the company’s financial risk profile.
 

KEY RATING DRIVERS

Credit Strengths:

• Extensive experience of the promoters along with healthy orderbook providing revenue visibility: :

  Mastek Engineering Private Limited is led by a team of seasoned promoters with over a decade of industry expertise. Under the leadership of directors, the company has successfully leveraged a deep understanding of market dynamics to build strong relationships with suppliers and customers. Their strategic vision and operational acumen have been pivotal in driving the company’s stability and fostering growth prospects. The company’s robust order book, valued at Rs. 367.60 crores, further reinforces its revenue-generating potential. With Rs. 154 crores (41.89%) of projects already completed and the remaining Rs. 213.76 crores (58.11%) in unexecuted orders, Mastek Engineering demonstrates strong visibility for sustained revenue over the near to medium term. This extensive project pipeline across various sectors highlights the company’s growth trajectory and enhances its creditworthiness.

  The synergy of experienced leadership and a well-diversified order book positions Mastek Engineering as a financially stable and operationally efficient entity, making it a strong candidate for favorable credit assessment.

• Healthy financial risk profile: :

  Mastek Engineering Private Limited demonstrates a robust financial risk profile, marked by consistent improvement in its operational and financial performance over the past three years. The company has achieved significant growth in its scale of operations. With a remarkable Compound Annual Growth Rate (CAGR) of 71.39% in Total Operating Income (TOI). As of H1 FY24-25, the company has already recorded revenue of Rs. 54.88 crores, which represents 48% of its projected revenue for FY24-25, and has reached approximately Rs. 82 crores to date. The company remains confident in achieving its projected revenue targets. Profitability metrics highlight positive trends, with operational profitability exhibiting a steady upward trajectory. The company recorded a substantial CAGR 90.08% increase in Operating Profit Before Depreciation, Interest, and Taxes (OPBDIT), driven by consistent growth and improved operational efficiency. Profit After Tax (PAT) also demonstrated strong growth, with a CAGR of 75.81%, reflecting the company’s enhanced profitability and operational effectiveness. Debt protection metrics remain comfortable and continue to improve, with the Interest Coverage Ratio (ISCR) at 3.11 times in FY24, up from 2.44 times in FY23. Similarly, the Debt Service Coverage Ratio (DSCR) stands at 1.78 times in FY24, a notable increase from 1.44 times in FY23. The gearing ratio has improved to 1.30 times in FY24 from 2.22 times in FY23, demonstrating better leverage management and lower reliance on debt.

• Well established and reputed client base: :

  Mastek Engineering Private Limited (MEPL) benefits from a well-established and reputed client base, particularly within the oil and gas sector, where it has built strong relationships with leading industry players. The company actively undertakes industrial construction projects for prominent organizations, including Indian Oil Corporation Ltd (IOCL), Oil and Natural Gas Corporation Ltd (ONGC), Gas Authority of India Ltd (GAIL), Chennai Petroleum Corporation Ltd (CPCL), Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), Northeast Gas Grid (IGGL), Bharat Gas Resources Ltd (BGRL), Indian Oil-Adani Gas Pvt. Ltd (IOAGPL), Petronet, Reliance, Cairn, Vedanta, Larsen & Toubro (L&T), and others.

  MEPL’s client portfolio features some of the most reputed names in the industry, ensuring recurring business opportunities and a steady revenue stream. The company’s commitment to delivering reliable, high-quality, and professional services has earned it the trust of its clients and contributed to its strong reputation in the market.

Credit Risks:

• Working capital intensive operations and Intense competition from established players in the market: :

  Mastek Engineering Private Limited (MEPL) operates in a working capital-intensive industry, necessitating substantial financial resources to support project execution, procurement, and operational demands. With Rs. 213.76 crores worth of unexecuted orders slated for completion within a year, the company faces significant working capital requirements, along with the need for additional bank guarantees to maintain smooth cash flow management. The inherent volatility of the sector often results in elevated levels of receivables and inventory, which can strain liquidity and heighten reliance on external funding. Efficient working capital management is vital to ensure uninterrupted operations and uphold financial stability.

  The company operates in a highly competitive environment dominated by well-established and resourceful players in the EPC sector, particularly within the industrial construction and oil and gas industries. The strong presence of these major competitors limits MEPL’s pricing power and profitability, making it challenging to sustain competitive margins. To maintain its market position and secure new contracts, MEPL must continually invest in quality enhancements, technological advancements, and cost-efficiency measures. Additionally, diversifying its client base is crucial for reducing dependency on a few key clients, mitigating risks, and enhancing business resilience in a demanding marketplace.

• Susceptibility to tender-based operations and volatility in raw material prices: :

  Mastek Engineering Private Limited (MEPL) operates in a business environment heavily reliant on tender-based contracts, particularly with Public Sector Undertakings (PSUs), which subjects the company to intense competition and pricing pressures. The nature of competitive bidding often results in lower margins, impacting overall profitability. Additionally, MEPL faces vulnerability to fluctuations in raw material prices, with critical inputs like steel and cement forming a significant portion of project costs. In the absence of adequate cost escalation clauses in contracts, unexpected increases in raw material prices can lead to margin erosion, posing a challenge to the company’s financial stability and operational efficiency.

ANALYTICAL APPROACH - Standalone

BWR has adopted a standalone approach while assigning the ratings and has applied its rating methodology as detailed in the Rating Criteria provided at the end of this document.

 

RATING SENSITIVITIES

The company's ability to execute work orders effectively, achieve its projected revenue and profitability growth, and manage working capital efficiently will remain the key rating sensitivities.

Upward Rating Factors: The ratings could improve if there is a significant enhancement in the scale of operations by 25% and increase in bottom line by 15%, leading to higher profitability, consistent receipt of fresh orders, and the maintenance of the order book at a stable level. Additionally, if the company continues to maintain its debt protection metrics and debt servicing track records at current levels and increase in TNW by 100% and improvement in gearing ratio (lees than 1X), a rating upgrade could be considered.

Downward Rating Factors: A downgrade could occur if there is a sustained decline in the scale of operations by 20% and decrease in profitability by 10%, a reduction in the inflow of new orders, risks include the possibility of a decline in cash accruals due to unforeseen project delays, cost overruns, or disruptions in revenue realization, a deterioration in the debt-equity ratio or gearing (exceeding 1.5x), or a decline in debt protection metrics from their current levels.

LIQUIDITY INDICATORS - Adequate

Mastek Engineering Private Limited exhibits an adequate liquidity position, underpinned by robust financial metrics. The company reported net cash accruals of Rs. 6.44 crores in FY24, comfortably covering its CPLTD of Rs. 1.92 crores for FY24-25, ensuring sufficient coverage for its repayment obligations. An EBITDA of Rs. 12.14 crores in FY24 against interest and finance charges of Rs. 3.90 crores underscore strong operational cash flows and debt servicing capability. The company’s current ratio stood at a healthy 1.90 times in FY24, reflecting adequate working capital management. Further, financial flexibility is supported by an overdraft facility of Rs. 10 crores and BG limits of Rs. 39 crores, providing a cushion for operational and financial requirements.

The Tangible Net Worth (TNW) witnessed a significant improvement, increasing from Rs. 5.76 crores in FY22 to Rs. 14.17 crores in FY24, indicating reduced reliance on promoter equity infusions and a stronger capital structure. Efficient receivables management, with days outstanding maintained under 60, highlights the company’s operational efficiency. However, sustaining this liquidity position will depend on maintaining efficient project execution, prudent working capital management, and mitigating risks associated with sector-specific volatilities. The promoters are likely to extend support in the form of unsecured loans to meet its working capital requirements and repayment obligations.

ABOUT THE ENTITY

Mastek Engineering Private Limited is a well-established Indian company specializing in comprehensive engineering services. Initially formed as an unregistered partnership firm under the Partnership Act of 1932 on March 16, 2000, it transitioned into a private limited company on June 3, 2020, under the Companies Act, 2013. The company provides advanced design and detailed engineering solutions across mechanical, civil, and electrical domains. Its expertise includes constructing godowns, roads, compound walls, and foundations, along with the fabrication and erection of structural works, pipeline projects (cross-country, submerged, and plant piping), and equipment installation. Mastek also excels in horizontal directional drilling, cathodic protection, corrosion monitoring systems, fire-fighting solutions, and tank construction and maintenance services.

Mastek Engineering serves prominent clients in the oil and gas sector, including Indian Oil Corporation Ltd (IOCL), Oil and Natural Gas Corporation Ltd (ONGC), Gas Authority of India Ltd (GAIL), Chennai Petroleum Corporation Ltd (CPCL), Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), Reliance Industries, Cairn India (Vedanta Group), and many others. Known for its innovation, unwavering commitment to quality, and customer-focused services, Mastek consistently delivers sustainable and efficient engineering solutions, reinforcing its reputation as a trusted leader in the industry.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 22 - 23 (Audited)	FY 23 - 24 (Audited)	FY 24 - 25 (Unaudited - Midterm-H1)
Operating Revenue	Rs.Crs.	42.87	101.05	54.88
EBITDA	Rs.Crs.	6.73	12.14	6.21
PAT	Rs.Crs.	2.63	5.78	3.51
Tangible Net Worth	Rs.Crs.	8.39	14.17	17.68
Total Debt / Tangible Net Worth	Times	2.22	1.30	0.86
Current Ratio	Times	2.65	1.90	1.59

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include the standard covenants typically prescribed for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Creadit Rating Agency	Status and Reason for Non-Cooparation	Date of Press Release
CRISIL	CRISIL Ratings has migrated the rating of Mastek Engineering Private Limited to the Issuer Not Cooperating category due to the absence of requisite information for review and the non-submission of the No Default Statement (NDS) for the past three months.	28Mar2024

ANY OTHER INFORMATION

Not Applicable.

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating  (2025)			2024		2023		2022
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	10.73	BWR BB/Positive (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	39.00	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
NFB SubLimit	ST	(7.00)	BWR A4+ (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		49.73	(Rupees Forty Nine Crores and Seventy Three lakhs Only)

Hyperlink/Reference to applicable Criteria

• General Criteria
• Approach to Financial Ratios
• Short Term Debt
• Engineering Procurement and Construction

Analytical Contacts
Likith M S Rating Analyst likith.ms@brickworkratings.com	Suryanarayan N Associate Director - Ratings suryanarayan.n@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.)	Complexity of the Instrument
1	Union Bank of India	Term Loan - Out-standing	0.73	_	0.73	Simple##
2	Union Bank of India	Bank Guarantee - Sanctioned	_	39.00	39.00	Simple##
	Sub-Limit (Project Specific BG) - Sanctioned		(7.00)
3	Union Bank of India	Secured OD - Sanctioned	10.00	_	10.00	Simple##
Total			10.73	39.00	49.73
TOTAL (Rupees Forty Nine Crores and Seventy Three lakhs 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.