RATING RATIONALE
23Apr2020
Anil Construction Company
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.25.00 Crs. of Anil Construction Company
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||||
|---|---|---|---|---|---|---|---|
| Fund Based | |||||||
| Over Draft Sanctioned | 05.00 | Long Term | BWR | ||||
| Sub Total | 5.00 | ||||||
| Non-Fund Based | |||||||
| Bank Guarantee Sanctioned | 17.00 | Short Term | BWR | ||||
| Bank Guarantee Proposed | 03.00 | ||||||
| Sub Total | 20.00 | ||||||
| Grand Total | 25.00 | (Rupees Twenty Five Crores Only) | |||||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK
BWR believes that Anil Construction Company business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSThe rating draws strength from the vast business experience of the partners, established track of operations, moderate financial risk profile and a reasonable work order in hand. However, the rating is constrained by the small scale of operations, an elongated collection cycle and exposure to the risks associated with tender based businesses.The ratings are further constrained on account of Covid19 which has currently lead to a nationwide lockdown.
Credit Strengths:
- Extensive Experience Of The Partners :
Presence of 20 years in construction industry has helped the promoters get repeat orders from the Madhya Pradesh Rural Road Development Authority (MPRRDA) and Public Works Department (PWD) of Madhya Pradesh.
- Relatively Moderate Financial Risk Profile :
The gearing of the entity has improved to 1.11X in FY19 which is further expected to improve to 1.01X as per the provisional FY20 provided by the management. Gearing is likely to decline on account of accretion to reserve and absence of debt-funded capital expenditure (capex) over the medium term. The ISCR & DSCR of the entity stand at 2.94X & 3.19X in FY19 vis-a-vis 2.48X & 2.45X in FY18.
Credit Risks:
- Exposure to geographic concentration risk :
Since inception, ACC has constructed roads and bridges mainly for MPRRDA and PWD in Madhya Pradesh, and hence, faces geographic concentration risk.
- Delay in timely execution of project on account of lockdown due to Covid19 :
The construction work in the country has come to a stand still on account of the world wide pandemic caused on account of Covid19. This is expected to lead to a delay in the execution of projects which shall affect the revenues & profits of the entity in the short-medium term.
- Tender Based Operations :
Since revenue depends on success in winning tenders in a competitive bidding process,the margins available to the entity are restricted.
- Inherent risk associated with the constitution of the firm :
Constitution of the entity being a partnership concern, it is exposed to the risk of withdrawal of funds in case of personal exigencies.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the entity to improve revenue & profitability margins, manage liquidity, infuse capital, achieve projected financials and timely repay of debt obligations would be key rating sensitivities.
Positive: The rating outlook may be revised to 'Positive' in case the revenues, profit and liquidity position show sustained improvement.
Negative: The rating may be downgraded if there is any deterioration in financial position.
LIQUIDITY INDICATORS -
The average utilization stands at around 30%.The Net cash Accruals of the company increased to Rs.1.76 Crs. in FY19 as compared to Rs.1.04 Crs. in FY18. The Current Ratio stands at 0.80X in FY19. The debt repayment obligation stands at Rs 0.50cr in FY19. The cash & cash equivalents stand at Rs 0.40cr in FY19 indicating a moderate liquidity profile.
ABOUT THE ENTITYACC was set up as a partnership firm in 2004 and is promoted by Mr Pawan Kumar Jain and family. The firm is engaged in the business of civil construction of roads. The firm is a Class A contractor for PWD Madhya Pradesh.The firm gets its contracts from Madhya Pradesh Rural Road Developement Authority(MMRDA), Public Works Department(PWD), RES Department and other external contractors. Currently the firm has orders in hands in tune of Rs 20.00crs providing revenue visibility in the medium term.
On provisional basis the entity has earned a total operating income in tune of Rs 25.20cr with an EBITDA of Rs 2.52cr in FY20.
| Standalone Financial Indicators (in ₹ crore) | Units | FY 18-19 (A) | FY 17-18 (A) | |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 23.91 | 17.77 | |
| EBITDA | Rs.Crs. | 2.04 | 1.29 | |
| PAT | Rs.Crs. | 1.14 | 0.80 | |
| Tangible Net Worth | Rs.Crs. | 6.70 | 4.43 | |
| Total Debt/Tangible Net Worth | Times | 1.11 | 1.24 | |
| Current Ratio | Times | 0.80 | 0.81 | |
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* A:Audited UA:Unaudited P:Provisional PROJ:Projected
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Note: These are latest available financial results. All ratios as per BWR's calculations; Amount in ₹ crore
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STATUS OF NON-COOPERATION WITH PREVIOUS CRA ANY OTHER INFORMATION
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| CRISIL | 19 Mar 2020 | 17.00 | CRISIL BB(Stable)/ A4 |
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 | |
|---|---|
|
Siddhi Kadakia Ratings Analyst Board : +91 22 2831 1426, +91 22 2831 1439 siddhi.k@brickworkratings.com |
Sushil Kumar Chitkara Associate Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | ||
|---|---|---|---|---|---|---|
| 1 | Over DraftSanctioned | 5.00 | _ | 5.00 | ||
| 2 | Bank GuaranteeSanctioned | _ | 17.00 | 17.00 | ||
| 3 | Bank GuaranteeProposed | _ | 3.00 | 3.00 | ||
| Total | 25.00 | |||||
| TOTAL (Rupees Twenty Five Crores Only) | ||||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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