Rating Rationale

Brickwork Ratings (BWR) reaffirms the long-term rating at BWR BBB- and the short-term rating at BWR A3 for the bank loan facilities of Narnarayan Infrastructure Private Limited totaling Rs. 87.02 crore, while revising the outlook to Negative to indicate the lower-than-expected performance for FY26 and anticipated reduction in operating margins going forward owing to geopolitical supply chain disruptions. Additionally, the company’s over all non fund based limit utilization have increased to ~72cr( 94% utilisation) as on September’26 driven primarily new orders. The outlook may be revised to 'Stable' upon a significant, sustained scale-up in revenues commensurate with the high BG limit utilization as well as recovery in margin levels going forward.

The rating continues to draw comfort from the promoters' extensive two-decade track record, steady execution capabilities, and recurring orders from Ahmedabad Municipal Corporation. The credit profile is supported by a comfortable capital structure (TOL/TNW of 0.89x in FY26), healthy debt coverage metrics, and medium-term revenue visibility backed by an unexecuted order book of ~Rs. 403 crore. Geographic, customer, and sectoral concentration and margin pressure constrain the ratings.

The terms of the sanction includes standard covenants typically required for such facilities.

• Experienced promoters with an established track record in the civil construction industry :

  The company benefits from the promoters' experience of over two decades in the civil construction segment, particularly in municipal road projects, which facilitates established relationships with stakeholders and supports operational continuity. This established market position has yielded an unexecuted order book of Rs. 403 crore as of September 2026, providing revenue visibility over the medium term. Furthermore, consistent order inflows from  Ahmedabad Municipal Corporation (AMC) indicate sustained client engagement and a proven project execution history.

• Comfortable Credit Profile :

  The capital structure of the company remained comfortable, marked by an overall gearing of 0.40x and a Total Outside Liabilities to Tangible Net Worth (TOL/TNW) ratio of 0.89x as on March 31, 2026, supported by a tangible net worth of Rs. 38.46 crore. Going forward, the capital structure is expected to improve steadily on the back of a healthy accretion of profits to reserves and scheduled term debt repayments. Furthermore, the debt coverage indicators remained adequate, marked by an Interest Coverage Ratio of 4.61 times in FY26. The Debt Service Coverage Ratio (DSCR) stood at a moderate 1.11x in FY26 primarily due to scheduled repayments associated with existing vehicle and equipment loans; however,  BWR expects the same to be above 1.20x in FY27, reflecting comfortable debt-servicing capabilities.

• High Geographical and Segmental Concentration :

  The company’s operations are primarily concentrated in Gujarat, with a significant portion of its order book derived from the Ahmedabad Municipal Corporation and the state government’s Roads & Buildings (R&B) Division. This reliance on a single region and government clients limits geographic diversification and exposes the business to region-specific policy or funding risks. Additionally, the company’s revenue is largely concentrated in road-related projects such as widening, resurfacing, and allied civil works while lacking presence in more diversified infrastructure segments like power transmission, water supply, and irrigation. This narrow project focus heightens sector-specific risks compared to peers with broader execution capabilities. Expanding its client base, geographic footprint, and project portfolio will be crucial to mitigating these concentration risks over the medium term.

• Intense Competition and Moderate scale of operations and expected moderation in margins going forward :

  The peripheral road construction industry is highly fragmented and characterized by intense competition on account of low barriers to entry. Although the company has demonstrated growth in its revenues over the year, the scale remains moderate, with revenues of Rs 91 crore in FY’26. The company has, in the past, demonstrated timely execution and has won multiple orders from AMC, providing reasonable merit for the company to grow its scale. Further availability of the unexecuted order book of ~Rs. 403 cr as of September’26 provides revenue visibility of 4.42x  basis FY’26 revenue. The company has been able to maintain the operating margins in the range of 8.5%- 10%; however, on account of input price volatility and geopolitical situations, the margins are expected to moderate to 7-7.5% in FY’27

Positive Sensitives

Revenue scaling up beyond Rs. 150cr while maintaining or improving current profitability and credit profile reflected in TOL /TNW of less than 1.00x and DSCR of more than 1.30x might be positive for the ratings.

Negative Sensitivities

Inability to scale up revenues or maintain the margins as projected, or deterioration of TOL/TNW to more than 1.50x, might lead to a negative rating action

The liquidity position of the company remains adequate, marked by expected gross cash accruals of Rs. 6.00-7.00 crore in FY27 against scheduled term debt repayment obligations of ~Rs. 4.00 crore. Additionally, the company held a cash and bank balance of Rs. 0.05 crore and unencumbered fixed deposit receipts (FDR) of Rs. 0.41 crore as on March 31, 2026. The non-fund-based limit utilization has remained high at 90% as of September 2026.  While the average utilization of the bank overdraft limits remained low at 25-30% for the trailing 12 months ended September 2026, providing a sufficient financial cushion. Furthermore, the comfortable current ratio of 1.75x in FY26 reflects efficient working capital management. The promoters also have a demonstrated track record of infusing funds via unsecured loans to sustain business operations, providing an additional liquidity buffer against adverse market conditions.

The company demonstrates an evolving ESG profile based on its environmental, social, and governance practices.

Environmental: Narnarayan Infrastructure's road construction activities carry a moderate environmental impact due to raw material consumption, fuel use, and on-site emissions. However, the company effectively mitigates these risks by strictly adhering to the environmental guidelines, waste management norms, and site-clearance protocols mandated by the Ahmedabad Municipal Corporation.

Social: The company's execution of municipal road projects significantly improves urban connectivity and socio-economic development within Ahmedabad. While they strictly comply with public safety and labour norms, especially in their niche of high-traffic areas, the firm remains exposed to standard sectoral risks regarding workforce safety and skilled labour availability.

Governance: Narnarayan Infrastructure is a closely held entity managed by experienced promoters who actively oversee daily operations, enabling agile decision-making and strong project control. However, consistent with its scale as a mid-sized private company, the governance framework remains modest.

Narnarayan Infrastructure Private Limited, promoted by Mr. Jagdishchandra Chimanlal Patel, is a Gandhinagar-based company established as a partnership firm in 1997 and later reconstituted as a private limited company in 2007. The company is a Class AA contractor and is engaged in the construction of roads, including widening, resurfacing, repairing, as well as the construction of allied bridges, civil work ancillary to road projects, and bridges.

The company gets most of the road construction projects from the Gujarat Government  R&B Division and works mainly for the Ahmedabad Municipal Corporation.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Not Applicable

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