Rating Rationale

Brickwork Ratings has reaffirmed the long-term and short-term ratings of "BWR BBB-/Stable" and "BWR A3" for the bank loan facilities of Rs. 86 crore of Suraj Construction Company.

The ratings assigned for the bank facilities of Suraj Construction Company continue to reflect strength from experienced partners and management, adequate liquidity, and a moderate financial risk profile of the firm  along  with improvement in operating profit; the rating derives weakness from factors such as an intensive working capital cycle and exposure to  risk inherent in tender-based business biusness

The rating outlook has been assigned as "stable" as BWR believes that Suraj Construction Company's business risk profile will be maintained over the medium term due to an unexecuted order book position of Rs 266.41 Crs as on 31 Aug 2026

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

As per the sanction conditions of the Bank, the unsecured loans shall not be withdrawn until the closure of the loan and shall remain subordinated to the term loans.

• Improvement in profit margin: :

   In FY 2026 (A), the company registered 6.2% degrowth in operating revenue, reaching Rs 170.11 crore compared to Rs 181.50 crore in FY 2025, due to slow realization of revenue from projects pertaining to the Baran-Shivpuri Section of New NH-27 in the state of Rajasthan on Performance Based Maintenance Mode. Hisar to Dabwali Section of NH-10 (New NH-09) from km 170.000 to Km 314.660 (length 144.66 Km) in the State of Haryana on Performance Based Maintenance Mode. Profitability margins also showed positive momentum: operating margin expanded to 9.12% (up from 7.40% in FY 2025) despite elevated raw material costs, while net profit margin declined to 3.66% (from 5.04% in FY 2025). As of Aug 30, 2026, the company maintains a healthy order book of Rs 266.41 crore, providing medium-term revenue visibility with an Order Book to Income (OB/OI) ratio of 1.56x. While operating performance is projected to remain on a growth trajectory, key monitorables will include managing regional concentration (65% of revenue from Haryana and ~35% from Madhya Pradesh and Rajasthan) and ensuring timely project execution while securing new orders

• Moderate financial risk profile :

   SSC  maintains a moderate financial risk profile, supported by a healthy Tangible net worth of Rs 85.624 crore in FY2026 (A) versus Rs 72..64 crore in FY2025 (A). The gearing ratio remained comfortable at 0.62x in FY2026 (A), with total borrowings rising to Rs 52.99 crore in FY 2026(A) from Rs 37.75 crore in FY 2025 due to increased long-term debt. Debt protection metrics were stable, with ISCR at 1.99x and DSCR at 1.32x in FY2026 (A) compared to 2.89x and 1.85x in FY2025. TOL/TNW stood at 0.79x in FY2026 (A) compared to 0.70x in FY2025, while Debt/EBITDA improved to 3.42x in FY2026(A) from 2.81x in FY 2025. Net Cash Accruals to Total Debt improved to 0.16x in FY 2026(A) from 0.30x in FY2024. With no major capex planned, the financial risk profile is expected to remain comfortable over the medium term.

• Experience Management and Long Track Record :

  Suraj Construction Company was established in 2004 as a partnership firm at Hisar, Haryana. The firm is engaged in civil construction services that primarily include road construction (Bitumen & concrete Roads), Civil Construction work (Buildings & godowns), and various Turnkey projects. Mr. Satish Kumar is the main partner having more than two decades of experience and other partners being Mr. Suraj Kumar and Mr. Mukesh having more than a decade of experience. They are also specialized in Civil Work containing National Highways Roads and Bridges and State Highways Roads Having Experience of more than 30 Years. They are EPC contractors, and the firm is presently registered as a Class-I contractor. Suraj Construction  will continue leveraging its seasoned management and established industry network for ongoing success

• Intensive working capital cycle: :

   SCC’s working capital management remains intensive, with Receivable days increasing to 71 days as compared to 56 days, along with  an inventory days of  101 days in FY2026 ( A) from 42 days in FY2025 (A), due to a robust order book. Accounts payable days, though deteriorated to 91 days in FY2026 (A) from 159 days in FY2025, remain stretched due to deferred payments to suppliers and inclusion of subcontractor fees. With sustained focus on inventory control and enhanced collection efficiency, the company’s working capital cycle is expected to improve going forward. However, the cash conversion cycle is comfortable at 82 days in FY 26, as against 61 Days in FY 25

• Competition in Industry :

  The industry is fragmented, with stiff competition from organized and unorganized players in the vicinity which might impact the revenues and profitability

• Exposure to risks inherent in tender-based business: :

   Tender-based operations limit the pricing flexibility of the company and make revenue dependent on the ability to bid successfully. The operating margin remains constrained by competitive pricing. Profitability of each project is subject to pricing, availability of labour, machinery mobilisation, weather, and geological conditions.

   

Going forward, the firm's ability to manage working capital efficiently, improve the scale of operations, and improve and maintain profitability, along with debt-servicing capability and liquidity, will be key rating sensitivities.

Positives: A rating upgrade could be driven by achieving sustained growth in revenues as per the projections, along with consistent improvement in profitability margins, with the operating margin rising above 12 -14% on a sustained basis. Successful realization of payments given govt. contracts. 

Negatives: A rating downgrade may be triggered by an inability to achieve the projected revenue and profit growth, with the operating margin dropping below 4%. An increase in Total Debt/TNW above 1.0x would indicate higher leverage risk. Any increase in Debt Equity Ratio more than 1.

Adequate liquidity is characterized by a sufficient cushion in accruals of Rs 13.38 Crs vis-à-vis repayment obligations of Rs 5.82 Crs and a moderate cash balance of Rs. 0.43 crore. The firm’s bank limits are utilized to the extent of 43% , supported by the above unit current ratio of 1.74 x in FY26

Suraj Construction Company was established in 2004 as a partnership firm at Hisar, Haryana. The firm is engaged in civil construction services that primarily includes Roads Construction (Bitumen & concrete Roads), Civil Construction work (Buildings & God owns) and various Turnkey projects. Mr. Satish Kumar is the main partner having more than two decades of experience and other partners being Mr. Suraj Kumar and Mr. Mukesh having more than a decade of experience. They are also Specialized in Civil Work containing National Highways Roads and Bridges and State Highways Roads Having Experience of More Than 30 Years. They are EPC Contractors and the firm is presently registered as Class - I Contractor.

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

No Other Information.

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