Ubitech Pvt. Ltd.

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 62.00 Crs. of Ubitech Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (02 Feb 2021)	Present
Fund Based	12.00	12.00	Long Term	BWR BB /Stable Downgrade/ISSUER NOT COOPERATING*	BWR BB + /Stable Upgrade
Non Fund Based	50.00	50.00	Short Term	BWR A4 Downgrade/ISSUER NOT COOPERATING*	BWR A4 + Upgrade
Grand Total	62.00	62.00	(Rupees Sixty Two Crores 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) has upgraded the long-term rating to BWR BB+ (Stable) and short term rating to BWR A4+ from BWR BB (Stable) (ISSUER NOT COOPERATING) and BWR A4 (ISSUER NOT COOPERATING) respectively for the bank loan facilities of Ubitech Pvt Ltd (‘UPL or the company’).

The rating continues to factor in the company’s experienced promoters, established long track record of over three decades with a demonstrated execution capability, diversified reputed customer base with geographically diversified order book position across multiple states and comfortable debt protection metrics. However, these strengths are partially offset by the high working capital intensity of UPL’s operations, decline in revenues, intense competition in industry and volatility in the revenue stream on account of the tender-based operations.

The outlook is Stable as the company was able to sustain revenues from business operations in FY21; a modest order book position provides revenue visibility in the medium term.

BWR has principally relied upon the standalone audited financial results of UPL upto 31st March 2020, FY21 management certified provisionals and projected financials for FY22 and FY23 and publicly available information/ clarifications provided by the company’s management.

KEY RATING DRIVERS

Credit Strengths:

Established track record of operations and experienced management :
The company commenced its operations in 1983 and has a successful track record of more than two decades in EPC business and a decade of experience in the manufacturing business. UPL’s long track record and the extensive experience of promoters have helped establish relations with various stakeholders for its business. Furthermore, the promoters are assisted by a team of experienced professionals in managing the company’s daily business operations.
Modest order book with revenue visibility and reputed clientele :
The company has an unexecuted order book comprising orders worth ~Rs. 293.17 Crs in July 2021 to be completed over the next two fiscal years providing revenue visibility for 2-3 years. The company has minimal counterparty risk of default in payments as its clientele primarily includes various government departments like Madhya Pradesh Poorv Kshetra Vidyut Vitaran Company Ltd (MPPKVVCL), Paschimanchal Vidyut Vitaran Nigam Limited (PVVNL), Jharkhand Bijli Vitran Nigam Limited (JBVNL), Gwalior Smart City Development Corporation Ltd (GSCDCL), Jammu and Kashmir Power Development Department (JKPDD) etc.
Comfortable debt protection metrics and financial risk profile :
Debt coverage indicators, the interest service coverage ratio (ISCR) and debt service coverage ratio (DSCR),improved to 7.70x and 7.11x, respectively, in FY21 (Provisional) from 5.00x and 3.65x, respectively, in FY20. The gearing improved to 0.25x in FY21 (Provisional) from 0.27x in FY20. TNW improved to Rs 70.23 crs in FY21 (Provisional) from Rs.50.47 crs in FY20 due to retention of profits.

Credit Risks:

Decline in revenues :
The total operating income has declined by ~57.51% to Rs. 104.13 crs in FY20 from Rs. 245.08 crs in FY19 due to impact of Covid-19; delay in realization of funds from government departments, the project authorities could not physically verify the work done, and hence, UPL could not submit relevant bills. However, it improved to Rs. 170.86 crs in FY21 (Provisional).
Tender-based nature of business, project execution risk, susceptibility of profitability to volatile raw material prices :
The company procures orders through tenders, wherein revenue and profitability are expected to remain susceptible to volatility in raw material prices to some extent. The company is also exposed to project execution risk in terms of time and cost overrun as the projects of PSUs frequently get stalled/delayed because of issues such as difficulties in land acquisitions, environmental clearances and political interference. However, the price escalation clauses in certain contracts provide comfort to some extent.
Working-capital-intensive nature of operations :
UPL’s operations have a high working capital intensity, primarily due to funding requirements for security deposits, retention amount and margin money towards various contracts. The average utilization of the company’s fund-based working capital limits stood at around 80% during the last 12 months ending on 31 July 2021.
Intense competition in industry :
The EPC industry is highly fragmented, with the presence of both organized and unorganized players providing similar services. Hence, the company faces competition from regional players, leading to intense competition and pricing pressures, which in turn affects the company’s profitability margins. Nonetheless, UPL has been able to mitigate this risk to an extent, benefitting from the established relations with its customers and gradual adoption of the latest technology.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria below (hyperlinks provided at the end of this rationale). BWR has considered the standalone approach to arrive at the rating.

RATING SENSITIVITIES

Upward: BWR may revise the ratings upward in the case of a substantial improvement in the TOI, maintaining the EBITDA margins and order book to revenue ratio of 2x or above.

Downward: BWR may revise the ratings downward in the case of deterioration in debt protection metrics and scale of operations, thereby impacting the company’s credit profile.

LIQUIDITY INDICATORS - Adequate

There are no long term secured borrowings from banks as on 31st March 2021. Against no scheduled debt repayments in FY21, the company had a cash accruals of Rs. 19.75 Crs in FY21. The company projected to generate cash accruals of Rs. 17.44 Crs in FY22 against no scheduled debt repayments, thereby indicating an adequate liquidity position.

ABOUT THE ENTITY

M/s Ubitech Pvt Ltd (UPL) was incorporated in the year 1983 which was promoted by Pandey family and currently the operations are being managed by Mr. Om Prakash Pandey and his son Mr Raaj Pandey. It is a government approved electrical - safety - authority grade contractor. In addition, UPL has been engaged in manufacturing metal sheets used in the automobile sector and general engineering custom products since 2007 at the Chennai plant. It also started a manufacturing plant in Faridabad in October 2018 for manufacturing of power press machines. Both units are ISO 9001:2008 certified. The registered office of the company is situated at Faridabad, Haryana.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	104.13	245.08
EBITDA	Rs.Crs.	16.02	25.20
PAT	Rs.Crs.	6.36	13.00
Tangible Net Worth	Rs.Crs.	50.47	43.94
Total Debt/Tangible Net Worth	Times	0.27	0.09
Current Ratio	Times	1.70	1.60

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Acuite D (ISSUER NON COOPERATING) as on 31/03/2021.

ANY OTHER INFORMATION

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2021 (History)		2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	12.00	BWR BB+/Stable (Upgrade)	02Feb2021	BWR BB Stable (Downgrade/ISSUER NOT COOPERATING*)	19Feb2020	BWR BB+ (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	50.00	BWR A4+ (Upgrade)	02Feb2021	BWR A4 (Downgrade/ISSUER NOT COOPERATING*)	19Feb2020	BWR A4+ (Assignment)	27Sep2019	BWR D (Withdrawal)	31Mar2018	BWR A4 (Downgrade/ISSUER NOT COOPERATING*)
Grand Total		62.00	(Rupees Sixty Two Crores 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
Shivam Bhasin Senior Rating Analyst shivam.b@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Ubitech Pvt. Ltd.

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	Bank of India	Cash Credit - Sanctioned	12.00	_	12.00
2	Bank of India	Bank Guarantee - Sanctioned	_	15.00	15.00
3	Indian Bank	Bank Guarantee - Sanctioned	_	35.00	35.00
Total			12.00	50.00	62.00
TOTAL (Rupees Sixty Two Crores Only)

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