Sumeet Facilities Ltd.(Formerly Known as Sumeet Facilities Pvt. Ltd.)

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 50.00 Crs. of Sumeet Facilities Ltd.(Formerly Known as Sumeet Facilities Pvt. Ltd.)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (23 Jan 2020)	Present
Fund Based	20.93	25.76	Long Term	BWR BB /Stable Assignment	BWR BBB - /Stable Upgrade
Non Fund Based	8.07	24.24	Short Term	BWR A4 Assignment	BWR A3 Upgrade
Grand Total	29.00	50.00	(Rupees Fifty 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 has upgraded the long term rating and the short term rating of Sumeet Facilities Ltd.(Formerly Known as Sumeet Facilities Pvt. Ltd.) for Bank loan facilities at BWR BBB- (Stable)/A3. Brickwork Ratings(BWR) has essentially relied on the audited financial statements of Sumeet Facilities Ltd.(Formerly Known as Sumeet Facilities Pvt. Ltd.) upto FY20, provisional statements of FY21, projections upto FY23, publicly available information and information/clarifications provided by the company’s management and its bankers to arrive at the present ratings. The rating further draws strength from management experience, moderate financial risk profile, established relations with reputed clients, adequate liquidity profile and Increasing scale of operations and revenue visibility through order book position. The rating is partially offset by Competitive Industry, uncertainty in the business due to nature of business which is tender based and Slightly stressed working capital.

BWR believes that Sumeet Facilities Ltd.(Formerly Known as Sumeet Facilities Pvt. Ltd.) business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

KEY RATING DRIVERS

Credit Strengths:

Management Experience :
SFPL has a long operational track record of around three decades in facilities management. The promoters, Mr. Prabhakar Salunke and his wife, Ms. Sunanda Salunke, have more than two decades of experience in the service sector. Thus, the company has been able to forge long lasting relationships with its customers.
Moderate Financial Risk Profile :
The scale of operations of the company are moderate. Despite the impact of Covid-19 on business operations, revenue has improved. As per FY21 provisionals, the company has achieved a total operating income of Rs. 223.91 Crs in FY21 which has improved from Rs 209.01 Crs in FY20. The company has already achieved revenue of Rs 130. 96 Crs upto August 2021. It is expected to further improve to Rs. 278.82 Crs in FY22. EBITDA increased to Rs. 16.42 Crs in FY21 from Rs. 13.67 Crs in FY20 due to increase in revenues as well as increasing in operating profit margins. PAT increased to Rs. 12.71 Crs in FY21 vis-a-vis Rs. 6.83 Crs in FY20, with the profitability remaining moderate in FY21 with the OPM and NPM at 7.33% and 5.67% respectively having increased from 6.54% and 3.27% in FY20. TNW increased to Rs. 43.19 Crs in FY21 as compared to Rs. 30.49 Crs in FY20 resulting in a moderate gearing of 0.70x and a TOL/TNW of 1.48x respectively in FY21. Debt protection metrics are healthy driven by DSCR and ISCR of 4.07x and 4.55x in FY21 which improved from 2.10x and 2.23x in FY20 due to increased profit levels. Current ratio increased to 1.46x in FY21 from 1.31x in FY20.
Increasing scale of operations and revenue visibility through order book position :
Scale of operations have been increasing Y-o-Y. As per FY21 provisionals, the company has achieved a TOI of Rs. 223.91 Crs in FY21 as compared to Rs. 209.01 Crs in FY20. Revenue had further increased by 22.81% in FY20 to Rs. 209.01 Crs as compared to Rs. 170.19 Crs in FY19 and Rs. 134.34 Crs in FY18. Therefore the revenue has had an increasing trend over the past several years. Furthermore, SFL currently has work orders in hand to the tune of Rs. 327 Crs to be executed. Therefore this indicates that SFL has sufficient revenue visibility for the medium term and should be able to achieve their projections of Rs. 278.82 Crs in FY22.
Established relations with Reputed Clients :
Sumeet Facilities Ltd. is engaged in providing Housekeeping and Manpower to Government Offices, PSU's, MNC and Corporate Clients along with listed companies. The company gets repeated orders from large number of clients. During FY21 the company had started w.e.f. 01.11.2020 new contract with GCC Chennai for Package II and Package V with total value of Rs 4310crores for 8 years. They have started this contract with our foreign partner URBESAR S A Spain with 30% stake. The contract is being run by the SPV in the name of Sumeet Urban Services (Chennai) II Pvt Ltd and Sumeet Urban Services (Chennai) V Pvt Ltd. They have deployedapproximately 10791 contractual employees in Chennai for successful implementation of this contract.

Credit Risks:

Competitive Industry :
Competitive and fragmented industry SFL operates in a highly fragmented and competitive industry with large number of organised and unorganised players. The manpower staffing industry is intensely competitive because of the presence of a large number of players. This results in pricing pressure for players, who have to incur high overheads to maintain quality of services and staff. Issues relating to workforce availability can also have an adverse impact on the company's relationship with clients and therefore its revenue.
Uncertainty related to business :
Part of Business is Tender based and it carries the element of uncertainty in getting of Contracts. Additionally the entity remains exposed to contract renewal risks.
Slightly working capital stressed :
Gross current assets (GCA) stands at 36.36% of the sales in FY21 which has marginally improved from 39.33% in FY20. This indicates that it is slightly working capital stressed with days receivables of 71 days in FY21 as compared to 80 days in FY20.

ANALYTICAL APPROACH - Standalone

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

The ability of the company to scale up its operations while maintaining a comfortable risk profile, successful bidding of the tenders and receiving the new contracts along with their timely execution, achieving its projections and maintaining adequate liquidity and profitability would be its key rating sensitivities.

Positive:The rating may be upgraded in case the revenue, profitability, capital structure of the company shows significant improvement.

Negative:The rating may be downgraded in case there is significant deterioration in the business revenue, profitability or financial risk profile of the company.

LIQUIDITY INDICATORS - Adequate

Cash and bank balances of Rs. 18.32 Crs as on March 31, 2021.
Moderate current ratio of 1.46x in FY21 (Prov.) which has increased from 1.31x in FY20.
Net Cash Accruals of Rs. 13.81 Crs in FY21 and Rs. 8.76 Crs in FY20 are sufficient to cover CPLTD of Rs. 0.93 Crs and Rs. 0.88 Crs respectively.
The average utilization for their 2 CC facilities for the last 7 months stood at 66.96% and 60.72%, indicating sufficient liquidity cushion.

ABOUT THE ENTITY

Sumeet Facilities Limited is a Limited Company and is engaged in providing Housekeeping and Manpower to Government Offices and Corporate Clients all over India. Their employee strength is approximately 18000, mainly in the state of Maharashtra, Tamilnadu, Chhattisgarh, Delhi, Gujarat, Rajasthan, Andhra Pradesh and Karnataka. Their main customers are Tamilnadu Medical Services Corporation Pvt Ltd, Chhattisgarh State Marketing Corporation Ltd, Tata Power Delhi, Collector Office Pune, Balmer & Lowrie & co Ltd, BMRCL Bengaluru, Bharat Electronics Ltd, Bharat Petroleum Corporation Ltd Mumbai, Indian Bank Pune, NIBM Pune, RBI Pune, SBI Maharashtra, AMC Ahmedabad, Sir Ganga Ram Hospital Delhi, KEM Hospital Pune, Aditya Birla Hospital Pune etc. As per FY21 provisionals, operating revenue stands at Rs 223.91 Crs, EBITDA is Rs 16.42 Crs, PAT is Rs 12.71 Crs, Tangible Net Worth is Rs 43.19 Crs, Total Debt/TNW 0.70 times and current ratio is 1.46 times.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	209.01	170.19
EBITDA	Rs.Crs.	13.67	11.06
PAT	Rs.Crs.	6.83	5.90
Tangible Net Worth	Rs.Crs.	30.49	23.65
Total Debt/Tangible Net Worth	Times	0.86	0.71
Current Ratio	Times	1.31	1.21

KEY COVENANTS OF THE FACILITY RATED

N/A

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

N/A

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	25.76	BWR BBB-/Stable (Upgrade)	NA	NA	23Jan2020	BWR BB /Stable (Assignment)	NA	NA	NA	NA
						23Jan2020	Withdrawn	NA	NA	NA	NA
Non Fund Based	ST	24.24	BWR A3 (Upgrade)	NA	NA	23Jan2020	BWR A4 (Assignment)	NA	NA	NA	NA
						23Jan2020	Withdrawn	NA	NA	NA	NA
Grand Total		50.00	(Rupees Fifty 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
Shevya Agarwal Rating Analyst shevya.a@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Sumeet Facilities Ltd.(Formerly Known as Sumeet Facilities 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 Maharashtra	Term Loan - Sanctioned	0.58	_	0.58
2	Federal Bank	Cash Credit - Sanctioned	_	_	0.00
3	Federal Bank	Term Loan - Sanctioned	_	_	0.00
4	Indian Bank	Cash Credit - Sanctioned	7.80	_	7.80
5	Indian Bank	Term Loan - Sanctioned	0.38	_	0.38
6	Indian Bank	Bank Guarantee - Sanctioned	_	11.96	11.96
7	Indian Bank	Cash Credit - Proposed	_	_	0.00
8	Others	Bank Guarantee - Proposed	_	4.28	4.28
9	Union Bank of India	Cash Credit - Sanctioned	13.50	_	13.50
10	Union Bank of India	Term Loan - Sanctioned	3.50	_	3.50
11	Union Bank of India	Bank Guarantee - Sanctioned	_	8.00	8.00
Total			25.76	24.24	50.00
TOTAL (Rupees Fifty Crores Only)

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Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

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