Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 11.00 Crs. of Shiv Shakti Construction Company.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (14 Sep 2020) |
Present | ||
| Fund Based | 3.00 | 3.00 | Long Term |
BWR B/Stable
Downgrade/ISSUER NOT COOPERATING* |
BWR B +
/Stable Upgrade |
| Non Fund Based | 8.00 | 8.00 | Short Term |
BWR A4
Reaffirmation/ISSUER NOT COOPERATING* |
BWR A4
Reaffirmation |
| Grand Total | 11.00 | 11.00 | (Rupees Eleven Crores Only) | ||
Brickwork Ratings has upgraded the long-term rating at BWR B+ (Stable) and reaffirms the short-term rating at BWR A4 for the Bank Loan Facilities of Rs. 11.00 Crore of Shiv Shakti Construction Company(SSCC). The rating is removed from ISSUER NOT COOPERATING CATEGORY.
BWR believes that Shiv Shakti Construction Company business risk profile will be maintained over the medium term. BWR has essentially relied upon the audited financial statements of Shiv Shakti Construction Company of FY18, FY19, FY20, FY21(Prov.) and projected financial statements of FY22, publicly available information and information / clarifications provided by the entity’s management.
The rating draws strength from the vast business experience of the partner's. However, the rating is constrained by the fluctuating scale of operations, Moderate profit margins with susceptibility to competitive bidding, Working capital intensive nature of operations albeit lean operating cycle, Presence in highly competitive and fragmented industry inherent to competitive bidding process and Partnership nature of constitution.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivity.
KEY RATING DRIVERSCredit Strengths:
The overall operations of SSC is looked after by Mr. Sanjay Singh Chauhan who possess a total experience of more than two decade in the field of civil works.
The scale of operations of SSC stood fluctuation for the past three years ended FY21, given the civil works nature of operations, wherein the contracts are spread over 2-3 years of execution. Given a short track record, the tangible net worth base also stood small thereby limiting the financial flexibility of the firm.
The PBILDT margin of SSC stood moderate, given the civil works nature of operations requiring high level of labour deployment followed by material costs. Moreover, the realizations of the firm are largely dependent upon the realizable contract value which is subject to competitive bidding required to be undertaken by the firm at the time of bidding for contracts, given the same being government contracts.
The operations of SSC are moderately working capital intensive in nature with funds blocked in debtors and inventory as the firm needs to maintain inventory for basic raw materials. However, the collection period stood moderate, since the firm is required to extend a credit period to its customer, depending upon the nature of work and the relationship with them.
SSC operates in a highly competitive and fragmented civil works industry, wherein a number of small & medium players are engaged in civil works for the government. Hence, the competition is intensified wherein competitive bidding is undertaken by all the players.
SSC is a partnership firm, hence the risks associated with withdrawal of partners’ capital exist. The firm is exposed to inherent risk of partners’ capital being withdrawn at time of personal contingency.
The ratings of SSCC are arrived at on a standalone basis after independent evaluation of its financial risk profile. For arriving at its ratings, BWR has applied its rating methodology as detailed in the rating criteria hyperlinks.
RATING SENSITIVITIES
Going forward the company’s ability to improve the scale of operations will be the key rating sensitivities.
Positive: The rating will be upgraded if the company is able to achieve significant growth in revenue and improvement in profitability backed by a favourable industry scenario.
Negative: The rating may be downgraded if there is lower than expected revenues affecting the profitability margins, coverage ratios, liquidity and gearing ratios adversely
LIQUIDITY INDICATORS - Adequate
The liquidity profile of the firm remained adequate marked by cash and bank balance of Rs. 1.15 crore as on 31, March 2021 along with no term debt obligations. Further, the cash accruals of the firm stood Rs.1.94 Crore as on 31, March 2020. Its working capital utilization of overdraft limit of Rs.3.00 crore stood high at ~90-100% for the past twelve months ended October 2021. The current ratio stood moderate at 1.22 times as on March 31, 2020. whereas the conversion cycle stood negative owing to high level of creditors as on balance sheet date. Thus the collection period stood at 29 days against 30 days in FY19 and creditors period stood high at 183 days in FY20 against 296 days in FY19. The firm has reported net worth of Rs.4.01 crore as on March 2020 (vis-a-vis Rs.5.49 Crore as on March 2019).
ABOUT THE ENTITYShiv Shakti Construction Company is a partnership firm established in 2008 by Mr. Sanjay Singh Chauhan and Shikha Singh Chauhan. The firm undertakes various kind of civil works viz. construction NH, repairs & maintenance building, etc., in MP for various govt bodies i.e. Public Work department (MP), Madhya Pradesh Rural Road Development Authority, National Highway Department, , MO Housing Board Department, Pradhan Mantri Gram sadak Yojana, Smart city Satna etc. On the other hand, various materials viz. oil, clovers, frames, nets, steel & TMT sheets/metals/bars/angles, equipment, pipes, sand, bricks, cement, etc. are procured from the domestic suppliers across Madhya Pradesh.The firm is classified Class A contractor by PWD Madhya Pradesh.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 37.86 | 38.71 |
| EBITDA | Rs.Crs. | 2.80 | 3.38 |
| PAT | Rs.Crs. | 0.95 | 0.88 |
| Tangible Net Worth | Rs.Crs. | 4.01 | 5.49 |
| Total Debt/Tangible Net Worth | Times | 1.64 | 1.49 |
| Current Ratio | Times | 1.22 | 1.23 |
Nil
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 3.00 |
BWR B+/Stable
(Upgrade) |
14Sep2020 |
BWR BStable
(Downgrade/ISSUER NOT COOPERATING*) |
28Jun2019 |
BWR B+Stable
(Reaffirmation) |
20Mar2018 |
BWR C+
(Downgrade/ISSUER NOT COOPERATING*) |
| NA |
NA
|
NA |
NA
|
NA |
NA
|
31Mar2018 |
BWR B+Stable
(Upgrade) |
||
| Non Fund Based | ST | 8.00 |
BWR A4
(Reaffirmation) |
14Sep2020 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
28Jun2019 |
BWR A4
(Reaffirmation) |
20Mar2018 |
BWR A4
(Reaffirmation/ISSUER NOT COOPERATING*) |
| NA |
NA
|
NA |
NA
|
NA |
NA
|
31Mar2018 |
BWR A4
(Reaffirmation) |
||
| Grand Total | 11.00 | (Rupees Eleven Crores Only) | |||||||
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 | |
|---|---|
|
Durga Lalit Purohit Ratings Analyst durga.lp@brickworkratings.com |
Ajit S Jagnade Senior Manager - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 ajit.j@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Punjab & Sind Bank | Cash CreditSanctioned | 3.00 | _ | 3.00 | |
| 2 | Punjab & Sind Bank | Bank GuaranteeSanctioned | _ | 8.00 | 8.00 | |
| Total | 3.00 | 8.00 | 11.00 | |||
| TOTAL (Rupees Eleven Crores Only) | ||||||
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