Mohan Poddar

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 51.00 Crs. of Mohan Poddar (or the firm)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (03 Sep 2020)	Present
Fund Based	6.50	6.50	Long Term	BWR BB/Stable Assignment	BWR BB + /Stable Upgrade
Non Fund Based	44.50	44.50	Short Term	BWR A4 Assignment	BWR A4 + Upgrade
Grand Total	51.00	51.00	(Rupees Fifty One 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 ratings of the bank loan facilities of MP to 'BWR BB+/Stable/BWR A4+' from 'BWR BB/Stable/ BWR A4

The upgrade factors in the improvement in the overall financial risk profile in FY21 marked by an increase in the scale of operations, profit margins, capital structure & debt coverage indicators and overall liquidity position, coupled with an improvement in the business performance in H1FY22. The ratings, further, continue to draw strength from experienced management, robust order book position and sustained profit margins. The ratings, however, continue to be constrained by low scale of operations, moderate capital structure & debt coverage indicators coupled with highly competitive & susceptibility of revenue to tender-based operations and partnership nature of constitutions.

Outlook: Stable

BWR believes that MP’s business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Established track record & experienced management :

MP is being managed by Mr. Mohan Poddar along with his brother Mr. Sohan Poddar, both of whom possess an experience of over 30 years and 15 years respectively in the construction industry. Their experience in the industry has helped the company establish a strong relationship with its suppliers & customers,whereas their technical expertise has helped the company to bid & win new orders.
Moderate albeit fluctuating profit margins :

The operating profit margin of MP stood moderate at 10.02% in FY21 (prov.) (vis-à-vis 11.89% in FY20). However, it deteriorated owing to increase in proportionate material costs & other operating expenses on the back of increase in building construction activities, which yield relatively lower margins than road construction activities. Moreover the net profit margin was maintained y-o-y at a healthy 6.37% in FY21 (prov.)
Modest scale of operations and healthy orderbook position :
The total operating income stood relatively modest and increased from Rs.48.34 crore in FY20 to Rs.78.29 crore in FY21 owing to increase in the number of order executions on the back of increase in demand thereof. However, during 8MFY22 the firm has achieved TOI of Rs. 47.44 crore and has a healthy order book position of Rs 486 crores (including L1 Orders of Rs 103 crores) which translates to Order book / Revenue ratio of 6.23 times which reflects medium term revenue visibility. The firm’s ability to increase its scale of operations amidst Covid-19 remains a key monitorable.

Credit Risks:

Moderate financial risk profile :
The financial risk profile is moderate, marked by moderate debt protection metrics and capital structure. Debt protection metrics, indicated by interest coverage and debt service coverage ratios of 2.78 times and 1.49 times respectively in FY21 (vis-à-vis 2.47 times and 1.33 times respectively in FY20). Networth is moderate at Rs 21.61 crore (FY20: Rs 15.83 crores) and the Capital structure is moderate as reflected in gearing of 1.41 times as on March 31, 2021 (FY20: Rs 1.70 times). Sustained improvement in the financial risk profile will remain a key monitorable.
Significant customer & geographical concentration risk :

The operations of MP are concentrated inChhattisgarh & Jharkhand, thereby imposing a significant customer & geographical concentration risk. Moreover, the customer profile of the firm is concentrated with the top 5 customers comprising 88.05% of the net sales, in FY21(Prov). Also, one of the orders itself constitutes more than 40% of the total order book, thus further accentuating concentration risk.
Presence in highly competitive industry coupled with tender-driven nature of operations :

MP operates in a highly competitive industry with a number of players engaged in the civil construction activities. Moreover, the presence of the government bodies as the customers intensifies the already prevailing competition in the market. Furthermore, the operations are tender-driven in nature wherein the firm has to indulge into competitive bidding, which is evidently reflected in the fluctuating operating profit margins and significant amount of funds blocked in retention money, security deposits, earnest money deposits, etc
Partnership nature of constitutions :

MP is exposed to inherent risk of partner's capital being withdrawn in case of any exigency. Due to the partnership nature of the constitution, it has restricted access to external borrowing where net-worth as well as credit worthiness of the partner are the key factors affecting credit decision of lenders.

ANALYTICAL APPROACH - Standalone

BWR has essentially relied upon the standalone audited financials of the company up to FY20, provisional financials for FY21, projections up to FY23, publicly available information and information/clarifications provided by the management.

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

Positive factors –

Significant increase in the scale of operations & capitalization by maintaining the order book ratio, reduction in geographical concentration while maintaining the profit margins, capital structure & debt coverage indicators.

Negative factors –

Deterioration in scale of operations coupled with deterioration in the profit margins, capital structure & debt coverage indicators, and liquidity position.

LIQUIDITY INDICATORS - Adequate

The firm is expected to generate cash accruals of over Rs 6.00 crore against repayment obligations of 2.35 crore in FY 2022. The current ratio stood comfortable at 4.21 times as on March 31, 2021 (vis-à-vis 1.96 times as on March 31, 2020). Moreover, the company is majorly dependent on working capital bank limits for managing its working capital requirements. Fund-based bank limit was utilised at an 79% on an average over the last 10 months through Oct 2021 Furthermore, the company has free cash & cash equivalents balance of ~Rs.0.48 crore as on March 31, 2021, and time to time fund support in the form of unsecured loans from promoters friends, and family thereby comforting liquidity.

ABOUT THE ENTITY

Established as a partnership firm in 2002 by the Poddar family, MP is a Class-A contractor certified by the government, engaged in civil construction of roads, buildings and bridges for the various government bodies in Chhattisgarh, Orissa, Jharkhand & Madhya Pradesh. The works executed comprise widening & strengthening of road, construction of godown, development of land, construction of government quarters, construction of various types of roads, construction & maintenance of rural roads,construction of hostels, construction of stadiums, construction of auditoriums, construction of bridges, construction of colleges, construction of buildings, construction of RCC drains, etc. The corporate office is located at Raipur which is in Chhattisgarh state. The overall operations of the firm are looked after by the partners viz. Mr. Mohan Poddar along with his brother Mr. Sohan Poddar since 2002

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	48.34	82.58
EBITDA	Rs.Crs.	5.75	6.71
PAT	Rs.Crs.	3.09	4.98
Tangible Net Worth	Rs.Crs.	15.83	15.63
Total Debt/Tangible Net Worth	Times	1.70	1.31
Current Ratio	Times	1.96	1.92

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

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	6.50	BWR BB+/Stable (Upgrade)	03Sep2020	BWR BBStable (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	44.50	BWR A4+ (Upgrade)	03Sep2020	BWR A4 (Assignment)	NA	NA	NA	NA
Grand Total		51.00	(Rupees Fifty One Crores Only)

Rating Advisory, as on 04Oct2021
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
Roma Gupta Ratings Analyst roma.g@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Mohan Poddar

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	AU Small Finance Bank	Over Draft - Sanctioned	1.50	_	1.50
2	AU Small Finance Bank	Bank Guarantee - Sanctioned	_	10.00	10.00
3	AU Small Finance Bank	Bank Guarantee - Proposed	_	2.00	2.00
4	HDFC Bank	Bank Guarantee - Proposed	_	6.50	6.50
5	HDFC Bank	Bank Guarantee - Sanctioned	_	26.00	26.00
6	HDFC Bank	Cash Credit - Sanctioned	5.00	_	5.00
Total			6.50	44.50	51.00
TOTAL (Rupees Fifty One Crores Only)

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