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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 16.42 | ACUITE BBB- | Negative | Reaffirmed | Stable to Negative | - |
| Bank Loan Ratings | 15.00 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 31.42 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and short term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) to the Rs. 31.42 crore bank facilities of ACME Excellent Management Private Limited (AEMPL). The outlook is revised from ’Stable’ to ’Negative’.
Rationale for rating reaffirmation and outlook revision The rating reaffirmation reflects moderate financial risk profile marked by moderate net worth, healthy gearing and debt protection metric. Also the rating factors in comfort derived by experienced management, established track record of operations. On the contrary, the rating is constrained by tender based operations of AEMPL, Stretched liquidity, higher bank limit utilization, Intensive Working capital operations and higher debtor days. |
| About the Company |
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Delhi based, Acme Excellent Management Pvt. Ltd. (AEMPL) was incorporated in 2012. The company is engaged in providing facility management services such as cleaning and sanitation, housekeeping, security and surveillance etc. The company has reputed clientele and caters to companies such as Delhi Metro Rail Corporation Limited, Directorate of Education in Delhi, Lucknow Metro, to name a few. AEMPL acquires business through tenders, the duration of which is a year for government agencies
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profiles of AEMPL to arrive at this rating.
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Key Rating Drivers
| Strengths |
| Experienced management
AEMPL was incorporated in 2012, prior to which the promoters of the company were associated with a proprietorship firm; Acme Enterprises, engaged in facility management services. The director of the company Mr. Mahesh Jena who have three decades of experience in the aforementioned line of businessThe established track record of operations and experience of management has helped the company to maintain a diversified and reputed client base. Acuité believes that AEMPL will continue to benefit through the experienced management and established track record of operations. Financial Risk Profile The company has moderate financial risk profile marked by moderate net worth and moderate debt protection metrics. The company’s net worth stood at Rs. 25.23 Cr as on 31st March 2022 as against Rs. 20.64 Cr as on 31st March 2021. There is minuscule improvement in gearing levels (debt-to-equity) as evident from 0.73 as on March 31, 2021 to 0.69 times as on March 31, 2022. However, interest coverage ratio stood at 4.02 times in FY2022 and 3.54 times in FY2021. However, there has been fall in debt service coverage ratio coming from 2.76 times in FY2021 to 1.91 times in FY22. Total outside liabilities to total net worth (TOL/TNW) has been increased in FY 22 and stood at 1.73 times as against 1.67 times in FY 21. |
| Weaknesses |
| Tender based nature of operations
The company’s operations are tender based. The company deals with government entities and bids for contracts. The tender based business model may restrict pricing power and profitability. However, the risk is mitigated due to the long track record of operations and experienced management. Intensive working capital management The company’s working capital is intensive in nature as evident from gross current assets (GCA) of 129 days for FY2022 as against 93 days for FY2021. The GCA days are mainly dominated by debtors’ days of 115 days as on 31 March 2022 which has increased from 73 days in previous year. Current Ratio stood low at 1.01 times as on 31 March 2021. |
| Rating Sensitivities |
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Company’s ability to improve the operating performance with profitability,
Company’s ability to improve the financial risk profile elongation of the working capital cycle leading to deterioration in liquidity position |
| Material covenants |
| None |
| Liquidity Position |
| Stretched |
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AEMPL has stretched liquidity as evident from net cash accruals of 5.01 crore in FY2022 as against debt obligation of ~ 1.06 Cr during the same period. However, moderate net worth has made the company dependent on short term borrowings for working capital management. The fund based bank limit utilization remains high at an average of ~91% for the last six months ended October 2022. Company has cash and Bank Balance of Rs 0.27 crores as on March 31, 2022. Current Ratio of company stood at 1.01 times as on March 31, 2022.
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| Outlook: Negative |
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Acuité believes that AEMPL liquidity position will continue to be stretched in the near term due to intensive working capital cycle resulting into high bank limit utilization. The outlook may be revised to ‘Stable’ in case the company registers higher-than expected growth in revenues and profitability resulting into significant improvement in liquidity profile of the company and improved working capital operations. The rating may be downgraded if the company’s Operating performance and profitability declines further resulting into further stretch in liquidity and further dip in working capital operations
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 101.39 | 122.25 |
| PAT | Rs. Cr. | 4.56 | 4.37 |
| PAT Margin | (%) | 4.50 | 3.57 |
| Total Debt/Tangible Net Worth | Times | 0.69 | 0.73 |
| PBDIT/Interest | Times | 4.02 | 3.54 |
| Status of non-cooperation with previous CRA (if applicable) |
| CRISIL vide its press release dated 13 July 2022, has mentioned the rating of ACME EXCELLENT MANAGEMENT PRIVATE LIMITED to ‘[CRISIL]B+/Stable/A4’ Issuer Not Cooperating as on 13 July 2022. |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
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