- Established track record, experienced management
Mr. Subramaniam Ashok Kumar and his wife Mrs. Duraisamy Kalaiselvi are the directors of the company and actively involved in the day to day operations. All the directors are having an experience of nearly two decades in the civil construction industry. With promoter's extensive industry experience supported by experienced management and timely execution of projects helped the company to establish longstanding relationship with various government bodies in Tamilnadu and, Kerala Governments as well as other corporate clients. Acuité believes that promoter’s established presence in the industry and strong counterparties, technical prowess and funded projects, will support AIDL’s business profile over the medium term.
- Healthy unexecuted order book
The company having an unexecuted order book position of Rs.1,625 Cr as on August 31, 2022. The company is planning to execute around Rs.1,200-1,400 Cr in FY2023-FY2024. The outstanding order book is 2.65x of the FY2022 revenue. Acuité believes that AIDL’s business risk profile to remain stable on account of moderate order book and ability of company to win new orders.
- Above- average financial risk profile
The financial risk profile of the company has remained above-average with healthy capital structure and debt protection metrics. The net worth of the company stood healthy at Rs.304.16 Cr and Rs.241.78 Cr as on March 31, 2022 and 2021 respectively. The gearing of the company has been improving over the last 2 years ending March 31, 2022 as a result of lower debt and increase in net worth levels. It stood at 0.27 times as on March 31, 2022 against 0.38 times as on March 31, 2021.Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 8.19 times and 3.93 times as on March 31, 2022 respectively as against 8.99 times and 6.17 times as on March 31, 2021 respectively. The decline in debt protection metrics is on account of increase in interest expense. The detoriation in DSCR ratio is on account of decrease in cash accruals. TOL/TNW stood at 1.19 times and 1.14 times as on March 31, 2022 and 2021 respectively.The debt to EBITDA of the company stood at 0.79 times as on 31 March, 2022(Prov.) as against 0.83 times as on 31st March, 2021. Acuite believes that financial risk profile of the company will remain stable over the medium term.
|
- Working capital-intensive operations
AIDL's working capital cycle is working capital intensive as reflected by its high gross current asset (GCA) days at 330 days as on March 31, 2022 as against 213 days as on March 31, 2021. The gross current asset (GCA) days are driven by high inventory days.Inventory days stood at 176 days as on March 31, 2022 as against 85 days as on March 31, 2021. The reason for increase in inventory days is a result of company being allotted major 2-3 high value water projects from TWAD under TN state government in FY21-22. As the project work was under full swing, the WIP on account of such projects had increased.Subsequently, the payable period stood at 345 days as on March 31, 2022 as against 174 days as on March 31, 2021 respectively. The debtors day stood at 44 days as on March 31, 2022 as against 12 days as on March 31, 2021. Further, the average bank limit utilization in the last six months ended September, 2022 remained at ~90 percent for fund based and 98 percent for non-fund based. Acuité believes that the operations of the AIDL's will remain moderately working capital intensive on account of continuous submission of security deposits and retention money.
- Exposure to execution-related risks, tender-driven nature of the business, high geographic and segment concentration risks
With 75-80 percent of the order book in nascent stages of execution, the company remains exposed to project execution risks. Any delay project execution could adversely affect the company’s revenues and profitability. AIDL remains exposed to geographical concentration risks as the orders are largely confined to Tamilnadu which account for 90 percent of the unexecuted order book. Further, the segmental concentration of the order book is high with the water supply infrastructure works contributing over 90 percent of the unexecuted order book, respectively. ADIL is into irrigation projects, wherein the sector is marked by the presence of several mid to large sized players. The risk becomes more pronounced as tendering is based on minimum amount of bidding on contracts, and susceptibility to inherent cyclicality in the infrastructure segment; further, it’s dependent on state government's thrust on irrigation and other infrastructure works. Acuité believes that above stated risks are mitigated to an extent as management is operating in this segment for nearly two decades.
In October 2019, the company was alleged in involvement in a goods and services tax (GST) dispute for the wrongful availment of an input tax credit (ITC) for an amount of Rs.63 Cr during financial years 2018-19 & 2019-20. The management has clarified that the company was liable on account of the subcontractors failure to pay the GST portion, which ADIL had claimed as ITC. According to the management, the ITC claimed by ADIL was in turn passed on to various principal contractors and was not used by the company. The management initially estimates a liability of only around Rs.3.27 Cr, along with applicable interest and penalties under the provision of the GST Act. ADIL had made a tax provision for the same in FY2020 and FY2021 and after the Principal contractors of the company have paid the tax, interest and 15 percent of penalty, there were no proceedings which were initiated against them in view of Section 74(5) of the CGST Act, 2017. Therefore, there will not be any liability on the Company under CGST Act.It is clarified that the tax and interest cannot be demanded, when there is no supply. The allegation of evasion of tax cannot be made, when there is no supply. Therefore, as stated by the management, a penalty of Rs.10,OOO/- can only be imposed as per the circular dated 06.07.2022 released by GST department.
|
