- Established track record, experienced management
Mr. Subramaniam Ashok Kumar and his wife, Mrs. Duraisamy Kalaiselvi, are the directors of the company and are 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 the promoter's extensive industry experience, supported by experienced management and timely execution of projects, the company helped to establish a longstanding relationship with various government bodies in Tamil Nadu and Kerala, as well as other corporate clients. Acuité believes that the 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.
- Moderate order book position and healthy EBTIDA margins:
The company having an unexecuted order book position of Rs. 1176.20 Cr. as on October 31, 2024. The company is planning to execute the outstanding orders in the next 15-17 months of time. The outstanding order book is 1.9 times of the FY2024 revenue. However, of the total outstanding orderbook, ~34% of the orderbook pertains to orders that the company has received in FY2025 (till Oct 2024), 30% pertains to orders received in FY2024, and ~26% of the unexecuted orderbook pertains to orders received in FY2021. The orders received in FY2019 and FY2020 on an aggregate basis pertain to 9.24 percent. The orders received in FY2019 and FY2020 on an aggregate basis are completed to an extent of 85-90 percent. The company ventured into a new segment of contracts, i.e., solar power, to grab the demand and opportunities. The company has recently received solar project contracts in October 2024, which amounts to Rs. 225.80 Cr. with 45 MW capacity. These solar projects are expected to be completed in one year's time. It is expected that orders from the solar segment will be boosted in the near future on account of demand. The operating margins ranged between 14.52-15.58 percent for the last two years ended FY2024. The company has recorded a growth in revenues of (20.60) percent in FY2024 as compared to the previous year, which stood at Rs. 620.21 Cr. in FY2024 as compared to Rs. 781.15 Cr. in FY2023. The deterioration in the revenues is on account of fewer tenders from the Tamil Nadu government, majorly for the irrigation and water supply segment, and delayed payments. However, Acuité believes that AIDL’s business risk profile to remain stable on account of new orders in solar segment and ability of company to win new orders.
- Healthy financial risk profile
The financial risk profile of the company is healthy with a healthy capital structure and debt protection metrics. The net worth of the company stood healthy at Rs. 438.83 Cr. and Rs. 383.93 Cr. as on March 31, 2024, and 2023, respectively. The improvement in the net worth is due to the accretion of reserves. The gearing of the company is minimal, which stood at 0.20 times as on March 31, 2024, against 0.32 times as on March 31, 2023. Debt protection metrics—interest coverage ratio and debt service coverage ratio—stood at 5.90 times and 2.65 times as on March 31, 2024, respectively, as against 9.39 times and 4.97 times as on March 31, 2023, respectively. Deterioration in debt protection metrics is on account of higher interest costs and repayment obligations; nevertheless, the ratios are healthy. TOL/TNW stood at 0.42 times and 0.84 times as on March 31, 2024 and 2023, respectively. The debt to EBITDA of the company stood at 0.90 times as on March 31, 2024, as against 0.96 times as on March 31, 2023. Acuite believes that the financial risk profile of the company will remain healthy over the medium term.
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- Working capital intensive operations
AIDL's working capital cycle is working capital intensive, as reflected by its high GCA days at 260 days in FY2024 as against 245 days in FY2023. The GCA days are driven by inventory days and other current assets (OCA), which pertain to retention money. Inventory days stood at 101 days in FY2024 as against 115 days in FY2023. The debtor’s day stood at 49 days in FY2024 as against 24 days in FY2023. The increase in debtor days is on account of delayed payments from Tamil Nadu government departments. Subsequently, the payable period stood at 42 days in FY2024 as against 83 days in FY2023, respectively. Further, the fund-based bank limits utilization of AIDL to 60 percent for fund-based and 64 percent for non-fund-based, respectively, for the past seven months ended October, 2024.
- 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 in 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 Tamil Nadu, which accounts for 95 percent of the unexecuted order book. Further, the segmental concentration of the order book is high, with the water supply infrastructure works contributing over 95 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 a 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 the above-stated risks are mitigated to an extent as management is operating in this segment for nearly two decades.
AIDL was alleged in involvement in a goods and services tax (GST) dispute in October 2019, for the wrongful availment of an input tax credit (ITC) during financial years 2018-19 & 2019-20. The management has clarified that the company was made 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. After the issue of GST circular dated 06.07.2022, the management expects ADIL to be penalized maximum upto Rs.45000 under Section 122 and 125 of the Act. However, the matter as on date is still sub-judice.
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