Extensive experience of the partners:
Mr. Periyasami, the founder of PSK engineering construction & co. established Saranya spinning Mills Private Limited during 1995. Mr. Ashok Kumar, the elder son of Mr. Periyasami, has been actively participating in the operations of PSK engineering and Saranya Spinning Mills Private Limited since 2000. Later, after the split in business in 2017, Mr. Ashok Kumar received full holding of Saranya Spinning Mills Private Limited, 50 percent holding in PSK engineering and his younger brother received 50 percent holding in PSK engineering. During 2017 Mr. Ashok kumar established new company in the name of Ashok Constructions. Acuite believes that the partners prior industry experience from PSK engineering and construction co. will help in improving the business risk profile of Ashok constructions.
Improvement in revenue supported by healthy order book position:
The operating revenue of the firm increased to Rs.126.75 Cr. as on March 31, 2025 (Prov) as against Rs.108.52 Cr. in the previous year. This growth was driven by a higher volume of orders and their timely execution. Furthermore, the firm has a healthy order book position with unexecuted orders worth ~Rs.335.76 Cr. which are to be executed in the next one-two years, thereby providing moderate revenue visibility over the medium term. Additionally, the operating profit margin increased to 16.65 percent in FY2025 (Prov), compared to 8.61 percent in FY2024. This was due to the company handling more projects work itself, which reduced its dependence on sub-contractors and helped to manage costs more effectively. The Profit After Tax (PAT) margin improved and stood at 8.15% in FY2025 (Prov), compared to 2.63% in the previous year.
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Moderate financial risk profile
The financial risk profile of the firm improved yet remained moderate marked by high gearing, moderate networth and debt protection metrics. The tangible net worth of the firm stood at Rs. 17.71 Cr as on March 31st, 2025 (Prov) as against Rs.7.38 Cr as on March 31st, 2024. The gearing level improved and stood at 2.86 times as on 31 March 2025 (Prov) as against 8.37 times as on 31 March 2024. The total debt of the firm stood at Rs. 50.59 Cr. as on March 31, 2025 (Prov) as against Rs. 61.79 Cr as on March 31, 2024. Total outside liabilities to tangible net worth (TOL/ TNW) stood at 4.67 times as on 31 March 2025 (Prov) as against 9.95 times as on 31 March 2024. The debt protection metrics improved marginally yet remain moderate where interest coverage ratio (ICR) stood at 3.89 times in FY2025 (Prov) as against 2.59 times in FY2024. Debt service coverage ratio (DSCR) stood at 2.06 times in FY2025 (Prov) as against 1.74 times in FY2024. Net Cash accruals / total debt (NCA/TD) ratio stood at 0.25 times in FY2025 (Prov) as against 0.07 times in FY2024.
Acuité believes that going forward the financial risk profile is expected to improve on account of steady accruals generation and in absence any further major debt funded capex over the medium term.
Intensive nature of working capital operations:
The firm’s working capital management is intensive in nature marked by Gross Current Assets (GCA) of 242 days in FY2025 (Prov) as compared to 227 days in FY2024. The high GCA days is on account of high debtor days and high other current assets. The inventory days stood at 21 days in FY2025 (Prov.) as compared to 30 days in FY2024. The debtor days stood at 43 days in FY2025 (Prov) as against 44 days in FY2024. Further, the creditor days stood at 66 days in FY2025 (Prov) as compared to 15 days in FY2024. The average utilization of working capital limits remained high with average utilisation of fund-based limits at ~93% over the last twelve months ending April 2025 and non-fund based limit utilisation at ~65.25% during the same period.
Acuité believes that working capital management of the firm will improve over the medium term.
Inherent risk of tender based operations:
The revenue and profitability depends entirely on the ability to successfully bid for the tenders. Entities in this segment face intense competition, thus requiring them to bid aggressively to procure contracts; this restricts the operating margin to a moderate level. Also, given the cyclicality inherent in the construction industry, the ability to maintain profitability margin through operating efficiency becomes critical. Acuité believes that the firm’s business risk and financial risk profile can be adversely impacted on account of presence of stiff competition and has inherent risk of susceptibility to tender based operations.
Inherent risk of capital withdrawal in a partnership firm
The firm is susceptible to the inherent risk of capital withdrawal given its constitution as a partnership. Any significant withdrawal from the partner’s capital will have a negative bearing on the financial risk profile of the firm.
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