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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 0.70 | ACUITE BB | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 2.50 | ACUITE BB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 1.80 | Not Applicable | Withdrawn | - |
| Bank Loan Ratings | 12.00 | - | ACUITE A4+ | Assigned |
| Bank Loan Ratings | 11.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 25.50 | - | - |
| Total Withdrawn | 2.50 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long term rating of ‘ACUITE BB’ (read as ACUITE double B) on the Rs.2.50 crore bank facilities of Ashok Kumar Mittal (AKM). The outlook is ‘Stable’.
Acuité has reaffirmed the short term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.11 crore bank facilities of Ashok Kumar Mittal (AKM). Acuité has assigned the short term rating to ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.12.00 crore bank facilities of Ashok Kumar Mittal (AKM). Acuite has reaffirmed & withdrawn its long term rating to 'ACUITE BB' (read as ACUITE double B) on the bank facilities of Rs.0.70 crore and also withdrawn the long term rating on the Rs.1.80 Cr proposed bank facilities of Ashok Kumar Mittal (AKM). The rating has been withdrawn on account of the request received from the company and No Objection Certificate received from the banker, as per Acuite's policy of withdrawal of ratings. Rationale for Rating The reaffirmation in the rating takes into consideration the established track record of operations of the firm and extensive experience of the promoters in the construction industry. AKM has recorded an operating income of Rs.123.54 Cr as on FY2023 and Rs. 128.84 Cr in FY2022. The rating also factors in the efficient working caital operations, moderate financial risk profile of the firm marked by low gearing levels of 0.79 times as on March 31, 2023 and adequate liquidity position. These strengths are partially offset by the firm’s competitive & fragmented nature of industry and capital withdrawal risk. |
| About the Company |
| Incorporated in 1985 Mr. Ashok Kumar Mittal established Ashok Kumar Mittal (AKM), a Chhattisgarh-based company, as a sole proprietorship. In 2002, the company started offering the Chhattisgarh government irrigation and PWD departments civil construction services. The registered office is located in Korba, in the district of Chhattisgarh. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of AKM to arrive at the rating |
| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management. The operations of AKM commenced in 1985. The proprietor, Mr. Ashok Kumar Mittal has experience of more than three decades in civil construction and well supported by a second line of generation comprising Mr. Deepak Kumar Mittal. Due to established track record in the construction industry, the firm has established relations with its customers and suppliers which has benefitted in terms of new orders in competitive bidding. Acuité believes that the firm will continue to benefit from proprietor’s extensive experience in the industry and its improving business risk profile over the medium term. Average financial risk profile The financial risk profile of the company remained moderate marked by moderate net worth, comfortable gearing and moderate debt protection metrics. The net worth of Rs.22.68 Cr as on FY2023 as against Rs.18.25 Cr as on FY2022. The gearing (debt-equity) stood at 0.79 times as on FY2023 as against 0.91 times as on FY2022. The total debt of Rs.18.00 Cr as on FY2023 consists of long-term of Rs.10.91 Cr., unsecured loan from directors of Rs. 4.67 Cr and short term debt of Rs. 2.42 Cr. The interest coverage ratio stood at 6.04 times for FY2023 as against 5.50 times for FY2022. The Net Cash Accruals to Total debt stood at 0.36 times for FY2023 and FY2022. The Total outside liabilities to Tangible net worth stood high at 2.62 times for FY2023 as against 3.03 times in FY2022. Efficient working capital cycle The working capital management of the company remained efficient marked by Gross Current Assets (GCA) of 59 days for FY2023 as compared to 57 days as on FY2022. The debtor period stood at 28 days for FY2023 and as against 38 days for FY2022. Further, the inventory holding stood at 06 days for FY2023 as against 04 days for FY2022. However, the creditor days stood at 116 days in FY2023 as against 91 days in FY2022. The average credit period allowed by suppliers is around 60-90 days. Acuité believes that the working capital management of the company will continue to remain a key rating sensitivity going ahead. |
| Weaknesses |
| Competitive and fragmented industry AKM is into the business of civil construction. This particular sector is marked by the presence of several mid to big size players. AKM faces intense competition from the other players in the sectors. Risk become more pronounced as tendering is based on minimum amount of biding of contracts. However, this risk is mitigated to an extent as management has been operating in this environment for last 35 years. Capital withdrawal risk AKM is exposed to risk of capital withdrawal considering its proprietorship constitution. However, there were no significant withdrawals observed during the period understudy. |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Adequate |
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The firm’s liquidity position is adequate, marked by marked by moderate net cash accruals to its maturing debt obligations. The firm generated sufficient net cash accruals in the range of Rs.4.51-6.51 Crore in FY2021-23 against no maturity repayment obligations crore in the same tenure. In addition, it is expected to generate sufficient cash accrual in the range of Rs.7.73-9.12 crore against the maturing repayment obligations of Rs.1.80-2.00 crore over the medium term. The working capital management of the firm is efficient marked by GCA days of 59 days in FY2023. The firm maintains unencumbered cash and bank balances of Rs.0.18 crore as on March 31, 2023. The current ratio stands at 0.64 times as on March 31, 2023. Acuité believes the company may continue to maintain adequate liquidity position over the medium term on account of steady accruals |
| Outlook: Stable |
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Acuité believes that the firm will continue to maintain a ‘Stable’ outlook over near to medium term owing to its established market position and experienced management. The outlook may be revised to ‘Positive’ in case the firm achieves higher than expected growth in revenues along with improvement in profitability, working capital management and debt protection metrics. Conversely, the outlook may be revised to ‘Negative’ in case of a significant decline in revenues and operating profit margins, or deterioration in the capital structure and liquidity position on account of higher-than-expected working capital requirements.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 123.54 | 128.84 |
| PAT | Rs. Cr. | 4.47 | 4.37 |
| PAT Margin | (%) | 3.62 | 3.39 |
| Total Debt/Tangible Net Worth | Times | 0.79 | 0.91 |
| PBDIT/Interest | Times | 6.04 | 5.50 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
| 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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