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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 30.00 | ACUITE BBB+ | Stable | Assigned | - |
| Bank Loan Ratings | 20.00 | ACUITE BBB+ | Stable | Upgraded | - |
| Bank Loan Ratings | 50.00 | - | ACUITE A2 | Assigned |
| Bank Loan Ratings | 75.00 | - | ACUITE A2 | Upgraded |
| Total Outstanding | 175.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the long-term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus) from ‘ACUITE BBB’ (read as ACUITE triple B) and the short-term rating to ‘ACUITE A2’ (read as ACUITE A two) from ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs. 95 Cr. bank facilities of A K Construction Company (AKCC). The outlook remains ‘Stable'.
Acuité has assigned the long-term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus) and the short-term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs. 80 Cr. bank facilities of A K Construction Company (AKCC). The outlook is ‘Stable'. Rationale for rating upgrade The rating upgrade takes into account the augmentation in the business risk profile of the group, marked by an improvement in scale of operations by 66 percent yo-y growth to Rs. 956.02 crore in FY2024 (Provisional) as against Rs. 575.75 crore in FY2023. The growth is primarily supported by the healthy execution of projects and the segmentally diversified order book position of the group. The group’s total unexecuted order book position stood at Rs. 1502.04 crore as of June 30, 2024, providing adequate revenue visibility over the medium term. The rating also takes into account the strong clientele base, primarily from State Government entities, and the long-standing operations of the group in the civil construction industry, aided by the experienced management. The rating also draws comfort from the group’s above-average financial risk profile and the adequate liquidity position backed by improving accruals and low debt repayment obligations. However, these strengths are offset by the high receivables days of the group and the highly competitive industry they operate in. |
| About the Company |
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Established in 1998, A K Construction Company (AKCC) is a partnership firm managed by Mr. Awadesh Kumar Pathak, Mr. Suresh Kumar Pathak and Mr. Ramesh Kumar Pathak. The firm is based in Uttar Pradesh and is engaged in civil construction works and undertakes contracts for constructing roads, bridges, government buildings for the government departments namely, Public Works Department (PWD), PMGSY and some PSU’s. AKCC is registered as a Class A contractor with PWD, UP Irrigation Department, UP Power Corporation, to name a few.
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| About the Group |
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The group consists of two companies namely, A K Infra Projects Private Limited (AKIPPL) a private limited company which was incorporated in 2008 and a sister concern A K Construction Company (AKCC). AKIPPL is promoted by Mr. Awadesh Kumar Pathak, Mr. Suresh Kumar Pathak and Mr. Ramesh Kumar Pathak along with a set of skilled professionals. The company undertakes building and electrification works for the government entities in Uttar Pradesh. Established in 1998, A K Construction Company (AKCC) is a partnership firm managed by Mr. Awadesh Kumar Pathak, Mr. Suresh Kumar Pathak and Mr. Ramesh Kumar Pathak. The firm is based in Uttar Pradesh and is engaged in civil construction works and undertakes contracts for constructing roads, bridges, government buildings.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| For arriving at this rating, Acuité has consolidated the business and financial risk profiles of A K Construction Company (AKCC) and A K Infraprojects Private Limited (AKIPL) together referred to as the ‘A K Group’ (AKG). The consolidation is in the view of common management, strong operational linkages between the entities and a similar line of business.
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| Key Rating Drivers |
| Strengths |
| Long-standing operations and experienced management
AK Group has established a long presence of around three decades in the civil construction industry and has developed a strong clientele base comprising government departments, National Highways & Infrastructure Development Corporation Ltd., Indian Oil Corporation Limited (IOCL), and Bharat Heavy Electrical Limited, to name a few. The group is managed by Mr. Awadesh Kumar Pathak, who has more than two decades of experience, and is supported by the decade-long expertise of Mr. Suresh Kumar Pathak and Mr. Ramesh Kumar Pathak. Acuité believes that going forward, the growth of the group will be aided by the long track record of operations and the management’s strong understanding of market dynamics. Improvement in scale of operations The group witnessed an improvement in its scale of operations marked by an operating income of Rs. 956.02 Cr. in FY2024 (Prov.) as against Rs. 575.75 Cr. in FY2023 due to healthy execution of their order book. Further, A K Group has a healthy unexecuted order book position to the tune of Rs. 1502.04 Crore approximately as on 30th June 2024. Going forward, the ability of the group to bag new orders and timely execution of the existing orders will remain a key rating monitorable. The EBITDA margin of the group stood at 4.61 per cent in FY2024 (Prov.) as against 4.59 per cent in FY2023 and the PAT margin of the group stood at 3.26 per cent in FY2024 (Prov.) against 3.00 per cent in FY2023. Though the group’s profitability is exposed to volatility in raw material, it has an in-built price escalation clause for major raw materials in most of its contracts. The group is expected to have better top-line in near to medium term supported by better margins as compared to previous years on account of better order book with higher margins. Healthy Financial Risk Profile The financial risk profile of the group is healthy marked by net-worth of Rs. 132.79 Crore as on 31st March 2024 (Prov.) against Rs. 100.59 Crore as on 31st March 2023. Further, the total debt of the group stood at Rs. 70.00 Crore as on 31st March 2024 (Prov.) against Rs. 47.88 Crore as on 31st March 2023. The capital structure of the group is comfortable marked by gearing ratio of the group which stood at 0.53 times as on 31st March 2024 (Prov.) against 0.48 times as on 31st March 2023. Further, the coverage indicators of the group improved reflected by interest coverage ratio and debt service coverage ratio of the group which stood at 4.24 times and 3.59 times respectively as on 31st March 2024 (Prov.) against 3.67 times and 3.05 times respectively as on 31st March 2023. The TOL/TNW ratio of the group stood at 0.88 times as on 31st March 2024 (Prov.) against 1.11 times as on 31st March 2023 and DEBT-EBITDA of the group stood at 1.56 times as on 31st March 2024 (Prov.) against 1.78 times as on 31st March 2023. Acuité believes that going forward the financial risk profile of the group will remain healthy with no major debt funded capex plans. Moderate Working Capital operations The working capital operations of the group is moderately marked by GCA days which stood constant at 62 days as on 31st March 2024 (Prov.) against 88 days as on 31st March 2023. There is an improvement in the GCA days due to the debtors days of the group which stood at 55 days in FY24 (prov.) against 76 days in FY23 and creditor days of the group stood at 23 days in FY24 (prov.) against 39 days in FY23. |
| Weaknesses |
| Presence of Competition in the industry
The civil construction sector is marked by the presence of several mid- to large-sized players. The group faces intense competition from other players in the sector. The group specialises in civil works related to the construction of roads and buildings, mainly for the government of Odisha and various municipal corporations in the state of Odisha. The group faces competition from large players as well as many local and small, unorganised players. However, this risk is mitigated to an extent on account of the experience of the management and the group’s well-established presence in its territory. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity profile of the group is adequate. The net cash accruals of group stood at Rs. 31.85 Cr. in FY 24 (prov.) against the CPLTD of Rs. 1.22 Cr. for the same period giving some legroom for growth fund. The group has cash & bank position of Rs. 9.62 Cr. and current ratio stood at 1.89 times for FY 24 (prov.). The average fund based bank limit utilization is at 88.86% and non-fund based bank limit utilization is at 73.98% for the 6 months’ period ending March 2024.
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| Outlook: Stable |
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Acuité believes that the outlook on the group will remain 'Stable' over the medium term on account of the experienced management, steady business risk profile and healthy financial risk profile. The outlook may be revised to 'Positive' in case of significant growth in revenue or operating margins from the current levels. Conversely, the outlook may be revised to 'Negative' in case of a decline in revenue or operating margins, deterioration in financial risk profile or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 956.02 | 575.75 |
| PAT | Rs. Cr. | 31.16 | 17.29 |
| PAT Margin | (%) | 3.26 | 3.00 |
| Total Debt/Tangible Net Worth | Times | 0.53 | 0.48 |
| PBDIT/Interest | Times | 4.24 | 3.67 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any Other Information |
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None
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| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.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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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||
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