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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 269.00 | - | ACUITE A2+ | Reaffirmed |
| Bank Loan Ratings | 41.00 | ACUITE A- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 310.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE A-’ (read as ACUITE A minus) and the short term rating of ‘ACUITE A2+ (read as ACUITE A two plus) on the Rs.310.00 crore of bank facilities of Barbrik Project Limited. The outlook is ‘Stable’.
Rationale for the rating The reaffirmation of the ratings continues to remain underpinned from experienced promoters and its established presence in the civil construction industry, operational track record of over three and half decades with demonstrated execution capability and healthy revenue visibility with orders from reputed clientele. The above rating strengths, however constrained by its geographical concentration risk, significant equity commitments (Rs 100 crore over the next two years) towards HAM projects, the inherent lifecycle risks in the HAM projects, including, inter alia, variability of annuities to changes in bank rate and inflation indices during both execution and operation stages, moderate level of financial support towards special purpose vehicles (SPVs) in which BPL has majority stake apart from inherent cyclical trends associated with the construction sector. |
| About Company |
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Barbrik Project Limited (BPL) was established as a partnership firm in 1985 and subsequently converted into a private limited company in 2008. The entity has been promoted by the Agarwal family of Chhattisgarh and is engaged in the construction of roads, bridges and highways. The company is a registered contractor for Public Works Department (PWD) of Chhattisgarh, Jharkhand, Maharashtra, Madhya Pradesh, Odisha and Bihar along with National Highway Authority of India (NHAI) and State Highway Authority of Jharkhand (SHAJ). The company is also engaged in undertaking logistic service for Central Coalfield Limited, Northern Coalfield Limited and Adani Enterprises Limited. Currently, the company is managed by Mr. Ramesh Kumar Agarwal, Mr. Rajesh Kumar Agarwal, Mr. Dhruv Kumar Agarwal, Mr. Kanhaiya Lal Agarwal, Mr. Ayush Kumar Agarwal and Mr. Sourabh Agarwal.
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| About the Group |
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Chhattisgarh based, PRA India Private limited (erstwhile P R Agrawal Project Private Limited) was incorporated in 2019 by Mr. Ramesh Kumar Agarwal. The company is engaged in civil construction work and currently undertakes projects subcontracted by Barbrik Project Limited.
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Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated the financial and business risk profile of Barbrik Project Limited (BPL) and PRA India Private Limited (PIPL). The group is herein, being referred to as Barbrik Group. The same is on account of common management, same line of operations and significant operational and financial fungibility.
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Key Rating Drivers
| Strengths |
| Experienced management and healthy order book
The group has a long execution track record of thirty five years in the civil construction business with an established track record of projects related to road, highways and bridges. The promoters of the group Mr. Ramesh Kumar Agarwal, Mr. Rajesh Kumar Agarwal, Mr. Dhruv Kumar Agagrwal, Mr Kanhaiya Lal Agarwal possesses more than three decades of experience in the infrastructure industry. The second-generation promoters Mr. Ayush Kumar Agarwal and Mr. Sourabh Agarwal (son of Mr. Ramesh Kumar Agarwal) have joined the business and also have experience of more than a decade in the infrastructure industry. The group has a long presence in this sector and has established a healthy relationship with customers for more than a decade. The timely execution of the projects has helped the group to improve its market presence in Odisha, Chhattisgarh, Madhya Pradesh, Jharkhand and Maharashtra. Group has bagged a HAM project of Rs 865 crore from NHAI through its SPV PRA Hatibena Badakumari Expressway (PRA HBEPL). Barbrik Group has a 100 percent stake in PRA HBEPL. (Sponsor- Barbrik Projects Ltd-74% and PRA India Private Limited -26%). The said project received its appointment date on 4.03.2022 and its ROW is around 90%. Groups’ order book stands at Rs 3,139 crore (including the new HAM project worth Rs 557 crore), with major contributions from the by-roads – HAM (17.8%), roads – EPC (57.4%), coal- over burden removal (24.2%), and hydro power (0.6%) segments. Almost 34 percent of outstanding orders are expected to be completed over the next 12-15 months, thus providing strong revenue visibility over the medium term. Group’s scale of operation had witnessed improvement as reflected from revenue of Rs 538.69 crore in FY22 as against 507.76 crore in FY21. Acuite believes the scale of operation will continue to improve in medium term backed by its healthy order book size. Comfortable financial profile The financial risk profile of the group is marked by high net worth, low gearing and healthy debt protection metrics. The net worth of the group stood at Rs. 283.88 crore in FY 2022 as compared to Rs 239.54 crore in FY2021. The gearing of the company stood low at 0.31 times as on in FY 2022 when compared to 0.33 times as on in FY 2021. Interest coverage ratio (ICR) is strong and stood 8.04 times in FY2022 as against 6.76 times in FY 2021. The debt service coverage ratio (DSCR) of the group also stood comfortable at 1.74 times in FY2022 as compared to 2.09 times in the previous year. The net cash accruals to total debt (NCA/TD) stood healthy at 0.76 times in FY2022 as compared to 0.86 times in the previous year. Going forward, Acuite believes the financial risk profile of the group will remain healthy on account of steady net cash accruals and no major debt funded capex plan. Healthy profitability margins The group has healthy profitability margins both at the operating and net level. The operating profitability margin of the group moderated to 16.22 per cent in FY2022 as compared to 17.48 per cent in the previous year due to change in project mix and increase in input prices such as bitumen, steel and cement. Group has a price escalation clause, but it generally follows with a lag. Going forward, the group will focus on margin accretive projects, which will improve its margin. The profit after tax (PAT) margins of the group stood at 8.23 percent in FY 2022 as against 8.96 percent in the preceding year. Since a significant share of the group's existing orders are for road projects and the inclusion of an adequate price escalation clause with the counterparty, Acuite believes the group's profitability margin will be maintained at healthy levels over the medium term. |
| Weaknesses |
| Working capital management
The operation of the group is working capital intensive marked by high gross current asset days (GCA) of 190 days in FY2022 as compared to 206 days in the previous year. Moreover, the inventory days of the company has increased to 74 days in FY2022 as compared to 64 days in the previous year. This increase in inventory is mainly due to increase in work-in- progress inventory during 31st March 2022. The debtor days of the group has also increased to 62 days in FY2022 as compared to 58 days in the previous year. Further, the high GCA days also emanates from the high other current asset of Rs.96.31 cr. in FY 2022 which mainly consists of short term security deposit of Rs.69.91 cr., loan and advances of Rs.20.69 cr., and rest is other current asset. |
| Rating Sensitivities |
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Scaling up of operations while maintaining their profitability margin
Timely execution of orders Sustenance of existing financial risk profile with healthy capital structure |
| Material Covenants |
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None
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| Liquidity Position |
| Adequate |
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The group has adequate liquidity marked by comfortable net cash accruals of Rs.67.15 crore as against Rs.36.40 crore long term debt obligations in FY2022. The bank limit of the company has been ~58 percent utilized during the last seven months ended in October 2022. In addition, the company had witnessed an improvement in GCA days as it stood at 190 days in FY2022 as against 206 days in FY2021. The current ratio of the group stood moderate at 1.04 times in FY2022. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of comfortable cash accruals against long debt repayments over the medium term.
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| Outlook: Stable |
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Acuité believes the group’s outlook will remain 'stable' over the medium term on account of the vast experience of the promoters, long execution track record, healthy order book position and strong financial risk profile. The outlook may be revised to ‘Positive’ in case the group registers healthy growth in revenues while achieving sustained improvement in operating margins, capital structure and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of a decline in the group’s revenues or profit margins, or in case of deterioration in the group’s financial risk profile and liquidity position or delay in completion of its projects or further deterioration in its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 538.69 | 507.76 |
| PAT | Rs. Cr. | 44.34 | 45.48 |
| PAT Margin | (%) | 8.23 | 8.96 |
| Total Debt/Tangible Net Worth | Times | 0.31 | 0.33 |
| PBDIT/Interest | Times | 8.04 | 6.76 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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• 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 • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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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