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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 11.00 | ACUITE BB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 9.00 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding | 20.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITÉ BB-' (read as ACUITE double B minus) and short-term rating of ‘ACUITÉ A4’ (read as ACUITE A four) on the Rs. 20.00 Cr. bank facilities of Bharat Construction (BC). The outlook is ‘Stable’.
Rationale for rating The rating reaffirmation takes into account the ability of the company to sustain its scale of operations through a healthy order book position despite some softening in the topline for FY24 reflected by slower execution. Further, rating also derives comfort from the strong industry presence of partners in construction industry. However, it is constrained by average financial risk profile, intensive working capital cycle and inherent limitations of sub-contracting business. |
| About the Company |
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Established in 1978, Bharat Construction is a partnership firm located in Khetwadi, Mumbai. The firm is a civil contractor registered with Govt Authorities like Municipal Corporation of Greater Mumbai (MCGM), Mumbai Metropolitian Region Development Authority (MMRDA) and Maharashtra Housing and Area Development Authority (MHADA) etc. The current partners of the firms are Mr. Mukund Surani, Mr. Premsingh U Purohit and Mr. Maheet M Surani.
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| Unsupported Rating |
| Not Applicable. |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of Bharat Construction to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
Bharat Construction is a partnership firm engaged in business of undertaking government construction contracts. The partners of the firm have around three decades of experience in construction activities. Over the past few years, the firm is only engaged in civil construction for MCGM. The firm executes all its contracts through subcontracting with experienced players. Acuité believes that the long operational track record coupled with the extensive experience of the management will continue to benefit the firm going forward, resulting in steady growth in the scale of operations. Stable operating performance on the back of healthy order book The operating revenue of the company has marginally reduced from Rs.37.28 Cr. in FY23 to Rs.34.82 Cr. in FY24. This decline was attributable to slower order execution of previous orders which were delayed due to pending clearances from relevant authorities and unavailability of funds from the government authorities. Currently, ~Rs.28 Cr revenue has been achieved till 15th January 2025. The EBITDA margin stood at 4.05 percent in FY24 as against 4.45 percent in FY23. The margins of the company are volatile and suspectible to the to the type and time of work or sub-contracting, and are expected to be in the range of ~4-5% over the medium term. The order book of the company stands at ~Rs.82.00 Cr. as on December 31, 2024 which gives healthy revenue visibility over the medium term. Further, Acuité believes that the company will be able to sustain its scale of operations in the near to medium term on acount of new contracts leading to healthy order book and also through better execution of the previous pending orders, which shall be a key rating sensitivity. |
| Weaknesses |
| Average Financial Risk Profile
The financial risk profile of the company stood average, marked by low net worth, moderate gearing (debt-equity) and low debt protection metrics. The tangible net worth stood at Rs.14.56 Cr. as on 31 March 2024 as against Rs.13.13 Cr. as on 31 March 2023. The gearing (debt-equity) stood at 1.52 times as on 31 March 2024 as compared to 1.55 times as on 31 March 2023. The major borrowings of company is in the form of short term debt to manage the working capital requirements which has led to increase in Debt/EBITDA from 5.77 times as on March 31, 2023 to 6.49 times as on March 31, 2024. Acuité believes that going forward, the financial risk profile of the firm may improve slowly, backed by steady cash accruals. Intensive Working Capital Management The working capital management of the company is intensive marked by GCA of 405 days in FY24 as against 354 days in FY23. The company does not maintain any inventory on its book as operations is on subcontracting basis and the material purchased by the sub-contractors is only through BMC approved material supplier. However, the debtor’s collection period increased to 177 days in FY24 as against 133 days for FY23 on account of increase in tender deposits and retention money which account for ~5-7% of the turnover, is receivable within 3-5 years after the completion of the entire work. The creditors days also stood high at 324 days in FY24 as against 312 days in FY23. These payables also include deposits from its sub-contractors. Hence overall, there is a stretch in the working capital. The working capital limits are marked by utilization of ~94 percent in the last 09 months ended December’ 2024. Risk associated with sub-contractor The firm over the past few years has been completing the construction work on a subcontracting basis only. As the firm itself is not directly involved in the completion of work, the financial and business risk profile of the subcontractors needs to be closely monitored as any financial risk to them can negatively affect the future orders inflows to the firm. Acuité believes that monitoring the financial and business risk profile of the subcontractors will be the key rating sensitivity for the firm. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company’s liquidity position is adequate, marked by net cash accruals Rs.1.31 Cr. in FY24 against the maturing debt obligations of Rs.0.25 Cr. Going forward, it is expected to generate cash accrual in the range of Rs.1.65-1.80 Cr. against the no maturing repayment obligations over the medium term. Additionally, the partners are expected infuse funds into the business in the form of unsecured loans as and when required. The working capital limits are marked by high utilizations of around 94 percent in the last 09 months ended December’ 2024. The current ratio stands at 1.00 times as on March 31, 2024.
Acuité believes that the liquidity of the firm may improve going ahead on account of increasing cash accruals from the business. |
| Outlook: Stable |
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 34.82 | 37.28 |
| PAT | Rs. Cr. | 1.30 | 1.32 |
| PAT Margin | (%) | 3.72 | 3.54 |
| Total Debt/Tangible Net Worth | Times | 1.52 | 1.55 |
| PBDIT/Interest | Times | 2.42 | 2.35 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable. |
| Any other information |
| None. |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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