Press Release

Press Release

October 21, 2024

BMS PROJECTS
Rating Assigned and Upgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	3.95	ACUITE BBB- \| Stable \| Assigned	-
Bank Loan Ratings	7.00	ACUITE BBB- \| Stable \| Upgraded	-
Bank Loan Ratings	12.40	-	ACUITE A3 \| Assigned
Bank Loan Ratings	44.00	-	ACUITE A3 \| Upgraded
Total Outstanding	67.35	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuité has upgraded its long-term rating to ‘ACUITE BBB-' (read as ACUITE Triple B minus) from 'ACUITE BB+' (read as ACUITE Double B plus) on the Rs.7.00 Cr. bank facilities and its short-term rating to ‘ACUITE A3' (read as ACUITE A three)' from 'ACUITE A4+' (read as ACUITE A four plus) on the Rs. 44.00 Cr. bank facilities of BMS Projects. The outlook is ‘Stable’.

Acuité has assigned its long-term rating to ‘ACUITE BBB-' (read as ACUITE Triple B minus) on the Rs.3.95 Cr. bank facilities and its short-term rating to ‘ACUITE A3' (read as ACUITE A three)' on the Rs.12.40 crore bank facilities of BMS Projects (BMSP). The outlook is ‘Stable’.

Rationale for Rating
The rating considers BMSP’s long track record of operations along with long standing experience of its partners in the civil construction industry. Further, the rating also considers above average financial risk profile marked by improving net worth, low gearing, and comfortable debt protection metrics. The tangible net worth of the firm stood at Rs.65.74 Cr. as on 31 March 2024(Prov.) as against Rs.61.15 Cr. as on 31 March 2023. However, the operating revenue marginally declined to Rs.116.87 Cr. in FY2024 (Prov) from Rs.117.59 Cr. in FY2023. Further the operating profit margin marginally improved to 14.49 per cent in FY2024(Prov.) compared against 13.67 per cent in FY2023. BMSP has an outstanding order book position of Rs.243.41 Cr. as of July 2024, reflecting moderate revenue visibility in the near term. Further, the rating remains constrained on account of working capital-intensive nature of operations and intensive competition in the tender based civil construction industry.

Going ahead, the ability of the firm to improve its operating performance while maintaining its financial risk profile without any further elongations in the working capital management will remain a key monitorable.

About the Company

Established in 2014, BMS Projects is a partnership firm managed by Mr. Bhupesh Somani and Mr. Manish Somani. The firm undertakes construction works for roads and buildings majorly in Odisha and Chhattisgarh. BMSP is a registered Class I category contractor with P.W.D.

Unsupported Rating

Not Applicable

Analytical Approach

Acuité has taken a standalone view of the business and financial risk profile of BMSP to arrive at the rating.

Key Rating Drivers

Strengths

Experienced management
BMSP is managed by Mr. Manish Somani and his partner Mr. Bhupesh Somani who have around two decades of experience in the civil construction business. The partners are supported by a group of professionals and engineers.
Acuité derives comfort from the vintage of the promoters and believes that long standing presence of the firm along with the healthy relationship with the clientele will continue to support the firm going forward.

Above average financial risk profile
The financial risk profile of the firm is above average marked by improving net worth, low gearing, and comfortable debt protection metrics. The tangible net worth of the firm stood at Rs.65.74 Cr. as on 31 March 2024(Prov.) as against Rs.61.15 Cr. as on 31 March 2023. The net worth has improved on account of accretion of profits to reserves. Further, USL of Rs. Rs.36.21 Cr. has been considered as quasi equity (part of networth) as the same is subordinated to bank loans. The gearing level of the firm stood at 0.77 times as on 31 March 2024(Prov.) as against 0.64 times as on 31 March 2023. The total debt of the firm stood at Rs.50.92 Cr. as on March 31, 2024(Prov.). Interest Coverage Ratio (ICR) stood moderate at 2.65 times for FY2024(Prov.) against 2.57 times for FY2023. Debt Service Coverage Ratio (DSCR) stood at 1.51 times for FY2024(Prov.) against 1.47 times for FY2023. The total outside liabilities to tangible net worth (TOL/TNW) of the firm stood at 1.24 times as of March 31, 2024(Prov.) as against 1.17 times as of March 31,2023. The Debt/EBITDA levels stood at 2.73 times as of March 31, 2024(Prov.) as against 2.37 times as of March 31,2023.

Acuité believes that the financial risk profile of the firm will remain above average over the medium term with no major debt funded capex plans and steady accruals.

Weaknesses

Working capital intensive nature of operations
The firm is having an intensive working capital management along with moderate bank limit utilization. The Gross Current Asset (GCA) days stood at 240 days as on March 31, 2024(Prov.) as against 211 days as on March 31, 2023. The inventory levels stood at 122 days in FY2024(Prov.) when compared against 109 days in FY2023. The debtor days stood at 84 days in FY2024(Prov.) as compared against 55 days in FY2023. The creditor days stood at 135 days in FY2024(Prov.) as against 165 days in FY2023.The average utilization of the bank limits of the firm for fund based facilities stood at ~83.76% and for non-fund based facilities it stood at ~85.54 in last 6 months ended July 2024.

Acuité believes that the firm’s working capital management will remain around similar levels over the medium term on account of the high inventory cycle and moderate level of funds maintained in the form of retention money.

Geographical concentration and inherent risks in tender-based business
Intense competition from several players, and exposure to risks arising from dependence on tenders and geographical presence restricted to Chhattisgarh and Odisha, restrict BMSP's ability to scale up further. Growth in revenue and profitability depends on the firm's ability to bid successfully and executes order within stipulated time frame.

Rating Sensitivities

Higher than the expected improvement in the operating performance along with profitability margins while further improving its order book position.
Significant decline in the operating performance, or deterioration in the financial risk profile or any elongations in the working capital cycle.

Liquidity Position

Adequate

The firm has an adequate liquidity position marked by sufficient net cash accruals against its maturing debt obligations. The firm generated cash accruals of Rs.10.05 Cr. in FY2024(Prov.) compared against Rs.4.28 Cr. maturing debt obligation over the same period. The firm maintains unencumbered cash and bank balances of Rs.1.11 Cr. as on March 31, 2024(Prov.). The current ratio stood at 1.65 times as on March 31, 2024(Prov.). The working capital operations of the firm are intensive in nature marked by GCA days of 240 days as on March 31, 2024(Prov.) with moderately high reliance on working capital limits which were ~85.54 % utilised over the last 6 months ended July 2024.

Acuite believes that the liquidity position of the firm will remain adequate on account of steady accruals generation.

Outlook: Stable

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	116.87	117.59
PAT	Rs. Cr.	2.99	2.71
PAT Margin	(%)	2.56	2.31
Total Debt/Tangible Net Worth	Times	0.77	0.64
PBDIT/Interest	Times	2.65	2.57

Status of non-cooperation with previous CRA (if applicable)

Not Applicable

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.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

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.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
07 May 2024	Cash Credit	Long Term	5.50	ACUITE BB+ (Downgraded & Issuer not co-operating* from ACUITE BBB- \| Stable)
	Cash Credit	Long Term	1.50	ACUITE BB+ (Downgraded & Issuer not co-operating* from ACUITE BBB- \| Stable)
	Bank Guarantee (BLR)	Short Term	5.50	ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A3)
	Bank Guarantee (BLR)	Short Term	18.50	ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A3)
	Bank Guarantee (BLR)	Short Term	20.00	ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A3)
12 Oct 2023	Bank Guarantee (BLR)	Short Term	5.50	ACUITE A3 (Reaffirmed)
	Bank Guarantee (BLR)	Short Term	18.50	ACUITE A3 (Reaffirmed)
	Bank Guarantee (BLR)	Short Term	20.00	ACUITE A3 (Reaffirmed)
	Cash Credit	Long Term	5.50	ACUITE BBB- \| Stable (Reaffirmed)
	Cash Credit	Long Term	1.50	ACUITE BBB- \| Stable (Reaffirmed)
27 Jul 2022	Cash Credit	Long Term	5.50	ACUITE BBB- \| Stable (Reaffirmed)
	Cash Credit	Long Term	1.50	ACUITE BBB- \| Stable (Assigned)
	Bank Guarantee (BLR)	Short Term	18.50	ACUITE A3 (Reaffirmed)
	Bank Guarantee (BLR)	Short Term	5.50	ACUITE A3 (Assigned)
	Bank Guarantee (BLR)	Short Term	20.00	ACUITE A3 (Assigned)
30 Jun 2022	Cash Credit	Long Term	5.50	ACUITE BBB- \| Stable (Upgraded from ACUITE BB+ \| Stable)
30 Jun 2022	Bank Guarantee (BLR)	Short Term	18.50	ACUITE A3 (Upgraded from ACUITE A4+)
07 Jun 2022	Cash Credit	Long Term	5.50	ACUITE BB+ \| Stable (Upgraded from ACUITE BB-)
07 Jun 2022	Bank Guarantee (BLR)	Short Term	18.50	ACUITE A4+ (Reaffirmed)
17 Aug 2021	Cash Credit	Long Term	5.00	ACUITE BB- (Downgraded & Issuer not co-operating* from ACUITE BB)
17 Aug 2021	Bank Guarantee (BLR)	Short Term	19.00	ACUITE A4+ (Reaffirmed & Issuer not co-operating*)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Axis Bank	Not avl. / Not appl.	Bank Guarantee (BLR)	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	20.00	Simple	ACUITE A3 \| Upgraded ( from ACUITE A4+ )
HDFC Bank Ltd	Not avl. / Not appl.	Bank Guarantee (BLR)	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.50	Simple	ACUITE A3 \| Upgraded ( from ACUITE A4+ )
HDFC Bank Ltd	Not avl. / Not appl.	Bank Guarantee (BLR)	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	18.50	Simple	ACUITE A3 \| Upgraded ( from ACUITE A4+ )
Axis Bank	Not avl. / Not appl.	Bank Guarantee (BLR)	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	3.40	Simple	ACUITE A3 \| Assigned
Union Bank of India	Not avl. / Not appl.	Bank Guarantee (BLR)	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	9.00	Simple	ACUITE A3 \| Assigned
Axis Bank	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	1.50	Simple	ACUITE BBB- \| Stable \| Upgraded ( from ACUITE BB+ )
HDFC Bank Ltd	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	5.50	Simple	ACUITE BBB- \| Stable \| Upgraded ( from ACUITE BB+ )
Union Bank of India	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	3.95	Simple	ACUITE BBB- \| Stable \| Assigned

Contacts

Mohit Jain
Senior Vice President - Rating Operations

Sanidhya Jain
Associate Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.