|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 45.00 | ACUITE A- | Negative | Reaffirmed | Stable to Negative | - |
| Bank Loan Ratings | 180.00 | - | ACUITE A2+ | Reaffirmed |
| Bank Loan Ratings | 10.00 | - | Not Applicable | Withdrawn |
| Total Outstanding | 225.00 | - | - |
| Total Withdrawn | 10.00 | - | - |
|
Rating Rationale |
|
Acuite has reaffirmed its long-term rating of ‘ACUITE A-' (read as ACUITE A minus) and short-term rating at ‘ACUITE A2+’ (read as ACUITE A two plus) on Rs.225.00 crore bank facilities of Bygging India Limited (BIL). The outlook is revised to 'Negative' from 'Stable'.
Acuite has further withdrawn its short-term rating on Rs.10.00 crore bank facilities of Bygging India Limited (BIL) without assigning any rating as the Instrument is fully repaid. The rating is being withdrawn on account of the request received from the company and the NDC received from the banker as per Acuité’s policy on withdrawal of rating as applicable to the respective facility / instrument. Rationale for revision in outlook The revision in outlook is due to continuous deterioration in the profitability margins of the company albeit increase in operating revenue. The operating margins declined and stood at 6.22 percent in FY2023 as against 8.37 percent in FY2022. Moreover, PAT margins stood at 0.32 percent in FY2023 as against 4.71 percent in FY2022. The decline in margins is attributable to one-time write off of bad debts, creation of provision for doubtful debt and overall higher contribution of lower margin generating projects in FY2023 vis-à-vis FY2022. The operating revenue stood at Rs.207.18 Cr. in FY2023 as against Rs.175.93 Cr. in FY2022 due to timely execution of orders. Further, the revision in outlook also considers elongated gross current asset days, the intensity of competition in industry due to tender based nature of operations restricting profit margins, long standing pending receivables and concentrated order book. However, the healthy unexecuted order book of Rs.424.95 crore outstanding from reputed clientele namely Bharat Heavy Electricals Limited (BHEL), NTPC, GE Power India, Nabi Nagar Power Generating Company Limited (NPGCL), Bridge & Roof, Toshiba Engineering, HTG Engineering, JSW Ispat, TATA Projects Limited, ADANI Power, etc. as of April 2024 along with L1 projects worth Rs.376.13 crore in hand provide medium term revenue term visibility and support the rating reaffirmation. Further, the rating also continues to factor in experienced management with established track record of operations, moderate financial risk profile, adequate liquidity and strong parentage. |
| About the Company |
|
Bygging India Limited (BIL) is a Mumbai based company incorporated in 1983, which is engaged in construction of RCC chimneys for power generation entities and is also involved in engineering and construction of other tall structures such as Prilling towers, silos, cooling towers and window towers. The company caters to industries such as oil & Gas, Power Generation, Petrochemicals, Cement, Steel, Refineries and Metal manufacturing industries. The directors of the company are Mr. Roberto Tobillas Angulo, Mr. Guillermo Aguirre Alvarez, Mr. Ram Babu Jhalani, Mr. Gopal Ravishankar Modi, Mr. Jyoti, and Mr. Jyoti Bansal.
|
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of BIL to arrive at the rating |
| Key Rating Drivers |
| Strengths |
| >Experienced management and established track record of operations
The company has a long operational track record for over three decades and is led by Mr. Ravishankar Modi (Managing Director) and R.B.Jhalani (CEO). The management of the company has an extensive experience of more than three decades in the construction industry. Hence, the long track record of operations has enabled company to build strong relationship with customer and supplier. The company is further supported by qualified professionals across the hierarchy to support the day-to-day operations of the company. Acuite believes that the company is expected to benefit from the experienced management team. >Strong parentage BIL is a subsidiary of Global Dominian Access Socieded Anomina, a Spanish company having established track record of two decades. The company is predominantly engaged in the construction and engineering segment. It has a worldwide presence through its subsidiaries in Europe, USA, Asia and Africa. The company has 88% of stake in BIL, which has benefitted company by gaining access to technical and financial assistance. Moving ahead, the Spanish parent is expected to acquire 100% stake in BIL post March 2028. The association with the company has also enabled them to avail borrowings at lower interest cost. As per the management, the company has started to execute work order w.r.t construction of Natural Draft Cooling Towers, Dome Silos for BHEL, CIDCO, SAIL and among others for which the company would be receiving technical assistance from the parent company. >Moderate Financial Risk Profile The financial risk profile of the company stood moderate marked by healthy net worth, low gearing, and moderate debt protection metrics. The tangible net worth stood at Rs.109.52 crore as on 31 March 2023 as against Rs.108.85 crore as on 31 March, 2022. The total debt of the company stood at Rs.89.12 crore includes Rs.0.56 crore of long-term debt, Rs.1.47 crore of CPLTD, Rs.26.82 crore of Unsecured loans and Rs.60.28 crore of short-term debt as on 31 March, 2023. The gearing (debt-equity) stood at 0.81 times as on 31 March 2023 as compared to 0.58 times as on 31 March, 2022. Interest Coverage Ratio stood at 1.61 times for FY2023 as against 4.67 times for FY2022. Debt Service Coverage Ratio (DSCR) stood at 1.23 times in FY2023 as against 2.55 times in FY2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 1.45 times as on 31 March, 2023 as against 1.16 times as on 31 March, 2022. Acuité believes that the financial risk profile of the BIL is likely to remain moderate on account of stable margins and conservative financial policy. >Healthy order book from reputed clientele The order book of the company remained outstanding at Rs.424.95 crore as of April 2024. The tenor of the work orders remains between 9-24 months, thereby providing medium term revenue visibility. Further, the company also has L1 orders worth Rs.376.13 crore in hand. The company also receives mobilization advance (MA) in the range of 5-10% of contract value from both PSUs and private entities. While the MA from private entities is interest free, the company pays interest to PSUs at the rate of 10-12%. The client also retains an amount to the tune of 5% of the contract value. However, the same is released on submission of security bank guarantee. The clientele profile of the company majorly comprises of public sector undertaking such as BHEL, GE Power India Limited, ISGES, Adani Power, RRVUNL, RPSG/CESC. In addition to this, the company has also been executing orders for private entities such as ACC Limited, Toyo Engineering Limited, IFFCO, Reliance, Technip FMC etc. The company has been executing orders across various states such as Bihar, Chhattisgarh, Andhra Pradesh, Telangana, Madhya Pradesh and Tamil Nadu. Acuite believes that with company executing work orders for reputed clientele, the risk of realization of receivables is partly mitigated. |
| Weaknesses |
| Working Capital Intensive Operations
The working capital management of the company is intensive marked by GCA days of 294 days in FY2023 as against 312 days in FY2022. The GCA days are driven by high debtor days and other current assets. The inventory days stood at 25 days in FY2023 as against 16 days in FY2022. The debtor days stood at 133 days in FY2023 as against 150 days in FY2022. BIL generally gives a credit period of 30-45 days to its customers, sometimes 90 days. The elongation in debtors’ days is mainly due to delayed realization of receivables. The majority of the orders which BIL caters to are tender-based contracts of public sector units and private players. The Creditor days stood at 173 days in FY2023 as against 209 days in FY2022. However, BIL generally gets a credit period of ~90 days from its suppliers due to its long-standing relationship with suppliers such as Berger Paints India Limited, Insta Power Ltd, Ultra Tech Cement, ALIKRAFT Engineers Pvt. Ltd and among others. For imports, the company get a credit period of 120 days. Significant decline in operating margins albeit improvement in revenue The company reported deterioration in the operating margins albeit increase in revenue. The operating margins stood at 6.22 percent in FY2023 as against 8.37 percent in FY2022 Moreover, PAT margins stood at 0.32 percent in FY2023 as against 4.71 percent in FY2022. The decline in margins is attributable to one-time write off of bad debts, creation of provision for doubtful debt and overall higher contribution of lower margin generating projects in FY2023 vis-à-vis FY2022. However, the revenue of the company improved and stood at Rs.207.18 Crore in FY2023 as against Rs.175.93 crore in FY2022 due to timely execution of orders. Acuite further believes that as the number of players that are involved in construction of RCC chimneys and cooling towers are few, this restricts the competition in the market and also enables in executing high margin work orders. Geographical and clientele concentration The company has been executing around 75% of outstanding work order for Bharat Heavy Electricals Limited, thereby having moderate client concentration. The company had already witnessed challenges w.r.t delay in site handover, resulting in delay in work execution. Further, the company is executing work order across 12 states, out of which around 40% of work order is being executed in the state of Bihar. On the equipment front, the company has well developed asset base for execution. However, the company also hires heavy machinery such as cranes and transit equipment on lease. Acuite, however believes that with long standing relationship with BHEL and Adani Power, the risk of work execution is expected to remain minimal. |
| ESG Factors Relevant for Rating |
| Not Applicable |
| Rating Sensitivities |
|
| Liquidity Position |
| Adequate |
|
The company’s liquidity position is adequate, marked by adequate net cash accruals against its maturity debt obligations. The company generated net cash accruals in the range of Rs.4.51-16.79 Crore from FY 2021- 2023 against its maturity repayment obligations in the range of Rs.2.12-2.31 crore in the same tenure. In addition, it is expected to generate sufficient cash accrual in the range of Rs.11.28-17.28 crore against the maturing repayment obligations of Rs.0.55-1.47 crore over the medium term. The working capital management of the company is intensive marked by GCA days of 294 days in FY2023 as against 312 days in FY2022. The average consolidated utilization of fund-based limits is approx..20% and of non-fund-based is around 70% of the sanctioned amount for the past 07 months ended March 2024. The company maintains unencumbered cash and bank balances of Rs.0.67 crore as on March 31, 2023. The current ratio of the company stands at 1.33 times as on March 31, 2023 as against 1.60 times as on 31 March, 2022. In addition to this, the company also has investments in mutual funds, unquoted funds to the tune of Rs.59.09 crore as on March 31, 2023.
Acuite believes that liquidity profile of the company is expected to remain adequate led by continuous execution of orders. |
| Outlook: Negative |
|
Acuité has revised the outlook on BIL to 'Negative' on account of decline in operating margins. Further, it also considers elongated gross current asset days, the intensity of competition in industry due to tender based nature of operations restricting profit margins, long standing pending receivables and concentrated order book. The rating may be downgraded in case of deterioration in the operating revenue, operating margins and working capital cycle. Conversely, the outlook may be revised to 'Stable' if the company is able to sustain improvement in scale of operations while maintaining the profitability and timely execution of work orders while restricting the elongation in its working capital cycle and maintaining the capital structure.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 207.18 | 175.93 |
| PAT | Rs. Cr. | 0.67 | 8.28 |
| PAT Margin | (%) | 0.32 | 4.71 |
| Total Debt/Tangible Net Worth | Times | 0.81 | 0.58 |
| PBDIT/Interest | Times | 1.61 | 4.67 |
| 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.
|
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
*Axis Bank- WCDL is a sub limit of OD facility
*Barclays Bank- WCDL is a sub-limit of OD facility |
|
Contacts |
|
|
|
About Acuité Ratings & Research |
