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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 5.00 | ACUITE BB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 40.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 45.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of 'ACUITE BB+' (read as ACUITE double B plus) and short-term rating reaffirmed of 'ACUITE A4+' (read as ACUITE A four plus) on the Rs. 45.00 Cr bank facilities of CMRM INFRAA ENGINEERING PRIVATE LIMITED (ERSTWHILE SREE LAKSHMI ELECTRICAL SERVI CES) (CIEPL). The outlook is 'Stable'.
Rating Rationale The rating takes into account the improved operating performance and moderate financial profile of CIEPL .The Company's revenue stood at Rs.113.93 Cr in FY2023(Prov.) as against Rs. 67.29 Cr in FY2022. The operating margins ranged between 6.5-5.78 percent for the last two years ended FY2023. The financial risk profile of CIEPL continues to be moderate with comfortable debt protection metrics and low gearing. The overall gearing of the Company stood at 0.37 times as on March 31, 2023 (Prov.) as against 0.17 times as on March 31, 2022. The interest coverage ratio stood at 6.59 times in FY2023(Prov.) as against 4.31 times in FY2022. The rating continues to derive strength from the promoters’ experienced managemnet and moderate financial risk profile. The rating albeit is constrained by its Working capital intensive operations and highly competitive and fragmented industry with tender-based nature of business for electrical construction works. |
| About the Company |
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CMRM INFRAA ENGINEERING PRIVATE LIMITED (Formerly known as Sree Lakshmi Electrical Services) established as a proprietor concern in the year 2003, promoted by Mr. Chandra Mohan Reddy. In June 2013, it was reconstituted as a partnership firm. Mr. Chandra Mohan Reddy is the firm's Managing Partner, and his spouse, Mrs. Sowbhagya Lakshmi, is the firm's other partner. The same directors reconstituted it as a private company in March 2021. The company is an electrical contractor and is a registered Class I contractor with the Government of Telangana, Andhra Pradesh, and Karnataka
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| Analytical Approach |
| Acuité has taken the standalone view of business and financial risk profile of CIEPL to arrive at the rating |
Key Rating Drivers
| Strengths |
Established in 2003, by Mr. Chandra Mohan Reddy, who has more than two decades of experience in the electrical and related construction industry. CIEPL is engaged in executing turnkey electrical projects for various Government departments of Andhra Pradesh (GoAP), Telangana (GoTS), and Karnataka. The promoter extensive industry experience and timely execution of projects has been able to establish longstanding relationship with various government as well as private clients. The Company is a registered class I contractor with different states and local governing bodies. Apart from working with Transmission Corporations of Telangana and Andhra Pradesh, various power distribution companies (Discoms) of GoAP, GoTS, Karnataka and other states. The timely execution of the projects has helped the company in improving its market presence, besides continued business from its reputed clientele.
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| Weaknesses |
The operations of the company are working capital intensive marked by Gross Current Asset (GCA) days of 259 days as on March 31, 2023(Prov.) as against 382 days as on March 31, 2022. The GCA days are marked by high debtors days. Inventory days stood at 51 days as on March 31, 2023(Prov.) as against 79 days as on March 31, 2022. The debtors day stood at 129 days as on March 31, 2023(Prov.) as against 165 days as on March 31, 2022. Subsequently, the payable period stood at 161 days as on March 31, 2023(Prov.) as against 502 days as on March 31, 2022 respectively. Further, the average bank limit utilization in the last nine months ended July, 23 remained at ~67 percent for fund based and 78 percent for non-fund based.
CIEPL operates in highly competitive and fragmented industry with presence of sever players and tender nature of business. CIEPL is into mid-size projects, wherein the competition is moderate vis-à-vis high or low value projects. However, the risk becomes more pronounced as tendering is based on minimum amount of bidding on contracts, and susceptibility to inherent cyclicality in the works and private investment in case of nongovernment projects. Also, site clearance issues of evacuation, movement of public infrastructure (electrical, telephone, water pipelines among others) poses risk of delay in project execution, and thus impacting the revenues. Acuité expects CIEPL enjoys the operational advantage and timely completion of the projects leading to securing business from corporates regularly.
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| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position: Adequate |
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The liquidity profile of CIEPL is adequate marked by its adequate net cash accruals to its maturing debt obligations. The company has reported cash accruals of Rs.4.77 Cr. in FY2023 (Prov.) as against current portion of long term debt (CPTLD) of Rs. 0.44 Cr, and expected to generate cash accruals in the range of Rs.5-7 Cr. against CPLTD of Rs.0.67- 0.71 Cr. over the medium term. Unencumbered cash and bank balances stood at Rs.5.02 Cr as on March 31, 2023 (Prv.). The current ratio of the company stood at 1.52 times as on March 31, 2023(Prov.).Acuité believes that though cash accruals are adequate, however, incremental working capital requirement for the growing size of operations are expected to absorb the cushion in the liquidity, though expected to continue at adequate levels.
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| Outlook: Stable |
| Acuité believes that CMRM will maintain a 'Stable' outlook over the medium term backed by its experienced management and adequate revenue visibility. The outlook may be revised to 'Positive' in case of sustenance of the revenues and profitability margins while improving its working capital management. Conversely, the outlook may be revised to 'Negative' in case of any stretch in its working capital management or larger-than-expected debt- funded capital expenditure |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 113.93 | 67.29 |
| PAT | Rs. Cr. | 4.45 | 3.21 |
| PAT Margin | (%) | 3.91 | 4.77 |
| Total Debt/Tangible Net Worth | Times | 0.37 | 0.17 |
| PBDIT/Interest | Times | 6.59 | 4.31 |
| Status of non-cooperation with previous CRA (if applicable) |
| Care vide its press release dated 14th Sept 2022, had downgraded the company to CARE B+/Stable/A4; Issuer Not Cooperating. |
| Any other information |
| None |
| Applicable Criteria |
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• 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 |
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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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