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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 2.50 | ACUITE BB+ | Stable | Downgraded | - |
| Bank Loan Ratings | 19.50 | - | ACUITE A4+ | Downgraded |
| Total Outstanding Quantum (Rs. Cr) | 22.00 | - | - |
| Rating Rationale |
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Acuité has downgraded the long-term rating to ‘ACUITE BB+’ (read as ACUITE Double B Plus) from ‘ACUITE BBB-’ (read as ACUITE Triple B minus) and the short term rating to ‘ACUITE A4+’ (read as ACUITE A Four Plus) from 'ACUITE A3+' (read as ACUITE A three plus) on the Rs. 22.00 crore bank facilities of DR Buildestate Private Limited (DRBPL).
The outlook is 'Stable'. Rationale for downgrade The rating takes into account the healthy financial risk profile of the company, comfortable debt profile and adequate liquidity position. Rating has been downgraded on account of subdued operational performance in FY 2022 and FY 2023. Due to non-availability of big ticket work order and delays in existing work orders company’s scale of operations have subdued significantly FY 2023. Also revenue visibility has declined as there was certain discrepancy observed in the order book as one big ticket project which was earlier part of the pipeline is omitted this year. Going forward, ability of the company to execute orders in time and growth in scale of operations as a result of new projects being awarded will remain key rating sensitivities. |
| About the Company |
| D R Buildestate Private Limited is a civil contractor involved in the construction of buildings, roads and highways for the government of Uttar Pradesh and Madhya Pradesh and also takes sub contracts from reputed clientele. DRBPL is promoted by Mr. Devendra Kumar and Mrs. Rajni Singh. The entity was established in 2004 and is based in Delhi NCR. The entity undertakes various civil construction projects for various government departments like UPAVP, MPUDCL, PWD etc. |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of D R Buildestate Private Limited to arrive at this rating. |
Key Rating Drivers
| Strengths |
| Financial Risk Profile Company’s financial risk profile is healthy marked by moderate tangible net worth base, comfortable gearing and debt protection metrics. Tangible net worth stood at Rs. 26.01 Cr in FY 2022 as against Rs. 22.46 Cr in FY 2021. Total debt in FY 2022 of Rs. 4.62 Cr consists of Rs. 1.76 Cr of long term debt, Rs. 1.55 Cr of working capital borrowings and Rs. 1.32 Cr of CPLTD. Gearing (Debt to Equity) stood below unity at 0.18 times in FY 2022. Interest coverage ratio improved and stood strong at 14.57 times in FY 2022 as against 7.57 times in FY 2021. NCA/TD moderated to 1.06 times in FY 2022 from 1.58 times in FY 2021. TOL/TNW improved from 1.47 times in FY 2021 to 1.02 times in FY 2022. Debt-EBITDA (excluding other income) moderated from 0.63 times in FY 2021 to 0.95 times in FY 2022. Improving profitability Company’s profitability has improved year on year. EBITDA margin has improved from 3.51% in FY 2020 to 5.75% in FY 2021 and further improved to 6.34% in FY 2022. PAT margin saw moderate improvement year on year from 4.19% in FY 2020 to 4.21% in FY 2021 and 4.62% in FY 2022. |
| Weaknesses |
| Declining operations and work order position
The company's operating revenue saw a dip in FY22 and further a sharp dip in FY23 on account of non-availability of big ticket work order and delays in existing work orders. Also revenue visibility has declined as there was certain discrepancy observed in the submission of order book position as one big ticket project which was earlier part of the pipeline is omitted this year restricting the order book to Rs. 57.90 Cr. as against Rs. 141 Cr. approx. in the last year. Competitive Business Environment DRBPL is involved in civil construction work on tender basis where the entry barriers are not so high and there is presence of numerous players in the sector which presents major challenges to the ability of DRBPL to bid and win tenders on a sustainable basis. Intense competition can be detrimental for the entity and the business acumen of promoters and management would be key for DRBPL's sustained growth in the medium term. Geographical Concentration and Government business risk DRBPL is involved in civil construction works in Uttar Pradesh and Madhya Pradesh. With limited geographical presence the entity also depends upon funds from completed government projects. Any approval or payment related delays from government departments can seriously affect the cashflows of DRBPL and the risk of concentrated geographical presence would mean that the entity would not have other sources of revenue to sustain operations which could affect topline significantly. |
| Rating Sensitivities |
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| Material covenants |
| None. |
| Liquidity Position |
| Adequate |
| Company has adequate liquidity position. In FY 2022 company generated NCA of Rs. 4.91 Cr against repayment of Rs. 1.75 Cr of long term loans. Company’s cash and bank position stood at Rs. 5.39 Cr in FY 2022 along with current ratio of 1.77. Out of fixed deposits of Rs. 20.82 Cr in FY 2022, company has Rs. 13.5 Cr as free investment while rest of the amount is lien marked as margin against bank guarantees and security money to government departments. |
| Outlook: Stable |
| Acuite believes that DRBPL will maintain a 'Stable' outlook over the medium term on the back of promoter's extensive experience and relationships with customers and suppliers, healthy financial risk profile and strong liquidity position. The outlook may be revised to 'Positive' incase the company registers higher-than-expected growth in its revenue and profitability. Conversely, the outlook may be revised to 'Negative' in case the company registers lower than expected growth in revenues and profitability or in case of deterioration in the company’s financial risk profile or elongation in the working capital cycle. |
| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 76.94 | 91.48 |
| PAT | Rs. Cr. | 3.55 | 3.85 |
| PAT Margin | (%) | 4.62 | 4.21 |
| Total Debt/Tangible Net Worth | Times | 0.18 | 0.15 |
| PBDIT/Interest | Times | 14.57 | 7.57 |
| Status of non-cooperation with previous CRA (if applicable) |
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CRISIL vide its press release dated 15 June 2022, has mentioned the rating of DRBPL as ‘[CRISIL] B+/Stable/A4’ Issuer Not Cooperating as on 15 June 2022. Brickwork vide its press release dated 23 March 2023, has mentioned the rating of DRBPL as ‘[BWR] BB-/Stable/A4’ Issuer Not Cooperating as on 23 March 2022. |
| 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 |
| 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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