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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 1.00 | ACUITE BB | Stable | Assigned | - |
| Bank Loan Ratings | 2.50 | ACUITE BB | Stable | Downgraded | - |
| Bank Loan Ratings | 4.00 | - | ACUITE A4+ | Assigned |
| Bank Loan Ratings | 19.50 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 27.00 | - | - |
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Rating Rationale |
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Acuité has downgraded the long-term rating to ‘ACUITE BB’ (read as ACUITE Double B) from ‘ACUITE BB+' (read as ACUITE Double B plus) on the Rs. 2.50 crore bank facilities and reaffirmed the short-term rating to ‘ACUITE A4+’ (read as ACUITE A Four Plus) on the Rs. 19.50 crore bank facilities of D R Buildestate Private Limited (DRBPL). The outlook remains 'Stable'.
Further Acuite has assigned the long-term rating of ‘ACUITE BB’ (read as ACUITE Double B) and the short-term rating of ‘ACUITE A4+’ (read as ACUITE A Four Plus) on the Rs. 5.00 crore bank facilities of D R Buildestate Private Limited (DRBPL). The outlook is 'Stable'. Rational for rating downgrade The rating downgrade is on account of moderation in operating performance and elongation of working capital cycle of D R Buildestate Private Limited. The company is estimated to generate revenue of Rs. 23.96 Cr. in FY2024E as against Rs. 25.76 Cr. in FY2023 and Rs. 76.96 Cr. in FY2022. The moderation is primarily on account of lower execution, due to limited orderbook. The total unexecuted order book stood at Rs. 28.13 crore as on 31st March 2024. Going forward, the company's ability to get new orders and scale up its operations while maintaining its profitability margins and capital structure will remain a key rating monitorable. |
| About the Company |
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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.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of D R Buildestate Private Limited to arrive at this rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management
DRBPL is promoted by Mr. Devendra Kumar and Mrs. Rajni Singh. The promoters have an industry experience of more than a decade. Moderate financial risk profile D R Buildestate has a moderate financial risk profile marked by moderate net worth, comfortable gearing and debt protection metrics. DRBPL’s net worth stood at Rs. 27.10 crore as on March 31,2023 against Rs. 26.01 crore as on 31st March 2022. The company’s gearing stood at 0.22 times as on March 31,2023 as against 0.18 times as on March 31, 2022. The company’s total debt as on March 31,2023 stood at Rs. 5.87 crore as compared to Rs. 4.62 crore as on March 31, 2022; comprising of long-term debt of Rs. 1.38 crore, short-term debt of Rs. 4.12 crore. TOL/TNW stood at 0.74 times as on March 31, 2023. The interest coverage ratio of the company stood at 5.27 times in FY23 against 14.57 times in FY22. DSCR stood at 1.43 times in FY2023 against 11.58 times in FY2022.
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| Weaknesses |
| Working capital operations
D R Buildestate has highly intensive working capital operations with average gross current asset (GCA) days standing over 148 days during FY21 to FY23. GCA days increased to 261 days in FY2023 against 95 days in FY2022 and includes other current assets i.e. advance to parties, receivables from revenue authority etc. Inventory days stood at 25 days in FY2023 against 5 days in FY2022. The debtor days stood at 13 days for FY23 against 0 days for FY22. The creditor days of the firm stood at 204 days for FY23 as against 124 days for FY22. The average bank limit utilization stood at ~44% for a period of 6 months between January 2024 and May 2024. Acuite believes that the working capital operations of the group will remain at similar levels over the medium term given the volatile nature of the industry. 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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| Liquidity Position |
| Adequate |
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Liquidity is adequately backed by DRBPL’s net cash accruals, which stood at Rs. 2.17 Cr. as on March 31, 2023, against maturing debt repayment obligation of Rs. 1.32 Cr. The company is expected to generate net cash accruals in the range of Rs. 2-2.9 Cr. in FY2024-26 as against repayment obligation of Rs. 0.32-0.47 Cr. for the same period. The cash and bank balances of the company stood at Rs. 1.57 Cr. as on March 31, 2023. The current ratio stood at 2.14 times as on March 31, 2023. The working capital operations of the company are highly intensive marked by its gross current asset (GCA) days of 261 days for FY2023 as against 95 days for FY2022. Acuité believes that going forward the company’s liquidity position shall remain adequate over the medium term due to adequate net cash accruals against it's maturing debt obligation.
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| Outlook: Stable |
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Acuite believes that DRBPL will maintain a 'Stable' outlook over the medium term on the back of promoter's extensive experience and moderate financial risk profile. The outlook may be revised to 'Positive' in case 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.
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 25.76 | 76.96 |
| PAT | Rs. Cr. | 1.09 | 3.55 |
| PAT Margin | (%) | 4.22 | 4.62 |
| Total Debt/Tangible Net Worth | Times | 0.22 | 0.18 |
| PBDIT/Interest | Times | 5.27 | 14.57 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
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None
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| 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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