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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 236.50 | ACUITE BBB- | Stable | Downgraded | Negative to Stable | - |
| Bank Loan Ratings | 335.00 | - | ACUITE A3 | Downgraded |
| Total Outstanding | 571.50 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuite has downgraded the long-term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) from ‘ACUITE BBB’ (read as ACUITE triple B) and the short term rating to ‘ACUITE A3’ (read as ACUITE A three) from ‘ACUITE A3+’ (read as ACUITE A three plus) on Rs.571.50 crore of bank facilities of Eversendai Construction Private Limited (ECPL). The outlook is revised to 'Stable' from 'Negative'.
Rationale for rating downgrade and revision of outlook: The rating downgrade and revision in outlook take into account of the decline in operating income in FY2024 and FY2023, high unbilled revenue and further elongation in the working capital operations in FY2024 and FY2023 as compared to FY2022. The year-over-year decline in turnover is attributed to fewer orders received in 2022 and 2023 and slow execution of orderbooks. The operating income stood at Rs.383.59 Cr. in FY2024(Prov.) and Rs.433.17 Cr. in FY2023 as against Rs.555.39 Cr. in FY2022. Further, the GCA days elongated to 333 days as on March 31, 2024 (Prov.) as against 318 days during the previous year. High GCA days attribute to high unbilled revenue of Rs.164.92 Cr. as on March 31, 2024.
However, the rating is supported by moderate increase in operating margins, increase in order book position, moderate financial risk profile and adequate liquidity.
Going forward, ESPL's ability to timely execute the order book and improve its working capital operations will be a key rating monitorable. |
| About the Company |
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Chennai based, Eversendai Construction Private Limited (ECPL) commenced its operations in 2009. They have established a state of art steel fabrication facility over an area of 40 acres in Trichy with an annual capacity of 30000 Tons. The company is engaged in execution of supply-cum erection contracts, as well as civil construction work. Eversendai is currently directed by Mr. Kaliyappan Saravanan, Mr. Narla Srinivasa Rao, Mr. Anbu, Mr. Nathan Elumalay, and Mr. Narishnath Nathan.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of ECPL to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management and established track record of operations:
The group company of ECPL is Eversendai Corporation Berhad (ECB) which is a Malaysian company established in 1984. They are involved in a wide range of projects, including structural steelwork, power plant construction, and infrastructure development. ECB has its fabrication facilities located in various countries like Malaysia, Dubai, India, Sharjah, Qatar, and Thailand. The group has experience of more than three decades in construction of structural steel for Airports, high rise buildings and other commercial buildings espicially in Middle eastern countries. They established the fabrication plant in India in 2014 at Trichy, named - Eversendai Constructions Private Limited (ECPL) with an annual fabrication capacity of 30,000 tons per annum. Along with steel fabrications, ECPL also undertakes civil contract works. Its clientele includes Lodha Developers, DLF Home Developers, L&T Limited etc. Acuite believes that the expertise of the parent group and reputed clientele will support ECPL's business profile over the medium term. Steady order flow ECIPL’s unexecuted order book position stood at Rs.2233.46 Cr. as on July 2024, compared to Rs.932.58 Cr. as on April 2023. The substantial growth in order book is due to receipt of new orders worth Rs.1707.95 Cr. in 2024. The outstanding order book, which is 5.82 times of FY2024 (prov.) revenue, is expected to be executed in next 3-24 months, there by promising a decent revenue visibility over the medium term. However, Acuite observed that execution of orders worth Rs.144.38 Cr. have been delayed since 2019 due to contractee’s funding issues. This, along with the execution of new orders received in 2024 draws a moderate execution risk on the revenue profile. Acuite believes that the timely completion of the outstanding order book is key monitorable. Moderate financial risk profile: The financial risk profile of ECPL is moderate marked by healthy net worth, low gearing and moderate debt protection metrics. The company’s net worth stood at Rs.196.37 Cr. as on March 31, 2024 (Prov.) as against Rs.192.42 Cr. during the previous year. Growth in net worth is primarily due to the accretion of profits to reserves. The total debt of the company is relatively decreasing and stood at Rs.121.42 Cr. as on March 31, 2024(prov) as against Rs.139.43 Cr. in the previous year. The total debt consists of long-term debt of Rs.27.20 Cr., short term debt of Rs.85.96 Cr. and CPLTD of Rs.8.26 Cr. The gearing level of the company is low with 0.62 times as on March 31, 2024 (Prov.) as against 0.72 times during the previous year. The Debt/ EBITDA moderately improved and stood at 2.67 times as on March 31, 2024(prov) as against 2.99 times as on March 31, 2023. Total outside liabilities to total net worth (TOL/TNW) stood at 1.74 times as on March 31, 2024 (prov) as against 2.00 times as on March 31, 2023. Further, the debt protection metrics are moderate with Interest Coverage Ratio (ICR) at 2.08 times as on March 31, 2024 (prov) as against 2.40 times during the previous year. Debt service coverage ratio (DSCR) improved to 1.47 times as on March 31, 2024 (Prov.) as against 1.37 times during the previous year. Acuite believes that the financial risk profile of the company continues to be moderate over the medium term, owing to the absence of any debt funded CAPEX. |
| Weaknesses |
| Declined top line, albeit improvement in the operating margins:
ECPL’s revenue stood at Rs.383.59 Cr. in FY2024(prov) and Rs.433.17 Cr. in FY2023 as against Rs.555.39 Cr. in FY2022. The revenue comprises an equal portion of civil and steel fabrication work. The year-over-year decline in turnover is attributed to fewer orders received in 2022 and 2023. Additionally, many orders were in the final stages of completion, resulting in lower revenue bookings but higher margins. The operations margins of the company improved and stood at 11.23 percent in FY2024(prov) as against 9.83 percent in FY2023. Steel fabrication works enjoy higher operating margins than civil works. The net profit margin registered a marginal decline to 1.08 percent in FY2024 (Prov.) as against 1.28 percent in FY2023. A decrease in the PAT margin is due to an increase in interest costs. Further, the company reported revenue of Rs.107.33 Cr. for 4MFY2025 with an operating margin of 12.13 percent and a PAT margin of 1.34 percent. Acuite believes that the operating revenue of the company will improve over the medium term owing to an increase in its order book. Intensive working capital operations: The working capital operations of the company are intensive marked by high GCA days 333 days as on March 31, 2024 (prov) as against 318 days during the previous year. Moderate deterioration in GCA days is attributable to an increase in collection period and inventory holding period. High GCA days attribute to high unbilled revenue of Rs.164.92 Cr. as on March 31, 2024. Inventory days stood at 76 days during March 31, 2024 (prov) as against 74 days in the previous year, and debtor days stretched to 69 days for March 31, 2024 (prov) as against 42 days during the previous year. Further, the company has created provision for debtors in FY2022 of Rs.10.67 Cr. The net debtors, after considering the provision, stand at Rs.64.25 Cr. for FY2024. The o/s debtor consisting of more than one year is ~59 percent. This includes intercompany payments pending, GST related issues and others. The creditor days of the company are high and stood at 224 days as on March 31, 2024 (prov) as against 232 days for the previous year. ECPL has utilized its fund based working capital limits in a moderate range, as the average utilization of consolidated bank limits stood at 48.97 percent during the past 11 months ending August 2024. Acuite believes that working capital operations will remain intensive over the medium term. Higher outstanding balance of unbilled revenue: The unbilled revenue continued to remain at high levels during FY2024(prov) as well, unbilled revenue stood at Rs.164.92 Cr. as on March 31, 2024 (Prov.), which constitutes around 43 percent of total operating revenue in FY2024. Hence, the ability of the company to realize the outstanding unbilled revenue on a timely basis remains a critical factor. |
| Rating Sensitivities |
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| Liquidity Position: Adequate |
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ECPL’s liquidity position is adequate which is evident from the sufficient net cash accruals (NCA) against moderate debt repayment obligations. The company has reported NCA’s of Rs.23.08 Cr. during FY2024 (Prov.) against debt repayment obligations of Rs.8.65 Cr. for the same period. Going forward NCA’s are expected to be in the range of Rs.27-32 Cr. in the medium term with the repayment obligations of Rs.8.65 Cr. – Rs.9.00 Cr. for the same period.
The company’s working capital operations are intensive which is reflected by GCA days of 333 days as on March 31, 2024 (Prov.), current ratio of the company stood at 1.31 times during FY2024 (Prov.). Unencumbered cash and bank balances stood Rs.11.90 Cr. as on March 31, 2024 (Prov.). Acuite believes that liquidity position is expected to be adequate on account of sufficient cash accruals against repayment obligations. |
| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 383.59 | 433.17 |
| PAT | Rs. Cr. | 4.16 | 5.55 |
| PAT Margin | (%) | 1.08 | 1.28 |
| Total Debt/Tangible Net Worth | Times | 0.62 | 0.72 |
| PBDIT/Interest | Times | 2.08 | 2.40 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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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