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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 5.00 | ACUITE BB | Stable | Assigned | - |
| Bank Loan Ratings | 9.00 | ACUITE BB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 33.00 | - | ACUITE A4+ | Assigned |
| Bank Loan Ratings | 17.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 64.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE BB’ (read as ACUITE double B) and its short term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.26.00 crore bank facilities of India Commercial Services (ICS). The outlook is ‘Stable’.
Furthermore, Acuité has assigned a long-term of ‘ACUITE BB’ (read as ACUITE double B) and its short term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.38.00 crore bank facilities of India Commercial Services (ICS). The outlook is ‘Stable’. Rationale for rating
The rating takes into cognizance the augmentation in scale of operations where revenue from operations of the firm increased to Rs 166.44 crore in FY24 as compared to the revenue of Rs 47.01 crore in FY23. There was marginal increase in firm’s operating margin which stood at 5.66% in FY24 as against 5.51% in FY23. The rating also factors in the comfortable unexecuted order book of ~Rs 315.88 crore as on October 20, 2024. The order book stood at ~1.90 times of the operating income of the FY24. The rating also draws comfort from management’s experience and established track in same line of business, moderate financial risk profile categorized by moderate net worth, comfortable gearing, comfortable debt protection metrics, along with adequate liquidity. However, these strengths are partially offset by firm’s high working capital operations, highly competitive industry marked by tender based nature of business and capital withdrawal risk associated with partnership firm. |
| About the Company |
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India Commercial Services (ICS) is a Jaipur based partnership firm established in the year 1978 by Mr. Hari Narayan Bargoti. It was later joined by late Mr. Mohan Lal Bargoti and Mr. Rakesh Bargoti. Currently, Mr Rakesh Bargoti and Mr Shubham Bargoti are the partners of the firm. The firm has been providing services such as commissioning and testing of electrical lines, underground cabling, substation work, laying of underground steel gas pipeline and setting up of grid connected solar PV system. Firm has presence in Rajasthan and Goa. However, small project was also being carried out in Uttarakhand in FY23.
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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 ICS to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Experienced partners with established track record in same line of business
India Commercial Services (ICS) is a Jaipur based partnership firm established in the year 1978 by Mr. Hari Narayan Bargoti. It was later joined by late Mr. Mohan Lal Bargoti and Mr. Rakesh Bargoti. Currently, Mr Rakesh Bargoti and Mr Shubham Bargoti are the partners of the firm . Mr Rakesh Bargoti have an experience of more than 4 decades whereas Mr Shubham Bargoti have an experience of 10 years in the same line of business. The business leverages benefit from the experience of the business and has grown over the years. Augmentation in scale in operations and improvement in profitability ; decline in PAT margin The operations of the firm reported a growth of 254.08% in operating income by achieving the revenue of Rs. 166.44 crore in FY24 as against Rs.47.01 crore in FY23 due to higher execution of the orders. The firm has a confirmed unexecuted order book of ~Rs 315.88 Cr. as on 20th Oct 2024. The order book stood at 1.90 times of the operating income of the FY24. Operating margin of the firm had also improved marginally which stood at 5.66% in the FY24 as against 5.51% in the FY23 albeit increase in remuneration paid to partners. PAT margin of the firm had been dipped Y-O-Y and stood at 3.98% in the FY24 as against 5.01% in the FY23 mainly on account of increase in finance cost and decline in the other income in the FY24 as compared with the FY23, as in the FY23 there was capital gain on sale of script of mutual funds of Rs 0.58 Crore. However, in absolute terms PAT increased which stood at Rs 6.63 crore in FY24 as against Rs 2.36 crore in FY23. Going forward, Acuité believes that the ability of the firm to maintain its scale of operations and improve in profitability margins will going to remain a key monitorable over the medium term. Moderate financial risk profile The firm’s financial risk profile is marked by moderate net worth, comfortable gearing and comfortable debt protection metrics. The adjusted tangible net worth of the firm stood at Rs 26.41 crore as on March 31, 2024 from Rs. 19.14 crore as on March 31, 2023 due to accretion of profit and infusion of funds by partners in form of capital. Gearing of the firm increased and stood at 0.85 times as on March 31,2024 as against 0.75 times as on March 31, 2023 due to increase in debt obligation in the form of vehicle loan. However, gearing is expected to improve in near to medium term as firm has no large capex plan and the repayment of the additional working capital term loan (WCTL) from Bank of Baroda The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood high at 2.32 times as on March 31, 2024 as against 2.14 times as on March 31, 2023. The moderate debt protection metrics of the firm is dipped but stood comfortable which marked by interest coverage ratio at 3.95 times as on March 31, 2024 and debt service coverage ratio at 3.44 times as on March 31, 2024 as against 4.69 times and 4.72 times as on March 31, 2023 respectively mainly on account of increase in finance cost. Net Cash Accruals/Total Debt (NCA/TD) also improved and stood at 0.32 times as on March 31, 2024 as against 0.19 times as on March 31, 2023. Acuité believes that going forward the financial risk profile of the firm will improve and remain comfortable over the medium term on the absence of any large capex plan in medium term. |
| Weaknesses |
| High working capital operations
The working capital operations of the firm is marked by high GCA days but the same has improved and stood at 167 days as on March 31, 2024 as against 413 days as on March 31, 2023. The GCA days is high primarily on account of high inventory days and other receivables in form of various deposits (including lien marked Fixed deposit), advances to related parties. The inventory days improved and stood at 57 days as on March 31, 2024 as against 148 days as on March 31, 2023 on account of execution of the orders. Debtor’s holding period drastically improved and stood at 18 days as on March 31, 2024 as against 103 days as on March 31, 2023. Debtor cycle generally depends on project. In agricultural projects, debtors’ cycle is elongated, whereas in Revamped Distribution Sector Scheme (RDSS), receivable cycle is 10 days from the date of invoice. Creditors holding period drastically improved and stood at 96 days as on March 31, 2024 as against 288 days as on March 31, 2023 as payment terms is of 45 days, speedy recovery from the debtors helped the firm to improve the creditors holding period. The fund-based limit remained utilized at ~85 per cent and nonfund based limit remained utilized at ~64 percent over the eight months ended August, 2024. Acuité believes that the working capital operations of the firm will remain at same level as evident from movement in the inventory period , other receivables and advances to related parties will remain a key monitorable. Capital withdrawal risk associated with partnership firm Being a partnership firm, firm is exposed to the capital withdrawal risk. Any significant withdrawal from the partner’s capital will have a negative bearing on the financial risk profile of the firm. Highly competitive industry marked by tender based nature of business The firm’s performance is susceptible to the tender based nature of business, where the business depends on the ability to bid for contracts successfully. Risk become more pronounced as tendering is based on minimum amount of biding of contracts. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The firm’s liquidity is adequate marked by steady net cash accruals of Rs.7.20 Cr. as on March 31, 2024 as against long term debt repayment of only Rs.0.36 Cr. over the same period. Overall profits and cash accruals from the business stood at a comfortable level in FY2024 which remain sufficient to meet the scheduled debt obligations. The current ratio dipped but stood comfortable at 1.23 times as on March 31, 2024 as against 1.38 times as on March 31, 2023. The fund-based limit remained utilized at ~85 per cent and non-fund based limit remained utilized at ~64 percent over the eight months ended August, 2024 Moreover, working capital management of the company is high but improved and stood at Gross Current Assets (GCA) of 167 days in 31st March 2024 as compared to 413 days in 31st March 2023.
Acuité believes that going forward the firm will continue to maintain adequate liquidity on account of adequate net cash accruals against its matured repayment obligations. |
| Outlook |
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Stable
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 166.44 | 47.01 |
| PAT | Rs. Cr. | 6.63 | 2.36 |
| PAT Margin | (%) | 3.98 | 5.01 |
| Total Debt/Tangible Net Worth | Times | 0.85 | 0.75 |
| PBDIT/Interest | Times | 3.95 | 4.69 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not applicable
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| 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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