| Experienced management and long track record of operation
The firm was established in 2001 and changed its constitution to LLP in 2017. The partners of the firm Mr. Ajay Bhoopal and Mr. Rajni Bhoopal have more than two decades of experience in similar industry. The firm has a long presence in this sector and has established a healthy relationship with customers for more than a decade. The timely execution of the projects has helped the firm to improve its market presence in the North-East part of the country. Acuité believes that the firm will continue to benefit from its promoter’s extensive industry experience and established relationship with customers over the medium term. Further, the firm mainly caters directly to the government entities as well as private parties such as Manipur State Power Distribution Co. Ltd., Guwahati Municipal Corporation, Jindal Saw Limited, Water Resource Departments, Public Works Departments and among others.
Healthy scale of operation
The revenue of the company stood healthy at Rs.150.43 crore in FY2022 as compared to Rs.30.42 crore in the previous year. This significant improvement in revenue is on account of increase in project execution during the period backed by steady order flow from the various Government departments and private parties. Further, the firm has already booked Rs.34.00 crore till August 2022 (Prov.) as against of Rs.8.50 crore till the same period in the corresponding year. Acuité believes the revenue of the firm will increase going forward based on the healthy unexecuted order book of Rs.230.05 crore as on 31st July 2022.
Healthy financial risk profile
The financial risk profile of the firm is marked by moderate net worth, comfortable gearing and healthy debt protection metrics. The net worth of the firm stood moderate at Rs.36.68 crore in FY 2022 as compared to Rs. 17.75 crore in FY2021. This improvement in networth is on account of retention of profit by the firm during the period. Further, Acuité has also considered unsecured loan of Rs.14.36 crore as quasi equity as the same amount is subordinated with the bank debt. The gearing of the firm stood comfortable at 0.94 times as on March 31, 2022 when compared to 0.74 times as on March 31, 2021. Interest coverage ratio (ICR) of the firm stood healthy at 4.92 times in FY2022 as against 4.21 times in FY 2021. The debt service coverage ratio (DSCR) of the company stood healthy at 3.53 times in FY2022 as compared to 3.19 times in the previous year. The net cash accruals to total debt (NCA/TD) stood at 0.18 times in FY2022 as compared to 0.10 times in FY2021. Going forward, Acuité believes the financial risk profile of the firm will improve on account of increase in net cash accruals and no major debt funded capex plan over the near term.
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| Working capital management
The operation of the firm is working capital intensive marked by high gross current asset (GCA) days of 288 days in FY2022 as against of 559 in the previous year. The inventory days of the firm stood comfortable at 33 days in FY2022 as compared to 17 days in the previous year. Moreover, the debtor days of the firm has improved but still stood high at 212 days in FY2022 as compared to 364 days in the previous year though it is a year end phenomenon. Acuité believes that the ability of the firm to manage its working capital operations efficiently will remain a key rating sensitivity.
Competitive and fragmented nature of industry coupled with tender based business
The company is engaged as a EPC and civil contractor and the particular sector is marked by the presence of several mid to big size players. The firm faces intense competition from the other players in the sectors. Risk becomes more pronounced as tendering is based on a minimum amount of bidding of contracts and hence the firm has to make bid for such tenders on competitive prices, which may affect the profitability of the firm. However, this risk is mitigated to an extent as the company is operating in this environment for the last twenty years.
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