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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 10.00 | ACUITE B+ | Stable | Assigned | - |
| Bank Loan Ratings | 15.00 | - | ACUITE A4 | Assigned |
| Total Outstanding Quantum (Rs. Cr) | 25.00 | - | - |
| Rating Rationale |
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Acuité has assigned its long term rating of ‘ACUITÉ B+’ (read as ACUITE B Plus) and short term rating of 'ACUITE A4' (read as ACUITE A Four) on the Rs 25.00 Cr. bank facilities of Jay Adinath Infrastructure (JAI). The outlook is ‘Stable’.
Rational for Rating Assigned The rating assigned reflects 8-10 years of experience of the partners in the infrastructure facilities. The rating also takes into account its healthy order book position as on October 2022 which states the total orders with the SPV stands at ~Rs. 2515 Cr out of which Rs. 1809.43 Cr is KCPL’s share. KCPL has subcontracted Rs.856.24 Cr out of this orderbook to Jai Adinath Group and out of this around Rs.360 Cr is unexecuted. It also considers moderate financial risk profile. The rating however is constrained by the limited track record of operations and intensive working capital operations. |
| About Company |
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M/s. Jay Adinath Infrastructure, a partnership firm, incorporated in May 2021. The Company is engaged in operating in the state of Gujarat for construction of Water Supply Project, Drainage Systems & Overhead Tanks and ancillary Infrastructure Facilities. The day-to-day operations of the entity are managed by Mr. Ketan Arunkumar Shah and Mr. Jaykumar Rasikbhai Savani.
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| About the Group |
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M/s. Jay Ambey Construction, a partnership firm, incorporated in May 2021. The Company is engaged in operating in the state of Gujarat for construction of Water Supply Project, Drainage Systems & Overhead Tanks and ancillary Infrastructure Facilities. The day-to-day operations of the entity are managed by Mr. Gajeshbhai I. Moradia and Mr. Jayesh I. Hirpada.
M/s. Shree Ganesh Infrastructure, a partnership firm, incorporated in May 2021. The Company is engaged in operating in the state of Gujarat for construction of Water Supply Project, Drainage Systems & Overhead Tanks and ancillary Infrastructure Facilities. The day-to-day operations of the entity are managed by Mr. Savan Savani and Mr. Milan Vaghasia. M/s. Om Construction - Ahmedabad, a partnership firm, incorporated in May 2021. The Company is engaged in operating in the state of Gujarat for construction of Water Supply Project, Drainage Systems & Overhead Tanks and ancillary Infrastructure Facilities. The daytoday operations of the entity are managed by Mr. Savan Savani and Mr. Milan Vaghasia. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated the business and financial risk profiles of Jay Adinath Infrastructure, Shree Ganesh Infrastructure, Om Construction- Ahmedabad and Jay Ambe Construction considering their common line of business, common management, and significant Financial and operational linkages. The entities are together referred to as Jai Adinath Group.
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Key Rating Drivers
| Strengths |
| >Track record of operation and experienced management in the Infrastructure sector
Jay Adinath Infrastructure and Group was incorporated in May 2021. The Group is engaged in operating in the state of Gujarat for construction of Water Supply Project, Drainage Systems & Overhead Tanks and ancillary Infrastructure Facilities. The partners of the group are Mr. Ketan Arunkumar Shah & Mr. Jaykumar Rasikbhai Savani, Mr. Gajeshbhai I. Moradia & Mr. Jayesh I. Hirpada, Mr. Savan Savani & Mr. Milan Vaghasia and Mr. Savan Savani & Mr. Milan Vaghasia who have an experience of nearly 8-10 years in this business. Acuité believes that the company is expected to continue to benefit from the proprietor’s established presence in the industry and its improving business risk profile over the medium. >Moderate Financial Risk Profile The financial risk profile of the group stood moderate, marked by average net worth and moderate gearing. The tangible net worth of the group stood at Rs.3.00 crore as on 31 March 2022. The total debt of the group stood at Rs.33.98 crore as on 31 March 2022 which is fully short-term in nature. The gearing (debt-equity) stood at 11.32 times as on 31 March 2022. Interest Coverage Ratio stood comfortable at 3.27 times for FY2022. Debt Service Coverage Ratio (DSCR) stood at 3.27 times in FY2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 22.63 times as on 31 March 2022. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.10 times for FY2022. Acuité believes that the financial risk profile of the company may impact with average net worth and moderate gearing |
| Weaknesses |
| >Intensive Working Capital Operations
The working capital management of the company is intensive marked by GCA days of 388 days in FY2022. Going forward, the GCA days are going to remain high based on high debtor days, unbilled revenue in Other Current Assets and also the nature of the industry. Debtor days stood high at 181 days in FY2022 as most of the company billings happen in the end of the month of March and the payment period mostly comes in April. Considering the nature of the industry, going forward, the debtor days are going to remain high. The average credit period allowed to customers is 90 days. However, the creditor days stood at 451 days in FY2022. The average credit period allowed by suppliers is around 30-90 days. Acuité believes that intensive working capital management will be maintained by the group looking at the industry and its operations. >Modest Scale of Operations The scale of operations of the group remains modest with revenue generated of Rs 61.07 Crore in FY 2022. The revenue generated is purely achieved on executing the orders which is taken on 100% subcontract basis from the Kevadiya Construction Private Limited. Also, the group has achieved a revenue of Rs.66.61 crore till November 2022 and has target to achieve ~Rs.85 crore by the end of FY2023. Acuite believes that operations of the firm will remain modest over the medium term and with the income from from executing strong Order book it may increase from FY 2023 onwards. >Highly Competitive Industry The infrastructure is a fairly fragmented industry with a presence of few large players where subcontracting & project specific partnerships for technical/financial reasons are fairly common. The company faces stiff competition with its competitors in procurring orders through bidding, immense competition for procuring tenders leads to very competitive pricing which in turn lead to stress on the margins. Moreover, susceptibility of raw material pricing again keeps profit margin vulnerable and is a key sensitivity factor. |
| Rating Sensitivities |
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| Material Covenants |
| None |
| Liquidity Position |
| Stretched |
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The group’s liquidity position is Stretched, marked by modest net cash accruals against no debt obligations. The group has net cash accruals in the range of Rs.3.41 Crore for FY 2022. In addition, it is expected to generate a sufficient cash accrual in the range of Rs.4.64-7.78 crore over the medium term. The working capital management of the group is intensive marked by GCA days of 388 days in FY2022. The group maintains unencumbered cash and bank balances of Rs.1.55 crore as on March 31, 2022. The current ratio stands at 1.03 times as on March 31, 2022. The average bank limit utilization in CC limits is approx. 95%-100% percent of the sanctioned amount. The average BG utilization is around 30%-40% for Shree Ganesh Infrastructure, around 80%-90% for Jay Ambey Construction and Om ConstructionAhmedabad. BG facilities were sanctioned in July 2021 for all the four entities. The utilization would increase further in all the entities as the business progresses.
Acuité believes that the liquidity positions of the company is a key rating sensitivity |
| Outlook: Stable |
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Acuité believes that the group will maintain a ‘Stable’ outlook owing to the experienced management in the sector and strong order book position. The outlook may be revised to ‘Positive’ in case of significant growth in its revenues and its profitability and improving its capital structure by equity infusion. Conversely, the outlook may be revised to ‘Negative’ in case any elongation in its working capital cycle leading to deterioration of its liquidity and financial risk profile.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 61.07 | 0.00 |
| PAT | Rs. Cr. | 3.41 | 0.00 |
| PAT Margin | (%) | 5.58 | 0.00 |
| Total Debt/Tangible Net Worth | Times | 11.32 | 0.00 |
| PBDIT/Interest | Times | 3.27 | 0.00 |
| Key Financials (Consolidated) |
| The partneship firm has started generating revenue from FY2022, hence the figures shown in KFI table is only for FY2022 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable. |
| Any Other Information | ||||||||||||||||||||||||
Standalone Figures:
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| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.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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| Rating History : |
| Not Available |
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