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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 5.00 | ACUITE B+ | Stable | Assigned | - |
| Total Outstanding | 5.00 | - | - |
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Rating Rationale |
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Acuite has assigned its long-term rating of ‘ACUITÉ B+' (read as ACUITE B Plus) on the Rs. 5.00 Cr. bank facilities of JB Constructions. The outlook is ‘Stable’.
Rationale for Rating The rating assigned reflects the long-standing experience of the J B Constructions in real estate market and execution of residential ,commercial projects and adequate collections from the customer. However, the rating is constrained by project completion risk, modest scale of operations and susceptibility to cyclicality inherent to real estate industry. |
| About the Company |
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Mumbai based, J B Constructions was formed in 1997. It is engaged in the development of residential and commercial building. Shri. Ashirwad M. Bondre and Shri. Shripad S. Joshi are partners of the entity.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuite has considered the standalone business and financial risk profile of JB Constructions to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management and established track record of operations-
The Partnership firm is managed by Shri. Ashirwad M. Bondre and Shri. Shripad S. Joshi and a team of experienced personnel. The Partners possess over 30 years of experience in this line of business. The firm has 27 years of experience as a real estate developer through various projects executed at Dombivali location. Currently the firm is engaged in development of two residential buildings namely Manisha Chs Ltd and Raghukunj Chs Ltd. The total saleable area of the projects under construction stand at 43809 sq ft. Acuite believes that the partners have demonstrated good execution capabilities with a reputation for quality and timely completion in the past. Further partner’s industry experience is expected to support in a successful sale of the units in the on-going project. |
| Weaknesses |
| Completion Risk-
The construction of the project Manisha Chs Ltd started in January 2023 and the same is expected to get completed by January 2025. Whereas the project Raghukunj Chs Ltd is stated to start in June 2024 and get completed by January 2026. The completion risk for the new projects remains high, as being in nascent stage of construction. The same is mitigated to some extent by the established track record of completion of projects in timely manner by the firm. However, any delay in completion of the project may led to cost and time overruns which will remain a key rating sensitivity going ahead. Modest Scale of operations- Firm has modest scale of operations marked by revenue of Rs. 2.01 Cr. in FY23 as against Rs. 3.25 Cr. in FY22.Further the revenue is expected to remain in the similar range over the medium term. The operating profit margin for FY23 stood at 6.91 percent as compared to 9.04 percent in FY22. Susceptibility to Real Estate Cyclicality, Regulatory Risks and intense competition in the industry - The real estate industry in India is highly fragmented with most of the real estate developers, having a city specific or region-specific presence. The risks associated with real estate industry are cyclical in nature and directly linked to drop in property prices and interest rate risks, which could affect the operations. Given the high level of financial leverage, the high cost of borrowing prevents the real estate's developers' from significantly reducing prices to boost sales growth. Moreover, the industry is also exposed to certain regulatory risks linked to stamp duty and registration tax directly impacting the demand and thus the operating growth of real estate players. |
| Rating Sensitivities |
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Timely completion of the project development
Timely sale of unsold inventory and realisation of its customer advance Any Sharp decline in cash flow due to slower customer advances or delays in project execution. |
| Liquidity Position |
| Adequate |
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The Firm’s liquidity position is adequate, and the company has sufficient net cash accruals of Rs.0.08 Cr. in FY2023 as against its NIL maturity debt obligations in the same tenure. In addition, it is expected to generate a sufficient cash accrual in the range of Rs. 0.18 – 0.22 crore as against the NIL maturing repayment obligations over the medium term. The firm is expected to have adequate liquidity over the medium term.
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| Outlook: Stable |
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Acuite believes the outlook on JB Constructions will continue to remain ‘Stable’ over the medium term backed by its long track record of operations and experienced management. The outlook may be revised to ‘Positive’ in case of higher-than expected advances from customers resulting in adequate cash flows for early completion of the project. Conversely, the outlook may be revised to ‘Negative’ in case of any undue delay in completion of the project, or less-than-expected bookings and advance leading to stretch on its liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 2.01 | 3.25 |
| PAT | Rs. Cr. | 0.08 | 0.23 |
| PAT Margin | (%) | 4.12 | 7.11 |
| Total Debt/Tangible Net Worth | Times | 11.70 | 2.00 |
| PBDIT/Interest | Times | 2.54 | 4.26 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Real Estate Entities: https://www.acuite.in/view-rating-criteria-63.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 Applicable |
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