­Experienced management coupled with long track of operations
KDBIL, a special-class civil contractor, has been into existence for more than three decades in construction of high-quality EHV transmission lines and substations. Mr. K. K. Shukla, the promoter of KDBIL, is having more than three decades of experience in the civil construction industry. Currently, the business operations are handled and managed by Mr. Bhanu Shukla, who brings an experience of around a decade. KDBIL has executed multiple orders which included construction work of line bays along with installation of line reactors, turnkey construction of pooling substations and others. With promoter's extensive industry experience and timely execution of past projects, KDBIL has been able to establish a long standing relationship with its suppliers and various government bodies. The company as on August 2023, has orders in hand of Rs. 390.22 Cr. out of which orders worth Rs. 113.88 Cr. has been completed and the unexecuted orders are worth of Rs. 276.34 Cr. which is expected to be completed by 2023-2024. However the orders are delayed on account of delays in approvals and in land acquisition.

Acuité believes that the promoter's extensive industry experience and established relation with its principal contractors and suppliers will aid KDBIL's business risk profile over the medium term.

Presence in diverse geographies coupled with reputed clientele
KDBIL’s operations are moderate and is spread across diverse geographies. The company currently has an unexecuted order book size of Rs.276.34 Cr to be executed over the next 12 to 24 months located in different geographical locations such as Madhya Pradesh, Maharashtra, Gujarat, Jammu & Kashmir, among others.The company offers integrated services through electrical systems design, complete solutions for civil design and construction activities, complete engineering-procurement and turnkey solutions, commissioning and also maintenance services. The company has earlier executed orders for Hindalco Industries Ltd, Gamesa India Pvt Ltd, Madhya Pradesh Power Transmission Co. Ltd, among others.

Acuité believes that KDBIL's presence in diverse geographies along with long term association with reputed clients is likely to aid the business risk profile over the medium term.

­Irregularity in servicing of debt obligations
Irregularity reported by the lender in servicing of debt obligations in recent past, in case of some of the term loans and over draft facilities availed by KDBIL, in a credit bureau report. The accounts have been classified as special mention accounts.

Below Average Financial Risk profile
The financial risk profile of the company is below average marked by low gearing, moderate net worth and weak debt protection metrics. The tangible networth of the company improved to Rs. 28.91 Cr. as on March 31, 2023(prov.) as against Rs. 28.60 Cr. as on March 31, 2022. The gearing level of the company stood at 0.71 times as on March 31, 2023(prov.) as against 0.87 times as on March 31, 2022. The debt protection metrics of the company are weak, with interest coverage ratio of 1.31 times as on March 31, 2023(prov.) as against 1.78 times as on March 31, 2022. The debt service coverage ratio stood at 0.56 times as on March 31, 2023(prov.) as against 1.32 times as on March 31, 2022.

Working Capital Intensive nature of operations
The operations of the company are of working capital intensive nature marked by high bank limit utilisation and high GCA days. The GCA of the company stood at 400 days in FY2023(prov.) as against 339 days in FY2022. The inventory days also stood high at 189 days in FY2023(prov.) as against 238 days in FY2022. The debtor days stood at 80 days in FY2023(prov.) as against 50 days in FY2022. The creditor days stood at 66 days in FY2023(prov.) as against 119 days in FY2022. The average utilisation of the working capital limits stood higher at 94.98% for nine months ended as on July 2023.

Tender based nature of operations
KDBIL executes tender based projects from government & private players with no major reliance on subcontract work. Once the tender is allotted, EMD of 1-2 per cent is deposited. The company raises bills on a monthly basis. KDBIL has the flexibility to avail mobilization advance and for some of the orders the company avails mobilization advances; it generally bears a high interest rate. The retention money is usually 10 percent of the contract value (Few projects have 10 percent performance guarantee) which is released after a defect liability period of 1-2 years; which is usually the O&M of the project. Since the nature of operations is tender based, the business depends on the ability to bid for contracts successfully. KDBIL has a success rate of 30 to 40 percent in bidding. KDBIL’s revenue and profitability are susceptible to risks inherent in contract-based operations. Besides, tender based operations limit pricing flexibility in an intensely competitive industry.

Acuité believes that KDBIL's revenue and profitability are susceptible to risks inherent in tender based operations which limit pricing flexibility in an intensely competitive industry.