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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 8.08 | ACUITE C | Assigned | - |
| Bank Loan Ratings | 25.00 | ACUITE C | Downgraded | - |
| Bank Loan Ratings | 11.43 | ACUITE D | Assigned | - |
| Bank Loan Ratings | 17.77 | - | ACUITE A4 | Assigned |
| Bank Loan Ratings | 30.28 | - | ACUITE D | Assigned |
| Total Outstanding Quantum (Rs. Cr) | 92.56 | - | - |
| Rating Rationale |
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Acuité has downgraded the long-term rating to ‘ACUITE C’ (read as ACUITE C) from 'ACUITE B+' (read as ACUITE B plus) on the Rs. 25.00 Cr bank facilities of Kinjal Civilcon LLP (KCL).
Acuité has assigned the long-term rating of ‘ACUITE C’ (read as ACUITE C) and 'ACUITE A4' (read as ACUITE A four) to the Rs.25.85 Cr bank facilities of Kinjal Civilcon LLP (KCL). Acuité has assigned the long-term rating of ‘ACUITE D’ (read as ACUITE D) to the Rs.41.71 Crbank facilities of Kinjal Civilcon LLP (KCL). Rationale for rating downgrade The rating downgrade reflects the irregularities in timely servicing of debt repayment obligations as per the feedback received from the bankers. |
| About the Company |
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Mumbai based KCL was incorporated as a partnership firm in 2019 by Mr. Heeralal Doshi, Mr. Divyesh Doshi, Mr. Sadashiv Shetty, Mr. Ashokkumar Bafna, Mr. Sogaram Dewasi,Mrs.Kinjal Salecha and Miss. Divya Doshi. The firm is engaged in construction of buildings, flyovers,etc.
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| Analytical Approach |
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Acuité has considered the standalone financial and business risk profiles of KCL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| Improvement in operating income and profitability
KCL reported an increase in its revenues of Rs.146 Cr for FY2023 (Provisional) against Rs.132 Cr in FY2022 and Rs.81 Cr in FY2021. Further, the unexecuted orderbook stood at Rs. 1018 Cr as of April 30, 2023, which is expected to be executed over the next two to three years, thus providing medium term revenue visibility. The operating profitability of the firm is generally range bound between 12 to 14 percent every year. Further, the net profit margin of the firm stood at 4.10 percent in FY2023 (Provisional) against 3.28 percent in FY2022. |
| Weaknesses |
| Delays in timely servicing of debt obligations
Delays in servicing of debt obligation were reported by the bankers of the firm. Delays were observed in servicing of secured overdraft facility and term loan repayments and interest obligations. Below average financial risk profile Financial risk profile of KCL is below average marked by low networth, moderate gearing and low debt protection metrics. The tangible net worth of the firm stood declined at ~Rs.27.64 Cr as on 31 March, 2023 (Provisional) as against Rs.29.82 Cr as on 31 March, 2022 due to capital withdrawal made by the partners worth ~Rs.8 Cr during the year. The accretion to reserves was ~Rs.5.97 Cr. The gearing (debt-equity) therefore remained moderate at of 2.20 times as on 31 March, 2023 (Provisional) as against 2.39 times as on 31 March, 2022 despite of reduced debt levels during the year. The total debt of Rs.61 Cr as on 31 March, 2023 (Provisional) consists of long term bank borrowings of Rs.18 Cr, short term bank borrowings of Rs.35 Cr and unsecured loans from directors of Rs.8 Cr. The coverage indicators of the firm remained modest with interest coverage ratio and DSCR at 1.99 times and 0.66 times for FY2023 (Provisional) as against 1.81 times and 0.33 times for FY2022. The Net Cash Accruals to Total debt stood at 0.12 times for FY2023 (Provisional) as against 0.07 times for FY2022. The Total outside liabilities to Tangible stood high at 5.11 times for FY2023 (Provisional) as against 4.19 times for FY2022. The Debt-EBITDA ratio stood at 2.97 times for FY2023 (Provisional) as against 4.15 times for FY2022. Acuité believes that ability of KCL to improve its financial risk profile over the medium term will remain a key rating sensitivity factor. Working capital intensive nature of operations The operations of KCL are working capital intensive marked by its Gross Current Assets (GCA) days of 247 days for FY2023 (Provisional) as against 266 days for FY2022. This is primarily on account of its receivable cycle which though remains elongated however recorded an improvement of 155 days in FY2023 (Provisional) as against 171 days in FY2022. The high receivable cycle is due to delayed payments from the government departments. This makes the company dependent on bank borrowings for its working capital requirement. The average bank limit utilization for 6 months’ period ended May 2023 stood high at ~96 percent. Further, the inventory cycle of the firm stood at 34 days in FY2023 (Provisional) as against 39 days in FY2022 whereas the creditors cycle stood at 194 days in FY2023 (Provisional) as against 209 days in FY2022. Acuité believes that ability of KCL to improve its working capital cycle over the medium term will remain a key rating sensitivity factor. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position - Poor |
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KCL has poor liquidity profile marked by instances of delays in servicing of debt repayment obligations. The firm generated cash accruals in the range of Rs.4 Cr to Rs.7 Cr during FY2021 to FY2023 (Provisional) against its repayment obligation in the range of Rs.9 Cr to Rs.35 Cr during the same period. The average bank limit utilization for 6 months’ period ended May 2023 stood high at ~96 percent.
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| Outlook |
| Not applicable |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 145.59 | 131.73 |
| PAT | Rs. Cr. | 5.97 | 4.32 |
| PAT Margin | (%) | 4.10 | 3.28 |
| Total Debt/Tangible Net Worth | Times | 2.20 | 2.39 |
| PBDIT/Interest | Times | 1.99 | 1.81 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • 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 |
| 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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