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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 3.00 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 7.26 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 20.67 | - | ACUITE A3+ | Assigned |
| Bank Loan Ratings | 19.07 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 50.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) and the short term rating of ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs.26.33 crore bank facilities of Laxmi Enterprises.
Acuité has assigned the long-term rating to ‘ACUITE BBB’ (read as ACUITE triple B) and the short term rating to ‘ACUITE A3+’ (read as ACUITE A three plus) on the Rs.23.67 crore bank facilities of Laxmi Enterprises. The outlook is ‘Stable’. Rationale for Rating The rating reaffirmation is on account of improved operating and financial performance of the company marked by improved revenues, range bound margins and moderate financial risk profile. The revenue of the firm has improved to Rs.121.45 crore in FY2023 (Prov) as against Rs.74.76 crore in FY2022 driven by increase in the orders execution related to railways. The PAT margin has also improved to 5.98 per cent in FY2023 (Prov.) as compared to 5.57 per cent in FY2022. Further, the rating also takes into account, the moderate financial risk profile of the firm, marked by low gearing and comfortable debt protection metrics in FY2023 (Prov.) along with adequate liquidity position and efficient working capital management of the firm during the same tenure. |
| About the Company |
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Laxmi Enterprises; a Jharkhand based partnership firm was established in the year 2002, by Mr. Vikas Kumar Saw, Mr. Ashish Kumar Saw, Mrs. Lakhi Devi and Mrs. Sangeeta Devi. The firm is mainly into construction business related to railway track installation, approach roads, level crossings, staff quarters, and supply of ballast etc. The firm is a registered government contractor for South Eastern Railways, East Coast Railways, Steel Authority of India Limited, Ircon International Limited, among others.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of LE while arriving at the rating.
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Key Rating Drivers
| Strengths |
| >Long track record of operation and experienced management
Established in 2002 as a partnership firm and has a long track record of almost two decades in the railway infrastructure and construction business. The partners of the firm Mr. Vikas Kumar Saw, Mr. Ashish Kumar Saw, Mrs. Lakhi Devi and Mrs. Sangeeta Devi, possess two decades of experience in the business of construction. The firm has a long presence in this sector and has established a healthy relationship with customers for more than a decade. >Healthy financial risk profile The financial risk profile of the firm stood healthy marked by moderate net worth, moderate gearing and comfortable debt protection metrics. The tangible net worth stood at Rs.29.75 crore as on 31 March 2023 (Prov) as against Rs.23.06 crore as on 31 March, 2022. The total debt of the firm for FY2023 (Prov) stood at Rs.27.41 crore includes Rs.14.43 crore of long-term debt, Rs.5.99 crore of short term debt, Rs.3.44 crore of unsecured loans and Rs.3.55 crore of CPLTD as on 31 March, 2023. The gearing (debt-equity) stood at 0.92 times as on 31 March, 2023 (Prov) as against 0.81 times as on 31 March, 2022. Interest Coverage Ratio stood at 8.40 times for FY2023 (Prov) as against 5.20 times for FY2022. Debt Service Coverage Ratio (DSCR) stood at 2.79 times in FY2023 (Prov) as against 1.74 times in FY2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 1.40 times as on 31 March, 2023 (Prov) as against 1.47 times as on 31 March, 2022. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.41 times for FY2023 (Prov) as against 0.37 times for FY2022. Acuité believes the financial risk profile of the firm will remain healthy on account of steady net cash accruals and no major debt funded capex plan. >Improved Working Capital Management The working capital management of the firm has improved marked by GCA days of 86 days in FY2023 (Prov) as against 133 days in FY2022. The debtor days stood at 49 days in FY2023 (Prov) as against 78 days in FY2022. The average credit period allowed to customers of 30-40 days. The creditor days stood at 33 days in FY2023 (Prov) as against 102 days in FY2022. The average credit period allowed by suppliers is 30-40 days. Acuité expects the working capital management to remain efficient over the medium term. >Moderate scale of operation coupled with healthy profitability margin The revenue of the firm stood moderate at Rs.121.45 crore in FY2023 (Prov.) as compared to Rs.74.76 crore in the previous year. This improvement in revenue of the firm is mainly on account of increase in execution of railways related projects. Going forward, Acuité believes that the revenue of the company will increase over the near term on account of healthy un-executed order book of Rs.316.49 crore as on July 2023. The operating profitability margin of the firm stood healthy at 13.92 per cent in FY2023 (Prov.) as compared to 14.85 per cent in the previous year. Also, net profitability margin of the firm stood at 5.98 per cent in FY2023 (Prov.) as compared to 5.57 per cent in the previous year. |
| Weaknesses |
| Competitive and fragmented nature of industry coupled with tender based business
The firm is engaged as a 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 firm is operating in this environment for the last twenty years. Inherent risk of capital withdrawal in a partnership firm The Firm is susceptible to the inherent risk of capital withdrawal given its constitution as a partnership. Any significant withdrawal from the partner’s capital will have a negative bearing on the financial risk profile of the firm. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position: Adequate |
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The company’s liquidity position is adequate marked by sufficient net cash accruals against its maturing debt obligations. The company has net cash accruals in the range of Rs.5.97-Rs.11.18 Crore from FY 2021- 2023 (Prov) against its maturing debt obligations in the range of Rs.2.70-3.55 crore in the same tenure. In addition, it is expected to generate a sufficient cash accrual in the range of Rs.14.12-17.88 crores against the maturing repayment obligations of around Rs.3.89-4.38 crore over the medium term. The working capital management of the company is efficient marked by GCA days of 86 days in FY2023 (Prov) as against 133 days in FY2022. The company maintains unencumbered cash and bank balances of Rs.0.21 crore as on March 31, 2023 (Prov). The current ratio stands at 2.10 times as on March 31, 2023 (Prov) as against 1.71 times as on March 31, 2022. The average bank limit utilization for the fund-based limits for past 07 months ending May 2023 is ~82% of the sanctioned amount. The average BG utilization is ~65 percent of the sanctioned amount.
Acuité believes the financial risk profile of the firm will remain healthy on account of steady net cash accruals and no major debt funded capex plan. |
| Outlook: Stable |
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Acuité believes the firm will maintain a 'stable' business risk profile over the medium term. The firm will continue to benefit from its experienced management and established association with customers and suppliers along with healthy financial risk profile. The outlook may be revised to “Positive” in case the firm registers significant improvement in scale of operations while sustaining their profit margins and achieving efficient working capital management. The outlook may be revised to ‘Negative’ in case of deterioration in the firm’s scale of operations and profitability or capital structure, or in case of further elongation of the working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 121.45 | 74.76 |
| PAT | Rs. Cr. | 7.26 | 4.16 |
| PAT Margin | (%) | 5.98 | 5.57 |
| Total Debt/Tangible Net Worth | Times | 0.92 | 0.81 |
| PBDIT/Interest | Times | 8.40 | 5.20 |
| Status of non-cooperation with previous CRA (if applicable) |
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Care Ratings, vide its press release dated April 24, 2023 had denoted the rating to Laxmi Enterprises (LE) as 'CARE B+/Stable/A4' (Issuer Not Cooperating)' on account of lack of adequate information required for monitoring of ratings.
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| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.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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