- Long operational track record and experienced management
Established in 1993, Orient Constructions Private Limited (OCPL) has a long operational track record of around four decades in the civil construction industry, through their erstwhile partnership concern, Orient Constructions. Moreover, the key promoter of OCPL, Mr. Ashok Kumar Jalan has more than four decades of experience in the construction industry. Acuité believes that the long standing experience of the promoter and the long track record of operations will benefit the company going forward resulting in steady growth in the scale of operations.
- Above average financial risk profile
The company’s financial risk profile is marked by modest networth, comfortable gearing and average debt protection metrics. The tangible net worth of the company stood at Rs.36.58 Cr as on 31st March, 2022 as compared to Rs.35.29 Cr as on 31st March, 2021. Gearing of the company stood comfortable at 0.34 times as on March 31, 2022 as against 0.51 times as on March 31, 2021. The Total Outside Liability/Tangible Net Worth (TOL/TNW) stood at 0.60 times as on March 31, 2022 as compared to 0.81 times in the previous year. The Interest Coverage Ratio stood at 3.22 times as on March 31,2022. However, Debt Service Coverage Ratio at 0.77 times as on March 31, 2022. Net Cash Accruals/Total Debt (NCA/TD) stood at 0.28 times as on March 31, 2022 as against 0.25 times as on March 31, 2021. Acuité believes that going forward the financial risk profile of the company will remain above average over the medium term, in the absence of any major debt funded capex plans.
- Healthy growth in revenue and strong order book position
Orient Constructions Private Limited has achieved revenues of Rs.92.94 Cr in FY2022 as compared to revenue of Rs.82.24 Cr in FY2021 and Rs. 82.00 Cr in FY2020, thereby registering a 2 year CAGR of 6.5 per cent. The growth in top line is on account of better order flow and execution apart from boost in infrastructure sector. The company has achieved revenues of around Rs.46.67 Cr till 31 st December 2022 (provisional). The unexecuted order book of around Rs.175 Cr is expected to be executed in the 12-18 months thus providing comfortable revenue visibility over the medium term. Acuité believes that the healthy order book position of the company provides comfortable revenue visibility over the medium term.
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- Working capital intensive nature of operations
The working capital intensive nature of operations is marked by moderate GCA days of 126 days as on March 31, 2022 as compared to 141 days as on March 31, 2021. The high GCA days are high primarily on account of a high other current assets due to retention money & security deposits. However, the inventory period remained moderate at 58 days as on March 31, 2022 as compared to 82 days in previous year. Further, the debtor holding period stood comfortable at 44 days as on March 31, 2022 as compared to 59 days as on March 31, 2021. Acuité believes that the working capital operations of the firm will remain at the same levels as evident from efficient collection mechanism and moderate inventory levels over the medium term.
- Competitive and fragmented nature of industry coupled with tender based business
The firm is engaged as a civil contractor and the sector is marked by the presence of several mid to big size players. The company 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 company must make bid for such tenders on competitive prices, which may affect the profitability of the company. However, this risk is mitigated to an extent as the company is operating in this environment for around a decade.
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