|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 172.14 | ACUITE BBB+ | Reaffirmed & Withdrawn | - |
| Bank Loan Ratings | 414.60 | - | ACUITE A2 | Reaffirmed & Withdrawn |
| Total Outstanding Quantum (Rs. Cr) | 0.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 586.74 | - | - |
| Rating Rationale |
|
Acuité has reaffirmed and withdrawn the long term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus) and the short term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs.586.74 Cr. bank facilities of P and C Projects Private Limited (PCPPL).
The rating has been withdrawn on Acuite's policy of withdrawal of raitngs. The rating has been withdrawn on account of the request recieved from the company, and the NOC received from the banker. Rationale for the reaffirmation The rating reaffirmation takes into account of the improvement in the operating income of the company, the rating also draws comfort from experienced promoter and the company’s long track record in the industry. These strengths are however, offset by the working capital intensive in nature of operations along with average financial risk profile. |
| About the Company |
|
Established in 1972 and based in Erode (Tamil Nadu), P&C Projects Private Limited (PCPPL) was initially set up as partnership firm by Late Mr. S P Periasamy and Mr. S P Chinnasamy. Later in year 1994, the firm’s constitution was changed into a private company ‘P&C Constructions Private Limited’. The company was later renamed as P&C Projects Private Limited (PCPPL) and currently is managed by Mr. S P Chinnasamy and second-generation team of Mr. S P Ravishankar, Mr. S P Rajesh, Mr. S C Sivakumar and other family members. PCPPL, a family owned business, undertakes civil construction activities primarily that of Roads, Highways, Buildings, Irrigation, Water supply and sewage/effluent treatment segments. The company is a ‘Special Class’ contractor registered with Government of Tamil Nadu, Kerala, Karnataka, etc. and undertakes works for Public Works Department, Municipal authorities, Roads & Buildings Department and State and National Highway authorities. Established in 1972 and based in Erode (Tamil Nadu), P&C Projects Private Limited (PCPPL) was initially set up as partnership firm by Late Mr. S P Periasamy and Mr. S P Chinnasamy. Later in year 1994, the firm’s constitution was changed into a private company ‘P&C Constructions Private Limited’. The company was later renamed as P&C Projects Private Limited (PCPPL) and currently is managed by Mr. S P Chinnasamy and second-generation team of Mr. S P Ravishankar, Mr. S P Rajesh, Mr. S C Sivakumar and other family members. |
| Analytical Approach |
|
Acuité has considered a standalone view of the business and financial risk profile of PCPPL to arrive at the rating.
|
Key Rating Drivers
| Strengths |
| Augmentation in business risk profile supported by growing order book
The operating revenue of the company improved to Rs.745.79 crore in FY2022 as compared to Rs.621.85 crore in FY 2021; the revenue has increased due to better project execution and improvement in order book position. The company has reported provisional revenue as on 31st December 2022 of Rs.519.17 crore and projects Rs.800 crore of revenues for FY2023. Despite high labour cost amid the economic slowdown and higher cost inventory; the margins were stable for FY 2022 and FY 2021. The operating margin stood at 11.28 per cent in FY2022 as compared to 10.94 per cent in the previous year. The PAT margins marginally increased to 5.81 per cent as on FY2022 as against 5.36 per cent as on FY2021. The RoCE levels for the company improved slightly to 22.19 per cent in 2022 as against 21.48 per cent in FY2021. Though the company’s profitability is exposed to volatility in raw material prices as their prices are volatile in nature, it has an in-built price escalation clause for major raw materials (such as steel, cement, fuel and bitumen) in most of its contracts. The company has strong order book position with unexecuted orders in hand for infrastructure projects worth around Rs.2300 crore which are to be executed in the upcoming two to three years, thereby providing strong revenue visibility in the medium term. Majority of the Company’s order book comprised of PWD and state highway orders. The other order book comprises of orders from PWD, Chennai Metro, HAL, Nalanda University & CPWD. Above Average Financial Risk Profile PCPPL’s financial risk profile is moderate, marked by improving net worth, modest gearing and adequate debt protection metrics. The tangible net worth of the firm improved to Rs.247.22 crore as on March 31, 2022 from Rs.205.25 crore as on March 31, 2021. Gearing of the firm improved marginally to 0.57 as on March 31, 2022 as compared to 0.65 as on March 31, 2021. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.36 times as on 31st March, 2022 as against 1.40 times as on 31st March, 2021. The moderate debt protection metrics of the firm is marked by Interest Coverage Ratio at 4.18 times and Debt Service coverage ratio at 2.63 times as on 31st March, 2022. Net Cash Accruals/Total Debt (NCA/TD) stood at 0.38 times as on 31st March, 2022. Promoters’ extensive experience in civil construction industry with established track record of operations in southern region PCPPL, a special class civil contractor, has established presence in executing projects related to buildings, water treatment plant, irrigation, roads and highways amongst others for both public and private sector. Mr. S P Chinnasamy, the chairman of PCPPL, has more than four decades of experience in the line of civil construction. With the promoters’ extensive industry experience and timely execution of its past projects, PCPPL has been able to establish long- standing relationship with various government divisions such as Central Public Works Department (CPWD), Chennai Metropolitan Development Authority (CMDA), Public Works Departments, Tamil Nadu Water Supply and Drainage Board, Tamil Nadu Road Sector Project (TNRSP), many region-wise principals and national highway authorities amongst others. As on December 31, 2022, PCPPL has an unexecuted order book position of approx. Rs.2300 Cr; estimated to be executed over the next 24-36 months providing long-term revenue visibility. The outstanding order book is 3.08x of the FY2022 revenue of Rs.745.79 crore. |
| Weaknesses |
| Delays in work order execution, extensions undertaken from the authorities
The outstanding order book is 3.08x of the FY22 revenue of Rs.745.79 crore; for orders past completion date, management has received the extension from the respective authorities and the pending work is to be executed in near term and has resulted in locking of its working capital limits for more than expected time and may result in cost overrun including additional finance cost. Susceptibility to tender-based operations Revenue and profitability depend entirely on the ability to win tenders. Entities in this segment face intense competition, thus requiring them to bid aggressively to procure contracts; this restricts the operating margin to a moderate level. Also, given the cyclicality inherent in the construction industry, the ability to maintain profitability margin through operating efficiency remain critical for the company. Tender based nature of operations, Central & State funded projects PCPPL executes only tender based projects funded by central government, state government bodies and international development agencies such as World Bank and Asian Development Bank (ADB) with low reliance on work received as a sub-contracting work from other entities. The funded projects are either budgetary support or funded from a consortium of banks. The bank guarantees (BG) submitted are typically 3.0-5.0 percent of the total work order value. In case of retention money, BGs have to be carried till completion of defect liability period, resulting in high working capital requirement in form of non-fund based limits. The defect liability period varies from segment-to-segment in the civil infrastructure sector. The company raises bills on milestone (stage) basis. PCPPL has the option of availing mobilization advance and usually avails the same based on project requirements. PCPPL’s management avails the mobilization funds in projects funded by World Bank and Asian Development Bank (ADB) as the advances are interest free, whereas on other hand, the advances from domestic principals carries interest rate of around 12.00 percent. The percentage of retention money is determined on the basis of the contract size, nature of work and the customer. The authorities keep on realizing the mobilization advances money with every monthly bills. |
| Rating Sensitivities |
|
None
|
| Material covenants |
|
None
|
| Liquidity Position |
| Adequate |
|
The liquidity position of the company is adequate marked by healthy net cash accruals against matured debt obligations. The company reported net cash accruals of Rs.53.63 crore as on March 31, 2022 against debt repayment of Rs.9.84 crore over the same period. The operations of the company remain working capital intensive which led to high reliance of working capital limits for smooth running of business. The company has high Gross Current Assets (GCA) of 198 days in 31st March 2022 as compared to 195 days in 31st March 2021. As a result, the fund-based limit of Rs.169.83 crore remained utilized at average at ~76 per cent over the twelve months ended January’ 2023. The cash and bank balances of the company stood at Rs.8.22 crore as on March 31, 2022. The current ratio stood comfortable at 1.61 times as on March 31, 2022.
|
| Outlook |
| Not Applicable |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 745.79 | 621.85 |
| PAT | Rs. Cr. | 43.32 | 33.31 |
| PAT Margin | (%) | 5.81 | 5.36 |
| Total Debt/Tangible Net Worth | Times | 0.57 | 0.65 |
| PBDIT/Interest | Times | 4.18 | 3.84 |
| Status of non-cooperation with previous CRA (if applicable) |
| Brickwork Ratings vide its press release dated 7.10.2022, had downgraded the company to BWR BB+/A4+; INC |
| Any other information |
| None |
| Applicable Criteria |
|
• 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 |
|
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
|
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |
|
Contacts |
| Analytical | Rating Desk |
| About Acuité Ratings & Research |
