Press Release March 25, 2025 P K CONSTRUCTION SHIMLA PRIVATE LIMITED Rating Downgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	6.73	ACUITE BB+ | Stable | Downgraded | Negative to Stable	-
Bank Loan Ratings	16.27	-	ACUITE A4+ | Downgraded
Total Outstanding	23.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuite has downgraded the long-term rating to 'ACUITE BB+' (read as ACUITE double B plus) from ‘ACUITE BBB-’ (read as ACUITE triple B minus) and short-term rating to ‘ACUITE A4+’ (read as ACUITE A four plus) from ‘ACUITE A3’ (read as ACUITE A three) on Rs.23.00 crore of bank facilities of P K Construction Shimla Private Limited (PKCSPL). The outlook is revised from ‘Negative' to 'Stable’. Rationale for rating The rating downgrade was on account of deterioration in operating performance including decline in revenues and profitability of PKCSPL due to delays in order execution. The rating continues to draw comfort from experienced management and long operational track record, steady order flow, moderate financial risk profile with adequate liquidity. The rating is however constrained by working capital intensive nature of operations, high geographical and clientele concentration in order book and inherent risks in tender based nature of business in an intensely competitive construction industry. However, the revision in rating outlook considers the build-up of order pipeline as reflected by steady order book position of Rs 140.52 Cr. (unexecuted order book) as on January 31, 2025 which imparts comfortable revenue visibility over the medium terms which stands at ~2.11 times of the company’s order inflow in the FY24.

About the Company

P K Construction Shimla Private Limited (PKCSPL), was established as a proprietorship concern in 1984 and reconstituted as a private limited company in 2016. The company is promoted by Mr. Pramod Kumar Sood and family. PKCSPL undertakes civil construction work and develops roads and bridges for government departments in Himachal Pradesh.

Unsupported Rating

­Not applicable

Analytical Approach

­Acuité has considered the standalone business and financial risk profile of PKCSPL to arrive at the rating.

Key Rating Drivers

Strengths

­Established track record of operation and experienced management The company was established as a proprietorship concern in 1984 and later it was reconstituted as a private limited company in 2016. The company is promoted by Mr. Pramod Kumar Sood and his family. The promoters of PKCSPL have been engaged in the construction industry for more than three decades. The extensive experience of the management has helped the company in establishing healthy relations with its customers and suppliers. Acuité believes the company will benefit from its established presence, experienced management to sustain their business in the near to medium term. Comfortable financial risk profile The company’s financial risk profile is marked by low net worth, low gearing, comfortable debt protection metrics. The tangible net worth stood at Rs. 28.05 Cr. as on March 31, 2024 as against Rs. 23.94 Cr. as on March 31, 2023 on account of accretion of reserves. The total debt of the company decreased to Rs 0.93 Cr. as on March 31, 2024 as against Rs. 4.52 Cr. as on March 31, 2023 on account of minimal utilisation of short term limits albeit increase in unsecured loan from Rs 0.05 Cr. as on March 31, 2023 to Rs 0.65 Cr. as on March 31, 2024. Based on that gearing (debt to equity) improved which stood at 0.03 times as on March 31, 2024 as against 0.19 times as on March 31, 2023.  The debt protection matrices of the company are comfortable marked by Interest coverage ratio (ICR) of 8.75 times and debt service coverage ratio (DSCR) of 5.56 times for FY2024 as against 8.67 times and 5.31 times respectively for the FY 2023. The net cash accruals to total debt (NCA/TD) of the company has improved which stood at 4.77 times in FY2024 as against 1.01 times in the FY2023. Acuité believes that the financial risk profile will continue to remain moderate on account of moderate cash accruals along with no major debt funded capex plans.

Weaknesses

Decline in operating scale albeit comfortable order book The company has reported revenues of Rs 66.34 Cr. in FY24 as against Rs 70.22 Cr. in FY23 reporting a decline of 5.53 percent on account of lower order execution.the deterioration in revenues further continued with company reporting revenues of Rs 35.05 Cr. in 10MFY25,  with expected to close the revenues at Rs 50.00 Cr. in FY25. The operating margin of the company declined marginally and stood at 8.27 percent in FY24 as against 8.71 percent in FY23. However PAT margin of the company has improved which stood at 6.19 percent in FY24 as against 5.88 percent in FY23 on account of increase in non-operating income which mainly consist of interest income. PKCSPL has an unexecuted order book of Rs 140.52 Cr. as on 31st Jan 25 compared to order book of Rs 39.10 Cr. as on 31st Oct 24. The substantial growth in order book is due to receipt of new orders worth of ~Rs 84.44 Cr. in the last 2 months, which are expected to be completed in the coming 2 years to 3 years. While the order book gives revenue visibility for the medium term, successful and timely completion of orders and subsequent booking of the revenues will remain as a key rating sensitivity. Working capital intensive operations PKCSPL's operations are working capital intensive marked by gross current assets (GCA) days at 120 days as on March 31, 2024 as against 114 days as on March 31, 2023. Elongated GCA days are driven by high debtor collection period, outstanding balance with government authority. Inventory days stood at 17 days as on March 31, 2024 as against 14 days as on March 31, 2023. The debtor days has improved which stood at 42 days as on March 31, 2024 as against 62 days as on March 31, 2023. Subsequently, the payable period stood at 120 days as on March 31, 2024 as against 96 days as on March 31, 2023. Further, the average bank limit utilization in the last ten months ended January 2025 remained at 16.74 percent for fund-based limits and 49.40 percent for non-fund-based limits. Acuité believes that the working capital operations of the company will remain intensive over the medium term based due to the nature of business. Highly Geographical and clientele concentration The company derives majority of revenue from government projects, limited to Himachal Pradesh thereby reflecting higher geographic concentration. Moreover, the unexecuted order book of the company is also geographically limited to state of Himachal Pradesh only. Further the major portion of order is being executed for Himachal Pradesh Public Works Department constituting to ~70 per cent of outstanding order book. Inherent risks in tender-based businesses and intense competition in the industry Intense competition from several players, and exposure to risks arising from dependence on tenders and geographical presence restricted to Himachal Pradesh, restrict PKCSPL’s ability to scale up further. Growth in revenue and profitability depends on the company's ability to bid successfully and executes order within stipulated time frame.

Rating Sensitivities

Ability to continously increase revenues and profitability   Timely execution of order book without any delays  Elongation of the working capital cycle Changes in the financial risk profile

Liquidity Position

Adequate

­The company’s liquidity is adequate marked by steady net cash accruals of Rs.4.45 Cr. as on March 31, 2024 as against long term debt repayment of Rs.0.20 Cr. over the same period. The current ratio of the company stood at 1.60 times as on March 31, 2024 as against 1.22 times as on March 31, 2023. The average bank limit utilization in the last ten months ended January 2025 remained just at 16.74 percent for fund-based limits and 4.43 percent for non-fund based limits. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of adequate net cash accruals as against minimal debt repayment obligation over the medium term.

Outlook: Stable

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Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	66.34	70.22
PAT	Rs. Cr.	4.11	4.13
PAT Margin	(%)	6.19	5.88
Total Debt/Tangible Net Worth	Times	0.03	0.19
PBDIT/Interest	Times	8.75	8.67

Status of non-cooperation with previous CRA (if applicable)

­Not applicable

Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite)

Not applicable

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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 29 Dec 2023 Bank Guarantee (BLR) Short Term 12.75 ACUITE A3 (Reaffirmed) Proposed Short Term Bank Facility Short Term 3.20 ACUITE A3 (Reaffirmed) Cash Credit Long Term 6.50 ACUITE BBB- | Negative (Reaffirmed) Term Loan Long Term 0.55 ACUITE BBB- | Negative (Reaffirmed) 06 Oct 2022 Bank Guarantee (BLR) Short Term 12.75 ACUITE A3 (Reaffirmed) Proposed Short Term Bank Facility Short Term 3.20 ACUITE A3 (Reaffirmed) Cash Credit Long Term 6.50 ACUITE BBB- | Stable (Reaffirmed) Term Loan Long Term 0.55 ACUITE BBB- | Stable (Reaffirmed)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating State Bank of India Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 12.75 Simple ACUITE A4+ | Downgraded ( from ACUITE A3 ) State Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 6.50 Simple ACUITE BB+ | Stable | Downgraded | Negative to Stable ( from ACUITE BBB- ) State Bank of India Not avl. / Not appl. Covid Emergency Line. 25 Nov 2021 Not avl. / Not appl. 25 Nov 2026 0.23 Simple ACUITE BB+ | Stable | Downgraded | Negative to Stable ( from ACUITE BBB- ) Not Applicable Not avl. / Not appl. Proposed Short Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 3.52 Simple ACUITE A4+ | Downgraded ( from ACUITE A3 )

Contacts

Mohit Jain Senior Vice President - Rating Operations Divya Bagmar Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.