|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 5.00 | ACUITE BBB- | Stable | Upgraded | - |
| Bank Loan Ratings | 295.00 | - | ACUITE A3 | Upgraded |
| Total Outstanding | 300.00 | - | - |
|
Rating Rationale |
|
Acuite has upgraded in its long-term rating to ‘ACUITE BBB-‘(read as ACUITE triple B minus) from ‘ACUITE BB’ (read as ACUITE double B) and short-term rating to ‘ACUITE A3 ‘(read as ACUITE A three) from ‘ACUITE A4+' (read as ACUITE A four plus) on Rs. 300 Cr. bank facilities of Ramacivil India Construction Private Limited. The outlook is ‘Stable’.
Rationale for Rating The rating upgrade reflects an improvement in RICPL’s business risk profile and a healthy order book. It has its exposure in various States and a healthy order book which provides it with revenue visibility. Furthermore, the company’s financial risk profile is healthy reflected by improving net worth, low gearing, comfortable debt protection metrics and adequate liquidity position. The company has adequate liquidity such as free fixed deposits and other investments to meet any kind of contingency. The legal proceedings are currently pending under the Delhi High Court and any adverse decision in favour of National Buildings Construction Company (NBCC) can impact on the liquidity profile of the company. This potential consequence will remain a significant sensitivity factor over the medium term. The rating also draws comfort from the longstanding operations of the company, extensive experience of the promoters in the infrastructure industry. However, the rating is constrained by the moderate working capital management and presence of being in a competitive and fragmented construction industry. |
| About the Company |
|
Delhi based, Ramacivil India Construction Private Limited was established as a partnership concern in 1972 by Mr. Ram Gupta and later was incorporated in 2017 the constitution was changed to private limited. It is engaged in contract-based building construction work mainly for organizations such as Central Public Works Department (CPWD), Delhi Public Works Department (DPWD) and others. Company is super class contractor which gives them the leverage to bid for projects of around Rs.500.00 Cr. Currently the company is managed by Mr. Parveen Gupta & Mr. Gautam Gupta.
|
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
|
Acuité has considered the standalone business and financial risk profiles of the RCPL to arrive at the rating.
|
| Key Rating Drivers |
| Strengths |
| Experienced Management
RCPL has been present in the construction and infrastructure industry for over four decades which has enabled the company to establish strong relations with its customers as well as with suppliers and also have a strong market position. The company is promoted by Mr. Ram Niwas Gupta who has been associated with the company since its association which gives him an experience of more than four decades. The established track record of operations coupled with experienced management has helped the company maintain a healthy order book position which was at Rs. 2870.75 Cr. as on 30th June 2024 and the OB/OI was at 2.77 times as on that date. Acuité believes that the company will continue to derive benefit from its promoter’s experience, healthy order book position and strong relations with its customers and suppliers. Increase in Revenue Growth RICPL has achieved revenues of Rs.1035.31 crore in FY2024 (Provisional) as compared to revenues of Rs. 867.73 crore in FY2023 and Rs. 693.64 crore in FY2022. The increase was on account of a healthy order book position and majority of project being under work-in-progress. The company had participated in an order book of Rs.6050 Cr. but due to elections code of conduct, the tender results were not declared and are expected to be declared by end FY2025. The company has attained a revenue of ~Rs. 56 Cr. in two months ended May 2025. The EBITDA margin stood at 5.73 percent in FY24 (Prov.) as against 5.42 percent in FY23 and 4.76 percent in FY22. The slight increase is directly attributable to higher revenues against better absorption of fixed costs of company. The profitability margin depends on company’s selection of projects being bid for. The PAT margin stood at 4.12 percent in FY24 (Prov.) as against 3.36 percent in FY23 and 3.30 percent in FY22. The increase was mainly from interest received from fixed deposits and others. The RoCE stood at 28.70 percent in FY24 (Prov.) as against 28.60 percent in FY23 and 24.18 percent in FY22. Acuite believes the scale of operation will improve over the medium term backed by healthy order flow. Healthy Financial Risk Profile The company’s financial risk profile is healthy reflected by improving net worth, low gearing and comfortable debt protection metrics. The tangible net worth of the company increased to Rs.224.04 crore in FY2024 (Prov.) from Rs.181.41 crore in FY2023 due to accretion to reserves. Gearing of the company stood below unity at 0.17 times in FY2024 (Prov.) as against 0.03 times in FY2023 and 0.08 times in FY22. The gearing of the company is expected to remain low over the medium term on account of the absence of any debt-funded capex plans and incremental working capital requirements, which is likely to be funded by the cash accruals of the company. The interest coverage ratio of the company improved to 9.08 times in FY24 (Prov.) as against 8.49 times in FY2023 and 9.02 times in FY2022 and Debt Service Coverage Ratio stood at 5.30 times in FY24 (Prov.) as against 4.89 times in FY23 and 5.39 times in FY22. Acuite believes that the financial risk profile of the company will remain healthy with no major capex plans. |
| Weaknesses |
| Moderate Working Capital Management
The working capital cycle of the company is marked by Gross Current Assets (GCA) of 147 days in FY24 (Prov.) as compared to 151 days in FY23 and 182 days in FY22. The inventory days remained at similar levels and stood at 14 days in FY24 (Prov.) as compared to 18 days in FY23 and 25 days in FY22. The debtor days stood at 53 days in FY24 (Prov.) as against 41 days in FY23 and 51 days in FY22. The creditor days to 128 days in FY24 (Prov.) as against 101 days in FY23 and 135 days in FY22. The credit from suppliers is dependent on the payments as and when received from the customers. Acuite believes that working capital requirements are expected to remain at similar levels due to the nature of the work orders in hand and to be executed over the medium term. Ongoing Litigation- NBCC “GREEN VIEW” dispute RICPL was awarded to construct an under-construction “Green View” project by National Buildings Construction Company (NBCC) in 2014 with cost and risk of the previous contractor. After 4 years, post completion and defect liability period being over, concerns were raised about cracks and structural damages in the building “Green View” which was deemed unfit for residency. The two entities had filed lawsuits against each other pertaining to the issues. NBCC issued a lawsuit claiming damages of Rs. 750 Cr. on RICPL as well as 20 other contractors. Presently, the legal proceedings are impending under the Delhi High Court and any adverse decision favouring NBCC, can impact the credit profile of the company. This potential consequence will remain a significant sensitivity factor over the medium term. Competitive and fragmented nature of industry With increased focus of the central government on the infrastructure sector, RICPL is expected to reap benefits over the medium term. However, most of its projects are tender-based and face intense competition, which may hence require it to bid aggressively to get contracts. Acuite believe that the company is susceptible to volatility in margins due to intense competition in infrastructure industry. |
| Rating Sensitivities |
|
| Liquidity Position |
| Adequate |
|
The company’s liquidity position is adequate marked by net cash accruals of Rs.46.12 crore in FY24 (Prov.) as against a long-term debt repayment of Rs. 2.63 crore over the same period. The current ratio improved at 1.70 times in FY24 (Prov.) as compared to 1.53 times in FY23 and 1.27 times in FY22. The cash and bank balances stood at Rs 5.66 crore in FY24 (Prov.) as against Rs. 10.87 crore in FY23 and Rs. 12.70 crore in FY22. The Company also had free Fixed deposits of RS. 117 Cr. and Mutual Funds of Rs. 20 Cr. which provides its cushion in the liquidity. The company does not have any debt funded capex plans over the medium term. Additionally, the fund-based limit was utilized at 22.43 per cent for the seven-months ended June 2024. However, the company has efficient working capital management as reflected by low Gross Current Assets (GCA) of 147 days in FY24 (Prov.) as compared to 151 days in FY23 and 182 days in FY22. Acuite believes that the company will maintain adequate liquidity position due to net cash accruals and no major capex plans.
|
| Outlook: Stable |
|
Acuité believes RICPL will benefit over the medium term from its promoters' extensive industry experience. The outlook may be revised to 'Positive' if scale of operations and, profitability, improves significantly, while maintaining working capital management. Conversely, the outlook may be revised to 'Negative' if financial risk profile weakens because of low cash accrual, or elongation of working capital cycle, or debt- funded capital expenditure or adverse decision of ongoing litigation in favour of NBCC.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 1035.31 | 867.73 |
| PAT | Rs. Cr. | 42.62 | 29.18 |
| PAT Margin | (%) | 4.12 | 3.36 |
| Total Debt/Tangible Net Worth | Times | 0.17 | 0.03 |
| PBDIT/Interest | Times | 9.08 | 8.49 |
| Status of non-cooperation with previous CRA (if applicable) |
| 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 must 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 |
|
|
|
About Acuité Ratings & Research |
