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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 10.50 | ACUITE BB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 18.50 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 29.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long term rating of ‘ACUITE BB’ (read as ACUITE Double B) and short-term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) to the Rs 29.00 crore bank facilities of Rawatsons Engineers Private Limited. The outlook is ‘Stable’.
Rationale for Reaffirmation The rating reaffirmation factors in the sound business risk profile of the company as reflected from its growing revenue trend in current year and healthy order book position. The company has achieved revenues of Rs. 84.96 Cr in FY2023 as compared to revenues of Rs. 82.26 Cr in FY2022 on account of healthy order inflow during the period. Further, the company has already achieved revenue of around Rs.61.54 Cr. till Dec’23 (Provisional). The rating also gets comforts from the increase in profitability margins. The operating margin of the company increased to 7.28 per cent in FY2023 as compared to 4.78 per cent in FY2022. This significant increase in operating margin is because the company is able to successfully transfer cost escalations to counter parties and has also been able to revise the prices for existing projects to align with the new steel rates. The rating also factors in the healthy order book of the company which stood at Rs.194.84 Cr as on December 2023. The rating also draws comfort from management’s extensive experience and above average financial position, characterized by a moderate net worth base and comfortable capital structure. However, these strengths are partially offset by the working capital intensive operations and presence in a competitive and fragmented industry. |
| About the Company |
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West Bengal based, Rawatsons Engineers Private Limited(REPL) was incorporated in 1981. It is engaged in the business of development of railway infrastructure. REPL mainly constructs steel bridge girders, foot over bridges and platform shelters. Mr. Prajesh Rawat, Mrs. Sudha Rawat, Mr. Damaru Dhar Rawat are directors of the entity.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of REPL to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
In 1981, REPL commenced its operations with Mr. Pradeep Rawat, Mr. Prajesh Rawat, and Mr. Damaru Rawat at the helm, each bringing over three decades of industry expertise. Acuité believes that the extensive experience of the promoters and their established track record will contribute to the company’s continued growth, ensuring a steady expansion in operational scale.
The company has achieved revenues of Rs. 84.96 Cr in FY2023 as compared to revenues of Rs. 82.26 Cr in FY2022. The turnover of the company has been growing at y-o-y of about 3.28 per cent. REPL has an unexecuted order book position of Rs.194.84 Cr as on December 2023 which will be executed in 17-18 months. Further, the company has already achieved revenue of around Rs.61.54 Cr. till Dec’23 (Provisional). Going forward, Acuite believes that the revenue of the company will improve backed by healthy order book position, which imparts revenue visibility over to medium term.
The operating margin of the company increased to 7.28 per cent in FY2023 as compared to 4.78 per cent in FY2022. This significant increase in operating margin is on account of adoption of new pricing based on updated steel prices and the revision of prices for executed projects to align with the new steel rates for tapping the price escalation. Acuité believes that the profitability margin of the company will improve backed by in-built price escalation clause that provides cushion for covering the increased input cost. This helps the company from any large variation in the raw material prices, thus protecting the operating margins to an extent. Further, the PAT margin of the company also increased to 3.60 per cent in FY2023 as compared to 0.97 per cent in FY2022. The ROCE levels stood at 12.24% in FY2023, up from 7.44% in FY2022. The company has reputed clientele, leading to low counter party risk since entire revenue is generated from the Indian Railways. Acuité believes the profitability margin of the company will be improved ls over the medium term on account of availability of adequate price escalation clause with the counter party.
The financial risk profile of the company is above average marked by moderate net worth, low gearing and comfortable debt protection metrics. The tangible net worth of the company stood at Rs.37.95 Cr as on March 31, 2023 as compared to Rs.34.88 Cr.as on March 31, 2022. This improvement in networth is mainly due to the retention of current year profits in reserves. The gearing of the company stood low at 0.45 times as on March 31, 2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 0.67 times as on March 31, 2023. The debt protection metrices of the company stood comfortable marked by Interest coverage ratio (ICR) of 3.07 times and debt service coverage ratio (DSCR) of 2.36 times for FY2023. The net cash accruals to total debt (NCA/TD) stood at 0.20 times in FY2023. Going forward, Acuité believes the financial risk profile of the company will remain above average on account of steady net cash accruals owing to stable profitability margins with no major debt funded capex plan over the near term.
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| Weaknesses |
The working capital operations of the company is intensive marked by high gross current asset (GCA) days of 255 days for FY2023 as compared to 260 days for FY2022. The inventory days stood at 98 days as on 31st March 2023 as compared to 102 days as on 31st March 2022. However, the debtor days stood at 23 days in FY2023 as against 9 days in FY 2022. The GCA days is high on account of a high proportion of other current assets consisting of other loans and advances and other deposits. Against this, the company has moderate dependence on its suppliers to support the working capital; creditors stood at 38 days as on March 31, 2023.
Acuité believes that the working capital operations of the company will remain at the similar levels over the medium term.
The company is engaged in providing H Beam sleepers for Indian Railways. The company faces competition from the other mid to big size players in the sector. Risk becomes more pronounced as tendering is based on the minimum amount of bidding of contracts. However, this risk is mitigated to an extent as the promoters have been operating in this environment for more than thirty years.
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| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company has adequate liquidity marked by steady net cash accruals of Rs. 3.42 Cr. as on March 31, 2023 as against Rs. 0.15 Cr long term debt obligations over the same period. The cash & Bank balance stood at Rs. 2.54 Cr for FY 2023. The current ratio of the company stood comfortable at 3.15 times in FY2023. However, the bank limit of the company has been ~96.75 percent utilized for the last six months ended in December 2023. Further, the working capital operations of the company is intensive marked by high gross current asset (GCA) days of 255 days for FY2023 as compared to 260 days for FY2022.
Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of healthy cash accruals and absence of any major debt funded capex plans over the medium term. |
| Outlook: Stable |
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Acuité believes that the company will maintain a ‘Stable’ outlook over the medium term on account of the extensive experience of the promoters and healthy financial risk profile. The outlook may be revised to ‘Positive’ if the company achieves substantial improvement in its scale of operations while maintaining profitability and improve its working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of a steep decline in revenues and profitability or financial risk profile leading to deterioration in liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 84.96 | 82.26 |
| PAT | Rs. Cr. | 3.06 | 0.80 |
| PAT Margin | (%) | 3.60 | 0.97 |
| Total Debt/Tangible Net Worth | Times | 0.45 | 0.48 |
| PBDIT/Interest | Times | 3.07 | 2.26 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| 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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