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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 35.00 | ACUITE BB | Stable | Assigned | - |
| Bank Loan Ratings | 35.00 | - | ACUITE A4+ | Assigned |
| Total Outstanding | 70.00 | - | - |
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Rating Rationale |
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Acuité has assigned the long-term rating to ‘ACUITE BB’ (read as ACUITE Double B) and the short-term rating to ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs. 70 Cr. bank facilities of RK Infra Electricals Private Limited (RKIEPL). The outlook is ‘Stable'.
Rationale for rating The rating assigned reflects the extensive experience of the promoters in the same line of industry for more than three decades. The rating gets comfort from stable business risk profile, healthy order book, moderate financial risk profile and liquidity profile of the company. However, rating is constraint with intensive working capital operations. |
| About the Company |
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Incorporated in 2021, RK Infra Electricals Private Limited is based in Bangalore. It is engaged in undertaking electrical installation for commercial complexes, hospitals, hotels, resorts etc. Mr. Halugudde Nagappagowda Ramakrishna, currently manages the company.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
| For arriving at this rating, Acuité has considered standalone financials of RK Infra Electricals Private Limited. |
| Key Rating Drivers |
| Strengths |
| Experience Management
The company is managed by Mr. Ramakrishna having rich experience in same line of industry from more than three decades. They undertake the government contracts & specializes in Electrical installation work in the state of Karnataka. They have executed various work allotted by BESCOM, MESCOM, BMRCL (Bangalore Metro Rail) & KPWD. The company has an order book of Rs. 147.16 Cr. which provides its revenue feasibility over the medium term. Acuite believes with his experience, the company will benefit in medium term for getting the new orders. Improving the revenue from operations & profitability The company witnessed an improvement in its scale of operations marked by an operating income of Rs. 73.71 Cr. in FY2024 (Prov.) as against Rs. 52.78 Cr in FY2023. The EBITDA margin of the company stood at 8.16% in FY2024 (Prov.) as against 5.82% in FY2023 and the PAT margin of the company stood at 3.58% in FY2024 (Prov.) against 2.71% in FY2023. Though the company’s profitability is exposed to volatility in raw material, it has an in-built price escalation clause (for few projects) for major raw materials in most of its contracts. Acuite believes that the company is expected to have better top-line in near to medium term supported by better margins from two segment of revenue (electrical contracts and fabrication of iron & steel) as compared to previous years. Moderate Financial Risk Profile The financial risk profile of the company is moderate marked by net-worth of Rs. 20.08 Crore as on 31st March 2024 (Prov.) against Rs. 17.44 Crore as on 31st March 2023 on the account of accretion of profits to reserve. Further, the total debt of the company stood at Rs. 14.83 Crore as on 31st March 2024 (Prov.) against Rs. 11.86 Crore as on 31st March 2023. The capital structure of the company is comfortable marked by gearing ratio of the company which stood at 0.74 times as on 31st March 2024 (Prov.) against 0.68 times as on 31st March 2023. Further, the coverage indicators of the company improved reflected by interest coverage ratio and debt service coverage ratio of the company which stood at 2.84 times and 2.02 times respectively as on 31st March 2024 (Prov.) against 3.46 times and 2.92 times respectively as on 31st March 2023. Acuité believes that going forward the financial risk profile of the company will remain steady with no major debt funded capex plans. |
| Weaknesses |
| Intensive Working capital Operations
The working capital operations of the company is intensive marked by GCA days which stood constant at 236 days as on 31st March 2024 (Prov.) against 214 days as on 31st March 2023. The debtor stood high at 140 days. As per the management, around Rs.1.44 Cr. has been stuck from few of the customers from past year due to delays from customers which leads to increase in creditor days of 87 days for FY 24 (Prov.) from 49 days in FY 23. Inventory days stood at 16 days for FY 24(Prov.). Acuite believes the working capital operations of the company will continue to remain intensive due to tender based nature of business.
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| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity profile of the company is adequate. The net cash accruals of company stood at Rs. 3.02 Cr. in FY 24 (prov.) against the CPLTD of Rs. 0.43 Cr. for the same period. The company has cash & bank position of Rs. 0.81 Cr. and current ratio stood at 1.62 times for FY 24 (prov.). The average fund-based bank limit utilization is at 53.15% for the 12 months’ period ending July 2024. Acuite believe that the liquidity of the company will remain adequate backed by steady cash accruals, absence of debt funded capex plan, moderate current ratio and moderate reliance on bank borrowings over the medium term.
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| Outlook: Stable |
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Acuité believes that the outlook on the company will remain 'Stable' over the medium term on account of the experienced management, steady business risk profile and financial risk profile. The outlook may be revised to 'Positive' in case of significant growth in revenue and maintaining operating margins at the current levels while improving working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of a decline in revenue or operating margins, deterioration in financial risk profile or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 73.71 | 52.78 |
| PAT | Rs. Cr. | 2.64 | 1.43 |
| PAT Margin | (%) | 3.58 | 2.71 |
| Total Debt/Tangible Net Worth | Times | 0.74 | 0.68 |
| PBDIT/Interest | Times | 2.84 | 3.46 |
| Status of non-cooperation with previous CRA (if applicable) |
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None
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| 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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| Rating History : |
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Not Applicable
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