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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 181.09 | ACUITE A- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 318.91 | - | ACUITE A2+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 500.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) and the short-term rating of ‘ACUITE A2+’ (read as ACUITE A two plus) on the Rs.500.00 crore bank facilities of Sahakar Global Limited (SGL). The outlook is ‘Stable’.
Rationale for rating reaffirmation The rating reaffirmation takes into account the long track record of operations, stable business risk profile and healthy order book position of SGL. The rating also considers healthy financial risk profile and adequate liquidity position of SGL. The rating is however constrained on account of higher repayment obligations linked to the NCDs redemption over the near term and susceptibility of toll collections towards traffic volume.
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| About the Company |
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Mumbai-based Sahakar Global Limited (SGL) incorporated in 1996 undertakes toll collection projects through e-tendering for National Highway Authority of India (NHAI),Maharashtra State Road Development Corporation (MSRDC), Airports Authority of India(AAI) and Other Government Agencies/PWDs. SGL was promoted by Mr. Kishore Agarwal and others.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profiles of SGL to arrive at this rating.
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Key Rating Drivers
| Strengths |
| Established track record in toll collection
SGL, incorporated in 1994, bids for toll collection projects with government authorities such as NHAI, MSRDC, AAI and other Government Agencies/PWDs. The company benefits from its established track record and extensive experience of the promoters in the industry. SGL is promoted by Mr. Kishore Agarwal (B.E. Electronics) and the family is into the industry for over two decades. The company has been dealing with NHAI since 2011. As on February 2022 the company operates at 28 tolls in 10 states. Acuité believes that SGL will benefit from its established position in toll collection and its strategy of scaling up through successful bids. Healthy financial risk profile The financial risk profile of SGL is healthy marked by healthy net worth, low gearing and moderate debt protection metrics. The tangible net worth stood healthy at Rs.210 Cr. as on March 31 2022, against Rs.193.12 crore as on March 31, 2021. The company follows a conservative leverage policy as reflected by its peak and YoY improving gearing which stood at 1.08 times as on March 31, 2022 against 1.23 times as on March 31 2021 and 1.32 times as on March 31, 2020. The total debt of Rs.227.34 crore as on 31 March, 2022 comprises outstanding NCD of Rs. 100.22 Cr, term loan of Rs.23.75 Cr. from banks & financial institutions, unsecured loans of Rs.2.29 crore and short-term borrowings from banks of Rs.98.31Cr. The term loans are availed mainly to fund security deposits to be placed with government authorities and in the current year the company has incurred capex towards additions to the building premises. The coverage indicators improved however remian moderate with an interest coverage ratio (ICR) of 1.71 times for FY2022 against 1.41 times for FY2021 and the DSCR deteriorated marginally and stood at 1.04 times for FY2022 (owing to higher NCD redemption) against 1.25 times in FY2021. The total outside liabilities to tangible networth (TOL/TNW) stood at 1.50 times as on March 31, 2022. Acuité expects the coverage indicators of SGL to remain moderate on account of the stable profitability margins. Acuité believes that the financial risk profile will remain healthy in the medium term mainly due to healthy net worth base and steady accruals. Healthy revenue and order book position During FY2022, with resumption in traffic volumes and operations being back to normalcy there are no issues faced by the company with respect to toll collection unlike earlier year. This is reflected through its significant increase in the total toll collection during FY2022 which stood at Rs. 2108 Cr. against Rs. 1205 Cr. in FY2021 marking a growth of almost 75%. The company had around 28 tolls operational during FY2022. Further, SGL has healthy revenue visibility over the medium term backed by a healthy order book of ~Rs.2565 crore. Coupled to this, the company bids for tenders continuously throughout the year and also gets repeat/extension on existing contracts; aggregate value of tenders bid are around Rs. 9000 Cr, with a conversion ratio of around 20-25%. |
| Weaknesses |
| Susceptibility of toll collection towards traffic volumes along with contract renewal risk
SGL is engaged in short term toll collection on a contractual basis and mainly bids for NHAI and PWD projects. The contacts are bid only for a period of 12 months, and post 12 months, company again has to bid afresh for the project. Thus SGL faces renewal risk. Further, the company has 100 per cent tender based business and is exposed to intense competition among other players bidding for contracts. The cash flows are entirely toll based, thus operations are susceptible to fluctuations in traffic volume. Traffic movement is linked to the level of economic activity in and around the operational area. Any event or regulatory interventions are likely to affect traffic movement which may create pressure on toll revenues, thereby affecting the cash flows of the company. In such situations, the company is dependent on the sponsor for funding support. The company mitigates this risk to a certain extent its has its pre-survey team that carries out the entire traffic survey before the bidding. High repayment obligations towards NCDs redemption in the near term All NHAI contracts received by the company have a mandatory requirement to submit Security Deposit along with Performance BG(Equivalent to 1 month or 15 days toll collections). In order to fund the same, and to partially repay its earlier debt, SGL had availed NCD to the tune of Rs. 125 Cr. during FY2020. As per the terms of the sanction, the NCD is structured under 3 series: Series IA, IB and II of Rs. 75 crore, Rs. 25 crore and Rs. 25 crore respectively for a tenure ranging from 36 to 54 months with principal moratorium ranging between 12-36 months. As there was a moratorium on the NCD instruments; the major repayments fall due in FY2024, and an amount equivalent to Rs.67 Cr is to be paid in FY2024 towards NCD redemption. However, these repayments are to be redeemed from expected release of security deposits mainataied by SGL towards its toll projects. Further, SGL has already prepaid NCDs to the tune of Rs. 11.65 Cr. during FY2023 and as on February 2023 the total outstanding NCD stand at Rs. 55.35 Cr. As on 28th February 2023, the company has security deposits to the tune of Rs. 195 Cr out of which around Rs. 75 Cr have been lien against the NCD redemption, and balance would be redeployed in the business. Further, company has made additional provisions for future security deposits that will be required for new bids by availing fund based limits from banks to the tune of Rs. 185 Cr. As on February-2023 SGL has unutilised limits to the tune of Rs. 101.80 Cr. Acuité believes that the timely redemption of its NCDs in the near term will be key monitorable. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position |
| Adequate |
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SGL currently has adequate liquidity marked by adequate net cash accruals to its maturing debt obligations. The company generated cash accruals of Rs.21.49 Cr. during FY2022, while its maturing debt obligations stood at Rs.19.41 Cr. which includes the NCD maturities of Rs. 17.71 Cr. for FY2022. The future NCD maturities will be redeemed through company's NCA and from the security deposits given to the contracting authority, which are released after the completion of contacts. The security deposits as on March 31, 2022 stood at Rs. 265.58 Cr. The cash accruals of the company are estimated to remain around Rs.34.00 to 44.00 Cr. during FY2023 & FY2024. Further, the company has liquid investments in gold to the tune of Rs. 3.68 Cr. Additionally, as per the revision in the security maintenance clause by NHAI, SGL will now have to maintain a security deposits and performance BG equivalent to 15 days of the contract value while earlier a security deposit along with performance BG equivalent to 1 month had to be maintained. This is expected to provide additional cushion to the liquidity. However, in some cases the amount for security deposit & performance BG may vary depending on each authority and contract size.
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| Outlook: Stable |
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Acuité believes that SGL will maintain a 'stable' credit profile on the back of its established presence in the service sector and the management's extensive experience. The outlook may be revised to 'Positive' in case of a significant improvement in toll revenue and cash flows. Conversely, the outlook may be revised to 'Negative' in case of a sharp decline in toll revenues, cash flow and/or higher than expected debt intake.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 2108.00 | 1205.15 |
| PAT | Rs. Cr. | 18.98 | 13.26 |
| PAT Margin | (%) | 0.90 | 1.10 |
| Total Debt/Tangible Net Worth | Times | 1.08 | 1.23 |
| PBDIT/Interest | Times | 1.71 | 1.41 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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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*Secured OD from Bandhan Bank has a sublimit of WCDL to the tune of Rs. 15 Cr. *BG from BOB has a sublimit of OD to the tune of Rs.15 Cr. |
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