Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 17.42 ACUITE BB+ | Reaffirmed & Withdrawn -
Bank Loan Ratings 0.08 Not Applicable | Withdrawn -
Bank Loan Ratings 32.50 - ACUITE A4+ | Reaffirmed & Withdrawn
Total Outstanding 0.00 - -
Total Withdrawn 50.00 - -
 
Rating Rationale

­Acuité has reaffirmed and withdrawn the long-term rating to ‘ACUITE BB+’ (read as ACUITE double B Plus) and short-term rating to 'ACUITE A4+' (read as ACUITE A Four Plus) on the Rs 49.92 crore bank facilities of Shankar Ramchandra Earthmovers Private Limited (SREPL). Further, Acuité has withdrawn the long-term bank facilities on Rs 0.08 crore of Shankar Ramchandra Earthmovers Private Limited without assigning any rating as it is a proposed facility.
The rating has been withdrawn on Acuite's policy of withdrawal of ratings as applicable to the respective instrument/facility. The rating has been withdrawn on account of the request received from the company, and the NOC (No Objection Certificate) received from the banker.

Rationale for Reaffirmation

The rating reaffirmation takes into account stable operating and financial performance of SREPL. The operating income of the company stood at Rs. 139.16 Cr. in FY2023 as against Rs. 148.59 Cr. in FY2022. The company recorded revenue of Rs. 149.65 crore for 11MFY2024 and is expected to close the year above Rs. 200 Cr. Further, the company has an healthy orderbook, as on March 2024, the unexecuted order book position  stood  Rs. 815.55 crore. The rating also draws comfort on account of extensive experience of the promoters in execution of civil construction contracts of over two decades and expected improvement in future operating revenues and margins.
However, the rating is constrained by the geographical concentration of order book coupled, significant deterioration in the debt protection metrics and inherent risk of tender based operations.

About the Company

­Incorporated in 1994, Pune based Shankar Ramchandra Earthmovers Private Limited (SREPL) is a class 1A contractor with Government of Maharashtra. The company is engaged in civil construction projects for roads and bridges majorly for Central Railway, National Highway Authority of India (NHAI) and Public Works Department (PWD). The company is promoted by Mr. Ramchandra Kad and Mr. Anant Kad.
 
Unsupported Rating

­Not Applicable
 
Analytical Approach

­Acuite has considered a standalone approach to arrive at the rating of Shankar Ramchandra Earthmovers Private Limited (SREPL).
 
Key Rating Drivers

Strengths

­Established track record of operations supported by experienced management

Established in 1994, Shankar Ramchandra Earthmovers Private Limited (SREPL) is registered as class 1A contractor with Government of Maharashtra and has established presence in executing projects related to construction and maintenance of roads and bridges for Public Works Department, NHAI and Central Railway. SREPL is promoted by Mr. Ramchandra Kad and Mr. Anant Kad who hold more than two decades of experience in civil construction industry. SREPL has demonstrated strong execution capability and has successfully executed projects worth more than Rs.420.00 Cr. over the last five years. Such projects also includes a road construction project which was taken up under its special purpose vehicle (SPV) PCIL HAM Bhele Shikrapur Private Limited (PHBSL) with a project cost Rs. 240 Cr. The project was executed under Hybrid Annuity mode and the SPV has started receiving annuity for the project.

Acuité believes the company will benefit from its established presence and experienced management over the medium term.

Moderate Working Capital Management
Working capital operations of the company are moderate marked by GCA days of 125 as on March 31, 2023 as against 273 days on March 31, 2022. Debtor collection period stood at 92 days as on March 31, 2023 as against 237 days on March 31, 2022.  Creditor days stood at 144 days on March 31, 2023 as against 118 days on March 31, 2022. The current ratio stood at 0.98 times on March 31, 2023 against 1.74 times on March 31, 2022.

Healthy Order Book Position
SREPL has shown significant growth in its operations during 11MFY2024. In 11MFY2024, the company has recorded revenue of Rs.149.65 crore and is estimated to close the year in the range of Rs. 200-215 Cr. driven by comparatively higher billing in the month of March. The company a has healthy order book position with unexecuted orders in hand worth of around Rs. 815.55 Cr. as on March, 2024 crore which are to be executed in the upcoming two to three years, thereby providing revenue visibility over the near to medium term.


Weaknesses

­Below Average Financial Risk Profile
The company’s financial risk profile is below average marked by increased overall gearing, moderate net worth and debt protection metrics. The tangible networth of the company stood at Rs.47.88 crore as on March 31, 2023, as against Rs.46.17 crore as on March 31, 2022. The gearing ratio stood at 2.03 times on March 31, 2023 as against 0.93 times on March 31, 2022.
This is due to significant rise in the debt levels of the company. The total debt of the company was Rs. 97.34 crore on March 31, 2023 compared to Rs. 42.72 crore on March 31, 2022. The total debt of the company as on March 31, 2023 consists long term debt of RS. 11.77 crore (PY Rs.0.78 Cr), Rs.67.52 crore USL from directors/promoters or group entities (PY Rs. 35.22 Cr), short term debt of Rs.10.94 crore (PY Rs. 4.27 Cr.) and CPLTD of Rs.7.10 crore (PY Rs. 2.46 Cr). The debt service coverage ratio and interest coverage ratio stood at 1.43 times and 2.19 times in FY2023 as against 1.70 times and 4.63 times in FY2022 respectively. Debt/EBITDA stood at 8.58 times on March 31, 2023 as against 2.23 times on March 31, 2022.

­Competition in construction segment, and to tender-based operations
Although the company has a long-standing presence of more than 25 years in the industry, as almost all its sales are tender based, the revenue depends on the company's ability to bid successfully for tenders. SREPL specialises in civil works related to construction and maintenance of roads and bridges projects mainly for Central Railway, Public Works Department (PWD) and NHAI. The company faces competition from large players, as well as many local and small unorganised players, adversely affecting the profitability. Currently majority of their projects are situated in Maharashtra. This increases the geographical concentration risk significantly. Nonetheless, the company is bidding for projects in new territories and has recently received contracts in Rajasthan, which is has mitigated the geographic concentration risk to some extent.

Susceptibility of operating margin due to volatility in input material prices and labour charges.
The basic input materials for execution of construction projects and works contracts are steel, stone chips, cement, and structures etc. The prices of which are highly volatile. However, currently government agencies’ work contracts have price escalation clause which mitigate price volatility risk to some extent. Furthermore, the operating margin of the company is exposed to sudden spurt in the input material prices along with increase in labour prices being in labour intensive industry.

Rating Sensitivities
Not Applicable
 
Liquidity Position
Adequate

­­The company has an adequate liquidity position as reflected by sufficient net cash accruals (NCA) against the maturing debt obligations. The company has generated cash accruals worth Rs. 5.75 crore in FY2023 as against maturing debt obligation of Rs. 2.46 crore in the same period. NCA for FY24-25 are expected to be in the range of Rs. 8.00 to Rs. 12.00 Cr. against maturing debt obligations of Rs. 5.00 to Rs. 7.50 crore. The unencumbered cash and bank balance of the company stood at Rs. 1.29 crore on March 31, 2023 as against Rs. 0.55 crore on March 31, 2022. The current ratio stood at 0.98 times on March 31, 2023 against 1.74 times on March 31, 2022. The company has an average bank limit utilization of 66.26% for fund based and 66.71% utilization of non-fund based limits for 12 months ended December 2023.
 
Outlook: Not Applicable
­
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 23 (Actual) FY 22 (Actual)
Operating Income Rs. Cr. 139.16 148.59
PAT Rs. Cr. 1.71 7.37
PAT Margin (%) 1.23 4.96
Total Debt/Tangible Net Worth Times 2.03 0.93
PBDIT/Interest Times 2.19 4.63
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 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
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
09 May 2024 Bank Guarantee (BLR) Short Term 23.00 ACUITE A4+ (Reaffirmed)
Dropline Overdraft Long Term 5.00 ACUITE BB+ | Stable (Reaffirmed)
Dropline Overdraft Long Term 3.42 ACUITE BB+ | Stable (Reaffirmed)
Letter of Credit Short Term 9.50 ACUITE A4+ (Reaffirmed)
Proposed Cash Credit Long Term 0.08 ACUITE BB+ | Stable (Reaffirmed)
Secured Overdraft Long Term 5.00 ACUITE BB+ | Stable (Reaffirmed)
Secured Overdraft Long Term 4.00 ACUITE BB+ | Stable (Reaffirmed)
05 Feb 2024 Proposed Bank Guarantee Short Term 40.00 ACUITE A4+ (Downgraded & Issuer not co-operating* from ACUITE A3+)
Proposed Cash Credit Long Term 10.00 ACUITE BB+ (Downgraded & Issuer not co-operating* from ACUITE BBB- | Stable)
15 Dec 2022 Proposed Bank Guarantee Short Term 40.00 ACUITE A3+ (Assigned)
Proposed Cash Credit Long Term 10.00 ACUITE BBB- | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
ICICI Bank Ltd Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 23.00 Simple ACUITE A4+ | Reaffirmed & Withdrawn
HDFC Bank Ltd Not avl. / Not appl. Dropline Overdraft Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.00 Simple ACUITE BB+ | Reaffirmed & Withdrawn
HDFC Bank Ltd Not avl. / Not appl. Dropline Overdraft Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 3.42 Simple ACUITE BB+ | Reaffirmed & Withdrawn
ICICI Bank Ltd Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 9.50 Simple ACUITE A4+ | Reaffirmed & Withdrawn
Not Applicable Not avl. / Not appl. Proposed Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 0.08 Simple Not Applicable|Withdrawn
ICICI Bank Ltd Not avl. / Not appl. Secured Overdraft Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.00 Simple ACUITE BB+ | Reaffirmed & Withdrawn
HDFC Bank Ltd Not avl. / Not appl. Secured Overdraft Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 4.00 Simple ACUITE BB+ | Reaffirmed & Withdrawn

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