Press Release

Press Release

July 30, 2024

SHRI ARUNA CONSTRUCTIONS PRIVATE LIMITED
Rating Reaffirmed and Withdrawn

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	3.00	ACUITE BB+ \| Reaffirmed & Withdrawn	-
Bank Loan Ratings	1.00	Not Applicable \| Withdrawn	-
Bank Loan Ratings	30.00	-	ACUITE A4+ \| Reaffirmed & Withdrawn
Total Outstanding	0.00	-	-
Total Withdrawn	34.00	-	-

Rating Rationale

Acuite has reaffirmed and withdrawn its long-term rating of 'ACUITE BB+' (read as ACUITE double B plus) and short-term rating of 'ACUITE A4+' (read as ACUITE A four Plus) on the Rs.33 Cr. bank facilities of Shri Aruna Constructions Private Limited (SACPL).

Acuite has also withdrawn the long-term rating on the Rs.1 Cr. proposed facilities of Shri Aruna Constructions Private Limited (SACPL). The same is withdrawn without assigning any rating as it is proposed facilities.

The rating withdrawal is in accordance with the Acuité's policy on withdrawal of rating as applicable to the respective facility / instrument. The rating is being withdrawn on account of request received from the company and NOC(No Objection Certificate) received from the lender.

Rationale for rating reaffirmation:
The reaffirmation of rating factors in the decline in scale of operations during FY2024 (Prov.), stable operating margins and above average financial risk profile. SACPL's revenue declined by ~75 percent in FY2024 (Prov.) due to lack of new orders and delay in funds from the respective department, leading to pileup of working progress. Consequently, gross current asset (GCA) days have elongated in FY2024. Despite the declined scale of operations, the financial risk profile remained healthy, primarily due to decent networth and low debt levels.

About the Company

Shri Aruna Constructions Private Limited (SACPL) was established in the year 2002 having its registered office in Bangalore, mainly engaged in the field of civil construction work in Karnataka for various clients. Mr. J. Venugopal Krishnam Raju, Mr. J. Rama Raju and Ms. J Sowjanya currently manage the company. . The major customers include Karnataka State Road Transport Corporation (KSRTC), Karnataka Housing Board (KHB), Karnataka State Police Housing & Infrastructure Development Corporation Limited (KSPH & IDCL), Sarva Sikshana Abhiyan, Karnataka Health System Development Research Projects (KHSDRP).

Unsupported Rating

Not Applicable

Analytical Approach

Acuité has taken the standalone view of business and financial risk profile of SACPL to arrive at the rating.

Key Rating Drivers

Strengths

Experienced management:
SACPL is promoted by Mr. J.Rama Raju and Mr. J.Venu Gopal Krishnam Raju and undertakes civil construction projects with established presence in Karnataka. Both the directors have more than two decades of experience in the industry. The company benefits from its established presence in the segment with long standing relationship with government agencies namely Karnataka Health System Development and Reform Project (KHSDRP), Karnataka Public Work Department (KPWD), Health and Family Welfare Department (HFWD) among others. The established presence and track record of in time completion of the orders has resulted in attaining repeated order from Karnataka State government departments. SACPL currently has around ~Rs.500 Cr. of outstanding order book from KPWD, Karnataka State Police Housing Corporation (KSPH) and others which are to be executed in next 18-24 months providing revenue visibility over the medium term.

Above average financial Risk Profile:
SACPL’s financial risk profile is above average marked by healthy net worth, healthy capital structure. The net worth improved to Rs.67.41 Cr. as on March 31, 2024 (prov.) as against Rs.65.29 Cr. as on March 31, 2023. Growth in net worth is primarily due to accretion of profits to reserves. The capital structure is healthy as observed from low gearing of 0.15 times as on March 31, 2024(Prov.) against 0.09 times of March 31, 2023. Total outside liabilities to net worth stood stable at 0.63 times as on March 31, 2024 (Prov). The company’s debt protection metrics are moderate, with an interest coverage ratio (ICR) of 5.00 times and a as of March 31, 2024 (prov.), compared to 5.04 times. However, a substantial decline in operating profit during the year has resulted in deterioration of debt service coverage ratio (DSCR) and debt-to-EBITDA to 0.55 times and 2.49 times respectively, as of March 31, 2024 (Prov.), compared to 4.01 times and 0.35 times as of March 31, 2023.

Weaknesses

Intensive nature of working capital operations:
SACPL’s working capital operations are intensive in nature as evident by gross current days (GCA) of 499 days in FY2024 (prov.), compared to 121 days in FY2023. Surge in GCA days is due to rise in inventory levels on account of works in progress. The GCA days includes the other current asset portion in form of retention money, security deposits and other advances, which further take it to elongated levels. The company enjoys credit period of 60-90 days from suppliers of raw materials and manages its operations with the cash credit facilities, as a result, dependency on external long term debt is very low. Besides, current ratio of the company has improved to 1.72 times during FY2024 (Prov.) against 1.48 times in previous year. SACPL’s bank limits were utilized at an average of 65 percent during the past 6 months ending June 30, 2024.

Intensive nature of working capital operations:
SACPL’s working capital operations are intensive in nature as evident by gross current days (GCA) of 499 days in FY2024 (prov.), compared to 121 days in FY2023. Surge in GCA days is due to rise in inventory levels on account of works in progress. The GCA days includes the other current asset portion in form of retention money, security deposits and other advances, which further take it to elongated levels. The company enjoys credit period of 60-90 days from suppliers of raw materials and manages its operations with the cash credit facilities, as a result, dependency on external long term debt is very low. Besides, current ratio of the company has improved to 1.73 times during FY2024 (Prov.) against 1.48 times in previous year. SACPL’s bank limits were utilized at an average of 65 percent during the past 6 months ending June 30, 2024.

Highly competitive and fragmented industry with tender-based nature of business
SACPL operates in highly competitive and fragmented industry with presence of several players and tender nature of business. SACPL is into mid-size projects, wherein the competition is moderate vis-à-vis high or low value projects. However, the risk becomes more pronounced as tendering is based on minimum amount of bidding on contracts, and susceptibility to inherent cyclicality in the works and private investment in case of non-government projects. However, having an operational track record of around over two decades has helped the company to mitigate this risk. Acuité expects SACPL enjoys the operational advantage and timely completion of the projects leading to securing business from Governments and corporates regularly.

Rating Sensitivities

Not applicable

Liquidity Position : Adequate

SACPL’s has adequate liquidity which is evident from the sufficient Net cash accruals (NCA) against nominal debt repayment. The company has reported NCA’s of Rs. 2.57 Cr. as on March 31, 2024(Prov.) against repayment obligations of Rs.0.22 Cr. for equipment loans for the same period. Bank limits were utilized in the range of 65 percent during the past 6 months ending June 31, 2024.

Outlook: Not applicable

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	41.54	163.39
PAT	Rs. Cr.	2.12	9.59
PAT Margin	(%)	5.10	5.87
Total Debt/Tangible Net Worth	Times	0.15	0.09
PBDIT/Interest	Times	5.00	5.04

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
• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
15 Sep 2023	Cash Credit	Long Term	3.00	ACUITE BB+ \| Stable (Reaffirmed)
	Proposed Long Term Bank Facility	Long Term	1.00	ACUITE BB+ \| Stable (Reaffirmed)
	Bank Guarantee/Letter of Guarantee	Short Term	19.00	ACUITE A4+ (Reaffirmed)
	Bank Guarantee/Letter of Guarantee	Short Term	11.00	ACUITE A4+ (Reaffirmed)
17 Jun 2022	Bank Guarantee/Letter of Guarantee	Short Term	17.00	ACUITE A4+ (Reaffirmed)
	Bank Guarantee/Letter of Guarantee	Short Term	11.00	ACUITE A4+ (Reaffirmed)
	Cash Credit	Long Term	3.00	ACUITE BB+ \| Stable (Upgraded from ACUITE BB \| Stable)
	Working Capital Term Loan	Long Term	0.53	ACUITE BB+ \| Stable (Upgraded from ACUITE BB \| Stable)
	Proposed Long Term Bank Facility	Long Term	2.47	ACUITE BB+ \| Stable (Upgraded from ACUITE BB \| Stable)
19 Mar 2021	Bank Guarantee (BLR)	Short Term	11.00	ACUITE A4+ (Upgraded from ACUITE A4)
	Bank Guarantee (BLR)	Short Term	17.00	ACUITE A4+ (Upgraded from ACUITE A4)
	Cash Credit	Long Term	3.00	ACUITE BB \| Stable (Upgraded from ACUITE B+ \| Stable)
	Proposed Long Term Bank Facility	Long Term	2.47	ACUITE BB \| Stable (Upgraded from ACUITE B+ \| Stable)
	Working Capital Term Loan	Long Term	0.53	ACUITE BB \| Stable (Upgraded from ACUITE B+ \| Stable)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Kotak Mahindra Bank	Not avl. / Not appl.	Bank Guarantee/Letter of Guarantee	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	19.00	Simple	ACUITE A4+ \| Reaffirmed & Withdrawn
Union Bank of India	Not avl. / Not appl.	Bank Guarantee/Letter of Guarantee	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	11.00	Simple	ACUITE A4+ \| Reaffirmed & Withdrawn
Union Bank of India	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	3.00	Simple	ACUITE BB+ \| Reaffirmed & Withdrawn
Not Applicable	Not avl. / Not appl.	Proposed Long Term Bank Facility	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	1.00	Simple	Not Applicable\|Withdrawn

Contacts

Analytical Details	Contact Details
Mohit Jain Senior Vice President - Rating Operations Tel: 022–49294017 mohit.jain@acuite.in Katta Akhil Analyst - Rating Operations Tel: 022-49294065 akhil.katta@acuite.in	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in Tel: 022-49294011 rating.desk@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.