Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 26.25 ACUITE BB- | Stable | Assigned -
Bank Loan Ratings 18.00 ACUITE BB- | Stable | Upgraded -
Bank Loan Ratings 12.00 - ACUITE A4+ | Upgraded
Total Outstanding 56.25 - -
Total Withdrawn 0.00 - -
 
Rating Rationale

­Acuité has upgraded its long-term rating to ‘ACUITE BB-’ (read as ACUITE Double B Minus) from ‘ACUITE C’ (read as ACUITE C) and its short-term rating to ‘ACUITE A4+’ (read as ACUITE A four Plus) from ‘ACUITE A4’ (read as ACUITE A four) on the Rs.30.00 Cr. bank facilities of SLC Projects Private Limited (SPPL). The outlook is ‘Stable’.

Acuité has assigned its long-term rating of ‘ACUITE BB-’ (read as ACUITE Double B Minus) on the Rs 26.25 crore bank facilities of SLC Projects Private Limited (SPPL). The outlook is ‘Stable’.

Rationale for Rating
The upgrade in the rating considers long operational track record of the company along with SPPL’s experienced management and their longstanding relationships with reputed clients such as DGNP(Director General of Naval Projects), HAL(Hindustan Aeronautics Limited). Further, the rating considers improvement recorded in the operating revenue to Rs.102.65 Cr. in FY2024(Prov) from Rs.82.41 Cr. in FY2023. Furthermore, the company has healthy outstanding order book position of Rs.198.44 Cr. as of September 2024, reflecting revenue visibility over the medium term. The rating also reflects SPPL’s moderate financial risk profile marked by modest net worth, moderate gearing and debt protection metrics.

However, the rating is constrained by stretched liquidity position along with moderately intensive working capital operations, high dependence on working capital limits and exposure to intensive competition in civil construction industry.

Going ahead, the ability of the company to improve its operating performance and financial risk profile without any further elongations in the working capital management and stretch in liquidity position will remain a key monitorable.

About the Company

­SLC Projects Private Limited (SPPL) commenced its operations in 2005 and provides infrastructure construction and engineering services. The company is actively involved in construction, electrical, and mechanical works for government defence-related projects. The company is set up by Mr. P. Subbaraju and the company operates from Visakhapatnam, Andhra Pradesh.
 
Unsupported Rating
­Not Applicable
 
Analytical Approach

­Acuité has taken a standalone view of the business and financial risk profile of SPPL to arrive at the rating.
 
Key Rating Drivers

Strengths

­Experienced management 
The company is promoted by Mr. P Subba Raju, Mrs. P Yasodha, Mr. P Srinivasa Raju and Mr. P Ramana Kumar Raju. The managing director, Mr. P. Subba Raju has more than three decades of experience in executing civil contract works and defence related projects. His long standing experience has helped the company in establishing comfortable relationships with their key customers and suppliers.
Acuité believes that SSPL will continue to benefit from the promoter’s established presence in the industry and its improving business risk profile over the medium term.

Moderate Financial risk profile
The company has a moderate financial risk profile marked by modest net worth, moderate gearing and deb protection metrics. The tangible net worth of the company stood at Rs.14.65 crore as on 31 March 2024(Prov.) as against Rs.11.68 crore as on 31 March 2023. The increase in net worth is on account of accretion of profits into reserves. The gearing level of the company stood at 2.64 times in FY2024(Prov.) as against 3.33 times in FY2023. Interest Coverage Ratio (ICR) stood at 2.04 times in FY2024(Prov.) against 1.77 times in FY2023. Debt Service Coverage Ratio (DSCR) stood at 1.03 times in FY2024(Prov.) against 1.07 times in FY2023. The total outside liabilities to tangible net worth (TOL/TNW) of the company stood at 3.25 times in FY2024(Prov.) as against 4.03 times in FY2023.

Acuite believes that the financial risk profile will improve and overall remain moderate over the medium term on account of moderate accruals generation and in absence no major debt funded capex plans.


Weaknesses

Moderately Intensive Working Capital Operations
The company is having moderately intensive working capital management along with high bank limit utilization. The Gross Current Asset (GCA) days stood at 132 days as on March 31, 2024(Prov.) as against 169 days as on March 31, 2023. Improvement in the GCA days is on account of improvement in the inventory levels. The inventory days improved and stood at 20 days in FY2024(Prov.) against 58 days in FY2023. The debtor days stood at 99 days in FY2024(Prov.) against 110 days in FY2023. The creditor days of the company stood stable at 27 days in FY2024(Prov.) and FY2023. The average utilization of the bank limits of the company remains high and stood at ~97.38 percent for fund based facilities and 89.78% for non-fund based facilities for 6 months from Oct-23 to Mar-24.

Acuité expects the working capital management to remain moderately intensive over the medium term.

Highly Competitive Industry
The infrastructure is a fairly fragmented industry with a presence of few large pan India players where subcontracting & project specific partnerships for technical/financial reasons are fairly common. The company faces stiff competition with its competitors in procuring orders through bidding, immense competition for procuring tenders leads to very competitive pricing which in turn lead to stress on the margins. Moreover, susceptibility of raw material pricing again keeps profit margin vulnerable and is a key sensitivity factor.

Rating Sensitivities

  • ­Higher than the expected improvement in the operating performance along with profitability margins while further improving its order book position.

  • ­Significant decline in the operating performance, or deterioration in the financial risk profile.

  • Any further elongations in the working capital cycle and stretch in the liquidity position.
 
Liquidity Position
Stretched

The company has a stretched liquidity position marked by sufficient net cash accruals against its maturing debt obligations. The company generated cash accruals of Rs.3.86 crore in FY2024(Prov.) against its maturing debt obligation of Rs.3.64 Cr. over the same period. The company maintains unencumbered cash and bank balances of Rs.2.04 crore as on March 31, 2024(Prov.). The current ratio stood at 1.31 times as on March 31, 2024(Prov.). The reliance of working capital limits is high marked by average utilization of ~97.38 percent for fund based facilities and 89.78% for non-fund based facilities for 6 months from Oct-23 to Mar-24.

Going ahead, the liquidity position of the company is expected to improve marginally on account of expected generation of sufficient net cash accruals in the range of Rs.4.82-5.99 Cr. against maturing debt obligation of Rs.3.53-2.63 Cr. over the medium term.
 
Outlook: Stable
­
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 24 (Provisional) FY 23 (Actual)
Operating Income Rs. Cr. 102.65 82.41
PAT Rs. Cr. 2.97 1.29
PAT Margin (%) 2.89 1.57
Total Debt/Tangible Net Worth Times 2.64 3.33
PBDIT/Interest Times 2.04 1.77
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

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
02 May 2024 Cash Credit Long Term 14.00 ACUITE C (Downgraded & Issuer not co-operating* from ACUITE B+)
Proposed Long Term Bank Facility Long Term 1.24 ACUITE C (Downgraded & Issuer not co-operating* from ACUITE B+)
Working Capital Term Loan Long Term 0.93 ACUITE C (Downgraded & Issuer not co-operating* from ACUITE B+)
Term Loan Long Term 1.83 ACUITE C (Downgraded & Issuer not co-operating* from ACUITE B+)
Bank Guarantee/Letter of Guarantee Short Term 12.00 ACUITE A4 (Reaffirmed & Issuer not co-operating*)
07 Sep 2023 Cash Credit Long Term 14.00 ACUITE B+ (Reaffirmed & Issuer not co-operating*)
Proposed Long Term Bank Facility Long Term 1.24 ACUITE B+ (Reaffirmed & Issuer not co-operating*)
Working Capital Term Loan Long Term 0.93 ACUITE B+ (Reaffirmed & Issuer not co-operating*)
Term Loan Long Term 1.83 ACUITE B+ (Reaffirmed & Issuer not co-operating*)
Bank Guarantee/Letter of Guarantee Short Term 12.00 ACUITE A4 (Reaffirmed & Issuer not co-operating*)
04 May 2023 Cash Credit Long Term 14.00 ACUITE B+ | Stable (Reaffirmed)
Proposed Long Term Bank Facility Long Term 1.24 ACUITE B+ | Stable (Reaffirmed)
Bank Guarantee/Letter of Guarantee Short Term 12.00 ACUITE A4 (Reaffirmed)
Working Capital Term Loan Long Term 0.93 ACUITE B+ | Stable (Reaffirmed)
Term Loan Long Term 1.83 ACUITE B+ | Stable (Reaffirmed)
02 May 2022 Cash Credit Long Term 14.00 ACUITE B+ | Stable (Upgraded from ACUITE D)
Proposed Long Term Bank Facility Long Term 0.20 ACUITE B+ | Stable (Upgraded from ACUITE D)
Working Capital Term Loan Long Term 1.97 ACUITE B+ | Stable (Upgraded from ACUITE D)
Term Loan Long Term 1.83 ACUITE B+ | Stable (Upgraded from ACUITE D)
Bank Guarantee/Letter of Guarantee Short Term 12.00 ACUITE A4 (Upgraded from ACUITE D)
29 Nov 2021 Working Capital Term Loan Long Term 1.97 ACUITE D (Downgraded from ACUITE BB | Stable)
Proposed Long Term Bank Facility Long Term 2.03 ACUITE D (Downgraded from ACUITE BB | Stable)
Cash Credit Long Term 14.00 ACUITE D (Downgraded from ACUITE BB | Stable)
Bank Guarantee/Letter of Guarantee Short Term 12.00 ACUITE D (Downgraded from ACUITE A4+)
23 Jul 2021 Bank Guarantee (BLR) Short Term 12.00 ACUITE A4+ (Upgraded from ACUITE A4)
Working Capital Term Loan Long Term 1.97 ACUITE BB | Stable (Assigned)
Proposed Long Term Bank Facility Long Term 2.03 ACUITE BB | Stable (Upgraded from ACUITE BB- | Stable)
Cash Credit Long Term 14.00 ACUITE BB | Stable (Upgraded from ACUITE BB- | Stable)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum
(Rs. Cr.)		 Complexity Level Rating
Bank of India Not avl. / Not appl. Bank Guarantee/Letter of Guarantee Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 12.00 Simple ACUITE A4+ | Upgraded ( from ACUITE A4 )
Bank of India Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 14.00 Simple ACUITE BB- | Stable | Upgraded ( from ACUITE C )
Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 2.43 Simple ACUITE BB- | Stable | Upgraded ( from ACUITE C )
Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 26.25 Simple ACUITE BB- | Stable | Assigned
Bank of India Not avl. / Not appl. Term Loan 13 Nov 2021 Not avl. / Not appl. 13 Dec 2026 1.57 Simple ACUITE BB- | Stable | Upgraded ( from ACUITE C )

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