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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 18.00 | ACUITE B+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 12.00 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 30.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating to ‘ACUITE B+’ (read as ACUITE B Plus) and its short-term rating to ‘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’.
Rationale for Rating The reaffirmation in the rating reflects SPPL's experienced management along with director’s extensive industry experience, the long operational track record of the company, and their longstanding relationships with the reputed clients - such as Director General Naval, and Hindustan Aeronautics Limited. Further, the rating also factors the improvement in the revenue in FY2022 of Rs.74.75 Cr as against Rs.56.93 Cr in FY2021. For FY2023 (Prov), the company has recorded a revenue of ~Rs.100 Cr. However, the rating is constrained by intensive working capital operations, highly competitive industry and high dependence on borrowings. |
| About the Company |
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SLC Projects Private Limited (SPPL) commenced its operations in 1968 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.
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| Analytical Approach |
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Acuité has taken a standalone view of the business and financial risk profile of SPPL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| >Experienced management SPPL’s business risk profile is supported by director’s extensive industry experience.
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 defense 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 financial risk profile of the company stood moderate marked by stable net worth, stable gearing and moderate debt protection metrics. The tangible net worth stood at Rs.10.38 crore as on 31 March 2022 as against Rs.12.02 crore as on 31 March 2021. The total debt of the company stood at Rs.26.05 crore includes Rs.3.64 crore of long-term debt, Rs.16.84 crore of short-term debt, Rs.3.85 crore of Unsecured loans and Rs.1.72 crore of CPLTD as on 31 March, 2022. The gearing (debt-equity) stood at 2.51 times as on 31 March 2022 as compared to 1.90 times as on 31 March, 2021. Interest Coverage Ratio stood at 1.70 times for FY2022 as against 2.18 times for FY2021. Debt Service Coverage Ratio (DSCR) stood at 1.60 times in FY2022 as against 2.06 times in FY2021. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 4.24 times as on 31 March, 2022 as against 3.16 times as on 31 March, 2021. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.05 times for FY2022 as against 0.06 times for FY2021. Acuité believes that the financial risk profile of the company is expected to remain moderate over the medium term. |
| Weaknesses |
| >Working capital intensive operations
The working capital management of the company is intensive marked by GCA days of 169 days in FY2022 as against 209 days in FY2021. Debtor days stood high at 119 days in FY2022 as against 167 days in FY2021 as most of the company billings happens in the end of the month of March and the payment period mostly comes in April. The average credit period allowed to customers is 90 days. However, the creditor days stood at 82 days in FY2022 as against 71 days in FY2021. The average credit period allowed by suppliers is around 30-45 days. Inventory Days stood at 39 days in FY2022 as against 15 days in FY2021. Acuité expects the working capital management to remain intensive over the medium term on account of the dealy in realisation from customers, which is inherent in the aforementioned industry. >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 procurring 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 |
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| Material covenants |
| None |
| Liquidity Position |
| Adequate |
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The company’s liquidity position is adequate, marked by sufficient net cash accruals against its maturing debt obligations. The company generated sufficient net cash accruals in the range of Rs.1.38-2.48 Crore in FY2020-22 against its maturity repayment obligations in the range of Rs.1.72 crore in the same tenure. In addition, it is expected to generate sufficient cash accrual in the range of Rs.4.30-10.83 crores against the maturing repayment obligations of Rs.2.15-3.91 crore over the medium term. The working capital management of the company is intensive marked by moderate GCA days of 169 days in FY2022 as against 209 days in FY2021. Average utilization for the working capital facilities is ~98% percent for the past 08 months ended March 2023. The company maintains unencumbered cash and bank balances of Rs.0.41 crore as on March 31, 2022. The current ratio stands at 1.03 times as on March 31, 2022, as against 1.08 times as on 31 March, 2021.
Acuite believes that the liquidity of the company will remain adequate in the near to medium term on account of significant debt repayment in the near to medium term. |
| Outlook: Stable |
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Acuité believes that SPPL will maintain a ‘Stable’ outlook over the medium term owing to its experienced management and long track record of operations. The outlook may be revised to 'Positive' if the company demonstrates substantial and sustained growth in its revenues from the current levels while maintaining its margins. Conversely, the outlook may be revised to 'Negative' in case the company registers lower than expected growth in revenues and profitability or deterioration in its working capital management or larger than-expected debt funded capex leading to deterioration in its financial risk profile and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 74.75 | 56.93 |
| PAT | Rs. Cr. | 0.62 | 0.36 |
| PAT Margin | (%) | 0.83 | 0.62 |
| Total Debt/Tangible Net Worth | Times | 2.51 | 1.90 |
| PBDIT/Interest | Times | 1.70 | 2.18 |
| Status of non-cooperation with previous CRA (if applicable) |
| Crisil vide its press release dated 28.02.2023 had reaffirmed the company to CRISIL D; Issuer Not Cooperating |
| 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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