> Long track record of operations and experienced management
The partners, Mr. Mukesh Patel and his family members collectively have more than four decade of experience in the civil construction industry. Constituted in 1980, SB has over the years developed its execution capabilities in undertaking civil construction contracts. The Firm's projects are ongoing in the states of Madhya Pradesh, Delhi, Gujarat and Rajasthan mainly for indian railways and their respective state municipal corporations.
Acuité believes that the firm will continue to benefit from its partners' extensive experience and long track record in the aforementioned industry.
> Moderate financial risk profile
The Firm has above average financial risk profile marked by moderate net worth, low gearing and comfortable debt protection measures. The tangible net worth stood at Rs.26.20 crore as on March 31, 2022(prov) as against Rs.24.58 crore as on March 31, 2021. The Firm’s total debt of Rs.13.94 crore as on March 31, 2022(prov) includes term loan of Rs.0.26 crore, unsecured loans from directors and promoters of Rs.12.65 crore and short term debt of Rs.1.02 cr. The Firm’s overall gearing stood moderate at 0.53 times as on March 31, 2022(prov) as against Rs.0.74 times as on March 31,2021. The adjusted debt to equity ratio stood at 0.05 times as on March 31, 2022(prov) as against 0.11 times as on March 31, 2021. The total outside liabilities to tangible net worth ratio stood at around 1.58 times as on March 31, 2022(prov) as against 1.80 times as on March 31, 2021. On account of decrease in debt in FY2022, there is an improvement in overall debt protection metrics as the interest coverage ratio (ICR) of the firm stood at 3.45 times as on 31 March, 2022(prov) as against 3.02 times in FY2021. The debt service coverage ratio (DSCR) stood at 3.45 times for FY2022(prov) as against 2.48 in FY2021. The net cash accruals to total debt stood at 0.29 times as on March 31, 2022(prov) as against 0.44 times in FY2021. |
| > Working capital management
The Firm’s working capital cycle elongated this year, marked by gross current asset days (GCA) of 292 days as on March 31,2022 (Prov) as against 80 days as on March 31,2021. The company’ inventory days remained in line as they stood at 39 days as on March 31, 2022(prov) as against 38 days as on March 31, 2021. The debtors days stood at 24 days as on March 31, 2022(prov) as against 17 days as on March 31, 2021. The elongation in GCA days is primarily because of increase in other current assets which includes retention money. The Firm’s creditor days stood at 217 days as on March 31, 2022(prov) as against 189 days as on March 31, 2021.
> High dependence on government orders, mitigated by established relations and efficient liasoning
SB does civil construction work mainly for government authorities which indicates that the firm's revenues are highly dependent on number and value of tenders floated by them. Moreover, any further delays in the execution of current projects along with delayed receipt from the authorities and site related issues are likely to result in higher working capital requirements. However, this risk is mitigated, on account of SBs established relations with the respective departments which result in timely realisations and winning of tenders at regular intervals.
> Inherent risk of capital withdrawal in a partnership firm
SB is susceptible to the inherent risk of capital withdrawal given its constitution as a partnership firm The partners have withdrawn capital of Rs.2.05 Cr in FY2022 (Prov.) and Rs. 7.62 Cr in FY2021. Any further significant withdrawal of capital will have a negative bearing on the financial risk profile of the firm.
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