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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 7.49 | ACUITE BB- | Stable | Assigned | - |
| Bank Loan Ratings | 9.80 | ACUITE BB- | Stable | Upgraded | - |
| Bank Loan Ratings | 10.00 | - | ACUITE A4+ | Assigned |
| Bank Loan Ratings | 2.00 | - | ACUITE A4+ | Upgraded |
| Total Outstanding | 29.29 | - | - |
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Rating Rationale |
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Acuité has upgraded the long-term rating to ACUITE BB- (read as ACUITE double B minus) from ‘ACUITE B+’ (read as ACUITE B plus) and short-term rating to ACUITE A4+ (read as ACUITE A four plus) from ‘ACUITE A4’ (read as ACUITE A four) on the Rs.11.80 Cr bank facilities of Sourabh Kumar Roy (SKR). The Outlook is 'Stable'.
Acuité has assigned the long-term rating of ACUITE BB- (read as ACUITE double B minus) and short-term rating of ACUITE A4+ (read as ACUITE A four plus) on the Rs.17.49 Cr bank facilities of Sourabh Kumar Roy (SKR). The Outlook is 'Stable'. Rationale for upgrade The rating upgrade reflects SKR’s consistent growth recorded in the operating income and above average financial risk profile. The operating income stood at Rs.70.17 Cr in FY2023 as against Rs.57.08 Cr in FY2022. The financial risk profile continues to remain above average with low gearing levels and above average debt protection metrics. The overall gearing of the firm stood at 0.59 times as on March 31, 2023 as against 0.63 times as on March 31, 2022. The Interest Coverage Ratio (ICR) stood at 4.30 times in FY2023 as against 4.19 times in FY2022. Further, the rating continues to derive strength from the experienced management and moderate order book position of Rs.173.99 Cr as on October 31, 2023. The rating, however is constrained on account of working capital intensive operations and exposure to risks pertaining to tender based nature of operations. Going forward, ability of the firm to improve its scale of operations while maintaining its profitability margins and capital structure and restricting further elongation in its working capital cycle will remain a key rating monitorable. |
| About the Company |
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Established in 2007, Sourabh Kumar Roy is a West Bengal based partnership firm engaged in road and bridge construction in southern districts of West Bengal. The firm undertakes tender based contract from the Public Works Department (PWD) of West Bengal government where it is registered as a 1st class civil contractor. The firm was promoted by Mr. Sourabh Kumar Roy and Mrs. Sangita Roy.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of the Sourabh Kumar Roy (SKR) to arrive at this rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management
Established in 2007, Sourabh Kumar Roy (SKR) is a first class civil contractor, has established presence in executing projects related to primarily roads, irrigations and bridge construction in the district of Burdwan, West Midnapore, East Midnapore, Purulia and Bankura. Mr. Sourabh Kumar Roy - Managing partner of the SKR has decade of experience in the line of civil construction. The firm undertakes tender based contract from the PWD department of West Bengal government. Acuité believes that the promoters’ experienced management will aid SKR's business risk profile over the medium term. Improving scale of operations supported by moderate order book. The operating income of SKR has been improving YOY and stood at Rs.70.17 Cr in FY2023 as against Rs.57.08 Cr in FY2022 registering a growth of 22.93% in FY2023. However, the operating margins moderated in FY2023 and stood at 7.72 percent as against 9.79 percent in FY2022. The company has an unexecuted order book position of Rs.173.99 Cr as on October 31, 2023 which estimated to be completed over the next 24-36 months thus providing medium-term revenue visibility. The outstanding order book is 2.48x of the FY2023 revenue levels. Acuité believes that improving scale of operations and moderate order book position will aid SKR's business risk profile over the medium term. Above -average financial risk profile. The financial risk profile of the firm has remained above average with improving net worth, low gearing and above average debt - protection metrics. The net worth of the firm stood at Rs.21.73 Cr and Rs.18.05 Cr as on March 31, 2023 and March 31, 2022 respectively. The total debt of Rs.12.91 crore as on March 31, 2023 consists of long term debt of Rs.2.39 crore, working capital borrowings of Rs.6.49 crore, USL from directors/promoters is Rs.2.26 crore and maturing portion of long term borrowings Rs.1.78 crores. The firms gearing stood low at 0.59 times as on March 31, 2023 as against 0.63 times in the March 31 2022. TOL/TNW stood at 1.60 times in FY2023. The Debt to EBITDA of the firm stood at 2.22 times as on March 31, 2023 as against 2.00 times as on March 31, 2022. The debt protection metrics stood above -average with Interest Coverage Ratio (ICR) at 4.30 times in FY2023 as against 4.19 times in the previous year 2022 and 3.91 times in FY2021. The DSCR stood at 1.65 times in FY2023 as against 1.93 times in FY2022. NCA/TD stood at 0.35 times in FY2023. Acuité expects the financial risk profile to remain above-average over the medium to long term on account of stable operations of the company. |
| Weaknesses |
| Working capital intensive operations
The working capital operations of the firm has improved, however remained high with GCA days of 213 days as on March 31, 2023 as against 238 days as on March 31, 2022. The high GCA days are mainly on account higher WIP inventories and increased loans and advances to suppliers. Inventory days stood at 85 days as on March 31, 2023 as against 104 days as on March 31, 2022. Subsequently, the debtor’s period stood at 2 days as on March 31, 2023 as against 30 days as on March 31, 2022. The payable days are high and stood at 238 days as on March 31, 2023 as against 288 days as on March 31, 2022. Further, the average bank limit utilization in the last the last six months ended October 2023 remained high at ~98.60 percent for the fund based facilities. Acuite believes that the firm’s working capital operations will remain intensive in nature owing its nature of operations. Susceptibility to tender-based operations Revenue and profitability depend entirely on the ability to win tenders. Entities in this segment face intense competition, thus requiring them to bid aggressively to procure contracts; this restricts the operating margin to a moderate level. Also, given the cyclicality inherent in the construction industry, the ability to maintain profitability margin through operating efficiency becomes critical. Acuité believes that the company’s business profile and financial profile can be adversely impacted on account of presence of stiff competition, and has inherent risk of susceptibility to tender based operations. |
| Rating Sensitivities |
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| Liquidity Position: Adequate |
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The firm has generated adequate net cash accruals to service its debt obligations. The net cash accruals stood at Rs.4.47 Cr in FY2023 as against the repayment of Rs.2.18 Cr for the same period and is expected to generate cash accruals in the range of Rs.4.50-5.54 Cr. in FY2024-FY2025 against CPLTD of Rs.1.78-2.76 Cr. over the same time period. Unencumbered cash and bank balances stood at Rs.0.64 Cr as on March 31, 2023. The current ratio of the firm stood at 1.73 times as on 31 March, 2023.
Acuité believes that SKR’s liquidity will remain sufficient over the medium term backed by repayment of its debt obligations and improving accruals. |
| Outlook: Stable |
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Acuité believes that SKR will maintain a 'Stable' outlook over the medium term due to experienced management, improving scale of operations and above -average financial risk profile. The outlook may be revised to ‘Positive’ in case the firm registers healthy growth in revenues while achieving sustained improvement in operating margins and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of lower-than expected revenues and profit margins, leading to deterioration in financial risk profile or further deterioration in working capital.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 70.17 | 57.08 |
| PAT | Rs. Cr. | 3.75 | 3.50 |
| PAT Margin | (%) | 5.34 | 6.14 |
| Total Debt/Tangible Net Worth | Times | 0.59 | 0.63 |
| PBDIT/Interest | Times | 4.30 | 4.19 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| 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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