Press Release

Press Release

April 24, 2024

SRIBAL CONSTRUCTION COMPANY
Rating Reaffirmed and Upgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	6.00	ACUITE BB+ \| Stable \| Upgraded	-
Bank Loan Ratings	8.00	-	ACUITE A4+ \| Reaffirmed
Total Outstanding	14.00	-	-

Rating Rationale

Acuité has upgraded the long-term rating to 'ACUITE BB+' (read as ACUITE double B plus) from 'ACUITE BB' (read as ACUITE double B) and reaffirmed the short-term rating of 'ACUITE A4+' (read as ACUITE A four plus) to the Rs. 14.00 crore bank facilities of Sribal Construction Company (SCC). The outlook is 'Stable'.

Rationale for rating upgrade

The rating upgrade takes into account augmentation in the revenues to Rs. 66.05 crores in FY23 increased from Rs. 50.27 crores in FY22. Further, the company has booked revenues of Rs. 94.82 Cr. in 11MFY2024 and estimated revenues for FY2024 is Rs. 100 Cr. The ratings also takes note of the established track record of firm for more than 15 years in the civil construction and structural fabrication industry along with a reputed clientele of the firm. Acuite takes note of the moderate financial risk profile along with a order book of the firm. However, the ratings are constrained by by moderate order book position and moderate financial risk profile. Further, it considers the competitive nature of industry along with input cost risk. The ratings remain susceptible to the risk of capital withdrawals, given the proprietorship constitution of the firm.

About the Company

Established in 2007, Sribal Construction Company is s a proprietorship concern engaged in civil construction and structural fabrication. The present proprietor of the company is Mr. R Sakthivel. The registered office of the company is in Bangalore.

Unsupported Rating

Not Applicable

Analytical Approach

Acuité has considered standalone business and financial risk profile of Sribal Construction Company to arrive at the rating.

Key Rating Drivers

Strengths

Established track record and extensive experience of promoters
Established in 2007, Sribal Construction Company has a established track record of operations with proprietor of the firm Mr. R Sakthivel having an experience of more than 15 years in the civil construction business. The firm has built a longstanding relationship with reputed clientele namely Biocon Biologics Limited, Axxalant Pharma Science, Hindustan Coca-cola, United Breweries, etc.

Augumentation in the scale
The scale of operations of the firm has improved with a revenue of Rs. 66.05 crores in FY23 increased from Rs. 50.27 crore in FY22. Further, the company has booked revenues of Rs. 94.83 Cr. in 11MFY2024 and estimated revenues for FY2024 is Rs. 100 Cr. The current order book stands moderate at Rs. 74.94 crore, which is 1.13 times the operating income of FY2023, providing near-term revenue visibility. Acuite believes that Sribal Construction Company will continue to benefit from extensive experience in this industry alongwith longstanding relationship with reputed clients.

Moderate financial risk profile
The financial risk profile of the firm continues to remain moderate marked by moderate net worth, moderate gearing and comfortable debt protection metrics. The tangible net worth of the firm increased to Rs. 7.36 crore as on March 31, 2023 from Rs. 4.80 crore in March 31, 2022. The total debt of the firm stood at Rs. 5.57 as on March 31, 2023 as against Rs. 3.02 crore in March 31, 2022. The capital structure of the entity remains comfortable with the gearing of 0.76 times in FY23. The debt protection metrics despite the deterioration stood healthy as reflected by debt service coverage ratio and interest service coverage ratio declined by 8.17 times in FY23 compared to 13.69 times in FY22.

Weaknesses

Extensive competition with regulatory risk
The construction industry is fairly fragmented industry with a presence of few large pan India players. The entity undertakes the projects for the private players and focuses more on the food and the pharma industry. Some of the reputed clients of Sribal Construction Company include – Coca Cola, Cipla, United Breweries etc. that helps the company to maintain healthy profitability margins. Further, it is a regulated industry with a price fluctuation risk of input prices such as cement, bitumen, steel, etc.

Capital withdrawal risk associated with proprietorship firm
Being a proprietorship firm, SCC is exposed to the capital withdrawal risk. Any significant withdrawal from the partner’s capital will have a negative bearing on the financial risk profile of the firm.

Rating Sensitivities

Sustainable improvement in revenue while maintaining profitability
Elongation of working capital cycle
Significant withdrawals of capital

Liquidity Position

Adequate

The liquidity position of the firm remains adequate. The firm generated net cash accruals of Rs. 5.26 crore in FY 23 against a repayment obligation of Rs.0.06-0.07 Cr. Besides, the company had a free cash and bank balance of Rs. 3.40 crore as on March 31, 2023. The current ratio stood at 1.56 times in FY23 as against 1.29 times in FY22. Besides, the company has a buffer in the working capital limits (average utilisation of ~43% during last 10 months ended on March 2024) supporting the liquidity position.

Outlook: Stable

Acuité believes that outlook on Sribal Construction Company will continue to remain 'stable' over the medium term on account of experience of the firm in construction industry. The outlook may be revised to 'Positive' if there is substantial and sustained improvement in the company's operating income or profitability, while maintaining its working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of weakening its capital structure and debt protection metrics.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 23 (Actual)	FY 22 (Actual)
Operating Income	Rs. Cr.	66.05	50.27
PAT	Rs. Cr.	4.70	3.07
PAT Margin	(%)	7.11	6.11
Total Debt/Tangible Net Worth	Times	0.76	0.63
PBDIT/Interest	Times	8.17	13.69

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

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
25 Jan 2023	Cash Credit	Long Term	0.90	ACUITE BB \| Stable (Assigned)
	Proposed Cash Credit	Long Term	4.00	ACUITE BB \| Stable (Assigned)
	Proposed Term Loan	Long Term	1.10	ACUITE BB \| Stable (Assigned)
	Bank Guarantee (BLR)	Short Term	6.00	ACUITE A4+ (Assigned)
	Proposed Bank Guarantee	Short Term	2.00	ACUITE A4+ (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Punjab National Bank	Not avl. / Not appl.	Bank Guarantee (BLR)	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	6.00	Simple	ACUITE A4+ \| Reaffirmed
Punjab National Bank	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	0.90	Simple	ACUITE BB+ \| Stable \| Upgraded ( from ACUITE BB )
Not Applicable	Not avl. / Not appl.	Proposed Bank Guarantee	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	2.00	Simple	ACUITE A4+ \| Reaffirmed
Not Applicable	Not avl. / Not appl.	Proposed Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	4.00	Simple	ACUITE BB+ \| Stable \| Upgraded ( from ACUITE BB )
Not Applicable	Not avl. / Not appl.	Proposed Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	1.10	Simple	ACUITE BB+ \| Stable \| Upgraded ( from ACUITE BB )

Contacts

Analytical Details	Contact Details
Mohit Jain Senior Vice President - Rating Operations Tel: 022–49294017 mohit.jain@acuite.in Anuja Bele Associate Analyst - Rating Operations Tel: 022-49294065 anuja.bele@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.