Established track record and extensive experience of promoters
Established in 2007, SCC 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. Acuite believes that the firm will continue to benefit from the extensive experience of the promoters in the medium to long term.

Modest scale of operations backed by moderate order book
The operations of the firm remained modest despite a healthy growth in the operating income to Rs. 101.43 crore in FY24 as compared to Rs. 66.05 crore in FY23. In 8MFY25, the company has reported revenues of Rs. 72.35 Cr. and expects to report revenues of ~Rs. 115 crore in FY25.  The operating profit margin of the company stood at 9.04 per cent in FY24 as compared to 8.95 per cent in FY23. In line with an increase in the operating margin, the PAT margins of the company stood at 7.78 per cent in FY24 as compared to 7.11 per cent in FY23. The unexecuted order book position of the company stood at Rs. 90.27 Crore as on Nov 2024, which provides revenue visibility for the near to medium term. Acuite believes that SCC will continue to report steady improvement in revenues on the back of moderate order book position.

Comfortable working capital management
The working capital management of the firm remained comfortable marked by GCA of 91 days and 86 days during FY24 and FY23 respectively. The inventory days stood stable at 12 days in FY24 and 20 days in FY23. Further, the debtor days stood at around 37 days in FY24 against 39 days in FY23.  The creditor days of the firm stood at 63 days for FY24 compared to 69 days for FY23. The company has utilised working capital limits also moderately, supporting the liquidity position with average utilization of ~ 62 per cent during the 06 months ending December 24. Acuite believes that working capital operations likely to remain moderate considering the comfortable overall working capital cycle.

Average financial risk profile
The financial risk profile of the firm remained average marked by moderate net worth, gearing and comfortable debt protection metrics. The tangible net worth of the firm remained low at Rs. 12.69 crore as on March 31, 2024 as compared to Rs. 7.36 crore as on March 31, 2023. The total debt of the firm stood at Rs. 6.15 crore as on March 31, 2024 as against Rs. 5.57 crore as on March 31, 2023. The capital structure of the entity remains comfortable with the gearing of 0.48 times as on March 31, 2024  as against 0.76 times as on March 31, 2024 . The TOL/TNW stood at 1.45 times in FY24 as against 1.81 times in FY23. The debt protection metrics stood healthy as reflected in debt service coverage ratio and interest service coverage ratio at 11.71 times and 12.85 times in FY24 respectively compared to 8.17 times in FY23.

Susceptibility of profitability to volatility in input prices and stiff competition
The construction industry is 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, the industry is having stiff competition with many players which is likely to put pressure on the profitability along with 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 capital will have a negative bearing on the financial risk profile of the firm.