Experienced management and established relationships
SLC is a partnership firm established in 1996 by Mr. Ravinder Rao, Mrs. M. Vanaja, and Mr. M. Sridhar Rao. The managing partner, Mr. Ravinder Rao, has been associated with this line of business for over three decades. The firm’s longstanding presence in the industry, consistent project execution, and timely delivery have supported a steady flow of orders, albeit modest. Acuité believes that SLC will continue to benefit from the partners’ extensive experience in the civil construction industry, which is expected to help maintain a moderate business risk profile over the medium term.
Moderate financial risk profile
Firm’s financial risk profile is moderate, marked by a modest net worth with moderate gearing and debt protection metrics. The net worth of the firm stood at Rs.43.01 Cr. as on March 31, 2025 (Prov) against Rs.43.86 Cr. as on March 31, 2024, and Rs. 34.62 Cr. as on March 31, 2023 respectively. Partners had withdrawn capital in FY2025 (Prov). The gearing of the firm stood at 1.19 times as on March 31, 2025(Prov) as against 1.26 times as on March 31, 2024, and 0.13 times as on March 31, 2023. The moderate deterioration in gearing since last two years on account of debt availed by the firm in FY2024 to purchase commercial building. Firm’s debt protection metrics is moderate marked by– Interest coverage ratio (ICR) and debt service coverage ratio stood at 14.25 times and 1.68 times as on March 31, 2025(Prov) respectively as against 11.36 times and 3.50 times as on March 31, 2024. TOL/TNW stood at 1.24 times as on March 31, 2025(Prov) against 1.38 times as on March 31, 2024 and 0.14 times as on March 31, 2023 respectively. The debt to EBITDA of the firm stood at 11.48 times on as on March 2025 (Prov) as against 7.52 times in FY2024 and 1.02 times in FY2023. Acuité believes that financial risk profile will remain moderate over the medium term on the back of modest net worth base and nature of business.
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| Modest scale of operations with fluctuating revenues coupled with modest order book
Firm reported revenues of Rs.52.57 Cr. in FY2025 (Prov), compared to Rs. 110.07 Cr. in FY2024 and Rs. 67.72 Cr. in FY2023. The volatility in revenue is primarily attributable to the tender-driven nature of the business and based on order book position and high geographically concentration risk as the firm executes orders in Telangana. Firm reported operating loss of (2.25) percent in FY2025 (Prov) on account of high raw material prices. The firm has an unexecuted order book position of Rs.61.95 Cr. as on August 31, 2025 which would be executed in next 12 months. The outstanding order book is 1.17 times the FY2025 (Prov) revenue. Acuité believes that the firm will stabilize it's scale of operations in near future, supported by orders in pipeline, thus ability to scale up it's operations will remain a key sensitivity for its credit profile.
Working capital intensive operations
SLCC's working capital cycle remains significantly elongated, with Gross Current Asset (GCA) of 241 days in FY2025(Prov) as against 147 in FY2024 and 124 in FY2023, primarily driven by stretched receivables and elevated inventory levels in FY2025 (Prov). Inventory days stood at 107 days In FY2025(Prov) as against 82 days in FY2024 and 33 in FY2023. The debtor day stood at 123 days in FY2025(Prov) as against 56 days in FY2024 and 58 days in FY2023. Acuité believes the working capital requirement is likely to remain at similar levels over the medium term.
Inherent risk of capital withdrawal
Being a partnership firm, SLCC remains exposed to the inherent risk of capital withdrawals by the partners, which could impact the net worth and financial flexibility of the entity. However, the risk is partially mitigated as there have been minimal capital withdrawals by the partners in FY2025 (Prov) and FY2024.
Risks associated with civil construction sector
The civil construction segment is characterized by stiff competition on account of the low complexity of work involved and minimal entry barriers in terms of qualifications required for the tenders floated. This results in the presence of many contractors in this segment, leading to intensely competitive bids, putting pressure on margins. Further, the margin is exposed to volatility in raw material prices. However, the built-in price variation clause in the contracts mitigates the risk to an extent and the long presence in the industry and established relationship with the clients provides comfort.
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