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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 72.25 | ACUITE A- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 60.00 | - | ACUITE A2+ | Assigned |
| Bank Loan Ratings | 127.75 | - | ACUITE A2+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 260.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed a long-term rating of ‘ACUITÉ A-’ (read as ACUITE A minus) and Short term rating of ‘ACUITÉ A2+’ (read as ACUITE A two plus) on the Rs 200.00 Cr. bank facilities of Sri Durga Condev Private Limited (SDCPL). Further, Acuité has assigned short term rating of ‘ACUITÉ A2+’ (read as ACUITE A two plus) on the Rs. 60.00 Cr. bank facilites of SDCPL.
The outlook is 'Stable'. Rationale for Rating The rating continues to reflect the company’s established track record of operations spanning more than three decades in executing roads, irrigation, and railway projects in Odisha. Further the scale of operation witnessed an improvement during FY23 backed by healthy execution of orders. The current order book provides revenue visibility over the medium term. The ratings also factor in company’s strong financial risk profile marked by its high net worth, low gearing ratio and healthy debt protection ratios.The ratings are constrained by high geographical concentration, working capital intensive nature of operation and intensive competition in construction business. |
| About the Company |
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SDCPL was started as a partnership firm in 1987 by Mr. Pramod Chandra Rath and was engaged in civil construction activities for road, bridge, building and railway tracks. The constitution was changed to a closely held company in 2000. Currently, the company is managed by Mr Pramod Chandra Rath and his family members. The company has executed projects primarily in the state of Odisha only.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has taken a standalone view of the business and financial risk profile of SDCPL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| Established track record in EPC segment
SDCPL has a long operational track record as the company is executing different kinds of civil projects since 1987. Over the years, company has successfully completed large number of projects related to construction of roads, bridges, buildings, etc. in Odisha. The company has a diversified order book as SDCPL has bagged orders from various PSUs and State government entities such as East Coast Railways, RITES Ltd NTPC Ltd, Mahandi Coalfield Limited, PWD among others. Hence the counterparty risk is low. Healthy Revenue visibility The current order book of Rs. 1410 Cr. imparts healthy revenue visibility over the medium term. The unexecuted order book comprises around 40 percent of orders from the PWD followed by around 37 percent from Indian Railways & its associates, remaining is from PSUs & different state government entities . Further current order book also reflects moderate segmental concentration as majority of orders are related construction of road and bridges. The company also executes orders related to construction of building, different kinds of structures, canal among others. The scale of operation had witnessed an improvement during FY23 and stood at Rs. 392.96 Cr. as against Rs 323.68 Cr in FY22 and Rs 278.25 Cr in FY21. The improvement is driven by healthy execution of orders. However, the execution of certain orders during last 2FYs was adversely impacted due to various reasons such as unprecedented rains, land disputes, etc. The company posted a revenue of Rs. 201.03 Cr in 5MFY24. Acuite believes the scale of operation will continue to grow over medium term backed by healthy order book size with strong execution capabilities. Healthy financial risk profile The financial risk profile of SDCPL is marked by its healthy net worth, low gearing ratio and strong debt protection metrics. The net worth stood at Rs. 161.04 Cr. as on 31st March’2023 as compared to Rs. 144.75 Cr. in the previous year. The gearing of the company stood comfortable at 0.53 times as on 31st March 2023 as against 0.55 times as on 31st March, 2022. TOL/TNW stood at 0.73 times as on 31 March 2023 as against 0.87 times as on 31 March 2022. SDCPL’s interest coverage ratio stood at 5.38 times in FY23 as against 4.94 times in FY22. DSCR of the company stood at 3.05 times in FY23 in comparison to 3.01 times in FY22. The Net Cash accruals to Total Debt (NCA/TD) stood at 0.37 times as on 31 March 2023 as compared to 0.39 times in the previous year. Going forward, Acuité believes the financial risk profile to remain healthy over the medium term backed by steady accruals and no major debt funded capex plans. Largely stable profitability margins The company has healthy profitability margins both at the operating and net level. The operating margin of the company stood at 11.12 percent in FY23 as compared to 12.19 percent in FY22. The profit after tax (PAT) margins of the company stood at 4.19 percent in FY23 as against 4.58 percent in the preceding year. The profitability margin depends largely on the company’s selection of projects being bid for. Acuité believes that the company will maintain its profit margins over the medium term as major portion of existing orders are road projects where profit margins are relatively higher as compared to other segments. |
| Weaknesses |
| Concentrated order book
The company since its inception has worked on projects primarily in Odisha. Moreover, the ongoing orders are also entirely from Odisha thereby implying high geographic concentration. The company’s ability to successfully bid for projects in other states would be a key to expand their base. Working capital intensive operations The operations of the company are working capital intensive as reflected from its Gross Current Asset (GCA) days. The GCA days stood high at 101 days as on 31 March 2023. Inventory days stood at 66 days as on 31 March 2023 against 59 days in the previous year. However, the debtor days stood at 35 days as on 31 March 2023 as against 41 days in the preceding Year. Acuité believes that the operations of the company will continue to be working capital intensive which is inherent to the infrastructure industry. |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Strong |
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Company has a strong liquidity profile as company has high-unencumbered cash & bank of ~Rs 34 Cr. as on 31st March 2023. Net cash accrual stood at Rs 31.66 Cr in FY23 as against current maturity of Rs 4.50 Cr. Current ratio stood at 1.70 times in FY 23 as against 1.58 times in FY22. The working capital utilization stood at 70.23 percent during last 12 months ended August 2023. Acuite believes liquidity profile will remain at strong level in medium term backed by healthy net cash accrual.
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| Outlook: Stable |
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Acuité believes the outlook on SDCPL will remain ‘Stable’ over the medium term backed by its long track record of operations, strong order book position and comfortable financial risk profile. The outlook may be revised to ‘Positive’ if the company is able to ramp up its scale of operation along with sustenance in the profitability margins. Conversely, the outlook may be revised to ‘Negative’ in case of deterioration in liquidity profile due to increase in working capital requirement.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 392.96 | 323.68 |
| PAT | Rs. Cr. | 16.45 | 14.83 |
| PAT Margin | (%) | 4.19 | 4.58 |
| Total Debt/Tangible Net Worth | Times | 0.53 | 0.55 |
| PBDIT/Interest | Times | 5.38 | 4.94 |
| 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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