Press Release SRI SRINIVASA CONSTRUCTIONS INDIA PRIVATE LIMITED August 04, 2023 Rating Assigned and Upgraded

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	30.00	ACUITE BBB+ | Stable | Assigned	-
Bank Loan Ratings	30.50	ACUITE BBB+ | Stable | Upgraded	-
Bank Loan Ratings	210.00	-	ACUITE A2 | Assigned
Bank Loan Ratings	140.00	-	ACUITE A2 | Upgraded
Total Outstanding Quantum (Rs. Cr)	410.50	-	-

Rating Rationale

­Acuité has upgraded its long term rating to ‘ACUITE BBB+’ (read as ACUITE Triple B Plus) from 'ACUITE BB+' (read as ACUITE double B Plus) and the short term rating to ‘ACUITE A2’ (read as ACUITE A two) from 'ACUITE A4+ (read as ACUITE four plus) on the Rs.170.50 Cr bank facilities of Sri Srinivasa Constructions India Private Limited (SSCIPL). Acuité has assigned its long term rating of ‘ACUITE BBB+’ (read as ACUITE Triple B Plus) and the short term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs.240.00 Cr bank facilities of Sri Srinivasa Constructions India Private Limited (SSCIPL). The outlook remains 'Stable'. Rationale for Upgrade The rating upgrade takes into account the stable operating and financial performance of the company, marked by stable operating income, improved margins and healthy financial risk profile. Further, the operating performance is supported by a healthy orderbook of ~Rs.2599 Cr to be executed as on Arpil 2023. The operating income of the company ranged between Rs.280-Rs.395 Cr in last three years ended March 31, 2023. Also, the operating margins improved to 8.96 percent in FY2023 (Prov) as against 7.26 percent in FY2022. The rating continues to derive strength from experienced management which helps them in winning orders from the government clients such as Karnataka Industrial Areas Development Board, PWD Project to name few and established relationship with its suppliers. However, the rating remains constrained by the intensive working capital management, geographical concentration of its projects, volatility in raw material prices and the tender based nature of operations.

About the Company

­The Karnataka based, Sri Srinivasa Constructions (SSC) was established in 1992 as a partnership firm by Mr. Y. Pitcheswara Rao and Mr. Y.V.S. Rama Krishna. In the year 2009, Sri Srinivasa Constructions India Private Limited (SSCIPL) was incorporated to take over the running operations of SSC. The company promoted by promoters is engaged in undertaking civil construction works including water supply projects, buildings, irrigation projects, industrial projects, road projects and power transmission projects in Karnataka, Andhra Pradesh, Tamil Nadu, Meghalaya and Telangana. SSCIPL is a registered Class 1 contractor for various departments including Public Work Departments (PWD), Panchayat Raj Engineering Department (PRED), Public Health Engineering Department (PHED) among others. The present directors of the company are Mr. Yaralagadda Pitcheswara Rao and Mr. Yarlagadda Ramakrishna Venkatashiva.

Analytical Approach

­Acuité has considered the standalone financials and risk profile of SSCIPL to arrive at the rating.

Key Rating Drivers

Strengths

>Experienced promoters and established nature of operations The company promoted by Mr. Y. Pitcheswara Rao and Mr. Y.V.S. Rama Krishna with their work experience closer to three decades, are engaged in undertaking civil construction works including water supply projects, buildings, irrigation projects, industrial projects, road projects and power transmission projects in Karnataka, Andhra Pradesh, Tamil Nadu, Meghalaya and Telangana. The promoters started off as a partnership firm 1992. In the year 2009, Sri Srinivasa Constructions India Private Limited (SSCIPL) was incorporated to take over the running operations of SSC. SSCIPL is a registered Class 1 contractor for various departments including Public Work Departments (PWD), Panchayat Raj Engineering Department (PRED), Public Health Engineering Department (PHED) etc. The company is also a Category 1 contractor for various divisions of water authority of the state of Karnataka. The extensive experience of promoter is also reflected through healthy order book position of ~Rs 2599 Cr as on April 2023 which provides the revenue visibility over the medium term. Out of this, the company had obtained new orders worth Rs.130.08 crore in the year 2023 till date. . The revenue of the company stood at Rs.343.92 Cr in FY2023 (Prov) as against Rs 393.04 Cr in FY 2022. Acuité believes that the company will continue to benefit with the promoters experience and its established presence in the industry, improving its business risk profile over the medium term. >Moderate financial risk profile The financial risk profile of the company stood moderate marked by moderate  net worth, gearing and debt protection metrics. The tangible net worth stood at Rs.123.10 crore as on 31 March 2023 (Prov) as against Rs.106.68 crore as on 31 March 2022. Higher revenues have led to better accretion to reserves, which has led to an improvement in financial risk profile of the company. The total debt of the company stood at Rs.49.06 crore includes Rs.44.57 crore of short-term debt, Rs.0.66 crore of unsecured loans, Rs.2.81 crore of long-term debt and Rs.1.01 crore of CPLTD as on 31 March 2022 (Prov). The gearing (debt-equity) stood at 0.40 times as on 31 March 2023 (Prov) as compared to 0.10 times as on 31 March 2022. Interest Coverage Ratio stood at 3.59 times for FY2023 (Prov) as against 7.87 times for FY2022. Debt Service Coverage Ratio (DSCR) stood at 2.76 times in FY2023 (Prov) as against 4.41 times in FY2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 1.65 times as on 31 March 2023 (Prov) as against 1.02 times on 31 March 2022. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.38 times for FY2023 (Prov) as against 1.88 times for FY2022. Acuité believes that, the asset lite model and strong operating performance will help maintain the financial risk profile of the company in medium term.

Weaknesses

>Intensive Working capital management The working capital management of the company is intensive marked by GCA days of 224 days in FY2023 (Prov) as against 102 days in FY2022. The debtor days stood at 81 days in FY2023 (Prov) as against 41 days in FY2021. The reason for high debtors is because the government had passed a policy of applying for billing once the milestone is completed for EPC projects and most of the company billings happens in the end of the month of March and the payment period mostly comes in April. The average credit period allowed to customers is around 45-60 days. The creditor days stood at 394 days in FY2023 (Prov) as against 134 days in FY2022. The average period allowed by suppliers is around 30-45 days. However, the inventory days remain around 85 days in FY 2023 (Prov) as against 12 days in FY 2022. Acuite expects the working capital management to remain intensive over the medium term. >Volatile raw material prices and tender based nature of operations impacting profitability Most EPC projects undertaken by the company has a gestation period of 12-36 months, and during this time period, profitability remains susceptible to fluctuations in the input prices. However, majority of orders in hand have a built-in inflation index-linked price escalation clause, depending upon the extent of coverage of the actual increase in input prices, which mitigates the risk to an extent. SSCIPL operates in infrastructural construction industry which is highly competitive with presence of large number small, regional and large players. EPC projects executed by the company are tender based with wins going to, the lowest bidder qualifying the terms and conditions stipulated by the respective agencies floating the bids. Acuité believes, this puts strain on profitability of the company in cases where the bidding gets aggressive. >Geographic concentration of projects Majority of the projects executed by the company are based out of Karnataka which is responsible for a large portion of the revenue in FY22 resulting in exposure to significant geographical and political risk. The company also have diversified to some extend picking up projects in Andhra Pradesh, Tamil Nadu, Meghalaya and Telangana.

Rating Sensitivities

Improvement in scale of operations while maintaining profitability margins Intensive working capital management

Material covenants

­None

Liquidity Position

Adequate

­The company’s liquidity position is adequate marked by sufficient net cash accruals against repayment obligations. The company has sufficient net cash accruals in the range of Rs.15.60-20.61 Crore from FY 2021- 2023 against its maturing debt obligation of Rs.0.74-1.65 crore during the same tenure. However, the company is expected to generate a sufficient cash accrual in the range of Rs.28.09-37.79 crore against the maturing repayment obligations of around Rs.1.39 crore over the medium term. The working capital management of the company is intensive marked by GCA days of 224 days in FY2023 (Prov) as against 102 days in FY2022. The company maintains unencumbered cash and bank balances of Rs.0.24 crore as on March 31, 2023 (Prov). The current ratio stands at 2.34 times as on March 31, 2023 (Prov) as against 2.47 times as on March 31, 2022. The average bank limit utilization for the past 12 months ending March 2023 for fund-based facility is ~ 72 percent. Average BG Utilization is around ~80% as on April 2023. Acuité expects the liquidity to remain adequate in the medium term.

Outlook: Stable

­Acuité believes that SSCIPL will maintain a stable business risk profile over the medium term. The company will continue to benefit from its experienced management and established association with customers and suppliers along with comfortable financial risk profile. The outlook may be revised to ‘Positive’ on case of significant improvement in scale of operations while sustaining their profit margins and achieving efficient working capital management. Conversely the outlook may be revised to ‘Negative’ in case of any further elongation of working capital cycle and delay in realization of bills from the government institutions.

Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 23 (Provisional)	FY 22 (Actual)
Operating Income	Rs. Cr.	343.92	393.04
PAT	Rs. Cr.	16.42	18.04
PAT Margin	(%)	4.78	4.59
Total Debt/Tangible Net Worth	Times	0.40	0.10
PBDIT/Interest	Times	3.59	7.87

Status of non-cooperation with previous CRA (if applicable)

­CRISIL, vide its press release dated February 27, 2023 had denoted the rating to Sri Srinivasa Constructions India Private Limited (SSCIPL) as 'CRISIL B+/Stable/CRISIL A4' (Issuer Not Cooperating)' on account of lack of adequate information required for monitoring of ratings.

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 30 May 2023 Bank Guarantee Short Term 50.00 ACUITE A4+ (Downgraded and Issuer not co-operating*) Cash Credit Long Term 20.00 ACUITE BB+ (Downgraded and Issuer not co-operating*) Cash Credit Long Term 5.50 ACUITE BB+ (Downgraded and Issuer not co-operating*) Cash Credit Long Term 5.00 ACUITE BB+ (Downgraded and Issuer not co-operating*) Bank Guarantee Short Term 30.00 ACUITE A4+ (Downgraded and Issuer not co-operating*) Bank Guarantee Short Term 60.00 ACUITE A4+ (Downgraded and Issuer not co-operating*) 22 Aug 2022 Bank Guarantee Short Term 60.00 ACUITE A2+ (Reaffirmed) Cash Credit Long Term 5.00 ACUITE A- | Stable (Reaffirmed) Cash Credit Long Term 5.50 ACUITE A- | Stable (Reaffirmed) Cash Credit Long Term 20.00 ACUITE A- | Stable (Reaffirmed) Bank Guarantee Short Term 30.00 ACUITE A2+ (Reaffirmed) Bank Guarantee Short Term 50.00 ACUITE A2+ (Reaffirmed) 27 May 2021 Bank Guarantee Short Term 60.00 ACUITE A2+ (Reaffirmed) Bank Guarantee Short Term 50.00 ACUITE A2+ (Reaffirmed) Bank Guarantee Short Term 30.00 ACUITE A2+ (Reaffirmed) Cash Credit Long Term 5.00 ACUITE A- | Stable (Reaffirmed) Cash Credit Long Term 20.00 ACUITE A- | Stable (Reaffirmed) Cash Credit Long Term 5.50 ACUITE A- | Stable (Reaffirmed) 15 Apr 2021 Cash Credit Long Term 20.00 ACUITE A- | Stable (Reaffirmed) Cash Credit Long Term 5.00 ACUITE A- | Stable (Reaffirmed) Cash Credit Long Term 5.00 ACUITE A- | Stable (Reaffirmed) Bank Guarantee Short Term 35.00 ACUITE A2+ (Reaffirmed) Bank Guarantee Short Term 5.00 ACUITE A2+ (Reaffirmed) Bank Guarantee Short Term 50.00 ACUITE A2+ (Reaffirmed)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating HDFC Bank Ltd Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 30.00 Simple ACUITE A2 | Upgraded State Bank of India Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 20.00 Simple ACUITE A2 | Assigned State Bank of India Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 71.60 Simple ACUITE A2 | Assigned HDFC Bank Ltd Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 25.00 Simple ACUITE A2 | Assigned Karnataka Bank Ltd Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 50.00 Simple ACUITE A2 | Assigned Canara Bank Not Applicable Bank Guarantee/Letter of Guarantee Not Applicable Not Applicable Not Applicable 50.00 Simple ACUITE A2 | Upgraded State Bank of India Not Applicable Bank Guarantee/Letter of Guarantee Not Applicable Not Applicable Not Applicable 60.00 Simple ACUITE A2 | Upgraded HDFC Bank Ltd Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 5.00 Simple ACUITE BBB+ | Stable | Upgraded State Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 5.00 Simple ACUITE BBB+ | Stable | Upgraded Canara Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 20.00 Simple ACUITE BBB+ | Stable | Upgraded Karnataka Bank Ltd Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 20.00 Simple ACUITE BBB+ | Stable | Assigned Axis Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 10.00 Simple ACUITE BBB+ | Stable | Assigned State Bank of India Not Applicable Letter of Credit Not Applicable Not Applicable Not Applicable 30.00 Simple ACUITE A2 | Assigned Not Applicable Not Applicable Proposed Bank Guarantee Not Applicable Not Applicable Not Applicable 13.40 Simple ACUITE A2 | Assigned Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 0.50 Simple ACUITE BBB+ | Stable | Upgraded

Contacts

Analytical	Rating Desk
Aditya Gupta Vice President-Rating Operations Tel: 022-49294041 aditya.gupta@acuite.in Siddharth Shah Analyst-Rating Operations Tel: 022-49294065 siddharth.shah@acuite.in	Varsha Bist Senior Manager-Rating Operations 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.