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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 46.86 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 30.00 | - | ACUITE A3 | Assigned |
| Bank Loan Ratings | 38.64 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding | 115.50 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating of 'ACUITE BBB-' (read as ACUITE triple B minus) and the short-term rating of ' ACUITE A3’ (read as ACUITE A three) on the Rs.85.50 Cr. bank facilities of SVS Mookambika Constructions Private Limited (SVSMC). The outlook remains ‘Stable’.
Further, Acuité has assigned the short-term rating of 'ACUITE A3’ (read as ACUITE A three) on the Rs. 30 Cr. bank facilities of SVS Mookambika Constructions Private Limited (SVSMC). Rationale for the rating The rating reaffirmation considers SVSMC’s stable operating performance and its moderate financial risk profile. The company generated a revenue of Rs.217.89 crore in FY2024 (Provisional) as against revenue of Rs. 171.63 crore in FY2023. It has an outstanding order book position of Rs.297 Cr. as of June 2024, reflecting revenue visibility over the near to medium term. The rating further reflects the moderate financial risk profile marked by moderate networth, low gearing and healthy coverage indicators. However, the rating remains constrained on account of the working capital intensive nature and tender based nature of operations. |
| About the Company |
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Andhra Pradesh based, SVS Mookambika Constructions Private Limited (SVSMC), was incorporated in the year 2009, by Mr. M. Satyanarayana Raju, who has more than 3 decades of experience in civil construction business. SVSMC undertakes civil construction activities primarily of Roads, Buildings, Bridges, Drains and such other allied activities for various government bodies like Ministry of Road Transport & Highways (MORTH), National Highway Authority of India (NHAI), Roads & Buildings (R&B), Public Works Department (PWD), Nabard, Panchayath Raj, Misc. Private Works. SVSMC, a Special Class Civil Contractor, is registered with NHAI, R&B, Panchayatraj, APIIC, Agricultural University of Andhra Pradesh and R&B, Panchayatraj of Orissa & PWD of Karnataka States. |
| Unsupported Rating |
| Not applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of SVSMC to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management; established track record of operations and healthy order book position providing medium term revenue visibility
SVSMC is promoted by Mr. Satyanarayana Raju, who has more than 3 decades of experience in civil construction business. SVSMC is a special class contractor and undertakes civil construction activities primarily of Roads, Buildings, Bridges, Drains and such other allied activities for various government bodies like Ministry of Road Transport & Highways (MORTH), National Highway Authority of India (NHAI), Roads & Buildings (R&B), Public Works Department (PWD), Nabard, Panchayath Raj, Misc. Private Works. Promoters’ extensive experience and past track record of completion of projects has helped the company in directly bidding the government projects and not relying on sub contract works. Acuité believes that the promoter's extensive industry experience will continue to support SVSMC's business risk profile over the medium term Stable Operating Performance The revenue of the company stood at Rs. 171.63 crore in FY2023 as against the revenue of Rs. 122.08 crore in FY2022. Further, the revenue of the company stood at Rs. 217.89 crore for FY2024(Prov.). The increase in revenue is on account of higher execution of work orders. The operating profit margin of the company stood at 14.45% for FY2023 as against 13.14% for FY2022. The operating profit margin for FY2024(Prov.) is 15.14%. The PAT margin is 5.64% for FY2023 as against 5.04% for FY2022 and the PAT margin for FY2024(Prov.) stood at 6.12%. Further, the company has outstanding order book position of Rs. 297.33 Cr. as of June 2024, reflecting moderate revenue visibility over the near term. Moderate Financial Risk profile The financial risk profile of the company is moderate marked by moderate networth, low gearing and healthy coverage ratio. The tangible net worth of the company stood at Rs.61.43 crore as on March 31, 2024(Prov) against Rs.46.22 crore as on March 31, 2023 and Rs.36.75 crore as on March 31, 2022. The company follows a moderate leverage policy as reflected by its gearing level of 1.26 times in FY2024(Prov) against 1.54 times in FY2023 and 1.30 times in FY2022. The coverage ratios of the company remained healthy with interest coverage ratio of 3.32 times for FY2024(Prov) against 3.77 times for FY2023 and 4.10 times for FY2022. The debt service coverage ratio stood at 1.87 times for FY2024(Prov) against 1.74 times for FY2023 and 3.53 times for FY2022. Acuité believes that the financial risk profile of the company is expected to remain moderate over the medium term on account of stable accretion to reserves.
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| Weaknesses |
| Working Capital Management
The operations of the company are of working capital intensive nature and are marked by GCA of 289 days for FY2023 as against 272 days for FY2022 and 251 days for FY24(Provisional). The GCA days are high on account of the nature of the business as the inventory days are high and stood at 193 days for FY2023 as against 140 days for FY2022. However, out of the total inventory,40-50% is work-in-progress at any point of time. The debtor days stood at 94 days for FY2024(Prov) against 92 days for FY2023 as against 82 days for FY2022. The amount of debtors includes retention money. Further, the creditor days stood at 101 days in FY2024(Prov) against 186 days for FY2023 and 183 days for FY2022. The average utilisation of working capital limits is 83.63 percent for twelve months ended March 2024. Acuité believes that the operations of the company will continue to remain working capital intensive over the medium term on account of nature of industry. Tender based nature of operations The operations of the company are of tender based nature and this industry has presence of several mid to big size players. The company, thus, faces intense competition from other players and is dependent on successful bidding of the tenders. Going ahead the company's ability to successfully bid for greater number of large order will remain a key monitoring factor. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity position of SVSMC is adequate marked by generation of sufficient net cash accruals to service its debt obligations. The net cash accruals stood at Rs.18.66 crore in FY2024(Prov) as against the repayment of Rs.5.32 crore for the same period. Going ahead, the net cash accruals is expected to be in the range of Rs. 25-33 crore and maturing debt obligations in the range of Rs.5.30-6.39 crore over the medium term. The company has unencumbered cash and bank balances of Rs.1.45 crore as on March 31, 2024(Prov). The current ratio of the company stood at 1.54 times as on 31 March, 2024. The average utilisation of working capital limits remained moderately high at 83.63 percent for twelve months ended March 2024.
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| Outlook: Stable |
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Acuité believes that SVSMC will continue to benefit over the medium term due to its experienced management and healthy order book providing revenue visibility. The outlook may be revised to 'Positive', in case of timely execution of its unexecuted order book leading to higher-than-expected revenues and profitability with improvement in working capital management. Conversely, the outlook may be revised to 'Negative' in case SVSMC registers lower-than-expected revenues and profitability or any significant stretch in its working capital management, leading to the deterioration of its financial risk profile and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 217.89 | 171.63 |
| PAT | Rs. Cr. | 13.33 | 9.68 |
| PAT Margin | (%) | 6.12 | 5.64 |
| Total Debt/Tangible Net Worth | Times | 1.26 | 1.54 |
| PBDIT/Interest | Times | 3.32 | 3.77 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| 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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