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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 59.98 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 114.56 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 174.54 | - | - |
| Rating Rationale |
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Acuite has reaffirmed its long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) and its short- term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs.174.54 Cr of bank facilities of Topline Infra Projects Private Limited (TIPPL). The outlook is ‘Stable’.
Rationale for Rating Reaffirmation The rating reaffirmation takes into consideration the steady improvement in the business risk profile of the company reflected by operating revenues of Rs.260.47 Cr in FY2023(Prov.) against Rs.218.33 Cr FY2022 registering a Y-o-Y growth of ~19 percent during the period. Furthermore, the profitability of the company also remained healthy with operating profit margin of 10.60 percent and absolute profit after tax of Rs.11.15 Cr. in FY2023 (Prov.). TIPPL also has a healthy unexecuted order book position of Rs.601.90 Cr as of March 2023, reflecting revenue visibility in the near-medium term. However, ~50 percent of the unexecuted orders are from one single client which possess customer concentration risk. The rating also factors in the healthy financial risk profile of the company with healthy networth, below unity gearing and comfortable debt-protection metrics. However, the rating is constrained on account of working capital intensive operations, presence in highly competitive industry and tender based nature of operations. |
| About the Company |
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Topline Infra Projects Private Limited (TIPPL), is a Kolkata based company that was incorporated in 2004 and is promoted by Mr. Saurav Agarwal and Mr. Gaurav Agarwal. The company is engaged in undertaking of civil construction of roads and railway platforms, mainly in the state of Bihar. Further company is also in the business of Operation and Maintenance of toll booths across the country. The company has recently undertaken work order to be executed in Ladakh
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of TIPPL to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Established operations in infrastructure industry with experienced management
The company was incorporated in 2004 with around two decades of established operations in the infrastructure industry. The promoters of TIPPL, Mr. Saurav Agarwal and Mr. Gaurav Agarwal have extensive experience in the civil construction business which has enabled the company to obtain orders from reputed clientele reflected by unexecuted order book position of Rs.601.90 Cr. as on date. and register healthy revenue growth. Furthermore, the operating revenues of Rs.260.47 Cr in FY2023(Prov.) against Rs.218.33 Cr FY2022 registering a Y-o-Y growth of ~19 percent during the period. Furthermore, the profitability of the company also remained healthy with operating profit margin of 10.60 percent and absolute profit after tax of Rs.11.15 Cr. in FY2023 (Prov.). Acuite believes that the promoters' experience and healthy relations with its customers will continue to benefit TIPPL over the medium term. Healthy financial risk profile The financial risk profile of the company remained healthy marked by healthy networth, low gearing and comfortable debt protection matrices. The tangible networth of the company Rs.136.10 Cr. as on 31 March, 2023 (Prov.) as against Rs.124.95 Cr. same period last year. The improvement is led by increase in tangible net worth on account of accretion of profit to reserves. The debt-equity ratio continues to remain below unity and improved at 0.50 times as on March 31, 2023 (Prov) as against 0.65 times as on March 31, 2022. The total debt stood at Rs.68.48 Cr in FY2023(Prov) against Rs.81 Cr in FY2022. The debt consists of Rs.28.01 Cr long term loans and Rs.40.47 Cr short term debt. The interest coverage ratio improved to 4.40 times in FY2023(Prov) against 3.44 times in FY2022, led by increase in operating profit and lower finance cost. The net cash accruals to total debt improved in FY2023(Prov) to 0.26 times against 0.18 times in FY2022. The total outstanding liability to tangible net worth improved to 0.57 times during FY2023(Prov) as against 0.72 times in FY2022. The debt-EBITDA improved to 2.47 times in FY2023(Prov) against 3.32 times in FY2022. Acuite believes that going forward the financial risk profile of the company is likely to remain healthy backed by steady accruals and no major debt funded capex plans. Healthy order book position The outstanding order book of the company stands at Rs.601.90 Cr as of March 2023. The order book comprises of 10 ongoing orders and one order where company has received LOA. The orders in hand are to be completed in next 2-3 years, thereby providing revenue visibility in the short-medium term. The orders also have escalation clause for orders with tenor above one-year w.r.t labour and material. The increase in labour cost is compensated as per CPI and materials as per WPI. The work order comprises of widening and upgradation of National Highways, improvement and road maintenance works in Bihar and West-Bengal. The company executes entire order on its own and subcontracts semi-skilled and unskilled portion of work. The top two orders with aggregate outstanding work orders of Rs.305.49 Cr, constitutes 50.75% of the total outstanding work order. These two orders pertain to widening and upgradation of National Highway in Leh Ladhak. It was awarded in July 2021, however there were delays in commencing the project on account of delays in receiving mobilisation advances. On clientele front, major portion of orders are executed for National Highway Authority of India followed by Road Construction Department of Bihar. As the major orders are being executed for NHAI, the bills are received within 2-3 days of raising the same. On geographical front, the major portion of orders, top two order are being executed in Ladakh, followed by Bihar. |
| Weaknesses |
| Intensive Nature of Working Capital Operations
The working capital operations of the company remained intensive with Gross Current Asset days (GCA days) of 148 days in FY2023(Prov) as against 184 days in FY2022. The GCA days are led by high inventory days of 117 days in FY2023(Prov) against 140 days in FY2022. The uncertified work is classified as work in progress under inventory. The company raises the bills post the work certification and realizes the same within 2-4 days of raising bill. Hence, debtors’ days remained at 3 days during FY2023(Prov). The creditor days stood at 19 days in FY2023(Prov) against 40 days in FY2022. The credit period allowed by suppliers is usually up-to 30 days with advance payments to some. However, the fund-based working capital limit utilisation for past 6 months ending June 2023 stood moderate at 60.57%. Tender based nature of operations and competitive industry TIPPL executes government road construction/widening projects. The revenue of the company is highly dependent on the number and value of tenders floated by the Government. Since the nature of operations is tender based, the business depends on the ability to bid for contracts successfully. Acuite believes that the ability of the firm to maintain the scale of operations along with profitability would be the key rating sensitivity factor over the medium term. |
| Rating Sensitivities |
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Significant improvement in the scale of operations while maintaining the profitability.
Sustained order-book growth. Further elongation in working capital cycle. |
| All Covenants |
| Not Applicable |
| Liquidity Position |
| Adequate |
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The liquidity profile of the company continues to remain adequate with moderate cash accruals and moderately utilised bank limits. The company generated cash accruals of Rs.17.64 Cr against repayment obligation of Rs.8.26 Cr in FY2023(Prov). The working capital management of the company is intensive with GCA days at 148 days in FY2023(Prov). However, the company draws comfort from moderately utilised fund-based working capital limits which stood at 60.57% for last 6 months ending June 2023. Going ahead, the company is expected to generate cash accruals in the range of Rs.22 Cr- Rs.26.61 Cr in FY2024 & FY2025 against repayment obligation of Rs.8.72 Cr and Rs.8.16 Cr respectively.
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| Outlook:Stable |
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Acuité believes that the outlook of TIPPL will remain ‘Stable’ over the medium term on account of healthy order book which provides near-medium term revenue visibility. The outlook may be revised to 'Positive' in case of significant improvement in scale of operations while maintaining the profitability and successful execution of work orders. Conversely, the outlook may be revised to ‘Negative’ in case delay in execution of outstanding orders and delayed realization of receivables resulting in further increase in GCA days.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 260.47 | 218.33 |
| PAT | Rs. Cr. | 11.15 | 7.74 |
| PAT Margin | (%) | 4.28 | 3.55 |
| Total Debt/Tangible Net Worth | Times | 0.50 | 0.65 |
| PBDIT/Interest | Times | 4.40 | 3.44 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| Not Applicable |
| 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 categorisa"on of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow pa&erns, number of counterpar"es 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 Ra"ng Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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