Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 113.50 ACUITE BBB+ | Upgraded & Withdrawn -
Bank Loan Ratings 7.06 Not Applicable | Withdrawn -
Bank Loan Ratings 180.00 - ACUITE A2 | Upgraded & Withdrawn
Total Outstanding Quantum (Rs. Cr) 0.00 - -
Total Withdrawn Quantum (Rs. Cr) 300.56 - -
 
Rating Rationale

­Acuité has upgraded & withdrawn its long-term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus ) from 'ACUITE BBB' (Read as ACUITE Triple B) and Short term rating to 'Acuite A2' (read as ACUITE A two) from 'ACUITE A3+' (read as ACUITE A three plus) on the Rs. 300.56 Cr bank facilities of Vascon Limited. 

The rating withdrawal is in accordance with the Acuité's policy on withdrawal of rating. The rating is being withdrawn on account of request received from the company and NOC received from the banker.

Rationale for upgradation of rating:
The rating upgrade  considers improved performance in EPC division and continued sales traction in real estate segment of Vascon Engineers Limited (VEL). The revenue from EPC segment stood at Rs.654.05Cr in FY23 against Rs.409.28Cr of previous year implying a growth rate of ~60 percent and continued similar growth in Q1 of FY24 with a revenue of Rs.148Cr. Real estate segment has also shown decent sales traction with an average quarterly collection of Rs.12.77Cr against an average quarterly sales of Rs.19Cr during FY23. However, one of 7 ongoing projects of VEL i.e  ‘Tulips’ recorded slow sales traction and delayed collection of receivables during the past 8 months. VEL has successfully sold out one project  in last 8 months and construction of 3 out of the 7 ongoing projects is almost completed which shows limited execution risk.

The rating also draws comfort from the improving performance of VEL's subsidiary GMP technical solutions private Limited. GMP’s turnover is Rs.253.91Cr as on March 31,2023 and has achieved turnover of Rs.94Cr as per YTD figures till August, 2023. With healthy order book of Rs.350 Cr which are to be executed in next 12-18 months GMP is expected to further improve its operating income and profitability. The healthy cash flows from EPC and Real estate segment has resulted in reduction in overall debt levels to Rs.~90Cr as on June 30, 2023 of the Group. Going forward any slowdown in receivables traction from real estate segment and  infusion of debt in real estate segment leading to negative impact on overall DSCR will be key monitor able aspect.


About Company

­VEL is a Pune-based player, engaged in engineering, procurement and construction (EPC), real estate construction and development. The company was incorporated in January 1986 by Mr. Vasudevan. It commenced operations with the construction of Cipla’s Patalganga factory in November 1986. Up to 1998, the company was a real estate contractor - executing contracts for third parties. VEL’s real estate business comprises construction of residential and office complexes along with IT parks, industrial units, shopping malls, multiplexes, educational institutions and hotelsm. Under the EPC segment VEL executed construction contracts. It primarily caters to Government departments and authorities

 
About the Group

­GMP technical solutions private limited (GTSPL) is a manufacturer of cleanrooms partitions, doors, fire rated doors and other cleanroom equipment. GMP also specialises in undertaking turnkey cleanroom projects for various industries like pharmaceutical, biotechnology, semiconductors, food processing, precision engineering, automobiles and optical manufacturing . It was established in 2005, and has completed over 1300 cleanroom projects. It caters to both domestic as well as export markets. GTSPL is an ISO 9001:2015 certified company and has two manufacturing facilities at Baddi (Himachal Pradesh) and Bhiwandi (Mumbai)

 
Unsupported Rating
­Not Applicable
 

Analytical Approach

Extent of Consolidation
•Full Consolidation
Rationale for Consolidation or Parent / Group / Govt. Support

­For arriving at the ratings, Acuite has considered the consolidated financial and business risk profile of VEL along with its subsidiaries, hereinafter referred to as the ‘Vascon’. Consolidation is on account of the common management and business synergies among the group companies. Subsidiaries of the company include Marvel Housing Private Limited, Vascon Value Homes Private Limited, GMP Technical Solutions Private Limited, GMP Technical Solutions Middle East (Step Subsidiary), Almet Corporation Limited, Marathawada Realtors Private Limited, Vascon EPC Limited. Associates and Joint Ventures of VEL include Phoenix Ventures, Cosmos Premises Private Limited, Vascon Saga Construction LLP, Vascon Qatar WLL, Mumbai Estates Private Limited and Ajanta Enterprises

Key Rating Drivers

Strengths

­Established track record of operation and experienced management
Vascon is a Pune-based player, engaged in real estate construction and development. The company was incorporated in January 1986, being in the construction business for over three decades, the company has gained strong technical and design expertise. Mr. R Vasudevan is the Chairman Emeritus of the company. He is a qualified engineer - BE (Civil) – from the University of Pune and has worked with organizations such as Maharashtra Industrial Development Corporation, Hindustan Construction Company Ltd, Atul Constructions Company Ltd and Beck Engineer Company Private Ltd. Mr. Siddharth Vasudevan is the Managing Director of the company. He is a qualified engineer – with Diploma in Engineering from Sinhgad Institute of Technology and has done Bachelors of Applied Sciences in Construction Management from Singapore. The company has a strong and capable second line of management with people who have been with the company since its inception.

Steady sales in Real estate projects and improving scale of execution and order book position in EPC:
Vascon Engineers Limited (VEL) has reported sales of Rs.94.01Cr as on March 31, 20223 in real estate segment. Currently VEL has successfully sold Forest Edge project and has received all the pending receivables. VEL currently has 6 on-going projects namely Windermere, Tulips, Vascon Goodlife, Ecotower, Vascon Springs, Forest county and all the projects have been reporting decent sales. EPC segment has registered revenue of Rs.654.05Cr for FY23 against Rs.409.28Cr of previous year implying a growth rate of ~60 percent and shown similar growth in revenue during Q1 of FY24 with a revenue of Rs.148Cr. VEL has outstanding orders worth Rs1739. Cr for EPC segment which are to be executed in next 12-24 months providing healthy revenue visibility over the medium term. Acuité believes Vascon’s ability to scale up its EPC segment without significantly adverse impact on its working capital efficiency will remain a key monitorable.

Continued improvement sclae of operations in clean room partition business:
GMP technical is the subsidiary of VEL involved in manufacturing and trading of clean room partitions with three manufacturing units.  The company has registered revenue of Rs.253.91Cr for FY23 posting a growth of 28 percent against previous years’ revenue of Rs.196.41Cr. This significant growth in revenue is mainly due to healthy orders from pharma sector customers in clean room partition business. EBITDA margin of the company has improved to 9.04 percent in FY23 against 7.96 percent of previous year on account of improved realisations. GMP has outstanding orders worth Rs.350.Cr as on September , 2023 which are to be executed in next 12-18 months months providing healthy revenue visibility over the medium term.

Healthy Financial risk profile:
The financial risk profile of the group is healthy with healthy capital structure and debt protection metrics. The net worth of the company stood at Rs.923.82 Cr as on March 31, 2023 against Rs.823.83 Cr during previous year. Improvement in net worth is primarily on account of accretion of profits to the reserves during the year. The gearing of group remained healthy under unity over the last 3 years, during FY23 VEL’s gearing stood at 0.15 times against 0.19 times of previous year.

Debt protection metrics – Interest coverage ratio and over all debt service coverage ratio stood at 9.61 times and 2.22 times as on March 31, 2023 respectively. VEL has surplus cash flows from real estate  project which is evident from a DSCR of ~1.25 times in real estate segment. Healthy networth along with Low debt levels has led to improvement in TOL/TNW at 0.78 times and Debt /EBITDA  at 1.07 times as on March 31, 2023 against 0.80 times of TOL/TNW and 2.10 times Debt/ EBITDA of previous year. Going forward financial risk profile of the group is expected to remain healthy on account of  low debt levels and expected improvement in EBITDA.

Weaknesses

Vascon’s EPC operations are Working capital intensive
Vascon’s EPC operations are working capital intensive, primarily on account of high receivable which include retention money it has to keep with clients (10-15 percent). Vascon has significant receivables in the EPC segment, with recoverable due for more than 3 years amounting to Rs. 36.81Cr as on March 31, 2023. Acuité believes that the ability of the Vascon to realize the  receivables with ageing of above 3 years and faster realization of receivables from EPC projects going forward will be a key rating sensitivity.

­Susceptibility to real estate cyclicality and regulatory risks The real estate industry in India is highly fragmented with most of the real estate developers, having a city specific or region - specific presence. The risks associated with real estate industry are cyclical in nature of business (drop in property prices) and interest rate risk, among others, which could affect the operations. Vascon is exposed to the risk of volatile prices on account of frequent demand supply mismatches in the industry. The Real Estate sector is under high stress on account of large amounts of unsold inventory and high borrowing costs. This is primarily attributable to the high residential property prices due to persistent rollover of bank debt, which has a cascading effect on the overall finance costs. Given the high degree of financial leverage, the high cost of borrowing inhibits the real estate developers' ability to significantly reduce prices to augment sales growth. Further, the industry is exposed to regulatory risk, which is likely to impact players such as Vascon, thereby impacting its operating capabilities.

Rating Sensitivities
  • ­Group's ability to scale up its clean room partition operations while maintaining current profitability levels.

  • Sustaining steady sales traction in  real estate projects.

 
All covenants
­None
 
Liquidity : Adequate

VEL has adequate liquidity with surplus flow from the real-estate segment and healthy advances from customers in GMP. Currently VEL has total debt around 90Cr in as on June, 2023. The DCSR of the Vascon stood at 1.24 times. Cash inflows from EPC as well real estate segment are expected to in the range of Rs. 700 -750Cr in FY24. Bank limit utilization for EPC segment stood almost full at ~81 percent for 9 month period ended August 31, 2023. The group has unencumbered cash and bank balances of ~Rs.31Cr as on March 31, 2023 providing additional comfort towards liquidity. The overall liquidity position of the group is expected to remain adequate over the medium term on account of adequate cash flow against repayment obligations constrained to some extent by working capital intensive EPC operations.
 

 
Outlook: Stable

­Acuité believes that Vascon will maintain a 'Stable' outlook over the medium term owing to its experienced management, long operational track record and healthy EPC order book. The outlook may be revised to 'Positive' in case the company registers sustainable sales traction in their key real estate project along with higher than expected revenue from their EPC segment. Conversely, the outlook may be revised to 'Negative' in case of steep decline in sales traction in real estate project and slower than expected pick up in the EPC revenues leading to adverse impact on Vascon’s liquidity profile

 
Other Factors affecting Rating
­None
 

Particulars Unit FY 23 (Actual) FY 22 (Actual)
Operating Income Rs. Cr. 1019.38 656.86
PAT Rs. Cr. 99.41 35.92
PAT Margin (%) 9.75 5.47
Total Debt/Tangible Net Worth Times 0.15 0.19
PBDIT/Interest Times 9.61 3.06
Status of non-cooperation with previous CRA (if applicable)
­Not Applicable
 
Any Other Information
­None
 
Applicable Criteria
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
• Complexity Level Of Financial Instruments: https://www.acuite.in/view-rating-criteria-55.htm
• Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm
• Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm
• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.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

 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
25 Feb 2023 Working Capital Term Loan Long Term 11.30 ACUITE BBB | Stable (Reaffirmed)
Working Capital Term Loan Long Term 1.63 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 6.52 ACUITE BBB | Stable (Reaffirmed)
Proposed Non Convertible Debentures Long Term 86.62 (Withdrawn)
Cash Credit Long Term 53.00 ACUITE BBB | Stable (Reaffirmed)
Bank Guarantee Short Term 40.00 ACUITE A3+ (Reaffirmed)
Bank Guarantee Short Term 100.00 ACUITE A3+ (Reaffirmed)
Non Convertible Debentures Long Term 23.38 (Withdrawn)
Proposed Bank Facility Long Term 0.54 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 0.53 ACUITE BBB | Stable (Reaffirmed)
Working Capital Term Loan Long Term 2.10 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 7.40 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 10.00 ACUITE BBB | Stable (Reaffirmed)
Bank Guarantee Short Term 40.00 ACUITE A3+ (Reaffirmed)
25 Feb 2022 Working Capital Term Loan Long Term 2.10 ACUITE BBB | Stable (Reaffirmed)
Working Capital Term Loan Long Term 1.99 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 21.14 ACUITE BBB | Stable (Reaffirmed)
Bank Guarantee Short Term 40.00 ACUITE A3+ (Reaffirmed)
Cash Credit Long Term 10.00 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 3.19 ACUITE BBB | Stable (Reaffirmed)
Bank Guarantee Short Term 40.00 ACUITE A3+ (Reaffirmed)
Working Capital Term Loan Long Term 11.30 ACUITE BBB | Stable (Reaffirmed)
Proposed Non Convertible Debentures Long Term 86.62 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 7.84 ACUITE BBB | Stable (Reaffirmed)
Cash Credit Long Term 63.00 ACUITE BBB | Stable (Reaffirmed)
Non Convertible Debentures Long Term 23.38 ACUITE BBB | Stable (Reaffirmed)
Bank Guarantee Short Term 100.00 ACUITE A3+ (Reaffirmed)
17 Feb 2022 Working Capital Term Loan Long Term 2.00 ACUITE BBB | Stable (Reaffirmed)
Working Capital Term Loan Long Term 2.10 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 21.14 ACUITE BBB | Stable (Reaffirmed)
Proposed Non Convertible Debentures Long Term 86.62 ACUITE BBB | Stable (Reaffirmed)
Bank Guarantee Short Term 4.78 ACUITE A3+ (Assigned)
Bank Guarantee Short Term 40.00 ACUITE A3+ (Reaffirmed)
Non Convertible Debentures Long Term 23.38 ACUITE BBB | Stable (Reaffirmed)
Bank Guarantee Short Term 35.22 ACUITE A3+ (Reaffirmed)
Cash Credit Long Term 63.00 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 7.84 ACUITE BBB | Stable (Reaffirmed)
Term Loan Long Term 3.19 ACUITE BBB | Stable (Assigned)
Bank Guarantee Short Term 110.00 ACUITE A3+ (Reaffirmed)
Cash Credit Long Term 10.00 ACUITE BBB | Stable (Reaffirmed)
Proposed Bank Facility Long Term 1.29 ACUITE BBB | Stable (Assigned)
02 Feb 2022 Cash Credit Long Term 10.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Bank Guarantee Short Term 40.00 ACUITE A3+ (Upgraded from ACUITE A3)
Working Capital Term Loan Long Term 2.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Non Convertible Debentures Long Term 110.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Term Loan Long Term 35.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Cash Credit Long Term 63.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Working Capital Term Loan Long Term 11.30 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
Bank Guarantee Short Term 120.00 ACUITE A3+ (Upgraded from ACUITE A3)
Term Loan Long Term 10.00 ACUITE BBB | Stable (Upgraded from ACUITE BBB- | Stable)
15 Jun 2021 Term Loan Long Term 35.00 ACUITE BBB- | Stable (Reaffirmed)
Working Capital Term Loan Long Term 11.30 ACUITE BBB- | Stable (Reaffirmed)
Bank Guarantee Short Term 40.00 ACUITE A3 (Reaffirmed)
Proposed Bank Facility Long Term 110.00 ACUITE BBB- (Withdrawn)
Working Capital Term Loan Long Term 2.00 ACUITE BBB- | Stable (Reaffirmed)
Cash Credit Long Term 10.00 ACUITE BBB- | Stable (Reaffirmed)
Term Loan Long Term 10.00 ACUITE BBB- | Stable (Reaffirmed)
Cash Credit Long Term 63.00 ACUITE BBB- | Stable (Reaffirmed)
Bank Guarantee Short Term 120.00 ACUITE A3 (Reaffirmed)
Non Convertible Debentures Long Term 110.00 ACUITE BBB- | Stable (Assigned)
26 May 2021 Term Loan Long Term 10.00 ACUITE BBB- | Stable (Reaffirmed)
Cash Credit Long Term 10.00 ACUITE BBB- | Stable (Reaffirmed)
Cash Credit Long Term 63.00 ACUITE BBB- | Stable (Reaffirmed)
Term Loan Long Term 35.00 ACUITE BBB- | Stable (Reaffirmed)
Working Capital Term Loan Long Term 11.30 ACUITE BBB- | Stable (Reaffirmed)
Working Capital Term Loan Long Term 2.00 ACUITE BBB- | Stable (Reaffirmed)
Bank Guarantee Short Term 40.00 ACUITE A3 (Reaffirmed)
Proposed Bank Facility Long Term 110.00 ACUITE BBB- | Stable (Reaffirmed)
Bank Guarantee Short Term 120.00 ACUITE A3 (Reaffirmed)
17 May 2021 Bank Guarantee Short Term 120.00 ACUITE A3 (Reaffirmed)
Cash Credit Long Term 63.00 ACUITE BBB- | Stable (Reaffirmed)
Term Loan Long Term 3.19 ACUITE BBB- | Stable (Assigned)
Proposed Bank Facility Short Term 2.81 ACUITE A3 (Assigned)
Term Loan Long Term 10.00 ACUITE BBB- | Stable (Reaffirmed)
Bank Guarantee Short Term 40.00 ACUITE A3 (Reaffirmed)
Proposed Bank Facility Long Term 110.00 ACUITE BBB- | Stable (Reaffirmed)
Term Loan Long Term 35.00 ACUITE BBB- | Stable (Reaffirmed)
Working Capital Term Loan Long Term 1.00 ACUITE BBB- | Stable (Assigned)
Working Capital Demand Loan Long Term 6.30 ACUITE BBB- | Stable (Assigned)
Cash Credit Long Term 10.00 ACUITE BBB- | Stable (Reaffirmed)
24 Mar 2020 Cash Credit Long Term 63.00 ACUITE BBB- | Negative (Reaffirmed)
Term Loan Long Term 10.00 ACUITE BBB- | Negative (Assigned)
Term Loan Long Term 110.00 ACUITE BBB- | Negative (Assigned)
Bank Guarantee Short Term 120.00 ACUITE A3 (Reaffirmed)
Term Loan Long Term 35.00 ACUITE BBB- | Negative (Assigned)
Bank Guarantee Short Term 40.00 ACUITE A3 (Reaffirmed)
Cash Credit Long Term 10.00 ACUITE BBB- | Negative (Reaffirmed)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
Catholic Syrian Bank Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 40.00 Simple ACUITE A2 | Upgraded & Withdrawn
Union Bank of India Not Applicable Bank Guarantee/Letter of Guarantee Not Applicable Not Applicable Not Applicable 40.00 Simple ACUITE A2 | Upgraded & Withdrawn
State Bank of India Not Applicable Bank Guarantee/Letter of Guarantee Not Applicable Not Applicable Not Applicable 100.00 Simple ACUITE A2 | Upgraded & Withdrawn
Union Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 10.00 Simple ACUITE BBB+ | Upgraded & Withdrawn
State Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 53.00 Simple ACUITE BBB+ | Upgraded & Withdrawn
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 0.54 Simple Not Applicable|Withdrawn
ICICI Home Finance Company Limited Not Applicable Term Loan Not available Not available Not available 6.52 Simple Not Applicable|Withdrawn
MERCEDES-BENZ FINANCIAL SERVICES INDIA PRIVATE LIMITED (ERSTWHILE DAIMLER FINANCIAL SERVICES INDIA PRIVATE LIMITED) Not Applicable Term Loan Not available Not available Not available 0.53 Simple ACUITE BBB+ | Upgraded & Withdrawn
TATA Capital Financial Service Ltd. Not Applicable Term Loan Not available Not available Not available 7.40 Simple ACUITE BBB+ | Upgraded & Withdrawn
Aditya Birla Capital Not Applicable Term Loan Not available Not available Not available 27.54 Simple ACUITE BBB+ | Upgraded & Withdrawn
Union Bank of India Not Applicable Working Capital Term Loan Not available Not available Not available 1.63 Simple ACUITE BBB+ | Upgraded & Withdrawn
State Bank of India Not Applicable Working Capital Term Loan Not available Not available Not available 2.10 Simple ACUITE BBB+ | Upgraded & Withdrawn
State Bank of India Not Applicable Working Capital Term Loan Not available Not available Not available 11.30 Simple ACUITE BBB+ | Upgraded & Withdrawn

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