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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 50.00 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 104.00 | - | ACUITE A3+ | Assigned |
| Total Outstanding | 154.00 | - | - |
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Rating Rationale |
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Acuite has assigned its long-term rating of ‘ACUITÉ BBB' (read as ACUITE triple B) and short-term rating of ‘ACUITÉ A3+’ (read as ACUITE A three plus) on the Rs. 154.00 Cr. bank facilities of VDB Projects Private Limited (VPPL). The outlook is ‘Stable’.
Rationale for rating The rating assigned reflects the established track record of operations and experience of the directors in the industry. It also reflects the improvement in the operating income which stood at Rs 268.82 Cr. in FY24(Prov.) as against Rs 140.18 Cr. in FY23. The rating also factors in the healthy financial risk profile of the company marked by healthy networth, low gearing levels and average debt protection metrics. Further, it considers the adequate liquidity position of the company supported by healthy cash accruals generation and moderate reliance on working capital limits. However, the rating is constrained due to susceptibility of operating margin to volatility in input material prices and labour charges, concentrated order book position and moderately intensive working capital management. |
| About the Company |
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VDB Projects Private Limited was incorporated in 2005. The company is engaged in the business of infrastructure development, construction and project management pertaining to roads and highways, irrigation systems and water drains. The company has its registered office in Bangalore, Karnataka. The directors of the company are Ms. Sridevi Mekapati, Mr. Mekapati Abhishek Reddy and Mr. Mekapati Abhinav Reddy.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuité has considered standalone business and financial risk profiles of VDB Projects Private Limited (VPPL) to arrive at the rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management and healthy order book-
The company is managed by Mr. Mekapati Abhishek Reddy and Mr. Mekapati Abhinav Reddy, along with Ms. Sridevi Mekapati and a team of experienced personnel. The directors have around two decades of experience in construction business. It has successfully completed various projects with a number of reputed counterparties like NHAI, MoRTH, GHM, BBMP to name a few. Acuité believes that the long track record and rich experience of the directors’ augur well for the relationship with their key suppliers and customers. The company has healthy order book position with unexecuted orders in hand worth of around Rs. 1012 Cr. which are to be executed in next 24-30 months, thereby providing revenue visibility over the medium term. Out of which Rs. 678 Cr. belongs to a contract secured from National Highways Authority India. VPPL has established Katakiya Expressway Private Limited as an SPV for executing the HAM Project. The company has achieved a revenue of Rs 268.82 Cr. in FY 2024(Prov.) as against Rs 140.18 Cr. in FY2023. Further, the company recorded revenue of Rs.81.16 Cr. till August 2024 in the current financial year. Acuité believes that the VPPL shall continue to benefit from established track record of operations and healthy order book position. Healthy financial risk profile The financial risk profile of the company is healthy marked by healthy net worth, low gearing, and average debt protection metrics. The net worth of the company stood at Rs.166.40 Cr. in FY 2024(Prov.) as compared to Rs 144.92 Cr. in FY2023. The increase in net-worth is majorly due to the accretion of profits to the reserves. The company follows a conservative leverage policy. The gearing of the company stood at 0.45 times in FY2024(Prov.) as compared to 0.43 times in FY2023. The gearing is expected to remain at similar levels over the medium term on account of absence of any debt funded capex plans and modest incremental working capital requirements. The TOL/TNW of the company stood at 0.52 times in FY2024(Prov.) as against 0.45 times in FY2023. Further, debt protection metrics stood moderate with Interest coverage ratio (ICR) stood at 3.82 times as on 31st March 2024(Prov.) as against 3.83 times as on 31st March 2023. The debt service coverage ratio (DSCR) of the company stood at 1.69 times as on 31st March 2024(Prov.) as compared to 2.52 times in the previous year. The net cash accruals to total debt (NCA/TD) stood at 0.35 times as on 31st March 2024(Prov.) as compared to 0.21 times in the previous year. Acuite believes the financial risk profile of the company may continue to remain healthy on account of expected steady net cash accruals and absence of any major debt-funded capex over the near term. |
| Weaknesses |
| Concentrated Order Book
VPPL has an unexecuted order book of approximately Rs.1012 crore. The company faces a high level of concentration, with around 67% of its unexecuted orders coming from a single client, the National Highways Authority of India (NHAI), valued at Rs.678 crores. Further, the appointment date for this order is yet to be received. Around 77% of land acquisition is complete and appointment date is expected post completion of 80% land acquisition. The concentration risk, however, is mitigated by the long-standing relationship between VPPL and NHAI. Moderately intensive working capital management The working capital operations of the company are moderately intensive in nature marked by GCA days of 188 days in FY2024(Prov.) against 317 days in FY2023. The debtors’ collection period stood at 68 days in FY2024(Prov.) as against 82 days in FY2023. The inventory days for the company stood at 77 days in FY2024(Prov.) as against 132 days in FY2023. Also, the creditors days stood at 4 days in FY2024(Prov.) as well as in FY2023. Furthermore, the average utilization of working capital limits remained moderate averaging around 58% over the last 12 months ending June 2024 for fund based and around 75% for Non fund based Limitsover the last12 months ending June 2024. Acuite believes that the working capital operations of the company will continue to remain in similar range due the nature of its business. Susceptibility of operating margin due to volatility in input material prices and labour charges The basic input materials for execution of construction projects and works contracts are steel, stone chips, cement, and structures etc. The prices of which are highly volatile. However, currently government agencies’ work contracts have price escalation clause which mitigate price volatility risk to some extent. Furthermore, the operating margin of the company is exposed to sudden spurt in the input material prices along with increase in labour prices being in labour intensive industry. |
| Rating Sensitivities |
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Improvement in scale of operation while maintaining the profitability margins. Timely execution of orders. Timely receipt of the appointment date for the NHAI order. Sustenance of healthy financial risk profile. |
| Liquidity Position |
| Adequate |
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The company’s liquidity position is adequate. It generated sufficient net cash accruals of Rs. 25.83 Cr. in FY2024(Prov.) as against its maturity debt obligations of Rs. 10.83 Cr. during the same tenor. Further, it is expected to generate sufficient cash accruals in the range of Rs. 33.04 – Rs.38.94 crore as against maturing repayment obligations of around Rs.15.47 – Rs.15.69 crore over the medium term. The working capital management of the firm is moderately intensive marked by GCA days of 188 days in FY2024(Prov.) as against 317 days in FY2023. The current ratio stands at 3.26 times as on 31st March 2024(Prov.) as against 3.98 times as on 31st March 2023. The cash and bank balance stood at Rs. 15.93 Cr. in FY2024(Prov.).
Acuite believes that company's liquidity position would remain adequate over the medium term on account of expected steady cash accruals and buffer available from the moderately utilised working capital limits. |
| Outlook: Stable |
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Acuite believes the outlook on VPPL will continue to remain ‘Stable’ over the medium term backed by its long track record of operations and experienced management along with healthy order book position and financial risk profile. The outlook may be revised to ‘Positive’ if the company is able to successfully acquire higher orders which will lead to significant improvement in scale of operations and the profitability margins while also improving its working capital operations. Conversely, the outlook may be revised to ‘Negative’ in case of any operating inefficiency by VPPL, significant delays in execution of its orders leading to deterioration in revenue and profitability along with financial risk profile and liquidity position of the company.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 268.82 | 140.18 |
| PAT | Rs. Cr. | 12.60 | 5.14 |
| PAT Margin | (%) | 4.69 | 3.67 |
| Total Debt/Tangible Net Worth | Times | 0.45 | 0.43 |
| PBDIT/Interest | Times | 3.82 | 3.83 |
| Status of non-cooperation with previous CRA (if applicable) |
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CRISIL, vide its press release dated August 13, 2024 had denoted the rating to VDB Projects Private Limited (VPPL) as 'CRISIL BB+ /Stable /CRISIL A4+' (Downgraded & Issuer Not Cooperating). |
| Any other information |
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None
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| 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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| Rating History : |
| Not Applicable |
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