Press Release October 28, 2024 VIJAY BUILDERS AND CONSTRUCTIONS PRIVATE LIMITED Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	8.50	ACUITE BB | Stable | Reaffirmed	-
Bank Loan Ratings	6.50	-	ACUITE A4+ | Reaffirmed
Total Outstanding	15.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

­Acuite has reaffirmed its long term rating of ‘ACUITE BB’ (read as ACUITE double B) and short term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs 15.00 Cr. bank facilities of Vijay Builders and Constructions Private Limited (VBCPL). The outlook is ‘Stable’. Rationale for reaffirmation The rating reaffirmation considers VBCPL’s overall improved financial risk profile, particularly the debt coverage indicators and gearing levels, primarily on account of lower finance cost and debt levels. However, the revenue and profitability of the company declined in FY2024. The revenue declined to Rs. 31.86 Cr. in FY2024 from Rs. 36.54 Cr. in FY2023 because of lower orders in hands and delay in billing from customers. The operating margin of the company declined to 2.30 percent in FY2024 from 3.02 percent in FY2023. However, these strengths are partially offset by the working capital-intensive nature of operations and competition in the industry due to tender based nature of operations along with susceptibility of margins to volatility in raw material prices.

About the Company

­VBCPL is a Mumbai based company currently promoted by Mr. Suneel Alreja, Mr. Karan Alreja and Mr. Abhishek Alreja. Mr. Vashdev Alreja is the father of the current promoters who started the business as a contractor in 1978 as a sole proprietorship concern, and reconstituted as a private limited company in 2006. VBCPL is engaged in civil construction and primarily undertakes contracts for oil and gas PSUs in the states of Kerala, Karnataka, Madhya Pradesh, Chhattisgarh, Goa, Gujarat, Haryana, Maharashtra and Orissa.

Unsupported Rating

­Not Applicable

Analytical Approach

­­Acuité has considered the standalone business and financial risk profile of VBCPL to arrive at the rating.

Key Rating Drivers

Strengths

­Established track record of operations and experienced management VBCPL was incorporated in year 1978 and has an established presence of over four decades in this line of business. The company is promoted by Mr. Suneel Alreja, Mr. Karan Alreja and Mr. Abhishek Alreja with over three decades of experience in construction industry. They have also developed strong and healthy relationship with reputed customers such as, Bharat Petroleum Corporation Ltd (BPCL) and G.R. Engg Pvt. Ltd. (ONGC), among others. 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 is moderate marked by moderate net worth, low gearing, and healthy debt protection metrics. The net worth of the company stood at Rs.11.48 Cr. in FY 2024, as against Rs.11.08 Cr. in FY2023. The total debt of the company stood at Rs.2.18 Cr., which includes Rs.0.20 crore of long-term debt, Rs.1.90 Cr. of unsecured loans and Rs.0.09 Cr. of short-term debt as on March 31, 2024.The gearing of the company stood healthy at 0.19 times as of March 31, 2024 as compared to 0.53 times as of March 31, 2023. The TOL/TNW of the company stood at 0.58 times as of March 31, 2024 as against 1.06 times as of March 31, 2023. Further, the debt protection metrics stood healthy reflected by Interest coverage ratio (ICR) of 30.35 times in FY24 as against 2.19 times in FY 2023. The debt service coverage ratio (DSCR) of the company stood at 4.92 times in FY2024  as compared to 1.96 times in the previous year. The improvement in debt protection metrics in on account of lower finance cost incurred during the year. Further, the Debt-Ebidta of the company stood improved at 2.83 times in FY2024 as against 4.68 times in FY2023. The net cash accruals to total debt (NCA/TD) stood at 0.27 times in FY2024 as against 0.09 times in FY2023. Acuite believes that the financial risk profile of VBCPL will continue to remain moderate over the medium term in the absence of any major debt-funded capital expenditure.

Weaknesses

Intensive nature of working capital operations The working capital operations of the company is intensive, marked by GCA days of 187 days in FY2024 as against 211 days in FY2023. The debtor’s collection period stood at 24 days in FY2024 as against 51 days in FY2023. The average contract execution cycle ranges between 6 months to 18 months. The billing is done on running basis at frequent intervals. The payment is received post 15-30 days of issuing the bills. The inventory days stood at 71 days in FY2024 as against 91 days in FY2023.The creditors days stood at 42 days in FY2024  as against 67 days in FY2023. Generally, the company gets 30 days credit period from its suppliers. However, the average utilization of working capital for fund-based limits remained moderate, averaging around 76% over the last 6 months ending Sep 2024. Acuité believes that the ability of the company to manage its working capital operations efficiently will remain a key rating sensitivity. ­Highly Competitive Industry with Susceptibility of margins to volatility in raw material prices The infrastructure is a fairly fragmented industry with a presence of few large pan India players. The company faces stiff competition with its competitors in procuring orders through bidding, immense competition for procuring tenders leads to very competitive pricing which in turn lead to stress on the margins. Further, VBCPL margins are susceptible to volatility in raw material prices. The key raw material required is fuel, cement, steel and iron, metal, concrete, to name a few. The company procures substantial portion of raw materials from local suppliers based on proximity to the construction site. Adverse changes in prices may affect the profitability of the company.

Rating Sensitivities

­Ability to sustain steady growth in scale of operations and profitability, while improving the financial risk profile. Any elongation of the working capital cycle leading to deterioration in debt protection metrics.

Liquidity Position

Adequate

The company’s liquidity position is adequate marked by sufficient accruals generation against its repayment obligations. The company generated average net cash accruals of Rs. 0.59 Cr. in FY2024 against repayment obligation of Rs. 0.10 Cr. Further, it is expected to generate average cash accrual in the range of Rs.0.80-1 Cr. against nominal repayment obligation over the medium term. The working capital operations of the company are intensive in nature marked by GCA days of 187 days in FY2024 along with moderate reliance on working capital limits with average utilisation of ~76% over the last 6 months ending Sep 2024.The company maintains unencumbered cash and bank balances of Rs.0.40 Cr. as on March 31, 2024 . The current ratio stands at 3.54 times as on March 31, 2024 as against 2.50 times as on 31 March, 2023. Going ahead, the liquidity is expected to remain adequate on account of moderate cash accrual generation and buffer available from moderately utilised working capital limits.

Outlook: Stable

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Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	31.86	36.54
PAT	Rs. Cr.	0.40	0.39
PAT Margin	(%)	1.25	1.08
Total Debt/Tangible Net Worth	Times	0.19	0.53
PBDIT/Interest	Times	30.35	2.19

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

Not Applicable

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 31 Jul 2023 Secured Overdraft Long Term 3.00 ACUITE BB | Stable (Reaffirmed) Proposed Long Term Bank Facility Long Term 5.50 ACUITE BB | Stable (Reaffirmed) Bank Guarantee/Letter of Guarantee Short Term 6.50 ACUITE A4+ (Reaffirmed) 12 May 2022 Secured Overdraft Long Term 3.00 ACUITE BB | Stable (Reaffirmed) Bank Guarantee/Letter of Guarantee Long Term 12.00 ACUITE BB | Stable (Reaffirmed) 19 Feb 2021 Bank Guarantee (BLR) Long Term 12.00 ACUITE BB | Stable (Reaffirmed) Secured Overdraft Long Term 3.00 ACUITE BB | Stable (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 Canara Bank Not avl. / Not appl. Bank Guarantee/Letter of Guarantee Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 6.50 Simple ACUITE A4+ | Reaffirmed Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 5.50 Simple ACUITE BB | Stable | Reaffirmed Canara Bank Not avl. / Not appl. Secured Overdraft Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 3.00 Simple ACUITE BB | Stable | Reaffirmed

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Contacts

Mohit Jain Senior Vice President - Rating Operations Apurva Kumari Associate Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@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. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.