| Promoters extensive experience in civil construction industry
Mr. Venkata Satish Kilaru (Managing Director), Mr. Suresh Kumar Kavuru, are the directors of the company and actively involved in the day to day operations. Both the directors are having an experience of over three decades in the civil construction industry. With promoter's extensive industry experience supported by experienced management and timely execution of projects helped the company to establish long-standing relationship with various government bodies as well as other corporate clients. VIIPL has registered Compounded annual growth rate (CAGR) of around 32 percent during past 3 years in operating income on account of increase in order execution. As of September 30, 2023, VIIPL has an unexecuted order book position of Rs. 881 Cr, which provides healthy revenue visibility. Acuité believes that healthy unexecuted order book, over two decades of civil construction expertise and strong counterparties will sustain and support the company’s business profile over the medium term.
Significant growth in operations albeit decline in margins:
The company’s operations have improved significantly during past 3 years primarily contributed by increasing orders. The revenue of VITIPL has shown Compounded Annual Growth Rate (CAGR) of 32 percent over past 3 years. During FY23 the company has reported revenue of Rs.158.23Cr against Rs.100.24Cr of previous year. Further the company has sustained similar growth in revenue during the first 6 months of FY24 with a revenue of Rs.165Cr and EBITDA margin of 10 percent. The EBITDA margin has declined to 8.93 percent during FY23 against 9.46 percent of previous year. This decline is on account of stiff competition in tendering. Going forward the margins are expected to improve marginally over the medium term.
Healthy Financial risk profile:
The financial risk profile of the company has remained healthy with healthy capital structure and debt protection metrics. The net worth of the company stood at Rs.33.85 Cr as on March 31, 2023 against Rs.27.63 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 the company remained healthy under unity over the last 3 years, during FY23 VITIPL’s gearing was marginally deteriorated to 0.66 times against 0.23 times of previous year. The deterioration is due to increase in long term debt taken for equipment. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood in at 5.00 times and 3.77 times as on March 31, 2023 respectively as against 6.67 times and 5.81 times as on March 31, 2022 respectively. TOL/TNW stood at 1.52 times and 1.40 times as on March 31, 2023 and 2022 respectively. The debt to EBITDA of the company stood at 1.45 times as on 31 March, 2023 as against 0.65 times as on 31st March, 2022. Going forward financial risk profile of the company is expected to remain healthy with absence of long term debt and expected improvement in EBITDA.
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| Moderate Working capital management:
The working capital management of the company remained moderate with moderate GCA days at 154 days as on March 31, 2023 as against 204 days as on March 31, 2022. Inventory days stood at 35 days as on 31st March, 2023 as against 41 days as on 31 March, 2022. Subsequently, the payable period stood at 45 days as on 31st March, 2023 as against 93 days as on 31st March, 2022 respectively. The debtor day stood at 64 days as on 31st March, 2023 as against 95 days as on 31st March, 2022. Further, the average bank limit utilization in the last six months ended September, 23 remained at ~62 percent for fund based and 58 percent for non-fund based. Acuite believes that working capital operations of the company will remain moderate over the medium term on account nature of operations.
High geographic and intense competition along with vulnerability to adverse price fluctuations including sizeable non-fund based exposure
VIIPL is exposed to the cyclicality inherent in the construction industry and intense competition in the tender-based contract award system, along with steep increase in input costs (steel, cement etc.), resulting in volatility in revenues and profit margins. However, its long standing promoter’s presence, past track record of timely execution of projects and established relationship with the clients led to healthy repeat order inflow. It is exposed to sizeable contingent liabilities in the form of bank guarantees (~Rs. 24 Cr as on March 31, 2023), mainly towards performance guarantee, and security deposits. Acuité believes that the ability of the company to maintain the scale of operations along with profitability would be the key rating sensitivity factor over the medium term.
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