CRISIL has revised its rating outlook on the long-term bank facilities of BL Kashyap and Sons Ltd (BLK) to ‘Stable’ from ‘Negative’, while reaffirming the rating at ‘A-’. The rating on the company’s short-term bank facilities and debt programme has also been reaffirmed at ‘P2’.

The rating revision reflects CRISIL’s expectation of an improvement in BLK’s business performance over the near to medium term in line with the gradually recovering business sentiment in the domestic construction (buildings) and real estate sector, as well rising orders in hand. As on May 31, 2010, the company had unexecuted orders of around Rs.28 billion including fresh orders of Rs.5.2 billion received in May 2010. BLK’s liquidity is also expected to benefit from better business prospects, lowering of debtor levels, and cash flows from the proposed monetisation of the real estate projects in its 98-per-cent subsidiary, Soul Space Projects Ltd (SSPL), most of which are in advanced stages of completion. The company’s management has indicated its intention to exit the real estate business over the medium term, and to liquidate all existing projects post their completion.

The ratings continue to be supported by BLK’s position as an established player in the construction industry, with a long track record and healthy project execution capabilities. These rating strengths are partially offset by the company’s moderate revenue diversity with limited presence in infrastructure segments, and its high working capital requirements.

For arriving at the ratings, CRISIL has combined the financials of BLK and its subsidiaries, BLK Lifestyle Ltd, Security Information Systems (India) Ltd, BLK Infrastructure Ltd, and SSPL. This is because while SSPL is the real estate arm of BLK, the other subsidiaries are engaged in allied services.

Outlook: Stable
CRISIL believes that BLK’s business levels will register gradual growth over the medium term, supported by execution of orders in hand and the improving business environment, especially for the residential sector. BLK’s financial risk profile and liquidity are also expected to gradually improve, with the monetisation of its real estate properties and better collection of receivables. The outlook may be revised to ‘Positive’ in case of better-than-expected improvement in the company’s revenues and profitability, as well as better working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of sluggish growth in revenues and profitability, and significant increase in debt levels due to further stretch in working capital levels, lower-than-expected proceeds from the sale of real estate properties, or investments in new businesses.

About the Company
BLK provides construction services in the commercial, residential, and industrial segments. Its promoters-Mr. Vinod Kashyap, Mr. Vineet Kashyap, and Mr. Vikram Kashyap—have been in this business since 1978. In 1989, the promoters incorporated BL Kashyap and Sons Pvt Ltd, into which they transferred their business; this was converted into a public limited company with the present name in 1995. In March 2006, the company raised Rs.2 billion through an initial public offering. BLK has also ventured into development of real estate projects, and allied services such as furnishing.

For 2009-10 (refers to financial year, April 1 to March 31), BLK reported a consolidated net profit of Rs.0.40 billion (Rs.0.67 billion for the previous year) on net sales of Rs.10.48 billion (Rs.13.93 billion).