CRISIL has assigned its ‘BB/Stable/P4+’ ratings to Sarada Projects Ltd’s (Sarada’s) bank facilities. The ratings reflect Sarada’s exposure to risks relating to geographical concentration in revenue profile, to small scale of operations and low project diversity, and to fluctuations in raw material prices. These rating weaknesses are partially offset by Sarada’s comfortable financial risk profile, marked by healthy gearing and debt protection measures, and the benefits that the company derives from its promoters’ experience in the construction industry.

Outlook: Stable
CRISIL believes that Sarada will maintain its low debt levels and benefit from its moderate order book. The outlook may be revised to ‘Positive’ if Sarada enhances its scale of operations substantially, and diversifies its revenue profile while maintaining its profitability. Conversely, the outlook may be revised to ‘Negative’ if the company’s profitability margins deteriorate steeply, or if it undertakes large debt-funded capital expenditure programmes, weakening its financial risk profile.

About the Company
Set up in 1991, as a partnership concern by Mr. Boppana Ramesh Kumar and his family members, Sarada (formerly, Sarada Projects), executes civil construction projects for government and quasi government departments. The projects are spread over five states namely Assam, Arunachal Pradesh, Andhra Pradesh, Madhya Pradesh and Chhattisgarh. Soma Holdings Ltd, a group company of Hyderabad-based construction company Soma Enterprises Ltd (Soma) holds 40 per cent stake in Sarada. Sarada executes projects, both on a direct as well as on joint venture with, and sub-contract basis from, Soma. Sarada had an order book of about Rs.770 million as on December 31, 2009.

Sarada reported a profit after tax (PAT) of Rs.8 million on net sales of Rs.155 million for 2008-09 (refers to financial year, April 1 to March 31) against a PAT of Rs.17 million on net sales of Rs.193 million for 2007-08.