CRISIL has assigned its ‘BB/Stable/P4+’ ratings to Varks Engineers Private Ltd’s (VEPL’s) bank facilities. The ratings reflect the limited diversity in VEPL’s revenue profile, its working-capital-intensive operations, and exposure to intense competition in the civil construction segment. These rating weaknesses are partially offset by VEPL’s sound track record in the segment aided by the extensive experience of the promoters, strong order book, and moderate financial risk profile.

Outlook: Stable
CRISIL believes that VEPL will maintain a stable business risk profile over the medium term, backed by a strong order book. The outlook may be revised to ‘Positive’ if the diversification of revenues across segments, and improved revenue visibility help strengthen VEPL’s business risk profile. Conversely, the outlook may be revised to ‘Negative’ if delays in recovery of receivables impact VEPL’s financial risk profile, or if large debt-funded capital expenditure weakens its capital structure.

About the Company
Set up in 1996 as a partnership firm, VEPL (formerly Varks Engineers) was reconstituted as a private limited company in 2005. VEPL is a closely held company managed by Mr. Nimma Sudarshan Reddy, its promoter-director. It undertakes civil engineering and construction projects, and specialises in underground and tunnelling work, hydropower and lift-irrigation projects, and construction of special-purpose structures.

VEPL reported a profit after tax (PAT) of Rs.43.90 million on net sales of Rs.871.90 million for 2008-09 (refers to financial year, April 1 to March 31) against a PAT of Rs.40.20 million on net sales of Rs.748.90 million for 2007-08.