Rating Rationale
November 24, 2017 | Mumbai
Akash Infra Projects Limited
Ratings downgraded to 'CRISIL BB+/Stable/CRISIL A4+', removed from 'Watch Negative'
 
Rating Action
Total Bank Loan Facilities Rated Rs.80 Crore
Long Term Rating CRISIL BB+/Stable (Downgraded from 'CRISIL BBB'; Removed from 'Rating Watch with Negative Implications')
Short Term Rating CRISIL A4+ (Downgraded from 'CRISIL A3+'; Removed from 'Rating Watch with Negative Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its ratings on the bank facilities of Akash Infra Projects Ltd (AIPL) to 'CRISIL BB+/CRISIL A4+' from 'CRISIL BBB/CRISIL A3+'; CRISIL has also removed the ratings from Watch with Negative Implications and assigned its 'Stable' outlook to the company's long-term facilities.
 
The downgrade follows blacklisting of AIPL by Ahmedabad Municipal Corporation (AMC) for constructing low-quality roads. As 43% of orders were from AMC, overall revenue will be impacted. Operating margin is also expected to decline over the medium term because of repairing work to be carried out for various roads damaged during monsoon, as notified by AMC; which will affect debt protection metrics. The downgrade also factors in the amount due from AMC for completed contracts and delay in realisation of same. This has affected operating cycle and may stretch liquidity.
 
The ratings reflect AIPL's established track record in the construction industry and healthy financial risk profile because of healthy networth of Rs.67.29 Cr.  These strengths are partially offset by modest scale of operations, segmental and geographical concentration in revenue, and exposure to intense competition and to risks related to tender-based business.

Key Rating Drivers & Detailed Description
Strengths
* Established track record in the construction industry
AIPL has been carrying out road work for various local bodies, such as Ahmedabad Urban Development Authority; and the Gujarat road and building departments for more than two decades. Outstanding order book of Rs 156 crore, to be executed in the next 18 months, provides revenue visibility.
 
* Healthy financial risk profile
Networth was Rs 67.29 crore as on March 31, 2017, backed by healthy accretion to reserves and equity of Rs 15.84 crore raised through a small and medium enterprise initial public offering (SME-IPO) in fiscal 2017. Gearing was robust at 0.07 time. Debt protection metrics were adequate, with net cash accrual to total debt and interest coverage ratios of 1.37 times and 5.62 times, respectively, for fiscal 2017. Though metrics will be affected by expected decline in profit levels for fiscal 2018 because of additional work carried out for repairing roads, they will remain strong over the medium term.
 
Weakness
* Modest scale of operations:
Revenue was modest at about Rs 92.38 crore in fiscal 2017, and is expected to remain at a similar level over the medium term on account of being blacklisted by AMC.
 
* Segmental and geographical concentration in revenue
Unlike other construction companies that are present in multiple segments such as commercial, residential, industrial, and infrastructure, AIPL focuses only on road construction. This, along with concentration in Gujarat, restricts growth opportunities.
 
* Risks related to tender-based business and to intense competition
Since entire income, which is primarily derived from government agencies, is tender-driven, turnover depends on ability to bid successfully. Also, the road construction and maintenance industry is highly fragmented, which puts pressure on operating margin.
Outlook: Stable

CRISIL believes AIPL will maintain its strong financial risk profile over the medium term because of low debt levels and healthy networth. The outlook may be revised to 'Positive' in case of substantial revenue growth, increase in operating profitability, and removal of the ban by AMC, while maintaining financial risk profile. The outlook may be revised to 'Negative' if increase in write-offs, stretch in receivables, and weak cash accrual due to lower-than-expected sales affects liquidity and debt protection metrics.

About the Company

AIPL was set up as a partnership firm (Akash Builders) in 1999 by Mr Yoginkumar H Patel and Mr Ambusinh P Gol in Gandhinagar, Gujarat; the firm was reconstituted as a private limited company within two months. It constructs and repairs roads in Gujarat. AIPL diversified into the hospitality business in 2007 by procuring a three-year lease on Pathikasharam, a three-star hotel in Gandhinagar, from the Government of Gujarat. In fiscal 2017, the company raised equity through an SME-IPO and was reconstituted as AIPL.
 
Profit before tax (PBT) is estimated at Rs 5.54 crore on operating income of Rs 92.48 crore for fiscal 2017; PBT was Rs 4.29 crore on operating income of Rs 72.93 crore in fiscal 2016.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs Cr. 92.48 72.93
Profit after tax Rs Cr. 4.44 3.57
PAT margin % 4.8 4.9
Adjusted debt/adjusted networth Times 0.07 0.20
Interest coverage Times 4.98 2.76

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size
(Rs. Cr)
Rating assigned
With outlook
NA Bank Guarantee NA NA NA 37 CRISIL A4+
NA Cash Credit NA NA NA 20.0 CRISIL BB+/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 23.0 CRISIL BB+/Stable
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  43  CRISIL BB+/Stable  14-08-17  CRISIL BBB/Watch Negative    No Rating Change  16-11-15  CRISIL BBB/Negative    No Rating Change  CRISIL BBB/Stable 
        24-07-17  CRISIL BBB/Stable               
Non Fund-based Bank Facilities  LT/ST  37  CRISIL A4+  14-08-17  CRISIL A3+/Watch Negative    No Rating Change    No Rating Change    No Rating Change  CRISIL A3+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 37 CRISIL A4+ Bank Guarantee 37 CRISIL A3+/Watch Negative 
Cash Credit 20 CRISIL BB+/Stable Cash Credit 20 CRISIL BBB/Watch Negative 
Proposed Long Term Bank Loan Facility 23 CRISIL BB+/Stable Proposed Long Term Bank Loan Facility 23 CRISIL BBB/Watch Negative 
Total 80 -- Total 80 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Construction Industry
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt
The Rating Process

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000
 jyoti.parmar@crisil.com

Aditya Sarda
Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000
aditya.sarda@crisil.com


Rishabh Jain
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2140
rishabh.jain@crisil.com


Nilesh Agarwal
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 79 4024 4536
Nilesh.Agarwal1@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is an agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers.

We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com 


Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY NOTICE

CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view the Company’s Customer Privacy at https://www.spglobal.com/privacy

Last updated: April 2016


DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL