Rating Rationale
September 12, 2017 | Mumbai
Alphageo (India) Limited
Ratings upgraded to 'CRISIL BBB/Positive/CRISIL A3+'
Rating Action
Total Bank Loan Facilities Rated Rs.109 Crore
Long Term Rating CRISIL BBB/Positive (Upgraded from 'CRISIL BBB-/Positive')
Short Term Rating CRISIL A3+ (Upgraded from 'CRISIL A3')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its ratings on the bank loan facilities of Alphageo (India) Limited to 'CRISIL BBB/Positive/CRISIL A3+' from 'CRISIL BBB-/Positive/CRISIL A3'.
The rating upgrade reflects CRISIL's belief that business and financial risk profile of the company will further strengthen on back of its healthy unexecuted order book, healthy growth in its revenues and a stable operating profitability margins. Alphageo has a strong unexecuted order book of Rs.1217 crores as on August 31,2017 providing revenue visibility over the ensuing medium term. The healthy growth in revenues is on account of strong execution of its order book. Improved scale and profitability coupled with no major debt funded capex is expected to support its financial flexibility.  Execution of orders with no time overruns will be key rating factor over medium term. The financial risk profile is expected to remain healthy going forward driven by steady cash generation and comfortable operating profit margin. The gearing remained comfortable at 0.5 times as on March 31, 2017, and debt protection metrics were healthy, with interest coverage and net cash accrual to total debt ratios at 27.4 times and 0.82 times, respectively for fiscal 2017. This will support incremental working capital requirement, resulting in lower dependence on working capital borrowing.
The ratings continue to reflect the benefits derived from the extensive industry experience of the Company and its promoters and its healthy order book aiding revenue visibility over the medium term. The ratings also factor in its healthy financial risk profile because of a healthy net worth, low total outside liabilities to tangible net worth ratio, and robust debt protection metrics. These rating strengths are partially offset by the seasonal nature of the company's operations leading to volatility in cash flows.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of AIL and it's wholly owned subsidiaries, Alphageo International Ltd and Alphageo DMCC. All these companies, together referred to as the Alphageo group, are engaged in similar activities.

Key Rating Drivers & Detailed Description
* Extensive industry experience of the Company and its promoters
Alphageo group also benefits from the extensive experience of the promoters and its established track record in the on-shore seismic services sector. The promoter of the company, Mr. Dinesh Alla, has been in seismic survey industry from over 3 decades. This has helped the group in building relationship with clients such as, Oil and Natural Gas Corporation (ONGC), Oil India Limited (OIL), Bharat Petro Resources Limited (BPRL) etc. and has been dealing with these companies for more than ten years.
* Healthy order book:  AIL has a healthy order book of Rs.1217 crores, as on August 31, 2017 aiding healthy revenue visibility over the medium term.

* Strong financial risk profile: AIL has a healthy financial risk profile marked by healthy networth of Rs 168 Crore and  gearing at 0.5 times, driven by healthy cash accruals and lower dependence on external debt. The gearing is expected to remain healthy over the medium term as there are no significant debt-funded capital expenditure (capex) plans. The debt protection metrics are robust: interest coverage and net cash accrual to total debt ratios were 27.4 times and 0.82 times, respectively, for fiscal 2017. 
* Seasonal nature of operations leading to volatility in cash flows.
Seismic data acquisition activity is carried out at slower pace during the monsoon season as it impedes the movement of men, material, and equipment and the quality of the seismic data being acquired. In view of the above stated operational constraints, most of the works are awarded and executed in the first and last quarters of every financial year, though the third quarter sees executions in small proportions. This seasonality nature of operations leads to volatility in cash flows.
Outlook: Positive

CRISIL believes Alphageo's business risk profile will continue to benefit over the medium term from healthy order book and execution capabilities. The ratings may be upgraded in case of a significant increase in scale of operations while the working capital cycle and capital structure are maintained. The ratings may be downgraded in case of any delay in order execution, larger-than-expected debt-funded capex, or a stretched working capital cycle, leading to weakening of the financial risk profile.

About the Group

AIL was set up in 1987 by Mr Dinesh Alla and his family members. The company provides seismic-data acquisition and processing services to oil and gas exploration companies. It is based in Hyderabad. Alphageo International Ltd and Alphageo DMCC, are based in Dubai and also undertake seismic survey activities.
AIL has recorded PAT of Rs.50.6 Cr on operating income of Rs.305.1 Cr for the fiscal 2017 vis-a-vis PAT of Rs.11.6 Cr on operating income of Rs.89.4 Cr for the fiscal 2016.

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs. Cr. 305.1 89.4
Profit After Tax Rs. Cr. 50.6 11.6
PAT Margins % 16.6 13
Adjusted Debt/Adjusted Net worth Times 0.54 0.02
Interest coverage Times 27.4 40.1

Status of non cooperation with previous CRA: AIL has not cooperated with ICRA Limited which has Classified it as Non Cooperative vide release dated April 06,2017. The reason provided by ICRA Limited is non-furnishing of information required for monitoring of ratings.

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)
Assigned with
NA Bank Guarantee NA NA NA 69 CRISIL A3+
NA Cash Credit NA NA NA 40 CRISIL BBB/Positive
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  40  CRISIL BBB/Positive    No Rating Change  04-08-16  CRISIL BBB-/Positive  16-11-15  CRISIL BBB-/Stable  20-11-14  CRISIL BB+/Stable  -- 
Non Fund-based Bank Facilities  LT/ST  69  CRISIL A3+    No Rating Change    No Rating Change  16-11-15  CRISIL A3  20-11-14  CRISIL A4+  -- 
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 69 CRISIL A3+ Bank Guarantee 69 CRISIL A3
Cash Credit 40 CRISIL BBB/Positive Cash Credit 40 CRISIL BBB-/Positive
Total 109 -- Total 109 --
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
Criteria for rating Short-Term Debt (including Commercial Paper)

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