Rating Rationale
September 28, 2018 | Mumbai
Alphageo (India) Limited
Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2'
 
Rating Action
Total Bank Loan Facilities Rated Rs.109 Crore
Long Term Rating CRISIL BBB+/Stable (Upgraded from 'CRISIL BBB/Positive')
Short Term Rating CRISIL A2 (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 (AGIL; part of Alphageo group) to 'CRISIL BBB+/Stable/CRISIL A2' from 'CRISIL BBB/Positive/CRISIL A3+'.
 
The upgrade reflects significant improvement in the Alphageo group's business and financial risk profiles, backed by healthy revenue growth and operating margin while working capital cycle has been stable. Operating income grew 40% to Rs 429 crore in fiscal 2018, and should grow at 5-10% in fiscal 2019 as well. Operating margin was healthy at 28.6% in fiscal 2018, despite declining from 33.4% earlier. Return on capital employed was 37.8%. Debt protection metrics are comfortable, with interest coverage and net cash accrual to total debt ratios of 22 and 1.83 times, respectively. Unexecuted orders of Rs 827 crore support revenue visibility for the next two fiscals. Inflow of orders and the time taken to complete them will, nevertheless, be closely monitored over the medium term.
 
The ratings continue to reflect the promoters' extensive experience, and the group's established position in the onshore seismic survey services industry, moderate revenue visibility, and healthy financial risk profile. These rating strengths are partially offset by seasonality in operations, volatility in cash flows, and susceptibility to risks relating to tender-driven businesses, and unfavourable government policies.

Analytical Approach

For arriving at the ratings CRISIL has considered the consolidated the financials of AGIL and its wholly owned subsidiaries Alphageo International Ltd (Dubai) and Alphageo DMCC (Dubai), and 74% subsidiary, Alphageo Marine Services Pvt Ltd.

Key Rating Drivers & Detailed Description
Strengths
* Established market position in the onshore seismic survey services and extensive experience of the promoters:
AGIL is the largest onshore seismic survey services provider in India for oil exploration and production companies with a long track record of almost three decades of operation. The company has demonstrated strong execution capabilities and is also equipped with the latest technology resulting in repeat orders from the existing customers and new orders from prospective customers. The Company has also built healthy relationship with the key clients such as Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL). Extensive experience of the company and healthy relationship with the key clients will continue to support the business risk profile.
 
* Moderate revenue visibility:  Unexecuted orders of Rs 827 crore as on March 31, 2018 support revenue visibility for the forth coming years.

* Healthy financial risk profile: Networth was healthy at Rs 229.6 crore while the gearing and total outside liabilities to tangible networth ratios were comfortable at 0.2 time and 0.58 time respectively on March 31, 2018. The debt protection metrics are robust: interest coverage and net cash accrual to total debt ratios were 22 times and 1.83 times, respectively, in fiscal 2018.
 
Weakness
* 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, major portion of the revenue is achieved 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.
 
* Susceptibility to tender based operations and government policies 
Despite the moderate revenue visibility for the next two years, future revenue growth will continue to depend on ability to win orders and on the government policies and investment decisions which drive orders in this segment. Any policy changes or lower spending on exploration and production (probably due to lower crude prices) can significantly impact revenue and profitability.
Outlook: Stable

CRISIL believes the Alphageo group will continue to benefit from its moderate unexecuted orders and strong project execution capabilities. The outlook may be revised to 'Positive' if healthy inflow of orders and their timely execution considerably strengthen key credit metrics. The outlook may be revised to Negative if delays in order execution, significant stretch in receivables, or any large capital expenditure or support extended to affiliates weakens the financial risk profile, especially liquidity.

About the Company

AGIL was incorporated in 1987 by Mr Dinesh Alla and his family. The company provides seismic-data acquisition and processing services to oil and gas exploration companies. It is based in Hyderabad. AGIL is listed on the Bombay Stock Exchange and National Stock Exchange of India Ltd. Alphageo International Ltd and Alphageo DMCC, are based in Dubai and also undertake seismic survey activities.
 
Alphageo Marine Services Pvt Ltd was incorporated in October, 2017 to undertake marine or aerial geophysical survey services. However currently there are no operations in the company.

Key Financial Indicators
Particulars Unit 2018 2017
Revenue Rs. Cr. 429.4 305.9
Profit After Tax Rs. Cr. 54.5 50.6
PAT margins % 12.7 16.5
Adjusted Debt/Adjusted Net worth Times 0.2 0.29
Interest coverage Times 22 24.9

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 69 CRISIL A2
NA Cash Credit NA NA NA 40 CRISIL BBB+/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  40.00  CRISIL BBB+/Stable      12-09-17  CRISIL BBB/Positive  04-08-16  CRISIL BBB-/Positive  25-11-15  CRISIL BBB-/Stable  CRISIL BB+/Stable 
            13-01-17  CRISIL BBB-/Positive      18-11-15  CRISIL BBB-/Stable   
                    16-11-15  CRISIL BBB-/Stable   
Non Fund-based Bank Facilities  LT/ST  69.00  CRISIL A2      12-09-17  CRISIL A3+  04-08-16  CRISIL A3  25-11-15  CRISIL A3  CRISIL A4+ 
            13-01-17  CRISIL A3      18-11-15  CRISIL A3   
                    16-11-15  CRISIL A3   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 69 CRISIL A2 Bank Guarantee 69 CRISIL A3+
Cash Credit 40 CRISIL BBB+/Stable 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
Rating Criteria for Upstream Oil and Gas Sector
CRISILs Criteria for rating short term debt

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