| BSR Infratech India Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB+/Stable/CRISIL A2’ ratings on the bank facilities of BSR Infratech India Limited (BSR).
The ratings continue to reflect the extensive experience of the promoters in the civil construction industry and strong project execution capability, and the moderate financial risk profile. These strengths are partially offset by large working capital intensive requirements and exposure to geographical concentration risk in revenue and tender based operations. |
Key Rating Drivers & Detailed Description Strengths:
The promoter, Mr B Srinivasa Rao, has experience of over two decades in the construction industry. Aided by his extensive experience, the company has established strong project execution capabilities and long relationships with key stakeholders in the industry.
The company has a large unexecuted order book of around ~ Rs 3495 crore (4.5 times the revenue of FY 2021), as on June 30, 2021, to be executed largely in Karnataka, assuring healthy revenue visibility over the medium term. These orders are expected to be executed over the next 24 - 48 months, and provide a strong revenue visibility to the company. The company has unexecuted orders worth Rs 2455 crore, in the Andhra Pradesh capital region of Amaravati. However, these projects have not be executed since May 2019 and are stuck at various stages on account of absence in clarity from Andhra Pradesh government over the approvals. The management has, however, been able to increase its order book in Karnataka and maintain its revenue profile. Strong operating capability and healthy asset base will help the company benefit from the increased government spending on road infrastructure, particularly in the state of Karnataka.
Financial risk profile remains supported by moderate capital structure and debt protection metrics. Capital structure, reflected by TOLTNW at 2.1 times as on 31st March, 2021 remained moderate due to longer working capital cycle and higher reliance on bank debt. With disruptions in economy due to the pandemic, the company’s working capital cycle remained stretched in fiscal 2021. However, with recovery in this fiscal, the company’s ability to focus on collections and improve its working capital cycle remains a key monitorable. Interest coverage remains moderate at about 3 times for fiscal 2021 and is expected to remain in this level over the medium term.
Weaknesses:
The company has a large working capital requirement, reflected in gross current asset (GCA) days on 224 days as on 31 March, 2021. High GCA is mainly on account of long collection cycle witnessed in fiscal 2021 on account of pending debtors’ from partially executed projects in Andhra Pradesh and stretch in collections from existing customers on account of the pandemic. Debtors’ outstanding of Rs 381 crore as on 31 March, 2021, includes Rs 96 crore of pending debtors’ from Andhra Pradesh. The company remains exposed to projects awarded by Amaravati Development Corporation Limited (ADCL) and Andhra Pradesh Capital Region Development Authority (APCRDA; 'CRISIL A+(CE)/Watch Negative'), which remain halted from May 2019. With no major clarity on these projects, realization of these debtors’ outstanding will be unlikely in the medium term. Nevertheless, the collection cycle for its counterparties in Karnataka is likely to improve with recovery in economy in this fiscal and therefore, CRISIL Ratings believe that the debtors’ outstanding days will improve to 165 - 170 days in the medium term. Further, the company does not intend to execute the projects or increase its exposure any further as uncertainty is expected to remain until the Andhra Pradesh government clears the ambiguity surrounding these projects. This is also not expected to add any further debtors outstanding from the counterparties in Andhra Pradesh.
The company's order book is largely skewed towards Karnataka. Any slowdown in project announcements by the governments of this state, or extraneous factors such as socio-political unrest, could adversely affect the company's revenue and operations.
The construction and civil works sector is highly competitive, marked by presence of both, large companies with pan-India presence, and small, local players. BSR concentrates majorly on irrigations, roads & bridges. As the size and complexity of projects increase, competition may intensify. Furthermore, as all works are tender-based, revenue also depends on the ability to bid successfully. Profitability may come under pressure because of competitive pricing by local, small players. |
Liquidity: Adequate The company's liquidity remains adequate. Cash accruals expected at around Rs 55 - 60 crore per annum over the medium term, will remain sufficient to meet annual repayment obligations of about Rs 20 - 30 crore during the corresponding period. Further, the company has adequate cushion in bank guarantee limits in order to secure new orders and necessary mobilization advances for its projects. Further, the promoter has the financial flexibility to bring need based funds for meeting any ad-hoc requirements. Nevertheless, the bank limit utilization on overall cash credit limit of Rs 150 crore, remain high at an average of around 94% over the 14 months ended May 2021. Also, the unencumbered cash and bank balances at Rs 34 crore, remain moderate as on 31st March, 2021. |
Outlook: Stable CRISIL Ratings believes that BSR's business risk profile will be supported by its strong order book and execution capabilities over the medium term. |
Rating Sensitivity factors Upward factors:
Downgrade factors:
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About the Company Formed as a partnership firm in 2006, and reconstituted as a closely held public limited company in 2008, BSR undertakes civil construction work in Karnataka, Andhra Pradesh, and Telangana. Operations are managed by managing director, Mr B Srinivasa Rao. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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