| CDS Infra Projects Limited | ||||||
| Ratings removed from 'Watch Developing'; Ratings reaffirmed; Rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has removed its ratings on the bank facilities of CDS Infra Projects Limited (CDSIPL) from ‘Rating Watch with Developing Implications’, while reaffirming the ratings at 'CRISIL A-/CRISIL A2+' and assigning a ‘Stable’ outlook.
CRISIL Ratings had placed the ratings of CDSIPL on ‘Watch with Developing Implications’ following a declaration by the Ministry of Road and Highways (MoRTH), which made CDSIPL ineligible to participate in any tender or request for proposal (RFP) issued by Authority / MoRTH / National Highways Authority of India (NHAI) / National Highways and Infrastructure Development Corporation / state government for national highway works for a period of two years.
Following this, CDSIPL had filed a petition in the High Court of Madhya Pradesh against the MoRTH order. The High Court has set aside the said MoRTH order, and hence, there is no restriction on the company’s future bidding of tenders. Though, CDSIPL had a healthy order book, and the orders in hand or already awarded orders were not likely to be impacted by the MoRTH declaration, there were concerns around reduction in the company’s order book amid its ineligibility for future bidding. With the High Court verdict of setting aside the MoRTH order, the concerns are now mitigated, and hence, the ratings have been removed from ‘Watch with Developing Implications’. However any further appeal initiated by MORTH against the said order of high court and its impact on the business risk profile of CDSIPL will be a key monitorable.
The company’s healthy order book of more than 4600 crores provides strong revenue visibility over the medium term. With improvement in the progress of the HAM projects CDSIPL expects healthy revenue boost in the ongoing fiscal.
The ratings continue to reflect the company’s established market position and a healthy financial risk profile. These strengths are partially offset by modest but improving operating margin and susceptibility to risks related to tender-based operations and inherent cyclicality in the construction industry. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has fully consolidated the business and financial risk profiles of CIPL with Vee Vee Properties Pvt Ltd (VVPL) and has moderately combined the business and financial risk profiles of its SPVs for Hybrid Annuity Model (HAM) projects. This is because VVPL is a wholly owned subsidiary of CIPL and both the entities, together referred to as the CDS group, have fungibility of funds. Moreover, HAM SPVS are moderately consolidated since the debt in the SPVs is non-recourse to the parent. In-line with CRISIL Ratings' moderate consolidation approach, the equity requirement and expected cost overrun in under-implementation projects have been factored into the financials of the company.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
Furthermore, revenue remains susceptible to economic cycles impacting the construction industry; the company mainly caters to government agencies and public sector undertakings, expenditure of which is directly linked to the economy. Any delay or deferment of capex in end-user industries could adversely affect revenue, Sustenance of revenue will remain a key rating sensitivity factor over the medium term. |
Liquidity: Strong Bank Limit were utilised moderately at around 72% for the past six months ended June ’22. Bank limit utilisation was moderate on account of efficient working capital management, as reflected in gross current assets of 148 days as on March 31, 2022, which is estimated to improve from 193 days a year prior. Net cash accrual expected are expected at over Rs 100 Cr in FY 22. The same are sufficient against repayment obligation of Rs 23-24 Cr on annual basis in medium term. Current ratio was comfortable at 1.52 times as on March 31, 2021 and around 1.27 times in FY22. Furthermore, constant building up of free cash and bank balance lend comfort to liquidity, with free reserve of Rs 79.25 crore by way of bank balance/liquid investments as on March 31, 2022. |
Outlook: Stable CRISIL Ratings believes CIPL will continue to benefit from its strong presence and healthy track record. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company CIPL was incorporated in May 2004 as an EPC company to carry out civil works in India. The company constructs roads and undertakes earthwork for government and public sector entities. Mr Sandeep Chandra manages the operations.
VVPL is a wholly owned subsidiary and a non-operational entity as on date. CIPL had invested in VVPL to purchase land and build a corporate office and to keep it as a collateral; the amount is estimated at Rs 60 crore as of the end of fiscal 2022. |
Key Financial Indicators
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Status of non cooperation with previous CRA: CIPL has not cooperated with Brickwork Ratings India Private Limited which has classified it as issuer not cooperative vide release dated January 06, 2022. The reason provided by Brickwork Ratings India Private Limited is non-furnishing of information. |
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 – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 05-Sep-2022 in line with the lender-wise facility details as on 05-Sep-2022 received from the rated entity.
Criteria Details
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