| Dee Vee Projects Limited | ||||||
| Ratings reaffirmed at 'CRISIL A / Stable / CRISIL A1; FD Withdrawn | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRSIL A/Stable/CRISIL A1’ ratings on the bank facilities of Dee Vee Projects Limited (DVPL).
CRISIL Ratings has withdrawn its rating on the Fixed Deposit programme of DVPL. The rating is withdrawn on the request of the company and confirmation that there are no outstanding fixed deposit obligations. The withdrawal is in line with CRISIL Ratings' policy for withdrawal of ratings.
The ratings continues to reflect DVPL's strong business risk profile marked by its established market position, robust order book, sound operating efficiencies developed under aegis of its experienced management. The ratings also take into account the company’s strong financial profile marked by increasing net worth, comfortable capital structure and healthy debt protection metrics. These strengths are partially offset by its susceptibility to tender-based operations, geographical concentration in revenues, and working capital intensive operations. |
Key Rating Drivers & Detailed Description Strengths: Extensive industry experience of the promoters and establish market position: DVPL’s moderate scale provides it an operating flexibility in an intensely competitive civil construction industry. Further, it also benefits from the promoters' experience of over the 4 decades, their strong understanding of market dynamics, and healthy relations with customers and suppliers. In addition, DVPL benefits from its track record of timely and cost-effective project executions supported by efficient management practices. Its long-standing relationship with its customers which primarily include central and state government bodies limits the counterparty risks.
Increasing revenues and adequate visibility backed by strong orderbook: DVPL’s revenues have grown at a CAGR of five percent over the past 4 years through FY21 at Rs. 800 crores. DVPL has a strong and diversified order book of Rs 2400 crores as of February 2022, providing healthy revenue visibility over the medium term. The revenue growth is driven by strong execution capabilities and continued demand from infrastructure and construction segment. Continued efforts on bidding for profitable projects as well as government’s focus on construction and road infrastructure should support future order book. In addition, an effective management structure with multiple directors and project heads supports the company efficiently manage its projects and bandwidth of its operations.
Strong financial profile: DVPL’s capital structure remains comfortable due to low reliance on external funds. Gearing stood at 0.3 times and total outside liabilities to adjusted networth (TOL/ANW) stood at 1.7 times for year ending on 31st March 2021, on a networth base of Rs. 196 crores. Debt protection metrics have also been healthy with moderate profitability, reflected in interest coverage of 8 times and net cash accruals to debt of 0.8 times, for fiscal 2021. Financial risk profile is expected to remain strong over the medium term in absence of any major debt funded capital expenditure and healthy accruals.
Weakness: Susceptibility to tender-based operations: Revenue and profitability entirely depend on the ability to win tenders. Also, entities in this segment face intense competition, thus leading to aggressive bidding in tenders, that can not only restrict margin expansion but can even lead to margin contraction in rapid and sudden increasing commodity prices scenario. Absence of pass through of prices, can be extremely detrimental and can even completely erode profitability. Also, given the cyclicality inherent in the construction industry, the ability to maintain profitability margin through operating efficiency becomes critical.
Working capital intensive nature of operations: The operations remain working capital intensive, reflected in gross current assets of 130 to 140 days in past three fiscals. The company is exposed to working capital swings stemming from material requirements for projects, high debtors as well as unbilled WIP stock (inventory) movements depending upon progress achieved for different projects. With increasing revenues, requirement for incremental working capital funding will increase, and hence management of working capital cycle will remain key rating monitorable.
Geographical concentration in Chhattisgarh and Odisha: Over the years, the company has successfully been able to diversify in multiple locations. The company currently has ongoing projects in 9 states and union territories; however, majority projects are in Chhattisgarh and Odisha which together accounted for about 47% to 50% of total revenues. Ability to diversify into geographies whilst managing resource mobilization, overcoming local authorities’ /state government’ nuances if any and managing projects effectively through top management bandwidth allocation will remain critical. |
Liquidity: Strong DVPL has strong liquidity driven by expected cash accruals of more than Rs.50 to 60 crores per annum in fiscal 2022 and 2023, against annual repayment obligations of Rs. 27 crores. Bank limit utilization for fund-based limits was average at 36% over the past 12 months through December 2021. The company has capex plan of around Rs.15 to 20 crores per annum, which can be easily absorbed on the strong balance sheet and funded by steady cash flows. The company can fund its repayment obligations and working capital requirements through internal accruals. Cash and cash equivalents were Rs.49 crores as on March 31, 2021. |
Outlook Stable CRISIL Ratings believe DVPL will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company DVPL was originally established as partnership firm in 1980 with the name of Patel Enterprises and later in the year 2012 it got converted into closely held public company with the current name. Company is engaged in diversified civil construction works such as construction of staff quarters, integrated town ships, residential projects, bridges, roads, irrigation works, electrification etc. It also undertakes projects for railway’s infrastructure. Company is based in Chhattisgarh and managed by Mr. Dinesh Kumar Patel, Mr. Vikas Ranjan Mahto, Mr. Navin Kumar Patel and Mr. Vivek Ranjan Mahto. |
Key Financial Indicators
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Status of non cooperation with previous CRA: DVPL has not cooperated with Credit Analysis & Research Ltd (CARE) which has classified it as non-cooperative vide release dated 29th March 2019. The reason provided by CARE is non-furnishing of information for monitoring of ratings.
DVPL has not cooperated with India Ratings and Research (Ind-Ra) which has classified it as non-cooperative vide release dated 20th February 2020. The reason provided by Ind-Ra is non-furnishing of information for monitoring of ratings.
DVPL has not cooperated with Acuité Ratings & Research Limited (ACUITE) which has classified it as non-cooperative vide release dated 30th May 2022. The reason provided by ACUITE is non-furnishing of information for monitoring of ratings. |
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 Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 27-Jun-22 in line with the lender-wise facility details as on 02-Mar-22 received from the rated entity.
Criteria Details
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