Rating Rationale
December 23, 2024 | Mumbai
G Gokul Shetty Shri Mahalingeshwara Construction
Ratings reaffirmed at 'CRISIL BB-/Stable/CRISIL A4+'
 
Rating Action
Total Bank Loan Facilities RatedRs.13.77 Crore
Long Term RatingCRISIL BB-/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL BB-/Stable/CRISIL A4+' ratings on the bank facilities of G Gokul Shetty Shri Mahalingeshwara Construction (GSMC).

 

The ratings continue to reflect the extensive experience of the key promoter in the civil construction industry and firm's long-term association with reputed clients. These strengths are partially offset by its modest scale of operations and exposure to risks arising from intense competition and geographic concentration.

Analytical Approach

CRISIL Ratings has evaluated the standalone business and financial risk profiles of GSMC.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the key promoter: The three-decade-long experience of the key promoter in the civil construction business has helped the firm establish strong presence in Udupi and Mangaluru. The firm was set up as a proprietorship concern by Mr Gokul Shetty in 1992 and was reconstituted as a partnership firm in October 2022 after his family members joined the business.

 

  • Long-term association with reputed clients: The firm has been constructing buildings, roads, dams and sewer and sea protection walls for over three decades and has successfully executed various projects for the state government and local self-government bodies in Karnataka. This has helped GSMC get repeat orders from its key clients, including the Karnataka Public Works Department, Minor Irrigation and Ground Water department, ports and fisheries department, as well as the Pradhan Mantri Sadak Yojana.

 

Weaknesses:

  • Modest scale of operations amidst intense competition: The civil construction industry is highly fragmented and the consequent intense competition will continue to constrain scalability, pricing power and profitability. GSMC had modest revenue of Rs 27.88 crore for fiscal 2024. Steady flow of orders and their timely execution resulting in revenue growth will remain monitorable.

 

  • High geographic and client concentration: GSMC’s operations are restricted to Karnataka, and majority of the work orders are for the roads and bridges department and local self-government bodies. Thus, business will remain vulnerable to concentration risk in terms of geographic presence and clientele.

Liquidity: Adequate

Bank limit utilisation was moderate at 86.08% on average for the 14 months through September 2024. Cash accrual is expected over Rs 2 crore against term debt obligation of Rs 1.2 crore over the medium term. The partners withdrew Rs 1.9 crore during fiscal 2024 which resulted in a decline in the networth. Any further diminution in the networth will be monitorable

Outlook: Stable

CRISIL Ratings believes GSMC will continue to benefit from the extensive experience of its promoters.

Rating sensitivity factors

Upward factors

  • Revenue growth of more than 25% per fiscal and sustenance of operating margin resulting in higher accruals
  • Sustained improvement in the financial risk profile

 

Downward factors

  • Decline in revenues or in operating profitability to less than 9% leading to lower-than-expected cash accruals
  • Larger-than-expected capital withdrawal and/or substantial stretch in the working capital cycle, weakening the capital structure and liquidity.

About the Company

GSMC was set up in 1992 as a sole proprietorship firm by Mr Gokul Shetty G and was reconstituted later as a partnership firm with his family members joining the business (fiscal 2023 was the first year of operations for the partnership firm). The firm undertakes civil construction contracts, mainly for building roads and bridges in Udupi and Mangaluru.

Key Financial Indicators

As on/for the period ended March 31

 Unit

2024

2023

Operating income

Rs.Crore

27.89

36.62

Reported profit after tax (PAT)

Rs.Crore

1.34

2.28

PAT margin

%

4.81

6.2

Adjusted debt/adjusted networth

Times

2.26

2.19

Interest coverage

Times

3.57

7.47

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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.Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 5.77 NA CRISIL A4+
NA Cash Credit NA NA NA 8.00 NA CRISIL BB-/Stable
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 8.0 CRISIL BB-/Stable   -- 03-11-23 CRISIL BB-/Stable / CRISIL A4+ 07-10-22 CRISIL BB/Stable   -- --
Non-Fund Based Facilities ST 5.77 CRISIL A4+   -- 03-11-23 CRISIL A4+ 07-10-22 CRISIL A4+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 5.77 Bank of Baroda CRISIL A4+
Cash Credit 8 Bank of Baroda CRISIL BB-/Stable
Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
Rating Criteria for Construction Industry

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