Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A/Stable/CRISIL A1’ ratings on the bank facilities of GHV (India) Pvt Ltd (GHV).

 

The rating reflects an adequate executable orderbook of Rs 5,846 crore as on September 30, 2024, resulting in orderbook to revenue ratio of 1.74 times (on revenue for fiscal 2024). The company added orders worth Rs 4,250 crore in the previous fiscal, driven by project worth Rs 3,090 crore in Mumbai (Versova to Bangur Nagar stretch of Mumbai Coastal Road project). The company has added orders of around Rs 400 crore in fiscal 2025 and is expected to win additional projects of around Rs 4,000 crore during the remaining months of the year. The orderbook provides adequate revenue visibility in the medium term. However, it is concentrated with orders in the states of Maharashtra and Gujarat forming around 80% of the total orderbook. Further, the top three orders account for around 77% of the executable value. The timely execution of these orders along with diversification through the addition of new projects will remain a key monitorable.

 

Operating performance is adequate for the first six months of fiscal 2025 with revenue and operating margin of Rs 983 crore and 10.8%, respectively, against Rs 1,254 crore and 9.8%, respectively, for fiscal 2024. While revenue for the first six months of fiscal 2025 was lower on account of monsoons and state elections, it is expected to pick up in the second half of the fiscal with ramp up in the Mumbai projects. Revenue is expected over Rs 3,300 crore for fiscal 2025, while operating margin is likely to improve to over 11% with higher execution. Good execution ability is reflected in compound annual growth rate (CAGR) of around 27% as achieved in revenue between fiscals 2020 to 2024, while maintaining margins at 10-11%.

 

The financial risk profile is also adequate with gearing and total outside liabilities to tangible net worth (TOL/TNW) ratios of 0.73 time and 1.47 times, respectively, in fiscal 2024. While external debt increased substantially to Rs 530 crore in fiscal 2024 against Rs 337 crore in fiscal 2023, it was partly on account of the company replacing its creditors with trade finance facilities leading to discounts as well as faster execution. However, loans and advances extended to group companies increased to Rs 232.48 crore as on March 31, 2024, from Rs 143.51 crore as on March 31, 2023, including for entities not engaged in road construction. While these outflows are expected to be one-time and recoverable on demand, any further outflows to group companies (excluding subsidiaries, associates and joint ventures [JVs] formed for undertaking infrastructure development) may weaken the financial risk profile and will remain a key rating sensitivity factor.

 

Of the ongoing three hybrid annuity model (HAM) projects, one project has applied for provisional commercial operations date (PCOD) and the remaining two projects from the government of Gujarat (GoG) have received the appointed date in December 2024. GHV also owns two operational HAM projects (both have received two annuities till date) and has raised top-up debt of around Rs 120 crore against these projects, the proceeds from which were up streamed to the company in the current fiscal. This amount is expected to be utilised towards partly funding the equity commitments for the ongoing HAM projects. Net cash accrual is expected to be sufficient to fund the remaining equity commitments, given there are no large capital expenditure (capex) plans and limited incremental working capital requirements. Liquidity is further supported by average fund-based bank limit utilisation of 78% for last 12 months from October 2023 and unencumbered cash and equivalent of Rs 30 crore as on December 30, 2024.

 

The ratings continue to reflect the extensive experience of the promoters in the construction segment and improving scale of operations and adequate financial risk profile. These strengths are partially offset by the limited geographical as well as revenue diversification and exposure to intense competition and cyclicality inherent in the construction industry.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of GHV and those JVs/associate companies, which have been formed in the normal course of business to bid for or undertake engineering, procurement and construction (EPC) projects. CRISIL Ratings has also moderately consolidated those special purpose vehicles (SPVs) where GHV has provided a corporate guarantee (CG) to the extent of support required over the medium term. These SPVs have not been fully consolidated as the CGs are expected to fall off once the projects achieve COD. Two of the five existing HAM projects have received PCOD and CGs provided by GHV have fallen off. GHV had also extended CG to Karmala Road Project Pvt. Ltd (KRPPL, associate company undertaking a HAM project, with 26% shareholding by GHV). KRPPL has also achieved COD and the CG has fallen off.

 

CRISIL Ratings has also moderately consolidated GHV-BDE-DIL (JV for coal trading contract). This is because there are no operational, financial and managerial linkages between GHV and this entity, and GHV’s involvement is only limited to fulfilling technical qualifications required for this project.

 

Interest-bearing mobilisation advances of Rs 5 crore as on March 31, 2024 (Rs 23 crore as on March 31, 2023) have been considered as debt and retention money of Rs 45 crore as on March 31, 2024 (Rs 23 crore as on March 31, 2023) has been considered as a part of receivables.

 

Loans and advances of Rs 344.50 crore as on March 31, 2024 (Rs 105 crore as on March 31, 2023) from related parties and other unsecured loans have been treated as advances from customers. This is because these are mainly mobilisation advances received from HAM SPVs and are expected to be repaid in line with project progress and receipt of milestone payments. These advances are also non-interest bearing.

 

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:

• Extensive experience of the promoters: The promoters have been in the infrastructure industry for around five decades and have forged strong relationships with customers, suppliers and contractors. GHV has in-house labor and machinery, which allows superior execution without any delays and reliance on third parties. This is also evident from investments of Rs 66 crore in the last two fiscals to enhance capacities for executing a higher orderbook. The operating margin is supported by no subcontracting expenses, no leasing of equipment and early completion bonuses. Additionally, GHV bids for projects which are backed by strong counterparties, such as Municipal Corporation of Greater Mumbai, Government of Gujarat and Karnataka Neeravari Nigam Ltd, to name a few. Apart from roads and bridges, GHV is focusing on project alternatives in other infrastructure segments such as coastal roads, railway works and pipeline projects.

 

• Improving scale of operations: Revenue has posted a CAGR of 27% during the past four fiscals and is expected to be sustained over Rs 3,300 crore in future as well. The improvement in revenue was achieved while maintaining operating margin at 10-11%. Interest coverage ratio remained stable at 4.5 times in fiscal 2024 on account of better operating performance. For the first six months of fiscal 2025, GHV has reported revenue of Rs 983 crore, while operating margin has increased to 10.8%. Revenue is expected to improve further to over Rs 3,300 crore in fiscal 2025 backed by the execution of outstanding orders with improved operating margins of over 11%. The executable orderbook is Rs 5,846 crore as on September 30, 2024, providing adequate revenue visibility. The company added orders worth Rs 4,250 crore and Rs 400 crore in fiscal 2024 and the first six months of fiscal 2025 and is expecting to add orders worth around Rs 4,000 crore in the second half of fiscal 2025. The ability of GHV to maintain executable orderbook at an optimum level to ensure revenue visibility and sustain the operating scale is a key monitorable.

 

The working capital cycle has also been stable with gross current assets (GCAs) of 113 days as on March 31, 2024. The ability to efficiently manage working capital requirements and maintain comfortable liquidity will remain a key monitorable.

 

• Adequate financial risk profile: Debt increased to Rs 530 crore (including interest-bearing mobilisation advances) as on March 31, 2024, from Rs 337 crore as on March 31, 2023. This was on account of – a) replacing creditors with trade finance facilities to avail discounts as well as hasten execution, b) commitments towards HAM projects and c) loans and advances extended to group companies. Nevertheless, gearing and TOL/TNW ratios remained adequate at 0.73 time and 1.47 times, respectively, as on March 31, 2024.  Healthy operating performance coupled with limited equity commitments and no large debt-funded capex will result in an improvement of the financial risk profile over the medium term. Equity commitments of around Rs 206 crore will be required over the next three fiscals until 2028 towards ongoing HAM projects. Proceeds from top-up debt of Rs 120 crore, raised against completed HAM projects and up streamed to GHV, will be utilised towards partly funding these equity commitments. Financial risk profile is also supported by average fund-based bank limit utilisation of 78% for the 12 months from October 2023 and unencumbered cash and cash equivalents of Rs 30 crore as on December 31, 2024.

 

Weaknesses:

• Limited geographical as well as revenue diversification: While GHV has executed projects across 10 states in the past, the current orderbook is largely spread across two states viz., Maharashtra and Gujarat. These two states are key focus regions of GHV wherein it has developed strong supplier relationships, established company presence and execution synergies. GHV’s ability to diversify to other regions while maintaining profitability remains to be seen.

 

Operations continue to be focused on road projects and hence contribute a major portion of its revenue. The operating performance remains susceptible to concentration arising from focus on road projects, increasing exposure to cyclicality. Though GHV is focusing on project alternatives in other infrastructure segments as well, its ability to scale up these segments profitably remains to be seen. Further, the top three orders form 77% of the executable orderbook exposing the company to execution risk. The timely implementation of these orders within budgeted cost will remain a key rating sensitivity factor.

 

• Exposure to intense competition and cyclicality inherent in the construction industry: While increased focus of the Government of India (GoI) on the infrastructure sector, especially roads and highways, is expected to benefit players in the medium term, most of these projects are tender-based and face intense competition, thus requiring the company to bid competitively to get contracts, which restricts the operating margin to a moderate level. Also, given the cyclicality inherent in the construction industry, the company’s ability to maintain profitability margin through operating efficiency is critical. Revenue remains susceptible to economic cycles that impact the construction industry. Furthermore, GHV mainly caters to government agencies, whose expenditure is directly linked to the economy.

Liquidity: Adequate

Liquidity is supported by expected net cash accrual of over Rs 200 crore per annum against debt obligation of up to Rs 60 crore over the medium term. While GHV incurred capex of Rs 66 crore in the last two fiscals, there are no plans for any significant capex over the medium term. Equity commitments of around Rs 206 crore will be required over the three fiscals for ongoing HAM projects. The proceeds from top-up debt of Rs 120 crore, to be raised against completed HAM projects, have been streamed up to the company, which will be utilised towards funding the equity commitments in HAM projects. Net cash accrual is expected to be sufficient to fund the remaining equity commitments, given no large capital expenditure (capex) plans as well as limited incremental working capital requirements. Liquidity is further supported by average fund-based bank limit utilisation of 78% for last 12 months from October 2023 and unencumbered cash and cash equivalents of Rs 30 crore as on December 30, 2024.

Outlook: Stable

CRISIL Ratings believes GHV will continue to benefit from the extensive experience of its promoters and healthy executable orderbook over the medium term.

Rating sensitivity factors

Upward factors

• Improvement in operating margin or income resulting in net cash accrual above Rs 250 crore on a sustained basis
• Higher-than-expected improvement in the financial risk profile
• Sustenance of working capital cycle, leading to strengthening of liquidity

 

Downward factors

• Lower-than-expected operating income or moderation in profitability leading to net cash accrual below Rs 175 crore on a sustained basis
• Decline in executable orderbook leading to moderation in orderbook to revenue ratio
• Debt-funded capex or stretch in the working capital cycle, resulting in higher debt and weakening of the financial risk profile

About the Company

GHV, based in Mumbai, was incorporated in 2009 by Mr Jahid Vijapura and his three brothers, Mr Mustaq Vijapura, Mr Farooq Vijapura and Mr Shafi Vijapura, by reconstituting a partnership firm, G. H. Vijapura & Co. The firm was set up in 1965 by the late Mr Hussein M Vijapura and was engaged in infrastructure development.

 

GHV is an EPC contractor and executes projects related to the construction of roads, bridges, dams, irrigation projects and airport runways, among others. The company's first large irrigation project was undertaken in 1977 in partnership with GoG. Post that, the group has successfully completed numerous other irrigation projects with other state governments. The company has expertise in construction of runways/resurfacing, parking bays and taxiways. The company has worked with airports in Mumbai, Pune, Vadodara, Udaipur, Patna, Guwahati, Belgaum, Diu and Kochi. Currently, the orderbook comprises mostly of national and state highway projects.

 

The company currently has five HAM projects on its books – a) two in Maharashtra, which are operational and have received two annuities till date, b) one in Madhya Pradesh, which is under-construction and has applied for COD, and c) two in Gujarat, which have received appointed date in December 2024.

 

For the six months ended September 30, 2024, the company reported revenue and net profit of Rs 983 crore and Rs 59 crore, respectively.

Key Financial Indicators

Particulars	Unit	2024	2023
Operating income	Rs crore	3361	3093
Profit after tax (PAT)	Rs crore	171	157
PAT margin	%	5.1	5.1
Adjusted debt/adjusted networth	Times	0.73	0.68
Interest coverage	Times	4.24	5.47

CRISIL Ratings adjusted financials

Any other information: Not Applicable