Rating Rationale
June 21, 2022 | Mumbai
Generic Engineering Construction and Projects Limited
Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+'; Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities RatedRs.160 Crore (Enhanced from Rs.80 Crore)
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
Short Term RatingCRISIL A3+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its CRISIL BBB/Stable/CRISIL A3+ ratings on the bank facilities of Generic Engineering Construction and Projects Limited (GECPL).

 

The rating reflects GECPL's extensive experience of the promoters in the civil construction industry, strong order book providing revenue visibility and above average financial risk profile. These strengths are partially offset by its susceptibility to cyclical downturns and intense competition in civil construction industry and working capital intensive operations.

 

CRISIL Ratings had assigned its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings to the bank facilities of GECPL as on June 13, 2022.

Key Rating Drivers & Detailed Description

Strengths:

Extensive industry experience of the promoters: The promoters have an experience of over 50 years in Civil Construction industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers. They have longstanding relationships with customers, which has helped the firm successfully navigate business cycles over the years. Over the years, GECPL has successfully completed several projects with various government authorities and private entities. Revenue has grown to Rs 260 Crore in fiscal 2022 from Rs 200 Crore in fiscal 2020.

 

Strong revenue visibility: Successful track record of project execution has led to healthy orders of around Rs 817 crore as of March 2022, to be executed in the next two-three years. This provides strong revenue visibility over the medium term and will help scale up operations.

 

Above average financial risk profile: Networth was strong at Rs. 181 crores as on March 31, 2022, and capital structure is comfortable as reflected in gearing and total outside liabilities to adjusted networth ratio of 0.28 times and 0.61 times, respectively, as on March 31, 2022. Repayment of loans and limited reliance on outside borrowings for working capital limit or capital expenditure (capex) will keep the capital structure at similar levels. Debt protection is adequate on account of moderate operating margin and limited interest expense, indicated by interest coverage and net cash accrual to adjusted debt ratios of 4.5 times and 0.4-0.45 times, respectively in fiscal 2022.

 

Weaknesses:

Large working capital requirement: The large working capital requirement, reflected by gross current assets (GCAs) of 260-440 days for past four fiscals, is driven by debtors and inventory of 100-150 days each. The increase to 440 days was due to Covid 19 pandemic impact in FY2021, whereby debtors and inventory had increased to 151 and 162 days respectively, however in FY2022 debtors and inventory days have come down to normal levels at 106 and 108 days respectively. Debtors are usually high in March due to 40% revenues booked in last quarter of the fiscal. Further, there is high work in progress inventory as some portion of booking is done on milestone basis. Because of the business requirement, operations will remain working capital intensive over the medium term.

 

Susceptibility to cyclical downturns and intense competition in civil construction industry:  Construction industry is cyclical by nature and is also prone to economic downturns and GECPL, like other players in the industry, will remain susceptible to these trends. GECPL is also a relatively small player in the highly competitive and fragmented civil construction industry. With revenue of Rs. 260 crores in fiscal 2022. The presence of a large number of small players also restricts pricing flexibility for players such as GECPL, resulting in pressure on its margins.

Liquidity: Adequate

GECPL has adequate liquidity driven by expected cash accruals of Rs.25-30 crores annually in fiscal 2023 and fiscal 2024 against long term repayment obligations of Rs.1.5–3 crores annually. GECPL's fund-based limits have been utilized around 86% over the 12 months ended March 2022. CRISIL Ratings expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations and incremental working capital requirements.

Outlook: Stable

CRISIL Ratings believes GECPL will continue to benefit from its strong track record in the civil construction industry, a healthy order book and above average financial risk profile.

Rating Sensitivity factors

Upward factors

  • Sustained revenue growth and stable operating margin leading to higher cash accrual
  • Efficient working capital management with GCA below 250 days

 

Downward factors

  • Steep decline in revenue or operating profitability leading lower net cash accrual below Rs. 10 crores
  • Substantial increase in GCAs to above 400 days, thus weakening liquidity and the financial risk profile

About the Company

GECPL, incorporated in 1994 in Mumbai by Mr. Manish Patel and his family. It undertakes civil construction work for buildings across commercial, residential, industrial, health and leisure and institutional buildings with presence in states of Maharashtra, Karnataka, Gujarat, Goa & Himachal Pradesh. GECPL is listed in the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)

Key Financial Indicators

As on / for the period ended March 31

 

2022*

2021

Operating income

Rs crore

261.47

130.76

Reported profit after tax

Rs crore

13.92

2.78

PAT margins

%

5.32

2.13

Adjusted Debt/Adjusted Net worth

Times

0.28

0.29

Interest coverage

Times

4.52

3.36

*Provisional

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)

ISIN

Name of instrument

Date of allotment

Coupon
rate (%)

Maturity date

Issue size
(Rs crore)

Complexity levels

Rating assigned

with outlook

NA

Cash Credit

NA

NA

NA

10.00

NA

CRISIL BBB/Stable

NA

Cash Credit

NA

NA

NA

15.00

NA

CRISIL BBB/Stable

NA

Cash Credit

NA

NA

NA

20.00

NA

CRISIL BBB/Stable

NA

Cash Credit

NA

NA

NA

15.00

NA

CRISIL BBB/Stable

NA

Bank Guarantee

NA

NA

NA

5.00

NA

CRISIL A3+

NA

Bank Guarantee

NA

NA

NA

30.00

NA

CRISIL A3+

NA

Bank Guarantee

NA

NA

NA

10.00

NA

CRISIL A3+

NA

Bank Guarantee

NA

NA

NA

35.00

NA

CRISIL A3+

NA

Proposed Bank Guarantee

NA

NA

NA

20.00

NA

CRISIL A3+

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 60.0 CRISIL BBB/Stable 13-06-22 CRISIL BBB/Stable   --   --   -- --
Non-Fund Based Facilities ST 100.0 CRISIL A3+ 13-06-22 CRISIL A3+   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 35 Union Bank of India CRISIL A3+
Bank Guarantee 10 Axis Bank Limited CRISIL A3+
Bank Guarantee 5 HDFC Bank Limited CRISIL A3+
Bank Guarantee 30 State Bank of India CRISIL A3+
Cash Credit 15 Union Bank of India CRISIL BBB/Stable
Cash Credit 10 Axis Bank Limited CRISIL BBB/Stable
Cash Credit 15 HDFC Bank Limited CRISIL BBB/Stable
Cash Credit 20 State Bank of India CRISIL BBB/Stable
Proposed Bank Guarantee 20 Not Applicable CRISIL A3+

This Annexure has been updated on 21-Jun-2022 in line with the lender-wise facility details as on 21-Jun-2022 received from the rated entity.

Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Construction Industry
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt

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