Key Rating Drivers & Detailed Description

Strengths:

Strong operating capabilities in rooftop solar installation:

The company has strong operating capabilities which is reflected by the major projects carried out by the company in the past three years. The company is also the preferred original equipment manufacturer for reputed companies like TATA, Bosch and Honeywell.

 
Average financial risk profile:

GRPL’s debt protection metric were average marked by interest coverage ratio estimated at 1.7 as on 31st March 2020. Its net worth was moderate, though improved significantly estimated at Rs 10.6 cr as of 31st March 2020. Its gearing however has is estimated to be above 2 times as on March 31, 2020. Despite the improvement in net worth as the company is largely dependent on external funds for growth.

Weakness:

Working capital intensive nature of operations:

The gross current assets (GCAs) were estimated at 210 - 220 days as on March 31, 2020, primarily driven by large debtors of 150 days. The company also maintains normal inventory of about 30 - 45 days. The working capital intensive operating cycle exerts pressure on working capital management during the peak execution period leading to high bank line utilization. 

Modest scale of operations:

The business risk profile is constrained by modest scale in the intensely competitive industry. Furthermore, the scale is expected to remain modest over the medium term, with the turnover estimated at Rs 55 - 60 crore for fiscal 2020.

Rating Sensitivity factors

Upward Factors:

• Improvement in debtor realization thereby easing the working capital cycle
• Sustained significant improvement in scale of operation by 20% and sustenance of operating margin, leading to higher-than-expected cash accruals

Downward factors:

• Further deterioration in leverage levels leading to increase in gearing above 3 times
• Increase in working capital requirements due to debtors stretch

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