| Himcon Engineers India Private Limited | ||||
| Rating reaffirmed at 'CRISIL A4+' | ||||
| Rating Action | ||||
| ||||
| 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 A4+’ rating on the short-term bank facilities of Himcon Engineers India Private Limited (HEIPL).
The rating continues to reflect the extensive experience of the promoters in the construction industry and the comfortable financial risk profile of the company. These strengths are partially offset by the average scale of operations amidst intense competition, large working capital requirements and exposure to intense competition and volatile operating margins. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the promoters and established track record in the construction industry: Mr Dhirendra Singh, key promoter, has experience of around two decades in the construction business and has helped to successfully execute orders and establish a reputed client base among government and private players. The promoters follow a prudent approach while taking orders to ensure minimal debtor related risks and a healthy operating margin.
Comfortable financial risk profile: The capital structure is healthy, as indicated by estimated networth, and total outside liabilities to adjusted networth ratio of Rs 32.28 crore and 0.33 time, respectively, as on March 31, 2022. The company has limited reliance on bank lines and funds projects through own cash reserve, advances/deposits from customers and support from creditors, resulting in healthy debt protection metrics. The financial risk profile of the company will remain comfortable over the medium term driven by low gearing and adequate debt protection metrics.
Weaknesses: Average scale of operations: Revenue improved significantly to Rs 61.41 crore in fiscal 2022. However, operating income fluctuated between Rs 39.29 crore in fiscal 2021 and Rs 33.71 crore in fiscal 2020 based on orders. The revenue is expected to remain modest over the medium term. Sustained revenue growth and healthy order book will remain key monitorable.
Large working capital requirements: The working capital cycle continues to remain large marked by an estimated Gross Current Assets (GCA) of 139 days as on March 2022 due to large debtor days. The debtor days have been high in the range of 95-115 days for the past 2 fiscals through fiscal 2021. Though they have improved in fiscal 2022, due to on-time payment by customers it continues to remain high. The GCA also consists of retention money which the company receives one year post the completion of a project. The working capital requirement is expected to remain large over the medium term.
Exposure to intense competition and volatile operating margins: Because of low entry barriers, the civil construction industry has several players. Contracts are awarded through competitive bidding or tendering, which exert pressure on scalability and operating margin. The operating margins have remained volatile in the range of 7.5-10.5% due to volatility in the raw material prices which the company is only able to pass down partially to its customers. Sustenance of operating margins will remain a key monitorable over the medium term. |
Liquidity: Adequate Cash accrual was estimated to be Rs 3.83 crore in fiscal 2022 against negligible term debt obligation towards vehicle loans and is expected at Rs 4-5 crore over the medium term. Unencumbered fixed deposits and cash stood at Rs 16 crore as on March 31, 2022. The company has not availed any fund-based facility except vehicle loans. Current ratio is estimated to have been healthy at 3.47 times as on March 31, 2022. Low gearing and moderate networth support the financial flexibility, which will cushion adverse conditions or downturns in the business. |
Rating Sensitivity Factors Upward factors
Downward factors
|
About the Company Incorporated in 2002, HEIPL constructs buildings for government and private players. Based in New Delhi, the company is managed by Mr Dhirendra Kumar Singh and his family members. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 8.75 | Union Bank of India | CRISIL A4+ |
| Bank Guarantee | 9 | Union Bank of India | CRISIL A4+ |
This Annexure has been updated on 13-Mar-23 in line with the lender-wise facility details as on 22-Feb-23 received from the rated entity.
Criteria Details
|