| Inderdeep Construction Co. | ||||||
| 'CRISIL BBB+ / Stable / CRISIL A2 ' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BBB+/Stable/CRISIL A2’ ratings to the bank facilities of Inderdeep Construction Co (ICC).
The ratings reflect the firm’s established market position and the experience of its partners in the construction industry, moderate working capital cycle and comfortable financial risk profile. These strengths are partially offset by exposure to risks inherent in tender-based operations, and susceptibility of operating performance to volatility in toll collections and traffic flow. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of partners: Mr. Kishore Khubchandani has an experience of over two decades in the civil construction industry, their strong understanding of market dynamics and heathy relationships with suppliers and customers, will continue to support the business risk profile. Also, ICC has been in the toll collection business for over 10 years and has steadily scaled up operations and diversified geographically. The firm has developed an in-house traffic assessment model to bid for the right contracts. Business risk profile will continue to be supported through the healthy execution capabilities and experience of the promoters.
Established market position: The firm has established a strong market position in the civil construction as well as the toll collection business. This is reflected in the increase in revenue to Rs 930 crore in fiscal 2022 from Rs 647 crore in fiscal 2021. The firm generally executes sub-contracted projects from Eagle Infra India Limited (CRISIL A/Stable/CRISIL A1). Also, the firm has received projects for executing of OB removal for Western Coalfields Limited. The firm has a healthy order book of Rs 1,158 crore for the civil construction as of July 2022, and a healthy order book for toll collection operations as well, which is to be executed over the medium term, and hence provides revenue visibility.
Efficient working capital cycle: Gross current assets were at 84 days as on March 31, 2022, driven by moderate receivables and low inventory of 62 and 3 days, respectively. The firm receives payments on monthly as well as milestone basis for the civil construction operations while the toll collection business which generates around 50% of the revenues for the firm, in on cash basis, which helps keep receivables under control. The receivables should remain stable over the medium term. The inventory is generally work-in-progress and is expected to rise, but remain comfortable, with increase in scale of operations. Working capital cycle is expected to remain efficient over the medium term.
Comfortable financial risk profile: ICC has a healthy capital structure as indicated by networth of Rs 137 crore and low reliance on external funds yielding gearing of 0.62 time and low total outside liabilities to adjusted networth (TOLANW) ratio of 1.14 times as on March 31, 2022. These are expected to improve with steady accretion to reserve over the medium term. Debt protection metrics have also been healthy due to low leverage and comfortable profitability. The interest coverage and net cash accrual to total debt ratio were 6.56 times and 0.58 time, respectively, for fiscal 2022. The debt protection metrics are expected to remain at similar levels due to low leverage over the medium term.
Weakness: Exposure to risks inherent in tender-based operations: Revenue remains susceptible to economic cycles that impact the construction industry. Furthermore, the firm mainly caters to government agencies, expenditure of which is directly linked to the economy. The large number of players in the construction segment resulting in intense competition necessitates aggressive bidding to get contracts, which could impact the operating margin.
Susceptibility of operating performance to volatility in toll collection and traffic flow: The firm generates around 50% of its revenues from the toll collection business. Operating performance and revenue are susceptible to the ability of the management to assess traffic flow and bid accordingly for tenders. Low traffic volume or inaccuracy in forecasting the traffic flow could impact the revenues and profitability of the firm. Also, the tolling contracts do not provide any traffic guarantee. The risks associated with variability in traffic volume will persist. However, strong in-house traffic assessment team and the extensive experience of the proprietor in forecasting traffic flow partially offset the risk. |
Liquidity: Adequate Bank limit utilisation was moderate at 75% on average for the 12 months through July 2022. Cash accrual is expected at Rs 50-55 crore against term debt obligation of Rs 12-14 crore over the medium term and the surplus will cushion liquidity. Partners have withdrawn around Rs. 6-9 crore each in fiscal 2020 and 2021. Current ratio was healthy at 1.78 times and the firm had cash and bank balance of Rs 26.7 crore as on March 31, 2022, partly encumbered for bank guarantee. Low gearing and moderate networth provide financial flexibility to withstand adverse conditions or downturn in the business. |
Outlook Stable CRISIL Ratings believe ICC will continue to benefit from the extensive experience of its promoter and strong execution capabilities. |
Upward factors
Downward factors
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About the Firm ICC was established as a partnership firm by the Khubchandani family in 1993. The firm undertakes toll collection across India and civil construction activities such as construction of sewer lines, water treatment plants, public utility buildings, and asphalt/concrete roads in Maharashtra. ICC is approved ‘1-A’ class civil contractor with various government departments. |
Key Financial Indicators
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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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 07-Sep-2022 in line with the lender-wise facility details as on 01-Sep-2022 received from the rated entity.
Criteria Details
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