Rating Rationale
December 05, 2022 | Mumbai
P C Snehal Construction Private Limited
Ratings migrated to 'CRISIL BB/Stable/CRISIL A4+'
 
Rating Action
Total Bank Loan Facilities RatedRs.164 Crore
Long Term Rating&CRISIL BB/Stable (Migrated from 'CRISIL BB-/Stable ISSUER NOT COOPERATING*')
Short Term Rating^CRISIL A4+ (Migrated from 'CRISIL A4+ ISSUER NOT COOPERATING*')
& *Issuer did not cooperate; based on best-available information
^ *Issuer did not cooperate; based on best-available information
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

Due to inadequate information and in line with the Securities and Exchange Board of India guidelines, CRISIL Ratings had migrated its ratings on the bank facilities of P C Snehal Construction Private Limited (PCSCPL) to 'CRISIL BB-/Stable/CRISIL A4+ Issuer Not Cooperating'. However, the company's management has subsequently started sharing the information necessary for a comprehensive review of the ratings. Consequently, CRISIL Ratings is migrating the ratings to 'CRISIL BB/Stable/CRISIL A4+'.

 

The ratings reflect the extensive experience of the promoters in the civil construction industry, the company's healthy revenue visibility and its moderate financial risk profile. These strengths are partially offset by large working capital requirement and susceptibility to risks inherent in tender-based business.

Analytical Approach

Unsecured loan of Rs 17.85 crore as on March 31, 2022, from the promoters has been treated as neither debt nor equity.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters and healthy revenue visibility

The promoters have technical expertise and experience of over four decades in the civil construction industry, predominantly water supply and sewage projects. Their expertise and the company's diversified geographical reach and track record of project execution will continue to support the business. Established market position led to a healthy order pipeline of around Rs 746 crore as on August 31, 2022, which provides medium-term revenue visibility.

 

  • Moderate financial risk profile

Networth, gearing and total outside liabilities to adjusted networth (TOLANW) ratio are estimated at Rs 52 crore, 0.81 time and 1.68 times, respectively, as on March 31, 2022. The TOLANW ratio is supported by sizeable customer advances. Debt protection metrics were adequate, as reflected in interest coverage and net cash accrual to total debt ratios of 2.21 times and 0.18 time, respectively, in fiscal 2022, supported by moderate operating profitability.

 

Weakness:

  • Large working capital requirement

Gross current assets were at 123 days as on March 31, 2022, driven by receivables and inventory of 39 days and 55 days, respectively. The working capital cycle is supported by payables of 61 days.

 

  • Susceptibility to risks inherent in tender-based business

The company faces intense competition from regional contractors in Gujarat, Maharashtra, Madhya Pradesh and Rajasthan, as well as large national players. Large players operate in several sectors, while smaller players such as PCSCPL (water supply and sewerage) specialize in one or two segments. Despite its established position, the company will continue to face competitive pressure over the medium term.

Liquidity: Adequate

Cash accrual, expected at Rs 8-10 crore per fiscal, will comfortably cover yearly debt obligation of Rs 0.5-1.6 crore over the medium term, and the surplus will cushion the liquidity. Bank limit utilisation was high at 96% on average over the 10 months through August 2022. Current ratio was moderate at 1.72 times as on March 31, 2022. The promoters had extended support by way of unsecured loan of Rs 17.85 crore as on March 31, 2022, to meet working capital requirement and debt obligation.

Outlook: Stable

PCSCPL will continue to benefit from the extensive experience of its promoters.

Rating Sensitivity factors

Upward factors

  • Increase in revenue by 30% and rise in operating margin to 10-11% leading to higher cash accrual
  • Efficient working capital management strengthening the liquidity

 

Downward factors

  • Decline in revenue by 20% and fall in profitability resulting in lower cash accrual
  • Further stretch in the working capital cycle or large, debt-funded capital expenditure, weakening the financial risk profile

About the Company

PCSCPL was set up in 1977 as a partnership firm by Mr Manubhai Patel. The firm was reconstituted as a private limited company in June 2017. Based in Ahmedabad, Gujarat, the company undertakes civil construction work and specializes in laying of pipes for water supply and sewage projects. It undertakes projects across India but has large presence in Gujarat, Maharashtra, Madhya Pradesh, Uttar Pradesh and Rajasthan.

Key Financial Indicators

Particulars

Unit

2022

2021

Revenue

Rs crore

230.34

148.47

Profit after tax (PAT)

Rs crore

6.14

3.22

PAT margin

%

2.66

2.17

Adjusted debt/adjusted networth

Times

0.81

0.65

Interest coverage

Times

2.21

1.92

 

Status of non cooperation with previous CRA:

PCSCPL has not cooperated with Brickwork Ratings India Pvt Ltd (Brickwork Ratings) and India Ratings And Research Pvt Ltd (India Ratings), which have classified the company as non-cooperative through releases dated July 29, 2020, and January 11, 2019, respectively. The reason provided by Brickwork Ratings and India Ratings is non-furnishing of information for monitoring the ratings.

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisil.com/complexity-levels. 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

level

Rating assigned 

with outlook

NA

Cash Credit

NA

NA

NA

17.62

NA

CRISIL BB/Stable

NA

Overdraft Facility

NA

NA

NA

5.88

NA

CRISIL A4+

NA

Bank Guarantee

NA

NA

NA

140.50

NA

CRISIL A4+

 

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/ST 23.5 CRISIL BB/Stable / CRISIL A4+ 30-07-22 CRISIL A4+ / CRISIL BB- /Stable(Issuer Not Cooperating)* 28-07-21 CRISIL BB/Negative / CRISIL A4+ 31-12-20 CRISIL BB+ /Stable / CRISIL A4+ (Issuer Not Cooperating)*   -- --
      --   --   -- 31-08-20 CRISIL A3+ / CRISIL BBB/Stable   -- --
Non-Fund Based Facilities ST 140.5 CRISIL A4+ 30-07-22 CRISIL A4+ (Issuer Not Cooperating)* 28-07-21 CRISIL A4+ 31-12-20 CRISIL A4+ (Issuer Not Cooperating)*   -- --
      --   --   -- 31-08-20 CRISIL A3+   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Bank Guarantee 70.5 CRISIL A4+
Bank Guarantee 18 CRISIL A4+
Bank Guarantee 52 CRISIL A4+
Cash Credit 15 CRISIL BB/Stable
Cash Credit 2.62 CRISIL BB/Stable
Overdraft Facility 1 CRISIL A4+
Overdraft Facility 4.88 CRISIL A4+
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Assessing Information Adequacy Risk
CRISILs Bank Loan Ratings
The Rating Process
Understanding CRISILs Ratings and Rating Scales
CRISILs Approach to Recognising Default
CRISILs Criteria for rating short term debt

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