| Pratham EPC projects Limited | ||||||
| 'CRISIL BBB-/Stable/CRISIL A3' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 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 assigned its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings to the bank facilities of Pratham EPC projects Limited (PEPL; part of the Pratham group)..
The ratings reflect the technical expertise and extensive experience of the promoters in the engineering, procurement and construction (EPC) industry, PEPL’s healthy order book providing revenue visibility, its robust financial risk profile and sound operating efficiencies. These strengths are partially offset by its susceptibility to risks inherent in tender-based operations and large working capital requirement. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of PEPL and its subsidiaries, including Pipeflow Integrity India Pvt Ltd (PIIPL) and Pratham International Contracting –L.L.C - O.P.C, UAE (PIC).
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers & Detailed Description Strengths: Technical expertise and extensive industry experience of the promoters: PEPL was founded in 2008 by mechanical engineers Mr Pratikkumar Vekariya and Mr Nayankumar Pansuriya. Experience of around two decades in the EPC industry has given the promoters an understanding of the market dynamics and enabled them to establish healthy relationships with suppliers and customers.
Healthy order book providing revenue visibility: The PEPL has unexecuted orders of Rs 651.76 crore as on November 2024, including a major unexecuted order of Rs 482.51 crore from Sun Petrochemicals Pvt Ltd (rated ‘CRISIL AA/Stable/CRISIL A1+’), to be executed over the next 24-36 months, providing revenue visibility over the medium term.
Robust financial risk profile: The company’s capital structure has been healthy due to lower reliance on external funds, yielding gearing of 0.06 time and total outside liabilities to adjusted networth (TOLANW) ratio of 0.29 time, as on March 31, 2024.The debt protection metrics have also been strong due to low leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratios were 7.55 times and 3.31 times, respectively, for fiscal 2024. The debt protection metrics are expected to remain at similar levels over the medium term.
Weakness: Susceptibility to risks inherent in tender-based operations: The revenue and profitability entirely depend on the ability to win tenders. Also, entities in this segment face intense competition, thus requiring them to bid aggressively to get contracts, which restricts the operating margin. Also, given the cyclicality inherent in the construction industry, the ability to maintain profitability margin through operating efficiency becomes critical.
Large working capital requirement: Gross current assets (GCAs) stood at 115-330 days over the three fiscals ended March 31, 2024. The company’s large working capital requirement is reflected in its GCAs of 330 days as on March 31, 2024, owing to high receivables of 85 days and inventory of 167 days. PEPL is required to extend long credit period. Furthermore, due to its business needs, the company holds large inventory. |
Liquidity: Adequate Bank limit utilisation was moderate at 76% on average for the 12 months through October 2024. Annual cash accrual is expected at Rs 15-18 crore against yearly term debt obligation of Rs 1.06 crore over the medium term, and will cushion liquidity.
The current ratio was healthy at 4.33 times as on March 31, 2024.The promoters are likely to extend equity and unsecured loans to meet the working capital requirement and debt obligations. Low gearing and moderate networth support the company’s financial flexibility and provide the financial cushion in case of any adverse condition or downturn in the business |
Outlook: Stable CRISIL Ratings believes PEPL and its subsidiaries will continue to benefit from the extensive experience of the promoters and established relationships with clients. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company It was founded as partnership firm in 2008 and subsequently it was incorporated as a private limited company in 2014. Subsequently, it was reconstituted as a public limited company in 2023. The company provides engineering, procurement, and construction services mainly for oil and gas pipelines, irrigation, power, industrial projects, water and environment solutions. PEPL is promoted by mechanical engineers Mr Pratikkumar Vekariya (Chairman and Managing Director) and Mr Nayankumar Pansuriya (Whole Time Director). It is listed on the SME (small and medium enterprises) platform of National Stock Exchange of India Ltd (NSE Emerge).
PIC was incorporated in June 2024 with a purpose to facilitate the cross-country orders within UAE, Saudi Arabia and the Mena Region.
PIIPL and PIC are subsidiaries of PEPL. holds 52% stake in PIIPL and 100% stake in PIC. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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