| R & C Infraengineers Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB / Stable / CRISIL A3+ '; rated amount enhanced for 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 on the bank facility of R & C Infraengineers Pvt Ltd’s (RCIPL) continue to reflect strong market position, as reflected in various tenders from the state government and orders from Uttar Pradesh Jal Nigam and company’s healthy financial risk profile. These strengths are partially offset by moderate scale of operations and geographical concentration in order book.
Earlier on May 12, 2022, CRISIL Ratings had upgraded its ratings on the bank facilities of RCIPL to 'CRISIL BBB/Stable/CRISIL A3+' from ‘CRISIL BBB-/Stable/CRISIL A3’.
The upgrade factors in improved business performance of RCIPL, driven by sharp increase in turnover while managing the working capital aside stable operating profitability, during fy22. Sizeable order book in hand and its timely execution resulted in over 81% growth in top-line during fy22 (over fy21) and available order book of 524 crore as of 01st April 2022 further provides healthy revenue visibility over the medium term. Timely execution of available order book while efficiently managing the working capital will remain a key rating sensitivity factor.
The rating also factors in company’s healthy financial risk profile, that has been sustained over the past few fiscals even amid business slowdown during fy20 and fy21. Resultantly, gearing ratio continues to remain below 1 time over the past few fiscals and is estimated at around 0.3-0.4 time as of Mar 31, 2022. Liquidity remains supported by efficient working capital management and moderate reliance on external debt. Hence, net cash accruals, expected at Rs 20-25 crore per annum, would continue to aid the incremental working capital requirements in the absence of sizeable term debt repayments. |
Key Rating Drivers & Detailed Description Strengths:
RCIPL enjoys operating flexibility in an intensely competitive industry. Furthermore, it benefits from the extensive experience of the promoters, their strong understanding of the market dynamics and healthy relationships with customers and suppliers. This has helped the company attain a strong position in the civil construction industry in Uttar Pradesh and has led to procurement of EPC-Water tenders from the state government and from Jal Nigam. It has also helped in diversification of the portfolio from National Highway (NH)-based projects, such as inclusion of Kanpur Development Authority tenders and entailing residential and commercial complex construction. Order book of Rs 524 crore as of April 2022, executable over the next year, provides healthy revenue visibility over the medium term, though its timely execution while managing the working capital will remain a key monitorable.
The financial risk profile should remain supported by the absence of any debt-funded capital expenditure (capex), limited debt and adequate profitability. Gearing is expected at 0.3-0.4 time as on March 31,2022 and is likely to remain stable over the medium term too. Debt protection metrics were healthy, indicated by interest coverage and net cash accrual to total debt ratios of 7.59 times and 1.03 times, respectively, in fiscal 2022. The metrics should remain stable over the medium term in the absence of any debt-funded capex.
Weakness:
After witnessing business slowdown in fy20 and fy21, revenue has improved significantly in fy22 on the back of timely execution of order book. Penetration into water EPC projects with foraying into different geographies further supported the revenue growth in the stated fiscal. Though business growth during fy22 of around 81% (over fy21) remains significant, low order execution in the past two fiscals has constrained the scalability to around 320 crores during fy22, despite stated y-o-y growth. Further, timely execution of order book, 1.6 times the revenue of fy22, of Rs 524 crore as of April 2022 would remain a key rating sensitivity factor
Albeit company has forayed into different geographies alongside penetrating into water EPC segment, the outstanding order book is concentrated towards Uttar Pradesh, with stated territory comprising of over 75% of total orders. Though geographical concentration risk is partly offset by company’s long-standing presence in the state and proven track record of timely execution of orders in the past, any political disturbance or change in govt. policy could adversely impact the cash flows of RCIPL and the same will be monitored closely. Successful bidding and execution thereof in water EPC contracts, providing additional revenue stream to the business risk profile of RCIPL will also remain a key monitorable. |
Liquidity: AdequateBank limit utilisation averaged 74% over the 12 months through February 2022. Cash accrual, expected at Rs 20-24 crore per annum, will sufficiently cover yearly debt obligation of Rs 8-10 crore over the medium term. Current ratio was healthy at 3.18 times and cash and bank balance was high at around Rs 9 crore as on March 31, 2022. Low gearing and moderate net worth provide the financial cushion to withstand any adverse conditions or downturns in the business. |
Outlook Stable RCIPL will continue to benefit from the promoters’ extensive experience and healthy relationships with clients. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company RCIPL, incorporated in 2013, is based in Faizabad, Uttar Pradesh, and is a Class A civil contractor for the state’s developmental agencies, such as Public Works Department and National Highways Authority of India. Mr Krishna Mohan Singh, Mr Alok Kumar Singh and Mr Anand Singh are the promoters and directors of the company. |
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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 16-May-2022 in line with the lender-wise facility details as on 20-Aug-2021 received from the rated entity.
Criteria Details
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