Rating Rationale
January 13, 2021 | Mumbai
RNS Infrastructure Limited
Ratings reaffirmed at 'CRISIL BB+/Stable/CRISIL A4+'
 
Rating Action
Total Bank Loan Facilities RatedRs.608.8 Crore
Long Term RatingCRISIL BB+/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL’s ratings on the bank facilities of RNS Infrastructure Limited (RNS infra) continue to reflect RNSIL’s established market position in the civil construction segment in Karnataka, healthy revenue visibility, and above-average financial risk profile because of comfortable capital structure and debt protection metrics. These strengths are partially offset by working capital-intensive operations and exposure to project risks in the real estate sector.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position in Karnataka and healthy revenue visibility:

The company has constructed tunnels, bridges, buildings, dams, reservoirs, and highways; and also executed irrigation and power projects, and has acquired a track record of timely and quality project delivery. This is reflected in operating income of Rs 290 crore in fiscal 2020. Confirmed orders worth around Rs 1929 crore as of November 2020 provide healthy revenue visibility.

 

  • Above-average financial risk profile:

Capital structure is comfortable, as reflected in networth of Rs 254 crores and gearing of 0.5 times, respectively, as on March 31, 2020. Moderate operating margin and controlled reliance on external debt led to average debt protection metrics, with interest coverage and net cash accrual to total debt ratios of 2.2 times and 23%, respectively, for fiscal 2020.

 

Weakness:

  • Working capital-intensive operations:

Gross current assets were high at over 428 days as on March 31, 2020, due to stretch in receivables and sizeable work-in-progress inventory following delays in clearance of real estate projects. Working capital requirement will remain large over the medium term.

 

  • Exposure to project risks in the real estate segment:

The real estate sector is cyclical and affected by volatile prices, opacity of transactions, and a highly fragmented market structure owing to many regional and national players. RNSIL has limited prior experience on real estate projects, which makes it more vulnerable to these risks. Furthermore, the company faces high demand risk for its ongoing project, with limited bookings of less than 5% till date.

Liquidity: Adequate

RNS infra has adequate liquidity profile marked by extensively utilized bank lines though supported by adequate cash accruals for meeting repayment obligations. RNSIL has access to fund based limits of Rs 70 crores, utilized to the tune of 92% on an average over the 3 months ended November 2020. RNSIL’s liquidity is marked by expected cash accruals of more than Rs 20 crores per annum in FY 2021 and FY 2022. The company has long term repayment obligations around Rs 6 - 13 crores and no major capex plans.

Outlook Stable

CRISIL believes RNS Infra will continue to benefit over the medium term from its established market position in the construction segment.

Rating Sensitivity factors

Upward factors:

  • Improvement in scale of operations to over Rs 500 crore along with stable profitability
  • Improvement in the working capital cycle

 

Downward factors:

  • Decline in cash accruals to less than Rs 10 crore for fiscal 2021
  • Increase in working capital requirement, weakening the financial risk profile, particularly liquidity
  • Any major liability arising out of the real estate business

About the Company

Set up in 1961 as a partnership firm by late Mr Rama Nagappa Shetty (chairman) and reconstituted as a private limited company in 2003, RNS Infra entered the real estate business in fiscal 2007 and undertakes construction of tunnels, irrigation works, bridges, power projects, buildings, dams, reservoirs, and highways. It has completed civil construction projects for the Government of Karnataka and has executed projects in Andhra Pradesh, Maharashtra, Tamil Nadu, and Goa. The company is constructing its second real estate project, RNS Shrinikethan, and has also set up a 10 megawatt solar power plant in Pavagadh, Karnataka. Operations are managed by Mr Rama Nagappa Shetty's son, Mr Naveen Shetty.

Key Financial Indicators

Particulars

Unit

2020

2019

Revenue

Rs.Cr

290.13

368.56

Profit After Tax (PAT)

Rs.Cr

10.70

15.93

PAT Margin

%

3.69

4.32

Adjusted debt/adjusted networth

Times

0.46

0.49

Interest coverage

Times

2.23

1.52

 

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)

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

70

NA

CRISIL BB+/Stable

NA

Term Loan

NA

NA

Mar-2024

10.8

NA

CRISIL BB+/Stable

NA

Bank Guarantee

NA

NA

NA

528

NA

CRISIL A4+

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 80.8 CRISIL BB+/Stable   -- 21-12-20 CRISIL BB+/Stable 09-05-19 CRISIL BB+/Stable 28-03-18 CRISIL BBB/Stable CRISIL BBB-/Stable
      --   -- 02-07-20 CRISIL BB+/Stable   --   -- --
Non-Fund Based Facilities ST 528.0 CRISIL A4+   -- 21-12-20 CRISIL A4+ 09-05-19 CRISIL A4+ 28-03-18 CRISIL A3+ CRISIL A3
      --   -- 02-07-20 CRISIL A4+   --   -- --
All amounts are in Rs.Cr.
 
 
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 360 Canara Bank CRISIL A4+
Bank Guarantee 38 HDFC Bank Limited CRISIL A4+
Bank Guarantee 50 State Bank of India CRISIL A4+
Bank Guarantee 40 The Karnataka Bank Limited CRISIL A4+
Bank Guarantee 40 Union Bank of India CRISIL A4+
Cash Credit 30 Canara Bank CRISIL BB+/Stable
Cash Credit 5 HDFC Bank Limited CRISIL BB+/Stable
Cash Credit 5 State Bank of India CRISIL BB+/Stable
Cash Credit 15 The Karnataka Bank Limited CRISIL BB+/Stable
Cash Credit 3 Union Bank of India CRISIL BB+/Stable
Cash Credit 12 Union Bank of India CRISIL BB+/Stable
Term Loan 4.97 Canara Bank CRISIL BB+/Stable
Term Loan 0.8 State Bank of India CRISIL BB+/Stable
Term Loan 2.46 The Karnataka Bank Limited CRISIL BB+/Stable
Term Loan 2.57 Union Bank of India CRISIL BB+/Stable

This Annexure has been updated on 16-Dec-2021 in line with the lender-wise facility details as on 06-Dec-2021 received from the rated entity.

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
Rating Criteria for Construction Industry
CRISILs Approach to Recognising Default
The Rating Process

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