| Raj Shyama Constructions Private Limited | ||||||
| Ratings upgraded to 'CRISIL A- / Stable / CRISIL A2+' | ||||||
| Rating Action | ||||||
| ||||||
| 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 upgraded its ratings on the bank facilities of Raj Shyama Constructions Pvt Ltd (RSCPL) to 'CRISIL A-/Stable/CRISIL A2+' from 'CRISIL BBB+/Positive/CRISIL A2'. The ratings upgrade factors in the improvement in the company's business risk profile with revenue rising from Rs 524 crore in fiscal 2021 to Rs 759 crore in fiscal 2022, supported by the timely execution of large orders for clients such as the National Highways Authority of India (NHAI, 'CRISIL AAA/Stable') and Public Works Departments (PWDs) of Uttar Pradesh (UP) and Uttarakhand. Till Oct 2022 company has achieved revenue of ~Rs.306 cr. revenue was lower in first half due to elections in some states and also due to extended monsoon, however with the healthy order book of more than Rs. 2485 cr. to be executed over the next 2 years provide healthy revenue visibility. Sustained healthy revenue growth supported by good visibility with order book along with enhanced geographical presence will remain the key rating monitorable.
The EBITDA margins are stable ~12.69% in FY22 as the company has price escalation clause that allows them to pass on increase in RM prices to customers. Margins are expected to be range of 10-12% in the medium term.
The financial risk profile remains robust supported by healthy networth of Rs. 228 crores which is expected to increase further due to higher accretion to reserve, keeping gearing below 0.5 time as on March 31, 2022. The financial risk profile is expected to remain robust over the medium term, despite debt-funded capital expenditure (capex), due to healthy profitability and stable revenue.
Liquidity is adequate supported by low bank limit utilisation of 12% in the 12 months through Oct 2022, along with expected healthy cash accrual vis---vis debt obligation. Also, need-based funding support from the promoters in the form of unsecured loans (Rs 17.83 crore as on March 31, 2022) is likely to continue.
The ratings continue to reflect the extensive experience of the promoters in the construction industry and the company's robust financial risk profile. These strengths are partially offset by exposure to volatility in raw material prices and working capital-intensive operations |
Analytical Approach Unsecured loan of Rs 17.83 crore as on March 31, 2022, has been treated as neither debt nor equity, as the loan is from the promoters and should remain in the business over the medium term. |
Key Rating Drivers & Detailed Description Strengths:
The two-decade-long experience of the promoters and RSCPL's successful track record of executing civil construction projects for government agencies will continue to support the business. The company's entry into electric civil contracting work has helped diversify its business risk profile. Customers include the PWDs of UP and Uttarakhand, Ghaziabad Development Authority, UP State Industrial Development Corporation, and UP irrigation department. The extensive experience has helped the company bag contracts for NHAI, which has helped scale up operations despite the Covid-19 pandemic. Orders of Rs 2485 crore as of Oct 2022 to be executed over the next 2 years provide revenue visibility for the near term.
The healthy capital structure is reflected in moderate networth of Rs 228 crore and low gearing of 0.28 time as on March 31, 2022, due to modest reliance on external debt. The networth is expected to increase supported by revenue growth and steady profitability leading to better accretion to reserve. Debt protection metrics are robust, indicated by net cash accrual to total debt and interest coverage ratios of 1.05 time and 15.55 times, respectively, for fiscal 2022. The company may undertake regular capex of Rs 10-15 crore for scalability of projects and updating machinery. Expectation of sustained profitability and growth in topline will keep the financial risk profile healthy.
Weakness:
High exposure to fixed-price contracts with no price-escalation clauses renders revenue and profitability susceptible to increase in price of the key input (bitumen), and consequently, in project cost. RSCPL partially offsets the risk by factoring in any expected increase in raw material cost in its bid price for tenders. The operating margin has improved after the company's entry into the electrical contract business and taking on of large projects which helped achieve economies of scale. The operating margin is expected to remain at 10-12% over the medium term.
Gross current assets improved to 130 days as on March 31, 2022, due to improvement in receivable days in the current fiscal, the receivables cycle has been comfortable, supported by fast recovery from NHAI with payments being received within 10-20 days of raising the bills which is done on a monthly basis. The company procures stone and grit locally and bitumen from various suppliers against credit of 75-100 days, further supporting its working capital management. The GCAs are expected at 120-150 days over the medium term. |
Liquidity: Adequate Cash accrual, expected at Rs.70-80 crore per annum, over the medium term should comfortably cover annual term debt obligation of Rs.10-15 crore and the surplus will support liquidity. Bank limit utilisation was low at 12% on average in the 12 months through Oct 2022.
Current ratio is at 1.97 times as on March 31, 2022. Need-based funding support from the promoters is expected to continue. Low gearing and moderate networth support financial flexibility |
Outlook Stable CRISIL Ratings believes RSCPL will continue to benefit from its established track record and the extensive experience of its promoters in the civil construction industry |
Rating Sensitivity factors Upward factors:
Downward factors:
|
About the Company RSCPL was incorporated in 2001 by Mr Tapesh Tyagi and his family. The Ghaziabad-based company undertakes civil construction work, involving repair, strengthening, and construction of roads, setting up earthen embankments, rock cutting, and land development.
In 2018, the company entered the power transmission business under the central government scheme, Deen Dayal Upadhyaya Gram Jyoti Yojan |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 80 | HDFC Bank Limited | CRISIL A2+ |
| Bank Guarantee | 80 | Kotak Mahindra Bank Limited | CRISIL A2+ |
| Bank Guarantee | 42.5 | Punjab and Sind Bank | CRISIL A2+ |
| Bank Guarantee | 47 | YES Bank Limited | CRISIL A2+ |
| Cash Credit | 10 | HDFC Bank Limited | CRISIL A-/Stable |
| Cash Credit | 15 | Kotak Mahindra Bank Limited | CRISIL A-/Stable |
| Drop Line Overdraft Facility | 10 | Kotak Mahindra Bank Limited | CRISIL A-/Stable |
| Overdraft Facility | 1 | Punjab and Sind Bank | CRISIL A-/Stable |
| Proposed Long Term Bank Loan Facility | 11.5 | Not Applicable | CRISIL A-/Stable |
| Secured Overdraft against term deposits | 3 | YES Bank Limited | CRISIL A-/Stable |
This Annexure has been updated on 13-Mar-2023 in line with the lender-wise facility details as on 01-Mar-2023 received from the rated entity.
Criteria Details
|