Rating Rationale
August 24, 2022 | Mumbai
Ramacivil India Construction Private Limited
Ratings reaffirmed at 'CRISIL A-/Stable/CRISIL A2+'
 
Rating Action
Total Bank Loan Facilities RatedRs.300 Crore
Long Term RatingCRISIL A-/Stable (Reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
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 reaffirmed its 'CRISIL A-/Stable/CRISIL A2+' ratings on the bank facilities of Ramacivil India Construction Private Limited (RICPL).

 

The business risk profile of RICPL remains strong, backed by the experience of more than five decades of the promoters in the construction industry. The company has a sound clientele including several government entities and its order book of more than Rs 2,300 crore as on June 30, 2022, provides healthy revenue visibility for the medium term. Revenue is estimated to increase by around 30% on-year in fiscal 2022 to around Rs 693 crore from Rs 532 crore in the previous fiscal and is expected to increase to more than Rs 740 crore in fiscal 2023. Operating profit remains modest due to subcontracting of ancillary work and is estimated to remain around 6.0%-6.5% in fiscal 2022. Working capital cycle remains large with estimated gross current assets at 122 days as on March 31, 2022. The financial risk profile remains robust driven by estimated strong networth of Rs 159 crore as on March 31, 2022. Low dependence on external debt kept gearing healthy at around 0.03 time as on March 31, 2022. The gearing is expected below 0.05 time over the medium term.

 

The ratings also factor-in RICPL’s strong liquidity supported by large, unencumbered cash and bank balance of more than Rs 58 crore as on July 31, 2022, generation of healthy cash accrual against low debt obligations and availability of mobilisation advances in all orders though not availed by RICPL.

 

The ratings are driven by the long track record of the promoters in the civil construction industry, robust order book and comfortable financial risk profile. These strengths are partially offset by the exposure to risks related to the tender-based nature of business and high revenue concentration in the building construction segment.

Key rating drivers and detailed description

Strengths:

  • Extensive experience of the promoters: The five-decade-long experience of the promoters and RICPL’s successful track record of executing civil construction projects for government agencies will continue to support the business. Customers include central and state Public Works Departments (PWDs) as well government agencies such as RITES, NBCC, HSCC, WAPCOS and Airport Authority of India Limited. The extensive experience of the promoters has helped the company bag steady contracts and scale up operations. Order book of more than Rs 2,300 crore as of July 2022 to be executed over the next two years provides revenue visibility for the near term. Consistent growth in order book and timely execution of contracts will remain key monitorables.

 

  • Robust financial risk profile: Capital structure is healthy as reflected in comfortable networth of Rs 159 crore, estimated as on March 31, 2022. The networth is expected to increase over the medium term supported by revenue growth and steady profitability leading to better accretion to reserves. Gearing was below 0.05 time in the four years through fiscal 2022 due to low dependance on external debt. Debt protection metrics were robust owing to steady operating profitability and cash accrual—interest coverage and net cash accrual to adjusted debt ratio were estimated at 9.18 times and 7.24 times, respectively, in fiscal 2022.

 

Weaknesses:

  • Exposure to risks inherent in tender-based business amid intense competition: RICPL undertakes construction under engineering, procurement and construction model (EPC) and bags projects by submitting bids for tenders floated by government or private entities. Hence, revenue and profitability depend on ability to bid successfully for tenders. Intense competition due to presence of several mid-sized players may continue to constrain scalability, pricing power and profitability. Operating margin is expected at 6.0-6.5% over the medium term.

 

  • High revenue concentration in building construction segment and susceptibility to cyclicality in the construction industry: More than 90% of the company’s revenue comes from building construction projects unlike other construction companies which are present in diversified civil construction segments such as roads, commercial and residential real estate, industrial construction, and infrastructure (bridges, dams, power projects, and so on). Exposure to a single segment increases susceptibility to economic cycles or any delay or deferment of capex in the end-user industries. Moreover, expenditure by government agencies and public sector undertakings is directly linked to the economy. The successful implementation, funding and execution of projects under stringent timelines to avail benefits, followed by timely collection of receivables from the central and state governments will be closely monitored.

Liquidity: Strong

Bank limit utilisation was low at 28% on average for the 16 months through July 2022. Cash accrual is expected over Rs 34 crore against term debt obligation of Rs 1.60 crore over the medium term, and the surplus will cushion liquidity. Current ratio remained healthy estimated at 1.76 times as on March 31, 2022 and is expected to improve over the medium term. Liquidity is strengthened by large, unencumbered cash and bank balance of around Rs 59 crore as on March 31, 2022. Low gearing and moderate networth support financial flexibility to withstand adverse conditions or downturn in the business.

Outlook: Stable

RICPL will continue to benefit from its established market position, strong order book and healthy liquidity.

Rating Sensitivity factors

Upward factors:

  • Operating margin increasing by more than 200 basis points and revenue growth of more than 25% on a consistent basis
  • Prudent working capital management and enhancement in fund-based bank lines

 

Downward factors:

  • Operating margin dropping to less than 5.5% or significant delays in execution of orders, resulting in cash accrual of less than Rs 25 crore
  • Fall in unencumbered cash and bank balance or sizeable stretch in the working capital cycle or any large, debt-funded capex impacting the financial risk profile and liquidity

About the company

RICPL was set up in 1972 as a partnership concern named Rama Construction Co and was reconstituted into a private limited company with the current name in 2017. RICPL is engaged in civil construction activity. Based in Delhi, the company undertakes contracts for various government agencies mostly around Delhi, Uttar Pradesh, West Bengal, Odisha, Jammu and Kashmir, and Bihar. RICPL is registered as a Class I (Super) contractor with the central PWD and Class IA contractor with the Municipal Corporation of Delhi. Mr Ram Niwas Gupta and his sons, Mr Parveen Gupta and Mr Gautam Gupta, manage operations.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

532.22

639.79

Reported profit after tax

Rs crore

23.81

27.38

PAT margin

%

4.47

4.28

Adjusted Debt/Adjusted networth

Times

0.04

0.03

Interest coverage

Times

5.31

11.20

Status of non cooperation with previous CRA:

RICPL has not cooperated with Acuite Ratings and Research Ltd which has classified the company as non-cooperative through a release dated July 7, 2021. The reason provided by Acuite Ratings and Research Ltd is non-furnishing of information for monitoring of 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.crisilratings.com. 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 levels

Rating assigned

with outlook

NA

Cash Credit

NA

NA

NA

5.0

NA

CRISIL A-/Stable

NA

Bank Guarantee

NA

NA

NA

273.0

NA

CRISIL A2+

NA

Proposed Bank Guarantee

NA

NA

NA

22.0

NA

CRISIL A2+
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 5.0 CRISIL A-/Stable   -- 27-07-21 CRISIL A-/Stable   --   -- Suspended
Non-Fund Based Facilities ST 295.0 CRISIL A2+   -- 27-07-21 CRISIL A2+   --   -- Suspended
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 49 HDFC Bank Limited CRISIL A2+
Bank Guarantee 39 IndusInd Bank Limited CRISIL A2+
Bank Guarantee 185 Union Bank of India CRISIL A2+
Cash Credit 1 HDFC Bank Limited CRISIL A-/Stable
Cash Credit 1 IndusInd Bank Limited CRISIL A-/Stable
Cash Credit 3 Union Bank of India CRISIL A-/Stable
Proposed Bank Guarantee 22 Not Applicable CRISIL A2+

This Annexure has been updated on 23-Feb-23 in line with the lender-wise facility details as on 08-Feb-23 received from the rated entity.

Criteria Details
Links to related criteria
Understanding CRISILs Ratings and Rating Scales
CRISILs Bank Loan Ratings
The Rating Process
Rating criteria for manufaturing and service sector companies
Rating Criteria for Construction Industry

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Nitin Kansal
Director
CRISIL Ratings Limited
D:+91 124 672 2154
nitin.kansal@crisil.com

Rachna Anand
Team Leader
CRISIL Ratings Limited
D:+91 22 3342 3491
Rachna.Anand@crisil.com

Snehanshu Vats
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 124 672 2000
Snehanshu.Vats@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html