Rating Rationale
April 21, 2021 | Mumbai
Shanti Procon LLP
Ratings upgraded to 'CRISIL BBB / Stable / CRISIL A3+ '; rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.173 Crore (Enhanced from Rs.120 Crore)
Long Term RatingCRISIL BBB/Stable (Upgraded from 'CRISIL BBB- / Stable')
Short Term RatingCRISIL A3+ (Upgraded from 'CRISIL A3 ')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its rating on the bank loan facilities of Shanti Procon LLP (SPL) to ‘CRISIL BBB/Stable/CRISIL A3+’ from ‘CRISIL BBB-/Stable/CRISIL A3’.

 

The rating upgrade reflects CRISIL Rating’s belief that the SPL’s business risk and financial risk profile is expected to strengthen over the medium term. Company's revenue is estimated at Rs 330 crore for fiscal year 2021, up 7 per cent over the previous year backed by timely execution of orders and expecting sustained revenue growth over the medium term. Currently firm has outstanding order book of Rs 928 crore as on March 31, 2021, providing healthy revenue visibility of 24-30 months, thereby sustained scaling up of revenues. Additionally the working capital cycle remained well managed with gross current asset days of 128 days despite revenue growth. The financial risk profile remain comfortable with adjusted gearing of 0.67 times and comfortable interest coverage of 4.8 times in FY20 and expected to remain comfortable as on March 31, 2021.

 

The ratings also take into account the extensive experience of the promoters in the construction business along with SPL's healthy order flow and strong financial risk profile. These strengths are partially offset by moderate working capital requirement and exposure to customer/order concentration risks.

Key Rating Drivers & Detailed Description

Strengths:

  • Established track record in the construction sector and stable revenue profile

Benefits from the promoters’ experience of over three decades, their strong understanding of local market dynamics, and healthy relations with customers and suppliers should continue to support the business. This is reflected in healthy order book of Rs 929 crore as on March 31, 2021, which provides revenue visibility for next 24-36 months, thereby assuring steady revenue flow over the medium term. Revenue were at Rs 309 crore in FY20 and estimated Rs 330 crore in FY21.

 

  • Comfortable financial risk profile

Financial risk profile is likely to remain robust over the medium term. Networth was Rs 41 crore with gearing of 0.67 time as on March 31, 2020. The gearing are estimated below 0.65 timed as on March 31, 2021. Debt protection metrics were healthy too, with interest coverage and net cash accrual to adjusted debt ratios of 4.88 times and 0.30 time, respectively, in fiscal 2020. In absence of large debt funded capex, the debt protection metrics are also expected to improve over the medium term.

 

Weakness:

  • Moderate working capital requirement

Operations may remain working capital intensive over the medium term. Gross current assets were at around 128 days in FY20, driven by various deposits required for tenders. The GCA are estimated to remain in range of 100-130 days over the medium term.

 

  • Risk related to customer concentration

Although the revenue concentration has reduced, the top five orders contributes around 54% of the total order value reported as on March 31, 2021. Execution of this order would be monitored closely as any delay in its accomplishment will significantly impact the business.

Liquidity: Adequate

Liquidity is adequate backed by sufficient cash accrual of over Rs 5.5 crore vis-a-vis repayment obligation of Rs 1-2 crore over the medium term; the surplus cash will be used as working capital. The fund-based limit utilised at around 80% during the 12 months through February 2021. The current ratio expected over 1.40 times as on March 31, 2021. Liquidity further supported by unencumbered cash and bank balance of Rs 6-7 crore as on March 31, 2021

Outlook Stable

CRISIL Ratings believes SPL will continue to benefit from the extensive experience of its promoters and execution of outstanding order book while maintaining comfortable financial risk profile.

Rating Sensitivity factors

Upward factors

  • Sustained growth in revenue while improving operating margin over 6.5%
  • Improvement in the working capital cycle, leading to easing of liquidity

 

Downward factors

  • Steep decline in revenue or operating margin
  • Stretch in working capital requirement, leading to GCAs of above 175-200 days.

About the Company

Established as partnership firm, Shanti Construction Co. in 1997 by Mr Mansukh Devani and his brothers. In fiscal 2021, the firm was reconstituted as LLP with the current name. It is an 'AA' class government-approved contractor primarily undertaking civil construction works for buildings. The firm has executed various projects for government entities as well as for the private sector, including hospitals, hostels and school buildings.

Key Financial Indicators

Particulars

Unit

2020

2019

Revenue

Rs crore

309.16

230.96

Profit after tax (PAT)

Rs crore

8.97

7.60

PAT margin

%

2.90

3.29

Adjusted debt/adjusted networth

Times

0.67

0.53

Interest coverage

Times

4.62

3.99

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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

Bank Guarantee

NA

NA

NA

140

NA

CRISIL A3+

NA

Cash Credit

NA

NA

NA

19

NA

CRISIL BBB/Stable

NA

Overdraft Facility

NA

NA

NA

11

NA

CRISIL BBB/Stable

NA

Proposed Fund-Based Bank Limits

NA

NA

NA

3

NA

CRISIL BBB/Stable

 

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 33.0 CRISIL BBB/Stable   -- 10-01-20 CRISIL BBB-/Stable 09-12-19 CRISIL BBB-/Stable   -- CRISIL BBB-/Stable
      --   --   -- 19-02-19 CRISIL BBB-/Stable   -- --
Non-Fund Based Facilities ST 140.0 CRISIL A3+   -- 10-01-20 CRISIL A3 09-12-19 CRISIL A3   -- CRISIL A3
      --   --   -- 19-02-19 CRISIL A3   -- --
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 140 CRISIL A3+ Bank Guarantee 101 CRISIL A3
Cash Credit 19 CRISIL BBB/Stable Cash Credit 19 CRISIL BBB-/Stable
Overdraft Facility 11 CRISIL BBB/Stable - - -
Proposed Fund-Based Bank Limits 3 CRISIL BBB/Stable - - -
Total 173 - Total 120 -
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
CRISILs Criteria for rating short term debt
CRISILs Bank Loan Ratings

Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
 naireen.ahmed@crisil.com

Rahul Subrato Kumar Guha
Director
CRISIL Ratings Limited
D:+91 22 4097 8320
rahul.guha@crisil.com


Neha Kantilal Sharma
Associate Director
CRISIL Ratings Limited
D:+91 79 4024 4507
neha.sharma@crisil.com


Vicky Modi
Senior Rating Analyst
CRISIL Ratings Limited
D:+91 124 672 2175
vicky.modi@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, portals etc.


About CRISIL Ratings Limited

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 rating 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.crisil.com/ratings 




About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL 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 forms part of and applies to each credit rating report and/or credit rating rationale (each a "Report") that is provided by CRISIL Ratings Limited  (hereinafter referred to as "CRISIL Ratings") . For the avoidance of 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 or otherwise 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. Rating by CRISIL Ratings 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 company/entity.

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. CRISIL Rating's public ratings and analysis 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 web sites, www.crisil.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 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 analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL Ratings you may contact CRISIL RATING 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 a prior written consent of CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings Limited 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 Ratiings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: www.crisil.com/ratings/credit-rating-scale.html