Rating Rationale
January 24, 2023 | Mumbai
Tirupati Sarjan Limited
'CRISIL BB/Stable/CRISIL A4+' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.60 Crore
Long Term RatingCRISIL BB/Stable (Assigned)
Short Term RatingCRISIL A4+ (Assigned)
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 assigned its ‘CRISIL BB/Stable/CRISIL A4+’ ratings to the bank facilities of Tirupati Sarjan Limited (TSL).

 

The ratings reflect the extensive experience of the promoters and moderate financial risk profile. These strengths are partially offset by susceptibility to tender-based operations, working capital-intensive operations and high exposure to group companies.

Analytical Approach

Unsecured loans from the promoters (Rs 33.31 crore as on March 31, 2022) have been treated as 75% equity and 25% debt because the loans carry a low interest rate and are expected to remain in the business over the medium term

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters: Benefits from the promoter experience of more than three decades in the construction industry and successful execution of real estate and government projects should continue to support business risk profile. TSL is registered as an 'AA' class contractor with the Government of Gujarat.

 

  • Moderate financial risk profile: Limited reliance on external funds led to strong gearing of 0.49 time and moderate total outside liabilities to adjusted networth ratio of 1.23 times as on March 31, 2022. Healthy profitability led to comfortable debt protection metrics: interest coverage and net cash accrual to total debt ratios were 1.35 times and 0.06 time, respectively, for fiscal 2022. The metrics are expected to remain stable over the medium term.

 

Weaknesses:

  • Working capital-intensive operations: Gross current assets (GCAs) have been 335-400 days over the three fiscals ended March 31, 2022, because of sizeable unsold real estate projects inventory of Rs 22.04 crores.

 

  • Extensive exposure to group companies: Investment of Rs 49.77 crore in group companies in the form of equity, loans and advances as on March 31, 2022, accounts for 64% of the networth. Any further exposure to group companies that may impinge on its own cash accrual and affect liquidity will remain a rating sensitivity factor for TSL.

Liquidity: Adequate

Bank limit utilisation was 70-80% for the 12 months through November 2022. Cash accrual is expected to be Rs 3.20-4.50 crore on yearly basis against yearly term debt obligation of Rs 2-2.4 crore over the medium term; the remaining accrual will cushion liquidity. Current ratio was healthy at 1.52 times as on March 31, 2022.

Outlook: Stable

The company will continue to benefit from the extensive experience of its promoters and established relationships with clients.

Rating Sensitivity factors

Upward factors

  • Steady improvement in scale of operations by 30% and sustenance of operating margin leading to higher cash accrual
  • Improvement in working capital cycle with GCAs below 250 days

 

Downward factors

  • Decline in net cash accrual below Rs 2 crore on account of fall in revenue or operating profit
  • Substantial deterioration in working capital requirement weakening financial risk profile, including liquidity.
  • Any additional investments in its group companies will increase the liquidity pressure.

About the Company

Incorporated in 1995, TSL is promoted by Mr Jitendra Patel, Mr Jaswant Patel, Mr Bhailal Shah, Mr Rajesh Shah, Mr Ankit Shah and Mr Ruchirkumar Patel. The company is a civil constructor and constructs commercial and institutional buildings, roads and bridges, and canals; and also undertakes irrigation work for government bodies in Gujarat. It is listed on the Bombay Stock Exchange.

Key Financial Indicators

As on / for the period ended March 31

 

2022

2021

Operating income

Rs crore

90.21

64.61

Reported profit after tax (PAT)

Rs crore

1.69

1.13

PAT margin

%

1.87

1.75

Adjusted debt/adjusted net-worth

Times

0.49

0.58

Interest coverage

Times

1.35

1.31

 

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.Cr)

Complexity

levels

Rating assigned

and outlook

NA

Cash Credit

NA

NA

NA

17.00

NA

CRISIL BB/Stable

NA

Bank Guarantee

NA

NA

NA

43.00

NA

CRISIL A4+

 

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 17.0 CRISIL BB/Stable   -- 16-12-22 Withdrawn (Issuer Not Cooperating)* 31-08-21 CRISIL B+ /Stable(Issuer Not Cooperating)* 31-08-20 CRISIL B+ /Stable(Issuer Not Cooperating)* CRISIL B+/Stable
      --   -- 28-10-22 CRISIL B+ /Stable(Issuer Not Cooperating)*   --   -- --
Non-Fund Based Facilities ST 43.0 CRISIL A4+   -- 16-12-22 Withdrawn (Issuer Not Cooperating)* 31-08-21 CRISIL A4 (Issuer Not Cooperating)* 31-08-20 CRISIL A4 (Issuer Not Cooperating)* CRISIL A4
      --   -- 28-10-22 CRISIL A4 (Issuer Not Cooperating)*   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 6 Union Bank of India CRISIL A4+
Bank Guarantee 27 The Mehsana Urban Co-Op. Bank Limited CRISIL A4+
Bank Guarantee 10 Bank of Baroda CRISIL A4+
Cash Credit 4 Union Bank of India CRISIL BB/Stable
Cash Credit 10 Bank of Baroda CRISIL BB/Stable
Cash Credit 3 The Mehsana Urban Co-Op. Bank Limited CRISIL BB/Stable

This Annexure has been updated on 24-Jan-23 in line with the lender-wise facility details as on 23-Jan-23 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
CRISILs Rating criteria for Real Estate Developers
Rating Criteria for Construction Industry
CRISILs Criteria for rating short term debt

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