Rating Rationale
September 29, 2023 | Mumbai
Udayshivakumar Infra Limited
'CRISIL BBB/Stable/CRISIL A3+' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.195 Crore
Long Term RatingCRISIL BBB/Stable (Assigned)
Short Term RatingCRISIL A3+ (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 BBB/Stable/CRISIL A3+' ratings to the bank facilities of Udayshivakumar Infra Limited (UIL).

 

The ratings reflects UIL's long track record of operations and extensive experience of the promoters, healthy order book providing revenue visibility, comfortable financial risk profile and sound operating efficiencies. These strengths are partially offset by its susceptibility to tender-based operations and working capital intensive operations.

Key Rating Drivers & Detailed Description

Strengths:

Long track record of operations and extensive experience of the promoters: Since its inception, UIL has successfully completed various infra projects from different government departments and agencies. The promoter Mr. Udayshivakumar has over 20 years of experience in the civil construction sector. This has given him an understanding of the market dynamics and enabled him to establish relationships with suppliers and customers.

 

Healthy order book providing revenue visibility: The company has order book of Rs 503 crore as on May 2023, which is to be executed over next 12-24 months. Its healthy order book provides significant revenue visibility over medium term.

 

Comfortable financial risk profile: UIL’s capital structure have been at healthy level due to lower reliance on external funds yielding gearing of 0.31 times and low total outside liabilities to adj tangible networth (TOL/ANW) of 0.97 times for year ending on 31st March 2023. UIL’s debt protection measures have also been at healthy level due to leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 7.29 times and 0.49 times for fiscal 2023. UIL’s debt protection measures are expected to remain at similar level over medium term.

 

Sound operating efficiencies: UIL has healthy operating efficiencies, marked by healthy return on capital employed (RoCE). Driven by high economies of scale and experienced management.

 

Weaknesses:

Susceptibility to tender-based operations: Revenue and profitability entirely depend on the ability to win tenders. Also, entities in this segment face intense competition, thus requiring  to bid aggressively to get contracts, which restricts the operating margin to a moderate level. Also, given the cyclicality inherent in the construction industry, the ability to maintain profitability margin through operating efficiency becomes critical.

 

Working capital intensive operations: Gross current assets were at 162.8-210.8 days over the three fiscals ended March 31, 2023. Its intensive working capital management is reflected in its gross current assets (GCA) of 210.8 days as on March 31, 2023. Its large working capital requirements arise from its high debtor and inventory levels. It is required to extend long credit period. Furthermore, due to its business need, it holds large work in process & inventory.

Liquidity- Adequate

Bank limit utilisation is moderate at around 80.27 percent for the past twelve months ended July 2023. Cash accrual are expected to be over Rs  20-22 crore which are sufficient  against term debt obligation of Rs 6.0-9.8 crore over the medium term. Current ratio was healthy at 1.8 times on March 31, 2023. Healthy cash and bank balance of around Rs crore as on March 31, 2023. Low gearing and moderate net worth support its financial flexibility, and provides the financial cushion available in case of any adverse conditions or downturn in the business

Outlook: Stable

CRISIL Ratings believe UIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating Sensitivity factors

Upward factors

  • Sustained improvement in scale of operation by 30-40% and sustenance of operating margin, leading to higher cash accruals
  • Improvement in working capital cycle, with gross current assets improve to below 200 days
  • Traction in order book above Rs 800 crores and increase in number of projects executed.

Downward factors

  • Decline in profitability below 200 bps due to raw material costs or change in revenue mix.
  • Large debt-funded capital expenditure weakens capital structure
  • Witnesses a substantial increase in its working capital requirements thus weakening its liquidity & financial profile

About the Company

UIL was initially formed as a sole proprietorship under the name of M/s Udayshivakumar at Davangere, Karnataka in August 2002 and was converted into a partnership firm under the name of M/s. Udayshivakumar in 2014. Later, it was converted into a private limited company with the name Udayshivakumar Infra Private Limited in 2019. Subsequently, the company was converted into a public limited company in August 2022, and its name was changed to Udayshivakumar Infra Limited. UIL is engaged in business of civil construction works such as construction of roads and bridges, canal works, irrigation works, etc. for State Government, Central Government and Government Civic Bodies and Corporations. Additionally, it is engaged in manufacturing of ready-mix concrete (RMC). UIL is listed on both National Stock Exchange and Bombay Stock Exchange.UIL is promoted by Mr. Udayshivakumar Rajanna.

Key Financial Indicators

As on/for the period ended March 31

 

2023

2022

Operating income

Rs crore

286.96

185.70

Reported profit after tax

Rs crore

15.84

12.21

PAT margins

%

5.56

6.66

Adjusted Debt/Adjusted Networth

Times

0.31

0.43

Interest coverage

Times

7.13

7.04

Status of non cooperation with previous CRA:

UIL has not cooperated with Brickwork Ratings India Private Limited which has classified it as non-cooperative vide release dated February 06, 2023. The reason provided by Brickwork Ratings India Private Limited 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. Cr)

Complexity Level

Rating assigned with outlook

NA

Cash Credit

NA

NA

NA

30

NA

CRISIL BBB/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

70

NA

CRISIL BBB/Stable

NA

Bank Guarantee

NA

NA

NA

95

NA

CRISIL A3+

 

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 100.0 CRISIL BBB/Stable   --   --   --   -- --
Non-Fund Based Facilities ST 95.0 CRISIL A3+   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 95 State Bank of India CRISIL A3+
Cash Credit 30 State Bank of India CRISIL BBB/Stable
Proposed Long Term Bank Loan Facility 70 Not Applicable CRISIL BBB/Stable
Criteria Details
Links to related criteria
The Rating Process
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
Rating Criteria for Construction Industry
CRISILs Criteria for rating short term debt

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