Ratings /Instruments Long term Bank Short-term Bank Sai Engicon and Construction Private Limited December 17, 2018 Amount 5.00 20.00 Total 25.00 (Rupees Twenty Five crore only) Details of facilities in Annexure-1 Rating 1 CARE BB; Stable; ISSUER NOT (Double B; Outlook: Stable;ISSUER NOT ) CARE A4 ISSUER NOT ( A Four; ISSUER NOT ) Rating Action Issuer Not Cooperating; Revised from CARE BB+;Stable; Issuer Not Cooperating (Double B Plus; Outlook: Stable; Issuer Not Cooperating); based on best available information. Issuer not cooperating; Revised from CARE A4+; Issuer Not Cooperating; (A Four Plus; Issuer Not Cooperating); based on best available information. Detailed Rationale and key rating drivers CARE has been seeking information from Sai Engicon and Construction Private Limited (SECPL) to monitor the ratings vide e-mail communications/letters dated October 03, 2018, December 05, 2018, December 06, 2018 and numerous phone calls. However, despite our repeated requests, the company has not provided the requisite information for monitoring the ratings. In line with the extant SEBI guidelines, CARE has reviewed the rating on the basis of the publicly available information which however, in CARE s opinion is not sufficient to arrive at a fair rating. The rating on SECPL s bank facilities will now be denoted as CARE BB; Stable/A4; ISSUER NOT. The revision in the ratings assigned to the bank facilities of SECPL take into account the unavailability of information. Users of this rating (including investors, lenders and the public at large) are hence requested to exercise caution while using the above rating. Detailed description of the key rating drivers At the time of last rating in July 18, 2018 the following were the rating strengths and weaknesses: Key Rating Weaknesses: Small scale of operations with moderate profitability margins: The scale of operations of the company remained small marked by total operating income of Rs.40.49 crore (Rs.29.86 crore in FY16) with a PAT of Rs.1.70 crore (Rs.0.49 crore in FY16) in FY17. Further, the total operating income of the company witnessed an erratic trend during last three years (FY15-FY17) due to low orders release by the state government. Furthermore, the total capital employed has also remained low at Rs.16.47 crore as on March 31, 2017. The company has booked revenue of Rs.31.00 crore in 9MFY18. The operating profit margins of the company remained moderate during last three years (FY15-FY17). The PBILDT margin improved in FY17 on account of better management of cost of operations and the same stood at 10.56% in FY17 as against 10.00% in FY16. Furthermore, the PAT margin also improved during FY17 and the same stood moderate at 4.19% in FY17 as against 1.63% in FY16. Working capital intensive nature of business: The operations of the company remained working capital intensive as the company executes orders mainly for public sector units. The average inventory period was around a months during FY17 due to work uncertified by the customers. Accordingly the average utilization of working capital was moderately high at around 80% during last 12 months ended December 31, 2017. Geographical and client concentration risk albeit reputed clientele: SECPL executes orders mainly for various public sector units like Public Works Department (Bihar), Rural Works Department (Bihar), etc. and earns revenue of about 80%- 90% of its total operating income from the above clients which exposes it to client concentration risk. Moreover, entire turnover comes from executing projects in Bihar, which exposes growth to regional impetus on infrastructure development. However, the company has long standing relationship with these clients for more than a decade which offsets the risk to some extent. Further the clients of the company are reputed government players and hence, default risk is minimal. 1 Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications *Issuer not cooperating, based on best available information 1 CARE Ratings Limited
Intense competition and tender driven process risk: SECPL has to bid for the contracts based on tenders opened by the various public sector units. Upon successful technical evaluation of various bidders, the lowest bid is awarded the contract. The company receives projects which majorly are of a short to medium tenure (i.e. to be completed within maximum period of one to two years). Apart from this, present economic slowdown is also having a negative bearing on the construction sector which may also hinder the growth of the company. Furthermore, orders are generally tender driven floated by government units indicating a risk of non-receipt of contract in a competitive industry. Key Rating Strengths Experienced promoters with long track record of operations: SECPL is into civil construction business since 2007 and thus has around a decade of track record of operations. Due to long track record of operations the company has established satisfactory relationship with its clients. Furthermore the key promoter; Mr. Ritesh Ranjan Singh (aged 47 years), has around two decades of experience in civil construction industry, looks after the day to day operations of the company. He is supported by other director Mr. Arjun Yadav, Mr. Rakesh Kumar Singh and Mr. Sujeet Kumar Singh who also has around two decades of experience in this line of business. Healthy order book position: SECPL has an order book position of around Rs.118.40 crore (2.92x of FY17 TOI) as on December 31, 2017 which is to be completed by March, 2019. The healthy order book position indicates good revenue visibility in medium term. Comfortable capital structure with satisfactory debt coverage indicators: The capital structure of the company remained comfortable marked by debt equity and overall gearing ratios both at 0.01x and 0.29x respectively as on March 31, 2017. Moreover, the leverage ratios were improved as on March 31, 2017 due to less utilization of working capital limit. The debt coverage indicators also improved and remained satisfactory in last three years (FY15-FY17). Furthermore the interest coverage ratio improved to 2.96x in FY17 on account of higher increase in PBILDT level vis-à-vis increase in interest expenses. The total debt to GCA improved as on March 31, 2017 due to low debt level and the same remained at 1.58x as on March 31, 2017. Analytical approach: Standalone Applicable Criteria Policy in respect of Non-cooperation by issuer Criteria on assigning Outlook to Credit Ratings CARE s methodology for manufacturing companies Financial ratios Non-Financial Sector Criteria for Short Term Instruments CARE s Policy on Default Recognition About the Company Incorporated in May 2007, Sai Engicon and Construction Private Limited (SECPL) was promoted by Mr. Ritesh Ranjan Singh, Mr. Arjun Yadav, Mr. Rakesh Kumar Singh and Mr. Sujeet Kumar Singh. The company has been engaged in civil construction activities in the segment like construction of buildings, bridges, tunnels, roads, etc. The company is classified as Class 1 contractor by Public Works Division, Bihar which indicates that the company can participate for higher value contracts released by government departments. SECPL participates in tenders and executes orders for the Public Works Department (Bihar), Rural Works Department (Bihar), etc. The company has an order book position of Rs.118.40 crore (2.92x of FY17 total operating income) as on December 31, 2017 which is to be completed by March, 2019. Status of non-cooperation with previous CRA: CRISIL has placed its ratings under non cooperation as per its PR date May 30, 2018 due to non submission of information by the company. Any other information: Not Applicable. Rating History (Last three years): Please refer Annexure-2 Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to care@careratings.com for any clarifications. Analyst Contact: Name: Rajesh Shaw Tel: 033-40581911 Mobile: +91-9007700172 Email: rajesh.shaw@careratings.com 2 CARE Ratings Limited
About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. Annexure-1: Details of Name of the Instrument Fund-based - LT-Cash Credit Non-fund-based - ST- Bank Guarantees Date of Issuance Coupon Rate Maturity Date Size of the Issue Rating assigned along with Rating Outlook - - - 5.00 CARE BB; Stable; ISSUER NOT Issuer not cooperating; Revised from CARE BB+; Stable on the basis of best available information - - - 20.00 CARE A4; ISSUER NOT Issuer not cooperating; Revised from CARE A4+ on the basis of best available information 3 CARE Ratings Limited
Annexure-2: Rating History of last three years Sr. No. Name of the Instrument/Bank 1. Fund-based - LT-Cash Credit 2. Non-fund-based - ST- Bank Guarantees Type Current Ratings Amount Rating Outstanding 2018-2019 LT 5.00 CARE BB; Stable; ISSUER NOT Issuer not cooperating; Revised from CARE BB+; 1)CARE BB+; Stable (12-Jul-18) Stable on the basis of best available information ST 20.00 CARE A4; ISSUER 1)CARE A4+ NOT (12-Jul-18) Issuer not cooperating; Revised from CARE A4+ on the basis of best available information * Issuer Not Cooperating; based on best available information Rating history 2017-2018 2016-2017 - - - - - - 2015-2016 4 CARE Ratings Limited
CONTACT Head Office Mumbai Ms. Meenal Sikchi Mr. Ankur Sachdeva Cell: + 91 98190 09839 Cell: + 91 98196 98985 E-mail: meenal.sikchi@careratings.com E-mail: ankur.sachdeva@careratings.com Ms. Rashmi Narvankar Mr. Saikat Roy Cell: + 91 99675 70636 Cell: + 91 98209 98779 E-mail: rashmi.narvankar@careratings.com E-mail: saikat.roy@careratings.com CARE Ratings Limited (Formerly known as Credit Analysis & Research Ltd.) Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022 Tel: +91-22-6754 3456 Fax: +91-22-6754 3457 E-mail: care@careratings.com AHMEDABAD Mr. Deepak Prajapati 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad - 380 015 Cell: +91-9099028864 Tel: +91-79-4026 5656 E-mail: deepak.prajapati@careratings.com BENGALURU Unit No. 1101-1102, 11th Floor, Prestige Meridian II, No. 30, M.G. Road, Bangalore - 560 001. Cell: +91 98407 54521 Tel: +91-80-4115 0445, 4165 4529 CHANDIGARH Mr. Anand Jha SCF No. 54-55, First Floor, Phase 11, Sector 65, Mohali - 160062 Chandigarh Cell: +91 85111-53511/99251-42264 Tel: +91-0172-490-4000/01 Email: anand.jha@careratings.com CHENNAI Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai - 600 002. Cell: +91 98407 54521 Tel: +91-44-2849 7812 / 0811 COIMBATORE T-3, 3rd Floor, Manchester Square Puliakulam Road, Coimbatore - 641 037. Tel: +91-422-4332399 / 4502399 JAIPUR Mr. Nikhil Soni 304, Pashupati Akshat Heights, Plot No. D-91, Madho Singh Road, Near Collectorate Circle, Bani Park, Jaipur - 302 016. Cell: +91 95490 33222 Tel: +91-141-402 0213 / 14 E-mail: nikhil.soni@careratings.com KOLKATA Ms. Priti Agarwal 3rd Floor, Prasad Chambers, (Shagun Mall Bldg.) 10A, Shakespeare Sarani, Kolkata - 700 071. Cell: +91-98319 67110 Tel: +91-33- 4018 1600 E-mail: priti.agarwal@careratings.com NEW DELHI Ms. Swati Agrawal 13th Floor, E-1 Block, Videocon Tower, Jhandewalan Extension, New Delhi - 110 055. Cell: +91-98117 45677 Tel: +91-11-4533 3200 E-mail: swati.agrawal@careratings.com PUNE Mr.Pratim Banerjee 9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune - 411 015. Cell: +91-98361 07331 Tel: +91-20- 4000 9000 E-mail: pratim.banerjee@careratings.com CIN - L67190MH1993PLC071691 HYDERABAD Mr. Ramesh Bob 401, Ashoka Scintilla, 3-6-502, Himayat Nagar, Hyderabad - 500 029. Cell : + 91 90520 00521 Tel: +91-40-4010 2030 E-mail: ramesh.bob@careratings.com 5 CARE Ratings Limited