| Aarvi Encon Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB/Stable/CRISIL A3+' | ||||||
| Rating Action | ||||||
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| 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 BBB/Stable/CRISIL A3+’ ratings on the bank loan facilities of Aarvi Encon Limited (AEL; part of Aarvi group)
The ratings continue to reflect group’s established market position in supply of technical manpower, the extensive experience of the promoters, and a healthy financial risk profile and efficient working capital cycle. These strengths are partially offset by susceptibility to cyclicality in key end-user industries and a modest operating margin due to intense competition. |
Analytical Approach For arriving at the ratings CRISIL Ratings has combined the business and financial risk profiles of AEL, and its wholly owned subsidiaries, Aarvi Engineering and Consultants Pvt Ltd, Aarvi Encon FZE, Aarvi Encon Resources Limited and Aarvi Energy Company. That’s because all these companies, together referred to as the Aarvi group, are in the same line of business and have business and financial linkages.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Efficient Working Capital Cycle: The working capital operations of the group are efficiently managed as reflected in the gross current asset of 102 days as on March 31, 2024 (78 days a year ago). This is mainly driven by the moderate debtors of around 75 days and unbilled revenues of around 18 days as on March 31, 2024 (79 days and 5 days a year ago). Overall a moderate credit period is extended to the customers of around 30 days post which the payments are received and no stretch is seen in the same. Working capital operations are expected to be efficiently managed with gross current assets ranging from 100 to 110 days over the medium term.
Weaknesses:
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Liquidity: Adequate Net cash Accruals are expected to be over Rs 11 to Rs 14 crore with no repayment obligations over medium term. Bank limit utilization is low as reflected in low average utilization of 33% during the past 12 months ended in July 2024. Company has cash and cash equivalent of Rs 31 crore as on March 31,2024. Company has no material capex plans over the medium term Current ratio is healthy at around 2.56 times as on March 31, 2024 (2.29 times a year ago) CRISIL Ratings expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its incremental working capital requirements. |
Outlook: Stable CRISIL Ratings believes the group will continue to benefit from an established market position and improved financial flexibility. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Group Established in 1987 by the Sanghavi family, AEL supplies technical manpower to the oil and gas, engineering, infrastructure, and renewable energy industries. Operations are managed by Mr Virendra Sanghavi and his son, Mr. Jaydev Sanghavi |
Key Financial Indicators: Consolidated
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
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Criteria Details
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