Rating Rationale
December 27, 2021 | Mumbai
Akash Infra Projects Limited
Ratings reaffirmed at 'CRISIL BB / Stable / CRISIL A4+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.80 Crore
Long Term RatingCRISIL BB/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL BB/Stable/CRISIL A4+’ rating on the bank facilities of Akash Infra Projects Limited (AIPL).

 

The ratings reflect AIPL's established track record in the construction industry, and a moderate capital structure. These strengths are partially offset by modest scale of operations, large working capital requirement, segmental and geographic concentration risk in revenue, and exposure to intense competition and risks related to tender-based business.

Key Rating Drivers & Detailed Description

Strengths:

  • Established track record in the construction industry:

AIPL has been undertaking road projects for several local bodies, including Ahmedabad Urban Development Authority and the Roads and Buildings Department (Gujarat), for more than two decades. AIPL currently has orders worth around Rs 250 crore, assuring near-term revenue visibility.

 

  • Moderate capital structure:

AIPL had a networth and gearing of Rs 77 crore and 0.30 times respectively, as on March 31, 2021. Debt protection metrics were adequate, with net cash accrual to total debt and interest coverage ratios of 0.11 time and 2 times, respectively, in fiscal 2021.

 

Weaknesses:

  • Modest scale of operations:

Revenues were modest at Rs 67 crore in fiscal 2021 declining from Rs. 71.6 cr in the previous fiscal. The performance in current fiscal is estimated to remain around similar level.

 

  • Large working capital requirement:

Large working capital requirement is reflected in high GCA over 660 days as on March 31, 2021. This is driven by high debtors, retention money, security deposit and fixed deposit margin money for bank guarantee. The GCA has progressively increased in last three years driven by long stuck debtors with Ahmedabad Municipal Corporation and moderated turnover.

 

  • Segmental and geographic concentration risk in revenue:

Unlike other construction companies that are present in multiple segments (such as commercial, residential, industrial, and infrastructure), AIPL focuses only on road construction. This, along with geographic concentration in Gujarat, restricts growth opportunities.

 

  • Risks related to tender-based business and intense competition:

Since the entire income—primarily derived from government agencies—is tender-driven, turnover depends on the ability to successfully bid for orders. Also, the road construction and maintenance industry is highly fragmented, which may continue to constrain pricing power and profitability.

Liquidity: Stretched

Bank limit utilisation is high at 94 percent for the past twelve months ended August 2021. Cash accrual are expected to be over Rs 2.5 cr which are sufficient against term debt obligation of around Rs 0.6 cr in current financial year. Current ratio stood at 2.94 times on March 31, 2021. Low gearing and moderate net worth provides AIPL healthy financial flexibility though liquidity remains stretched driven by high capital blocked in working capital.

Outlook: Stable

CRISIL Ratings believes AIPL’s working capital requirement shall continue to constrain the credit risk profile.

Rating Sensitivity factors

Upward factors:

  • Prudent working capital management, with GCAs moderating to below 250 days
  • Realisation of outstanding debtors with AMC

 

Downward factors:

  • Pressure on topline or margin leading to moderation in cash accruals to below Rs. 2 cr
  • Deterioration in working capital cycle

About the Company

Gandhinagar (Gujarat)-based AIPL was set up in 1999 as a partnership (Akash Builders) between Mr Yoginkumar H Patel and Mr Ambusinh P Gol; the firm got converted into a private-limited company within two months. In fiscal 2017, the company raised equity through an SME-IPO and was reconstituted as AIPL. The company constructs and repairs roads in Gujarat.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

67.2

72.6

Reported profit after tax

Rs crore

1.1

0.6

PAT margins

%

1.7

0.9

Adjusted Debt/Adjusted Net worth

Times

0.30

0.25

Interest coverage

Times

2.0

2.1

 

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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. Cr) Complexity Level Rating assigned With outlook
NA Bank Guarantee NA NA NA 25 NA CRISIL A4+
NA Cash Credit NA NA NA 20 NA CRISIL BB/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 31.3 NA CRISIL BB/Stable
NA Working Capital Term Loan NA NA Mar-2025 3.7 NA CRISIL BB/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 55.0 CRISIL BB/Stable   -- 11-09-20 CRISIL BB/Stable   -- 24-10-18 CRISIL BB+/Stable CRISIL BB+/Stable
      --   -- 28-01-20 CRISIL BB+/Negative   --   -- --
Non-Fund Based Facilities ST 25.0 CRISIL A4+   -- 11-09-20 CRISIL A4+   -- 24-10-18 CRISIL A4+ CRISIL A4+
      --   -- 28-01-20 CRISIL A4+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 25 Punjab National Bank CRISIL A4+
Cash Credit 20 Punjab National Bank CRISIL BB/Stable
Proposed Long Term Bank Loan Facility 31.3 Not Applicable CRISIL BB/Stable
Working Capital Term Loan 3.7 Punjab National Bank CRISIL BB/Stable

This Annexure has been updated on 27-Dec-2021 in line with the lender-wise facility details as on 30-Jul-2021 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
Rating Criteria for Construction Industry
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt

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