| Bigbloc Construction Limited | ||||
| Rating migrated to 'CRISIL BB+/Stable' | ||||
| Rating Action | ||||
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| & *Issuer did not cooperate; based on best-available information | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Due to inadequate information, CRISIL Ratings, in line with guidelines of the Securities Exchange Board of India (SEBI), had migrated its rating on the long-term facilities of Bigbloc Construction Limited (BCL) to ‘CRISIL B/Stable Issuer Not Cooperating'. However, the management has subsequently started sharing the information, necessary for carrying out a comprehensive review of the rating. Consequently, the rating are being migrated to ‘CRISIL BB+/Stable’
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Analytical Approach CRISIL Ratings has consolidated the business and financial risk profiles of BCL and Starbigbloc Building Material Pvt td (SBM), together referred to as the Bigbloc group. That is because SBM is a 100% subsidiary of BCL, and both the entities have significant business and financial linkages. BCL has also extended a corporate guarantee for bank facilities availed by SBM.
The interest-free unsecured loans of Rs 6.48 crore extended to BCL by the promoters, have been treated as debt in the absence of a proven track record of non-withdrawal.
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: Extensive experience of the promoters and healthy relationships with suppliers and customers: The promoters have a three-and-half decade-long experience in the textiles industry and have spent over a decade in the construction materials business. Their longstanding presence, technical expertise and healthy relationships with customers and suppliers, have helped BCL establish its market position and brand image in the AAC blocks segment in the West India region.
Established brand presence and growing preference of customers towards AAC blocks: BCL sells its products under the NXTBLOC brand, which is one of the top 10-15 brands for AAC blocks in India. The company holds a market share of around 10% in Mumbai, and around 15% in Ahmedabad. AAC blocks are preferred over the conventional clay-fired red bricks, as they are relatively light weight, energy-efficient and fire-resistant. They also provide better thermal insulation as compared to red bricks, and reduce the time and cost of construction, given their enhanced workability.
Strategic location of manufacturing facilities: Production facilities at Umargaon (near the Mumbai border) and Kapadvanj (Gujarat) facilitate access to key markets within Maharashtra, Gujarat and Rajasthan. These include Mumbai, Thane, Pune, Silvassa, Ahmedabad, Vadodara, Rajkot, Bhavnagar, Indore and Udaipur. The strategic location reduces freight cost, given the logistic intensive nature of the product, and also curbs the geographical concentration risk.
Weakness: Moderate financial risk profile: Capital structure is marked by moderate gearing and total outside liabilities to adjusted networth (TOL/ANW) ratios of 2.29 times and 3.08 times, respectively, as on March 31, 2021, mainly due to higher reliance on bank debt. However, debt protection metrics have improved, marked by interest coverage and net cash accrual to total debt ratios of 2.71 times and 0.12 time, respectively, in fiscal 2021. Better operating performance and repayment of term debt should support the financial risk profile going forward. Company has achieved revenue of Rs. 69.48 crore as on September 30, 2021.
Moderately working capital intensive operations: Gross current assets ranged from 115 to 150 days over the three fiscals ended March 31, 2021. Receivables were also high between 75 and 90 days during the same period, as customers need to be offered significant credit as per industry standards. Institutional sales and increase in dealer network is expected to help improve the working capital cycle in fiscal 2022 led by a drop in receivables, which would be a key rating sensitivity factor.
Exposure to risks arising from intense competition and cyclicality in the real estate sector: Entry of several new players, given the moderate entry barriers in the AAC blocks industry, has intensified competition and resulted in substantial addition of manufacturing capacities over the years. The company is also exposed to cyclicality associated with the real estate sector. Operating margin and ROCE of BCL, have thus been moderate in the range of 7-11.7% and 7.4-8.0%, respectively, over the four fiscals ending March 31, 2021. Risk related to increased competition from smaller players however has partially reduced during the post lockdown period as relatively large players such as BCL were able to favourably navigate the operational and logistical challenges, supported by better economies of scale. |
Liquidity: Stretched Liquidity is marked by high bank limit utilisation, though partly aided by sufficient cash accrual and funding support from the promoters. Bank limit utilisation averaged around 97.45% for the 13 months ended September 2021. Nevertheless, expected net cash accrual of over Rs 10 crore should comfortably cover the term debt of Rs 5-6 crore per fiscal over the medium term. The balance amount could be used to partly cover the incremental working capital expenses. Promoters too have extended support via unsecured loans. Current ratio was low around 1 time as on March 31, 2021. |
Outlook: Stable CRISIL Ratings believes BCL will continue to benefit from the growing demand for AAC blocks, and remain supported by extensive experience of its promoters and their established relationships with reputed customers and suppliers. |
Rating Sensitivity Factors
Downward factor
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About the Company BCL manufactures AAC blocks at its plant in Valsad, Gujarat. Operations were demerged from Mohit Industries Ltd in 2015 and are now managed by the director, Mr Mohit Saboo. The company has an installed capacity of 3 lakh cubic metres per annum and markets its products under the brand, NXTBLOC. SBM, a subsidiary of BCL, has an installed capacity of 2.5 lakh cubic metre per annum for AAC blocks. This plant is located in Kheda, Gujarat. |
Key Financial Indicators
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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)
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Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | |||||||||||||||||||||||||||||||||||||||
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Criteria Details
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