Rating Rationale
November 30, 2023 | Mumbai
 
Deepak Builders And Engineers India Limited
'CRISIL BBB-/Stable/CRISIL A3' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.470 Crore
Long Term Rating CRISIL BBB-/Stable (Assigned)
Short Term Rating CRISIL 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
*Issuer did not cooperate; based on best-available information

 

Detailed Rationale

CRISIL Ratings has assigned its CRISIL BBB-/Stable/CRISIL A3 ratings to the bank facilities of Deepak Builders and Engineers India Limited (DBEIL).

 

The rating reflects DBEIL's established market position backed by extensive industry experience of the promoters and healthy scalability. These strengths are partially offset by leveraged capital structure and working capital intensive operations.

Key Rating Drivers & Detailed Description

Strengths

  • Established market position and extensive industry experience of the promoters: The promoters have around three decades of industry experience in executing civil construction projects and has established good market position with timely execution of projects. The company has a healthy relation with its customers HSCC India Limited, National Project Construction Corporation Limited (NPCC), Wapcos Limited, Engineer India Limited, other government agencies on account of its regular orders and successful execution of large projects. This has helped the company to clock steady growth in revenue over the years, evident by compound annual growthy rate (CAGR) of 17% during past three fiscals through Fiscal 23.

 

  • Healthy Scalability: The company has witnessed a substantial growth in the top line in the last three fiscal as the revenues have increased at a CAGR 17% till FY23 and booked revenue of Rs. 433 crores in fiscal 2023 as against 273 crores in fiscal 2020, this demonstrated track record of timely contract execution and achieving what company has projected. Besides, order book of more than Rs. 1400 crores which is 3 times of the topline of fiscal 2023, to be executed over the next 2-3 years provides revenue visibility to the company and it is expected that company able to book revenue of Rs. 600-620 crores in fiscal 2024. CRISIL Ratings believes that timely execution of orders with stable operating profitability will further strengthen the market position of the company.

 

Weaknesses

  • Leveraged capital structure: Increased reliance on external debt to source inventory for projected related requirements resulted into high leverage with total outside liabilities to tangible networth (TOL/TNW) increasing to 3.76 times as at Mar 31, 2023, up from 2.8 times as of Mar 31, 2022. High leverage was also on account of moderate net worth, estimated at around Rs 93 crore as of Mar 31, 2023. While the leverage position has improved in the ongoing fiscal, during April-Sep, its sustained improvement needs to be monitored. CRISIL believes the TOL/TNW ratio to remain rangebound at 2.5-2.6 times over the medium term and any unexpected increase in the same will remain a key monitorable.

 

  • Working capital intensive operations: Operations continue to remain working capital intensive with estimated gross current assets (GCA’s) of 220-240 days over the past three fiscal through fy23. The working capital requirement further increased during fy23, as on account of competitive pricing, company opted for high inventory buying leading to increase in inventory holding days to 162 as of Mar 31, 2023 from 79 days as on same date during previous fiscal. Debtor days stood range bound at 80-90 days during the discussed period. With bulk of the inventory being deployed towards business specific requirement in the ongoing fiscal compounded with expected deployment over the medium term, in line with project execution timelines, CRISIL believes the overall inventory holding and GCA shall moderate over the medium term. However, sustained improvement in the same will remain a key monitorable.

Liquidity: Adequate

Bank limit utilisation is moderate at around 78 percent for the past 12 months ended September 2023.  Cash accruals are expected to be over Rs 40-42 crore which will be sufficient against maturing term debt obligation over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio was comfortable at 1.52 times as on March 31, 2023 and shall continue to remain so over the medium term as well.

Outlook: Stable

CRISIL Ratings believes DBEIL 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 with stable operating margins of 11-12%.
  • Prudent working capital management leading to lower dependence on external debt and an improved leverage position.

 

Downward factors

  • Delay in order execution or lower profitability, leading to lower-than-expected net cash accrual.
  • Stretch in the working capital cycle leading to higher debt, thus weakening the financial risk profile with gearing ratio increasing to 2.5-2.6 times.

About the Company

DBEIL was incorporated as a proprietorship firm in the year 1984 by Mr. Deepak Kumar Singal. Later, the firm was converted to a partnership firm in 1990, and subsequently reconstituted as a private limited company in 2017. In 2022, the company was converted into a closely held public company under the current name. DBEIL is engaged in the business of government contract work and construction of infrastructure facilities including hospitals, bridges, roads, government buildings, etc. It is based in Ludhiana, Punjab.

 

DBEIL is promoted by Mr. Deepak Kumar Singal and Mrs. Sunita Singal (spouse).

Key Financial Indicators

As on / for the period ended March 31

 Unit

2023

2022

Operating income

Rs.Crore

433.61

363.15

Reported profit after tax

Rs.Crore

21.40

17.90

PAT margins

%

4.93

4.93

Adjusted Debt/Adjusted Networth

Times

2.15

1.42

Interest coverage

Times

2.76

2.59

Status of non cooperation with previous CRA

DBEIL has not cooperated with INFOMERICS Valuation and Rating Private Limited (INFOMERICS) which has classified it as non-cooperative vide release dated 13-Mar-2023. The reason provided by INFOMERICS 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

Levels

Rating Assigned

with Outlook

NA

Bank Guarantee

NA

NA

NA

52

NA

CRISIL A3

NA

Bank Guarantee

NA

NA

NA

58

NA

CRISIL A3

NA

Bank Guarantee

NA

NA

NA

302

NA

CRISIL A3

NA

Cash Credit

NA

NA

NA

38

NA

CRISIL BBB-/Stable

NA

Cash Credit

NA

NA

NA

2

NA

CRISIL BBB-/Stable

NA

Drop Line Overdraft Facility

NA

NA

NA

0.7

NA

CRISIL BBB-/Stable

NA

Proposed Working Capital Facility

NA

NA

NA

12.75

NA

CRISIL BBB-/Stable

NA

Working Capital Term Loan

NA

NA

Mar-2025

4.55

NA

CRISIL BBB-/Stable

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 58.0 CRISIL BBB-/Stable 01-11-23 Withdrawn (Issuer Not Cooperating)* 25-02-22 CRISIL B+ /Stable(Issuer Not Cooperating)*   -- 10-12-20 CRISIL B+ /Stable(Issuer Not Cooperating)* CRISIL B+ /Stable(Issuer Not Cooperating)*
      -- 24-04-23 CRISIL B+ /Stable(Issuer Not Cooperating)*   --   --   -- --
Non-Fund Based Facilities ST 412.0 CRISIL A3 01-11-23 Withdrawn (Issuer Not Cooperating)* 25-02-22 CRISIL A4 (Issuer Not Cooperating)*   -- 10-12-20 CRISIL A4 (Issuer Not Cooperating)* CRISIL A4 (Issuer Not Cooperating)*
      -- 24-04-23 CRISIL A4 (Issuer Not Cooperating)*   --   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 52 HDFC Bank Limited CRISIL A3
Bank Guarantee 58 Punjab National Bank CRISIL A3
Bank Guarantee 302 Punjab National Bank CRISIL A3
Cash Credit 38 Punjab National Bank CRISIL BBB-/Stable
Cash Credit 2 HDFC Bank Limited CRISIL BBB-/Stable
Drop Line Overdraft Facility 0.7 HDFC Bank Limited CRISIL BBB-/Stable
Proposed Working Capital Facility 12.75 Not Applicable CRISIL BBB-/Stable
Working Capital Term Loan 4.55 Punjab National Bank CRISIL BBB-/Stable
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
The Rating Process
Rating Criteria for Construction Industry
Understanding CRISILs Ratings and Rating Scales

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Nitin Kansal
Director
CRISIL Ratings Limited
D:+91 124 672 2154
nitin.kansal@crisil.com


Gaurav Arora
Associate Director
CRISIL Ratings Limited
B:+91 124 672 2000
gaurav.arora@crisil.com


VISHAL CHAUHAN
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 124 672 2000
VISHAL.CHAUHAN@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html