| Dineshchandra Tollways Private Limited | ||||
| Rating outlook revised to 'Positive', rating reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||
| Detailed Rationale |
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CRISIL has revised its outlook on the long-term bank facility of Dineshchandra Tollways Private Limited (DTPL) to 'Positive' from 'Stable' and reaffirmed the rating at 'CRISIL A(SO)'. |
| Analytical Approach |
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CRISIL has applied its analytical approach of rating instruments backed by guarantee. The (SO) suffix reflects the payment structure that is designed to ensure full and time-bound payment to lenders. Given DRAIPL has extended unconditional and irrevocable corporate guarantee to DTPL, CRISIL has consolidated the business and financial risk profile of DTPL with DRAIPL. |
| Key Rating Drivers & Detailed Description |
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Strengths: * Corporate guarantee, and additional undertaking, provided by DRAIPL DTPL continues to benefit from the corporate guarantee and additional undertaking provided by DRAIPL, which covers the principal, interest, and other monies payable on the company's guaranteed bank facilities. * Healthy business risk profile of DRAIPL Business risk profile of the parent DRAIPL has improved significantly in fiscal 2018, as reflected in ramp up in revenue (by 72%) on account of strong order book execution. Operating margin also improved by 140 bps to 8.6% in fiscal 2018 with execution of HAM orders. DRAIPL reported operating income of Rs 892 crore for first half of fiscal 2019, while operating margins improved to 11.6% backed by higher proportion of HAM order execution. The healthy business profile is also supported by strong revenue visibility, with orders of Rs 7155 crore as on September 30, 2018 (accounting for about 3.7 times the revenue in fiscal 2018). DRAIPL also continues to benefit from the extensive experience (of more than four decades) of its promoters in the construction business. Over the years, the company has established healthy relations with various state government departments, NHAI and Ministry of Road Transport and Highway by virtue of its demonstrated track record of executing projects in a timely manner. * Comfortable financial risk profile Improvement in operating income and operating margin have resulted in a comfortable financial risk profile for DRAIPL. While strong cash accruals resulted in healthy debt protection metrics with interest coverage improving to around 12.5 times for fiscal 2018, steady accretion to reserve and low debt ensured gearing was low, around 0.23 time as on March 31, 2018. Total outside liabilities to tangible networth ratio should remain moderate around 2 times. * Moderate working capital intensity in operations DRAIPL's working capital cycle improved in fiscal 2018 with gross current assets (GCA) reducing to 91 days on account of higher proportion of HAM projects executed. DRAIPL has managed its receivable cycle well at 20-40 days in the four fiscals through March 2018. Inventory cycle was between 10-20 days in the last 4 years. GCA days has increased to 119 days in the first half of fiscal 2019 as the company has started the preparatory work for its HAM project. Dependence on the central and state governments and multilateral agencies continues for timely receipt of payments. Working capital management and revenue growth will remain key rating sensitivity factors. * Achievement of fourth milestone 1 month ahead of schedule The project has achieved four milestones till November 2018 with the fourth milestone being achieved 1 month ahead of schedule. Both physical and financial progress in the project were 80% till December 2018 and the project is expected to be completed in time. Weakness: * Exposure to cyclical demand inherent to construction industry DRAIPL's revenue is susceptible to economic cycles, by virtue of its presence in the construction industry. The players in the construction industry are largely impacted during an economic slowdown; as their revenue largely depends on the ability of customers to pay in such times. Further, more than 90 per cent of its order book constitutes of projects from road and highway segment. DRAIPL is also executing more number of Hybrid Annuity Model (HAM) projects from NHAI and state authorities. Thus, DRAIPL's performance in future will largely depend on successful execution of these projects awarded. |
| Liquidity |
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DTPL is presently under construction stage and first repayment is scheduled for June 30, 2020, post achieving COD. Liquidity is expected to be adequate post-completion as the project will receive semi-annual annuities and O&M payout from NHAI. The company is expected to receive annuity along with interest on balance annuity, which shall be sufficient to meet the annual repayments. Debt service coverage ratio is expected to be more than one time throughout the tenure of the debt. Further, DSRA equivalent to average 6 months of interest and one repayment instalment will be created after SCOD/COD out of cash accruals of the project, latest by release of second annuity. Monthly interest payment is currently being funded by the sponsor until receipt of annuities |
| Outlook: Positive |
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The rating reflects the unconditional and irrevocable guarantee from DRAIPL, and the outlook for DTPL is based on the outlook on the rating of the guarantor, DRAIPL. CRISIL believes that DRAIPL will, over the medium term, maintain healthy business and financial risk profiles. The rating may be upgraded if the company sustains the improvement in its profitability, backed by execution of high-value orders while maintaining its scale of operations and its financial risk profile. The outlook may be revised to 'Stable' if stretch in working capital cycle, any large capital expenditure, or unconditional and irrevocable guarantees extended to new road projects weakens DRAIPL's financial risk profile. |
| About the Company |
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DTPL was set up for 2-laning development and maintenance of Barmer-Sindhari-Jalore section of State Highway-16 (SH-16) and Ahore-Bali-Mundra section of SH-16 (total 178 kilometre) in the State of Rajasthan (under Rajasthan State Highway Investment Program Package 2), under a design, build, finance, operate, and transfer basis. 45% of DTPL's shares are held by DRAIPL, while the balance is equally distributed between Mr Dineshchandra R Agrawal, Mr Jagdishchandra Agrawal, and Mr Hardik Agrawal. |
| Key Financial Indicators | ||||||||||||||||||||||||
*The project is under-construction phase and hence, financials are not available for fiscal 2018 and fiscal 2017 |
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 - Details of Consolidation | ||||||||||||||
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||
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| For further information contact: | ||||||
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