| Enviro Infra Engineers Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2'; Rated amount enhanced | ||||||
| Rating Action | ||||||
| ||||||
| 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 upgraded its ratings on the bank facilities of Enviro Infra Engineers Limited (EIEL; Formerly known as Enviro Infra Engineers Private Limited) to ‘CRISIL BBB+/Stable/CRISIL A2’ from ‘CRISIL BBB/Positive/CRISIL A3+’.
The rating upgrade takes into account CRISIL Ratings’ believe that business risk profile of the company will continue to improve as a result of its healthy orderbook of 7.6 times of fiscal 2022’s operating income as on December 31, 2022. The company’s turnover is estimated to have grown to over ~Rs. 300 crore in fiscal 2023 as compared to Rs. 210.2 crore in fiscal 2022, which is likely to result in higher cash accruals in the fiscal. It is likely to see further growth in fiscal 2024 as a result of its orderbook.
The financial risk profile is expected to continue to remain comfortable with gearing and TOL/TNW estimated at below 1.0 time as on March 31, 2023. Debt protection metrics are expected to continue to remain robust. Liquidity remains comfortable with moderate bank limit utilisation of 75% in the 12 months ended January 2023 and cash accruals expected over Rs. 49 crore which are sufficient against repayment obligations.
The rating reflects EIEL's extensive industry experience of the promoters, and healthy financial profile. These strengths are partially offset by its susceptibility to tender-based operations and working capital intensive operations as well as the project risks associated with its hybrid annuity model (HAM) project |
Analytical Approach CRISIL Ratings has moderately combined the business and financial risk profiles of EIEL and its SPV for its HAM project. In-line with CRISIL's moderate consolidation approach, the equity requirement and expected cost overrun in under-implementation projects have been factored into the financials of the company.
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 industry experience of the promoters: The promoters have an experience of over a decade in undertaking EPC turnkey projects for wastewater plants. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers leading to a healthy outstanding orderbook of Rs 1600 crore (7.6 times of fiscal 2022 operating income) as of December 31, 2022. Its strong orderbook has led to revenue growth of 97% to Rs. 210 crore in fiscal 2022 and estimated turnover of over Rs. 300 crore in fiscal 2023.
Healthy financial profile: EIEL’s capital structure has been at a healthy level due to lower reliance on external funds yielding gearing of 0.25 times and low total outside liabilities to adj tangible networth (TOL/ANW) of 0.9 times for year ending on March 31, 2022. Its debt protection measures have also been comfortable due to moderate leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 11.6 times and 1.99 times for fiscal 2022 and are likely to remain at similar levels in fiscal 2023.
Weakness: Susceptibility to tender-based operations: The company’s revenue and profitability entirely depend on the ability to win tenders. Further, as the company majorly undertakes Government projects, any change in Government policy could result in adverse impact on its operating income and operating profitability.
Working capital intensive operations: Gross current assets were at 133-256 days over the three fiscals ended March 31, 2022. Its intensive working capital management is reflected in its gross current assets (GCA) of 133 days as on March 31, 2022. Its large working capital requirements arise from its high debtor levels as a result of retention money being included in the same. Debtor days stood at 89 days as on March 31, 2022 and are likely to remain at a similar level going forward.
Project risk associated with HAM project: EIEL has been awarded a HAM project worth ~Rs. 182 crore from UP Jal Nigam. Financial closure has been achieved, thereby mitigating its financing risk to some extent. Though construction has commenced, and the company has achieved two milestones of its project, it continues to be exposed to associated project risks such as construction risk for the remainder of the project. |
Liquidity: Adequate Bank limits of Rs. 38 crore (enhanced from Rs. 36 crore in January 2023) are moderately utilized at around 75% for the past twelve months ended January 2023. Cash accruals are expected to be over Rs 49 crore which are sufficient against term debt obligation of Rs 1.5 crore in fiscal 2023. Cash accruals are likely to be sufficient to meet repayment obligations as well the incremental equity contribution for its project SPV. In addition, it will be act as cushion to the liquidity of the company. Current ratio is healthy at 2.02 times on March 31, 2022 and expected to continue to remain comfortable as on March 31, 2023. |
Outlook: Stable CRISIL Ratings believe EIEL will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity Factors Upward factor
Downward factor
|
About the Company EIEL was incorporated in 2009, it is located in Delhi. EIEL is promoted by Mr. Sanjay Jain & Manish Jain. EIEL is engaged in civil construction works. |
Key Financial Indicators
Status of noncooperation with previous CRA EIPL did not cooperate with INFOMERICS Valuation and Rating Private Limited, which classified it as ‘issuer not cooperative’ vide release dated December 30, 2022. The reason provided by INFOMERICS Valuation and Rating Private Limited is non-furnishing of information for monitoring of ratings |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure - List of Entities Consolidated
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
This Annexure has been updated on 13-Apr-2023 in line with the lender-wise facility details as on 06-Dec-2021 received from the rated entity.
Criteria Details
|