Rating Rationale
February 23, 2024 | Mumbai
GPT Infraprojects Limited
Ratings upgraded to 'CRISIL A-/Stable/CRISIL A2+'
 
Rating Action
Total Bank Loan Facilities RatedRs.490 Crore
Long Term RatingCRISIL A-/Stable (Upgraded from 'CRISIL BBB+/Positive')
Short Term RatingCRISIL A2+ (Upgraded from 'CRISIL A2')
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 GPT Infraprojects Ltd (GPTIL; part of the GPT group) to 'CRISIL A-/Stable/CRISIL A2+' from ‘CRISIL BBB+/Positive/CRISIL A2’.

 

The rating upgrade reflects the improved business risk profile of the company owing to growth in revenue at compound annual rate of 9% during the four fiscals through 2023 and operating margin of more than 11%. Orders of Rs 2,990.8 crore as on December 31, 2023 (3.7 times of fiscal 2023 revenue), along with revival in profitability from the concrete sleeper division, strengthen the business risk profile. Streamlined project execution and improvement in realisations led to reduction in unbilled revenue exposure as on December 31, 2023. This has led to improved working capital cycle, with expected gross current assets (GCAs) at less than 200 days as on March 31, 2024 (292 days as on March 31, 2021). High interest-bearing working capital limit and its utilisation has reduced, which resulted in reduced interest outgo during the nine months of fiscal 2024. This is likely to strengthen the debt protection metrics, with interest coverage ratio more than 4 times in fiscal 2024 (2.5 times in fiscal 2023). Sustenance of improvement in the business risk profile and working capital cycle will remain a key rating sensitivity factor.

 

The ratings reflect the extensive experience of the promoters in the civil construction business, and the strong project execution capabilities, healthy order pipeline and moderate financial risk profile of the company. These strengths are partially offset by large working capital requirement and susceptibility to risks inherent in tender-based business.

Analytical Approach

For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of GPTIL and its subsidiaries, GPT Investments Pvt Ltd, GPT Concrete Products South Africa (Pty) Ltd, Jogbani Highway Pvt Ltd; and its associate, GPT TransNamib Concrete Sleepers (Pty) Ltd. This is because as all these entities, collectively referred to as the GPT group, have common management and significant financial linkages, and are in the same business.

 

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 strong project execution capabilities: The promoters’ experience of four decades in the construction industry, strong understanding of local market dynamics and healthy relationships with customers and suppliers will continue to support the business. Strong track record and project execution capabilities, majorly in east India, helped the company bag orders of Rs 2,990.8 crore as on December 31, 2023.

 

  • Healthy order book position: Large pipeline of unexecuted orders worth Rs 2,990.8 crore (which is around 3.7 times of revenue in fiscal 2023) provides steady revenue visibility. Average execution cycle is 2-3 years depending on the size of the project.

 

  • Moderate financial risk profile: Networth and gearing are expected at Rs 329 crore and 0.5 time, respectively, as on March 31, 2024 (Rs 271 crore and 0.9 time, respectively, a year earlier). Steady accretion to reserve and better profitability should help the networth improve further. Interest coverage and net cash accrual to adjusted debt ratios will remain comfortable at more than 4 times and 0.5 time, respectively, in fiscal 2024.

 

Weaknesses:

  • Large working capital requirement: Owing to improvement in payment cycle and realisation of unbilled revenue, GCAs is expected to decline to less than 200 days as on March 31, 2024, from 237 days as on March 31 2023. However, the working capital cycle will remain stretched. The company has higher unbilled revenue as the business model entails construction of bridges with longer execution periods and billing is done on milestone basis only after approval by authorities. Diversification in the order book with reduced contribution from longer payment cycle projects leading to improved working capital management will remain a key rating sensitivity factor over the medium term.

 

  • Exposure to intense competition and risks inherent in tender-based business: Revenue and profitability depend on the ability to win tenders. Intense competition prompts players to bid aggressively to get contracts, and thus, restricts their operating margin. Because of inherent cyclicality, sustaining the operating margin through operating efficiency becomes critical. Uncertified work done on the project remains unbilled, as billing is done on milestone basis after certification of a portion of work done as per the tender terms.

Liquidity: Strong

Average month-end bank limit utilization was moderate at around 86% for the 12 months through January 2024. Liquidity remains strong due to reduced working capital requirement and sufficient Net cash accrual, expected at more than Rs 80 crore per against term debt obligation of Rs 10-11 crore over the medium term. Moderate cash and equivalent stood at Rs 7 crore as on December 31, 2023 which provides additional cushion to liquidity. Current ratio is expected to be moderate at 1.3 times as on March 31, 2024.

Outlook: Stable

CRISIL Ratings believes the company will continue to benefit from its established market position in the construction business, over the medium term.

Rating Sensitivity factors

Upward factors

  • Strong revenue growth along with improved operating margin leading to net cash accrual more than Rs 90 crore.
  • Diversification in the order book with reduced contribution from longer payment cycle projects leading to improved working capital management.
  • Maintenance of moderate bank limit utilisation and no major debt-funded capital expenditure (capex) plans adversely impacting the capital structure.

 

Downward factors

  • Decline in revenue or profitability leading to cash accrual below Rs 40 crore.
  • Large Debt-funded capex or further stretch in the working capital cycle weakening the financial risk profile and liquidity.

About the Company

GPTIL is the flagship company of the GPT group, which undertakes civil infrastructure projects and manufactures concrete sleepers and iron castings for railways and healthcare sectors. The company is promoted by Mr Dwarika Prasad Tantia, Chairman, and Mr Shree Gopal Tantia, Managing Director. Mr Atul Tantia and Mr Vaibhav Tantia (sons of Mr DP Tantia) are the chief financial officer and chief operating officer, respectively.

Key Financial Indicators

Particulars

Unit

2023

2022

Revenue

Rs.Crore

809.15

674.52

Profit After Tax (PAT)

Rs.Crore

31.40

24.34

PAT Margin

%

3.87

3.61

Adjusted debt/adjusted networth

Times

0.9

1.0

Interest coverage

Times

2.52

2.45

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.Crore)

Complexity

level

Rating assigned

with outlook

NA

Bank guarantee

NA

NA

NA

237.29

NA

CRISIL A2+

NA

Proposed Bank guarantee

NA

NA

NA

57.91

NA

CRISIL A2+

NA

Cash credit

NA

NA

NA

164.75

NA

CRISIL A-/Stable

NA

Term Loan

NA

NA

Mar-2029

30.05

NA

CRISIL A-/Stable

Annexure - List of Entities Consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

GPT Infraprojects Ltd

100%

Common management and same business

Jogbani Highway Pvt Ltd

100%

Subsidiary of GPTIL

GPT Investments Pvt Ltd

100%

Subsidiary of GPTIL

GPT Concrete Products South Africa (Pty) Ltd

100%

Subsidiary of GPTIL

GPT TransNamib Concrete Sleepers (Pty) Ltd

100%

Subsidiary of GPTIL
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 194.8 CRISIL A-/Stable   -- 18-08-23 CRISIL BBB+/Positive 12-04-22 CRISIL BBB+/Stable   -- --
      --   -- 27-06-23 CRISIL BBB+/Positive 31-03-22 CRISIL BBB+/Stable   -- --
Non-Fund Based Facilities ST 295.2 CRISIL A2+   -- 18-08-23 CRISIL A2 12-04-22 CRISIL A2   -- --
      --   -- 27-06-23 CRISIL A2 31-03-22 CRISIL A2   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 30 Axis Bank Limited CRISIL A2+
Bank Guarantee 40 Bank of India CRISIL A2+
Bank Guarantee 5.5 Standard Chartered Bank Limited CRISIL A2+
Bank Guarantee 45 Punjab National Bank CRISIL A2+
Bank Guarantee 61.79 State Bank of India CRISIL A2+
Bank Guarantee 40 UCO Bank CRISIL A2+
Bank Guarantee 15 Indian Bank CRISIL A2+
Cash Credit 25 Punjab National Bank CRISIL A-/Stable
Cash Credit 11.25 Axis Bank Limited CRISIL A-/Stable
Cash Credit 55 State Bank of India CRISIL A-/Stable
Cash Credit 10 Bank of India CRISIL A-/Stable
Cash Credit 9.5 Standard Chartered Bank Limited CRISIL A-/Stable
Cash Credit 24 Indian Bank CRISIL A-/Stable
Cash Credit 30 UCO Bank CRISIL A-/Stable
Proposed Bank Guarantee 57.91 Not Applicable CRISIL A2+
Term Loan 3.01 Standard Chartered Bank Limited CRISIL A-/Stable
Term Loan 10.02 Axis Bank Limited CRISIL A-/Stable
Term Loan 11.74 State Bank of India CRISIL A-/Stable
Term Loan 1.1 UCO Bank CRISIL A-/Stable
Term Loan 1.1 Bank of India CRISIL A-/Stable
Term Loan 3.08 Punjab National Bank CRISIL A-/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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