| Generic Engineering Construction and Projects Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 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 reaffirmed its ‘CRISIL BBB/Stable/CRISIL A3+’ ratings on the bank facilities of Generic Engineering Construction and Projects Limited (GECPL).
The rating reflects GECPL's extensive experience of the promoters in the civil construction industry, strong order book providing revenue visibility and above average financial risk profile. These strengths are partially offset by its susceptibility to cyclical downturns and intense competition in civil construction industry and working capital intensive operations. |
Key Rating Drivers & Detailed Description Strengths: Extensive industry experience of the promoters: The promoters have experience of over 50 years in the civil construction industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with suppliers and customers. They have longstanding relationships with customers, which has helped the firm successfully navigate business cycles over the years. Over the years, GECPL has successfully completed several projects with various government authorities and private entities. Revenue has grown to Rs 272 Crore in fiscal 2023 from Rs 200 Crore in fiscal 2020.
Strong revenue visibility: Successful track record of project execution has led to healthy unexecuted order book of around Rs 777 crore as of August 2023, to be executed in the next two-three years. This provides strong revenue visibility over the medium term and will help scale up operations.
Above average financial risk profile: Networth was strong at Rs. 234.6 crores as on March 31, 2023, and capital structure is comfortable as reflected in gearing and total outside liabilities to adjusted networth ratio of 0.25 time and 0.56 time, respectively, as on March 31, 2023. Repayment of loans and limited reliance on outside borrowings for working capital limit or capital expenditure (capex) will keep the capital structure at similar levels. Debt protection is adequate on account of moderate operating margin and limited interest expense, indicated by interest coverage and net cash accrual to adjusted debt ratios of 3.75 times and 0.45 time, respectively in fiscal 2023.
Weakness: Large working capital requirement: The large working capital requirement, reflected by gross current assets (GCAs) of 283-436 days for the past four fiscals, is driven by debtors and inventory of 120-150 days each. The increase to 436 days was due to Covid 19 pandemic impact in FY2021, whereby debtors and inventory had increased to 151 and 162 days respectively, however by FY2022 debtors and inventory days have come down to normal levels at 135 and 133 days respectively. Debtors are usually high in March due to 40% of revenues booked in last quarter of the fiscal. Further, there is high work in progress inventory as some portion of booking is done on milestone basis. Because of the business requirement, operations will remain working capital intensive over the medium term.
Susceptibility to cyclical downturns and intense competition in civil construction industry: Construction industry is cyclical by nature and is also prone to economic downturns and GECPL, like other players in the industry, will remain susceptible to these trends. GECPL is also a relatively small player in the highly competitive and fragmented civil construction industry. With revenue of Rs. 272.5 crores in fiscal 2023. The presence of a large number of small players also restricts pricing flexibility for players such as GECPL, resulting in pressure on its margins. |
Liquidity: Adequate GECPL has adequate liquidity driven by expected cash accruals of Rs.28-31 crores annually in fiscal 2024 and fiscal 2025 against long term repayment obligations of Rs.1.5–2.2 crores annually. GECPL's fund-based limits have been utilized around 85% over the 12 months ended July 2023. CRISIL Ratings expects internal accruals, cash & cash equivalents, and unutilized bank lines to be sufficient to meet its repayment obligations and incremental working capital requirements. |
Outlook: Stable CRISIL Ratings believes GECPL will continue to benefit from its strong track record in the civil construction industry, a healthy order book and above average financial risk profile. |
Rating Sensitivity Factors Upward factors
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About the Company GECPL, incorporated in 1994 in Mumbai by Mr. Manish Patel and his family. It undertakes civil construction work for buildings across commercial, residential, industrial, health and leisure and institutional buildings with presence in states of Maharashtra, Karnataka, Gujarat, Goa & Himachal Pradesh. GECPL is listed in the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) |
Key Financial Indicators
Status of noncooperation with previous CRA CARE Ratings has assigned non-cooperative rating to the bank facilities of GECPL vide press release dated 15th November, 2022 on account of non-cooperation by GECPL with the efforts to undertake a review of the ratings outstanding. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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