Rating Rationale
January 17, 2025 | Mumbai
Kay Cee Energy & Infra Limited
Ratings reaffirmed at 'Crisil BB+/Stable/Crisil A4+'
 
Rating Action
Total Bank Loan Facilities RatedRs.60 Crore
Long Term RatingCrisil BB+/Stable (Reaffirmed)
Short Term RatingCrisil A4+ (Reaffirmed)
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 BB+/Stable/Crisil A4+' ratings on the bank loan facilities of Kay Cee Energy & Infra Limited (KCEIL).

 

The ratings continue to reflect KCEIL’s established regional presence, backed by experience of the promoters, and moderate financial risk profile. These strengths are partially offset by exposure to risks inherent in tender-based business amid intense competition and large working capital requirement.

Analytical Approach

Crisil Ratings has evaluated the standalone business and financial risk profiles of KCEIL.

 

Unsecured loan (Rs 2.94 crore as on March 31, 2024) extended by the promoters has been treated as debt because such loans have been repaid in the past.

Key Rating Drivers & Detailed Description

Strengths:

  • Established regional presence, backed by extensive experience of the promoters: The promoters have technical qualifications and three decades of experience in engineering, procurement and construction (EPC) contracts and extra high-voltage lines covering the area of power transmission and energy sectors; their strong understanding of market dynamics and healthy relations with customers and suppliers should continue to support the business.

 

Repeat orders from existing clients along with on-boarding of new customers reflected in stable revenue of Rs 64 crore in fiscal 2024 (as compared to Rs 61 crore in fiscal 2023). Revenue growth remained stable as the execution of contracts was disrupted due to Rajasthan State Assembly elections in November 2023 and Lok Sabha elections in April 2024. The company reported revenue of Rs 37.86 crore till September 2024 and is expected to generate Rs 100-120 crore for fiscal 2025, supported by healthy execution of its orderbook worth Rs 532 crore (as on September 30, 2024) including contracts of Rs 119 crore received in fiscal 2025. The entire orderbook is to be executed in the next 24-30 months, providing adequate revenue visibility over the medium term.

 

  • Moderate financial risk profile: The capital structure should remain supported by the absence of any major, debt-funded capital expenditure (capex). Networth improved to Rs 44.63 crore as on March 31, 2024, from Rs 22.16 crore on 31st March 2023, driven by equity capital raised by the company by floating its initial public offering of Rs 15.93 crore through the National Stock Exchange-Small and Medium Enterprises platform in January 2024. Moderate reliance on debt led to total outside liabilities to tangible networth ratio and gearing of 1.34 times and 0.59 time, respectively, as on March 31, 2024; the ratios are projected at 1.36 times and 0.52 time as on March 31, 2025. Debt protection metrics were also moderate, with interest coverage and net cash accrual to adjusted debt (NCAAD) ratio of 3.11 times and 0.20 time for fiscal 2024. In the absence of any plan to issue additional debt, interest coverage and NCAAD ratios are expected at 4.04 times and 0.38 time for fiscal 2025. Although the financial risk profile will remain aided by healthy accretion to reserve and steady operating profitability, the impact of large working capital requirement on it will remain a key monitorable.

 

Weaknesses:

  • Exposure to risks inherent in tender-based business amid intense competition: KCEIL undertakes construction under EPC and bags projects by submitting bids for tenders floated by government or private entities. Hence, revenue and profitability depend on the ability to bid successfully for tenders. Intense competition due to the presence of several mid-sized players may continue to constrain scalability, pricing power and profitability. Moreover, expenditure by government agencies and public sector undertakings is directly linked to the economy. Any delay or deferment of capex in end-user industries could limit scalability. Though the operating margin improved to 19.9% in fiscal 2024 (from 16.31% in fiscal 2023) and is estimated at 21% till September 2024 in fiscal 2025, its sustenance amid risks related to tender-based operations and intense competition shall remain monitorable.

 

  • Large working capital requirement: Gross current assets (GCAs) were 439 days as on March 31, 2024, driven by receivables of over 98 days, inventory of 192 days and high earnest money deposits to be maintained with customers. The working capital requirement increased in fiscal 2024 as receipt of payments from government authorities were delayed due to elections while project completion was also disrupted resulting in high work-in-progress inventory. Since the company is in the initial stages of executing some orders, working capital requirement may improve once the execution is stabilised and realisation from customers is timely. GCAs may moderate to around 385 days as on March 31, 2025, driven by expected debtors of 90 days and inventory of 170 days. The working capital is partly supported by payables of around 307 days. Efficient working capital management amid increasing scale will remain monitorable.

Liquidity: Adequate

Liquidity should remain supported by the ample surplus available in cash accrual and bank lines. Utilisation of the fund-based working capital limit was around 39% while that of the non-fund-based limit was 68% for the 12 months through November 2024. Cash accrual is expected at around Rs 11 crore per annum, against yearly debt obligation of Rs 4.67 crore over the medium term. Current ratio stood healthy at 2.12 times on March 31, 2024. The promoters are likely to extend need-based funds (equity and unsecured loans) to support operations.

Outlook: Stable

KCEIL will continue to benefit from the extensive experience of the promoters and their established relationship with clients.

Rating sensitivity factors

Upward factors:

  • Improvement in the working capital cycle, with moderation in GCAs, along with strengthening of the financial risk profile
  • Substantial and sustainable increase in revenue and profitability, leading to cash accrual above Rs 10 crore

 

Downward factors:

  • Further stretch in the working capital cycle or any large, debt-funded capex or dividend payout
  • Decline in revenue and operating margin, resulting in cash accrual below Rs 4 crore

About the Company

KCEIL, incorporated in 2015, undertakes EPC projects. Its service portfolio includes handling, erection, testing and commissioning of equipment and materials for power transmission and distribution systems, including transmission lines, construction of substations, automation, extension/modification and expansion of existing power systems for various government and private entities. The company is based in Rajasthan and promoted by Mr. Lokendra Jain and Mrs. Shalini Jain

Key Financial Indicators

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

64.51

61.09

Reported profit after tax

Rs crore

5.03

5.37

PAT margins

%

8.11

8.78

Adjusted Debt/Adjusted Net worth

Times

0.59

1.03

Interest coverage

Times

3.11

3.61

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 Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 15.00 NA Crisil A4+
NA Proposed Long Term Bank Loan Facility NA NA NA 30.00 NA Crisil BB+/Stable
NA Term Loan NA NA 31-Mar-28 15.00 NA Crisil BB+/Stable
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 45.0 Crisil BB+/Stable   -- 19-01-24 Crisil BB+/Stable   --   -- --
Non-Fund Based Facilities ST 15.0 Crisil A4+   -- 19-01-24 Crisil A4+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 15 Punjab National Bank Crisil A4+
Proposed Long Term Bank Loan Facility 30 Not Applicable Crisil BB+/Stable
Term Loan 15 Punjab National Bank Crisil BB+/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
Rating Criteria for Engineering Sector

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