Rating Rationale
January 19, 2021 | Mumbai
Ravi Shankar Jaiswal
Ratings reaffirmed at 'CRISIL BB / Stable / CRISIL A4+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.8.2 Crore
Long Term RatingCRISIL BB/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
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 facilities of Ravi Shankar Jaiswal (RSJ).

 

The ratings continue to reflect the extensive experience of the partners in the civil construction industry and a moderate financial risk profile. These strengths are partially offset by modest scale of operations and exposure to risks related to intense competition.

Analytical approach

Unsecured loan of Rs 1.12 crore provided by the partners as on March 31, 2020, has been treated as debt.

Key rating drivers and detailed description

Strengths

* Extensive experience of the partners: The three-decade-long experience of the partners, their strong understanding of the market dynamics and healthy relationships with suppliers and customers will continue to support the business risk profile.

 

* Moderate financial risk profile: Networth was Rs 11.18 crore, gearing was 0.50 time and total outside liabilities to tangible networth ratio was 1.29 times as on March 31, 2020. Debt protection metrics were adequate, indicated by interest coverage and net cash accrual to total debt ratios of 4.24 times and 41%, respectively, in fiscal 2020. The financial risk profile is expected to remain moderate, backed by limited reliance on external debt.

 

Weaknesses

* Exposure to risks related to intense competition: As almost all the sales are tender-based, revenue is dependent on the ability to bid successfully for tenders. Players' margins come under pressure because of competitive pricing. Profitability on each project is subject to pricing of raw materials, availability of labour, machinery mobilisation and weather and geological conditions. Exposure to risks related to intense competition is likely to persist.

 

* Modest scale of operations: Revenue was modest at Rs 24.51 crore in fiscal 2020, thus constraining operating flexibility. Revenue remained low in fiscal 2020 on account of delay in receiving approval from the government and is expected to remain so over the medium term, with orders of Rs 70 crore expected to be executed in the next 18-24 months.

Liquidity: Adequate

Cash accrual, expected at Rs 3-3.5 crore per annum, will sufficiently cover yearly debt obligation of Rs 1.2-1.3 crore over the medium term. Bank limit utilisation averaged 86% over the 12 months through November 2020. Current ratio was healthy at 1.53 times on March 31, 2020. The partners are likely to extend support through unsecured loans to meet the working capital requirement and debt obligation. The firm has opted for moratorium for interest payment on its working capital facility until May 2020 under the Reserve Bank of India's Covid-19 Regulatory Package.

Outlook: Stable

RSJ should continue to benefit from the partners’ extensive experience.

 

Rating sensitivity factors

Upward factors

  • Sustained increase in revenue and stable profitability, leading to cash accrual above Rs. 5 crore
  • Improvement in the financial risk profile

 

Downward factors

  • Decline in net cash accrual to below Rs 1.5 crore
  • Any debt-funded capital expenditure or significant capital withdrawal by the partners weakening the financial risk profile

About the firm

Established in 2002 as a partnership firm by Mr Ravi Shankar Jaiswal in Jabalpur, Madhya Pradesh, RSJ undertakes civil construction, of mainly roads and bridges, for government departments.

Key financial indicators

As on / for the period ended March 31

 

2020*

2019

Operating income

Rs crore

24.51

58.73

Reported profit after tax (PAT)

Rs crore

1.02

2.10

PAT margin

%

4.18

3.58

Adjusted debt/adjusted networth

Times

0.50

0.64

Interest coverage

Times

4.24

5.82

*Provisional

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)

ISIN

Name of Instrument

Date of Allotment

Coupon Rate (%)

Maturity Date

Issue Size (Rs Crore)

Complexity levels

Rating Assigned with outlook

NA

Cash Credit

NA

NA

NA

1.0

NA

CRISIL BB/Stable

NA

Bank Guarantee

NA

NA

NA

7.2

NA

CRISIL A4+

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 1.0 CRISIL BB/Stable   --   -- 06-11-19 CRISIL BB/Stable   -- --
Non-Fund Based Facilities ST 7.2 CRISIL A4+   --   -- 06-11-19 CRISIL A4+   -- --
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 7.2 CRISIL A4+ Bank Guarantee 3.6 CRISIL A4+
Cash Credit 1 CRISIL BB/Stable Cash Credit 1.1 CRISIL BB/Stable
- - - Proposed Non Fund based limits 3.5 CRISIL A4+
Total 8.2 - Total 8.2 -
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Rating Criteria for Construction Industry
The Rating Process
CRISILs Bank Loan Ratings

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