| Sam India Builtwell Private Limited. | ||||||
| Rating outlook revised to 'Positive'; Ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank facilities of Sam India Builtwell Private Limited. (Sam) to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL A-'. The short-term rating has been reaffirmed at 'CRISIL A2+'
The revision in outlook has been due to the continuous improvement in the business risk profile of Sam owing to healthy order flow and timely execution of large orders. Revenue increased at a compound annual growth rate of 60% during the three fiscals through 2021 and is expected at more than Rs 1400 crore in fiscal 2022. Besides, order book of around 2.9 times of the topline of fiscal 2021, to be executed over the next 2-3 years provides revenue visibility. The earnings before interest, tax, depreciation, and amortisation (EBITDA) margin, modest due to the large proportion of sub-contracting of ancillary work, has sustained at 6-7% in the three fiscals through 2021. However, the strong clientele base comprising several government entities with strong track record of timely payments results in low dependence on external debt. As a result, the company is likely to witness higher accretion to reserve and further improvement in its financial risk profile. The ability of the company to sustain its revenue and margins will remain a key sensitivity factor.
The ratings also factor-in the strong liquidity of Sam supported by large, unencumbered cash and bank balance of more than Rs 60 crore as on September 30, 2021, generation of healthy cash accrual against minimal debt obligations and availability of mobilisation advances in majority of orders.
The ratings continue to reflect the extensive experience of the promoters of Sam in the civil construction industry and its established market position, robust order book and comfortable financial risk profile. These strengths are partially offset by the exposure to risks related to tender-based nature of business and to cyclicality in the industry. |
Key Rating Drivers & Detailed Description Strengths Extensive experience of key promoter and established market position Mr Arvind Goel has experience of over two decades (in executing various projects for construction of metros, roads and bridges), his strong understanding of local market dynamics, and healthy relationships with suppliers and customers should continue to support the business. Mr Madan Lal, the erstwhile promoter exited from SIBPL in fiscal 2021. Sam is registered with the Central Public Works Department of India (CPWD) as Class-I contractor and is enlisted with Military Engineer Services (MES) as Class Super Special (SS) contractor. Since inception, the company is a preferred contractor for execution of government projects and has a healthy track record of timely completion of projects and received a steady flow of repeat orders. Revenue increased by 38% during fiscal 2021 over the previous fiscal.
Robust orders provide significant revenue visibility: Sam has orders of 2.91 times its revenue in fiscal 2021, which provides healthy revenue visibility over the medium term. The order book diversification into various geographies (Delhi, Uttar Pradesh, Gujarat, Maharashtra and Himachal Pradesh) and authorities (CPWD, NHAI, DMRC, UPMRC, GMRC, NBCC) constituting high value orders of short duration has resulted in a judicious mix of projects, which in turn lowers the risk of client or geographical concentration in revenue.
Healthy financial risk profile Financial risk profile should continue to be comfortable, driven by healthy profit after tax margin, low debt, prudent working capital management and the absence of any large, debt-funded capital expenditure (capex). Networth continued to be strong at Rs 211.19 crore as on March 31, 2021. Gearing (0.21 time as on March 31, 2021) remained under 0.50 time for the five fiscals through 2021. Debt protection metrics were robust owing to steady profitability and cash accrual; interest coverage and net cash accrual to adjusted debt ratios were 15.05 times and 1.58 times, respectively, in fiscal 2021. Exposure to risks related to tender-based nature of business Sam undertakes construction under the civil construction and engineering, procurement, construction model, where projects are secured through tenders floated by government entities; revenue and profitability thus totally depend on the success in bidding for such tenders. Aggressive bidding and the tender nature of business, large number of players in the mid-sized segment, and intense competition may continue to constrain scalability, pricing power, and profitability of players. Operating margin is expected at around 7.0% over the medium term, the ability to maintain profitability margin through operating efficiency becomes critical.
Susceptibility to inherent cyclicality in the construction industry Revenue remains vulnerable to economic cycles that impact the construction industry. Further, the company mainly caters to government agencies and public sector undertakings, expenditure of which is directly linked to the economy. Any delay or deferment of capex in end-user industries could adversely affect revenue. This risk is mitigated by the company's presence in diversified segments such as roads, bridges and metros. |
Liquidity: Strong Liquidity is marked by sufficient accrual and healthy cash and bank balance, nil bank limit utilisation and mobilisation advances received for a few projects. The entire cash accrual of Rs 70-80 crore per fiscal in 2021, 2022 and 2023, could be used to cover the working capital requirement, given the minimal debt obligation of Rs 3.84 crore. Utilisation of the bank guarantee of Rs 525 crore averaged 72% for the 18 months ended September 2021 while that of the cash credit limit of Rs 25.50 crore was nil. Unencumbered cash and bank balance was around Rs 65 crore as of September 2021; and around Rs 50.0 crore is maintained in the form of fixed deposits as margin with banks and the balance is retained as free cash and current account balance. Liquidity is also supported by interest free mobilisation advances availed in some projects. |
Outlook: Positive Sam will continue to benefit from its established market position, strong clientele base and healthy order flow. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Sam, established in 1998, is currently managed by Mr Arvind Goel and Mr. Aditya Goel. The Delhi based company undertakes civil construction activities such as construction of airports, metro rails, hospitals, and institutional and multistorey residential buildings for government authorities. Sam is an approved contractor in the Class-I category for CPWD and in Class SS (Super Special) category for MES. |
Key Financial Indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
*Cash credit & overdraft facility of Rs.25.50 crore is sub-limit of bank guarantee facility. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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*Cash credit & overdraft facility of Rs.25.50 crore is sub-limit of bank guarantee facility.
Criteria Details
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