| T And T Infra Limited | ||||||
| 'CRISIL BBB+ / Positive / CRISIL A2 ' assigned to Bank Debt; Corporate Credit Rating 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 assigned its 'CRISIL BBB+/Positive/CRISIL A2' ratings to the bank facilities of T And T Infra Ltd (TTIL) and reaffirmed its 'CCR BBB+/Positive' corporate credit rating on the company.
The ratings reflect the established regional position of TTIL in the construction of bridges, flyovers and other road structures, backed by the experience of its promoters. The ratings also factor in the company's healthy order book, which provides medium-term revenue visibility, and sound financial risk profile. These strengths are partially offset by geographical concentration in revenue and large working capital requirement. |
Key rating drivers and detailed description Strengths: Established regional market position and extensive industry experience of the promoters: TTIL has established a niche position in the construction of bridges, flyovers and road structures and has a proven track record in Maharashtra, under the guidance of its promoters. The company specialises in cable-styled bridges, girders and flyovers. The promoters are technocrats and have been in the construction industry for around three decades and have developed expertise over the years. They have been instrumental in adopting new construction technologies. The experience of the management team and established track record should aid the company's business risk profile over the medium term.
Healthy order book: The company has an order book of around Rs 2,000 crore, which is over 4 times the revenue in fiscal 2022 and provides strong revenue visibility over the medium term. The company has augmented its order book in the past 15-18 months with projects from the National Highways Authority of India (NHAI), the Maharashtra Public Works Department (PWD), Municipal Corporation of Greater Mumbai (MCGM) and various municipal corporations. In the past, majority of the orders were from state departments/agencies and urban local bodies in Maharashtra. Currently over 30% of the orders are from NHAI and the Ministry of Road Transport and Highways (MoRTH), which adds diversity in term of counterparties. The company recorded revenue of ~Rs 362 crore in fiscal 2022, up almost 40% on-year, and has earned revenue of ~Rs 220 crore in the first half of fiscal 2023. Revenue growth is expected at 35-45% for this fiscal. Revenue growth should sustain over the medium term backed by the healthy order book.
Sound financial risk profile: The financial risk profile is supported by healthy networth, sound capital structure and adequate debt protection metrics. The capital structure improved in fiscal 2022 due to better working capital management and reduced reliance on external funds, resulting in healthy gearing of 0.25 time and total outside liabilities to adjusted networth (TOLANW) ratio of 0.66 time as on March 31, 2022. The debt protection metrics have been adequate because of low leverage and healthy operating profitability. The interest coverage and net cash accrual to total debt ratios are estimated at 9.6 times and 1.03 time, respectively, for fiscal 2022.
The company may undertake capital expenditure (capex) of Rs 50-55 crore over the medium term to support execution of its healthy order book. The capex will be funded partly (60-70%) through medium-term debt. Reliance on working capital bank lines is expected to increase because of incremental working capital requirement. Hence, debt will increase over the medium term. Nonetheless, the financial metrics should remain comfortable because of healthy accretions and improving networth.
Weaknesses: Geographical concentration in revenue and susceptibility to risks inherent in tender-based operations and competition: The company's entire order book is from Maharashtra, resulting in geographical concentration in revenue. Any natural calamity or unforeseen event at the local level can severely impact operations. Though, the company plans to expand its footprint in nearby states in the near term, majority of its orders will be from Maharashtra. Furthermore, 65-70% of the orders are from state government departments/agencies and urban local bodies. Any delay in execution of these orders or in payments by state government departments/agencies can impact operations and working capital management. Moreover, revenue and profitability depend entirely on the ability to win tenders amid intense competition from large, national-level players as well as local players.
The company's profitability remains susceptibility to sharp volatility in key input prices. Long-term contracts generally cover price escalation costs for steel and cement, but the pass through happens with a lag. The company procures raw material only on receipt of orders of short duration to mitigate the price fluctuation risk.
Large incremental working capital requirement: Gross current assets were 100-170 days over the three fiscals ended March 31, 2022. With the company likely to tamp up operations, the incremental working capital requirement will be large over the medium term. Timely availability of additional bank lines and efficient collection cycle remains critical to manage the working capital cycle and liquidity effectively. |
Liquidity: Adequate Bank limit utilisation was low at 47% on average for the 12 months through October 2022 but has increased in recent months due to increased order execution. Cash accrual is expected at Rs 40-60 crore against term debt obligation of Rs 10-13 crore over the medium term and will cushion liquidity. Current ratio was healthy at 1.83 times as on March 31, 2022. The company is in the process of contracting additional working capital bank lines, timely availability of which will be critical for execution of orders, future bidding and sustenance of adequate liquidity. |
Outlook: Positive CRISIL Ratings believes TTIL will continue to benefit from the extensive experience of its promoters and its established regional track record and healthy order book. |
Rating sensitivity factors Upward factors
Downward factors
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About the company TTIL was established as a partnership firm in 2004 and was reconstituted as a private limited company in 2012 and as a closely held public limited company in 2018. The company undertakes construction of roads, bridges, flyovers and other structures for the PWD and municipal corporations in Maharashtra, and for other government and semi-government bodies such as NHAI and MORTH. The company is based in Pune, Maharashtra, and promoted by Mr Shrimant Tandulkar and Mr Shivram Thorave. |
Key financial indicators
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Status of non-cooperation with previous CRA: TTIL has not cooperated with India Ratings And Research Pvt Ltd (India Ratings) which has classified it as non-cooperative vide its release dated October 16, 2018. The reason provided by India Ratings is non-furnishing of information for monitoring of ratings. |
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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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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This Annexure has been updated on 06-Dec-2022 in line with the lender-wise facility details as on 06-Dec-2022 received from the rated entity.
Criteria Details
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