Rocky Dhar

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs.52.80 Crs. of Rocky Dhar

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous(13 Nov 2020)	Present
Fund Based
Cash Credit - Sanctioned	20.00	20.00	Long Term	BWR B /Stable Reaffirmation	BWR B + /Stable Upgrade
Covid -19 Emergency Line Credit - Sanctioned	00.00	02.80
Sub Total	20.00	22.80
Non-Fund Based
Bank Guarantee - Sanctioned	15.00	15.00	Short Term	BWR A4 Reaffirmation	BWR A4 Reaffirmation
Bank Guarantee - Proposed	00.00	15.00
Sub Total	15.00	30.00
Grand Total	35.00	52.80	(Rupees Fifty Two Crores and Eighty lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has upgraded the long-term rating at BWR B+ (Stable) and the short-term rating at BWR A4 for the bank loan facilities of Rocky Dhar. The rating upgrade takes into account the approach to reinstate the long term and short term rating which was downgraded in Nov.,2020 due to non submission of information as the issuer did not cooperate, while rating was overdue. The firm has now provided information as required and the rating factors in the experience of the management, improved scale of operations in FY20, increased net profitability in FY20, further strengthening of the order book position with new orders bagged during the ongoing pandemic, need based infusion of capital by the proprietor leading to acceptable total gearing and improved debt service coverage ratios. The ratings are however constrained by underachievement of estimates for revenue and operating profits, deterioration in EBIDTA margins in FY20 from  FY19, slow release of funds from the government leading to modest scale of operations, stretched working capital cycle,  geographic concentration risk, intense competition, besides proprietorship constitution of the Firm and infrastructure activity related risks along with lack of information availability from the Firm.

BWR takes cognizance of Rocky Dhar availing moratorium under the Covid relief package from April 2020 through September 2020 for the interest payment for its bank loan facilities and on principal payment of CCEPL loans with lenders, and deferred scheduled payments for the period in line with the RBI guidelines. The Firm has been regular in debt obligation payments in the post-moratorium period, as confirmed by its banker. The Company has also not opted for loan restructuring under the RBI Resolution Framework for Covid-19-related stress. 

The Outlook is Stable as the Firm has been able to register year-over-year growth in its topline in FY20. As advised by the Firm booked total revenue of Rs.44crs Crs till 29 Dec,2020.

KEY RATING DRIVERS

Credit Strengths:

• Financial and Credit risk profile :

  The financial risk profile of Rocky Dhar remains comfortable. The Firm booked total operating income of Rs.60Crs in FY20 registering a growth of 12.8% year-over-year with higher execution of work orders despite operations being impacted by the pandemic in the last month of the fiscal. As advised by the management, the Firm recorded total operating income of Rs.44crs until January 2021. For the full year FY21, the Firm is likely to fall short of expectations although marginally as per BWR estimates. Net profitability improved to 8.95% in FY20 from 7.6% in FY19 with savings in interest costs on the back of repayment of high costs NEDFI loans. This led to improved ISCR of 3.12x in FY20 (FY19:2.06x) despite moderate EBIDTA margins in the year. Gearing improved to 0.54x in FY20 (FY19:0.61x) with reduction in borrowings and expansion in net worth.

• Expansion in Net Worth :

  Need based infusion of capital of Rs.1.60crs in FY20 along with retention of profits has led to expansion of Net worth of Rs.42.61Crs as on March 31, 2020 from Rs.35.37Crs as on March 31, 2019. The Firm has used internal accruals and the funds infused to pay off high cost NEDFI loans helping in improved gearing levels in FY20.

• Order Book Position :

  The Firm managed to bag new orders of value Rs.96crs in October 2020 for upgradation/ improvement of road in Shillong, further strengthening its order book position. As on January 28,2021, the order book position of the firm comprises 19 orders, with residual value of Rs. 274.17 Crores (increased from work order of Rs.170crs as on March 31, 2019) to be completed by FY24, which shows revenue visibility in the ensuing fiscals. The contracts range from 1 year to 3 years period. The proposed enhancement in BG limits is for the new orders received. However, the timely execution of orders would remain critical for achieving revenue growth and profitability on the expected lines.

• Experienced Management :

  The proprietor Mr. Rocky Dhar has been involved in the civil construction business for more than 17 years and has a thorough knowledge of the industry. The long track record in the industry has helped the firm to establish strong relationships with its suppliers and customers.

Credit Risks:

• High Working Capital Cycle :

  The Operating cycle of the Firm is improved from 350days in FY19 to 280days in FY20 but it is still at a higher side owing to high debtor cycle and inventory conversion period. The counterparty for the tender-based projects executed by Rocky Dhar are reputed Government organisations. Although the counterparty credit risk for the firm is low, the slow release of funds from the Government has led to a higher debtor cycle of ~200 days in FY20 (FY19:225 days). The inventory conversion period has improved from 154 days in FY19 to 113days in FY20,however there are delays in execution of work orders due to the pandemic and heavy rainfall. As advised by the management there has been no penal charges for the delay in execution.

• Under Achievement of Projections in FY20 and Moderate EBIDTA margins :

  The Firm achieved revenue of Rs.60 crs in FY20 (FY19:Rs.53crs), which is only 60% of its projected revenues for FY20. As advised, the revenue could not be achieved as per the projections due to lower billings at the end of the year owing to the lockdown in March 2020.Work at all the sites in Meghalaya halted due to lockdown in March 2020 to June 2020. Work at the sites started in a phased manner from July 2020 onwards. The Firm could start full execution only from September 2020. Also, the Anti citizenship bills passed in October 2019 led to disturbance in Meghalaya which resulted in work disruptions. During 9MFY21, the Firm achieved revenues of Rs.24crs and total operating income of Rs.44crs until January 2021. The lower execution was due to the pandemic. Work at sites were resumed in full swing only in September 2020. EBIDTA margins moderated to 17.7% in FY20 from 20.7% in FY19 owing to increase in equipment hiring and repair costs, transportation costs and other site expenses. EBIDTA margins are expected to be around 12% to 13% going forward.

• Geographic Concentration and Intense Competetion :

  Rocky Dhar’s operations are concentrated in Meghalaya,which exposes the firm to geographical concentration risks. Any adverse development in the region can impact the execution of its projects, thereby impacting the operations.

• Constitution of the Firm and Infrastructure activity related risk :

  Being a proprietorship firm, the risk of capital withdrawal remains inherent and any significant withdrawal of capital by the proprietor could be a cause of concern. The firm is exposed to high political, regulatory and execution risks, which might generate threat towards project activities.

RATING SENSITIVITIES

Positive Triggers: Ability of the Firm to maintain consistent healthy order book position and timely execution of the projects, leading to sustained revenue growth and improved profitability helping it to meet the financial projections along with sustain liquidity position. Specific credit metrics could include ISCR of above 3.0x times on a sustained basis.  

Negative Triggers:  Any delay in execution of the existing order book or weaker order book position due to prolonged impact of Covid-19, leading to lower revenues and profitability than the anticipated levels as well as a deterioration in liquidity position. The rating may also be downgraded if the liquidity position worsens. Specific credit metrics could include ISCR below 3.0x on a sustained basis.  

LIQUIDITY INDICATORS - Adequate

Rocky Dhar's liquidity is Adequate. It is expected that the firm would meet its near term commitments through its internal sources. BWR is projecting cash accruals (profit after tax plus depreciation) of approximately Rs 6.0Crs for FY21 against total scheduled repayments of Rs.2.0Crs (for vehicle loans) in FY21. The firm had cash and cash equivalents of Rs.0.54Crs (excluding fixed deposits of Rs.5.55crs which is margin money against Bank Guarantee limits) at the end of March,2020. The Firm had availed GECL of Rs.2.80crs in August 2020 to meet the liquidity mismatch due to COVID. However, no moratorium was availed on interest payments under the RBI covid relief package. The Firm's ISCR has improved to over 3.0x in FY20 and is expected to be sustained at the level going forward. The Firm has utilised over 90% of its fund based working capital limits in the last twelve months. Utilisation of non fund based bank guarantee limits has also been at 89% in the last tweleve months and the Firm has proposed for an enhancement of the BG limits for execution of the new orders. 

ABOUT THE ENTITY

• Rocky Dhar is a proprietorship firm, established in 2009 by Mr. Rocky Dhar and is based out of Shillong, Meghalaya.  The firm is mainly engaged in civil construction activities inclusive of road construction. It is registered as Class I contractor with PWD, Meghalaya, rendering civil and road construction activities. 

• It is a category I contractor and enlisted with all major Government Agencies like CPWD/MES/PWD/NPCC/BRO.

• The Firm is engaged in civil construction work and has executed various building projects like office complexes, hotels, residential apartments etc.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	60.09	53.29
EBITDA	Rs.Crs.	10.64	11.01
PAT	Rs.Crs.	5.38	4.04
Tangible Net Worth	Rs.Crs.	42.61	35.57
Total Debt/Tangible Net Worth	Times	0.54	0.61
Current Ratio	Times	2.17	2.28

KEY COVENANTS OF THE FACILITY RATED

Standard Covenants

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

As per press release dated March 31,2020, ICRA has maintained the ratings of ICRA B,Stable/A4 on bank loans of Rocky Dhar under the Issuer Not Cooperating category 

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating  (2021)			Rating History (2020)
Type	Tenure	Amount	Rating	13Nov2020
Fund Based
Cash Credit - Sanctioned Covid -19 Emergency Line Credit - Sanctioned	Long Term	20.00 02.80	BWR B+/Stable	BWR B/Stable
Non-Fund Based
Bank Guarantee - Sanctioned Bank Guarantee - Proposed	Short Term	15.00 15.00	BWR A4	BWR A4
Grand Total		52.80	(Rupees Fifty Two Crores and Eighty lakhs Only)

Facilities	Current Rating  (2021)			Rating History (2019)
Type	Tenure	Amount	Rating	23Oct2019
Fund Based
Cash Credit - Sanctioned Covid -19 Emergency Line Credit - Sanctioned	Long Term	20.00 02.80	BWR B+/Stable	BWR B +/Stable
Non-Fund Based
Bank Guarantee - Sanctioned Bank Guarantee - Proposed	Short Term	15.00 15.00	BWR A4	BWR A4
Grand Total		52.80	(Rupees Fifty Two Crores and Eighty lakhs Only)

Facilities	Current Rating  (2021)			Rating History (2018)
Type	Tenure	Amount	Rating	22Jun2018
Fund Based
Cash Credit - Sanctioned Covid -19 Emergency Line Credit - Sanctioned	Long Term	20.00 02.80	BWR B+/Stable	BWR B +/Stable
Non-Fund Based
Bank Guarantee - Sanctioned Bank Guarantee - Proposed	Short Term	15.00 15.00	BWR A4	BWR A4
Grand Total		52.80	(Rupees Fifty Two Crores and Eighty lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Analytical Contacts
Madhu Sonthalia Senior Rating Analyst Board : +91 80 4040 9940 madhusonthalia@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	20.00	_	20.00
2	Bank Guarantee - Sanctioned	_	15.00	15.00
3	Covid -19 Emergency Line Credit - Sanctioned	2.80	_	2.80
4	Bank Guarantee - Proposed	_	15.00	15.00
Total		22.80	30.00	52.80
TOTAL (Rupees Fifty Two Crores and Eighty lakhs Only)