The upgrade reflects TEPL's ability to maintain a negative working capital cycle in the financial year ended 31 March 2012 (FY12: negative 42 days, FY11: negative 13 days). Credit metrics also remained strong in FY12 with net financial leverage of 1.4x (FY11: 1.4x) and EBITDA interest coverage of 3.5x (4.5x).
EBITDA margins improved to 12.3pc in FY12 (FY11: 10.6pc ). The presence of price escalation clauses in all the contracts entered into by the company in the past two years protects its EBITDA margins from raw material price volatility.
The metrics is likely to improve in FY13 on the back of healthy revenue growth and reduced debt based on Ind-Ra's projections.
The ratings further benefit from TEPL's strong revenue visibility from its outstanding order book of INR5,957.3m as on 1 February 2013 (5.3x FY12 revenue).
The ratings, however, continue to be constrained by TEPL's small size of operations (revenue for FY12: INR1,126.5m; FY11: INR1,212.1m) and geographical concentration arising from its contract execution activities being mostly based in and around Jharkhand.
TEPL is a civil contractor engaged in the construction of canals, dams, bridges, roads, laying of railway tracks, etc.
It was started as a partnership firm in 1988 and incorporated in 1996. In 9MFY13, TEPL reported revenue of INR896.8m.
Ind-Ra has also upgraded TEPL's bank loan ratings as below:
- INR80m fund-based limits (increased from INR70m): upgraded to Long-Term 'IND BBB-' from 'IND BB+'
- INR840m non-fund-based limits (increased from INR740m): upgraded to Short-Term 'IND A3' from 'IND A4+'
--IBNS (Posted on 04-04-2013)