NATIONAL's INR150m cash credit limits have also been assigned an 'IND BB-' rating.
Ind-Ra has taken a consolidated view of the Panesar group (group) which consists of five entities while assigning ratings to NATIONAL to reflect the legal and operational linkages between them in terms of the same line of business and common founders.
The ratings are constrained by the group's low EBITDA margins of 4.7pc for FY12 (financial year ended 31 March 2012) and high working capital requirements due to high debtor holding days.
Hence, liquidity is stressed as witnessed from the average cash credit utilisation of around 100pc for the six months ended 28 February 2013. However, counter party risk is low as 100pc of debtors are the government departments of Nagaland.
The ratings are supported by the group's low financial leverage (net adjusted debt/ EBIDTAR) of 2.4x and high interest coverage of 4.9x in FY12. Also, the ratings are strengthened by the group's founder's 50 years of experience in the construction business and its ability to procure and execute contracts in Nagaland.
The Panesar group is the largest construction contractor in Nagaland. The overall order book size of all the five entities is INR8961.0m to be executed in three to four years.
The five entities forming the group are: MS Panesar and Sons, Singh Construction Co, MB Panesar and Sons Pvt Ltd, NATIONAL and Perfect Construction. All the entities are rated at 'IND BB-'/Stable.
NATIONAL is a partnership among Mohan Singh Panesar, Sarabjit Singh Panesar, Balwant Kaur Panesar and Jaspreet Kaur Panesar in a profit sharing ratio of 1:1:1:1.
Total debt of INR37m as on 31 March 2012 (FY11: INR25.7m) consisted of unsecured loans of INR31.8m and short-term loans of INR5.2m.
--IBNS (Posted on 04-04-2013)