Key Rating Drivers
The ratings are constrained Lekcon's high customer concentration and geographic concentration risks as 87pc of the orders are from its top five customers and 72pc of the orders are from the Odisha government, respectively.
The ratings are also constrained by Lekcon's sub-contracting nature of business.
Out of the total unexecuted order book of INR3,273.7m as on 1 August 2013, sub-contracts constitute 65pc and direct contracts constitute 35pc .
The ratings are supported by Lekcon's moderate credit metrics in FY13 with interest coverage (EBITDA/interest expenses) of 2.5x (FY12: 3.1x) and net leverage (EBITDA/ net debt) of 1.5x (1.9x) based on provisional results.
EBITDA margin improved to 14.6pc in FY13 from 11.8pc in FY11.
The ratings are also supported by over a decade-long experience of Lekcon's founders in the construction industry.
The company has an order book of INR3,273.7m (4.5x of FY13 revenue), which provides revenue visibility for the next four years.
Negative: A sustained decline in revenue, increase in margin pressures or deterioration in credit metrics and liquidity profile will be negative for the ratings.
Positive: A sustained improvement in revenue while profitability, credit metrics and liquidity profile being maintained or improved will be positive for the ratings.
Lekcon was incorporated in 2009. It undertakes civil and infrastructure construction, primarily in the roads and earth works segments.
The company is registered as a special class contractor with the Odisha Roads and Buildings Department.
--IBNS (Posted on 26-08-2013)