Rating Rationale

4 May 2021
Digvijay Construction Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of ₹. 51.45 Crores of
Digvijay Construction Pvt. Ltd.

Particulars

Amount (₹ Crs) Rating*

Facility Tenure Previous

Previous Present Present
(December, 2019)
BWR BBB-
BWR BBB-
Fund based 10.00 13.45 Long Term Stable
Stable
(Reaffirmation)
BWR A3 BWR A3
38.00 38.00 Short Term
Non Fund Based (Reaffirmation)

Total 48.00 51.45 INR Fifty one Crores & forty five lakhs Only

*Please refer to BWR website www.brickworkratings.com/ for the definition of the ratings
Complete details of bank facilities are provided in Annexure-I

Ratings: Reaffirmed
Brickwork Ratings (BWR) has considered the standalone financials of Digvijay Construction
Pvt. Ltd. (DCPL or the company) and has essentially relied on audited financial statements up to
FY21, projected financials upto FY23, and publicly available information and clarifications
provided by the entity’s management.

The rating reaffirmation duly considers the company’s moderate financial risk profile and
adequate liquidity position. DCPL also benefits from the promoters’ vast business experience of
more than three decades in the line of road construction, existence since 1989 and strong
relations with customers. However, the rating is constrained by the susceptibility to time and cost
overruns in order execution and exposure to risks due to the tender-driven nature of the business
and cyclicality in the construction sector.

BWR believes the business risk profile will be maintained over the medium term. The Stable
outlook indicates a low likelihood of a rating change over the medium term.

Going forward, the entity’s ability to execute projects in a timely manner, repay debt, improve
sales and efficiently manage liquidity would be key rating sensitivities.

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Credit Strengths:
● Experienced management: The promoters have extensive experience of more than three
decades in road construction and have an established track record withstanding industry
cycles. Over the years, they have developed long-standing relations with clients in the
government departments of Gujarat, Maharashtra, Andhra Pradesh and Madhya Pradesh.
The company benefits from the promoters’ significant experience in the tender bidding
process, which helps in the continuous receipt of orders.

● Moderate financial risk profile: The company's financial profile remained comfortable,
marked by a healthy net worth, low gearing and moderate debt coverage ratios. The
tangible net worth was Rs. 21.71 Crs as on 31 March 2021 on account of previous years’
accumulated profits. The company’s gearing stood low, at 0.72x in FY21, against 1.41x
in FY20, and the TOL/TNW was 1.23x in the last fiscal, FY21. The interest and debt
service coverage were moderate, at 2.06x and 1.24x, respectively, on the back of healthy
profit margins. DCPL achieved a TOI of Rs. 53.30 Crs in FY21, compared with Rs. 19.16
Crs in FY20. The company has reported an operating profit margin of 9% and a net profit
margin of 1.77% in FY21. As on 31 March 2021, the company had work on hand worth
Rs 83.19 Crs to be executed by March 2022. There is revenue visibility in the medium
term since the construction work of multiple projects is in progress. Furthermore, the
company’s majority revenue was mainly generated from Gujarat state government.

Credit risks:
● Susceptibility to risks inherent in tender-based business: Since the company’s
business model is tender-based, revenue depends on the company’s ability to win tenders
successfully. Additionally, the majority orders are from government entities, resulting in
high dependence on timely clearances for tenders and payment. Going ahead, revenue
and profitability are expected to remain susceptible to inherent risks in tender-based
operations. Furthermore, the nationwide lockdown due to COVID-19 and slowdown in
construction work may affect project completion within the stipulated time frame.

● High competition intensity and inherent risk associated with infrastructure

industry: The construction industry is highly fragmented in nature, with the presence of
a large number of unorganised players and a few large organised players, which, coupled
with the tender-driven nature of construction contracts, poses huge competition. DCPL,
like any other construction company, is exposed to risks inherent in the construction
sector, such as a slowdown in new order inflows and the risks of delays in execution.
Operations are vulnerable to price variations in key raw materials; however, the risk is
largely mitigated in the case of contracts that include an escalation clause.

RATING SENSITIVITIES
Positive:

● Significant ramp-up in operating revenues on the back of timely project completion,

maintaining new order flows and efficient debtor's collections

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 ● Improvement in profitability and the further infusion of additional funds by way of
capital and unsecured loans
Negative:

● Lower-than-expected cash flow from operations either because of subdued sales or due to
a significant delay in completion, weakening of the liquidity position
● Deterioration in the gearing and debt coverage metrics, the withdrawal of unsecured
loans and a delay in collection

Liquidity : Adequate
Liquidity is adequate, supported by positive fund flow generated from operations. Net cash
accruals have improved from Rs. 1.89 Crs in FY20 to Rs. 2.42 Crs in FY21. The company has
adequate cash flow to meet the debt obligations. Cash credit utilisation remained low at 37% in
the last six months ending on 28 February 2021.

COMPANY PROFILE
Digvijay Construction Private Limited (DCPL) was established in 1989 by Mr. Digvijaysinh G.
Padheria to undertake civil construction work, such as road construction, dams, canal lining and
other similar works, in the state of Gujarat. DCPL is a registered "AA” class contractor (EPC)
with the Government of Gujarat.

Key Financial Indicators

Key Parameters Units 2021 2020

Result Type Audited Audited
Operating Revenue ₹ in Cr 52.29 18.43
EBITDA ₹ in Cr 4.79 4.36
PAT ₹ in Cr 0.95 0.31
Tangible Net worth ₹ in Cr 21.71 20.48
Total Debt/Tangible Net worth Times 0.72 1.41
Current Ratio Times 1.88 2.16

NON-COOPERATION WITH PREVIOUS RATING AGENCY IF ANY : Not Applicable

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Rating History for the last three years (including withdrawn/suspended ratings)

Facilities Current Rating (2021) Rating History

Amount (₹ 31March
Tenure Rating 2020 2019
Cr) 2018

Issuer not
Cooperating*
BWR BB+
BWR BBB- (Stable) BWR BBB-
Long
Fund Based 13.45 Stable - 6August2019 Stable
Term
BWR BBB-
Stable
16Dec2019

Issuer not
Cooperating*
BWR A4+
Short BWR A3 BWR A3
Non Fund Based 38.00 - 6August2019
Term
BWR A3
16Dec2019

Total 51.45 INR Fifty One Crores & forty five lakhs Only

*Issuer did not cooperate, based on the best available information.

COMPLEXITY LEVELS OF THE INSTRUMENTS

For more information, visit www.brickworkratings.com/download/ComplexityLevels.pdf

Hyperlink/Reference to applicable Criteria

● General Criteria
● Approach to Financial Ratios
● Infrastructure Sector
● Short Term Debt

For any other criteria obtain hyperlinks from website

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 Analytical Contacts

Kunjal Dabhi
Dileep Singh -Director - Ratings
Ratings Analyst
B :+91 79 66174046 / 47
B :+91 79 66174046 / 47
[email protected]
[email protected]

1-860-425-2742 [email protected]

Digvijay Construction Pvt. Ltd.

ANNEXURE I
Details of Bank Facilities rated by BWR

Sl. No. Type of Facilities Long Short Total

Term Term (₹ Cr)

1 Fund Based
Cash Credit 38.00 - 41.45
Term Loans 3.45*

2 Non-Fund Based
Bank Guarantee
- 10.00 10.00

TOTAL 51.45
Total INC Fifty One Crores & forty five lakhs Only
*Term loan outstanding as of 31March2021.

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