BVSR Constructions Private Limited

August 06, 2018

Summary of rated instruments

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Long Term: Cash credit facilities 10.00 10.00 [ICRA]A- (Stable); reaffirmed
Long Term: Non-Fund Based facilities 220.00 220.00 [ICRA]A- (Stable); reaffirmed
Long Term: Unallocated 84.00 84.00 [ICRA]A- (Stable); reaffirmed
Total 314.00 314.00
* -Instrument details are provided in Annexure 1

Rating action
ICRA has reaffirmed the long-term rating of [ICRA]A- (pronounced ICRA A minus) to the Rs. 10.00 crore1 cash credit
facilities, Rs. 220.0 crore non-fund-based limits and Rs. 84.00 crore unallocated facilities of BVSR Constructions Private
Limited (BVSR)2. The outlook on the long-term rating is ‘Stable’.

Rationale
The rating reaffirmation takes into account the healthy orderbook accretion of Rs. 1,329.50 crore resulting in an
outstanding orderbook of Rs. 2,496.30 crore which is 3.7 times the operating income of FY2018 providing healthy
revenue visibility over the medium term. The rating factors in the well-diversified order book with a total of 38 projects
in the roads & bridges and irrigation segments thereby reducing dependency on few critical orders. The rating also
favorably takes into account the comfortable liquidity position of BVSR with liquid investments of Rs. 18.77 crore along
with unencumbered surplus from five operational BOT projects. Additionally, BVSR’s financial profile continues to remain
healthy with low TOL/TNW of 1.4 times as on March 31, 2018 and comfortable coverage indicators with TD/OPBDITA and
interest coverage of 0.4 times and 6.8 times respectively in FY2018. The rating also factors in BVSR’s strong operational
track record with demonstrated ability in executing road construction and irrigation projects over the past fifteen years.

The ratings are, however, constrained by the high execution risks with ~89% of the order book in the initial stages of
execution; any delay in receipt of prerequisite approvals could adversely affect the revenues and profitability. ICRA also
takes note of the equity commitments towards the new HAM project amounting to Rs. 81.44 crore over next two years;
however, the unencumbered cash and surplus available from operational BOT portfolio mitigates the risk to a large
extent. The rating is also constrained by high segmental concentration with road and irrigation segments contributing to
61% and 39% of the order book respectively. Notwithstanding the benefits derived out of cluster-based project
execution (access to quarries, better utilisation of machinery etc.). BVSR remains exposed to geographical concentration
risks as the orders are largely confined to Telangana and Andhra Pradesh which account for 91% of the outstanding order
book.

Going forward, BVSR’s ability to diversify its segments, improve its operating margins and efficiently manage its working
capital cycle would remain key rating sensitivities.

1
1 crore = 100 lakh = 10 million
2
For complete rating scale and definitions, please refer to ICRA’s website www.icra.inor other ICRA Rating Publications

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Outlook: Stable
ICRA believes BVSR will continue to benefit from the extensive experience of its promoters and be able to execute the
current order book as per the schedule. The outlook may be revised to 'Positive' if the billing is significantly higher than
anticipated with improvement in profitability. The outlook may be revised to 'Negative' in case billing remains lower than
anticipated or elongation in working capital cycle or any significant cost over-run for HAM project resulting in higher than
anticipated equity support from BVSR.

Key rating drivers

Credit strengths
Significant orderbook accretion provides medium term revenue visibility: The orderbook accretion has been healthy at
Rs. 1,329.50 crore resulting in an outstanding orderbook of Rs. 2,496.30 crore which is 3.7 times the operating income of
FY2018 providing healthy revenue visibility over the medium term.

Favourable liquidity position: BVSR has five state BOT annuity projects across Andhra Pradesh and Madhya Pradesh with
good unencumbered surplus. This along with the liquid investments of Rs. 18.77 crore results in favorable liquidity
position.

Healthy financial profile: BVSR’s financial profile remains healthy as reflected by low TOL/TNW of 1.4 times as on March
31, 2018 and comfortable coverage indicators with TD/OPBDITA and interest coverage of 0.4 times and 6.8 times
respectively in FY2018.

Efficient working capital management: Shorter receivable cycle, low work in progress coupled with high mobilisation
advances resulted in low working capital intensity of 3.6% in FY2018. Consequently, the working capital borrowings
remained low.

Established operational track record: BVSR has an established track record in executing roads & bridges and irrigation
contracts for more than fifteen years.

Credit weaknesses
High geographic concentration risk: BVSR remains exposed to geographical concentration risks as the orders are largely
confined to Telangana and Andhra Pradesh which account for 91% of the outstanding order book. However, the
company derives its benefits out of cluster-based project execution helps in lowering its fixed overheads and thereby in
keeping its margins intact.

Funding requirement for recently awarded HAM project: The total equity requirement towards the newly awarded
HAM project is estimated at Rs. 81.44 crore over next two years. However, BVSR is comfortably placed supported by
unencumbered cash of Rs. 18.77 crore parked in fixed deposits as on March 31, 2018 and healthy surplus from the five
operational BOT annuity projects.

High execution risks: With 89% of orderbook in its nascent stages of execution, the company remains exposed to high
project execution risks. Any delay in receipt of prerequisite approvals could adversely affect the revenues and
profitability

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Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.

Links to applicable criteria:

Corporate Credit Rating Methodology

Rating Methodology for Construction Entities

About the company:

Late Mr. B.V. Subba Reddy started his career as an individual contractor in the year 1957. In the year 2001, he formed a
partnership firm M/s. B.V. Subba Reddy Constructions and subsequently converted into a private limited company in the
year 2004. BVSR Constructions Private Limited (BVSR) is primarily engaged in road construction and irrigation works. The
company is an ISO 9001-2008 construction company. The company has a total outstanding order book of Rs. 2,429.20
crore as on June 30, 2018 (OB/ OI of 3.7 times FY2018 revenues) with geographical presence largely confined to Andhra
Pradesh and Telangana regions across roads & bridges and irrigation segments. The company also has a portfolio
comprising of five state road annuity projects (under BOT mode).

Key Financial Indicators

FY 2016 FY 2017 FY2018*
Operating Income (Rs. crore) 319.9 574.0 572.8
PAT (Rs. crore) 13.4 23.8 22.4
OPBDIT/ OI (%) 7.5% 7.3% 7.4%
RoCE (%) 22.1% 33.3% 28.2%

Total Debt/ TNW (times) 0.2 0.3 0.2

Total Debt/ OPBDIT (times) 0.6 0.7 0.4
Interest coverage (times) 5.1 7.8 6.8
NWC/ OI (%) -8.8% -0.4% 3.6%
*-Provisional

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

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Rating history for last three years:
Chronology of Rating History for the
Current Rating (FY2019) past 3 years
Date & Date & Date &
Rating in Rating in Rating in
Amount Amount Date & Rating FY2018 FY2017 FY2016
Rated Outstanding July 5, Apr 22,
Instrument Type (Rs. crore) (Rs Crore) Aug 2018 2017 2016 Apr 9, 2015
1 Cash Credit Long Term 10.00 10.00 [ICRA]A- [ICRA]A- [ICRA]BBB+ [ICRA]BBB+
(Stable); (Stable); (Stable); (Stable);
upgraded Reaffirmed Reaffirmed
2 Bank Long Term 220.00 220.00 [ICRA]A- [ICRA]A- [ICRA]BBB+ [ICRA]BBB+
Guarantee (Stable); (Stable); (Stable); (Stable);
upgraded Reaffirmed Reaffirmed
3 Unallocated Long Term 84.00 84.00 [ICRA]A- [ICRA]A- [ICRA]BBB+ [ICRA]BBB+
(Stable); (Stable); (Stable); (Stable);
upgraded Reaffirmed Reaffirmed

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument Details
Date of Amount
Issuance / Coupon Maturity Rated Current Rating and
ISIN No Instrument Name Sanction Rate Date (Rs. crore) Outlook

Long Term: Fund Based

NA August 2017 9.70% - 10.00 [ICRA]A- (Stable)
Cash Credit
Long Term: Bank
NA August 2017 - - 220.00 [ICRA]A- (Stable)
Guarantee
NA Long Term: Unallocated August 2017 - - 84.00 [ICRA]A- (Stable)
Source: Company;

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ANALYST CONTACTS
Shubham Jain Rajeshwar Burla
+91 124 4545 306 +91 40 4067 6527
shubhamj@icraindia.com rajeshwar.burla@icraindia.com

Shweta Sankaramani
+91 40 4067 6528
shweta.sankaramani@icraindia.com

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries:

+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

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companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit
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For more information, visit www.icra.in

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