ICRA Upgrades Rating of Brij Gopal Construction Company Private Limited

Strategic Insights -

Brij Gopal Construction Company Private Limited (BGCC), a construction company based in Haryana, has seen its long-term rating upgraded by credit rating agency ICRA. The upgrade, from BBB- to BBB with a stable outlook, is a result of the company's steady inflow of new orders and comfortable order book position. The company's order book stands at Rs. 1,793.3 crore, with a pending order book of Rs. 2.2x FY 2015 revenues. This steady revenue visibility is expected to continue over the medium term, driven by the company's ability to execute its order book and maintain liquidity.

Despite the company's working capital intensive nature, its debt levels remain low with modest term liabilities and scheduled repayments. However, the company's reliance on external borrowings is a key rating sensitivity, as it will be driven by the working capital intensity of operations and levels of accruals. BGCC's profit margins remain low, and the company needs to improve its working capital cycle and secure timely funding to execute its order book and maintain adequate liquidity.

The rating remains constrained by the high concentration risk with two Haryana state government departments accounting for 3/4 of the company's revenues in FY 2015. Any delay in payments from these customers will stretch the company's liquidity. Moreover, the order concentration is high, with five orders accounting for 60% of the pending order book. Customer and geographical diversification are critical to minimize these risks.

Key Takeaways:

  • ICRA has upgraded BGCC's long-term rating from BBB- to BBB with a stable outlook.
  • The company's steady inflow of new orders and comfortable order book position are key drivers of the rating upgrade.
  • The company's order book stands at Rs. 1,793.3 crore, with a pending order book of Rs. 2.2x FY 2015 revenues.
  • BGCC's debt levels remain low with modest term liabilities and scheduled repayments.
  • The company's reliance on external borrowings is a key rating sensitivity.
  • BGCC's profit margins remain low, and the company needs to improve its working capital cycle and secure timely funding.
  • The rating remains constrained by high concentration risk with two Haryana state government departments accounting for 3/4 of the company's revenues in FY 2015.
  • Any delay in payments from these customers will stretch the company's liquidity.
  • The company needs to diversify its customer base and reduce dependence on government contracts.

Statistics:

  • Rs. 1,793.3 crore - pending order book of BGCC as on Mar-15.
  • Rs. 2.2x FY 2015 revenues - pending order book as a multiple of FY 2015 revenues.
  • 60% - proportion of the pending order book accounted for by five large orders.
  • 3/4 - proportion of the company's revenues in FY 2015 accounted for by two Haryana state government departments.
  • Rs. 255.73 crore - company's revenues in FY 2012.
  • Rs. 820.34 crore - company's revenues in FY 2015.

Sources:

  • ICRA Limited
  • Brij Gopal Construction Company Private Limited (BGCC)
  • Haryana State Industrial and Infrastructure Development Corporation (HSIIDC)
  • Haryana Urban Development Authority (HUDA)