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RKEC Projects Limited Issuer Profile January 2018

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Page 1: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

RKEC Projects Limited Issuer Profile January 2018

Page 2: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

Contact details

Rahul Subrato Kumar Guha

Director - CRISIL Ratings

Tel: 022-40978320

Email:[email protected]

Venkata Kakulavarapu

Associate Director - CRISIL Ratings

CRISIL Limited

Tel: +91 40 4032 8222

[email protected]

Sravya Madhav

Senior Rating Analyst - CRISIL Ratings

Tel: +91 40 4032 8216

[email protected]

Page 3: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

3

Index

Company description .......................................................................................................................................... 4

About the promoter ............................................................................................................................................. 5

Organisation structure ........................................................................................................................................ 6

Board of Directors ............................................................................................................................................... 7

Shareholding pattern (as on September 30, 2017) ............................................................................................. 7

Key milestones .................................................................................................................................................... 8

Clientele ............................................................................................................................................................... 9

Ongoing works .................................................................................................................................................. 10

Completed works ............................................................................................................................................... 15

Company profile in a nutshell ........................................................................................................................... 20

SWOT analysis ................................................................................................................................................... 23

Key financials .................................................................................................................................................... 26

Page 4: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

4

Company description

About the Company

Established in 1994 as sole proprietorship firm RK Engineers & Contractors was subsequently rechristened as

RKEC Projects Private Limited in 2005, the company is engaged in undertaking civil construction projects

related to construction of bridges and marine works such as construction of jetties. Over years, RKEC Projects

Limited has become Specialist in Construction of Industrial Projects, Marine Works & Bridges. The Company is

a Certified ISO 9001: 2015, ISO 14001: 2015 & OHSAS 18001: 2007 Organization .Based out of Vishakhapatnam

in Andhra Pradesh, RKEC is promoted by Mr. Garapati Radhakrishna and Smt.G.Parvathi Devi. The day to

operations of the company are managed by Mr. Garapati Radhakrishna.

Factsheet

Date of incorporation 01-04-2005

Regd and corporate office 10-12-1,Rednam Alcazar,Rednam Gardens,

Visakhapatnam-530002

Statutory auditors M/s. Brahmananda Reddy & Co.

Bankers and other lenders Vijaya Bank

Bank limits Fund based: Rs 15 crore

Non-fund based: Rs 120 crore

Bank limits

Bank name Consortium role Fund-based

(Rs crore)

Non-fund-based (Rs

crore)

Total

(Rs crore)

Vijaya Bank Sole 15 120 135

Total 15 120 135

Source : Company

Page 5: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

5

About the promoter

G Radhakrishna

The promoter, Mr. Garapati Radhakrishna holds a bachelors degree in mechanical engineering from Andhra

University and has over three decades of experience and specialization in civil and mechanical construction

works. Prior to the formation of the Company, he was carrying on the business of civil construction as a sole

proprietor under the name of M/s R. K. Engineers and Contractors, which has transformed finally into a public

company in November 2016.

He is instrumental in taking major policy decisions for the Company and plays a vital role in identifying,

developing and formulating business strategies and effective Implementation of all projects.

Under his able guidance, the company has so far executed 81 Projects successfully worth over Rs. 1400 Crore.

Page 6: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

6

Organisation structure

Mr. G. RADHAKRISHNA

Chairman &

Managing Director

C.F.O.

G.M. (ADMINISTRATION & COMMERCIAL)

HR MANAGER

EXECUTIVE HR

ASSISTANTFRONT OFFICE

G.M. (FINANCE & ACCOUNTS)

MANAGER-ACCOUNTS

ASST. MANAGER ACCOUNTS

ASSISTANT

ASSISTANT

COMPANY SECRETARY

DIRECTOR - PROJECTS

AGM (PURCHASE & STORES)

PURCHASE

ENGINEER

STORES

STORE MANAGER -

SITES

SITE PROJECT MANAGERS

QA/AC DIVISION

SURVEYOR

SENIOR PILING

ENGINEER

ENGINEERS

SUPERVISOR

SENIOR FOREMAN

FOREMAN

MARINE CREW

MECHANICAL ENGINEER

SENIOR ENGINEER

CIVIL

ENGINEER

SENIOR ENGINEER -ELECTRICAL

ADM & ACCOUNTS

DIVISON

AGM -TECHNICAL

PROJECT PLANNING &

COST CONTROL MANAGER

DESIGN TEAM

TENDERS & CONTRACTS MANAGER

ASSISTANT

DIRECTOR - POWER DIVISION

ENGINEER

Mrs. G. PARVATHI DEVI

Whole Time Director

Page 7: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

7

Board of Directors

Name Designation Experience

Mr. G Radhakrishna Chairman and Managing Director 32 years

Mrs. G Parvathi Devi Whole Time Director 25 years

Vice Admiral Satish Soni, PVSM, AVSM, NM (Retd) Independent Director 40 years

Mr. Peter Lucas, Commissioner of Income Tax

(Retired) Independent Director 40 years

Dr. G Sita Ratnam Director 20 Years

Shareholding pattern (as on September 30, 2017)

Name of shareholder Number of shares Type % shareholding

Mr. G Radhakrishna 1,93,01,700 Promoter 99.94%

Mrs. G Parvathi Devi 10,000 Promoter 0.05%

Mrs. G Naga Pushyami 100 Member 0.0005%

Mrs. G Hima Bindu Sree 100 Member 0.0005%

Mr. G V Ram Mohan 100 Member 0.0005%

Mr. G V Lalith Lochaan 100 Member 0.0005%

Mr.B Srinivasa Rao 100 Member 0.0005%

Mr. C R R Vishnu Kumar 100 Member 0.0005%

Mr. Rama Raju 100 Member 0.0005%

Mr.J Murali 100 Member 0.0005%

Mr.CH Prasad Verma Raju 100 Member 0.0005%

Total 1,93,12,600 100.00%

Page 8: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

8

Key milestones

Page 9: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

9

Clientele

Director General Naval Projects

Cochin Port Trust

Military Engineering Services

Jawaharlal Nehru Port Trust

Mumbai Port Trust

Indian Railways

Adani Group

Essar Group

SEW Infrastructure Limited

CONCOR

Vedanta Ltd

Page 10: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

10

Ongoing works by order value

Sl. No.

Client Description of the work Value of contract (Rs. Crore)

Value of pending contract (Rs. Crore) as on Sep 30 2017

1 Office of Director General Naval Project, Visakhapatnam

Augmentation of shore supply at N-4 to N-26 jetties, dry docks, slipways and degaussing bay including associated works at Naval Dockyard, Visakhapatnam

19.60 12.13

2 Office of Director General Naval Project, Visakhapatnam

Construction of Jetty with loading facility at Visakhapatnam

149.73 64.01

3 Cochin Port Trust, Cochin 682 009

Construction of multi-user liquid terminal at Puthuvypeen, Cochin Port-(re-tender)

217.32 70.41

4 Purvanchal Vidyut Vitran Nigam Limited, Varanasi

Rural electrification works in Pratapgarh district, Uttar Pradesh, under Rajiv Gandhi Grameen Vidyutikaran Yojna (RGGVY) - l2th Plan

120.36 54.70

5 PWD, Puducherry Construction of road over bridge AT LC-43A at Km.38/175 of NH45A in Puducherry

34.96 5.57

6 Chief Engineer, MES, Shillong Zone

Provision of OTM ACCN No 1 at Leimakhong 19.73 5.69

7 Jawaharlal Nehru Port Trust, Mumbai

Construction of coastal berth, Mumbai 143.32 143.32

Total 705.02 355.09

Page 11: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

11

Ongoing works site

Construction of multi-user liquid terminal at Puthuvypeen, Cochin Port Client: Cochin Port Trust, Cochin

Construction of jetty with loading facility at VISAKHAPATNAM

Client: DGNP, Visakhapatnam

Page 12: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

12

Augmentation of shore supply at N-4 to N-26 jetties, dry docks, slipways and degaussing bay including

associated works at Naval Dockyard, Visakhapatnam

Client: DGNP, Visakhapatnam

Page 13: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

13

Construction of road overbridge at LC-43A at KM38/175 of NH45A in PUDUCHERRY

Client: PWD, Puducherry

Provision of OTM ACCN NO1 at LEIMAKHONG

Client: MES, Shillong

Page 14: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

14

Rural electrification works of Pratapgarh District, Uttar Pradesh

Client: Purvanchal Vidyut Vitran Nigam Limited, Varanasi

Construction of coastal berth at Jawaharlal Nehru Port

Client : JNPT, Mumbai.

Page 15: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

15

Completed works by order value

S. No.

Name of the Project Client Project Value (Rs. In Crore)

1 Construction of 4th multipurpose berth at Hazira Adani Port Pvt Ltd, Hazira 36.52

2 Construction of second liquid chemical/POL berth off Pir Pau, Mumbai

Mumbai Port Trust, Mumbai 129.20

3 Strengthening of alumina silo at Kakinada Sea Port Ltd Vedanta Ltd, Jharsuguda, Odisha

4.75

4 Re-Construction of Uran Patch Beacon, Elephanta Patch Beacon and construction of Pir Pau Beacon in Mumbai Harbour.

Mumbai Port Trust, Mumbai 6.35

5 Construction of mooring dolphins at liquid cargo jetty at JNPort Jawaharlal Nehru Port Trust, Mumbai

9.11

6 Setting up of overhauling facilities for M-36 GTs INS EKSILA, Visakhapatnam

DGNP, Visakhapatnam 10.61

7 Construction of pre-engineered warehouse (PEB structure) along with CC paving around warehouse etc. at proposed MMLP at Visakhapatnam

Container Corporation of India Ltd., New Delhi

7.02

8

Construction of proposed major bridge No63 (open web girder) and No 66 (PSC slab) with pile foundation and RCC substructure, earthwork, blanketing, mechanical compaction etc. in approaches and other allied works in connection with doubling of Delang-Puri section of KUR Division fromkm482.40 to Km 499.180

East Coast Railway, Bhubaneswar-23

14.32

9 Construction of SHTIL preparation hanger at INS Kalinga, Visakhapatnam.

DGNP, Visakhapatnam 8.75

10 Gandhar-Hazira Transmission Project-Narmada river crossing piling and civil works

Essar Projects (India) Limited, Jamnagar

34.50

11 Construction of coal berth and approach for Essar Bulk Terminal Salaya Limited.

Essar Projects (India) Limited, Jamnagar

100.00

12 Intake seawater pump house for Essar Oils Limited at Jamnagar Essar Projects (India) Limited, Jamnagar

2.44

13 Improvement of movement network in Nanded City under JNNURM. Nanded Waghala City Municipal Corporation, Nanded

60.23

Page 16: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

16

Completed works site

Construction of multipurpose berth in Hazira Construction of second liquid chemical/POL Berth

Reconstruction of Uran Patch,Elecphanta patch

and Pir Pau Beacon Gandhar-Hazira transmission project

Construction of coal berth and approach for Essar N-14 Jetty at Naval Dockyard,Vizag

Page 17: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

17

Slipway facilities at Naval Dockyard (V) Intake seawater pump house at Jamnagar

Fishing harbour at Machilipatnam Port Overhauling facilities at INS EKSILA,

Visakhapatnam

Major Bridge across Godavari River at Nanded Road over Bridge on River Birupa at Cuttack

Page 18: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

18

Industry overview

The infrastructure sector is a key driver for the Indian economy as it is responsible for propelling the country’s

overall development. The sector includes power, bridges, dams, roads and urban infrastructure development.

In a bid to create robust domestic infrastructure, the government has been increasing its investing in the sector;

total infrastructure spending is expected to be about 10% of gross domestic product (GDP) during the 12th Five-

Year Plan (2012–17), up from 7.6% during the previous plan (2007–12).

Mr Nitin Gadkari, Minister of Road Transport and Highways, and Shipping, has announced the government’s

target of investing Rs 25 trillion (USD 376.53 billion)in infrastructure over three years, inclusive of Rs 8 trillion

(USD 120.49 billion) for developing 27 industrial clusters and an additional Rs 5 trillion (USD 75.30 billion) for

road, railway, and port connectivity projects.

In August 2016, India jumped 19 places in World Bank's Logistics Performance Index (LPI) 2016, to rank 35th

amongst 160 countries.

Record allocation in Budget 2017-18

The allocation for infrastructure in Budget 2017-18 stands at a record Rs 3,96,135 crore. For 2017-18, the total

capital and development expenditure of the railways has been pegged at Rs 1,31,000 crore. Furthermore, in the

irrigation segment, the Long-Term Irrigation Fund already set up in the National Bank for Agriculture and Rural

Development (NABARD) is likely to be augmented by 100% to take its total corpus to Rs 40,000 crore.

Medium-term outlook

Road and Infra investments are expected to grow at a healthy rate over 2016-17 to 2018-19 as compared with

the past three years. Telangana, Karnataka, and Gujarat are expected to lead investments in the sector. Growth

in irrigation is mainly linked to the status of structural parameters such as current irrigation penetration levels,

relationship of crop yields to monsoon, crop-wise irrigation focus, and the gap between irrigation potential

created and utilized.

Market size

India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years,

with 70% funds required for power, roads, and urban infrastructure segments.

According to the government, the Indian power sector has an investment potential of USD 250 billion in the

next 4-5 years, providing immense opportunities in power generation, distribution, transmission, and

equipment

A report released by the Indian Construction Equipment Manufacturers’ Association pegs the construction

equipment industry to grow to USD 5 billion by fiscal 2020 from its current size of USD 2.8 billion

Foreign direct investment (FDI) received in the construction development sector from April 2000 to March 2016

stood at USD 24.19 billion, according to the Department of Industrial Policy and Promotion (DIPP).

Page 19: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

19

Competition

The industry is highly fragmented and dominated by big names such as Larsen & Toubro, the Jaypee Group, GMR

and NCC, and is highly competitive, with global majors also operating. In this highly fragmented industry,

medium-sized players compete for sub-contracts.

Investments

India is witnessing significant interest from international investors in the infrastructure space. Amongst a large

list many Spanish companies are keen on collaborating with India on infrastructure, high-speed trains,

renewable energy, and developing smart cities. Some of the major investments are listed below.

The Asian Development Bank (ADB) has approved a USD 631 million loan to develop the first coastal corridor-

Vishakhapatnam-Chennai industrial corridor.

Silver Spring Capital Management, a Hong Kong-based equity hedge fund, plans to invest over Rs 2,000 crore

(USD 306 million) in Hyderabad-based infrastructure developer Transstroy India Ltd, for construction of

highways in the country.

Altico Capital, the non-banking financial company (NBFC) of Clearwater Capital Partners LLC, plans to invest

around USD 150 million in the commercial office properties and infrastructure sector over the next 12-18

months.

Sovereign wealth funds and global pension funds plan to invest up to USD 50 billion in the Indian

infrastructure sector over the next five years.

Airports Authority of India (AAI) plans to develop city-side infrastructure at 13 regional airports across India,

with help from private players.

The ADB and Government of India (GoI) signed a loan agreement of USD 80 million, which is the third tranche

of a USD 200 million financing facility under the North Eastern Region Capital Cities Development

Investment Programme, and will be invested for improving water supply, solid waste management, and

sanitation in Agartala and Aizwal.

Maharashtra state government plans to launch infrastructure projects worth Rs 73,367 crore (USD 10.78

billion) in Mumbai and neighbouring areas, which include coastal road, trans-harbour link, metro rail,

airport, and road projects.

The Government of India (GoI) has earmarked Rs 50,000 crore (USD 7.34 billion) to develop 100 smart cities

across the country.

Private equity giant Carlyle Group is planning to invest Rs 500 crore (USD 73.36 million) in Feedback Infra,

which could make the US firm a major shareholder in the Gurugram-based infrastructure services company.

France has announced a commitment of EUR 2 billion (USD 2.17 billion) to convert Chandigarh, Nagpur, and

Puducherry into smart cities.

The Construction Industry Development Board (CIDB) of Malaysia has proposed to invest USD 30 billion in

urban development and housing projects in India.

GoI has unveiled plans to invest USD 137 billion in its rail network over the next five years.

GoI has announced highway projects worth USD 93 billion, which include government flagship National

Highways Building Project (NHDP) with total investment of USD 45 billion over next three years.

Source : CRISIL research

Page 20: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

20

Company profile in a nutshell

Market position Resources

Established presence with operations across

India

Extensive experience of the promoters and

established relationship with clients

Large portfolio of projects executed, and a

healthy order book of Rs. 355.9 Crore as on

Sep 30,2017

Focus on varied segments such as marine

works, roads and bridges, building and infra

works, and electrification

Healthy increase in scale

Orders from diversified customers like Cochin

Port Trust, PWD, JNPT with current large order

being Rs.143.32 Crore

Strong execution capabilities and healthy

saleability

Established counterparty relationships

Abundant availability of labour and quality

equipment

Experienced and well-qualified team of engineers

Owned machinery with minimal dependence on

leasing /hiring

Moderate reliance on bank debt supported by

adequate cash accrual

Low gearing, providing access to external debt

Operating efficiency Order book

Increasing scale resulting in improved

operating efficiency

Operating margin of 12-17% in the four fiscals

through 2017

Healthy return on capital employed of 55% as

on March 31,2017

Large orders of Rs 355.9 crore as on Sep 30,2017

The orders are to be executed over the next 24

months

Financial profile Liquidity

Healthy capital structure with sub-1 gearing

in the four fiscals ended March 31, 2017

Comfortable debt protection metrics with net

cash accrual to total debt ratio (NCATD) of

0.66 time and interest coverage ratio of 3.72

times for fiscal 2017

Strong net worth of Rs. 36 crore as on March

31, 2017

Debt mainly consists of working capital borrowing

More-than-adequate cash accrual to service

negligible debt obligation.

Healthy cash balance of Rs. 4.51 crore as on March

31, 2017

Moderate current ratio of 1.33 times as on March 31,

2017

Management

Prudent debt-funding policy as reflected in sub-1 gearing in the four fiscals ended March 31, 2017

Extensive experience of the promoters and management team

Strong execution capabilities demonstrated by diverse projects executed across geographies and

segments.

Page 21: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

21

Established player with strong revenue visibility

The company has an established presence in the civil construction segment and its operations are spread across

geographies. There has been a healthy compound annual growth rate (CAGR) of 53% in revenue over the four

fiscals through 2017. Growth is supported by an ability to bid for large projects, and an extensive bidding

experience has resulted in a healthy success rate. There were orders of Rs. 355.9 crores in hand as on Sep 30,

2017.

Tender-based nature of operations

Orders are mainly acquired through bidding for tenders floated by various government authorities. Hence, the

top line depends upon successful bidding for such tenders.

Presence across segments; however order concentration in marine works

Operations are spread across four major segments: marine structures, roads and bridges, building and

infrastructure works, and electrification.

123

197

112

7157

0

50

100

150

200

250

H1 FY18 2016-17 2015-16 2014-15 2013-14

Revenues in Rs. Crore

Page 22: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

22

Operating efficiency

Margin benefits from scale, but is susceptible to the tender-based business model

Operating capability is strong and the scale has been growing in the past four fiscals. However, the operating

margin is susceptible to the nature of orders executed and the tender-based business model. The margin has

been at 12-17% in the four fiscals through 2017. The management has a policy of bidding for projects with a

healthy margin based on its project feasibility analysis.

Working capital-intensive operations inherent in the infrastructure industry

Gross current assets were 151 days, as on March 31, 2017, attributable to large work-in-progress (WIP) of

ongoing projects along with high earnest money deposits (EMD) and retention money. During fiscal 2017,

payments from Cuddalore Port Company Ltd were stretched on account of the cyclone as the work was stalled

and payments were stuck.

Financial profile

The gearing is low, debt protection metrics are strong and the net worth is comfortable. The gearing was below

only one during the four fiscals ended March 31, 2017, as the company does not borrow aggressively for large

capital expenditure, with most debt been taken for meeting working capital requirement. The net worth was Rs

36 crores as on March 31, 2017. The NCATD and Interest Coverage were 0.66 times and 3.72 times for the Fiscal

2017.

Liquidity

There is no major long-term debt. Net cash accrual was Rs. 10 crores in fiscal 2017, and has been growing over

the years. The cash and bank balance was Rs. 4.51 crores, as on March 31, 2017. Liquidity is supported by the

ability and willingness of the promoters to infuse funds on a need basis. The current ratio was healthy at 1.33

times as on March 31, 2017.

Page 23: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

23

SWOT analysis

Strengths

Strong execution capabilities and adequate access to resources

Extensive experience of the promoters and efficient management team

Healthy orders which keep increasing every year

Weaknesses

Working capital- intensive operations

Moderate scale of operations

Opportunities

Allocation of Rs 4 lakh crore to infrastructure development in Budget 2017

Various opportunities from state governments to build irrigation canals, drinking water

pipelines, and others

Scope of partnering with international infrastructure companies in expansion

Threats

Intense competition from fragmented and unorganised players in the industry

Tender-based nature of operations; orders dependent on successful winning of tenders

Page 24: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

24

Strengths

Extensive experience of the promoters and efficient management team

Promoter, Mr G Radhakrishna, has an experience of more than three decades in the civil construction industry.

He is a graduate in mechanical engineering and started his own work in 1985 through a proprietorship firm. The

company is professionally managed with various functional heads.

Strong execution capabilities and healthy orders

Steady growth over the years has improved the ability to bid for larger projects and resulted in healthy success

rates. The company depends on its own fleet for 90% of its machinery requirement. The management has

experience in diverse segments, thus enhancing execution capabilities.

Healthy orders

The company is a mid-sized player in the infrastructure segment and hence, growth in scale of operations is vital

to make its presence felt and gain market position. There were healthy orders of Rs 355.9 crores as on Sep 30,

2017.

Weaknesses

Working capital-intensive operations

Gross current assets were 151 days as on March 31, 2017, and have remained high at 150-258 days over the four

fiscals ended March 31, 2017. That is because of high WIP, EMD, retention money, and other deposits. Owing to

the nature of industry, the working capital cycle is expected to remains streched over the medium term as well.

Opportunities

Rapid urbanisation and favourable investments

The infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In India,

total infrastructure spending is expected to be about 10% of the GDP during the 12th Five-Year Plan (2012–17),

up from 7.6% during the previous plan (2007–12). Rapid urbanisation in India will continue to propel demand for

infrastructure spend over the medium to long term.

Government initiatives and significant interest from international investors in the infrastructure space

GoI has made a record allocation of Rs 3,96,135 crores for several infrastructure projects in Union Budget

2017-18, which is expected to provide a significant boost to the Indian infrastructure sector. India is also

witnessing significant interest from international investors in this sector. Many Spanish companies are keen on

collaborating with India on infrastructure – high-speed trains, renewable energy, and developing smart cities.

Page 25: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

25

Threats

Intense competition from fragmented and unorganised players

The construction and civil works sector is highly fragmented with the presence of very large companies such as

Larsen & Toubro Ltd (L&T) and Gammon India Ltd (Gammon), as well as smaller local players. While large players

such as L&T and Gammon operate in several sectors including roads; hydroelectric projects; thermal plants; and

urban infrastructure, smaller players specialise in one or two business segments.

RKEC specialises in civil works related to infrastructure, mainly marine works, roads and bridges, building and

infrastructure works and electrification The Company faces competition from major players, as well as many

local and small unorganised players.

Tender-based nature of operations

Operations are predominantly tender-based and revenue is dependent on the ability to bid successfully for

tenders. The operating margin is susceptible to the competitive pricing nature of the industry. Profitability on

each project is subject to pricing, availability of labour, machinery mobilisation, weather and geological

conditions, and other factors.

Page 26: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

26

Key financials

Year ended

30-Sep-17

31-Mar-17 31-Mar-16 31-Mar-15 31-Mar-14

Audited Audited Audited Audited

Operating income Rs crores 123 197 112 71 57

OPBDIT Rs crores 23 28 13 9 10

PAT Rs crores 10 9 3 3 2

Net cash accrual Rs crores 12 10 6 5 5

Cash flow from operations (CFO) Rs crores (1) 5 5 (2) 8

Free operating cash flows (FOCF) Rs crores (4) 3 4 (2) 6

Adjusted net worth Rs crores 47 36 28 26 23

Total debt Rs crores 16 15 25 11 22

Exposure to group companies Rs crores - - - - -

OPBDIT / Operating income % 18.7 14.4 11.9 12.5 17.4

PAT / Operating income % 8.7 4.4 3.0 3.9 3.5

Adjusted RoCE % 78.9 55 26 18 17

Adjusted PBDIT interest coverage Times 9.8 3.72 2.54 3.02 2.49

Cash flow from operations / Total

debt

Times (0.07) 0.35 0.20 (0.15) 0.33

Net cash accruals / Adjusted debt Times 1.48 0.66 0.23 0.50 0.22

Total debt / Tangible net worth Times 0.34 0.43 0.89 0.41 0.96

Adjusted debt / Adjusted net

worth

Times 0.34 0.43 0.89 0.42 0.96

Current ratio Times 1.46 1.33 1.16 1.35 1.14

Gross Current Assets Days 160 151 258 153 278

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Page 28: RKEC Projects LimitedMarket size India needs Rs 31 trillion (USD 454.83 billion) to be spent on infrastructure development over the next five years, with 70% funds required for power,

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