Rating Advisory

September 11, 2018 | Mumbai A dar sh Bi r m echaO r i gi nal Tem pl at e123

Sriganesh Engineering Works

Advisory as on September 11, 2018

This rating advisory is provided in relation to the rating of Sriganesh Engineering Works

The key rating sensitivity factors for the rating include:

 Scale of operations and profitability

 Working capital management
 Timely execution of projects

CRISIL Ratings has a policy of keeping its accepted ratings under constant and ongoing
monitoring and review. Accordingly, it seeks regular updates from companies on business and
financial performance. CRISIL is yet to receive adequate information from Sriganesh Engineering
Works (SGEW) to enable it to undertake a rating review. CRISIL is taking all possible efforts to
get the rated entity to cooperate with its rating process for enabling it to carry out the rating
review.

CRISIL views information availability risk as a key factor in its assessment of credit risk. (Please
refer to CRISIL Ratings publication dated April 30, 2012 - 'Information Availability - a key risk
factor in credit ratings')

If SGEW continues to delay the provisioning of information required by CRISIL to undertake a

rating review then, in accordance with circular SEBI/HO/MIRSD/MIRSD4/CIR/P/2016/119 dt Nov
1, 2016 and SEBI/HO/MIRSD/ MIRSD4/ CIR/ P/ 2017/ 71 dt June 30, 2017 issued by Securities
and Exchange Board of India, CRISIL will carry out the review based on best available
information and issue a press release.

About the Firm

SGEW, a partnership firm established in 2000 by Mr N Ankaiah and his family, is engaged in civil
construction.

Please note: This advisory should not be construed as a rating reaffirmation.

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 Rating Rationale
June 27, 2017 | Mumbai

Sriganesh Engineering Works

'CRISIL B+/Stable/CRISIL A4' assigned to bank debt

Rating Action
Total Bank Loan Facilities Rated Rs.20 Crore
Long Term Rating CRISIL B+/Stable (Assigned)
Short Term Rating CRISIL A4 (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities

Detailed Rationale
CRISIL has assigned its 'CRISIL B+/Stable/CRISIL A4' ratings to the bank facilities of Sriganesh Engineering Works
(SGEW).

The ratings reflect the firm's modest scale of operations in the fragmented civil construction industry, exposure to
risks inherent in its tender-driven business, and subdued financial risk profile because of small networth. These
weaknesses are partially offset by the extensive experience of its promoters in the civil construction industry, and its
moderate order book providing revenue visibility over the medium term.

Key Rating Drivers & Detailed Description

Weaknesses
* Modest scale of operations in a fragmented industry, and exposure to risks inherent in tender-
driven business: SGEW's small scale is indicated by revenue of around Rs 15 crore for fiscal 2017. The firm has
moderate order book of around Rs 30 crore as of June 2017, to be executed in 18 months. The scale of operations
has remained small because of intense competition in the fragmented civil construction industry, restricting revenue
growth of players.

* Below-average financial risk profile: The firm's networth is small, estimated at Rs 5.1 crore as on March 31,
2017 and has remained modest, despite its promoters' extensive experience, because of low revenue leading to
limited accretion to reserves. The networth is likely to increase in the long run because of improving profitability, but
will remain small. Debt protection metrics are moderate with interest coverage ratio at 1.82 times in fiscal 2017. The
financial risk profile is also constrained by modest liquidity because of high bank limit utilisation.

* Large working capital requirement: The firm has large working capital requirement because of substantial
receivables and inventory in the construction business. Its gross current assets are estimated at 411 days as on
March 31, 2017.

Strength
* Extensive industry experience of the promoters: SGEW's key promoter, Mr Ankaiah, has experience of more
than three decades in the industry. Before setting up the firm, he worked in civil construction companies for 18 years.
His experience has enabled the firm to win local government tenders. Under his leadership, the firm has established
relationships with its suppliers and customers, and undertaken sub-contracting works.
Outlook: Stable
CRISIL believes SGEW will continue to benefit from its promoters' extensive experience in the civil construction
industry. The outlook may be revised to 'Positive' if the firm significantly ramps up operations, while maintaining
profitability and capital structure. The outlook may be revised to 'Negative' if the financial risk profile, particularly
liquidity, weakens because of larger-than-expected working capital requirement or decline in cash accrual, or large,
debt funded capital expenditure.

1
About the Firm
SGEW, a partnership firm established in 2000 by Mr N Ankaiah and his family, is engaged in civil construction.

Profit after tax (PAT), on a provisional basis, was Rs 0.81 crore on an operating income of Rs 15.16 crore in fiscal
2017, against a PAT of Rs 0.24 crore on operating income of Rs 9.28 crore, in fiscal 2016.

Any other information: Not applicable

Note on complexity levels of the rated instrument:

CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are
available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that
they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific
instruments.

2
Annexure - Details of Instrument(s)
Rating
Date of Coupon Rate Issue Size
ISIN Name of Instrument Maturity Date Assigned with
Allotment (%) (Rs Crore)
Outlook
CRISIL
NA Overdraft NA NA NA 2.0
B+/Stable
NA Bank Guarantee NA NA NA 13.5 CRISIL A4
Proposed Bank
NA NA NA NA 3.5 CRISIL A4
Guarantee
Proposed Long Term CRISIL
NA NA NA NA 1.0
Bank Loan Facility B+/Stable

Annexure - Rating History for last 3 Years

Start of
Current 2017 (History) 2016 2015 2014
2014

Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank LT/S CRISIL
3 -- -- -- -- --
Facilities T B+/Stable
Non Fund-based LT/S CRISIL
17 -- -- -- -- --
Bank Facilities T A4
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.

Annexure - Details of various bank facilities

Current facilities Previous facilities
Amount Amount
Facility Rating Facility Rating
(Rs.Crore) (Rs.Crore)
Proposed Long Term CRISIL
1 -- 0 --
Bank Loan Facility B+/Stable
Proposed Bank
3.5 CRISIL A4 -- 0 --
Guarantee
Bank Guarantee 13.5 CRISIL A4 -- 0 --
CRISIL
Overdraft 2 -- 0 --
B+/Stable
Total 20 -- Total 0 --

Links to related criteria

CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Construction Industry
Criteria for rating Short-Term Debt (including Commercial Paper)

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This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term
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Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into
consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment
advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or
otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision
within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any
securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as
of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its
opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors
and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional
advice before acting on the Report in any way.

5
Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the
accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the
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legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of
the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities
or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other
applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available
for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and
undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business
units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have
information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public
information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing
conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument
of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

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