Rating Rationale Brickwork Ratings assigns ‘BWR for proposed fixed deposit (FD) issue

Rating Rationale
Brickwork Ratings assigns ‘BWR FBB-’ for proposed fixed deposit (FD) issue
of Mukand Engineers Limited.
Brickwork Ratings assigns ‘BWR FBB-’ Rating1 for proposed fixed deposit (FD) issue of
Mukand Engineers Limited (MEL or “the Company”).
(₹ Cr)
Fixed Deposit
Proposed Fixed
Long Term
BWR FBBInstruments with this rating are
(Pronounced BWR F considered to have moderate risk
Double B Minus)
of default regarding timely
Outlook: Stable
servicing of financial obligations.
(INR Eight Crores Ninety One Lakhs only)
BWR has relied upon MEL’s audited financial results up to FY14 and unaudited financial results
of Q1FY15, projected financials upto FY17 and the information/clarifications provided by the
The ratings, inter alia, factor long operating track record of the Company, professional and
experienced management team, strong revenue visibility, quality of client base, and moderate
capital structure. The ratings, however, are constrained by weak debt protection metrics,
declined profitability, stretched liquidity position, working capital intensive nature of business,
and weak current scenario of infrastructure construction industry.
Company Background and Operations
Mukand Engineers Limited (MEL), a public limited company, is an associate company of
Mukand Limited. It was incorporated in January, 1987 under the name Mukand Construction
and Project Engineering Company Private Limited. It was carved out of the engineering division
of Mukand Limited and the latter holds around 36% in the company.
MEL is in the business of Engineering Procurement and Construction (EPC) activities including
project and design engineering, feasibility, planning, civil and structural work which includes
mechanical, electrical, instrumentation and piping for the clients in petroleum, power
generation, fertilizers, steel and aluminium manufacturing sectors.
Management Profile
Mukand Engineers Limited (MEL) is managed by a blend of professional and experienced board
of directors.
Mr. Rajesh V Shah, Chairman, is MA Mathematics from Cambridge University and MBA from
University of California. He is associated with the Company since 1989 and has held various
positions in the organization.
Please refer to www.brickworkratings.com for definition of the Ratings
21 Oct 2014
Mr. Niraj R Bajaj, Director, holds MBA from Harvard Business School. He is associated with the
Company since 1992 and has held various positions in the organization.
Additionally, the Company also has some professional independent directors on its board
namely Mr. Prakash V Mehta, Mr. Narayana Ramanathan, and Mr. Sankaran Radhakrishnan.
Financial Performance
During the FY14, the Company’s operating income on increased to ₹85.48 Cr as against ₹76.02
Cr in FY13 marking a y-o-y growth of ~12%. The Company’s PAT, however, decreased to ₹1.82
Cr in FY14 as against ₹3.62 Cr in FY13. As per Q1FY15 unaudited financial results, the Company
has achieved an operating income of ₹26.48 Cr; and a PAT of ₹0.42 Cr.
The tangible networth of the Company is ₹57.78 Cr as on 31/Mar/2014. The Company, however,
has several sticky loans and investments (primarily in group companies) on its balance sheet
which entails downward adjustment to the networth. As a result the leverage indicator
debt/equity which is 0.79 times as per books also moves upwards; however, such an analytical
adjustment also keeps the leverage at moderate levels.
The Company’s debt protection metrics is weak since DSCR stands at 0.73 times for FY14, and it
is expected to be low in FY15 as well; on account of the significant repayment of public deposits
in respective years.
The outlook is Stable. The current scenario of infrastructure construction industry is weak
marked by increased competition, reduced profitability, increased working capital intensity, and
weak (although reviving on the back of improved political environment) infrastructure sector.
The Company has recently bagged several projects including some big ticket projects indicates
strong revenue visibility. However, the Company ability to execute these orders without
significant time & cost overruns is a key rating sensitivity. Additionally, the Company has a
planned refinancing procedure for its FD repayment that are due in compliance with the
Company’s Act 2013; the Company’s ability to implementation the same, along with improve
debtors’ turnover to reduce working capital intensity also are the key sensitivities of the rating.
Analyst Contact
Relationship Contact
[email protected]
[email protected]
Media Contact
[email protected]
Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty
of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
21 Oct 2014