Rating Rationale
October 26, 2017 | Mumbai

Raghava Constructions
Ratings upgraded to ‘CRISIL BBB-/Stable/CRISIL A3’
Rating Action

Total Bank Loan Facilities Rated Rs.485 Crore (Enhanced from Rs.185 Crore)
Long Term Rating CRISIL BBB-/Stable (Upgraded from ‘CRISIL BB+/Stable’)
Short Term Rating CRISIL A3 (Upgraded from ‘CRISIL A4+’)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its ratings on the bank facilities of Raghava Constructions (RGC) to ‘CRISIL BBB-/Stable/CRISIL A3’ from ‘CRISIL BB+/Stable/CRISIL A4+’.

The rating upgrade reflects significant improvement in business risk profile, driven by substantial and sustained increase in scale of operations, and higher than estimated operating profitability. Revenue more than doubled y-o-y in fiscal 2017 to Rs.948 crores from Rs.450 crores in previous fiscal with operating margin of 11.7 per cent in fiscal 2017 against 8.3 per cent in the previous fiscal. The healthy order book of Rs.4330 crores to be executed over next 18-24 months supports revenue visibility over the medium term.

The upgrade also factors in its enhanced financial flexibility and better capital structure, backed by sizeable increase in net worth due to equity infusion of Rs.41 crores in fiscal 2017. As a result, the firm reported a net worth of Rs.183 crores as on March 31, 2017 against Rs.71 crores as on March 31, 2016. Healthy growth in net worth and absence of large debt funded capital expenditure (capex) resulted in substantial improvement in gearing which stood at 0.17 times as on March 31, 2017 via-a-vis 0.60 times a year before.

The ratings continue to reflect benefits derived from the extensive experience of promoters in the construction industry and a strong order-book providing revenue visibility over the medium term. The ratings also factor in the healthy financial risk profile because of healthy capital structure and debt protection metrics. These rating strengths are partially offset by geographical in the revenue profile, large working capital requirement, and exposure to intense competition in the construction industry resulting in modest profitability margins.

Key Rating Drivers & Detailed Description

* Extensive experience of promoters in the construction industry
Mr. P Prasad Reddy and Mr. P Harsha Reddy are RGC’s active promoters and have experience of more than a decade in the construction sector. The firm is a registered special class-1 contractor with Road and Building (R&B) department and Irrigation & CAD department in Telangana and Andhra Pradesh (AP).

* Strong order book providing revenue visibility over the medium term
The firm has a strong unexecuted order book of around Rs.4330 crore as on September, 2017 to be executed over the next 18-24 months providing strong revenue visibility over the medium term.

* Healthy financial risk profile
The financial risk profile is driven by healthy capital structure marked by low gearing, healthy net worth and debt protection metrics. The gearing remained low at 0.17 times with net worth at Rs 183 crore as on March 31, 2017. The net cash accruals to total debt (NCATD) and interest coverage stood at 2.5 times and 16.8 times in fiscal 2017.

* Geographical concentration in the revenue profile
RGC has been in the civil contract works business for almost a decade; however, almost 100 per cent of its revenue is from projects in Telangana. This makes RGC’s revenue growth dependent on regional impetus on infrastructure development. The firm books 100 per cent of its revenue from various government and quasi-government entities, leading to revenue concentration. Any dispute or irregularities in a particular project can hamper potential relationships, thereby significantly affecting the firm’s top line.

* Large working capital management
RKEC’s working capital-intensive operations are indicated by gross current assets (GCAs) of 157 days as on March 31, 2017 backed by high debtor of 75 days and low inventory days 8 days as on March, 2017.

* Exposure to intense competition
Construction and civil works sector is highly fragmented with the presence of large companies as well as smaller local players. While large players operate in several sectors including roads, hydel projects, thermal plants, and urban infrastructure; smaller players specialise in one or two business segments. RKEC specialises in civil works related to irrigation and road works.

Outlook: Stable

CRISIL believes RGC will continue to benefit from the extensive promoters’ experience and its long standing relationship with customers and suppliers and healthy order book. The outlook may be revised to ‘Positive’ if the firm diversifies revenue geographically while sustaining profitability margins, maintains capital structure, and manages incremental working capital requirement prudently. The outlook may be revised to ‘Negative’ if there is significant pressure on revenue and profitability, considerable delays in realisation of receivables, or if the firm undertakes larger-than-expected, debt-funded capital expenditure, thereby weakening its financial risk profile, particularly liquidity.

About the Firm

RGC was set up in 2003 as a partnership firm by Mr. P Prasad Reddy and his family members. The firm is a civil contractor, and mainly undertakes irrigation and highway projects. It is based in Hyderabad (Telangana).

Key Financial Indicators
Particulars Unit 2017 2016
Revenue Rs. Cr. 948 450
Profit After Tax (PAT) Rs. Cr. 71 23
Profit Margin % 11.7 9.2
Adjusted Debt/Adjusted Net worth Times 0.2 0.6
Interest coverage Times 16.8 7.4

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 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.
Annexure – Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon
Rate (%)
Maturity Date Issue Size
(Rs Cr)
Assigned with
NA Bank Guarantee NA NA NA 350 CRISIL A3
NA Secured Overdraft Facility NA NA NA 35 CRISIL BBB-/Stable
NA Proposed long term bank loan facility NA NA NA 100 CRISIL BBB-/Stable

Annexure – Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  135  CRISIL BBB-/Stable    No Rating Change    No Rating Change  20-05-15  CRISIL BB+/Stable/ CRISIL A4+  22-10-14  CRISIL BB+/Negative/ CRISIL A4+  CRISIL BB+/Stable/ CRISIL A4+ 
Non Fund-based Bank Facilities  LT/ST  350  CRISIL A3    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL 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
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 350 CRISIL A3 Bank Guarantee 145 CRISIL A4+
Proposed Long Term Bank Loan Facility 100 CRISIL BBB-/Stable Cash Credit 15 CRISIL BB+/Stable
Secured Overdraft Facility 35 CRISIL BBB-/Stable Proposed Long Term Bank Loan Facility 20 CRISIL BB+/Stable
0 Proposed Short Term Bank Loan Facility 5 CRISIL A4+
Total 485 Total 185
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
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt


For further information contact:
Media Relations Analytical Contacts Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.comJyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000
Rahul Guha
Director – CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8320
Venkata Shantaram
Associate Director – CRISIL Ratings
CRISIL Limited
D:+91 40 4032 8222
Neha Agarwal
Rating Analyst – CRISIL Ratings
CRISIL Limited
D:+91 40 4032 8233
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301
For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.comFor Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is an agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers.

We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit You can view the Company’s Customer Privacy at

Last updated: April 2016


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 “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this 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.

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 cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, 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, (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:

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:

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at, 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.

All rights reserved @ CRISIL