Raji Mathew & Co.

January 05, 2023

Ratings
Instrument / Amount Ratings Rating Complexity
Facility (Rs. crore) Action Indicator
IVR BB/Positive (IVR
Long Term
31.84 Double B with Positive Assigned Simple
Bank Facilities
Outlook)
Long IVR BB/Positive; IVR A4+
Term/Short (IVR Double B with
45.00 Assigned Simple
Term Bank Positive Outlook; IVR A
Facilities Four Plus)
76.84
(Rupees
Seventy-Six
Total
Crore and
Eighty-Four
Lakh Only)

Details of Facilities are in Annexure 1

Detailed Rationale
‘Positive’ Outlook has been assigned on account of expectation of increase in scale of
operations and profitability on the back of healthy order book.

The rating assigned to the bank facilities of Raji Mathew & Co. draws comfort from its
experienced partners and management in the industry, moderate debt protection metrics and
healthy order book. However, these strengths are partially offset by decline in scale of
operations in FY22, moderately leveraged capital structure, susceptibility of operating margins
to volatile input prices, geographical concentration risk with stiff Competition and tender based
contract awarding system and inherent risk of partnership concern.

Key Rating Sensitivities:

Upward Factors
• Sustainable & sustained improvement in scale of operations leading to improvement
in debt protection metrics.
• Sustenance of the capital structure with further improvement in liquidity.

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Downward Factors
• Decline in scale of operations leading to deterioration in debt protection metrics
• Moderation in liquid position with stretch in operating cycle
List of Key Rating Drivers with Detailed Description

Key Rating Strengths

• Experienced Partners and management team

The firm is being managed by experienced and professional partners who have rich
experience in the industry and is instrumental in setting up and developing the firm. The
partner also has educational qualification in Civil Engineering and three decades of experience
in the field of civil construction. This has given them an understanding of the dynamics of the
market and enabled them to establish relationships. The partners are also supported by an
experienced management team

• Healthy Order Book

The firm has a healthy outstanding order book of Rs. 228.12 crore (3.75x times of TOI for
FY22) as on October 31, 2022, with execution period up to March 2025 indicating medium
term revenue visibility. Of the total order book, orders pertaining to operations and
maintenance of roads are Rs.146.34 crore. The firm has also won two orders of ~Rs 69 crores.

• Moderate debt protection metrics

The debt protection metrics of the firm deteriorated in FY22 though remained moderate with
Interest Coverage Ratio at 4.02x in FY22 against 4.17x in FY21 and DSCR at 1.30x in FY22
against 1.94x in FY21. The firm’s Total Debt/GCA also deteriorated from 3.56x in FY21 to
8.62x in FY22.

Key Rating Weaknesses

• Decline in Scale of operations in FY22

The total operating income of the firm has declined from Rs 81.35 crore in FY21 to Rs 60.75
in FY22, impacting the EBITDA which declined from Rs 10.63 crore in FY21 to Rs 8.67 crore

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in FY22. The PAT also declined from 6.65 crore in FY21 to Rs 4.58 crore in FY22. However,
the EBITDA margin of the firm improved to 14.27% in FY22 from 13.07% in FY21. The PAT
margin deteriorated from 5.30% in FY21 to 4.90% in FY22 due to decline in operating
profitability and higher depreciation and interest costs. The GCA declined from Rs 8.72 crore
in FY21 to Rs 6.76 crore in FY22. The firm has reported total operating income of Rs 73.08
crore and PBT of Rs. 5.85 crore in H1FY22 and expects improvement in scale of operations
and profitability going forward on the back of healthy order book.

• Moderately leveraged capital structure

The total debt of the firm increased from Rs 22.74 crore as on March 31, 2021, to Rs 44.59
crore as on March 31, 2022, owing to increase in short-term borrowing and long-term
borrowings. The overall gearing of the firm deteriorated from 1.11x as on March 31, 2021, to
1.57x as on March 31, 2022. The TOL/TNW deteriorated from 1.67x as on March 31, 2021, to
2.22x as on March 31, 2022.

• Susceptibility of operating margin to volatile input price

Major raw materials used in civil construction activities are steel & cement and in road
construction activities are stone, asphalt/bitumen and sand which are usually sourced from
large players/dealers at proximate distances. The raw material & labour cost forms the majority
chunk of the total cost of sales for the last three years. As the raw material prices & labour
cost are volatile in nature, the profitability of the firm is subject to fluctuations in raw material
prices & labour cost. However, presence of escalation clause in most of the contracts protects
the margin to an extent.

• Geographical concentration risk with stiff Competition and tender based contract
awarding system

The firm pre-dominantly operates in the state of Kerala and is a Govt. Contractor with Public
Works Department and various departments of Government of Kerala indicating geographical
concentration risk where it competes with other contractors while bidding and securing orders
for construction works. The presence of a tender based contract awarding system along with
intense competition also restricts pricing flexibility of all players in the industry.

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• Inherent Risk of Partnership Concern

Being a partnership concern, the firm is exposed to inherent risk of the partner’s capital being
withdrawn at any time and firm being dissolved upon the demise/ retirement/ insolvency/
dispute of/ among the partners.

Analytical Approach: Standalone

Applicable Criteria:

Rating Methodology for Infrastructure Companies

Financial Ratios & Interpretation (Non- Financial Sector)
Criteria of assigning rating outlook

Liquidity –Adequate
The current ratio of the firm stood at 1.32x as on Mach 31, 2022. The liquidity of the firm is
expected to remain adequate in the near to medium term in view of expectation of sufficient
cushion in cash accruals in comparison to debt obligation. The firm’s average fund-based
utilization of working capital limits was low at 40.45% for 12 months period ended October
2022 and average non-fund-based utilization of working capital limits was at 78.01%. The firm
has unencumbered cash and cash equivalent of Rs 0.16 Cr as of March 31, 2022. The
operating cycle of the firm elongated from 66 days in FY21 to 91 days in FY22 due to higher
inventory WIP days with a decline in scale of operations.

About the Company

Raji Mathew & Co. is a registered Partnership Firm engaged in construction activities for more
than 20 years now. Mr. Raji Mathew is the managing partner and Cini Raji, Aleena Raje, and
Amala Raje are the other Partners of the Firm. The firm is a registered 'A' class contractor in
the Kerala and undertakes EPC projects for the Kerala State Government Authorities.

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 Financials (Standalone):

(Rs. Crore)
31-3-2021 31-3-2022
For the year ended* / As on
(Audited) (Audited)
Total Operating Income 81.35 60.75
EBITDA 10.63 8.67
PAT 4.33 2.99
Total Debt 22.74 44.59
Tangible Net worth 20.42 28.44
EBIDTA Margin (%) 13.07 14.27
PAT Margin (%) 5.30 4.90
Overall Gearing Ratio (x) 1.11 1.57
*Classification as per Infomerics` standards

Status of non-cooperation with previous CRA: None

Any other information: Not Applicable

Rating History for last three years:
Rating History for the past 3
Current Ratings (Year 2022-23)
years
Name of Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Facili Rating(s) Rating(s) Rating(s)
No. outstandi
ties Type Rating assigned assigned assigned
ng (Rs.
in 2021- in 2020- in 2019-
Crore)
22 21 20
Long term Long IVR BB
1. 31.84 -- -- --
Facilities Term /Positive
Long
Long Term/Short IVR
Term/
2. Term Bank 45.00 BB/Positive; -- -- --
Facilities Short
IVR A4+
Term

Name and Contact Details of the Rating Analyst:

Name: Jagrit Sharma Name: Harsh Raj Sankhla
Tel: (011) 45579024 Tel: (011) 45579024
Email: [email protected] Email: [email protected]

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About Infomerics:
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Infomerics credit ratings are an opinion on the credit risk of the issue / issuer and not a recommendation to buy,
hold or sell securities. Infomerics reserves the right to change, suspend or withdraw the credit ratings at any point
in time. Infomerics ratings are opinions on financial statements based on information provided by the management
and information obtained from sources believed by it to be accurate and reliable. The credit quality ratings are not
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assigned by Infomerics is based on the capital deployed by the partners/proprietor/ AOPs and the financial strength
of the firm at present. The rating may undergo change in case of withdrawal of capital or the unsecured loans
brought in by the partners/proprietor/ AOPs in addition to the financial performance and other relevant factors.

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Annexure 1: Details of Facilities
Name of Facility Date of Coupon Maturity Size of Rating
Issuance Rate/ IRR Date Facility Assigned/
(Rs. Crore) Outlook
WCTL – GECL -- -- Nov 2026 6.84 IVR BB/Positive

Cash Credit -- -- -- 25.00 IVR BB/Positive

45.00 IVR BB/Positive;

Bank Guarantee -- -- --
IVR A4+

Annexure 2: List of companies considered for consolidated analysis: Not Applicable

Annexure 3: Facility wise lender details
https://www.infomerics.com/admin/prfiles/Len-Raji-Mathew-jan23.pdf
Annexure 4: Detailed explanation of covenants of the rated instrument/facilities: Not
Applicable
Note on complexity levels of the rated instrument: Infomerics has classified instruments
rated by it on the basis of complexity and a note thereon is available at www.infomerics.com.