Press Release

RMN Infrastructures Limited

February 24, 2025

Facilities/Instruments Amount (₹ crore) Rating1 Rating Action

Long-term / Short-term bank facilities 160.00 CARE BBB; Stable / CARE A3 Assigned
Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

Ratings assigned to bank facilities of RMN Infrastructures Limited (RMN) takes into consideration experience of promoters with
long track record of operations in construction segment, healthy order book position with majority contracts availed from
government entities providing low counterparty risk, diversification of its revenue segment to road projects, water supply and
sewage projects and expanding its geographical presence to different states in recent years to mitigate geographical concentration
risk, significant improvement in scale of operations in the last three years ended FY24 (FY refers to April 01 to March 31),
comfortable financial risk profile after adjusting investments in affiliated/associated companies and debt coverage indicators,
comfortable operating cycle, adequate liquidity position and stable industry outlook.

However, rating strengths are tempered by dependence on subcontracting, concentration risk of orders in hand, fragmented
nature of construction sector with tender-based nature of operations and execution challenges, working capital intensive
operations resulting in higher gross current asset (GCA) days, profitability margins susceptible to input cost volatility and qualified
opinion provided by auditor in the last two years ended FY24, track record of delays in special purpose vehicles (SPVs) where
RMN is only a technical partner and qualified opinion given by auditors in the last two years ended FY24.

Rating sensitivities: Factors likely to lead to rating actions

Positive factors
• Increase in TOI by over ₹1000 crore while maintaining profit before interest, lease rentals, depreciation, and taxation
(PBILDT) margin of 9% and above on a sustained basis.
• Reduction in GCA days to below 120 days

Negative factors
• Delay in execution of orders resulting in scale of operations below ₹500 crore and PBILDT margin below 5% on a sustained
basis.
• Deterioration in capital structure of company marked by overall gearing beyond 0.50x on sustained basis.
• Elongation in collection days beyond 120 days impacting the company’s liquidity position.

Analytical approach: Standalone, factoring in investment in its associated companies.

Outlook: Stable
The ‘Stable’ outlook on ratings of RMN reflects CARE’s expectation of improvement in financial performance and sustained financial
risk profile in the medium term with no significant debt envisaged for the projected period.

Detailed description of key rating drivers:

Key strengths

Experienced promoters with established presence in the industry

The company is promoted by Mr. R Maheshwara Naidu, which was later converted into a public limited company 2007. The
management has hands-on experience in the engineering, procurement, and construction (EPC) industry. The company’s
departments are managed by different directors with experience of over three decades in relevant fields. The company has
established presence in the EPC segment, especially in Karnataka, through successful order execution in the past.

Healthy order book position providing medium-to-long term revenue visibility

RMN has healthy active order book position as of December 01, 2024, at ₹3716.86 crore, which translates to 4.43x gross billing
for FY24. This provides revenue visibility for medium-to-long term. The company undertakes orders primarily from Government
entities. Majority orders have escalation clause, which provide assurance on transferring input costs in case of price fluctuation.
RMN provides construction services to reputed clientele including Government and Public sector undertakings. Though top seven

1
Complete definition of ratings assigned are available at www.careedge.in and other CARE Ratings Limited’s publications.

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customers contribute ~78% of the orderbook, majority orders being received from government departments resulted in low
counterparty risk.

In the given active order book, irrigation contribute ~50.33% followed by infra 29.65% and water supply 18.96% respectively.
Though irrigation contributes major share, diversification of its EPC services in various fields reducing segment concentration risk
to certain extent. The company is providing EPC services majorly in three states; Madhya Pradesh (29.78%), West Bengal
(19.95%) and Maharashtra (16.38%) contributing to ~66% to total active order book.

Significant growth in scale and profitability despite moderation in FY24

RMN has demonstrated substantial growth in scale and profitability in the last five years, with revenue increasing from ₹328.10
crore in FY20 to ₹839.68 crore in FY24. Initially focused on EPC services for irrigation projects in Andhra Pradesh, Telangana, and
Karnataka, the company has successfully diversified into water supply and infrastructure projects across multiple states, including
Madhya Pradesh, West Bengal, and Maharashtra. This diversification has enabled the company secure high-value contracts and
ensure efficient project execution.

In FY23, revenue reached ₹1,018.83 crore, driven by faster execution of short term projects within strict timelines. However, in
FY24, delays in approvals and permits due to the code of conduct across departments resulted in a revenue decline, though it
remained at a comfortable level. PBILDT improved from ₹17.94 crore in FY20 to ₹62.92 crore in FY24, supported by efficient
working capital management and lower interest costs. Non-operating income of ₹14.04 crore contributed to a profit after taxes
(PAT) of ₹42.73 crore in FY24. In the last five years, PBILDT and PAT margins have strengthened from 5.47% and 1.91% in FY20
to 7.49% and 5.09% in FY24, reflecting sustained profitability.

In H1FY24, RMN reported a TOI of ₹296.99 crore, with PBILDT and PAT margins of 12.02% and 6.52%, respectively. In 8MFY25,
the company recorded a revenue of ₹360 crore. Given that a significant portion of revenue is typically realised in Q4FY25, financial
performance is expected to align with projected levels.

Comfortable financial risk profile

The company’s capital structure, marked by overall gearing ratio (adjusting group exposure) stood comfortable at ~0.45x as on
March 31, 2024 (FY20: 0.41x) considering strong net worth position with accumulated healthy profits and low reliance on working
capital limits despite being working capital intensive. RMN has availed working capital limit of ₹30 crore, which is relatively low
for its scale of operations, reflecting efficient working capital management. Other debt coverage indicators such as, interest
coverage ratio and total debt to gross cash accruals stood comfortable at ~5.95x and 1.66x respectively in FY24.

Key weaknesses

Moderate additions in asset base; dependence on sub-contracting

The company historically had relied on subcontractors for heavy construction equipment and timely execution of works,
accordingly, subcontracting expense stood at ~50%-85% of the cost of sales. However, RMN also executes few critical works by
purchasing the required equipment and rely on subcontracting, wherever needed and save cost to company based on work
location. Gross block of fixed assets ₹62 crore as on March 31, 2020, to ₹122.70 crore as on March 31, 2024, led to company’s
gradual reduction on reliance on subcontracts. However, sub-contracting expenses as percentage of cost of sales stood at ~50%
despite addition of fixed assets.

Working capital intensive operations and high GCA days

Though RMN Infrastructure Limited operates in a working capital-intensive environment, its reliance on working capital limits
remains minimal, even with the expansion in its scale of operations. The company’s operating cycle remains healthy at 24 days,
supported by elongated creditor days of 95 at the year-end, which offsets the impact of a collection period of ~95 days. However,
gross current asset days stood elevated at ~185 days, driven by higher collection days. The marginal increase in the collection
period towards the year-end was primarily due to a significant portion of sales being booked in Q4FY24. As of March 31, 2024,
total debtors stood at ₹229.89 crore, including retention money of ₹53.15 crore, with a substantial share of sales recorded in
March 2024.

As of November 30, 2024, outstanding debtors stood at ₹243.66 crore, with retention money of ₹170 crore, of which ₹100 crore
is expected to be realised by the end of the current financial year. The company has maintained a strong average collection
efficiency of 81% for the last 12 months, ensuring stable cash flow management.

Fragmented nature of construction sector with tender-based nature of operations and execution challenges
The infrastructure sector in India is highly fragmented and competitive with many small and mid-sized players. This and tendering
process in order procurement results in intense competition within the industry, fluctuating revenues, and restrictions in
profitability. All these are tender- based and the revenues are depend on the company’s ability to bid successfully for these
tenders. Profitability margins come under pressure because of competitive nature of the industry. However, RMN has rich
experience, long standing track record in the construction industry and cordial relations with its clients which fares well against
the peers in the industry.

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Default history of SPVs where RMN is only a technical partner

RMN holds ~25% stake in two Special Purpose Vehicles (SPVs) GVRMP Whagdhari Ribbanpally Tollway Private Limited (GWRTPL)
and GVRMP Dharwad Ramnagar Tollway Private Limited (GDRTPL) having default track record due to delay in execution of project
and other constraints. Of these, GWRTPL has reached a One-Time Settlement (OTS) with its lenders and has fully repaid its debt
and is debt free as of March 31, 2024. RMN infused funds by way of unsecured loans amounting to ~₹25 crore, through which,
the SPV repaid the debt. In case of GDRTPL, RMN requested Karnataka Road Development Corporation Limited (KRDCL) for
termination of the project, which is under consideration. However, RMN’s role is limited to that of a technical partner, with no
corporate guarantee, directorship involvement, or personal guarantees provided by RMN’s directors and CARE Ratings Limited
(CARE Ratings) notes that RMN doesn’t have financial obligation to repay debt in this SPV.

Further support extended by RMN to these entities resulting in deterioration in financial risk profile is a key monitorable factor
from credit perspective.

Qualified opinion by auditor in last two years ended FY24

The auditor provided qualified opinion in the last two years ended FY24 on non-compliance to accounting standards, inadequacies
in internal control systems and absence of confirmation and reconciliation of balances in parties accounts combined with non-
availability of data to assess their impact on financials statements. In response, RMN has been actively implementing and
strengthening internal control policies and procedures for its daily operations. These measures are being regularly reviewed to
enhance overall quality and accuracy of financial reporting.

Liquidity: Adequate
Liquidity is adequate marked by gross cash accruals of ₹51.24 crore against debt repayment obligation of ₹16.24 crore for FY25.
RMN has free cash and bank balance of ₹5.87 crore. With adjusted gearing of 0.56xx as of March 31, 2024, the issuer has
sufficient gearing headroom, to raise additional debt for its capex if required. Average utilisation of working capital limits stood at
~48.92%. its unutilised working capital limits provide sufficient cushion to meet short-term exigencies.

Assumptions/Covenants: Not applicable

Environment, social, and governance (ESG) risks: Not applicable

Applicable criteria
Definition of Default
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Rating Watch
Financial Ratios – Non financial Sector
Construction
Infrastructure Sector Ratings
Short Term Instruments

About the company and industry

Industry classification

Macroeconomic indicator Sector Industry Basic industry

Industrials Construction Construction Civil construction

RMN was established by R Maheshwara Naidu in 1995 as a partnership firm ‘R Maheshwara Naidu Engineers and Contractors’. In
FY07, the partnership firm was converted to a public limited company under the current name. RMN was initially engaged only in
irrigation projects and minor road works within Andhra Pradesh, however, over the years, the company diversified its scope of
operations and now has a presence in water supply and sewerage system projects, land restoration and roads. The company
obtained quality certification ISO 9001 – 2008 by maintaining standards.

Brief Financials (₹ crore) March 31, 2023 (A) March 31, 2024 (A) H1FY25 (UA)
Total operating income 1,018.83 839.68 296.99
PBILDT 87.54 62.92 35.71
PAT 51.48 42.73 19.37
Overall gearing (times) 0.36 0.36 NA
Interest coverage (times) 8.71 5.95 6.78
A: Audited UA: Unaudited; NA: Not Available; Note: these are latest available financial results

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Status of non-cooperation with previous CRA: Brickworks has placed the rating for bank facilities of RMN Infrastructures
Limited under BWR BBB-; Stable; Issuer Not Cooperating/ BWR A3; Issuer Not Cooperating vide PR dated October 22, 2024, due
to absence of adequate information from the company.

Any other information: Not applicable

Rating history for last three years: Annexure-2

Detailed explanation of covenants of rated instrument / facility: Annexure-3

Complexity level of instruments rated: Annexure-4

Lender details: Annexure-5

Annexure-1: Details of instruments/facilities

Maturity
Date of
Date Size of
Name of the Issuance Coupon Rating Assigned and
ISIN (DD- the Issue
Instrument (DD-MM- Rate (%) Rating Outlook
MM- (₹ crore)
YYYY)
YYYY)
Fund-based - LT/ ST-Cash CARE BBB; Stable / CARE
- - - 35.00
Credit A3
Non-fund-based - LT/ ST- CARE BBB; Stable / CARE
- - - 125.00
Bank Guarantee A3

Annexure-2: Rating history for last three years

Current Ratings Rating History

Date(s) Date(s) Date(s) Date(s)

Name of the
Sr. and and and and
Instrument/Bank Amount
No. Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned
(₹ crore)
in 2024- in 2023- in 2022- in 2021-
2025 2024 2023 2022
CARE BBB;
Fund-based - LT/
1 LT/ST 35.00 Stable / - - - -
ST-Cash Credit
CARE A3
Non-fund-based - CARE BBB;
2 LT/ ST-Bank LT/ST 125.00 Stable / - - - -
Guarantee CARE A3
LT/ST: Long term/Short term

Annexure-3: Detailed explanation of covenants of rated instruments/facilities : Not applicable

Annexure-4: Complexity level of instruments rated

Sr. No. Name of the Instrument Complexity Level

1 Fund-based - LT/ ST-Cash Credit Simple

2 Non-fund-based - LT/ ST-Bank Guarantee Simple

Annexure-5: Lender details

To view lender-wise details of bank facilities please click here

Note on complexity levels of rated instruments: CARE Ratings has classified instruments rated by it based on complexity.
Investors/market intermediaries/regulators or others are welcome to write to [email protected] for clarifications.

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Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in case of withdrawal of capital, or the unsecured loans brought
in by the partners/proprietors in addition to the financial performance and other relevant factors. CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

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