India Ratings upgrades Capacit'e Infraprojects to 'IND BBB+'/Stable

As per the rating agency the key rating drivers were:

Improved Operational Performance and Credit Metrics:

CIL's order execution pace, which was impacted due to the COVID-19 outbreak in FY21, picked up in FY22, leading to a rise in the consolidated revenue to INR13.34 billion (FY21: INR8.8 billion).

The consolidated EBITDA margin also increased to 16 per cent in FY22 from 15.5 per cent in FY21. The execution pace continued during 1QFY23, resulting in CIL clocking around INR4.7 billion in revenues (1QFY22: INR2.8 billion).

CIL's credit profile improved in FY22 with its net leverage (debt less unrestricted cash/EBITDA) decreasing to 1.4x (FY21: 2.0x; FY20: 0.78x) and interest coverage (gross interest expense/EBITDA) increasing to 3.4x (1.9x, 3.9x). Ind-Ra expects CIL's credit metrics to improve further over the medium term on account of an increase in its operational performance.

Strong Revenue Visibility, but Highly Concentrated Order Book

At end-June 2022, CIL had an unexecuted order book of INR82.3 billion, providing a strong revenue visibility of 6.1x of FY22 revenues (excluding the MHADA project of INR43.6 billion), with public sector orders comprising 68 per cent of the order book, with the balance coming from private players. Ind-Ra expects the order book to remain strong over the medium term, considering the government's focus on infrastructure development and the company's ability to execute projects in a timely manner.

Strong Execution Capabilities:

CIL has successfully executed complex and large residential and real estate engineering, procurement and construction projects in the past. CIL is among the top three companies in the high-rise and the super high-rise segment, having executed more than 45 buildings ranging from 100-280m.

Since its inception, the company has evolved from constructing primarily residential real estate projects to commercial projects and has gradually forayed into hybrid projects for both government and private sector clients. CIL is now engaged in key projects which are of importance to the government such as CIDCO, MHADA and some public sector hospital projects.

Conversion of Promoter loan to Equity:

In FY22, the promoters infused INR502 million into CIL, in the form of unsecured loans. These unsecured loansare now being converted to equity and warrants for 31 million shares at INR160 per share have been allotted.

Commenting on the upgrade, Rohit Katyal, Executive Director and CFO, Capacit'e Infraprojects, said, "We are pleased with another rating upgrade in a short span of time. The 'BBB+/Stable'rating upgrade reaffirms our financial positioning and emphasis on balance-sheet growth. Our immediate goal is to continue the growth trajectory which will help the Company boost the rating even further in the near future. The good scores indicate Capacit'e Infraprojects' leadership position in the EPC sector. Our strong order book, robust execution capabilities and efficiency show that we will maintain our market position."

Capacit'e Infraprojects Limited has etched a name for itself as a quality contractor in the buildings space. Capacit'e has been rapidly emerging as a marquee contractor in the building space with good repute.

The Company's sharp focus on the single segment of buildings, with an emphasis on technology, a robust asset base and the promoters' rich experience in the EPC space have enabled it to scale up quickly in the building space and become a well-respected player. Capacit'e provides end-to-end construction services for High Rise and Super High-Rise Buildings, Townships, Mass Housing, etc., in the residential space, Office Complexes, IT & ITES Parks in the commercial space and Hospitality, Healthcare Facilities, Industrial Buildings, and MLCPs in the institutional space.

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