CARE assigns A+ rating to NCD issue Era Infra Engg

October 4, 2007

CARE has assigned a ‘CARE A+ [Single A (Plus)]’ rating to the proposed Non Convertible Debentures (NCDs) aggregating Rs.100cr. of Era Infra Engineering Ltd.(EIEL), formerly known as Era Constructions (India) Ltd. These NCDs would be redeemed in 8 quarterly installments in 2nd and 3rd year from the date of allotment. Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk.

CARE has reaffirmed a ‘CARE A+ [Single A (Plus)]’ rating to the Secured NCDs aggregating Rs.50cr. of Era Infra Engineering Ltd. (EIEL). . Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk.

CARE has reaffirmed a ‘CARE A+ [Single A (Plus)]’ rating to the Unsecured NCDs aggregating Rs.100cr. of Era Infra Engineering Ltd. (EIEL). Instruments with this rating are considered to offer adequate safety for timely servicing of debt obligations. Such instruments carry low credit risk.

The ratings take into account EIEL’s experience in diversified construction activities, strong pre-qualification credentials, increasing order book position resulting in improved financial performance, reputed clients and positive outlook for the construction sector. However, the rating is constrained by increasing working capital requirements given the aggressive growth, increasing investment requirement for BOT projects, vulnerability to increasing competitive pressures given its relative size and inherent cyclical trends associated with construction sector.

EIEL, the flagship company of Era Group was incorporated in September 1990, promoted by Mr. H.S Bharana, a civil engineer by profession, having more than two decades of experience in construction industry. The company is engaged in construction activities of infrastructure, institutional, industrial, commercial and housing. EIEL has executed 65 projects in the last 16 years valued at Rs.650cr.

Total operational income of the company has increased 99% and 145% in FY’06 and FY’07 respectively due to increase in average contract size and its ability to execute projects as per time schedules.

Consequent to the increase in the total income, profitability of the company has also been rising consistently. PBILDT margin during FY’07 have increased from 15.64% to 18.35% due to increase in ticket size of the contracts and changing project mix towards high value turnkey contracts.

Overall gearing, however, has increased as on Mar 31, 2007 on account of issue of FCCBs and increase in borrowings to meet capex, investment in BOT and working capital requirements. On excluding FCCBs, overall gearing improves to 1.68 as on Mar 31, 2007.

EIEL has raised USD 75 million (Rs. 326 crs) through FCCBs in Jan’07 to fund capex plans and investment in BOT projects. As per FCCB terms, the conversion price will be decided in Jan’08 and conversion process would commence from Mar’08.

EIEL has issued 55 lakh fresh warrants to promoters and associates in May 2007 at a price of Rs.425. Application money equal to 10% (Rs.23cr.) has been received at the time of issue of these warrants. These warrants would be converted to equal number of equity shares in Nov 2008, expected to bring Rs.210cr. Besides, existing warrants issued in Dec 2005 at a price of Rs 135 would contribute Rs.48cr. towards equity in FY’08.

Liquidity as measured by current ratio is satisfactory at 2.78 times as on March 31, 2007. Company’s working capital requirements have been mostly funded from the borrowings during the year. Going forward, the liquidity of the company is likely be under pressure on account of increasing order book position, working capital intensive nature of operations, increasing order book position and increasing investments in BOT projects.

Source: moneycontrol.com