(The following statement was released by the rating agency)
July 25 - Fitch Ratings has assigned India-based Grotech Landscape Developers Private Limited (GLDPL) a National Long-Term Rating of ‘Fitch BB(ind)'. The Outlook is Stable. A list of additional rating actions is provided at the end of the commentary.
The rating is constrained by GLDPL’s small size of operations and low-margin nature of business. In FY11 (year end March), revenue was INR217m (FY10: INR55m) and EBITDA margin was 3.3% (3.7%). Provisional results for FY12 indicate revenue of INR260m and EBITDA margin of 4.4%.
The ratings are also constrained by the nascent and unorganised state of the domestic landscaping industry, which comprise several small local companies. The industry is also highly vulnerable to an economic downturn, and hence GLDPL could face difficulties in attracting new clients. The company’s unexecuted confirmed order book as on 31 March 2012 was only 0.81x its FY12 revenue (FY11: 0.85x).
The ratings are, however, supported by over 20 years of experience of GLDPL and its team in the industry. The ratings also reflect GLDPL’s comfortable debt service parameters as reflected by its low net financial leverage (net adjusted debt/EBITDA) of 0.98x in FY11 (FY12 (provisional): 0.21x). The company’s debt comprises only working capital limits, of which a majority are non-fund-based facilities that are used to provide bank guarantees. GLDPL has also demonstrated its ability to complete projects satisfactorily and obtain repeat orders from clients.
Positive: Future developments that may, individually or collectively, lead to positive rating action include significant growth in operating revenue and order book without significant deterioration in credit metrics.
Negative: Future developments that may, individually or collectively, lead to negative rating action include adjusted net debt/EBITDA above 2x on a sustained basis.
Grotech Landscape Developers was established in August 2008 and provides all landscaping services under one roof, from design and development of office complexes and plant sites to their maintenance. Its main clients are corporate entities.
GLDPL’s bank facilities have assigned the following ratings:
- INR70m non-fund-based working capital limits: National Long-Term ‘Fitch BB(ind)’ and National Short-Term ‘Fitch A4+(ind)’
- INR15m fund-based working capital limits: National Long-Term ‘Fitch BB(ind)’ and National Short-Term ‘Fitch A4+(ind)’