Press Release

PES Installations Private Limited

January 21, 2022
Ratings
Facilities/Instruments Amount (Rs. crore) Rating1 Rating Action
CARE BB; Stable
Long Term Bank Facilities 8.50 Assigned
(Double B; Outlook: Stable)
Long Term / Short Term Bank CARE BB; Stable / CARE A4
2.00 Assigned
Facilities (Double B; Outlook: Stable/ A Four)
CARE A4
Short Term Bank Facilities 16.50 Assigned
(A Four)
27.00
Total Bank Facilities (Rs. Twenty-Seven
Crore Only)
Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The ratings assigned to PES Installations Private Limited (PESIPL) is primarily constrained on account of modest scale of
operations, moderate capital structure and debt coverage indicators. Further, the ratings continue to remain constraint by
elongated operating cycle and competitive nature of the industry. The credit profile derives comfort from experienced
promoters coupled with long track record of operations, moderate profitability margins, Positive outlook & high growth potential
for the sector, Reputed customer base and Sizable order book in-hand.

Rating Sensitivities
Positive Factors - Factors that could lead to positive rating action:
• Improvement in scale of operations to above Rs.80 crore on sustained basis.
• Improvement in collection period below 120 days on sustained basis.
Negative Factors- Factors that could lead to negative rating action:
• Deterioration in the capital structure as marked by overall gearing ratio of above 1.50x on sustained basis.
• Deterioration in profitability margins as marked by PBILDT and PAT margin below 7.00% and 2.00% respectively on
sustained basis.
• Continued elongation in the operating cycle of the company beyond 100 days.

Detailed description of the key rating drivers

Key Rating Weaknesses
Modest scale of operations: Despite being operational for nearly three decades, the scale of operations has remained
modest marked by a total operating income and gross cash accruals of Rs. 33.68 crore and Rs. 2.87 crore respectively during
FY21. Further, PESIPL works as per CMC (comprehensive maintenance contract) under which, the company has exclusive rights
for providing service and maintenance work to its clients for a period of 10 years from the date on which infrastructure medical
facilities installed for the first time for a client. The small scale limits the company’s financial flexibility in times of stress and
deprives it from scale benefits.

Moderate capital structure and moderate debt service coverage indicators: The capital structure of the company
remained moderate marked by overall gearing ratio of 0.60x as on March 31, 2021 as against 0.57x as on March 31, 2020 on
account of moderate reliance on external debt. The debt service coverage indicators remain moderate marked by interest
coverage of 3.09x and total debt/GCA of 4.52x respectively for FY21 as against interest coverage of 4.25x and total debt/GCA
of 2.80x respectively for FY20.

Elongated operating cycle: The operations of the company are working capital intensive marked by operating cycle of 82
days for FY21. PESIPL is required to maintain adequate inventory of raw material for smooth running of its production process
and finished goods of all the products to meet the immediate demand of its customers resulting in an average holding period of
around 34 days for FY21. The company executes ~70% of the projects for the government hospitals and bodies associated
with the government (such as government medical colleges), collection period rises up to 247 in FY21. The company has
similar payment terms with the suppliers which stood at 374 days in FY21. Further, the working capital limits remained fully
utilized for the last 12- month’s period ended December 2021.

Presence in a moderately competitive nature of industry: Infrastructure services related to hospital are considered
moderately competitive in nature of business and is characterized by generous margins. The sector is moderately competitive,
comprising few players in the organized segment as a result of high entry barriers. This results in moderate competition which
has a favourable impact on the player's margins.

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

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 Press Release

Key Rating Strengths

Experienced management coupled with long track record of operations: PESIPL is run and managed by industry
professionals having average experience of more than four decades in the same field. Mr. R P Chadha holds vast experience of
around four decades in the same industry. Similarly, Mr. Dinesh Chadha and Mr. Pankaj Chadha have experience of around
three decades each. MR. Gaurav Chadha has around two decades of experience with sound professional knowledge to the
company. Majority of the directors are working in the same industry which has enabled them to establish good relationship with
customers and suppliers. The directors are further assisted by a team of qualified and experienced professionals who have
considerable experience in the industry.

Moderate profitability margins: The profitability margins of PESIPL are improving in last four years ending FY21. The
PBILDT margin and PAT margin are 16.61% and 7.84% respectively in FY21 as against 13.62% and 7.17% in FY20
respectively. Improvement in the PBILDT margin is on account of cost reduction by in-house manufacturing of the parts
required for medical equipment, which the company used to import earlier.

Positive outlook & high growth potential for the sector: As per CARE Research, the Indian healthcare sector is expected
to grow about 10%-12% in FY22. In FY21, the sector witnessed a dip in the footfall of non-covid patients. Consecutively,
revenue as well as margins, both witnessed a decline in the said year. However, with the improvement in situation and being
one of the most essential economic segments, the sector is expected to grow in the coming years.

Sizable order book in-hand: The unexecuted order book of the company as on December 31, 2021 stood at Rs.35.72 crore
which is approximately 1.06 times of its total operating income for FY21, thereby giving medium term revenue visibility. The
tenor of the orders undertaken by the company is up to 1-2 years. Most of the orders being executed are fixed price, fixed time
in nature and hence effective and timely execution of the orders has a direct bearing on the margins attained.

Liquidity: Stretched
The liquidity position of the company is stretched characterized by fully utilized working capital limits for the last 12 months
ending on December 31, 2021. Further, the company has reported gross cash accruals to the extent of Rs. 2.87 crore during
FY21 and is expected to generate envisaged GCA of Rs.2.98 crore for FY22 against repayment obligations of Rs.2.58 crore in
same year. The company has low free cash & bank balances of 0.46 crore as on March 31, 2021.

Analytical approach: Standalone

Applicable Criteria
Rating Outlook and Credit Watch
Policy on default recognition
Liquidity Analysis of Non-financial sector entities
Financial Ratios – Non financial Sector
Manufacturing Companies
Service Sector Companies
Wholesale Trading

About the Company

Incorporated in 1995, PES Installations Private Limited (PESIPL) is an ISO 9001 certified company. PESIPL is managed by its
promoters Mr. R P Chadha, Mr. Gaurav Chadha, Mr. Dinesh Chadha and Mr. Pankaj Chadha. The company is engaged in
providing services related with Hospital Infrastructure by designing, supplying of equipment’s, and installing gas pipelines in
hospitals, modular operating theatres, hospital furniture and infant care products. The company mainly undertakes contracts
from government hospitals by bidding through tenders. Further, PESIPL also undertakes work for private hospitals which are
procured on account of well-established brand-image and good customer relationship for a long span of time.
Crore
Brief Financials (Rs. crore) 31-03-2020 (A) 31-03-2021 (A) 9MFY22*
Total operating income 52.51 33.68 31.33
PBILDT 7.15 5.60 7.83
PAT 3.76 2.64 NA
Overall gearing (times) 0.57 0.60 NA
Interest coverage (times) 4.25 3.09 NA
A: Audited; NA: Not Available
*refers to the period from April 1, 2021 to December 31, 2021.
Status of non-cooperation with previous CRA: Brickwork has conducted the review and has downgraded PES Installations
Private Limited as “Not Cooperating” vide its press release dated July 29,2021.
Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2
Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3
Complexity level of various instruments rated for this company: Annexure- 4

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Annexure-1: Details of Instruments / Facilities

Size of the
Name of the Date of Coupon Maturity Issue Rating assigned along
ISIN
Instrument Issuance Rate Date (Rs. with Rating Outlook
crore)
Fund-based - LT-Cash Credit - - - 8.50 CARE BB; Stable
Non-fund-based - ST-Bank
- - - 16.50 CARE A4
Guarantees
LT/ST Fund-based/Non-fund- CARE BB; Stable / CARE
- - - 2.00
based-CC/WCDL/OD/LC/BG A4

Annexure-2: Rating History of last three years

Current Ratings Rating history
Date(s) & Date(s) & Date(s) & Date(s) &
Name of the
Sr. Amount Rating(s) Rating(s) Rating(s) Rating(s)
Instrument/Bank
No. Type Outstanding Rating assigned assigned assigned assigned
Facilities
(Rs. crore) in 2021- in 2020- in 2019- in 2018-
2022 2021 2020 2019
CARE
Fund-based - LT-Cash
1 LT 8.50 BB;
Credit
Stable
Non-fund-based - ST- CARE
2 ST 16.50
Bank Guarantees A4
CARE
LT/ST Fund-
BB;
based/Non-fund-
3 LT/ST* 2.00 Stable /
based-
CARE
CC/WCDL/OD/LC/BG
A4
*Long Term / Short Term

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: Not Applicable

Annexure 4: Complexity level of various instruments rated for this company

Sr. No Name of instrument Complexity level
1 Fund-based - LT-Cash Credit Simple
2 LT/ST Fund-based/Non-fund-based-CC/WCDL/OD/LC/BG Simple
3 Non-fund-based - ST-Bank Guarantees Simple

Annexure 5: Bank Lender Details for this Company

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

Note on complexity levels of the rated instrument: CARE Ratings Ltd. has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to care@careedge.in for any
clarifications.

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 Press Release

Contact us
Media Contact
Name: Mradul Mishra
Contact no.: +91-22-6754 3573
Email ID: mradul.mishra@careedge.in

Analyst Contact
Name: Shivam Tandon
Contact no.: +91- 11-4533 3263
Email ID: shivam.tandon@careedge.in

Relationship Contact
Name: Swati Agrawal
Contact no.: +91-11-4533 3200
Email ID: swati.agrawal@careedge.in

About CARE Ratings Limited:

Established in 1993, CARE Ratings Ltd. is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India (SEBI), it has also been acknowledged as an External Credit Assessment Institution (ECAI) by the
Reserve Bank of India (RBI). With an equitable position in the Indian capital market, CARE Ratings Limited provides a wide
array of credit rating services that help corporates to raise capital and enable investors to make informed decisions backed by
knowledge and assessment provided by the company.
With an established track record of rating companies over almost three decades, we follow a robust and transparent rating
process that leverages our domain and analytical expertise backed by the methodologies congruent with the international best
practices. CARE Ratings Limited has had a pivotal role to play in developing bank debt and capital market instruments including
CPs, corporate bonds and debentures, and structured credit.

Disclaimer
The ratings issued by CARE Ratings Limited 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 Limited has based its ratings/outlooks based on information obtained from reliable and credible
sources. CARE Ratings Limited 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 Limited have paid a credit rating fee, based on the amount and type of bank
facilities/instruments. CARE Ratings Limited 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 Limited
is, inter-alia, based on the capital deployed by the partners/proprietor and the current financial strength of the firm. The
rating/outlook may undergo a change in case of withdrawal of capital or the unsecured loans brought in by the
partners/proprietor in addition to the financial performance and other relevant factors. CARE Ratings Limited is not responsible
for any errors and states that it has no financial liability whatsoever to the users of CARE Ratings Limited’s rating.

Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve
acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the
ratings may see volatility and sharp downgrades.

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