Industry

A Leading South Based EPC / Infrastructure

Activity

Civil Engineering / Irrigation / Roads

About the Company

The Company is more than a 50-Years Old Company, with a revenue of ₹ 1,000+ Crore in last financial year, FY 24.  It is engaged into Civil Engineering /Roads/ Irrigation for the State & Central Govt / Asian Development Bank / World Bank funded Projects. It has entered into contracts with various government departments such as PWD, TNHB, Railways, Police Housing, Slum Clearance Board, CPWD, etc. They have an order book position of ₹ 3,500+ Crore.

Challenges Faced by the Company

The Company had been enjoying WC facilities of ₹ 200 Crore under a sole banking arrangement for more than 30 years with more than 120% security cover and high commission, BG margin.

Company was comfortable with the existing lender, but over a period they felt for a growing business Company should have multiple banking arrangements but managed to secure less than ₹50 crore General line from a private bank again with 100% security cover with high cost and margin even after having investible grade from Credit Rating Agency. Company has approached for an enhancement of ₹ 200Cr from their existing banker/s and even agreed for additional security but due to their internal policy guidelines Bank couldn’t be able to satisfy the Company requirements.

Company revenue was less than ₹ 300Cr, large quantum of tenders was released by the State and Central Govt. where many projects was funded no hassle in receivables, but Company’s WC limits are fully utilised, so they opted to secure the projects at 100% cash margin, because of this their day-to-day operations was not smooth and co wasn’t confident to take up large projects without adequate limits.

VGro Assignment & Transaction Target

Vgro developed a financial model of the project, covering the contract. Preparation of the Information Memorandum/Pitching Report for prospective lenders by taking all the necessary assumptions, Data and in close coordination with co finance and management team.

Project Specific Limits

To achieve financial tie-up for projects, need immediate funds in the form of project specific loan as exiting lender will take time to cede paripassu, NOC etc.

Consortium Arrangement

Establishing the general working capital limits by doing the proper assessment taking all the ongoing, pipeline, projects to be bided and retention etc.

Moving from Multiple banking arrangement to Consortium.

A new bank has to apprise and lead the consortium whereas an existing lender with more than 30years relationship is not in the position to assess and take the leader position.

• Release of few personal guarantees.
• Release/replacement of few immovable securities.
• Permission to issue BG on behalf of JV or SPV.
• Justification for reduction in security cover from 1.2X to 0.6%.
• Reduction of rate of interest, cash margin and BG commission.

Moving all properties to securities trusty

Immovable properties offered to exiting lender was way back 30+ years before, taking a fest legal opinion and to perfect all securities according to legal trusty was tough and challenging process.

External Credit Rating

Coordination for External Credit Rating by providing the necessary justification / data approved by the co time to time.

Result

On boarded 3 project specific lenders under tuning to ₹ 250+ Crore sole banking arraignment with better sanction terms with the security cover less than 40%.

On boarded 6 leading banks under the consortium, enhanced the WC limits from ₹ 200 Crore to ₹ 650 Crore.

After long exercise, VGro helped the Company in achieving the upgradation of ECR from investible grade to ‘A’ rating.

Summary of the Transaction

A comprehensive financial support from VGro for a 5 decade old EPC company in transforming from sole banking to multiple banking keeping in view the expanding business of the company. In the process facilitated adequate NFB limits to support the growing business. VGro also helped to obtain “A” rating over a period which enabled the company to participate in high value projects. Recently the company has secured a project worth ₹ 1500+ Crore and has retained Vgro for the financial closure of the project, a testimony for sustained support of Vgro.  The company is poised for topline of ₹ 1,150+ crore in FY 24 and estimated to achieve ₹1,400 crore in FY 25.