Press Release

B D Security Limited
November 14, 2024

Facilities/Instruments Amount (₹ crore) Rating1 Rating Action

Long Term Bank Facilities 24.78 CARE BB+; Stable Reaffirmed
Long Term / Short Term Bank Facilities 3.22 CARE BB+; Stable / CARE A4+ Reaffirmed
Short Term Bank Facilities 4.00 CARE A4+ Reaffirmed
Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

The reaffirmation of the ratings assigned to the bank facilities of B D Security Limited (BDSL) is constrained by modest albeit
improving scale of operations, elongated operating cycle leading to high dependence upon the working capital limits, and
moderation in financial risk profile. The rating is further constrained by regulated nature of private security industry leading to
moderate profitability margins and exposure to intense competition. The rating, however, derives strength from company’s
association with reputed clientele reflecting lower counter party risk and experienced promoters in the industry.

Rating sensitivities: Factors likely to lead to rating actions

Positive factors
• Ability to scale up the operations to over Rs 140.00 crores while maintaining the PBILDT margin of over 6% on a consistent
basis.
• Improvement in operating cycle days to 60 days.

Negative factors
• Moderation in capital structure with overall gearing above 2.50x
• Moderation in debt service indicators as marked by Total Debt/GCA above 10.00x and interest coverage below 2.00x
• Elongation of operating cycle beyond 120 days on sustained basis.

Analytical approach: Standalone

Outlook: Stable
CARE Ratings believes that the entity shall benefit from experience of its promoters in security business along with association
with reputed clientele

Detailed description of key rating drivers:

Key weaknesses

Modest albeit improving scale of operations

The scale of operations of the company improved from Rs 84.46 crores in FY23 (refers to period from April 01, 2022, to March
31,2023) to Rs 118.61 crores in FY24 (refers to period from April 01, 2023, to March 31,2024) marking a y-o-y growth of ~40%
on account of more orders from existing customers and addition of new customers. Nevertheless, the scale remains modest, it
limits the company’s financial flexibility in times of stress. Though, the risk is partially mitigated by the fact that the scale of
operation is growing continuously on the back of addition of new clients. During H1FY25 (refers to the period from April 1, 2024,
to September 30, 2024; based on provisional results), the company has booked revenue of Rs. 56 crore and is expected to clock
revenue of Rs 130 crores in FY25 based on current order book. The profitability of the company has improved as marked by
PBIDTA margin of 12.45% in FY24 against previous year margin of 7.33%. The improvement is on account of economies of scale
and shift in focus towards telecom business which is more profit accretive than security business. The PAT margin improved in
tandem with PBIDTA margin from 4.01% in FY23 to 6.62% in FY24.

Elongated operating cycle

The operations of the company are working capital intensive in nature marked by elongated operating cycle of 83 days in FY24
(PY: 71 days) on account of high receivable days. The company has to offer liberal credit period to its customers as majority of
them are large sized players which possess high bargaining power as compared to other clients of BDSL resulting in an average

1
Complete definition of ratings assigned are available at www.careedge.in and other CARE Ratings Limited’s publications.

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collection period of 72 days for FY24. Moreover, the company needs to extend ~5-10% of the contract value towards retention
money held as security deposits with the customers. The company has inventory days of 21 days and creditor days of 9 days for
FY24 on account of its telecom business.

Moderation in financial risk profile

As on March 31,2024 the debt profile of the company comprises of working capital borrowings of Rs 39.49 crores, term loan of
Rs 10.05 crores, vehicle loans of Rs 0.37 crores and unsecured loans of Rs 8.13 crores. The overdraft limit from Jammu and
Kashmir was utilized to the turn of Rs 18.95 crores on balance sheet date. The facility was proposed to be taken over by HDFC
Bank and demand draft of equivalent amount was issued in favour of the company. Hence on balance sheet date the working
capital utilization stood high at Rs 39.49 crores. Further, to support the growing scale the company also availed business loans
from various banks and NBFCs and unsecured loans were also infused by promoters. The increase in external borrowings resulted
in moderation of capital structure as marked by overall gearing from 2.51x as on March 31,2023 to 3.43x as on March 31,2024.
The debt coverage indicators as marked by interest coverage ratio improved from 3.01x in FY23 to 4.36x in FY24 owing to
improvement in profitability. The total debt to GCA remained at similar level of 6.72x for FY24. (PY:6.59x)

Regulated nature of private security industry

The private security industry is a labour-intensive industry. Parliament of India has passed Private Security Agencies (Regulation)
Act, 2005 to safeguard the interests of private security guards. The Act provides guidelines for the regulation of the industry. The
act lays down guidelines for licensing and training norms of the security guards. The Act also incorporated provisions related to
workers’ wages, working hours, and leave. Wage-related compliance parameters include the minimum wage, overtime, house
rent allowances, provident fund, gratuity, bonus, insurance – Life insurance and health insurance. Working hours and leave related
compliance parameter includes working hours, leave – annual, and weekly leave and others, hours of training. The government
regulations are necessary since the industry is considered predominantly an unorganized sector with 60 per cent of security
service providers still operate as unorganized players. Only 10 per cent of work force of private security industry is absorbed by
organized sector. In order to prevent exploitative tendency of private industry players vis-à-vis low wages and unfriendly
employment practices

Exposure to intense competition in security business

The manned security guarding services industry has large number of unorganized players and a few organized players leading to
intense competition. Unorganized players have regional presence and offer services at low cost resulting in pricing pressure for
organized players which have higher overheads to maintain quality. Further, some of the organized players have global presence
and have a strong market position and brand name. Moreover, the industry has high employee attrition rate due to the presence
of large number of unorganized players. Any issues with regards to availability of workforce may constrain the relationship with
the client and impact revenue and profitability.

Key strengths

Association with reputed clientele albeit moderate order book position

BDSL provides end-to-end security services solutions to various enterprises. The company’s headquarter is in Jammu and it
operates 12 branches spread all over Northern India. It has a reputed and diversified client portfolio across different
industries/sectors including Banking and Finance, Petrochemicals, Telecommunications, Retail, Hospitality etc. Some of the clients
of the company are Jammu and Kashmir Bank Limited (CARE AA-; Stable), Berger paints India Limited (CARE A1+), Platinum
Automobiles Private Limited, Bharti Airtel Limited. The company derives 43% of its revenue from private security business and
57% of its revenue is derived from telecom business under which it gets service contracts to maintain fibre cables (both FTH i.e.
Fiber-to-home and LDL i.e Long-distance-line services.). Major clientele for telecom business includes Reliance Industries Limited,
Tower Vision India P Ltd., Bharti Airtel Limited. The customer base is diverse with top 5 customers accounting for ~30% of total
operating income. Further, the current order book in hand as on October 15, 2024, is Rs 65.47 crores which is to be executed
during current financial year (FY25) providing revenue visibility in near terms.

Experienced Promoters
BDSL is promoted by Mr. Sahil Gupta, an MBA by qualification. He oversees the company's strategic direction and operations. He
has nearly two decades of experience in the private security industry. He is supported by his mother Mrs. Suman Gupta having
decade long experience in the private security industry. Further, directors are assisted by a team of qualified professionals who
have substantial experience in the manned security guarding industry and also in telecom industry.

Liquidity: Stretched

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Liquidity is stretched owing to negative cash flow from operations due to elongated collection period resulting in high working
capital requirement which is primarily met through bank borrowings. The utilization of working capital limits thus remains 90%
utilized on an average for the past 12 month ending September 2024. The company has low free cash balance of Rs 0.18 crores
as on March 31,2024. However, the repayment obligations remain comfortable against envisaged gross cash accruals (GCA). The
company has generated GCA of Rs 8.64 crores during FY24 and is envisaged to generate GCA of Rs 9.20 crores against which
repayment obligation stands at Rs 2.25 crores during same year.

Applicable criteria
Definition of Default
Liquidity Analysis of Non-financial sector entities
Rating Outlook and Rating Watch
Financial Ratios – Non financial Sector
Service Sector Companies
Short Term Instruments

About the company and industry

Industry classification
Macroeconomic indicator Sector Industry Basic industry
Services Services Commercial Services & Supplies Diversified Commercial Services

B D Security Private Limited incorporated in 2006 by Mr. Sahil Gupta as a private limited company. The constitution was changed
to public limited company during FY24 and named as B D Security Limited (BDSL). The company is engaged in providing manned
security guard services with client portfolio across various sectors such as telecom, automobile, petrochemicals, banking etc.
Some of the clients of the company are Jammu and Kashmir Bank Limited (CARE AA-; Stable), Berger paints India Limited (CARE
A1+), Platinum Automobiles Private Limited, Bharti Airtel Limited etc. The company has a workforce of over 5000 manpower
personnel and is licensed to operate in two states under PSARA act (Private Security Agency Regulation Act). BDSL’s portfolio of
services also includes app-based checking and monitoring, surprise check on deployed staff., on the job training and 24x7 control
room. The company generate revenue through two segments, 40% revenue of the company is through security solution and 60%
of revenue is through telecom business under which it gets service contracts to maintain fibre cables (both Fiber-to-home (FTH)
and Long-distance-line services (LDL)). Major clientele for telecom business includes Reliance Industries Limited, Tower Vision
India P Ltd., Bharti Airtel Limited. Headquarters of company is located in Jammu, and it operates all over India through 4 branch
offices. The company is accredited with ISO 9001:2015 certification.

Brief Financials (₹ crore) March 31, 2023 (A) March 31, 2024 (A) H1FY25 (UA)
Total operating income 84.46 118.61 56.00
PBILDT 6.19 14.77 NA
PAT 3.38 7.86 4.00
Overall gearing (times) 2.51 3.43 1.51
Interest coverage (times) 3.01 4.36 NA
A: Audited UA: Unaudited; NA: Not Available Note: these are latest available financial results

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating history for last three years: Annexure-2

Detailed explanation of covenants of rated instrument / facility: Annexure-3

Complexity level of instruments rated: Annexure-4

Lender details: Annexure-5

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Annexure-1: Details of instruments/facilities

Rating
Size of the
Name of the Date of Coupon Maturity Assigned and
ISIN Issue
Instrument Issuance Rate (%) Date Rating
(₹ crore)
Outlook
Fund-based - CARE BB+;
- - - 18.95
LT-Cash Credit Stable

Fund-based - CARE BB+;

- - 31/03/2025 5.83
LT-Term Loan Stable
Fund-
CARE BB+;
based/Non-
- - - 3.22 Stable / CARE
fund-based-
A4+
LT/ST
Non-fund-
based - ST-
- - - 4.00 CARE A4+
Bank
Guarantee

Annexure-2: Rating history for last three years

Current Ratings Rating History

Date(s) Date(s) Date(s) Date(s)

Name of the
and and and and
Sr. No. Instrument/Bank Amount
Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned
(₹ crore)
in 2024- in 2023- in 2022- in 2021-
2025 2024 2023 2022
1)CARE 1)CARE
CARE BB+; BB+;
Fund-based - LT-
1 LT 5.83 BB+; - Stable Stable -
Term Loan
Stable (28-Aug- (26-Sep-
23) 22)
1)CARE 1)CARE
CARE BB+; BB+;
Fund-based - LT-
2 LT 18.95 BB+; - Stable Stable -
Cash Credit
Stable (28-Aug- (26-Sep-
23) 22)
1)CARE 1)CARE
Non-fund-based - CARE A4+ A4+
3 ST 4.00 - -
ST-Bank Guarantee A4+ (28-Aug- (26-Sep-
23) 22)
1)CARE 1)CARE
CARE
BB+; BB+;
BB+;
Fund-based/Non- Stable / Stable /
4 LT/ST 3.22 Stable / - -
fund-based-LT/ST CARE A4+ CARE A4+
CARE
(28-Aug- (26-Sep-
A4+
23) 22)

LT: Long term; ST: Short term; LT/ST: Long term/Short term

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

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Annexure-4: Complexity level of instruments rated

Sr. No. Name of the Instrument Complexity Level
1 Fund-based - LT-Cash Credit Simple
2 Fund-based - LT-Term Loan Simple
3 Fund-based/Non-fund-based-LT/ST Simple
4 Non-fund-based - ST-Bank Guarantee Simple

Annexure-5: Lender details

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

Note on complexity levels of rated instruments: CARE Ratings has classified instruments rated by it based on complexity.
Investors/market intermediaries/regulators or others are welcome to write to [email protected] for clarifications.

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Established in 1993, CARE Ratings is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise capital
and enable investors to make informed decisions. With an established track record of rating companies over almost three decades,
CARE Ratings follows a robust and transparent rating process that leverages its domain and analytical expertise, backed by the
methodologies congruent with the international best practices. CARE Ratings has played a pivotal role in developing bank debt
and capital market instruments, including commercial papers, corporate bonds and debentures, and structured credit.

Disclaimer:
The ratings issued by CARE Ratings 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 has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings 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 have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings 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 is, inter-alia, based on the capital deployed by the
partners/proprietors and the current financial strength of the firm. The ratings/outlook may change in case of withdrawal of capital, or the unsecured loans brought
in by the partners/proprietors in addition to the financial performance and other relevant factors. CARE Ratings is not responsible for any errors and states that it has
no financial liability whatsoever to the users of the ratings of CARE Ratings. The ratings of CARE Ratings do not factor in any rating-related trigger clauses as per the
terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

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