HFPL is Chennai based company engaged in the civil construction business since 2000.
The civil construction industry is a highly competitive industry, and HFPL's modest size of operations and its low net worth limits its ability to bid for larger and more profitable projects.
19.78 crores in FY10, which limits HFPL's ability to bid for large sized projects.
The rating takes into account the intensely competitive and cyclical nature of the steel industry, HFPL's moderate scale of operations and client concentration risk as two-thirds of revenues come from a single client , Bharat Heavy Electricals (BOM:500103).
The rating also factors in the vulnerability of HFPL's profitability to adverse movement in steel prices, given the lack of backward integration and absence of price variation clauses in its contracts with BHEL.
Nevertheless, the rating favourably factors in the promoters long experience in the steel industry, HFPL's established relationship with clients and positive demand outlook given expectations of large capacity additions in the power sector.