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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 26.00 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 5.00 | - | ACUITE A2 | Assigned |
| Bank Loan Ratings | 64.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding | 95.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) and the short-term rating of 'ACUITE A2' (read as ACUITE A two) on the Rs.90.00 Cr. bank facilities of Team Hiitec EQPT Private Limited (Erstwhile Titanium Equipment and Anode Manufacturing Company Private Limited) (THEPL). The outlook is 'Stable'. |
| About the Company |
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Team Hiitec Eqpt Private Limited (Erstwhile Titanium Equipment and Anode Manufacturing Company Private Limited), incorporated in 1975. The company is engaged in Designing and fabrication of engineering equipment, such as heat exchangers and pressure vessels. Its other business segments are ultra-filtration, and water purification and distribution. The present directors of the company are Mr. Cittur Sundar Rao Ramesh, Mr. Nitin Cowlagi Seshgiri, Mr. Suresh Krishnamurthi Rao and Mr. Ramachandran Nagarathnam. The registered office of the company is in Tamil Nadu. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has taken the standalone view of the business and financial risk profile of Team Hiitec EQPT Private Limited (Erstwhile Titanium Equipment and Anode Manufacturing Company Private Limited) to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management with an established track record of operations and reputed clientele THEPL, incorporated in 1975, designs and fabricates engineering equipment, including high-pressure titanium and stainless-steel storage tanks, vessels, and heat exchangers. The long track record of company’s operations and established relationship with its reputed customer profile has helped the company in procuring repeat orders from various entities such as SRF Limited, Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited, the Department of Atomic Energy, the Government of India, Thyssenkrupp Industrial Solutions India Private Limited, and Naval Physical amongst others. Acuité believes that THEPL’s business risk profile is expected to improve further over the medium term supported by industry experience and domain knowledge of the management, long-standing relationship with its clientele, geographical reach and established track record of operations. Healthy financial risk profile THEPL has a healthy financial risk profile marked by healthy net worth, low gearing and comfortable debt protection metrics. The tangible net-worth of the company stood healthy at Rs.103.56 Cr. as on 31 March 2024 (prov.) as against Rs.96.78 Cr. as on 31 March 2023 due to accretion of profits to reserves. The total debt of the company stood at Rs. 2.71 Cr. as on March 31, 2024 (prov.) as against Rs. 7.17 Cr. as on March 31, 2023. The debt profile comprises of Secured loan from banks - cash credit facilities. The gearing (debt-equity) stood at 0.03 times as on 31 March 2024 (prov.) as against 0.07 times as on 31 March 2023 due to a decrease in the company’s overall debt. The interest coverage ratio improved at 7.96 times for FY2024 as against 4.48 times for FY2023 further the debt-service coverage ratio stood at 6.52 times for FY2024 (prov.) as against 7.28 times for FY2023 and 4.39 times for FY2022. The Net Cash Accruals to Total debt stood at 3.15 times for FY2024 (Prov.) as against 1.05 times for FY2023. The Total outside liabilities to Tangible net worth stood at 0.24 times for FY2024 (prov.) as against 0.27 times for FY2023. The Debt-EBITDA ratio stood at 0.22 times for FY2024 (prov.) as against 1.34 times for FY2023. Going ahead, the financial risk profile of the company is expected to moderate on account of addition of debt for the capex, however, will overall maintain a healthy financial risk profile backed by its healthy networth position. |
| Weaknesses |
| Working capital intensive nature of operations The working capital operations of THEPL are intensive in nature as marked by improved, yet high Gross Current Assets (GCA) of 225 days during FY2024 (prov.) as against 335 days during FY2023. The inventory days reduced to 117 days in FY2024(Prov) from 199 days in FY2023. The receivables days stood at 108 days in FY2024(Prov) against 122 days in FY2023. The operations of the company are project based and the gestation period is around 12 months due to which the work in progress inventory of the company is usually high. The company receives around 10 percent of the advance payments from the customers and the remaining is received upon completing the dispatch of the orders, however considering the high gestation period, the balance receivables also get affected and therefore the debtors cycle remains elongated. Further, the creditors cycle of the company stood improved at 25 days during FY2024 (prov.) against 85 days in FY2023. However, the reliance on working capital limits stood at low at ~12% during the last 6 months ended August 2024. Acuité believes that the ability of THEPL to improve and maintain an efficient working capital cycle over the medium term will remain a key rating sensitivity factor. Improved albeit modest scale of operations and susceptibility of profitability to fluctuations in raw material costs The company has recorded healthy growth in operating income to Rs. 124.66 Cr. in FY2024 (prov.) from Rs. 83.52 Cr. in FY2023, marking a growth of ~49% on the back of higher order executions. Further, the operating profit margin of the company improved and stood at 7.70% in FY24(Prov.) as compared to 3.66% in FY23 primarily on account of reduced employee and other costs as a percentage to revenue albeit increased material cost. However, the company`s order book position stood at ~Rs.103 Cr. as of June 2024, reflecting moderate revenue visibility in the near term. Further, the management expects FY25 revenue growth to be subdued due to delays in certain orders, primarily resulting from budget allocation challenges faced by some of its key clients. Further, the company’s profitability remains susceptible to volatility in raw material costs as it forms about ~50% of its operating income and, hence, any adverse fluctuations in the cost of raw materials would have an impact on the company’s operating profitability. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company generated cash accruals of Rs.8.53 Cr. during FY2024 (prov.) against its nil debt repayment obligation during the same period. Further, the company is expected to generate cash accruals in the range of Rs.8.91 Cr -Rs.9.17 Cr. against expected nominal repayment obligation. The current ratio stood healthy at 4.25 times in FY24 (prov.) as against 3.77 times in FY23. The working capital operations of THEPL are intensive in nature marked by GCA days of 225 days in FY2024(Prov), however, the reliance on working capital limits stood low at~12 percent over the last 6 months ending August 2024. Further the company has liquid investments of Rs. 10.89 Cr. as of March 31, 2024(Prov). Going ahead, the liquidity position is expected to remain healthy on the back of healthy buffer available in the working capital limits, liquid investments and moderate accruals generation. |
| Outlook: Stable |
| Acuité believes that THEPL will maintain 'Stable' outlook over the medium term on account of its experienced management with an established track record of operations, reputed clientele and healthy financial risk profile. The outlook may be revised to 'Positive' in case of significant and sustained growth in revenue and profitability while effectively managing its working capital cycle and keeping the debt levels moderate. Conversely, the outlook may be revised to 'Negative' in case of lower than expected growth in revenue or deterioration in the financial and liquidity profile most likely as a result of higher than envisaged working capital requirements. |
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 124.66 | 83.52 |
| PAT | Rs. Cr. | 6.67 | 5.75 |
| PAT Margin | (%) | 5.35 | 6.88 |
| Total Debt/Tangible Net Worth | Times | 0.03 | 0.07 |
| PBDIT/Interest | Times | 7.96 | 4.48 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
| In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in |
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