Press Release March 28, 2025 HAMON COOLING SYSTEMS PRIVATE LIMITED Rating Assigned and Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	12.00	ACUITE BBB- | Stable | Reaffirmed	-
Bank Loan Ratings	25.00	-	ACUITE A3 | Assigned
Bank Loan Ratings	73.00	-	ACUITE A3 | Reaffirmed
Total Outstanding	110.00	-	-
Total Withdrawn	0.00	-	-

Errata - This press release is to rectify certain errors which were inadvertently captured in Weakness section. The detailed review of the rating was communicated through press release dated February 13, 2025.

Rating Rationale

Acuité has reaffirmed its long-term rating to 'ACUITE BBB-’ (read as ACUITE Triple B minus) and the short term rating to 'ACUITE A3' (read as ACUITE A Three) on Rs. 85.00 crore bank facilities of Hamon Cooling Systems Private Limited (HCSPL). The outlook is 'Stable'. Further, Acuité has also assigned its short-term rating to 'ACUITE A3' (read as ACUITE A Three) on the Rs. 25.00 crore bank facilities of Hamon Cooling Systems Private Limited (HCSPL). Rationale for rating The rating reaffirmation considers the established track record of the company over the last two decades along with long standing experience of the management in the industry. The rating is further supported by a healthy order book of Rs 384 crore (as on October 31, 2024) and onset of spare part business giving sound revenue visibility and steady margins over medium term along with moderate financial risk profile. However, these strengths are partly offset by the intensive working capital operations of company as marked by higher gross current asset (GCA) days constituting of high debtors and other current assets. Further, it also factors in the risk faced by the company from strong competition and industry specific revenue concentration.

About the Company

HCSPL was originally incorporated as an Indian subsidiary of Hamon & Cie (International), part of Belgium based Hamon Group. Later in April 2022, Hamon and Cie (International) filed for bankruptcy, which eventually led to acquisition of HCSPL by Mr. Akhileshwar Gangadeen Chorasiya in October 2022. HCSPL carries out design, manufacture, construction and commissioning of different types of cooling towers and systems. It offers a wide range of wet cooling towers, including large natural draft concrete cooling towers, FRP package towers and large mechanical draft cooling towers made from concrete, wood or FRP-pultrusion. It also provides forced draft towers along with spares and maintenance of cooling towers. The manufacturing facility of company is situated at Umbergaon, Gujarat. The current directors of the company are Mr. Akhileshwar Gangadeen Chorasiya. and Mrs. Nootan Akhileshwar Chorasiya.

Unsupported Rating

­Not Applicable

Analytical Approach

Acuité has considered the standalone business and financial risk profiles of HCSPL to arrive at the rating.

Key Rating Drivers

Strengths

Established track record with professional and experienced management HCSPL has an established track record of operations of more than two decades in the cooling tower manufacturing industry. Further, before acquisition of HCSPL, the promoter of the company Mr. Akhileshwar Chorasiya was also engaged into the business of cooling towers from past ten years through one of his other companies Cleanflow Cooling Tower Solutions Private Limited and was associated with HCSPL as a sub-contractor over the years. Over the years company has established a strong position in this industry leading to gain a sizeable market share with a healthy order book from reputed oil & gas and power players like Numaligarh Refinery, IOCL, Adani, etc.    Acuite believes that HCSPL will continue to benefit from its established track record of operations and experienced management in near to medium term. Significant increase in operating income albeit decrease in operating profits The company reported a 67 percent year-on-year increase in its operating income, reaching Rs. 217.88 crores in FY24, compared to Rs. 130.5 crores in FY23, driven by improved and timely order execution. However, the operating margins of the company marked a dip in FY24 to 0.83 percent in FY24 as against 3.41 percent in FY23. The reasons for the decline in margins were due to increase in contract expenses without revenue realizations on legacy projects of former promoter. Further, with a strong order book of ~Rs 384 crores (as on October 31, 2024) and growth in the spare business, the EBITDA margins of the company are expected to remain around 3-4 percent over the medium term. Further, the PAT margins for the company were marked high at 7.4 percent in FY24 on account of a non-cash exceptional item of Rs.16.19 crores pertaining to write off of advances from customers.  As of December 31, 2024 company has already booked ~Rs.198 crores in revenue (~Rs 12 crores from spare sales) at an EBITDA margin of 3.07%. Acuite believes that the continuous focus of company towards attaining new contracts and timely execution of existing orders coupled with complete resolution of legacy issues shall help the company to improve their operating performance.    Moderate financial risk profile The financial risk profile of the company remained moderate marked by a moderate net worth, low gearing and healthy debt protection metrics. The net worth of the company stood at Rs. 54.09 crores as on March 31, 2024 as against Rs. 38.06 crores as on March 31, 2023. The increase in net worth is primarily due accretion in reserves on account of the exceptional income. This led to decrease in the gearing of the company to 0.40 times as on March 31, 2024 as against 0.48 times as on March 31, 2023.  The company holds short term borrowings only for working capital purposes, therefore, the debt protection metrics remained healthy with debt service coverage ratio and interest coverage ratio both standing at 1.36 times as on March 31, 2024. Acuite expects the financial risk profile to remain moderate on account of steady cash accruals with no debt-funded capex plans.

Weaknesses

Intensive working capital operations The working capital operations of the company remains intensive marked by GCA days of 186 days in FY24 as against 226 days in FY23. This is majorly attributable to the high debtor and other current assets which mainly includes retention money ~ 7.5% of contract value. The debtor days stood at 92 days in FY24 as against 88 days in FY23. The debtor receipts are based on milestone completions with a receivable cycle of 30-45 days. Further, the inventory days stood low at 2 days in FY24 as against 1 day in FY23 as the client directly gets the inventory supplied to plant. The creditors days stood at 70 days in FY24 as against 105 days in FY23. As a result, the reliance of working capital limits is low, reflected by average utilizations of around ~26.23 percent in fund-based facility in last 8 months ended November’ 2024. Acuite expects the working capital operations of the company may continue to be intensive on as long as other current assets of the company remains high relative to operating income. Risk from strong competition and sector specific revenue HCSPL faces strong competition from experienced players in the industry. Further, the revenue of HCPSL is highly concentrated from oil & gas and power sector, therefore, any slowdown in this particular industry may affect the performance of the company.

Rating Sensitivities

Improving operating performance supported by healthy order book and increasing margins. Efficient management of working capital operations. Steady cash accruals and no significant debt funded capex affecting the financial and liquidity profile.

Liquidity Position

Adequate

The liquidity position of HCSPL is adequate marked with moderate cash accruals and no major repayment obligations for the company. Further, it is expected that company will generate NCA in range of Rs. 6-11 crores over the medium term. The current ratio of the company stood at 1.45 times as on March 31, 2024. The average bank limit utilization in fund based facility for last 8 months ended November 30, 2024 stood low at ~26.23 percent. Further, the company also maintained cash and bank balance of Rs. 10.81 crores as on March 31, 2024. Acuite believes the liquidity position of the company may continue to remain adequate with steady cash accruals.

Outlook : Stable

­

Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	217.88	130.50
PAT	Rs. Cr.	16.13	16.62
PAT Margin	(%)	7.40	12.73
Total Debt/Tangible Net Worth	Times	0.40	0.48
PBDIT/Interest	Times	1.36	43.30

The above PAT includes exceptional non cash income of Rs.16.19 Cr in FY24 and Rs.12.56 Cr in FY23

­

Status of non-cooperation with previous CRA (if applicable)

­Not Applicable

Any other information

­None

Applicable Criteria

• 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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 20 Nov 2023 Bank Guarantee (BLR) Short Term 27.00 ACUITE A3 (Assigned) Proposed Bank Guarantee Short Term 48.00 ACUITE A3 (Assigned) Cash Credit Long Term 10.00 ACUITE BBB- | Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Bank of Baroda Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 27.00 Simple ACUITE A3 | Reaffirmed HDFC Bank Ltd Not avl. / Not appl. Bank Guarantee (BLR) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 35.00 Simple ACUITE A3 | Reaffirmed Bank of Baroda Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 10.00 Simple ACUITE BBB- | Stable | Reaffirmed HDFC Bank Ltd Not avl. / Not appl. Cash Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 2.00 Simple ACUITE BBB- | Stable | Reaffirmed Not Applicable Not avl. / Not appl. Proposed Bank Guarantee Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 11.00 Simple ACUITE A3 | Reaffirmed Not Applicable Not avl. / Not appl. Proposed Bank Guarantee Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 25.00 Simple ACUITE A3 | Assigned

Contacts

Mohit Jain Senior Vice President - Rating Operations Parth Patel Lead Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating. Note: None of the Directors on the Board of Acuité Ratings & Research Limited are members of any rating committee and therefore do not participate in discussions regarding the rating of any entity.