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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 9.25 | ACUITE B+ | Stable | Downgraded | - |
| Bank Loan Ratings | 16.00 | - | ACUITE A4 | Downgraded |
| Total Outstanding Quantum (Rs. Cr) | 25.25 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has downgraded the long-term rating to ‘ACUITE B+’ (read as ACUITE B plus) from ‘ACUITE BB-’ (read as ACUITE double B minus) and the short-term rating to ‘ACUITE A4’ (read as ACUITE A four) from ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.25.25 Cr bank facilities of Batliboi Environmental Engineering Limited (BEEL). The outlook is ‘Stable’.
Rationale for Rating Downgrade The rating downgrade is on account of deterioration in the operating performance and financial risk profile of the company marked by decline in scale of operations, increase in overall gearing and elongated working capital cycle. The operating income deteriorated to Rs. 57.56 Cr. in FY22 as against Rs. 78.89 Cr. in FY21. The gross current asset days of the company deteriorated to 219 days as on March 31, 2022 as against 172 days as on March 31,2021. The overall gearing of the company rose to 76.32 times as on March 31, 2022 as against 1.93 times as on March 31, 2021. The rise in gearing levels is mainly on account of eroded networth due to losses in FY22. |
| About the Company |
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Mumbai-based, BEEL was incorporated in the year 1959 and is promoted by Mr. Kaushik Kantilal Shah, Mr. Edwyn William Rodrigues, Mr. Kabir Nirmal Bhogilal and Mr. Sanjiv Harischandra Joshi .The company is engaged in design, selection, engineering, fabrication, supply, installation, and commissioning of air and water pollution control equipment and systems for a variety of industrial and municipal applications. The company deals with dedicated vendors in Pune.
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| Analytical Approach |
| Acuité has taken a standalone view of the business and financial risk profile of BEEL to arrive at the rating. |
Key Rating Drivers
| Strengths |
BEEL was incorporated in the year 1959 and is currently promoted by Mr. Kaushik Kantilal Shah, Mr. Edwyn William Rodrigues, Mr. Kabir Nirmal Bhogilal and Mr. Sanjiv Harischandra Joshi. The company has a presence over six decades in the industry. The current promoters have more than two decades of experience in the similar line of business. The top management is ably supported by a well-qualified and experienced team of the second line of management. The management has built strong relations with its customers and suppliers and deals with reputed clientele like SW Steel Limited, Thermodyne Technologies Pvt. Ltd, Epsilon Carbon Private Limited, etc. The operating income deteriorated to Rs. 57.56 Cr. in FY22 as against Rs. 78.89 Cr. in FY21. . The company has unexecuted orders in hand worth Rs. 100 Cr as of January 2023. This gives moderate revenue visibility over the near to medium term Acuité believes that SSPL will continue to benefit from the promoter’s established presence in the industry over the medium term.
Pollution control norms laid out of by the government are getting more stringent every year. Protection of the environment against any kind of pollution is one of the key focus areas in today’s environmentally conscious world. This is likely to help BEEL in generating more sales for pollution control equipment’s and expand their business by adding more clients to their portfolio. |
| Weaknesses |
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BEEL’s operating income deteriorated to Rs. 57.56 Cr. in FY22 as against Rs. 78.89 Cr. in FY21. The operating profitability deteriorated to (2.45) percent in FY22 as against 4 percent in FY21. . The decrease is majorly on account of increase in material cost as the steel and cement prices were high The company’ net profitability saw a deterioration to (5.30) percent in FY22 as against 2.50 percent in FY21. Acuite believes the ability of BEEL to scale up operations while maintaining its profitability margins will be a key rating monitorable.
BEEL has a below average financial risk profile marked by low networth , high gearing and low coverage indicators. The tangible networth stood at Rs. 0.11 Cr as on March 31,2022 as against Rs. 3.06 Cr as on March 31,2021. The networth eroded due to accretion of losses to reserves. BEEL’s overall gearing rose to 76.32 times as on 31 March, 2022 as against 1.93 times as on 31 March, 2021. The total outside liabilities to tangible net worth (TOL/TNW) of the company deteriorated to 365.35 times as on March 31, 2022 as against 12.20 times as on March 31, 2021. The coverage ratios of the company stood low with Interest Coverage Ratio (ICR) of (0.81) times in FY22 as against 2.69 times in FY21. The Debt Service Coverage Ratio (DSCR) deteriorated to (0.77) times in FY22 as against 2.31 times in FY21. Acuité expects the financial risk profile to remain average over the medium term
BEEL has working capital intensive nature of operations. The Gross Current Asset (GCA) days increased to 219 days as on March 31, 2022 as against 172 days as on March 31, 2021. The GCA days are driven by debtor days. The debtor days stood high at 197 days as on March 31,2022 as against 161 days as on March 31, 2021. The stretch in debtor days is mainly due to the retention money which the customers pay over a period of time. The receivables from the entity account for ~ 39.84 % of the total receivables of LBK as on March 31, 2022.. The inventory days stood at 5 days as on March 31, 2022 as against 0 days as on March 31, 2021. The creditor days increased to 153 days as on March 31,2022 as against 139 days as on March 31, 2021. The average bank limit utilisation stood at ~10-20 percent for the six months period ended December, 2022. Acuite believes BEEL’s ability to restrict further elongation in its working capital cycle will be a key rating sensitivity. |
| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position |
| Poor |
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BEEL’ liquidity position is poor marked by modest net cash accruals of Rs. 2-2.5 Cr in FY21-22 against maturing debt obligations of Rs. 0.1-.5 in FY20-21.The company is expected to generate net cash accruals of Rs. 2-3 Cr in FY23-24 as against maturing debt obligations of Rs. 0.5-0.8 Cr over the same period. The average bank limit utilisation stood at ~10-20 percent for the six months period ended December, 2022. Furthermore, the company maintained unencumbered cash and bank balances of Rs. 1.68 Cr as on March 31, 2022. The current ratio stood moderate at 1.14 times as on March 31, 2022.
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| Outlook: Stable |
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Acuité believes that BEEL will maintain a ‘Stable’ outlook over the medium term owing to its experienced management and long track record of operations. The outlook may be revised to 'Positive' if the company demonstrates substantial and sustained growth in its revenues from the current levels while maintaining its margins. Conversely, the outlook may be revised to 'Negative' in case the company registers lower than expected growth in revenues and profitability or deterioration in its working capital management or larger-than-expected debtfunded capex leading to deterioration in its financial risk profile and liquidity
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 57.56 | 78.89 |
| PAT | Rs. Cr. | (3.05) | 1.97 |
| PAT Margin | (%) | (5.30) | 2.50 |
| Total Debt/Tangible Net Worth | Times | 76.32 | 1.93 |
| PBDIT/Interest | Times | (0.81) | 2.69 |
| Status of non-cooperation with previous CRA (if applicable) |
| India Ratings vide its Press Release dated 8/05/2017 declared BEEL as “Issuer Not Co-operating” |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Entities In Manufacturing Sector:- 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 |
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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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