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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 126.77 | ACUITE D | Downgraded | - |
| Bank Loan Ratings | 44.88 | Not Applicable | Withdrawn | - |
| Bank Loan Ratings | 368.98 | - | ACUITE D | Downgraded |
| Total Outstanding | 495.75 | - | - |
| Total Withdrawn | 44.88 | - | - |
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Rating Rationale |
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Acuité has downgraded the long-term rating to ‘ACUITE D’ (read as ACUITE D) from ‘ACUITE B’ (read as ACUITE B) on the Rs.126.77 Cr. and the short term rating to ‘ACUITE D’ (read as ACUITE D) from ‘ACUITE A4’ (read as ACUITE A four) on the Rs. 368.98 Cr. bank facilities of Bhilai Engineering Corporation Limited (BECL).
It has further withdrawn the proposed long-term limit without assigning any rating on the Rs. 44.88 Cr. bank facilities of Bhilai Engineering Corporation Limited (BECL) based on a written request from company. The withdrawal is in accordance with Acuite's policy on withdrawal of ratings. Rationale for Downgrade The rating downgrade is on account of the severe liquidity constraints in the operations of the Company leading to delays in servicing debt repayments in a timely manner by BECL, concurrent devolvement in Letter of Credit and an overdue account for more than 30 days . The rating also factors the stretched liquidity profile of the company marked by the working capital-intensive nature of operations and the high utilisation of the fund-based bank limits. However, Acuité considers the long-standing operations of the company marked by the experienced management and the established relationship with customers. |
| About the Company |
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Incorporated in 1960, Bhilai Engineering Corporation Limited (BECL) is based in Bhilai (Chhattisgarh) and is headed by Mr. Veenu Jain, Mr. Arvind Kumar Jain, Mr. Ashish Jain and Ms. Geetika Jain. The company has a diversified business and is engaged in engineering, procurement & construction (EPC), industrial equipment supplies, manufacturing fertilizers & agro-inputs and manufacturing of processed foods.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of BECL to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced management and established relationship with customers
BECL has been operational for more than six decades. Since 1976, the promoters, Mr. A.K. Jain and Mr. Veenu Jain have been in the business of manufacturing specialized equipment’s for the heavy engineering goods, fertilizers and food products. The extensive experience of the promoters and the long track record of operations has aided in establishing comfortable relationships with key suppliers and reputed customers across the country including large PSU’s. Acuité believes the long experience of the management will continue to benefit the company going forward, resulting in further growth in the scale of operations. |
| Weaknesses |
| Delays in servicing term debt obligations and overdues in Letter of Credit devolvement payments
Due to the severe liquidity constraints leading to mis-matches in the cash flows of the Company, , there has been delays in servicing debt repayments in a timely manner by BECL. Working Capital Intensive nature of operations The working capital management of the company remained intensive marked by high Gross Current Assets (GCA) of 297 days for FY2023 as compared to 253 days as on FY2022. The debtor period stood at 128 days for FY2023 as against 130 days of FY2022. Further, the inventory holding stood at 114 days for FY2023 as against 81 days for FY2022. The payment cycle varies from 30-50 days. Acuite believes that the working capital cycle of the Company would continue to remain intensive due to nature of its business especially the fertiliser division. Decline in the operating margin alongwith operating losses in FY2023 The company has consistently witnessed decline in operating margins since the past three years and an operating loss in FY2023. The primary reason for losses in FY2023 was delays in project division and losses incurred in the same. Moreover, the rise in expenditure led to operating losses of 2.82 per cent in FY2023 as compared to 1.16 per cent in FY2022. Acuité believes that, going forward, the ability of the company to break the cycle of losses and achieve profits will be a key sensitivity factor. |
| Rating Sensitivities |
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| Liquidity Position |
| Stretched |
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The liquidity position of the company is stretched marked by full utilisation of its working capital limits owing to working capital intensive nature of operations. The average working capital utilisation of its limits remained at ~99.18 % in last six months ended Dec 2023. The company reported net cash accruals of Rs. (33.91) Cr in FY2023. There has been delays in servicing of debt obligations of bank due to stretches in liquidity during the current year. The current ratio stood at 1.47 times in FY23. The cash and bank balances stood at 0.78 in FY23.
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| Outlook: Not Applicable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 650.82 | 727.48 |
| PAT | Rs. Cr. | (42.70) | (26.23) |
| PAT Margin | (%) | (6.56) | (3.61) |
| Total Debt/Tangible Net Worth | Times | 0.70 | 0.60 |
| PBDIT/Interest | Times | (0.33) | 0.31 |
| 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 |
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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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