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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 12.09 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 34.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 46.09 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs. 34.00 Cr bank facilities of Binayak Hi Tech Engineering Private Limited (BHTEPL). The outlook remains ‘Stable’.
Acuité has assigned the long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) to the Rs. 12.09 Cr bank facilities of Binayak Hi Tech Engineering Private Limited (BHTEPL). The outlook is ‘Stable’. Rationale for reaffirmation of the rating The rating reaffirmation factors in the augmentation in business risk profile of the company marked by increase in the scale of operations along with improvement in the profitability margins. BHTEPL has generated revenues of Rs.151.73 Cr in FY2023 as against Rs.139.65 Cr in FY2022 and Rs.87.30 Cr in FY2021, thereby, registering a CAGR of 32.18 per cent over the last two years. The rating also draws comfort from established track record of operations of more than two decades and experienced management which helped the company in establishing long term relationships with its customers especially from the international market. The rating also takes into account the adequate liquidity position and above average financial profile of the company as reflected by the comfortable gearing and healthy debt coverage indicators. These strengths are, however, offset by the company’s working capital intensive nature of operations and the exposure to risks related to customer concentration. |
| About the Company |
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Incorporated in 1995, Binayak Hi Tech Engineering Private Limited (BHTEPL) is engaged in the manufacturing of landscaping products namely cast iron / ductile iron manhole covers & gratings, fabricated mild steel manhole covers & gratings, ornamental castings like garden benches, tree gates, designer cast bamboos, fencing and others. The company is promoted by Mr. Mahesh Kumar Jhunjhunwala, Mrs. Kiran Jhunjhunwala, Mr. Atul Jhunjhunwala and Mrs. Priyanka Jhunjhunwala. The company's clientele is geographically distributed throughout the world, reducing the risk of geographic concentration. BHTEPL is engaged in exporting the products to more than 20 countries mainly USA, UK, Europe, Middle East, Africa and Australia. The company is well versed with international standards such as BS EN, ASTM, ASSM and DIN.
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of BHTEPL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| Experienced management and established relationship with customers
BHTEPL has been operating for more than two decades supported by the expertise of Mr. Mahesh Kumar Jhunjhunwala and Mr. Atul Jhunjhunwala who possess more than three decades of industry experience. The extensive experience of the management along with the established track record of operations has aided the company in establishing strong and healthy connections with the international customers. Acuité believes that the experienced management and the long standing operations will continue to benefit the company going forward. Stable business risk profile The company has witnessed steady improvement in the scale of operations and has generated revenues of Rs.151.73 Cr in FY2023 as against Rs.139.65 Cr in FY2022 and Rs.87.30 Cr in FY2021, thereby, registering a CAGR of 32.18 per cent over the last two years. The increase in the operating income is supported by the regular orders and the timely execution of it coupled with the healthy capacity utilisation levels ranging between 85-90 per cent. The growth in the operating income is further supported by the company’s established market presence and steady demand for the products prevailing in the international market. Moreover, the operating margin of the company improved to 9.35 per cent in FY2023 from 8.31 per cent in FY2022 on account of relaxation in the freight costs and decrease in the sales promotion expenses. Also, the PAT margin rose to 5.40 per cent in FY2023 as compared to 4.49 per cent in FY2022 due to decrease in the interest costs owing to reduction in the debt levels. The increase in profitability margins translated into healthy Return on Capital Employed (ROCE) of the company, which stood at 22.21 per cent as on March 31, 2023 as compared to 19.06 per cent as on March 31, 2022. Acuité believes that, the business risk profile of the company will continue to improve further backed by the continuous order flow and healthy execution of it followed by the ability of BHTEPL to pass on the rise in its input costs and protect any sharp erosion in margins. Above average financial risk profile The company’s above average financial risk profile is marked by moderate yet increasing net worth, comfortable gearing and healthy debt protection metrics. The tangible net worth of the company increased to Rs.34.17 Cr. as on March 31, 2023 from Rs.26.29 Cr. as on March 31, 2022, on account of retention of profits. Gearing of the company improved to 0.66 times as on March 31, 2023 as compared to 1.32 times as on March 31, 2022 due to reduction in the total debt burden. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.10 times as on March 31, 2023 as against 1.94 times as on March 31, 2022. Further, the healthy debt protection metrics of the company is marked by Interest Coverage Ratio (ICR) at 6.92 times in FY2023 as against 5.05 times in FY2022 and Debt Service Coverage Ratio (DSCR) at 2.63 times in FY2023 as against 2.45 times in FY2022. The improvement in the credit metrics is on account of increase in the accruals as against the minimal debt level. Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.41 times as on March 31, 2023. Acuité believes that, going forward, the financial risk profile of the company will remain above average backed by steady accruals and absence of any major debt funded capex plan. |
| Weaknesses |
| Working capital intensive nature of operations
The working capital intensive nature of operations of the company is marked by moderate but improving Gross Current Assets (GCA) days of 106 days as on March 31, 2023 as compared to 145 days as on March 31, 2022. The moderate GCA days are due to improvement in the debtor period which stood at 40 days as on March 31, 2023 as compared to 74 days as on 31st March 2022. Moreover, the inventory period stood comfortable at 47 days as on 31st March, 2023 against 59 days in the previous year. Acuité believes that, going forward, the working capital cycle of the company will remain around the similar levels as evident from the existing collection mechanism and comfortable inventory levels over the medium term. Customer concentration risk The company’s revenues are highly concentrated to the extent of ~48.65 per cent coming in from its top five customers. However, the vintage of its client relationships mitigates the concentration risk to a certain extent. The Company has a global presence, mainly catering to US and European markets. The US market is expected to continue to be the highest contributing region, going forward, by securing the repeat high-value orders from the same. |
| Rating Sensitivities |
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| Material covenants |
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None
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| Liquidity Position: Adequate |
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The company’s liquidity is adequate marked by steady net cash accruals which stood at Rs.9.27 Cr. in FY2023 as against long term debt repayment of only Rs.2.25 Cr during the same period. The fund based limit utilization stood low at 45 per cent over the six months ended May, 2023. The cash and bank balances of the company stood at Rs.5.66 Cr. as on March 31, 2023 as compared to Rs. 3.72 Cr. as on March 31, 2022. Further, the current ratio stood moderate at 1.44 times as on March 31, 2023. However, the working capital management is intensive in nature marked by Gross Current Assets (GCA) days of 106 days as on March 31, 2023 as compared to 145 days as on March 31, 2022.
Acuité believes that, going forward, the liquidity position will remain adequate supported by the gradually improving accruals. |
| Outlook: Stable |
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Acuité believes that the outlook on BHTEPL will remain 'Stable' over the medium term on account of the experience of the promoters and improving business risk profile and the above average financial risk profile. The outlook may be revised to 'Positive' in case the company witnesses a material improvement in its scale of operations along with the liquidity profile and working capital management . Conversely, the outlook may be revised to 'Negative’ in case of decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile and liquidity position or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 151.73 | 139.65 |
| PAT | Rs. Cr. | 8.19 | 6.27 |
| PAT Margin | (%) | 5.40 | 4.49 |
| Total Debt/Tangible Net Worth | Times | 0.66 | 1.32 |
| PBDIT/Interest | Times | 6.92 | 5.05 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
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Not Applicable
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| 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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