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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 6.75 | ACUITE B+ | Stable | Assigned | - |
| Bank Loan Ratings | 3.25 | - | ACUITE A4 | Assigned |
| Total Outstanding Quantum (Rs. Cr) | 10.00 | - | - |
| Rating Rationale |
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Acuité has assigned its long-term rating of ‘ACUITE B+’ (read as ACUITE B 'plus' ) and its short-term rating of ‘ACUITE A4’ (read as ACUITE A four) on the Rs. 10 Cr bank facilities of CAPCHEM ELECTRICALS LIMITED (CEL). The outlook is ‘Stable’.
Rating Rationale The rating assigned favourably factors in the experienced management and moderate order book position of the Company. However, the rating remains constrained by the below average financial risk profile and working capital intensive nature of operations. Going forward, the Company’s ability to improve its scale of operations while maintaining its profitability and capital structure and ability to restrict further elongation in the working capital cycle will remain a key rating monitorable. |
| About the Company |
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Capchem Electricals Limited incorporated inAugust 2010 as a private limited company, changed its constitution to an unlisted public company from April, 2022 onwards. The company is engaged in providing maintenance services to electrical sub-stations for data centres, switchgear, capacitors, circuit breaker, transformers and other electrical distribution equipment. The company is based in Mumbai and is owned by Mr. Anand Anant Galgali along with his family members.
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of CEL to arrive at the rating |
Key Rating Drivers
| Strengths |
CEL started its operations in 2010 under the leadership of Mr. Anand Anant Galgali and Ms. Anupama Galgali. Mr. Galgali possesses more than a decade of industry experience. Further, in April 2022, CEL appointed four new directors for augmenting the overall business profile of CEL. The newly appointed directors include Mr Ramchandra Vitthal Satre, Mr Rajan Pratapsingh Thakur, Mr Shrikishan Chunnilal Shrirangam and Ms Nisha Gujar. Acuité believes that the experience and expertise of the promoters and management will benefit the company going forward, resulting in steady growth in the scale of operations.
As on December, 2022 the company’s unexecuted order book position stood at Rs.71 Cr. i.e. 5.07 times of its FY22 revenue. The orders were received in August, 2022 (for a total value of Rs.79 Cr) and are expected to be completed over the medium term.
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| Weaknesses |
The company’s below average financial risk profile is marked by low net worth, high gearing and weak debt protection metrics. The net worth of the company stood at Rs.2.52 Cr , Rs.2.83 Cr, Rs.2.79 Cr as on March 31, 2022 , 2021, 2020 respectively. The gearing of the company has been deteriorating over the last 3 years ending March 31, 2022. It stood at 4.78 times as on March 31, 2022 against 4.55 times as on March 31, 2021 and 4.08 times as on March 31, 2020. The deterioration in gearing ratio is due to increase in debt portion. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 1.10 times and 0.58 times as on March 31, 2022 respectively as against 1.09 times and 0.61 times as on March 31, 2021 respectively. TOL/TNW stood at 8.23 times in FY22, 6.69 times in FY21 and 6.97 times in FY20 . The debt to EBITDA of the company stood at 7.06 times as on March 31, 2022 as against 8.91 times as on March 31, 2021 and 4.76 times as on March 31, 2020.
The working capital management of the company remained intensive with high GCA days at 549 days as on March 31, 2022 as against 986 days as on March 31, 2021. Inventory days stood at 221 days as on March 31, 2022 as against 453 days as on March 31, 2021. Subsequently, the payable period stood at 354 days as on March 31, 2022 as against 513 days as on March 31, 2021 respectively. The debtors day stood at 120 days as on March 31, 2022 as against 323 days as on March 31, 2021. Further, the average bank limit utilization in the last eight months ended November , 22 remained at ~97 percent for fund based and 67 percent for non-fund based. Acuité believes ability of the Company to improve its working capital cycle over the medium term will remain a key rating monitorable.
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| Rating Sensitivities |
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Lower-than-expected revenue and profitability Any further deterioration in working capital management leading to deterioration in financial risk profile and liquidity |
| Material covenants |
| None |
| Liquidity Position: Poor |
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The company’s liquidity is poor marked by low net cash accruals of Rs. 0.13Cr in FY2022 against repayment obligations of Rs. 1.35 Cr. The working capital cycle of CEL stood intensive on account of high GCA (Gross Current Asset) days of 549 in FY2022.Unencumbered cash and bank balances stood at Rs. 0.20 Cr as on March 31, 2022. The current ratio of the company stood at 1.39 times as on March 31, 2022. The fund based bank limits utilization of CEL is 97 percent for fund based and for 67 percent for non- fund based for the past eight months ending November, 2022. Acuité believes that the liquidity of the company is likely to improve over near to medium term owing to increase in scale of operations and margins.
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| Outlook: Stable |
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Acuité believes that CEL will maintain a ‘Stable’ outlook over the medium term owing to its experienced management and moderate orderbook position.. 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 deterioration in its working capital management or larger-than expected debt-funded capex leading to deterioration in its financial risk profile and liquidty.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 13.83 | 7.08 |
| PAT | Rs. Cr. | 0.05 | 0.02 |
| PAT Margin | (%) | 0.35 | 0.31 |
| Total Debt/Tangible Net Worth | Times | 4.78 | 4.55 |
| PBDIT/Interest | Times | 1.10 | 1.09 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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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| Rating History : |
| Not Applicable |
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