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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 6.45 | ACUITE BB- | Stable | Upgraded | - |
| Bank Loan Ratings | 1.45 | - | ACUITE A4+ | Assigned |
| Bank Loan Ratings | 3.55 | - | ACUITE A4+ | Upgraded |
| Total Outstanding | 11.45 | - | - |
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Rating Rationale |
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Acuité has upgraded its long-term rating to 'ACUITE BB-’ (read as ACUITE double B Minus) from ‘ACUITE B+’ (read as ACUITE B plus) and its short-term rating to ‘ACUITE A4+’ (read as ACUITE A four Plus) from ‘ACUITE A4’ (read as ACUITE A four) on the Rs. 10 Cr. bank facilities of Capchem Electricals Limited (Erstwhile Capchem Electricals Private Limited) (CEL). The outlook is ‘Stable’.
Acuité has assigned its short-term rating of ‘ACUITE A4+’ (read as ACUITE A four Plus) on the Rs. 1.45 Cr. bank facilities of Capchem Electricals Limited (Erstwhile Capchem Electricals Private Limited) (CEL). Rationale for upgrade : The rating upgrade takes into account the established track record of operations along with experienced management of CEL, augmentation in the business risk profile backed by an improvement in the scale of operations, a sustained moderate financial risk profile during FY2024. The company's revenue stood at Rs.30.62 Cr. in FY2023, implying a growth rate of ~121.45 percent against the previous year. Further, the company is estimated to achieve a revenue of Rs.40.68 Cr. in FY2024. The margins during FY2023 stood at 12.91 percent against 10.79 percent in FY2022. The financial risk profile of the company continues to be moderate with moderate debt protection metrics and gearing levels. The overall gearing of the company stood at 0.95 times as on March 31, 2023, as against 4.78 times as on March 31, 2022. The interest coverage ratio stood at 2.46 times in FY2023 against 1.10 times in FY2022. The ratings are further supported by the company’s healthy order book position of Rs. 294.55 Cr. as on March 31, 2024, reflecting revenue visibility over the medium term. The rating remains constrained by the working capital-intensive nature of operations. |
| About the Company |
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Capchem Electricals Limited incorporated in August 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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| Unsupported Rating |
| Not applicable |
| 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 to augment its overall business profile. 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.
The company has reported significant YOY growth of 121.45 percent in FY2023 as compared to FY2022. Revenues stood at Rs.30.62 Cr. in FY2023 as against Rs.13.83 Cr. in FY2022. The improvement in the revenues is on account of healthy inflow of orders and their timely execution. Out of the total revenue, 80 percent of the revenue is from one order i.e, Aamanthin info park (electrical sub-stations work). The margins during FY2023 stood at 12.91 percent against 10.79 percent in FY2022. The company has a healthy order book position of Rs 294.55 Cr. as of March 31st 2024, which is to be executed in the next 1–2 years, providing revenue visibility over the medium term. Further, the company is estimated to achieve a revenue of Rs.40.68 Cr. in FY2024. Operating profit margins are estimated to be stable in FY2024 in the range of 12.5 - 13 percent. Acuite believes that the scale of operations will continue to improve over the medium term backed by a healthy order book position.
The financial risk profile of the company has remained moderate with low net worth, moderate gearing and debt protection metrics. The net worth of the company stood at Rs.7.29 Cr. and Rs.2.52 Cr. as on March 31, 2023, and 2022 respectively. The reason for improvement in the net worth is on account of infusion of Rs.1.40 Cr. as equity share capital and of Rs.1.96 Cr. as securities premium in FY2023. The gearing of the company stood at 0.95 times as on March 31, 2023, against 4.78 times as on March 31, 2022.The improvement in the gearing ratio is on account of increase in net worth position and decrease in long term debt. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 2.46 times and 1.19 times as on March 31, 2023, respectively as against 1.10 times and 0.58 times as on March 31, 2022, respectively. The debt to EBITDA of the company stood at 1.72 times as on March 31, 2023, as against 7.06 times as on March 31, 2022. Acuite believes that financial risk profile will improve in the medium term on account of moderate capital structure and debt protection metrics.
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| Weaknesses |
Company’s working capital cycle is intensive as reflected by its GCA days at 392 days as on March 31, 2023, as against 549 days as on March 31, 2022. However, the improvement is reflected in FY2023 is on account of improvement in the inventory days. Inventory days stood at 102 days as on March 31, 2023, as against 221 days as on March 31, 2022. The debtor days stood at 221 days as on March 31, 2023, as against 120 days as on March 31, 2022. Subsequently, the payable period stood at 291 days as on March 31, 2023, as against 352 days as on March 31, 2022, respectively. Further, the average bank limit utilization in the last 6 months ended March 24 remained at ~90 percent for fund-based limits and 100 percent for non- fund-based limits. 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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| Liquidity Position: Adequate |
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The liquidity profile of the company is adequate, marked by adequate net cash accruals to its maturing debt obligation. The company generated cash accruals of Rs.1.79 Cr. in FY2023, while its maturing debt obligations were Rs. 1.24 Cr. during the same period. Going forward, the company is expected to generate net cash accruals in the range of Rs. 3.00-6.00 Cr. in FY 2024-25 against repayment obligations of Rs.0.78-0.92 Cr. Unencumbered cash and bank balances stood at Rs. 0.01 Cr. as on March 31, 2023. The current ratio stood at 1.20 times as on March 31, 2023. The fund-based bank limit utilization of company is 90 percent for fund-based and 100 percent for non-fund-based limits respectively, for the past 6 months ending March 2024. Acuité believes that the liquidity of the company is likely to be adequate in the near to medium term backed by adequate accrual generation.
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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 along with improving scale of operations supported by a healthy order book position and the company’s moderate financial risk 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 liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 30.62 | 13.83 |
| PAT | Rs. Cr. | 1.67 | 0.05 |
| PAT Margin | (%) | 5.45 | 0.35 |
| Total Debt/Tangible Net Worth | Times | 0.95 | 4.78 |
| PBDIT/Interest | Times | 2.46 | 1.10 |
| 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 • 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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