|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 124.00 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 106.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding | 230.00 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed its long-term rating to 'ACUITE BBB+' (read as ACUITE triple B plus) and also reaffirmed its short-term rating to 'ACUITE A2' (read as ACUITE A two) on the Rs. 230 crore bank facilities of Dozco India Private Limited (DIPL). The outlook is 'Stable'.
Rationale for rating The rating reflects a stable business risk profile of the company by marked an increase in topline from Rs. 386.63 Cr. in FY23 to Rs. 455 Cr. in FY24 (provisional). However, there is a declining trend in the operating margin from 10.65 percent in FY23 to 9.45 percent in FY24(provisional). It is restricted to higher revenue share from trading business and a slightly improved but stretched operating cycle. The improvement in the working capital cycle is largely due to reduced inventory levels of the Company to 217 days in FY24(provisional) due to decrease in maintenance of stocks. The financial risk profile has remained healthy, with gearing below unity and steady debt coverage indicators. The ratings continue to draw comfort from the experienced management, wide distribution network, and long-standing relationships with suppliers and customers. |
| About the Company |
|
Incorporated in 1992, Dozco India Private Limited (DIPL) is engaged in the trading of heavy earth moving and construction equipment (HEMM) and its spare parts and the manufacturing of mining equipment. DIPL, with a corporate office in Vizag, is promoted by the Bangur family, and the company is currently headed by Mr. Radhe Shyam Bangur, Mr. Shiv Kumar Bangur, Mr. Om Prakash Bangur, Mr. Ramesh Kumar Bangur, Mr. Nand Gopal Bangur, and Mr. Kamal Kishore Bangur. The company also set up a manufacturing plant in 2013 to manufacture rockbreakers (hammers), chisels, buckets, hydraulic quick couplers, undercarriages, and other equipment for the mining and material handling industries.
|
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
|
Acuité has considered the standalone financial and business risk profile of Dozco India Private Limited (DIPL) to arrive at the rating.
|
| Key Rating Drivers |
| Strengths |
| Long operational track record and experienced management
The directors of the company, Mr. Radhe Shyam Bangur, Mr. Shiv Kumar Bangur, Mr. Om Prakash Bangur, Mr. Ramesh Kumar Bangur, Mr. Nand Gopal Bangur and Mr. Kamal Kishore Bangur, have been in the industry for around four decades. DIPL has a long operational track record of 38 years in the mining industry. Acuité believes that the long track record of operations and experienced management will benefit the company going forward, resulting in steady growth in the scale of operations. Growth in HEMM dealership business and manufacturing business The HEMM dealership business has grown over the years. The high value equipment like excavator and dozers are the main revenue driver in this dealership business. This increase is due to both, the increase in prices of the equipment and the increase in the number of units sold per year. The HEMM dealership business is expected to grow further with increasing investment in the mining sector across India and most of the heavy equipment of DIPL are used in construction of roads in difficult terrain. Therefore, increasing infrastructure on hilly areas by the Government will benefit DIPL. The manufacturing business of DIPL has leveraged the relationships of the HEMM and spare parts customers and existing networks to market the manufacturing products across India. Moreover, DIPL also exports the manufacturing products to the neighbouring countries. Therefore, manufacturing sector has seen a growth over the years. Healthy financial risk profile The company’s financial risk profile is marked by healthy net worth, comfortable gearing and debt protection metrics. The tangible net worth (TNW) of the company stood at Rs.208.37 Cr. as on March 31, 2024(provisional). The gearing of the company stood comfortable at 0.90 times as on March, 2024(provisional) as against 0.68 times as on March 31, 2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood comfortable at 1.34 times as on March 2024(provisional) as against 1.10 times as on March 2023. The debt protection metrics of the company is comfortable marked by Interest Coverage Ratio (ICR) at 2.63 times as on March 2024(provisional), however, the Debt Service Coverage Ratio (DSCR) stood at a moderate level of 1.44 times as on March 31, 2024(provisional). Acuité believes that going forward the financial risk profile of the company will remain healthy over the medium term, in the absence of any major debt funded capex plans. |
| Weaknesses |
| Working capital intensive nature of operations
The working capital intensive nature of operations of the company is marked by high Gross Current Assets (GCA) of 279 days as on March 2024(provisional) as compared to 315 days as on March 2023. The high level of GCA days is primarily on account of improving but high inventory levels during the same period. The inventory holding improved to 217 days in March FY 2024(provisional) as compared to 266 days as on 31st March FY 2023. The management is consciously reducing its inventory levels of spare parts of all brands and models as these are imported and have high lead time leading to bulking up of inventory. The debtor collection has increased and stood moderate to 73 days as on March FY 2024(provisional) as compared from 62 days as on March FY 2023. Acuite believes that the working capital requirement of the company would remain at similar levels for the medium term.
Declining operating profitability The company has marked a declining trend in operating margin to 9.45 percent in FY 24(provisional) from 10.65 percent in FY 23. The decline has been since the company is not in need of funding requirements, it passed the benefit on it's customers in terms of lower product prices. The ROCE is 10.17 percent in March FY 2024(provisional) as compared to 10.54 percent in March FY 23.
|
| Rating Sensitivities |
|
| Liquidity Position |
| Adequate |
|
The company’s liquidity is adequate marked by steady net cash accruals of Rs. 23.23 Cr. as on March, 2024 (provisional) as against long term debt repayment of Rs.10.80 Cr. over the same period. The current ratio declined slightly but stood comfortable at 1.65 times as on March, 2024(provisional) as compared to 1.83 times as on March, 2023. The unencumbered cash and bank balances of the company stood at Rs 2.65 Cr. and the encumbered stood at Rs. 30.50 Cr. as on March, 2024(provisional). The fund-based limit utilization is moderate which stood to 70.50 percent over the 12 months ended March FY 2024(provisional). The company does not have any significant capex plans in the near to medium term. Further the promoters have demonstrated flexibility infuse unsecured loan in the past as and when needed to support the growth in the business. The company also have successfully recovered investments in China and Sri Lanka post winding up the operations. Acuité believes that the financial risk profile of the company is likely to remain healthy over the medium term, in the absence of any major debt funded capex plans.
|
| Outlook: Stable |
|
Acuité believes that the outlook on DIPL will remain 'Stable' over the medium term on account of the long track record of operations, experienced management, strong business risk profile, and healthy financial risk profile. The outlook may be revised to 'Positive' in the event of significant growth in revenue while improving operating margins from the current levels. Conversely, the outlook may be revised to 'Negative' in the event of a decline in revenue or operating margins, a deterioration in the financial risk profile, or a further elongation in its working capital cycle.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 455.00 | 386.63 |
| PAT | Rs. Cr. | 15.50 | 11.50 |
| PAT Margin | (%) | 3.41 | 2.97 |
| Total Debt/Tangible Net Worth | Times | 0.90 | 0.68 |
| PBDIT/Interest | Times | 2.63 | 2.89 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
|
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Trading Entities: https://www.acuite.in/view-rating-criteria-61.htm |
| Note on complexity levels of the rated instrument |
|
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.
|
|
| |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
|
|
|
About Acuité Ratings & Research |
