|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 354.88 | ACUITE AA- | Stable | Assigned | - |
| Bank Loan Ratings | 687.55 | ACUITE AA- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 30.00 | - | ACUITE A1+ | Assigned |
| Bank Loan Ratings | 40.00 | - | ACUITE A1+ | Reaffirmed |
| Total Outstanding | 1112.43 | - | - |
| Total Withdrawn | 0.00 | - | - |
|
Rating Rationale |
|
Acuite has reaffirmed its long-term rating of 'ACUITE AA-' (read as ACUITE Double A minus) on the Rs. 687.55 Cr. and its short-term rating of ‘ACUITÉ A1+’ (read as ACUITE A one plus) on the Rs. 40.00 Cr. bank facilities of ‘Eastman Auto and Power Limited (EAPL)’. The outlook is 'Stable'.
Acuite has assigned its long-term rating of 'ACUITE AA-' (read as ACUITE Double A minus) on the Rs.354.88 Cr. and short-term rating of ‘ACUITÉ A1+’ (read as ACUITE A one plus) on the Rs. 30.00 Cr. bank facilities of ‘Eastman Auto and Power Limited (EAPL)’. The outlook is 'Stable'. Rationale for Rating Reaffirmation The rating reaffirmation considers EAPL's sustained improvement in operational performance which is expected to continue over the medium term. The rating also factors in the experienced management, long track record of operations and efficient working capital management of the company. However, the rating is constrained by moderate financial risk profile and susceptibility to changes in regulations, customer preferences and forex risk.
|
| About the Company |
|
Eastman Auto and Power Limited (EAPL) is Gurgaon based company and was incorporated in 2000. The company was initially involved in trading activity till 2008. The company leased out plant in Nalagarh district, Himachal Pradesh for manufacturing of invertor Battery. In 2018, the company set up another plant (own unit) in Baddi district, Himachal Pradesh for the same. The installed capacity remained at 6000000 units in FY2024. EAPL has wide product range including inverter batteries, E-rickshaw batteries, solar batteries, tubular batteries etc. EAPL sell its batteries under brand name; ‘Addo’ and ‘Eastman’ catering to solar, E-Rickshaws and home UPS, contributes ~ 99 per cent in its revenues, whereas the company also undertakes contract manufacturing for reputed client such as Fujiyama Systems Private Limited, Lucas Indian Service Limited and Havells India Limited which accounts for rest ~1 per cent in revenues.
|
| Unsupported Rating |
|
Not Applicable
|
| Analytical Approach |
|
Acuite has considered the standalone business and financial performance of Eastman Auto and Power Limited (EAPL) to arrive at the rating.
|
| Key Rating Drivers |
| Strengths |
| Experienced management and long track record of operations
The company was initially incorporated in 2000 by Mr. Jagdish Rai Singal, as a subsidiary of Eastman group. During the time the promoters were engaged in industrial manufacturing and automobile industry. The day-to-day operation of the company are currently managed by Mr. Shekhar Singal (Managing Director) S/o Mr. Jagdish Rai Singal. The management is ably supported by qualified and experienced professionals that has resulted in maintaining strong relationship with their clients such as Fujiyama Power Systems Private Limited, Havells India Limited and Lucas Indian Service Limited to name a few. The other directors include Mr. Vineet Jain (Independent director) who is also associated with the other group companies as an independent director. Mr. Sanjeev Gupta (Independent director) and Mr. Surajit Sur (Whole time director). The promoters are supported by team of well qualified and experienced professionals. Acuite believes that the company would continue to benefit from experience of the directors and long track record of the company. Improvement in scale of operations and profitability margins EAPL reported total operating income of Rs. 3225.63 Cr. in FY2024 as against Rs.2334.26 Cr. in FY 2023. The company has reported growth of 38.19 per cent in FY2024. The growth is driven by increase in sales volume of E-Rickshaw and inverter batteries in FY2024. Total production volume increased from 2767644 units in FY 2023 to 3508774 units in FY2024. Out of this, e-rickshaw battery volume evidenced the growth of 37.77 per cent and production value stood at 24,56,614 units in FY2024 as compared to 17,83,141 units in FY2023. The realisation price of E- Rickshaw and inverter batteries also increased by 5 per cent in FY2024. EAPL's profitability margin improved in FY2024 and stood at 7.69 per cent in FY2024 as against 5.26 per cent in FY2023. The improvement is majorly on account of decrease in raw material cost and increase in realisation price. PAT margin has improved to 3.97 per cent in FY2024 as against 1.90 per cent in FY2023. In 10M FY2025, EAPL reported Rs. 3218.00 Cr. of turnover and estimates further improvement in the turnover and targets a revenue of~ Rs. 4100.00 Cr. Efficient working capital management The efficient working capital management of the company is marked by comfortable Gross Current Assets (GCA) of 87 days as on March 31, 2024 compared to 98 days as on March 31, 2023. The debtor days stood at 27 days as on March 31, 2024 as against 20 days as on March 31, 2023. The average collection period is around 30 days. The inventory days for the company stood at 56 days in FY 2024, compared to 59 days in FY 2023. Additionally, creditor days stood at 31 days in FY 2024, compared to 44 days in the previous year. Furthermore, the reliance on working capital limits remained low, with utilization at around 42 percent over 12 months ending December 2024. Acuite believes that working capital requirements are expected to remain efficient of the company over the medium term. |
| Weaknesses |
| Moderate financial risk profile
EAPL's financial risk profile is moderate marked by moderate net worth, gearing and debt protection metrics. The net worth of the company stood at Rs.313.89 Cr. as on March 31, 2024 as against Rs.190.89 Cr. as on March 31, 2023. EAPL has exposure to its subsidiaries to the tune of Rs. 162.87 Cr. as on March 31, 2024 as against Rs. 45.53 Cr. as on March 31, 2023 which is ~ 52 per cent of total net worth as on March 31, 2024. The gearing (debt equity) stood at 1.85 times as on March 31, 2024 as against 1.98 times as on March 31, 2023. Further, debt protection metrics stood moderate, marked by interest coverage ratio (ICR) at 5.83 times in FY2024 as against 5.49 times in FY2023. The DSCR stood at 2.09 times in FY2024 against 2.14 times in FY2023. The Net Cash Accruals to Total Debt (NCA/TD) stood at 0.27 times in FY 2024 compared to 0.23 times in the previous year. Acuite believes the financial risk profile of the EAPL will improve with no further debt funded capex plan over the medium term.
Susceptibility to changes in regulations, customer preferences and forex risk The battery industry remains susceptible to changes in government regulations regarding the content raw material used. Further, the industry is susceptible to changes in consumer preferences. Hence, the operational performance of the company is expected to be impacted in event of any of above event. The company exports around 11 per cent of their products to foreign countries, thus its business remains exposed to fluctuations in foreign exchange rates, thereby affecting its margins. Currently there is no hedging mechanism in place, thus the company remains susceptible to foreign exchange rate fluctuations over the medium term. |
| ESG Factors Relevant for Rating |
|
During the year 2024, EAPL transitioned to IND AS from GAAP for improving transparency and compliance aligning international regulatory framework.
EAPL has dedicated R&D division where they have taken numerous initiatives which includes Carbon compatibility with lower water loss, Formation Program Design for reducing sulfation, Gauntlet design for leach-out reduction and better diffusion, Casting process design for corrosion reduction. The envelope of EAPL’s empowerment values extends well beyond the company offices and factories. As an organization, Eastman has taken many impactful CSR initiatives through Darshana Singal Foundation. For instance, empowering women is a key mission for EAPL. The Darshana Singal Foundation’s launched Sapno Ki Sawari initiative - aimed at distributing electric rickshaws to women across India. The idea was to enable these women as the breadwinner for their families through reliable means. This CSR campaign garnered great success within the community. At Eastman Auto & Power Ltd. (EAPL), company believes in the power of empowering lives as a principle that drives our Corporate Social Responsibility (CSR), endeavours through the Darshana Singhal Foundation (DSF). EAPLs mission is to uplift communities, foster independence, and instil hope by transforming lives one initiative at a time. |
| Rating Sensitivities |
|
Sustainable improvement in the scale of operations and profitability.
Changes in financial risk profile and significant exposure to its subsidiaries Deterioration in working capital cycle and liquidity profile of the company. |
| Liquidity Position |
| Strong |
|
EAPL liquidity is strong, marked by healthy generation of net cash accruals in FY2024 to its maturing debt obligations. The company has generated cash accruals of Rs.159.74 Cr year ending March 31, 2024 as against its long term debt obligations of Rs.54.49 Cr for the same period. Going forward company is expected to generate net cash accrual in the range of Rs.208.45 – 248.40 Cr. against modest CPLTD of Rs. 63.23 Cr. The cash and bank balances of the EAPL stood at Rs.22.04 Cr as on March 31, 2024. The current ratio stood at 0.91 times as on March 31, 2024 and the bank limits remain utilised at low at an average of nearly of 42 per cent for the 12 months ending December 2024.
Acuité believes that the liquidity of the EAPL is likely to remain adequate in view of the healthy net cash accruals against repayment obligations. |
| Outlook |
|
Stable
|
| Other Factors affecting Rating |
| None |
| Key Financials : | ||||||||||||||||||||||||
*The company has transitioned to IND AS from GAAP in FY24, thus FY23 is restated to that effect |
||||||||||||||||||||||||
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
|
• 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 |
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
About Acuité Ratings & Research |
