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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 183.50 | ACUITE A- | Stable | Upgraded | - |
| Bank Loan Ratings | 102.00 | - | ACUITE A2+ | Upgraded |
| Total Outstanding Quantum (Rs. Cr) | 285.50 | - | - |
| Rating Rationale |
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Acuité has upgraded the long-term rating from ‘ACUITE BBB+’ (read as ACUITE triple B plus) to 'ACUITE A-' (read as ACUITE A Minus) and the short-term rating ‘ACUITE A2’ (read as ACUITE A two) to ‘ACUITE A2+’ (read as ACUITE A two Plus) on the Rs. 285.50 crore bank facilities of Enpro Industries Private Limited (EIPL). The outlook is ‘Stable’.
Rationale for Rating Upgrade Acuite factors in experienced management, Improvement in Business, Healthy financial risk profile and adequate liquidity profile of the company The revenue from operations of the company witnessed substantial improvement to Rs. 345.01 crore in FY2023 as against Rs. 298.59 crore in FY2022. The operating profit margin of the company remains stable with minuscule dip of 140 bps in FY 23. Operating Profit Margin of company stood at 25.33% in FY2023 as against 26.73% in FY2022. Similarly, PAT Margin stood at 12.92 Percent in FY 2023 as against 13.27 percent in FY 2022. Coupled to this gearing improved in FY 23 and coverage indicators stood Strong. Acuité believes that the company will grow its scale of operations in the volume terms and improve profitability while maintaining a healthy capital structure. |
| About the Company |
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Pune-based, EIPL was established as a partnership firm by Mr. Shrikrishna Karkare and Mrs. Alka Karkare in the year 1988 and later reconstituted as a private limited company in 1999. The company is engaged in the designing and manufacturing of mechanical fluid systems such as lubes oil systems, filtration skids and fuel handling systems among other customized applications for power, petrochemical, chemical & fertilizers, refineries and process industries. Further, it has recently doubled its manufacturing capacity and added a new ‘Process Equipment Division’ to expand its presence across different product lines and industries. EIPL has its manufacturing facility in Markal, Pune and also has its presence abroad with regional offices in North America, Middle East, Europe, Japan and Korea to cater to the export markets.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of EIPL to arrive at this rating. |
Key Rating Drivers
| Strengths |
| Experienced Managment
Incorporated in 1991, EIPL is promoted by Mr. Shrikrishna Karkare and Mrs. Alka Karkare, who have an experience of more than three decades in the aforementioned line of business. The extensive experience of promoters in the industry has helped the company in developing long-standing relationships with its customers and suppliers by the way of repetitive orders from them. Furthermore, EIPL caters to a set of reputed clientele such as Mitsubishi Hitachi Power Systems India Private Limited in power sector, GE Oil & Gas India Private Limited in Oil & Gas industry and IFFCO Limited in Chemical & Fertilizers industry. In addition to this, the company recently expanded its customer portfolio to industries such as food processing, pharmaceutical, agriculture and defence. Business risk profile-Improved EIPL’s operation witnessed improvement which is apparent from growth in revenue from operations by ~16% in FY2023 to Rs 345.01 crore as against Rs. 298.59 crore for FY2022 (~26 percent from FY 21 to FY 23). The operating profit margin of the company decreased by 140 bps in FY 23. Operating Profit Margin of company stood at 25.33% in FY2023 as against 26.73% in FY2022. Net profit margin of the company remains stable in FY 23 with minuscule fall by 35 bps and stood at 12.92 percent in FY2023 as against 13.27 percent in FY 22. ROCE of the company stood at 19.25 times in FY2023. lier. Increase in net worth is on account of Profit accretion. Financial Risk Profile- Healthy Company has healthy financial risk profile marked by strong net worth, low gearing and strong coverage indicators The Total Tangible net worth stood at Rs. 278.77 Cr as on 31st March 2023 as against Rs. 233.79 Cr a year earlier. Increase in net worth is on account of Profit accretion.Company follows conservative leverage policy marked by low gearing. Debt to Equity ratio improved and stood at 0.52 times in FY 2023 as against 0.58 times in FY 22. Interest coverage ratio stood strong at 5.60 times for FY2023 as against 6.45 times in FY2022. Likewise, Debt Service coverage ratio stood comfortable at 2.39 times for FY2023 as against 2.25 times in FY2022. Total outside liabilities to total net worth (TOL/TNW) stood at 0.94 times as on FY2023 vis-à-vis 0.97 times as on FY2022. Debt-EBITA stood at 1.59 times as on 31st March 2023 as against 1.64 times as on 31st March 2022. The Net Cash Accruals to Total debt stood at 0.41 times as on FY2023 and 0.42 times for FY2022. The financial risk profile of the company is expected to improve and remain comfortable in medium terms. |
| Weaknesses |
| Working capital operations- Intensive
Company has intensive working capital requirements as evident from gross current assets (GCA) of 427 days in FY2023 as compared to 396 days in FY2022. Intensiveness of Working capital is on account of Inventory Days. Company has to maintain its inventory based on orders in hand. Inventory days stood at 274 days in FY 23 (242 days in FY22). Debtor days stood at 149 days in FY2023 as against 145 days in FY 22. Fund based working capital limits are utilized at ~87 per cent during the last twelve months ended August 23. |
| Rating Sensitivities |
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Significant improvement in operating performance of the firm leading to improvement in overall financial risk profile Any deterioration in its liquidity leading to deterioration in debt protection metrics. Improvement in working capital cycle. |
| All Covenants |
| None |
| Liquidity Position |
| Adequate |
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Company has adequate liquidity marked by net cash accruals to its maturing debt obligations, current ratio and cushion available in working capital limits. Company generated cash accruals of Rs. 59.87 crore for FY2023 as against obligations of Rs. 15.54 crore for the same period. Current Ratio stood at 1.73 times as on 31 March 2023 as against 1.61 times in the previous year. Fund based working capital limits are utilized at ~87 per cent during the last twelve months ended August 23 leaving additional cushion in working capital limits to meet contingencies. Cash and Bank Balances of company stood at Rs 0.01 crore.
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| Outlook:Stable |
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Acuité believes that EIPL will maintain a 'Stable' outlook over the medium term on account of its managemnet extensive experience and healthy relationship with existing clients. The outlook may be revised to 'Positive' if the firm is able to sustain growth in revenues while maintaining its profitability and improving its working capital cycle. Conversely, the outlook may be revised to 'Negative' in case of any stretch in its working capital management leading to deterioration of its financial risk profile and liquidity profile.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 345.01 | 298.59 |
| PAT | Rs. Cr. | 44.56 | 39.61 |
| PAT Margin | (%) | 12.92 | 13.27 |
| Total Debt/Tangible Net Worth | Times | 0.52 | 0.58 |
| PBDIT/Interest | Times | 5.60 | 6.45 |
| 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 • Entities In Manufacturing Sector:- https://www.acuite.in/view-rating-criteria-59.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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