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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 45.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 45.00 | - | ACUITE A3+ | Reaffirmed |
| Total Outstanding | 90.00 | - | - |
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Rating Rationale |
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Acuite has reaffirmed the long-term rating ‘ACUITE BBB (read as ACUITE triple B)’ and short-term rating ‘ACUITE A3+’ (read as ACUITE A three plus) on Rs.90.00 crore bank facilities of Jagson International Limited (JIL). The outlook is ‘Stable’
Rationale for Reaffirmation The rating reaffirmation takes into account improved business risk profile, comfortable financial risk profile and strong liquidity Position. Company reported growth in revenue from operations by ~26% in FY2023 to Rs 222.43 crore as against Rs. 176.17 crore for FY2022. The operating profit margin of the company stood at 51.30 percent in FY 23. Financial risk profile of the company improved with improvement in gearing, strong net worth & improved coverage indicators. The Total Tangible net worth stood at Rs. 1213.85 Cr as on 31st March 2023 as against Rs. 1133.59 Cr a year ago. Interest coverage ratio stood strong at 31.93 times for FY2023 and Debt Service coverage ratio stood at 27.15 times for FY2023. These strengths are underpinned by dip in business performance in H1FY24 due to scheduled major maintenance of two of its rigs and elongated working capital requirement. Acuité believes that the company’s ability to grow its scale of operations and profitability while maintaining a healthy capital structure with improvement in working capital operations remains a key rating indicator. |
| About the Company |
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New Delhi based, Jagson International Limited (JIL) was incorporated in 1988 as a private limited company by Mr Jagdish Gupta. It’s a family-owned business. JIL is the flagship company of the Jagson group of Companies. JIL is one of the first private sector companies to enter the field of offshore drilling for Oil and Gas exploration. Besides this JIL is also involved in warehousing and storage at ports. JIL has successfully done offshore drilling in the Indian waters for more than a decade. ONGC has been awarding various contracts to JIL for offshore drilling and is currently the sole customer for JIL, against stiff global competition. JIL has successfully drilled wells offshore, up to the depth of 25,000 feet.Company is in process for capital expenditure of Rs~300 crores for new Rig "Sea Challenger" which is expected to boost the revenue of the company substantially in FY 25.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuite has considered standalone business and financial risk profile of Jagson International Limited. |
| Key Rating Drivers |
| Strengths |
| Experienced promoters, reputed clientele and established business model
JIL has establish presence since 1988 in the field of off-shore drilling for Oil and Gas exploration companies. The company is promoted by Mr. Jagdish Gupta is the founder of Jagson Group with business experience of more than 30 years in diversified businesses. He is supported by Ms. Rav inder Kaur Hora and Mr. Pradeep Gupta who has more than 2 decades of experience in diversified business. Jagson International Ltd. has been in the business of oil rigs and drilling for over 30 years. The vast experience of promoters and established track record of operations has helped to establish long-standing relationships with India's leading upstream companies like ONGC. JIL has been able to complete the deployments in a timely manner and has been able to secure contracts renewals at prev ailing rig charter rates. Improving Business Risk Profile JIL’s operation witnessed substantial improvement which is apparent from growth in revenue from operations by ~26% in FY2023 and stood at Rs 222.43 crore as against Rs. 176.17 crore for FY2022. The operating profit margin of the company increased by 11.52 percent and stood at 51.30% in FY 23 vis-à-vis 39.78% a year ago. Likewise, the net profit margin of the company increased by 12.98 percent and stood at 28.44 percent in FY2023 as against 15.46 percent in FY 22. ROCE of the company also saw a positive movement and stood at 7% in FY2023 vis-a vis 3.39% in previous fiscal. Company has reported operating income of Rs ~51 crore in H1 FY 24 which is ~116 lower in comparison to H1 FY 23. Operating income of the company in H1FY 24 was lower as two rigs were in scheduled major maintenance from April 23 to December 23. Strong Financial Risk Profile Company has comfortable financial risk profile marked by strong net worth, low gearing and comfortable coverage indicators. Tangible net worth of the company stood at Rs. 1213.85 Cr as on 31st March 2023 as against Rs. 1133.59 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 0.01 times in FY 2023 as against 0.05 times in FY 22. Improvement in gearing is on account of improved net worth and minimal dependence on external finds. Gearing is expected to increase as the company is undergoing a capex of Rs. 300 Cr. in near medium term which will be funded to the tune of ~ Rs. 225 Cr. through debt and remaining through internal funds. Interest coverage ratio increased by 1863 bps and stood strong at 31.93 times for FY2023 as against 13.30 times in FY2022. Increase in Interest coverage ratio is on account of higher profits in FY 23 in comparison to FY 22. Likewise, Debt Service coverage ratio increased by 1514 bps and stood comfortable at 27.15 times for FY2023 as against 12.01 times in FY2022. Total outside liabilities to total net worth (TOL/TNW) stood at 0.03 times as on FY2023 vis-à-vis 0.08 times as on FY2022. Debt-EBITDA improved and stood at 0.11 times as on 31st March 2023 as against 0.73 times as on 31st March 2022. The Net Cash Accruals to Total debt stood at 7.72 times as on FY2023 and 1.14 times for FY2022. |
| Weaknesses |
| Intensive working capital operations
Company has elongated working capital requirements as evident from gross current assets (GCA) of 356 days in FY2023 as compared to 393 days in FY2022. High GCA days is attributable to high inventory days. Maintaining high inventory of spare parts and consumables becomes imperative for the company as the rigs needs to be always up and working even an hour of downtime will result into heavy revenue losses. As a result Inventory days stood at 394 days in FY2023 as against 329 days in FY 22. Debtors days stood at 95 days in FY 23 (96 days in FY22). Exposure to group companies The company has exposure in the form of loans and advances, that has been extended to group company; Mahima Production Limited (motion picture company) which has also increased from Rs.~108 crores in FY22 to Rs.~113 crores in FY23. As per discussion with management, the loans are extended interest free. Neverthess, the tangible net worth of the company remained healthy at Rs. 1213.85 crores as on March 31, 2023(loan is ~10 percent of the net worth). Mahima Production limited has repaid Rs ~53 crores till November 23 and balance will be repaid in FY 25. Acuite believes that any significant write off can moderately impact the tangible net worth of the company. |
| Rating Sensitivities |
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Significant increase in total operating income. Any significant increase in exposure towards group companies Any elongation in gross current asset days. Company's ability to start operations for New Rig as per schedule |
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| Liquidity Position |
| Strong |
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Company has strong liquidity marked by net cash accruals to its maturing debt obligations, current ratio, cash and bank balance. Company generated cash accruals of Rs. 95.42 crore for FY2023. Current Ratio stood at 7.49 times as on 31 March 2023 as against 2.79 times in the previous year. Fund based working capital limits are utilized at ~65 per cent during the last twelve months ended June 23 while non fund based limit utilization is 45 percent leaving additional cushion in working capital limits to meet contingencies. Cash and Bank Balances of company stood at Rs 11.24 crores.
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| Outlook:Stable |
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Acuité believes that the outlook on JIL will remain 'Stable' over the medium term on account of its experienced promoter and long track record of operations. The outlook may be revised to 'Positive' in case of significant improvement in scale of operations while maintaining the profitability. Conversely, the outlook may be revised to 'Negative' in case of any stretch in its working capital management or any significant cost or time overrun in its proposed capex leading to deterioration of its revenue stream
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| Other Factors affecting Rating |
| None |
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| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 222.43 | 176.17 |
| PAT | Rs. Cr. | 63.26 | 27.23 |
| PAT Margin | (%) | 28.44 | 15.46 |
| Total Debt/Tangible Net Worth | Times | 0.01 | 0.05 |
| PBDIT/Interest | Times | 31.93 | 13.30 |
| 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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