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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 6.40 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 7.00 | - | ACUITE A2 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 13.40 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE BBB’ (read as ACUITE t riple B) and short-term rating of ‘ACUITE A2’ (read as ACUITE A two) on the Rs.13.40 Cr. bank facilities of Jayachandran Industries Private Limited (JIPL). The outlook is ‘Stable’.
Rating Rationale The rating reaffirmation takes into account the stable operating and financial performance of JC Group, marked by improved operating income, range bound operating margins and moderate financial risk profile. The operating income of the Company improved to Rs. 932.66 Cr in FY2022 as against Rs.660.11 Cr in FY2021. In 8M FY23 the company generated revenues of Rs. 607.76 Cr and is expected to close the year in the range of Rs. 965-975 Cr. The operating margins ranged between 4.57-4.89 percent for the last three years ended FY2022.The financial risk profile marked by modest gearing and comfortable debt protection metrics continues to remain moderate |
| About Company |
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Incorporated in 2009 by Mr. Anbalagan and his four brothers, JIPL is engaged in manufacture of lead acid batteries for automotives and invertor systems. The company markets the batteries under the brand name ‘JC’. The company has facility located in Coimbatore (Tamil Nadu) with installed capacity of 2400 MT per annum. The day to day operations of the company are managed by Mr. Bharani Kumar (Managing Director).
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| About the Group |
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Eswari Global Metal Industries Private Limited established as a partnership firm in the year 1986, later, in the year 2013 it was reconstituted to private limited company. The company is engaged in manufacturing of lead alloys from lead battery scrap. The company has facility located in Mangalore (Karnataka) with installed capacity of 72,000 tons per annum. The day to day operations of the company are managed by Mr. A Sabarinathan and Mr. Nithin.
Tamil Nadu based Jayachandran Alloys Private Limited (JAPL) was incorporated in the year 2006 by Mr. Anbalagan and his four brothers. The company is engaged in manufacturing of lead alloys from lead battery scrap. The company has its facility located in Perundurai (Tamil Nadu) with installed capacity of 24000 tons per annum. Jayachandran Industries Private Limited is a Tamil Nadu based company incorporated in the year 2009. The company is engaged in the manufacturing of lead batteries for auto motives and inverter systems. Jayachandran Plastics Private Limited is a Tamil Nadu based entity incorporated in the year 2010. The company is engaged into recycling of the plastic components from the battery scrap and manufacture plastic chips and granules. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has consolidated business and financial risk profile of Jayachandran Alloys Private Limited (JAPL), Eswari Global Metal Industries Private Limited (EGPL), Jayachandran Plastics Private Limited (JPPL), Jayachandran Industries Private Limited (JIPL) together referred as JC Group (JCG) to arrive at the rating. The consolidation is on account of common management, same line of business and significant operational and financial linkages
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Key Rating Drivers
| Strengths |
The promoters of the group started EGPL in 1986 with lead smelting unit in Mangalore (Karnataka) and later in 2006 EGPL added second unit in Mangalore (Karnataka). The founding directors of the JC group namely Mr. P Anbalagan, Mr. P Chandrasekaran, Mr. P Ramalingam and Mr. P Arumugam have around three decades of experience in trading of non-ferrous metals, manufacturing of lead alloys and battery manufacturing. The day-to-day operations of the group are also managed by second generation entrepreneurs namely Mr. C Bharani Kumar, Mr. A. Sabarinathan, Mr. C. Pradeep and Mr. C. Prasath having around a decade of experience in metals, plastic and battery industry. Further, the group has reported healthy revenue of Rs.932.66 Cr in FY2022 as against Rs.660.11 Cr. in FY2021 . Acuité believes that the JC group will continue to benefit from its established relationship with domestic and international reputed battery manufacturing clientele.
The financial risk profile of the company is moderate with moderate networth, moderate gearing and comfortable debt protection metrics. The net worth of the company stood at Rs.92.03 Cr and Rs.71.52 Cr as on March 31, 2022 and 2021 respectively. The improvement is on account of moderate accretion of net profit in the reserve. The gearing of the company stood at 1.60 times as on March 31, 2022 against 1.65 times as on March 31, 2021. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 4.12 times and 2.34 times as on March 31, 2022 respectively as against 2.87 times and 1.67 times as on March 31, 2021 respectively. The debt to EBITDA of the company stood at 3.29 times as on March 31, 2022 as against 3.70 times as on March 31, 2021. TOL/TNW stood at 2.16 times in FY2022 and 2.28 times in FY2021. Acuité believes that the financial risk profile of the company will continue to remain moderate over the medium term.
JC Group’s operation are comfortable in term of working capital marked by Gross Current Asset (GCA) days of 78 days in FY2022, 86 days in FY2021 respectively. The working capital cycle remained in the said range on account of limited credit period offered to the debtors and moderate levels of inventory maintained by the group. Inventory days stood at 35 days as on March 31, 2022 as against 56 days as on March 31, 2021. Subsequently, the payable period stood at 13 days as on March 31, 2022 as against 17 days as on March 31, 2021 respectively. The debtor day stood at 17 days as on March 31, 2022 as against 17 days as on March 31, 2021. Further, the average bank limit utilization in the last eight months ended November, 22 remained at ~85 percent for fund based and 92 percent for non-fund based. Acuité believes that the group will continue to effectively manage its working capital cycle in order to maintain a stable credit profile.
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| Weaknesses |
The major raw material of the group is battery scrap. The prices of the same are fluctuating in nature, therefore the operating profit margins of the group is susceptible to raw material price fluctuation. Further, JC Group imports 90 percent of its raw material from Middle East and Asian countries. Currently, battery storage (raw material lead) is being replaced by lithium-ion batteries for electric vehicles. There is expected pressure on demand due to moderation in off take by auto sector. The operating margins are also dependent on prices of raw material (i.e. lead) which is highly volatile in nature. It is exposed to intense competition in the replacement battery market in automobile segment from the market leaders. Acuité believes that established relations with suppliers will be crucial for the group for procuring its raw material.
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| Rating Sensitivities |
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| Material Covenants |
| None |
| Liquidity Position: Adequate |
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JC Group’s liquidity is adequate marked by moderate generation of net cash accruals in FY2022 to its maturing debt obligations, efficient working capital management and modest level of unencumbered cash and bank balance. JC group has generated cash accruals in the range of Rs.16.52-28.04 Cr during last three years ending FY2022 as against its long term debt obligations in the range of Rs.5.6-5.73 Cr for the same period. The Group is expected to generate adequate NCAs in the range of Rs.31.28-35.61 Cr. against modest CPLTD of Rs.6.56- 6.57 Cr over the medium term. The group’s Gross Current Asset (GCA) days stood at 78 days as on March 31, 2022. The current ratio stood at 1.52 times as on March 31, 2022 against 1.56 times in previous year. JC Group maintained unencumbered cash and bank balances of Rs.4.58 Cr as on March 31, 2022. Further, the group has unencumbered deposits with bank of Rs.10.13 Cr. The total working capital limit remained moderately utilized at an average of nearly 80 per cent for the 8 months ending November, 2022. Acuité believes that the liquidity of JC Group to remain adequate on account of moderate cash accruals against repayment obligations..
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| Outlook: Stable |
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Acuité believes that JC group will maintain a 'Stable' outlook over the medium term backed by its experienced management, moderate financial risk profile and efficient working capital operations. The outlook may be revised to 'Positive' in case of significant improvement in its revenues, while maintaining the profitability margins. Conversely, the outlook may be revised to 'Negative' in case of any further stretch in its working capital management, deterioration in financial risk profile and liquidity position.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 932.66 | 660.11 |
| PAT | Rs. Cr. | 20.70 | 10.72 |
| PAT Margin | (%) | 2.22 | 1.62 |
| Total Debt/Tangible Net Worth | Times | 1.60 | 1.65 |
| PBDIT/Interest | Times | 4.12 | 2.87 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Manufacturing Entities: https://www.acuite.in/view-rating-criteria-59.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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