Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 7.85 - ACUITE A4+ | Reaffirmed
Total Outstanding Quantum (Rs. Cr) 7.85 - -
 
Rating Rationale

­Acuité has reaffirmed its short-term rating of 'Acuité A4+' (read as 'Acuité A four plus') on the Rs. 7.85 crore bank facilities of Lamina International (LI).

Reason for rating reaffirmation
The rating reaffirmation factors in the improvement in revenues, albeit a decline in profitability margins, moderate financial risk profile, and adequate liquidity position of the group. The group's revenue improved and stood at Rs. 185.42 crore in FY22, registering a growth of 40 percent as against a revenue of Rs. 132.80 crore in FY21. Further The group’s revenue stood at Rs. 210 crore in FY23 (estimated). The improvement in revenues is driven by the healthy demand in the automobile sector, which in turn leads to an increase in demand for leaf springs and other parts as well as the addition of new customers to the portfolio. However, the operating margins deteriorated and stood at 8.29 percent in FY2022 as against 10.46 percent in FY2021. The ratings are constrained by the working capital-intensive operations and the cyclical nature of the industry.


About Company

Established in 1992, Lamina International (LI) is a partnership firm engaged in the exporting of leaf springs and iron castings. It exports products manufactured by Lamina Foundries Limited (LFL) and Lamina Suspension Products Limited (LSPL). Around 90 percent of the products are from LSPL, and the rest are from LFL. The day-to-day operations are managed by its partners, Mr. Nitte Vinaya Hegde, Mr. Guruprasad Adyanthaya, and Mr. Tonse Ramesh Shenoy, who have extensive experience spanning more than four decades in the casting industry. It mainly exports to the USA, the UAE, and Germany. It has a registered office in Karnataka.

 
About the Group

Lamina Group (LG) comprises Lamina Suspension Products Limited, Lamina Engineering Company Private Limited, Lamina Investments Private Limited, Lamina Leasing and Finance Limited, Lamina Foundries Limited, and Lamina International, established in 1976 by Mr. Nitte Vinaya Hegde, Mr. Guruprasad Adyanthaya, and Mr. Tonse Ramesh Shenoy. At present, it has a presence in the casting industry, automobile springs and brake drums, and a separate export arm for marketing automobile accessories. The group employs approximately 1500 people in total.

 

Analytical Approach

Extent of Consolidation
•Full Consolidation
Rationale for Consolidation or Parent / Group / Govt. Support

Acuite has considered the consolidated business and financial risk profile of Lamina Foundries Limited (LFL), Lamina Suspension Products Limited (LSPL) and Lamina International (LI) together referred as ‘Lamina Group’(LG). The consolidation is mainly on account of operational linkages and common management.

Key Rating Drivers

Strengths

Extensive experience in management and an established track record of operations
LG commenced operations in 1976. The group is promoted by its directors, Mr. Nitte Vinaya Hegde, Mr. Guruprasad Adyanthaya, and Mr. Tonse Ramesh Shenoy, who possess experience spanning more than four decades in the casting industry. The extensive experience has enabled the company to forge healthy relationships with customers and suppliers and has helped it get recurring orders from its customers. The same can be seen in its customer profile, which includes names like Tata Motors, Ashok Leyland, Mahindra & Mahindra, etc., which has helped them develop their presence in domestic as well as international markets. Acuité believes that its extensive experience and association with reputed clients will help the group establish a strong market position.

Moderate financial risk profile
Lamina Group has a moderate financial risk profile, marked by the fact that the tangible net worth of the group stood at Rs. 47.57 crores as of March 31, 2022 (incl. quasi equity of Rs. 35.91 crore), as against Rs. 46.10 crores as of March 31, 2021 (incl. quasi equity of Rs. 36.98 crore). The group’s gearing stood at 1.26 times as of March 31, 2022, as against 1.28 times on March 31, 2021. The total debt of Rs. 59.91 crore as of March 31, 2022, consists of long-term borrowings of Rs. 6.49 crore and short-term debt obligations of Rs. 28.18 crore. The Group is undertaking a capital expenditure of Rs. 14.50 crore in FY23 at Lamina Foundries Limited, for which a term loan of Rs. 9 crore is availed, and the rest will be funded through internal accruals. The capex is expected to be completed by June 2023. The interest coverage ratio stood at 1.63 times in FY 2022 as against 1.68 times in the previous year, 2021. The DSCR stood at 1.16 times in FY2022 as against 1.20 times in FY2021. Acuité believes that the financial risk profile of the group is likely to remain moderate in the medium term.

Weaknesses

Intensive nature of working capital operations
The operations of Lamina Group are working capital intensive, as reflected by gross current assets (GCA) of 219 days as of March 31, 2022, as against 300 days as of March 31, 2021. The inventory holding days stood at 134 days as of March 31, 2022, as against 176 days as of March 31, 2021. The average inventory holding period for the group is around 120–140 days. The inventory mainly consists of raw materials and work in progress. The debtor days stood at 80 days as of March 31, 2022, as against 104 days as of March 31, 2021. The average credit period allowed to customers is around 90 days. The creditors days stood at 102 days as of March 31, 2022, as against 149 days as of March 31, 2021. The average credit period received from the suppliers is around 90 days. Working capital requirements are funded through bank lines; the average utilisation of bank facilities is 68.95 percent for the last 6 months ended as of March 2023. Acuité expects any further elongation in the group's working capital cycle to be a key rating sensitivity factor.

Cyclical nature of the industry
The group's performance remains vulnerable to cyclicality in the steel sector as steel is a key raw material in the manufacturing of auto brake drums. Also, demand for steel and other nonferrous metals depends on the performance of end-user segments like automobiles, construction, and real estate. The Indian steel sector is highly competitive due to the presence of a large number of players. The operating margin of the group is exposed to fluctuations in the prices of raw materials (coal and iron ore) as well as realisation from finished goods.

Rating Sensitivities

Improvement in the group's overall operating performance
Deterioration in the financial risk profile
Further elongation in the working capital cycle

 
Material Covenants

­None

 
Liquidity position: Adequate

The group’s liquidity profile is adequate, marked by moderate net cash accruals against maturing debt obligations. The group generated cash accruals of Rs. 5.60 crore in FY22 as against debt obligations of Rs. 3.46 crore for the same period. The cash accruals of the company are estimated to remain in the range of Rs. 7.55–9.17 crore during FY 2023–25 against repayment obligations ranging from Rs. 1.43 crore to Rs. 3.23 crore for the same period. The average utilisation of bank facilities is 68.95 percent for the last six months ended March 2023. The company maintains unencumbered cash and bank balances of Rs. 1.52 crore as of March 31, 2022. The current ratio stood at 1.45 times as of March 31, 2022.

 
Outlook:

­Not Applicable

 
Other Factors affecting Rating
­None
 

Particulars Unit FY 22 (Actual) FY 21 (Actual)
Operating Income Rs. Cr. 185.42 132.80
PAT Rs. Cr. 2.21 0.96
PAT Margin (%) 1.19 0.72
Total Debt/Tangible Net Worth Times 1.26 1.28
PBDIT/Interest Times 1.63 1.68
Status of non-cooperation with previous CRA (if applicable)
­None
 
Any Other Information

­None

 
Applicable Criteria
• 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

­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.

 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
03 Mar 2022 Letter of Credit Short Term 6.00 ACUITE A4+ (Upgraded from ACUITE A4)
Packing Credit Short Term 1.85 ACUITE A4+ (Upgraded from ACUITE A4)
04 Dec 2020 Letter of Credit Short Term 6.00 ACUITE A4 (Reaffirmed)
Packing Credit Short Term 1.85 ACUITE A4 (Reaffirmed)
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Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
Canara Bank Not Applicable Letter of Credit Not Applicable Not Applicable Not Applicable 6.00 Simple ACUITE A4+ | Reaffirmed
Canara Bank Not Applicable PC/PCFC Not Applicable Not Applicable Not Applicable 1.85 Simple ACUITE A4+ | Reaffirmed
­

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