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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 3.00 | ACUITE B+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 12.00 | - | ACUITE A4 | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 15.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating to ‘ACUITE B+’ (read as ACUITE B plus) and Acuité has reaffirmed the short term rating to ‘ACUITE A4’ (read as ACUITE A four) on the Rs.15.00 crore bank facilities of Medex International (MI). Outlook is 'Stable'.
Rationale for the Reaffirmation The rating reaffirmation considers improvement in company’s operating income albeit decline in profitability margins. The revenue of the firm stood at Rs.28.93 Cr in FY2023 as against Rs.32.54 Cr in FY2022, while the operating margins stood at 5.38% and 4.05% during the same period. The rating also derives strength from the long track record of operations and experience of the management. The above strengths are constrained by the working capital-intensive nature of operations and MI’s presence in a competitive industry with low entry barriers. |
| About the Company |
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Medex International (MI) established in October 2016 is a Delhi based proprietorship firm of Mr. Swaran Singh, engaged in trading of various electrical goods and equipment such as cables, bulbs, transmission wires, switches, sockets etc. as a sub-contractor for EPC contractors engaged in undertaking various government projects related to distribution and supply of electricity in rural areas. Mr. Swaran Singh has an experience of about four decades in the industry through his association with the companies; Medcraft International Private Limited, Omkareshwar Builders Private Limited, Pathfinder Infrastructures Private Limited.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of MI to arrive at the rating. |
Key Rating Drivers
| Strengths |
| Long track record of operation and experience of the management
MI was established in 2016 as a proprietorship firm. The proprietor of the firm, Mr. Swaran Singh has an experience of about four decades through his association with Medcraft International Private Limited, Omkareshwar Builders Private Limited and Pathfinder Infrastructures Private Limited as director. The experience of management has helped the firm to develop healthy relationships with customers and suppliers in a relatively short span of time. MI’s operating income stood at Rs. 28.93 Cr in FY2023 as against Rs.32.54 Cr in FY2022, while the operating margins stood at 5.38% and 4% during the same period. Acuité believes that MI will sustain its existing business profile backed by experienced management. |
| Weaknesses |
| Below average financial risk profile
The financial risk profile of the company remained average marked by low net worth, high gearing and moderate debt protection metrics. The net worth of Rs.1.11 Cr as on FY2023(Prov) as against Rs.0.90 Cr as on FY2022. The gearing (debt-equity) stood at 2.13 times as on FY2023(Prov) as against 3.50 times as on FY2022. The total debt of Rs.2.36 Cr as on FY2023(Prov)consists of long-term of Rs.0.47 Cr. and short term of Rs.1.89 Cr. of bank borrowings. The interest coverage ratio stood at 1.31 times for FY2023(Prov) as against 1.59 times for FY2022. The DSCR stood at 1.39 times for FY2023(Prov) as compared to 1.59 times for FY2022. The Net Cash Accruals to Total debt stood at 0.16 times for FY2023(Prov) as against 0.16 times for FY2022. The Total outside liabilities to Tangible net worth stood high at 12.45 times for FY2023(Prov) as against 11.60 times in FY2022. Working capital management The working capital management of the company remained intensive marked by high Gross Current Assets (GCA) of 154 days for FY2023 (Prov) as compared to 93 days as on FY2022. The debtor period stood at 75 days for FY2023 (Prov). Further, the inventory holding stood at 31 days for FY2023 (Prov) as against 16 days for FY2022. The payment cycle varies from 15-30 days. The working capital cycle of the Company is expected to remain at similar levels over the medium term. Susceptibility to cyclicality nature of industry and competitive nature of industry The firm engaged in trading business of electrical products to dealers, as a sub-contractor for EPC contractors engaged in undertaking various government projects related to distribution and supply of electricity in rural areas. Demand for electrical components is majorly dependent upon the economic activities taking place in and around the country. The end user industry being infrastructure, manufacturing, service and real state, any significant slowdown in these industries will impact the demand of electrical components and will impact the revenues of the firm. Further, the firm competes with various players in the organized and unorganized segments in the electrical component trading industry, thus limiting the pricing power. |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Stretched |
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The company has a stretched liquidity profile marked by modest net cash accruals against repayment obligations and elongated working capital cycle. The company generated net cash accruals of Rs.0.39 Cr in FY2023 and is expected to generated net cash accruals in the range of Rs.0.60-0.98 Cr in the medium term. The gross current asset days of the firm stood high at 154 days in FY2023(Provisional) due to high debtor and inventory days. Current ratio stood modest at 1.09 times in FY2023(Prov). Acuité believes liquidity profile will continue to remain stretched in the medium term due to high working capital requirement.
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| Outlook: Stable |
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Acuité believes that MI will maintain a ‘Stable’ outlook on account of its experienced management and improving scale of operations. The outlook may be revised to 'Positive' in case of significant improvement in working capital operations while, maintaining revenues and profitability. Conversely, the outlook may be revised to 'Negative' in case of significant decline in scale of operations or profitability or significant elongation in working capital cycle.
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| Other Factors affecting Rating |
| None |
| About the Rated Entity - Key Financials |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 28.93 | 32.54 |
| PAT | Rs. Cr. | 0.33 | 0.35 |
| PAT Margin | (%) | 1.15 | 1.09 |
| Total Debt/Tangible Net Worth | Times | 2.13 | 3.50 |
| PBDIT/Interest | Times | 1.31 | 1.59 |
| 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 • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.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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