Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 8.25 ACUITE BB | Stable | Assigned -
Bank Loan Ratings 13.30 ACUITE BB | Stable | Downgraded -
Bank Loan Ratings 1.85 - ACUITE A4+ | Assigned
Bank Loan Ratings 0.60 - ACUITE A4+ | Reaffirmed
Total Outstanding Quantum (Rs. Cr) 24.00 - -
 
Rating Rationale
­Acuité has downgraded the long-term rating to ‘ACUITE BB' (read as ACUITE double B) from ‘ACUITE BB+’ (read as ACUITE double B plus) and reaffirmed the short-term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.13.90 Cr bank facilities, and has assigned the long-term rating of ‘ACUITE BB' (read as ACUITE double B) and the short-term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) on the Rs.10.10 Cr bank facilities of Sonodyne Technologies Private Limited (STPL). The outlook remains 'Stable'.

Rating Rationale
The rating downgrade is on account of the modest scale of operations of the company and the continuous losses incurred over the past three years. The rating is further constrained by the working capital intensive nature of operations of the company. However, these weaknesses are, offset by the experienced management, the long standing operations and the moderate financial risk profile of the company.

About the Company
Incorporated in 2006, Sonodyne Technologies Private Limited (STPL) is a Kolkata-based company promoted by Mr. Ashok Kumar Mukherjee. STPL is engaged in the business of speakers and sound producing apparatus.
 
Analytical Approach
Previously, Acuité had taken the consolidated business and financial risk profiles of Sonodyne Technologies Private Limited (STPL) and Sonodyne International Private Limited (SIPL) (referred to as the Sonodyne Group). Now, Acuité has modified the approach to ‘standalone’ to arrive at the rating as the operations of SIPL has been merged with STPL.
 

Key Rating Drivers

Strengths
  • Experienced management
STPL has been operating for over two decades and is aided by Mr Ashoke Kumar Mukherjee who has an experience of over four decades in the industry, assisted by his son Mr Anindya Mukherjee. The company has established comfortable relationships with the key suppliers and reputed customers over the years, thereby, ensuring the smooth flow of operations. Acuité derives comfort from the experienced management and the long-running operations of the company.

 
  • Moderate financial risk profile
The company’s moderate financial risk profile is marked by modest networth along with moderate gearing & debt protection metrics. The tangible net worth of the company marginally reduced to Rs.15.10 Cr as on March 31, 2022 from Rs.15.16 Cr as on March 31, 2021 due to accumulated losses. Gearing of the company stood moderate at 1.63 times as on March 31, 2022 as against 1.57 times as on March 31, 2021. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood moderate at 2.21 times as on March 31, 2022 as against 1.94 times as on March 31, 2021. The moderate debt protection metrics of the company is marked by Interest Coverage Ratio at 1.78 times as on March 31, 2022 and Debt Service Coverage Ratio at 1.40 times as on March 31, 2022. Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.03 times as on March 31, 2022. Acuité believes that going forward the financial risk profile of the company will remain moderate in the absence of major debt funded capex plans.
Weaknesses
  • Modest scale of operations
The company’s modest scale of operations is reflected by the revenues achieved in FY2022 of around Rs.32.08 Cr as compared to Rs.24.12 Cr in FY2021. The rise in revenues are on account of increase in the total sales along with surge in the export sales due to ramp up in the company’s operations after the pandemic. Further, till September, 2022, it achieved revenues of Rs.20.22 Cr (provisional). Acuité believes that the company’s ability to further improve the scale of operations will be key monitorable.
 
 
  • Fluctuating profitability margins
The profitability margins of STPL witnessed fluctuations as the operating margin declined to 3.26 per cent in FY2022 as compared to 8.60 per cent in FY2021 due to increase in the raw material costs. However, the losses incurred in FY2022 considerably recovered due to dip in the interest costs. Acuité believes that the company’s capability to improve the profitability margins will be a key sensitivity factor.
 
  • Working capital intensive nature of operations
The working capital intensive nature of operations of the company is marked by high but improving Gross Current Assets (GCA) of 354 days as on March 31, 2022 as against 452 days as on March 31, 2021 on account of high inventory period. The inventory holding stood high at 252 days as on 31st March, 2022 as compared to 323 days as on March 31, 2021 on account of maintaining high raw material stock due to high lead time of the imported materials from Taiwan, China, Switzerland. In addition to this, the product has to go through research and development stages to modify the specifications according to customer needs. However, the debtor period stood comfortable at 50 days as on March 31, 2022 as compared to 72 days as on 31st March 2021. Going forward, Acuité believes that the working capital operations of the company will remain intensive owing to high inventory requirement.
 
Rating Sensitivities
  • Increase in the scale of operations along with improvement in the profitability margins
  • Improvement in the financial risk profile
  • Elongation in the working capital cycle
 
Material covenants
­None
 
Liquidity position: Adequate
The company’s liquidity is adequate marked by net cash accruals stood at Rs. 0.76 Cr as on March 31, 2022 as against long term debt repayment of only Rs.0.13 Cr over the same period. The unencumbered cash and bank balances of the company stood at Rs.1.26 Cr as on March 31, 2022. The current ratio stood at 1.54 times as on March 31, 2022. However, the working capital intensive nature of operations of the company is marked by Gross Current Assets (GCA) of 354 days as on March 31, 2022 as against 452 days as on March 31, 2021. The fund based limit remained utilised at 96 per cent over the seven months ended November, 2022. Acuité believes that going forward the company will maintain adequate liquidity position due to steady accruals.
 
Outlook: Stable
Acuité believes that the outlook of the company will remain 'Stable' over the medium term on account of the long track record of operations and experienced management. The outlook may be revised to 'Positive' in case of significant growth in revenue while achieving sustained improvement in operating margins, capital structure and working capital management. Conversely, the outlook may be revised to ‘Negative’ in case of decline in the company’s revenues or profit margins, or in case of deterioration in the company’s financial risk profile or further elongation in its working capital cycle.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 22 (Actual) FY 21 (Actual)
Operating Income Rs. Cr. 32.08 24.12
PAT Rs. Cr. (0.02) (0.25)
PAT Margin (%) (0.08) (1.05)
Total Debt/Tangible Net Worth Times 1.63 1.57
PBDIT/Interest Times 1.78 1.41
Status of non-cooperation with previous CRA (if applicable)
None
 
Any other information
­None
 
Applicable Criteria
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.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
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
20 May 2022 Packing Credit Long Term 3.50 ACUITE BB+ ( Issuer not co-operating*)
Bank Guarantee Short Term 0.90 ACUITE A4+ ( Issuer not co-operating*)
Cash Credit Long Term 3.55 ACUITE BB+ ( Issuer not co-operating*)
Term Loan Long Term 4.89 ACUITE BB+ ( Issuer not co-operating*)
Letter of Credit Short Term 0.25 ACUITE A4+ ( Issuer not co-operating*)
Proposed Bank Facility Short Term 0.81 ACUITE A4+ ( Issuer not co-operating*)
16 Feb 2021 Term Loan Long Term 4.89 ACUITE BB+ (Downgraded and Issuer not co-operating*)
Bank Guarantee Short Term 0.90 ACUITE A4+ (Downgraded and Issuer not co-operating*)
Letter of Credit Short Term 0.25 ACUITE A4+ (Downgraded and Issuer not co-operating*)
Packing Credit Long Term 3.50 ACUITE BB+ (Downgraded and Issuer not co-operating*)
Proposed Bank Facility Short Term 0.81 ACUITE A4+ (Downgraded and Issuer not co-operating*)
Cash Credit Long Term 3.55 ACUITE BB+ (Downgraded and Issuer not co-operating*)
09 Dec 2020 Cash Credit Long Term 3.55 ACUITE BBB- (Issuer not co-operating*)
Letter of Credit Short Term 0.25 ACUITE A3 (Issuer not co-operating*)
Proposed Bank Facility Short Term 0.81 ACUITE A3 (Issuer not co-operating*)
Packing Credit Long Term 3.50 ACUITE BBB- (Issuer not co-operating*)
Bank Guarantee Short Term 0.90 ACUITE A3 (Issuer not co-operating*)
Term Loan Long Term 4.89 ACUITE BBB- (Issuer not co-operating*)
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Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
State Bank of India Not Applicable Bank Guarantee (BLR) Not Applicable Not Applicable Not Applicable 0.35 Simple ACUITE A4+ | Reaffirmed
State Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 3.55 Simple ACUITE BB | Stable | Downgraded ( from ACUITE BB+ )
State Bank of India Not Applicable Covid Emergency Line. Not Applicable Not Applicable Not Applicable 3.60 Simple ACUITE BB | Stable | Downgraded ( from ACUITE BB+ )
State Bank of India Not Applicable Covid Emergency Line. Not Applicable Not Applicable Not Applicable 1.40 Simple ACUITE BB | Stable | Assigned
State Bank of India Not Applicable Letter of Credit Not Applicable Not Applicable Not Applicable 0.25 Simple ACUITE A4+ | Reaffirmed
State Bank of India Not Applicable Letter of Credit Not Applicable Not Applicable Not Applicable 1.55 Simple ACUITE A4+ | Assigned
State Bank of India Not Applicable PC/PCFC Not Applicable Not Applicable Not Applicable 3.50 Simple ACUITE BB | Stable | Downgraded ( from ACUITE BB+ )
State Bank of India Not Applicable PC/PCFC Not Applicable Not Applicable Not Applicable 6.85 Simple ACUITE BB | Stable | Assigned
Not Applicable Not Applicable Proposed Short Term Bank Facility Not Applicable Not Applicable Not Applicable 0.30 Simple ACUITE A4+ | Assigned
State Bank of India Not Applicable Term Loan Not available Not available Not available 2.65 Simple ACUITE BB | Stable | Downgraded ( from ACUITE BB+ )
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