|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 38.00 | ACUITE BB+ | Stable | Reaffirmed | - |
| Bank Loan Ratings | 14.00 | - | ACUITE A4+ | Reaffirmed |
| Total Outstanding | 52.00 | - | - |
|
Rating Rationale |
|
Acuité has reaffirmed the long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) and the short-term rating of ‘ACUITE A4+’ (read as ACUITE A four Plus) on the Rs. 52.00 crore bank facilities of Spartan Engineering Industries Private Limited (SEIPL). The outlook is ‘Stable’.
Rationale for Rating Reaffirmation The rating is reaffirmed on account of SEIPL's consistent improvement in operating income, albeit fluctuating operating profitability and below average financial risk profile. The operating income of SEIPL stood at Rs.210.77 Cr. in FY2024(Prov.) as compared to Rs.176.95 Cr. in FY2023. The operating margins of the company increased to 8.92 percent in FY2024(Prov.) as compared to 6.90 percent in FY2023 on account of reduction in input material costs and higher sales. The operating profitability has fluctuated between 6.90-8.92 percent over the three years ended FY2024 (Prov.) The PAT margins improved to 2.15 percent in FY2024(Prov.) as against 1.38 percent in FY2023. The company has approximately generated sales of Rs.62 Cr. till the month of July 2024. The order book of the company stands approximately at Rs.115 Cr. as on June 2024. The financial risk profile is below average marked by modest net worth, moderately high gearing, and modest debt protection metrics. Furthermore, SEIPL's working capital intensive operations, competitive Industry and exposure to the cyclicality associated with end user industry also constrain the rating. |
| About the Company |
|
Mumbai-based Spartan Engineering Industries Private Limited (SEIPL), was incorporated in 1988. The company is engaged in the manufacturing and trading of construction equipment and machines. It sells products in India and abroad under various brands namely 'Spartan', 'Sky Plus', 'Elite Aviator' and 'Hercules'. The directors of the company are Mr. Mahendra Pranjivandas Mehta, Mr. Vikram Mahendra Mehta and Mrs. Hiral Vikram Mehta. SEIPL' manufacturing facility is located at Atgaon near Nashik
|
| Analytical Approach |
| For arriving at the rating, Acuité has considered the standalone business and financial risk profiles of Spartan Engineering Industries Private Limited (SEIPL). |
| Key Rating Drivers |
| Strengths |
| Experienced management and establish track record of operations
Incorporated in 1988, SEIPL is promoted by Mr. Mahendra Mehta and family. The company started its manufacturing operations in 2006. Mr. Mahendra Mehta, a mechanical engineer by profession, is the founder and chairman of the company and possesses over four decades of experience in the industry. His son, Mr. Vikram Mehta, currently handles the overall business operations and possess over a decade experience in same line of business. The company is well supported by second line of management. Spartan has established its market position as leading Indian company in construction Equipment Manufacturing. The manufacturing facility is located at Atgaon on Mumbai Nashik highway to manufacture an array of construction equipment’s & Fire Evacuation Lifts. The company has two more factories in Bhiwandi and Thane. The production facility covers Fabrication, Production Assembly, Testing, R&D, Design & Development, and Spares Management & Dispatch. It sells products in India and abroad under various brands namely 'Spartan', 'Sky Plus', 'Elite Aviator' and 'Hercules'. Acuité believes that the company will continue benefitting from its experienced management and established track record of operations over the medium term. Geographically diversified operations and reputed clientele The company has pan India presence through branches and distributors. It has branch offices in Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Noida and Pune. SEIPL also exports to Sri Lanka, Nepal and Dubai. And has warehouses at specific location to meet immediate orders. SEIPL's domestic customer profile includes some large players from the real estate and construction industries like Larsen & Toubro Ltd., Tata Projects, Shapoorji Pallonji and Oberoi Realty to name few which reduces counterparty risk and assure recurring flow of orders. Majority of the top ten customers and suppliers of SEIPL have been associated with it for more than a decade. Acuité believes that SEIPL will continue to benefit from its geographically well diversified operations and reputed clientele over the medium term. |
| Weaknesses |
| Below Average financial risk profile
The financial risk profile of the company stood below average marked by modest net worth, moderately high gearing, and modest debt protection metrics. The tangible net worth stood at Rs.23.11 Cr. as on 31 March 2024(Prov.) as against Rs.17.29 Cr. as on 31 March, 2023. The improvement is on account of accretion of profits to reserves and growth. The total debt of the company stood at Rs.78.96 Cr. which includes Rs.14.54 Cr. of long-term debt, Rs.6.39 Cr. of CPLTD, Rs.21.61 Cr. of Unsecured loans and Rs.36.42 Cr. of short-term debt as on 31 March, 2024(Prov.). Additionally, Rs.21.61 Cr. of the unsecured loans consists of Rs.4.15 Cr. from Directors/Promoters and Rs.17.46 Cr. from others. The gearing (debt-equity) stood moderately high at 3.42 times (Prov.) as on 31 March 2024 as compared to 3.44 times as on 31 March, 2023. Interest Coverage Ratio slightly improved to 1.67 times for FY2024(Prov.) as against 1.64 times for FY2023. Debt Service Coverage Ratio (DSCR) stood at 1.08 times in FY2024(Prov.) as against 1.09 times in FY2023. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 6.57 times (Prov.) as on 31 March, 2024 as against 6.91 times as on 31 March, 2023. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.09 times for FY2024(Prov.) as against 0.07 times for FY2023.
Working intensive nature of operations SEIPL’s operations are working capital intensive in nature marked by high Gross Current Assets (GCA) of 261 days as on March 31, 2024(Prov.) as against 230 days as on March 31,2023. SEIPL’s inventory days stood at 112 days as on March 31, 2024(Prov.) as against 80 days as on March 31, 2023. The debtor days stood at 116 days as on March 31, 2024(Prov.) as against 123 days as on March 31, 2023. The average credit period allowed to customers is 90 days. The creditor days stood at 147 days as on March 31, 2024(Prov.) as against 143 days as on March 31, 2023. The average credit period allowed by suppliers is 90-120 days. The fund based working capital limits remain utilized at an average of 94 percent for the last 06 months ending May 2024. |
| Rating Sensitivities |
|
| Liquidity Position |
| Adequate |
|
The company’s liquidity position is adequate, marked by sufficient net cash accruals against its maturing debt obligations. The company generated net cash accruals of Rs.3.87-6.73 Cr. from FY2022-24 against the matured debt obligations of Rs.3.48-5.36 Cr. in the same period. In addition, it is expected to generate a sufficient cash accrual in the range of Rs.11.98-18.72 Cr. over the medium term against expected maturing debt obligations of Rs.6.39-2.24 Cr. during the same period. The working capital management of the company is intensive marked by GCA days of 261 days in FY2024(Prov.) as against 230 days in FY2023. The company maintains unencumbered cash and bank balances of Rs.0.96 Cr. as on March 31, 2024(Prov.). The current ratio stands at 1.34 times (Prov.) as on March 31, 2024 as against 1.23 times as on March 31, 2023. The average utilization of fund based working capital limits remained moderately utilized at approximately 94 percent for the trailing 06 month’s period until May 2024.
|
| Outlook: Stable |
|
Acuité believes that SEIPL will maintain a 'Stable' outlook and continue to benefit over the medium term from its experienced management and healthy relations with reputed clientele. The outlook may be revised to 'Positive' in case the company registers strong growth in revenues while improving its profitability,capital structure and working capital management. Conversely, the outlook may be revised to 'Negative' in case of any further stretch in its working capital management, leading to further deterioration of its financial risk profile and liquidity.
|
| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 210.77 | 176.95 |
| PAT | Rs. Cr. | 4.54 | 2.44 |
| PAT Margin | (%) | 2.15 | 1.38 |
| Total Debt/Tangible Net Worth | Times | 3.42 | 3.44 |
| PBDIT/Interest | Times | 1.67 | 1.64 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable. |
| 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 • Trading Entities: https://www.acuite.in/view-rating-criteria-61.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. Acuité'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.
|
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| |
|
Contacts |
|
|
|
About Acuité Ratings & Research |
