Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 6.00 ACUITE B | Stable | Downgraded -
Bank Loan Ratings 7.00 - ACUITE A4 | Reaffirmed
Total Outstanding Quantum (Rs. Cr) 13.00 - -
 
Rating Rationale
Acuité has downgraded the long term rating from ACUITE B+ (read as ACUITE B plus) to ACUITE B’ (read as ACUITE B) on the Rs. 6 crore bank facility and reaffirmed the short term rating of ‘ ACUITE A4 (read as Acuite A four)’ on the Rs. 7.00 crore bank facilities of Zitron India Private Limited (ZIPL). The outlook is 'Stable'.

Rating Rationale:
Acuite has taken into account the fact that the company is having extensive experience in the business of designing, manufacturing, installation and commissioning of Ventilation Systems for mining and underground construction projects and the directors of the company have over a decade of experience in the aforementioned industry, adding value to the organization through their expertise. However, the financials of the company have experienced a major decline in operating revenues, profitability and coverage indicators in financial year 2022. Even though the company has good order book from Larsen and Toubro the financial performance of the company will remain subdued in FY23 on account of delayed dispatch order received from L&T resulting into delay in project completion and shifting of majority revenue in next fiscal i.e. FY24.

About the Company
Incorporated in 2001 by Late Mr. K R Dhadwal & Mr. Indrajit Dhadwal, New Delhi based ZIPL is engaged in the business of designing, manufacturing, installation and commissioning of Ventilation Systems for mining and underground construction projects for customers such as Hindustan Zinc Limited, Larsen & Toubro and Afcons Infrastructure Limited, to name a few.
 
Analytical Approach
Acuité has considered the standalone business and financial risk profiles of ZIPL to arrive at this rating.
 

Key Rating Drivers

Strengths
Experienced management
Incorporated in the year 2001, ZIPL is promoted by Late Mr. K R Dhadwal & Mr. Indrajit Dhadwal. The directors of the company have over a decade of experience in the aforementioned industry, adding value to the organization through their expertise.


Reputed Clientele
ZIPL’s clientele includes companies such as Larsen and Toubro, Hindustan Zinc Limited and Afcons Infrastructure Limited, to name a few. ZIPL is expected to continue to leverage its established relationships with reputed clients and suppliers. Acuité believes that ZIPL will continue to benefit from their long standing relationships with reputed customers and suppliers.
Weaknesses
Intensive Working capital management
The company has working capital intensive nature as apparent from Gross Current Assets (GCA) of 355 days in FY- 2022 as against  249 days in FY-2021. The GCA days are majorly dominated by the debtors and other currents assets. The debtor days stood at 204 days in FY2022 and 107 days in FY2021. The company maintains an inventory of around 107 days. On the other hand, the company gets a credit period of around 270 days from its suppliers. ZIPL’s working capital limits over the last six months period ending January 2023 was utilized at an average of 94 percent.
Acuite expects the operations of the company to remain working capital intensive on account of the high inventory levels maintained by the company and extended credit period offered to customers.

Declining operational performance and weak financial risk profile
The operational performance of the company have experienced a major decline in operating revenues, profitability and coverage indicators in financial year 2022. Even though the company has good order book from Larsen and Toubro the financial performance of the company will remain subdued in FY23 on account of delayed dispatch order received from L&T resulting into delay in project completion and shifting of majority revenue in next fiscal i.e. FY24.
The financial risk profile of the company is weak marked by high gearing and negative coverage indicators. The net worth of ZIPL has declined due to losses in FY 22, at Rs 2.22 crore as on 31st March 2022 as compared to Rs. 5.31 crore as on 31st March 2021. The gearing level (debt-equity) stood at 6.73 times as on 31 March 2022 as against 1.79 times as on 31 March 2021. The total debt of Rs. 14.93 crore as on 31 March 2022 comprises of short-term debt of Rs. 12.28 crore and long-term debt of Rs. 2.65 crores (GECL Loan). The NCA/TD and interest coverage ratio for FY 2022 stood at negative levels i.e., at (0.20) times and (0.69) times, respectively.
Rating Sensitivities
  • Improvement in GCA days to less than 150 days. Deterioration in financial risk profile.
  • Improvement in scale of operations and profitability
  • Improvement in capital structure of the company
  • Improvement in financial risk profile
 
Material covenants
­None
 
Liquidity Position
Stretched
­The company has a stretched liquidity profile marked by negative net cash accruals. The company generated cash accruals of Rs. (2.92) crore during FY2022. The current  ratio of the firm stood low at 1.10 times as on March 31, 2022. The average fund based working capital utilization for trailing six months stood at 94 per cent ended Jan 23 giving minimal legroom for growth capital. Acuite believes that the liquidity profile of the company is likely to remain stretched over the medium term on account of negative cash accrual.
 
Outlook: Stable
Acuité believes that ZIPL will maintain a 'Stable' outlook over the medium term backed by its experienced management and reputed clients. The outlook may be revised to 'Positive' in case the company registers higher -than-expected growth in its revenue and profitability while improving its liquidity position. Conversely, the outlook may be revised to 'Negative' in case the company registers lower-than expected growth in revenues and profitability or in case of deterioration in the company's financial risk profile or significant elongation in working capital cycle.
 

Particulars Unit FY 22 (Actual) FY 21 (Actual)
Operating Income Rs. Cr. 26.06 36.70
PAT Rs. Cr. (3.28) 0.68
PAT Margin (%) (12.59) 1.86
Total Debt/Tangible Net Worth Times 6.73 1.79
PBDIT/Interest Times (0.69) 1.96
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
• Entities In Manufacturing Sector:- 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
04 Jan 2022 Bank Guarantee Short Term 7.02 ACUITE A4 (Reaffirmed)
Bank Guarantee Short Term 2.98 ACUITE A4 (Reaffirmed)
Cash Credit Long Term 3.00 ACUITE B+ | Stable (Assigned)
05 Feb 2020 Bank Guarantee Short Term 5.98 ACUITE A4 (Assigned)
Letter of Credit Short Term 3.00 ACUITE A4 (Assigned)
Proposed Bank Facility Short Term 1.02 ACUITE A4 (Assigned)
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Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
Indian Bank Not Applicable Bank Guarantee/Letter of Guarantee Not Applicable Not Applicable Not Applicable 7.00 Simple ACUITE A4 | Reaffirmed
Indian Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 6.00 Simple ACUITE B | Stable | Downgraded
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