Emson Tools Manufacturing Corp Ltd

Brickwork Ratings assigns the long-term ratings of BWR BB/Stable & short-term ratings of A4 for the Bank Loan Facilities of Rs. 28.57 Crs. of Emson Tools Manufacturing Corp Ltd

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	24.57	Long Term	BWR BB /Stable Assignment
	(4.00)
Non Fund Based	4.00	Short Term	BWR A4 Assignment
Grand Total	28.57	(Rupees Twenty Eight Crores and Fifty Seven lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

Brickwork Ratings has assigned the long-term ratings of BWR BB/Stable & short-term ratings of A4 for the bank loan facilities Rs.28.57 Crs of Emson Tools Manufacturing Corp Ltd.

The rating has factored, inter alia, the Promoters with Extensive Industry experience, Improvement in Net Worth and Margins and Well-Integrated Operations Supporting Timely Deliveries. However, the rating is constrained by the Small and declining scale of operations, Elongated Conversion Cycle and inherent cyclicality and Intense competition in the steel industry. However, going forward, the ability of the firm to improve its financial risk profile would be the key rating sensitivity.

Brickwork Ratings (BWR) has essentially relied upon the audited financial statements upto FY24, relevant data to the extent available for 12MFY25(Prov.), projected financials for FY26 and FY27, as well as information/clarifications provided by the company’s management and its bankers, to arrive at the present ratings.

The long-term rating has been assigned a ‘Stable’ outlook as the business risk profile of the company is stable and its present financial performance is expected to be maintained in the medium term. The rating outlook may be revised to 'Positive' in case there is an improvement in revenues and profit margins on a sustained basis. The rating outlook may be revised to 'Negative' if there is any deterioration in the financial risk profile or liquidity issues.

Earlier, the company had an INC rating with BWR, which was withdrawn vide rationale dated 12.04.23.

KEY RATING DRIVERS

Credit Strengths:

• Promoters with Extensive Industry experience :

  The promoters possess over three decades of experience in the iron & steel forging business and have demonstrated a proven track record of withstanding industry cyclicality, which provides stability and confidence in the company’s long-term operations.

• Well-Integrated Operations Supporting Timely Deliveries :

  The company’s long-standing industry presence, backed by ISO accreditation, wide forging capabilities, integrated quality and heat-treatment facilities, assured raw material sourcing, and uninterrupted power backup, enhances its operational resilience and ability to ensure timely deliveries.

• Improvement in Net Worth and Margins :

  The net worth stood at Rs.19.29 crores in FY24, improving to Rs.19.94 crores in FY25. Interest Coverage Ratio (ISCR) was at a moderate 1.64x in FY25. Profitability metrics showed improvement, with the net margin rising from 0.69% in FY24 to 0.75% in FY25, and the operating margin increasing from 4.73% in FY24 to 6.12% in FY25.

Credit Risks:

• Small and declining scale of operations :

  The Total Operating Income (TOI) of the company has remained range-bound between Rs.90–100 Crs over the last three fiscals, reflecting a stagnant scale of operations. TOI for FY25 (Prov.) stood at Rs.91.19 Crs, marginally lower than Rs.93.63 Crs in FY24, primarily on account of muted demand and overall market slowdown.

• Elongated Conversion Cycle :

  The Company’s conversion cycle has elongated from 109 days in FY24 to 120 days in FY25, primarily on account of high receivable days of 108 days as on March 31, 2025. This indicates higher working capital blockage in receivables, which could impact liquidity if collections are delayed further.

• Inherent cyclicality and Intense competition in the steel industry :

  The Company’s revenue and profitability remain exposed to the inherent cyclicality of the steel industry. Additionally, the sector is characterized by intense competition, which limits the company’s bargaining power with customers and suppliers, thereby resulting in thin and volatile profit margins.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone performance of Emson Tools Manufacturing Corp Ltd. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward, the ability of the company to improve its scale of operations, profitability margins, overall credit risk profile and efficiently manage its working capital requirement would be the key rating sensitivity.

Positive: The rating may be upgraded if there is a substantial improvement in net profitability margins above 0.90%,if TNW exceeds Rs. 22.00 Cr. along with a significant and sustained increase in the scale of operations, while maintaining its robust credit profile.

Negative: The rating may be downgraded if the company is unable to achieve at least 95% of its projected financials, experiences a significant decline in revenue below Rs.110.00 Cr, reports a fall in net margins below 0.70%, shows weakening liquidity ratios.

LIQUIDITY INDICATORS - Stretched

• In FY24 (Audited), the company maintained a cash and bank balance of Rs.0.95 Crs including Rs.0.85 Crs Fixed Deposits maintained with Bank.
• The average utilization of the cash credit facility over the past 10 months stood at a high level of 80.76%.
• The company's long-term borrowings totaled Rs.11.75 Crores, comprising unsecured loans from directors amounting to Rs.2.94 Crores and bank borrowings of Rs.8.81 Crores.
• DSCR remained below unity at 0.95x in FY24, indicating limited debt servicing cushion.
• Current ratio stood at an adequate 1.52x in FY24.
• Conversion cycle recorded at 109 days in FY24, reflecting elongated working capital requirements.
• Net cash accruals of Rs.2.01 Crs in FY25 against CPLTD of Rs.2.53 Crs in FY24. 

ABOUT THE ENTITY

Emson Tools Manufacturing Corporation Ltd, led by Mr. Abhinav Dhall (Whole-Time Director) and Mrs. Devinder Dhall (Whole-Time Director), was incorporated in 1996 and traces its roots to a partnership formed in 1932. Beginning as a heat treatment shop, the company has grown into a leading forging manufacturer with state-of-the-art facilities and a strong presence in both domestic and international markets.

Specializing in precision closed-die forgings, Emson produces components ranging from 200 grams to 70 kilograms, in both machined and semi-machined forms, serving tractors, railways, and other demanding engineering sectors.

Its prestigious clientele includes Mahindra & Mahindra, Mita India Pvt. Ltd., Componenta Ltd., Somic ZF Components Ltd., Sona Koyo Steering Systems Ltd., TAFE Motors and Tractors Ltd., V.E. Commercial Vehicles Ltd., Indian Railways, along with direct export customers in the USA and Europe.

KEY COVENANTS OF THE FACILITY RATED

The terms of the loan sanction from banks include the standard covenants normally applicable to such facilities. In addition, certain specific financial covenants, as stipulated in the sanction letter, are as follows:

• Current Ratio: To be maintained at an estimated level of 1.10.

• Interest Coverage Ratio: To be maintained at an estimated level of 1.50.

• TOL/TNW (Total Outside Liabilities to Tangible Net Worth): To be maintained at an estimated level of 5:1.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating  (2025)			2024		2023		2022
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	24.57	BWR BB/Stable (Assignment)	NA	NA	05Jan2023	BWR B- Stable (Continues to be in ISSUER NOT COOPERATING* category/Downgraded)	NA	NA
FB SubLimit	LT	(4.00)	BWR BB/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	4.00	BWR A4 (Assignment)	NA	NA	05Jan2023	BWR A4 (Continues to be in ISSUER NOT COOPERATING* category/Reaffirmed)	NA	NA
Grand Total		28.57	(Rupees Twenty Eight Crores and Fifty Seven lakhs Only)

Hyperlink/Reference to applicable Criteria

• General Criteria
• Short Term Debt
• Approach to Financial Ratios
• Manufacturing Company

Analytical Contacts
Mukul Singh Sahu Ratings Analyst mukulsingh.s@brickworkratings.com	Ravi Rashmi Dhar Associate Director - Ratings ravi.d@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com	Customer Support | CustSupport@brickwrokratings.com

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	Indian Bank	Cash Credit - Sanctioned	21.50	_	21.50	Simple##
	Sub-Limit (EPC/PCFC) - Sanctioned	(4.00)
2	Indian Bank	Loans against Property - Out-standing	2.52	_	2.52	Simple##
3	Indian Bank	BG/LC/ILC - Sanctioned	_	4.00	4.00	Simple##
4	Indian Bank	GECL 1.0 - Out-standing	0.55	_	0.55	Simple##
Total			24.57	4.00	28.57
TOTAL (Rupees Twenty Eight Crores and Fifty Seven lakhs Only)

## BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.