RATING RATIONALE
23Jul2020
Bet Medical Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.21.45 Crs. of Bet Medical Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||||
|---|---|---|---|---|---|---|---|
| Fund Based | |||||||
| Cash Credit Sanctioned | 04.00 | Long Term | BWR | ||||
| Term Loan Sanctioned | 01.87 | ||||||
| Term Loan Sanctioned | 01.11 | ||||||
| Sub Total | 6.98 | ||||||
| Non-Fund Based | |||||||
| Bank Guarantee Sanctioned | 01.47 | Long Term | BWR | ||||
| Letter of Credit Sanctioned | 13.00 | Short Term | BWR | ||||
| Sub-Limit (Bank Guarantee) Sanctioned | (05.50) | ||||||
| Sub Total | 14.47 | ||||||
| Grand Total | 21.45 | (Rupees Twenty One Crores and Forty Five lakhs Only) | |||||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK
BWR believes that Bet Medical Pvt. Ltd. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERSBrickwork Ratings has principally relied upon the audited financial results up to FY 2019, provisional financial of FY 2020, projections up to FY 2022, publicly available information and information/clarifications provided by the company's management. The ratings draw strength from the experience of the promoters and management and Geographic diversification and established relationship with customers. The ratings are, however, constrained by Modest scale of operations amidst intense competition, high gearing levels, working Capital Intensive, and susceptibility to volatility in prices of equipment imported ,foreign exchange (forex ) risks and impact of Covid-19.
Credit Strengths:
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Experienced promoters and management :
The company benefits from its long existence in the market and the experience of the promoters and the management. Key promoters, Mr. D. Narasimha Rao and Mr. P. Emmanuel have over three decades of experience in the field of business and the company's management team also consists of people with knowledge and expertise in the field of medical and surgical equipment.
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Geographic diversification and established relationship with customers :
BET Medical Pvt. Ltd. caters to both private and government Institutions . Their customers are widespread such as AIIMS , Fortis hospital , Apollo specialty hospital , Kerala and Tamilnadu Medical Services Corporation Limited etc.. and as informed by the company , 60% constitutes of private institutions and 40% constitutes of government institutions.
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Modest scale of operations amidst intense competition :
Despite being in the medical equipment trading industry for almost three decades, company's scale of operations have been modest. The company's revenues have been modest at Rs. 55.78 Crs in FY19 (audited) indicates that the market for medical equipment is still dominated by some large global players.
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High gearing levels :
Due to the low net worth of INR 6.37 Crs and moderate debt level of Rs. 9.49 Crs , the gearing levels were high marked by total Debt/TNW and TOL/TNW at 1.49 times and 4.86 times respectively in FY19 (audited) and the same trend is likely to continue to stress the PAT margins.
-
Working Capital Intensive :
The conversion cycle stood high at 96 days in FY19 (audited) which is due to high receivables and inventory days of 117 and 87 respectively in FY19 (audited) against receivables and inventory days of 98 and 77 respectively in FY18 (audited) . The delay in the payment from the debtors that constitute private and government Institutions has led to the high receivable days which has impacted the conversion cycle.
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Susceptibility to volatility in prices of equipment imported , foreign exchange (forex ) risks and impact of Covid-19 :
The operating profit margins have significant fluctuations indicated by 0.99 % in FY19 (audited) against 0.02 % in FY18 (audited) as the company does not hedge its forex payables (against equipment imports), and hence profitability remains susceptible to volatility in prices of equipment imported . Corona virus outbreak and subsequent lockdown and labour shortages will have a bearing on their sales and performance as the company’s major imports are from Germany, Italy , Taiwan and Korea.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the company to increase its revenue , improve the profitability margins, improve the debt service coverage ratio, bring down the gearing levels , improve the conversion cycle and manage liquidity would be key rating sensitivities:
Positive: The ratings may be upgraded in case revenue, profitability margins, liquidity and capital structure of the company show significant improvement.
Negative: The rating may be downgraded in case there is a significant deterioration in the business and financial risk profile of the company.
LIQUIDITY INDICATORS -
Liquidity position of the company is stressed with the current ratio at 1.05 times and DSCR at 0.86 times in FY19 (audited) .Based upon the decline in sales and due to Covid-19 induced lockdown, high working capital utilization, high gearing ratio, current loan service obligations and decision to opt for RBI Moratorium Package, the company’s liquidity is stretched.
As observed , the company's cash credit average utilization was more than 100% between November 2019 and March 31st ,2020 . As confirmed by the banker the company has availed moratorium for working capital and term loan facilities issued by RBI under COVID-19 issue.
ABOUT THE ENTITYBET Medical private Limited was incorporated in 1991 by the promoters, Mr.D. Narasimha Rao and Mr. P. Emmanuel. The company's operation is engaged in trading of medical equipment , primarily related to surgical and radiology. The company's customers are widespread and their registered office is in Chennai . The company imports the surgical equipment such as Modular OR s (Turnkey) , OR tables , OR lights,Pendants , Surgical C- arms and radiology equipment such as Modular Hybrid OR s (Turnkey) , Mobile Interventional Imaging Solutions , Mammography Analogue & Digital majorly from Germany and Taiwan that accounts to 75% of the purchase and the remaining from Italy ,Korea.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 55.78 | 58.69 |
| EBITDA | Rs.Crs. | 0.55 | 0.01 |
| PAT | Rs.Crs. | 0.02 | 0.60 |
| Tangible Net Worth | Rs.Crs. | 6.37 | 6.35 |
| Total Debt/Tangible Net Worth | Times | 1.49 | 2.33 |
| Current Ratio | Times | 1.05 | 0.99 |
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| CRISIL | 22 Oct 2019 | 11.00 | CRISIL BB / A4+ (Stable )(ISSUER NOT COOPERATING) |
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.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Pratik Panda Rating Analyst pratik.p@brickworkratings.com |
Varadarajan R Associate Director - Ratings Board : +91 044 24663326 varadarajan.r@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | ||
|---|---|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 4.00 | _ | 4.00 | ||
| 2 | Term LoanSanctioned | 1.87 | _ | 1.87 | ||
| 3 | Term LoanSanctioned | 1.11 | _ | 1.11 | ||
| 4 | Bank GuaranteeSanctioned | 1.47 | _ | 1.47 | ||
| 5 | Letter of CreditSanctioned | _ | 13.00 | 13.00 | ||
| Sub-Limit (Bank Guarantee) Sanctioned | (5.50) | |||||
| Total | 8.45 | 13.00 | 21.45 | |||
| TOTAL (Rupees Twenty One Crores and Forty Five lakhs Only) | ||||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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