Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 15.00 Crs. of NGEF (Hubli) Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (08 Jan 2021) |
Present | ||
Fund Based | 10.00 | 10.00 | Long Term |
BWR B
/ Stable (Downgraded); Issuer Not Cooperating |
BWR B
/Stable Reaffirmation |
Non Fund Based | 3.00 | 5.00 | Short Term |
BWR A4 (Reaffirmed); Issuer Not Cooperating
|
BWR A4
Reaffirmation |
Grand Total | 13.00 | 15.00 | (Rupees Fifteen Crores Only) |
Brickwork Ratings (BWR) has reaffirmed the ratings as BWR B and BWR A4 to NGEF (Hubli) Ltd with stable outlook.
The ratings continue to draw strength from the extensive experience of the directors in electrical equipment industry, its long presence in the industry and comfortable work in hand orders indicating medium term revenue visibility. However, the ratings are constrained by its declined revenue, thin profitability, negative net worth, negative gearing, modest debt protection metrics, stretched liquidity and high competition in the industry.
The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR expects that the business risk profile of NGEF (Hubli) Ltd will be maintained over the medium term. The rating outlook may be revised to 'Positive' in case the company shows an increase in revenue, profitability, improves its capital structure, gearing, debt protection metrics and liquidity. The rating outlook may be revised to 'Negative' if there is any deterioration in the financial risk profile of the company.
KEY RATING DRIVERSCredit Strengths:
Directors of the company are well qualified and have an experience of more than 3 decades in the electrical equipment industry. Their long experience and understanding of business dynamics shall continue to support the business growth.
As per the management, as of now the company has orders in hand of Rs 59.37 Crs out of which 47.94 Crs have been completed; while balance work is under process shows a medium term revenue visibility.
Credit Risks:
Financial risk profile of the company is weak reflected in the negative tangible net worth of Rs -15.14 Crs in FY 20 eroded on account of previous year losses resulted a negative gearing marked by total debt to tangible net worth of -1.54x in FY 20. Debt protection metrics of the company stood at modest level marked by an ISCR of 1.88x and DSCR 0.58x in FY 20 however, it has improved from FY 19. Liquidity position of the company is stretched reflected in the below average current ratio of 0.86x in FY 20 and a thin net cash accruals against total debt of 0.03x in FY 20.
Net revenue of the company declined from Rs 130.54 Crs in FY 19 to Rs 104.61 Crs in FY 20 on account of less orders. However, the company has achieved a total revenue of Rs 125.66 Crs against the projected revenue of Rs 115.85 Crs in FY 21. Profitability of the company in FY 20 stood at thin level reflected in the operating margin of 1.22% and net margin of 0.52%.
Due to presence of many small and large players in the industry, the company faces stiff competition from them, limiting the product pricing and profitability of the company.
For ariving 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, to improves its profitability, capital structure, gearing, debt protection metrics, liquidity and maintaining overall financial risk profile will be the key rating sensitivities.
Positive: The rating outlook may be revised to positive if the company is able to increase its revenue, improves its profitability, capital structure, gearing, debt protection metrics, liquidity and maintains overall financial risk profile.
Negative: The rating outlook may be revised to negative if there is any deterioration in the financial risk profile.
LIQUIDITY INDICATORS - Stretched
Liquidity position of the company is stretched reflected in the below average current ratio of 0.86x and a thin net cash accruals against total debt of 0.03x in FY 20. Average utilization of its working capital limit in the last six month was ~60% at moderate level.
ABOUT THE ENTITYNGEF (HUBLI) Ltd., is Government of Karnataka state owned enterprise 100% subsidiary of NGEF Ltd., located at Rayapur, Dharwad, Karnataka in 10 acres of land. The company has been engaged in manufacturing of electrical motors and transformers with German Technology for more than 3 decades.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 104.61 | 130.54 |
EBITDA | Rs.Crs. | 1.28 | -0.61 |
PAT | Rs.Crs. | 0.54 | 0.53 |
Tangible Net Worth | Rs.Crs. | -15.14 | -15.69 |
Total Debt/Tangible Net Worth | Times | -1.54 | -1.04 |
Current Ratio | Times | 0.86 | 0.95 |
Key Parameters | Units |
|
|
---|---|---|---|
Operating Revenue | Rs.Crs. | Not Available | Not Available |
EBITDA | Rs.Crs. | Not Available | Not Available |
PAT | Rs.Crs. | Not Available | Not Available |
Tangible Net Worth | Rs.Crs. | Not Available | Not Available |
Total Debt/Tangible Net Worth | Times | Not Available | Not Available |
Current Ratio | Times | Not Available | Not Available |
Facilities | Current Rating (2021) | 2021 (History) | 2020 | 2019 | 2018 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 10.00 |
BWR B/Stable
|
08Jan2021 |
BWR B/ Stable (Downgraded); Issuer Not Cooperating
|
NA |
NA
|
23Apr2019 |
BWR B+/ Stable
|
NA |
NA
|
Non Fund Based | ST | 5.00 |
BWR A4
|
08Jan2021 |
BWR A4 (Reaffirmed); Issuer Not Cooperating
|
NA |
NA
|
23Apr2019 |
BWR A4
|
NA |
NA
|
Grand Total | 15.00 | (Rupees Fifteen Crores 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.
Hyperlink/Reference to applicable CriteriaAnalytical Contacts | |
---|---|
Nitish Kumar Rating Analyst nitish.k@brickworkratings.com |
Nagaraj K Associate Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@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 | 10.00 | _ | 10.00 | ||
2 | Bank GuaranteeProposed | _ | 5.00 | 5.00 | ||
3 | Inland Letter of Credit (ILC)Proposed | _ | _ | 0.00 | ||
Total | 10.00 | 5.00 | 15.00 | |||
TOTAL (Rupees Fifteen Crores Only) |
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