RATING RATIONALE
09Jan2025
TVS Electronics Ltd.
Brickwork Ratings reaffirms/ Assigned the ratings for the Bank Loan Facilities of Rs. 106.56 Crs. of TVS Electronics Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (22 Nov 2023) |
Present | ||
| Fund Based | 46.00 | 85.56 | Long Term |
BWR A/Stable
Reaffirmation |
BWR A
/Stable Reaffirmation |
| (4.50) | (4.50) | ||||
| (10.00) | (10.00) | ||||
| (0.00) | (35.00) | ||||
| (0.00) | (35.00) | Short Term |
|
BWR A1
Assignment |
|
| Non Fund Based | (0.00) | (35.00) | Long Term |
|
BWR A
/Stable Assignment |
| (0.00) | (35.00) | ||||
| (0.00) | (35.00) | ||||
| 21.00 | 21.00 | Short Term |
BWR A1
Reaffirmation |
BWR A1
Reaffirmation |
|
| (10.00) | (10.00) | ||||
| (6.00) | (6.00) | ||||
| Grand Total | 67.00 | 106.56 | (Rupees One Hundred Six Crores and Fifty Six lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
The rating reaffirmation of the bank loan facilities of TVS Electronics Limited (TVSE or the company) continues to draw strength from the strong parentage and brand equity of TVS, experienced and professional management, Stable performance of the product and customer service segments, supported by business plans and initiatives and long term agreements with reputed clientele. The rating action also factors the company’s various initiatives to augment its business profile through acquisitions and providing a wider offering with the on-going modernisation and upgradation of its Tumkur facility. The rating strengths remain constrained by the moderation in financial risk profile, its exposure to intense industry competition with moderate scale of operations and technological obsolescence.
The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. BWR believes TVSE’s business risk profile will be maintained over the medium term. The outlook may be revised to Positive if a sustained increase in the scale of operations with improvement in the profitability results in an improved financial risk profile with stabilisation of new products lines and services, thereby strengthening the business profile. The outlook may be revised to Negative with lower-than-expected revenue/cash accruals or a deterioration in the profitability/gearing indicators and/or a significant increase in the operating cycle, and/or a deterioration in the capital structure due to fresh debt-financed capital expenditure, thus weakening the company’s financial risk profile.
Credit Strengths:
-
Experienced management and established market position: :TVSE has an operational track record of over three decades and has been a part of the TVS group, an established and reputed business group. The company has an experienced and professional management team, having the robust internal control and risk management systems of the company is in a position to mitigate possible risks on price movements and technological obsolescence. TVSE has demonstrated the management's agility and awareness through the addition of new products that are in demand. The company continue to explore fresh opportunities.
-
Long-term agreements with reputed brands: :The company has entered into long-term agreements with reputed clientele such as Dell, HP, Fiserv for their various product lines. The company also has lifestyle portfolio from Harman, a reputed clientele.
-
Stable performance of the product and customer service segments, supported by business plans and initiatives: :
The company operates in two revenue segments: the Products and Solutions segment and the Customer Support Services segment. The share of the Products and Solutions segment in the topline remained stable at 73% in FY24, up from 70% in the previous year. Revenue from this segment grew by 8.67% year-on-year, while revenue from the Customer Support Services segment declined by 8.15% year-on-year. With a shift towards B2B services, including CMS, EMS, and IMS, the company expects greater revenue contribution from the B2B services segment moving forward. Additionally, the company has completed an acquisition, expanding its capabilities to offer a comprehensive range of solutions, including hardware, applications, digital payment solutions, and cloud computing software to sectors like retail, banking, and government. The company has also invested in M/S Swiftomatics Services Private Limited (Royal Pos) by subscribing to 2,000 optionally convertible and redeemable preference shares. Royal Pos provides end-to-end SaaS-based applications to retail merchants and restaurants, aiming to digitalize and automate operations for small and medium-sized enterprises. The company has integrated its Point of Sale products to offer efficient billing solutions to its customers.
-
Moderation in Financial Risk Profile: :
The company achieved operating revenue of Rs. 366.04 Crores during FY24, compared to Rs. 353.49 Crores in FY23, reflecting a year-on-year growth of 4%. The company recorded an EBITDA of Rs. 9.63 Crores in FY24, down from Rs. 19.70 Crores in FY23. The decline in profitability was primarily due to an increase in employee benefit expenses on a year-on-year basis, as well as an overall increase in operational costs. The operating profit margin stood at 2.63% in FY24, compared to 5.60% in FY23, while the net profit margin decreased to 0.07% in FY24, down from 2.69% in FY23. Furthermore, the total debt to tangible net worth (TNW) ratio and total outstanding liabilities to TNW ratio declined from 0.11 times and 1.44 times, respectively, as of March 31, 2023, to 0.46 times and 1.80 times, respectively, as of March 31, 2024. Despite the increase in these ratios, they remain at a comfortable level. Debt protection metrics, as indicated by the Interest Coverage Ratio (ISCR) and Debt Service Coverage Ratio (DSCR), decreased to 4.91 times and 4.61 times, respectively, as of March 31, 2024, compared to 14.44 times and 13.13 times, respectively, as of March 31, 2023. This decline is attributed to the increase in finance costs, higher operational expenses, and a reduction in EBITDA. In H1FY25, the company has achieved an operating revenue of Rs.215.88 Crores, EBITDA of Rs. 7.15 Crores and Net loss of Rs. 2.58 Crores.
-
Intense competition and moderate scale of operations : :The company operates in an intensely competitive and fragmented electronics industry. The company's moderate scale of operations are vulnerable to a certain extent to the periodic, regular renewal of its agreements with various clients. However, TVSE benefits on account of its strong brand presence and long-term relation with reputed clients.
-
Exposure to technological obsolescence: :The company deals in technology-related products and services, which requires frequent upgradation and calls for additional investment.
For arriving at its ratings, Brickwork Ratings has adopted a standalone approach and applied its rating methodology as detailed in the Rating criteria below. The Company do not have any subsidiary Company as on March 31, 2024.
RATING SENSITIVITIES
The company's ability to improve its revenue and profitability through the consolidation of factories and strengthen its business profile would be key rating sensitivities.
Upward:
- Substantial growth in revenue and profitability, strengthening the financial risk profile.
- Stabilisation of new product lines with an increased scale of operations resulting in higher contribution to revenue and profitability on a sustained basis.
Downward:
- Deterioration in key credit metrics owing to pressure on operating profits due to competition, sharp rise in receivables levels, or fresh capex.
The company’s liquidity position remains adequate, as evidenced by the moderate utilization of its fund-based working capital limits, which stood at approximately ~20% for the trailing 12 months ending November 2024. The company also maintains a current ratio above unity at 1.37 times as of March 31, 2024. In FY24, the company has reported net cash accruals of Rs. 10.19 crore, which comfortably covered its current maturity of Rs. 4.38 crore, leaving a surplus of Rs. 5.81 crore to address any unforeseen expenses. The liquidity position is further projected net cash accruals of Rs. 12.53 crore in FY25 and Rs. 18.00 crore in FY26, against total repayments of Rs. 7.52 crore & Rs.5.61 Crore for each of these years, ensuring ample coverage for debt servicing. The company’s cash and cash equivalent position as on September 30, 2024 stood at Rs ~4.46 Crores.
ABOUT THE ENTITY| Macro Economic Indicator | Sector | Industry | Basic Industry |
|---|---|---|---|
| Information Technology | Information Technology | IT - Services | IT Enabled Services |
TVS Electronics Limited (hereinafter referred to as ‘TVSEL’ or ‘the company’ ) was set up as an IT Peripherals manufacturer and has transformed itself into a leading Transaction Automation IT Products & Solution provider. It is based out in Chennai and has production/repair facilities presently at Tumkur (Karnataka). The company is listed on the BSE and NSE. It’s business consists of two revenue segments, viz., (a) Products and Solutions and (b) Customer Support Services. The products cater to seven broad sectors, viz., Retail – SME, Government, BFSI, Hospitality, Healthcare, E-commerce and Transport, Large Format Retail (LFR) Stores and Quick Service Restaurants (QSRs).
| Key Parameters | Units |
FY 22 - 23 (Audited - Annual) |
FY 23 - 24 (Audited - Annual) |
FY 24 - 25 (Unaudited - Midterm-H1) |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 353.49 | 366.04 | 215.93 |
| EBITDA | Rs.Crs. | 19.78 | 9.63 | 5.78 |
| PAT | Rs.Crs. | 9.52 | 0.27 | -2.58 |
| Tangible Net Worth | Rs.Crs. | 82.87 | 80.93 | 79.97 |
| Total Debt / Tangible Net Worth | Times | 0.11 | 0.46 | 0.51 |
| Current Ratio | Times | 1.40 | 1.37 | 1.31 |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
Not Applicable
ANY OTHER INFORMATIONNil
RATING HISTORY FOR THE PREVIOUS 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 | 85.56 |
BWR A/Stable
(Reaffirmation) |
NA |
NA
|
10Oct2023 |
BWR AStable
(Reaffirmation) |
28Feb2022 |
BWR A-Stable to Positive
(Reaffirmation and change in Outlook) |
| 0.00 |
NA
|
NA |
NA
|
22Nov2023 |
BWR AStable
(Reaffirmation) |
12Jul2022 |
BWR AStable
(Upgrade) |
||
| FB SubLimit | LT | (4.50) |
BWR A/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (10.00) |
BWR A/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| (35.00) |
BWR A/Stable
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| FB SubLimit | ST | (35.00) |
BWR A1
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| NFB SubLimit | LT | (35.00) |
BWR A/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| (35.00) |
BWR A/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| (35.00) |
BWR A/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
||
| Non Fund Based | ST | 21.00 |
BWR A1
(Reaffirmation) |
NA |
NA
|
10Oct2023 |
BWR A1
(Reaffirmation) |
28Feb2022 |
BWR A2+
(Reaffirmation) |
| 0.00 |
NA
|
NA |
NA
|
22Nov2023 |
BWR A1
(Reaffirmation) |
12Jul2022 |
BWR A1
(Upgrade) |
||
| NFB SubLimit | ST | (10.00) |
BWR A1
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
28Feb2022 |
BWR A2+
(Reaffirmation) |
| (6.00) |
BWR A1
(Reaffirmation) |
NA |
NA
|
NA |
NA
|
12Jul2022 |
BWR A1
(Upgrade) |
||
| Grand Total | 106.56 | (Rupees One Hundred Six Crores and Fifty Six lakhs Only) | |||||||
- General Criteria
- Approach to Financial Ratios
- Manufacturing Companies
- Short Term Debt
- Service Sector Company
| Analytical Contacts | |
|---|---|
|
Rahul Shaw Ratings Analyst rahul.shaw@brickworkratings.com |
Nagaraj K Director - Ratings Board : +91 80 4040 9940 nagaraj.ks@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.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 | Axis Bank Ltd. | Term LoanSanctioned | 7.49 | _ | 7.49 | Simple## |
| Sub-Limit (Capex LC) Sanctioned | (4.50) | |||||
| 2 | Axis Bank Ltd. | Cash CreditSanctioned | 6.00 | _ | 6.00 | Simple## |
| Sub-Limit (LC/BG) Sanctioned | (6.00) | |||||
| 3 | ICICI Bank | Term LoanSanctioned | 12.07 | _ | 12.07 | Simple## |
| 4 | ICICI Bank | Working Capital Demand LoanSanctioned | 35.00 | _ | 35.00 | Simple## |
| Sub-Limit (Bank Guarantee) Sanctioned | (35.00) | |||||
| Sub-Limit (Buyers Credit) Sanctioned | (35.00) | |||||
| Sub-Limit (Cash Credit) Sanctioned | (35.00) | |||||
| Sub-Limit (Inland Purchase/Sale Bill Discount) Sanctioned | (35.00) | |||||
| Sub-Limit (Letter of Credit) Sanctioned | (35.00) | |||||
| 5 | IDFC First Bank Limited | ILC/FLC/BGSanctioned | _ | 20.00 | 20.00 | Simple## |
| 6 | IDFC First Bank Limited | Cash CreditSanctioned | 15.00 | _ | 15.00 | Simple## |
| 7 | RBL Bank | Credit Exposure Limit (CEL)Sanctioned | _ | 1.00 | 1.00 | Simple## |
| 8 | RBL Bank | Cash CreditSanctioned | 10.00 | _ | 10.00 | Simple## |
| Sub-Limit (BG/LC) Sanctioned | (10.00) | |||||
| Sub-Limit (WCDL) Sanctioned | (10.00) | |||||
| Total | 85.56 | 21.00 | 106.56 | |||
| TOTAL (Rupees One Hundred Six Crores and Fifty Six 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.
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil | Nil |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| Nil | Nil | Nil | Nil |
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