BPL Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 28.00 Crs. of BPL Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (17 Jun 2020)	Present
Fund Based	10.00	15.00	Long Term	BWR B /Stable Assignment	BWR B /Stable Reaffirmation
Non Fund Based	18.00	13.00	Short Term	BWR A4 Assignment	BWR A4 Reaffirmation
Grand Total	28.00	28.00	(Rupees Twenty Eight Crores 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

The rating reaffirmation of the bank loan facilities of BPL Ltd ('BPL' or 'the company') continues to reflect the promoters’ experience of more than three decades in the consumer durables industry, established track record and brand and the recent modernization of its Printed Circuit Board (PCB) manufacturing facility. The ratings, are constrained by the modest scale of operations, deterioration in the credit risk profile with less than average credit metrics, stretched liquidity and customer concentration risks. The ratings also factor in the continuing delay in redemption of preference shares of Rs.169.59 Crs. which have fallen due in Aug 2019, impact of Covid-19 on the operations of the company, the competitive landscape, exposure to exchange fluctuation risks on account of imports from China, Korea etc. BWR notes the erosion in Tangible net worth (TNW) after adjusting for investments in group companies and advances to related parties. BWR also notes the outstanding contingent liabilities of around ~Rs.77 Crs. including statutory dues, litigations and corporate guarantee.

BWR notes that the company availed Covid-19 related RBI Moratorium Package during Mar'20 - Aug'20. As part of the Moratorium Package, the company got relief from Union Bank of India. The company has been regular in honouring the debt obligations post moratorium, as confirmed by lender. The company did not apply for one time restructuring (OTR) of any loan under RBI Resolution Framework for Covid-19 related Stress.

BWR believes BPL’s business risk profile will be maintained over the medium term. The outlook may be revised to ‘Negative’ if the company reports significantly lower than expected performance resulting in further deterioration of coverage indicators, delay in recovering advances from the related parties, further delays in redemption of the preference shares of ~Rs 54 Crs. and weakening of liquidity position. Further, any major debt-funded expenditure resulting in deterioration in capital structure and debt coverage indicators and/or a sharp reversal in industry operating conditions and/or delay or non-realization of receivables, thereby weakening the credit risk profile, may exert a downward pressure on the ratings.

KEY RATING DRIVERS

Credit Strengths:

Experienced promoters :
The company and the promoters have a long track record of around three decades and extensive experience in the printed circuit board (PCB) and consumer durables industry, which has helped in understanding the business cycles, establishing relationships with suppliers and customers, obtaining repeat orders and addressing associated inherent risks.
Established infrastructure for PCB manufacturing :
The company has its PCB manufacturing facility at Doddaballapur, Bangalore rural, with an annual installed capacity of 5.40 lakh square metres. The company added new customers like Havells, Crompton Greaves during FY20 which is likely to support the envisaged increased sales from manufacturing of PCBs. PCB sales were ~22% of company's revenue in FY20 which increased to ~69% in FY21.

Credit Risks:

Modest scale of operations and below average financial risk profile :
The company continues to have a modest scale of operations vis-a vis the competition from various domestic and international brands. After the brand licensing agreement with Reliance Retail Limited in FY20, PCB manufacturing and brand royalty remained the two sources of revenue for the company. As such owing to the change in the business incomes the financials of FY20 and FY21 are not considered comparable. Operating income declined from Rs. 94.56 Crs. in FY20 (22% contributed by PCB segment) to Rs. 43.76 Crs. in FY21. EBITDA and PAT in FY21 were at Rs. 2.09 Crs. and Rs. (21.46) Crs. respectively. One time deferred tax of Rs. 20.92 Crs. charged in FY21 led to loss for the company. Loss registered in FY21 led to decline in Tangible Net worth (TNW) to Rs. 148.72 Crs. as on 31Mar2021. TNW, adjusted for fair value of investments of Rs. 34.82 Crs., was Rs. 134.93 Crs. as on 31Mar2020. BWR notes the continued substantial advances and investments in the related entities/Group companies leading to erosion of TNW. Gearing remained comfortable at 0.08 time as on 31Mar2021 as total debt remained low. Debt coverage metrics given by ISCR and DSCR remained subdued at 1.03 times and (7.36) time respectively as on 31Mar2021.
Delay in redemption of Preference Shares of Rs. 169.59 Crs. :
During FY2006, the company underwent debt restructuring through then available CDR scheme and as part of the approved package, Non- Convertible, Non-Cumulative 0.001% Preference Shares of Rs. 100/- each aggregating to Rs.169.59 Crs. were issued to various lenders. Rs.115.19 Crs. of preference shares have been subscribed by promoters and promoter group. Preference shares amounting to Rs. 54.39 Crs. are held by outsiders like OBC (now PNB), Canara Bank, HDFC Limited, Export Import Bank Ltd, CBI. These preference shares amounting to Rs.169.59 Crs. fell due for redemption in Aug'19 and are yet to be redeemed. The company has informed that the preference shares were issued under the CDR scheme where debt was converted to equity and as such there is no separate Shareholders Agreement. Such delay in redemption/ buy back is contingent on liquidation from non-core investments/assets/ recoveries from advances to group companies as the same is segregated from operational cash flow by the company. The ability of the company to monetize its non core assets and recover its advances to the group companies is a key rating sensitivity.
Impact of Covid-19 pandemic :
The company's operations were impacted due to Covid-19 induced lockdown in FY21. The disruption in production and supply chain resulted in cash flow mismatches and the company had to incur losses on account of fixed costs. During the current wave of the pandemic too, there has been slowdown in sales and BWR expects the Q1FY22 sales to remain subdued compared to Q4FY21. Any prolonged disruption due to the pandemic may adversely impact the operating income, profitability and credit risk profile of the company.
Forex risk and competitive landscape :
Although the company has a long track record in the PCB business, the competition from domestic and global players will put pressure on the margin. The company will have to strengthen its market position with its brand and product differentiation. Due to ever evolving nature of the technological landscape in PCB segment, it may have to keep investing on R&D and hi-tech equipment. Furthermore, the company imported ~60% of its raw material in FY21 making it vulnerable to forex risk fluctuation. Although the dependence on imports has since reduced from ~80% in FY20 and the company has hedging limits in place, nonetheless the associated risks are mitigated to a certain degree.

ANALYTICAL APPROACH - Standalone

BWR has adopted a Standalone approach while arriving at its ratings and applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of the document). The company does not have any subsidiaries.

RATING SENSITIVITIES

Going forward, the ability of the company to increase its revenue and profitability, effectively manage impact on business operations due to the Covid-19 pandemic , monetize its non core assets and recover its advances to the group companies are key monitorables. BPL has outstanding contingent liabilities amounting to ~Rs.77 Crs. as on 31 Mar 2021 on account of disputed statutory liabilities and corporate guarantee offered to one of the group companies. Any crystallization of the above contingent liabilities and the impact of the same on the financial risk profile of the company, if any, would also be a key rating sensitivity.

Positive:

Increase in scale of operations, profitability and net cash accruals on a sustainable basis
Successful redemption of the preference shares pending for redemption since Aug'19

Negative:

Delay in recovery of advances made to group companies
Continued delay in redemption of the preference shares
Deterioration in key credit metrics on account of weaker than expected business performance and sustained pressure on net margins
Prolonged impact of Covid-19 on the revenue and cash flow leading to material deterioration in financial risk profile and liquidity

LIQUIDITY INDICATORS - Stretched

The company's liquidity is stretched as reflected in the working capital limit utilization of ~90% in past six months, low operating profit, net cash accruals and cash and cash equivalents and subdued debt coverage metrics and current ratio. Operating profit just covered the finance cost in FY21 and the trend may remain similar in FY22. Although the company has no term loan from any bank/FI as on 31Mar2021, the low net cash accruals are not sufficient to provide cushion for working capital requirements. Cash and cash equivalents remained low at ~Rs. 1.51 Crs. as on 31Mar2021. Current ratio continued to remain below 1.00 time as on 31Mar2021 due to high current liabilities as a result of reporting redeemable preference shares of Rs. 169.59 Crs. as other current liabilities. BWR notes that the company has availed benefits under RBI’s Covid-19 relief package. It has not applied for one time restructuring (OTR) of any account under RBI Resolution Framework for Covid-19 related Stress.

ABOUT THE ENTITY

BPL Limited was incorporated in 1963 at Palakkad, Kerala. The company is listed on BSE and NSE. BPL Ltd. is in the business of consumer electronic durable products and manufacturing of Printed Circuit Boards (PCB). Till FY20, the company sold its consumer durable products to online platforms like Amazon and Flipkart etc. In February 2020, BPL entered into an exclusive brand licence agreement with Reliance Retail Limited according to which Reliance will trade in BPL branded products across its own stores, its distribution network and its online selling platform. BPL will regulate quality and customer experience and will earn a royalty on usage of the BPL brand by Reliance. So, the company’s source of revenue in FY21 has been the manufacturing and sale of PCB and brand licensing fee from Reliance Retail Limited. The company’s PCB segment has an installed capacity of 5.40 lakh square metres with utilization of ~36% in FY21. The end use industries for the manufactured PCBs are lighting and automotive industry.

Mr. Ajit Gopal Nambiar is the Chairman and Managing Director.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	43.76	94.56
EBITDA	Rs.Crs.	2.09	-16.34
PAT	Rs.Crs.	-21.46	3.75
Tangible Net Worth	Rs.Crs.	148.72	169.75
Total Debt/Tangible Net Worth	Times	0.08	0.07
Current Ratio	Times	0.68	0.68

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

Not applicable

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	15.00	BWR B/Stable (Reaffirmation)	17Jun2020	BWR B/Stable (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	13.00	BWR A4 (Reaffirmation)	17Jun2020	BWR A4 (Assignment)	NA	NA	NA	NA
Grand Total		28.00	(Rupees Twenty Eight Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
Swarn Saurabh Senior Rating Analyst swarn.s@brickworkratings.com	Saakshi Kanwar Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

BPL Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Union Bank of India	SOD-RE - Sanctioned	15.00	_	15.00
2	Union Bank of India	ILC/FLC - Sanctioned	_	13.00	13.00
Total			15.00	13.00	28.00
TOTAL (Rupees Twenty Eight Crores Only)

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.