Hindusthan Urban Infrastructure Limited.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 180.00 Crs. of Hindusthan Urban Infrastructure Limited.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (05 Mar 2021)	Present
Fund Based	100.13	91.00	Long Term	BWR BBB-/Stable Reaffirmation	BWR BBB - /Stable Reaffirmation
Non Fund Based	254.25	89.00	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Grand Total	354.38	180.00	(Rupees One Hundred Eighty 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

Brickwork Ratings (BWR) has reaffirmed its BWR BBB-/Stable/BWR A3 rating on the bank loan facilities of Hindusthan Urban Infrastructure Ltd ('HUIL' or 'the company').

The rating action reflects HUIL's revival in business risk profile. Revenues have sustained at Rs 540.9 crore in FY21 and further improved to Rs 553.4 crore in 9MFY22 on the back of ramp up in sales from the chemical segment through its subsidiary Hindusthan Speciality Chemicals Limited. Profitability has improved substantially with operating margins at 10.92% in FY21 (FY20: 5.07%) and is sustained at 10.55% in 9MFY 22, supported by reducing operating expenses and focusing on high contribution orders in the conductor segment in HUIL. The financial risk profile remains average with a healthy networth and capital structure, and moderate debt protection metrics; however it is expected to improve over the medium term supported by the improved business performance.

The rating continues to reflect the promoter’s extensive experience, a diversified product profile, a reputed client profile and an average financial risk profile. These rating strengths are however partially off-set by the working capital intensity in operations and susceptibility to volatility in aluminium and alumina prices.

Outlook: Stable

BWR believes HUIL will continue to benefit from the extensive experience of the promoters in the industry. The Stable outlook indicates a low likelihood of a rating change over the medium term.

KEY RATING DRIVERS

Credit Strengths:

Established track record of operations and experienced management :
The company commenced its operations in 1959 and has a successful track record of more than six decades in the existing line of business. HUIL’s long track record and the extensive experience of promoters have helped establish relations with various stakeholders for its business. The company was established and is managed by the Mody family, holding 74.91% equity stake in HUIL as of December 31, 2021. Furthermore, the promoters are assisted by a team of experienced professionals in managing the company’s daily business operations.
Diversified product portfolio and reputed customer profile :
The company manufactures & sells various types of conductors and insulators. The products manufactured find end use power and discoms. HUIL client base consists of government and private clients, such as Powergrid Corporation of India Ltd , Larsen & Toubro Ltd , Tata Projects Ltd , Madhyanchal Vidyut Vitran Nigam Ltd, West Bengal State Electricity Distribution Company Ltd , Siemens Ltd, ABB India Ltd, Kalpataru Power Transmission Ltd etc., in various states, including West Bengal, Uttar Pradesh, Tamil Naidu, Orissa, Assam, Haryana, Madhya Pradesh and Gujarat. Thus, the company's counterparty credit risk is low.
Average Financial risk profile :
Debt coverage indicators, the interest service coverage ratio and debt service coverage ratio improved to 1.44x and 1.22x, respectively, in FY21 from 1.23x and 1.0x, respectively, in FY19. TNW was healthy keeping the capital structure comfortable with gearing at 0.67x in FY21.

Credit Risks:

Working capital-intensive operations :
Working capital requirement is large because of the inherent nature of the business and project execution cycle of 2-3 years, which results in high reliance on short-term debt. Receivables are high in this business due to the sizable retention money blocked in projects till the end of the performance guarantee period. As on March 31, 2021, receivables were 115 days, against 119 days a year earlier. This is however supported by a similar credit period available from suppliers with payables of 114 days as on March 31, 2021 (FY20: 105 days). This results in a controlled conversion cycle ranging from 80 - 100 days.
Susceptibility to volatility in aluminium and alumina prices :
While global aluminium prices have witnessed strong recovery from the previous fiscal on account of improved metal demand, the profitability will remain susceptible to volatility in aluminium and alumina prices, which are commoditized and cyclical. Movement in aluminium prices and aluminium-alumina spreads will be a key monitorable.

ANALYTICAL APPROACH - Consolidated

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive

Significant and sustained improvement in topline and profitability
Improvement is financial profile with improving coverage indicators and sustainability in capital structure

Negative:

Decline in revenues and/or profitability thereby reducing the cash accruals
Deterioration in financial risk profile especially liquidity

LIQUIDITY INDICATORS - Adequate

The liquidity is adequate, the company is expected to generate cash accruals of over Rs 30 crore in FY22 and Rs 50 crore in FY23 against repayment obligations of Rs 21.51 crore in FY22 and Rs 34.68 crore in FY23. The bank limit utilisation was moderate averaging 81% over the past 12 month through December 2021. Current ratio was adequate at 1.26 times as on March 31, 2021. Liquidity is further supported by need based funding from promoters through unsecured loans (outstanding at Rs 39.07 crore as on March 31, 201), and will be able to provide further support in case of any exigencies.

ABOUT THE ENTITY

HUIL was established in 1959 and is currently headed by chairman, Mr.Raghavendra Anant Mody. The Company is a leading manufacturer of overhead conductors and electro-porcelain high tension insulators such as Disc, solidcore, hollow and railway. Its operations can be classified into two divisions,viz, conductors and insulators.The conductor manufacturing units are located in Khurda,Orissa and Guwahati, Assam with a combined installed capacity of 66,000 metric ton per annum (MTPA) and insulator manufacturing unit is located in Bhopal, Madhya Pradesh with installed capacity of 15,380 MTPA. It is listed on the Bombay stock exchange.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	352.55	462.94
EBITDA	Rs.Crs.	31.19	42.23
PAT	Rs.Crs.	2.59	5.56
Tangible Net Worth	Rs.Crs.	458.22	455.32
Total Debt/Tangible Net Worth	Times	0.30	0.32
Current Ratio	Times	1.47	1.50

KEY FINANCIAL INDICATORS (Consolidated)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	540.96	550.33
EBITDA	Rs.Crs.	59.05	27.89
PAT	Rs.Crs.	-3.29	-30.96
Tangible Net Worth	Rs.Crs.	449.99	452.90
Total Debt/Tangible Net Worth	Times	0.67	0.65
Current Ratio	Times	1.26	1.24

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	91.00	BWR BBB-/Stable (Reaffirmation)	05Mar2021	BWR BBB-Stable (Reaffirmation)	14Feb2020	BWR BBB-Stable (Reaffirmation)	17Jan2019	BWR BBB-Stable (Assignment)
Non Fund Based	ST	89.00	BWR A3 (Reaffirmation)	05Mar2021	BWR A3 (Reaffirmation)	14Feb2020	BWR A3 (Reaffirmation)	17Jan2019	BWR A3 (Assignment)
Grand Total		180.00	(Rupees One Hundred Eighty 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
Arbez Noshir Karbhari Ratings Analyst arbez.k@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Hindusthan Urban Infrastructure Limited.

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	Canara Bank	Term Loan - Sanctioned	10.92	_	10.92
2	Canara Bank	Cash Credit - Sanctioned	5.00	_	5.00
3	Canara Bank	GECL - Sanctioned	8.00	_	8.00
4	Canara Bank	ILC/FLC - Sanctioned	_	25.00	25.00
5	Canara Bank	BG/LC/ILC - Sanctioned	_	35.00	35.00
6	IDBI Bank	GECL - Sanctioned	4.00	_	4.00
7	IDBI Bank	BG/LC/ILC - Sanctioned	_	15.00	15.00
8	IDBI Bank	Cash Credit - Sanctioned	10.00	_	10.00
9	State Bank Of India (SBI)	Funded Interest Term Loan - Sanctioned	0.56	_	0.56
10	State Bank Of India (SBI)	GECL - Sanctioned	12.52	_	12.52
11	State Bank Of India (SBI)	Cash Credit - Sanctioned	40.00	_	40.00
12	State Bank Of India (SBI)	Term Loan - Sanctioned	_	_	0.00
13	State Bank Of India (SBI)	BG/LC/ILC - Sanctioned	_	14.00	14.00
Total			91.00	89.00	180.00
TOTAL (Rupees One Hundred Eighty Crores Only)

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
Hindusthan Speciality Chemicals Limited	58.5	Full	Subsidiary - Operational & financial linkages and common management

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