H.V. Equipments Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.21.80 Crs. of H.V. Equipments Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned	04.05	Long Term	BWR B + (Stable)
Sub Total	04.05
Non-Fund Based
Bank Guarantee - Sanctioned	17.00	Long Term	BWR B + (Stable)
Letter of Credit - Proposed	00.75	Short Term	BWR A4
Sub Total	17.75
Grand Total	21.80	(Rupees Twenty One Crores and Eighty lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable

BWR assigns the Long Term Rating of BWR B+ Stable and Short term rating of BWR A4 to H.V. Equipments Pvt Ltd. The rating draws strength from the extensive experience of the promoters and moderate credit risk profile. However, the rating of the company is constrained by working capital intensive operations, tender based nature of operations and Covid 19 effect.

BWR believes that H.V. Equipments 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 financial credit risk profile deteriorate including the liquidity.

KEY RATING DRIVERS

Credit Strengths:

• Extensive experience of the promoters: :

  The business is promoted by Mr. S.S. Verma who is ably assisted by his family members Mr. Amit Verma and Mr. Anil Verma. Mr. S.S. Verma is having more than five decades of industrial experience with him along with two decades of experience of other directors.The company is engaged in manufacturing of pneumatic conveying system (mill reject handling system/ash handling system) has strong relationship with customers like BHEL, NTPC, Tata Projects Ltd, Larsen and Toubro Power Ltd etc.  

• Moderate Credit Risk Profile: :

  There has been an increase in revenues of the company to Rs.20.05 crs in FY19(A) from Rs.18.01 crs in FY18(A). The company has incurred profits of Rs.0.72 crs in FY19 (A) & Rs.0.64 crs in FY18 (A) respectively. Tangible net worth also remained at modest level at Rs.6.74 crs in FY19. Total debt/TNW stood at 0.89x in FY19 as compared to 1.10x in FY18. ISCR at 1.85x has improved in FY19 as compared to 1.73x in FY18 owing to increase in operating profits.

Credit Risks:

• Working Capital intensive operations: :

  Conversion cycle, at 147 days as on March 31, 2019, is on a higher side. It is a working capital intensive unit which has resulted into stretched liquidity position.

• Tender based nature of business: :

  The company participates in tenders and there is uncertainty of orders, thus exposing the firm to demand side risk.

• Covid 19 Effect: :

  Due to Covid 19 effect, the revenue visibility is challenging in the medium term however the company has projected revenue of Rs.25 crs in FY21 as has orders in hand worth Rs. 52 crs alongwith running orders. Though the operations were closed in April and May 2020 due to Covid 19 lockdown, the company managed to generate revenue of Rs. 6 crs from June'20 till date.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

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 improve its revenues and financial risk profile would remain the key rating sensitivities.

Positive: Rating may be upgraded in case of substantial improvement in revenues and profit margins of the company.

Negative: Rating may be downgraded in case there is deterioration in financial risk profile of the firm including the liquidity of the company. 

LIQUIDITY POSITION

The company has no associate or group concern. Cash and cash equivalents stood at Rs. 0.24 crs in FY19. Long term borrowings are on account of unsecured loans from directors of Rs. 0.65 crs, vehicle loans of Rs. 0.21 crs and business loans of Rs. 0.47 crs in FY19 from ICICI bank, RBL Bank and Deutsche bank. The company generated cash surplus of Rs. 0.92 crs as against CPLTD of Rs. 1.03 crs in FY19. Current Ratio stands at 1.32x along with ISCR of 1.85x and DSCR of 0.87x in FY19. Conversion cycle of 147 days as on March 31, 2019, is on a higher side resulting in stretched liquidity. CC utilisation stands at 90% as on date.  Taking into account the above, the liquidity position is considered to be Stretched.

PROFILE

H.V. Equipments Private Limited, incorporated in 1984, installs ash handling and mill reject systems (waste disposal of coal) for public sector enterprises. It mainly manufactures dense phase pneumatic conveying systems used for thermal power and cement plants, and paper mills. The company has a fabrication and design unit in Sector 63, Noida where approx 40%-50% of the equipment is manufactured. The company is promoted by Mr. S. S. Verma alongwith his family members Mr. Amit Verma and Mr. Anil Verma. The company has customers like BHEL, NTPC, L&T etc. It is a tender based business.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19 (Audited)	FY 17-18 (Audited)
Operating Revenue	Rs.Crs.	20.05	18.01
EBITDA	Rs.Crs.	2.26	2.20
PAT	Rs.Crs.	0.72	0.64
Tangible Net Worth	Rs.Crs.	6.74	6.02
Total Debt/Tangible Net Worth	Times	0.89	1.10
Current Ratio	Times	1.32	1.38

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2020)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2019	2018	2017
Fund Based
1	Cash Credit - Sanctioned	Long Term	04.05	BWR B+ (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned	Long Term	17.00	BWR B+ (Stable)	NA	NA	NA
3	Letter of Credit - Proposed	Short Term	00.75	BWR A4	NA	NA	NA
Total			21.80	(Rupees Twenty One Crores and Eighty lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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.

For More Information Contact:

Analytical Contacts	Investor Contacts
Shweta Tandon Rating Analyst B : +91 11 2341 2232 Ext : 111 shweta.t@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
V.K.Kukreja Associate Director - Ratings B : +91 11 2341 2232 kukreja.vk@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Cash Credit - Sanctioned	4.05	_	4.05
2	Bank Guarantee - Sanctioned	17.00	_	17.00
3	Letter of Credit - Proposed	_	0.75	0.75
Total				21.80
TOTAL (Rupees Twenty One Crores and Eighty lakhs Only)