RATING RATIONALE
18Aug2021

Avantel Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 52.00 Crs. of Avantel Ltd.

Particulars
Facilities** Amount(Rs.Crs.) Tenure Rating#
Fund Based 6.00 Long Term BWR BBB + /Stable
Assignment
(5.00)
(2.00) Short Term BWR A2
Assignment
(6.00)
Non Fund Based 46.00 Short Term BWR A2
Assignment
Grand Total 52.00 (Rupees Fifty Two 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 assignment of bank loan ratings of Avantel Limited (Avantel or the company) factors in the established and long track record of the company in the niche satellite communication systems segment, extensive industry experience of the promoters of around three decades, comfortable financial risk profile with y-o-y improvement, long standing relationships with low counter party risk customers including Ministry of Defence (MoD). The ratings also derive comfort from improved orderbook position as on 30 Jun 2021 providing short to mid term revenue visibility, the proprietary nature of the company’s key products and the strong research and development (R&D) facilities, which are expected to support the diversification of its product profile in the medium to long term. The ratings, however, are constrained by the moderate scale of operations, working capital intensive operations, segment and customer concentration risk and exposure to risks inherent in the tender-based business.
 
Brickwork Ratings (BWR) takes note of the recent positive developments including addition of High Frequency (HF) and radar product segments and fresh orders from the Indian Railways which are expected to diversify Avantel’s revenue streams going forward. Such diversification, timely execution and sustenance of operating margin shall remain a key monitorable. BWR also notes that the company has not opted for moratorium benefits and the one-time restructuring scheme under the RBI’s Covid-19 relief package, in view of the adequate liquidity position.
 
BWR believes Avantel’s business risk profile will be maintained over the medium term. The outlook may be revised to Positive if a significant increase in the scale of operations, along with sustained margins, an improved product/client-wise diversification and the timely realisation of receivables results in an improved working capital management. The outlook may be revised to Negative in case of muted revenue growth, deterioration in new order accretion, significant deterioration in profitability margins and/or significant debt-funded capex thus weakening the company’s financial risk profile. Any prolonged impact of Covid-19, affecting revenues and cash flows due to a disruption in production and demand, may exert a downward pressure on the ratings.

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this rationale). The company does not have any subsidiaries.

RATING SENSITIVITIES

Positive :

Negative :

LIQUIDITY INDICATORS - Adequate

Liquidity position is adequate marked by the steady internal cash accruals backed by strong margins and unutilised bank lines. Net cash accrual remains moderate against no term debt obligation over the medium term. Cash and cash equivalents were ~Rs.43 Crs and current ratio was 3.89 times as on 31 Mar 2021. Historically, the company maintains sufficient balance in cash and cash equivalents and working capital facilities to meet the short term liquidity requirements.

ABOUT THE ENTITY

Avantel Limited was incorporated on 30th May 1990 as a private limited company under the name of Dialog Communications Private Limited, Subsequently, in December 1994 it was converted into public company and rechristened to Avantel limited in September 2008. The company is listed on BSE since January 2001. The company has its registered office, manufacturing and R&D facilities at Visakhapatnam, Andhra Pradesh. 
 
The company is engaged in designing, developing and maintaining wireless and satellite  communication products, defense electronics, radar systems and development of network management software applications  for its customers predominantly from the aerospace and defence sectors. Avantel undertakes R&D activities for development of innovative solutions in the related areas. 
 
Dr. A. Vidyasagar is the Chairman & Managing Director of the company.  Mrs. A. Sarada and Mrs. A. Siddhartha Sagar are the other whole-time directors of the family-managed business.

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 77.70 51.92
EBITDA Rs.Crs. 22.18 15.38
PAT Rs.Crs. 15.33 10.76
Tangible Net Worth Rs.Crs. 66.24 51.67
Total Debt/Tangible Net Worth Times Not Available Not Available
Current Ratio Times 3.89 4.69
KEY COVENANTS OF THE FACILITY RATED

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


STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not applicable

ANY OTHER INFORMATION

Nil

RATING HISTORY FOR LAST 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 6.00
BWR BBB+/Stable
(Assignment)
NA
NA
NA
NA
NA
NA
FB SubLimit LT (5.00)
BWR BBB+/Stable
(Assignment)
NA
NA
NA
NA
NA
NA
FB SubLimit ST (2.00)
BWR A2
(Assignment)
NA
NA
NA
NA
NA
NA
(6.00)
BWR A2
(Assignment)
NA
NA
NA
NA
NA
NA
Non Fund Based ST 46.00
BWR A2
(Assignment)
NA
NA
NA
NA
NA
NA
Grand Total 52.00 (Rupees Fifty Two 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

Naveen S

Manager - Ratings Board : +91 80 4040 9940 naveen.s@brickworkratings.com

Saakshi Kanwar

Senior Manager Ratings saakshi.k@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
Avantel 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 Canara Bank Open Cash Credit / Cash Credit (Hypothecation/Pledge)Sanctioned 6.00 _ 6.00
Sub-Limit (BULC) Sanctioned (2.00)
Sub-Limit (ILC/FLC) Sanctioned (6.00)
Sub-Limit (ODBD) Sanctioned (5.00)
2 Canara Bank Bank GuaranteeSanctioned _ 46.00 46.00
Total 6.00 46.00 52.00
TOTAL (Rupees Fifty Two Crores Only)
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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.

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