RATING RATIONALE
28Feb2022

TVS Electronics Ltd.

Brickwork Ratings reaffirms the ratings with a revision in the outlook for the Bank Loan Facilities of Rs. 46.00 Cr of TVS Electronics Ltd.

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(23 Jun 2021)
Present
Fund Based 25.00 25.00 Long Term BWR A- /Stable
Reaffirmation
BWR A - /Stable to Positive
Reaffirmation and change in Outlook
Non Fund Based 21.00 21.00 Short Term BWR A2+
Reaffirmation
BWR A2 +
Reaffirmation
(10.00) (10.00)
Grand Total 46.00 46.00 (Rupees Forty Six 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 revision in outlook for TVS Electronics Limited (TVSE or the company) factors the sustained improvement and better than envisaged year-to-date business and financial profile after a stable performance in FY21, despite the Covid-induced disruptions mostly during Q1FY21. Brickwork Ratings (BWR) believes that the business and financial profile shall continue to be maintained over the medium term. Improvement in business performance is reflected in significant growth in revenue and EBIDTA margin to Rs.219.50 Cr and ~8.50% respectively in the 9MFY22 as against Rs.152.24 Crs and ~0.6% respectively for the corresponding period of the previous fiscal. The margins are better than the pre-covid levels and are largely supported by better demand and diversified folio aided by new product lines offering improved margins. Also, the profitability metrics are expected to be sustained at the present levels. The rating action also factors in the stable capital structure which has been maintained at comfortable levels with an almost zero-debt position and the improved liquidity position.

The ratings continue to draw strength from the strong parentage and brand equity of TVS,  experienced and professional management and robust financial and risk management practices and growing market demand for newly introduced products coupled with the company’s plans to further diversify its revenue streams. The rating strengths remain constrained by the exposure to intense industry competition, technological obsolescence, and forex risks.

The outlook may be revised downwards with lower-than-expected revenue/cash accruals or deterioration in profitability/debt indicators and/or significant increase in the operating cycle, and/or a deterioration in the capital structure due to debt-financed capital expenditure, thus weakening the company’s financial risk profile.

KEY RATING DRIVERS

Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale). The company does not have subsidiaries.

RATING SENSITIVITIES

The company's ability  to successfully stabilise its fresh business initiatives, improve its revenue and profitability through the newly added products 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.
  • Specific credit metrics which may result in a downward rating action include Total Debt/TNW exceeding 2 times, DSCR declining to below unity, and ISCR below 2 times on a sustained basis.

LIQUIDITY INDICATORS - Adequate

The company’s liquidity position is adequate, as seen in the average working capital utilisation of below 50% during the last 12 months. Cash and cash equivalents were around Rs.15 Crs as on 30 September 2021 (including the fixed deposits and mutual fund). The cash balance has further improved as on 31 December 2021, on a provisional basis, backed by the improved margins and the company's effective working capital management with various initiatives like advance collections, extending credits for imports through buyer’s credit, etc. The Current Ratio was 1.32 times, and Net Cash Accruals/Total Debt was 5.86 times as on 30 Sep 2021. The EBITDA is sufficient to cover interest and finance charges. The company does not have long-term borrowings as on date.

ABOUT THE ENTITY

TVS Electronics Limited (TVSE), Chennai, founded in 1986 as an IT peripheral manufacturer is now a leading transaction automation IT product manufacturer and service provider. TVSE has its production/repair facilities at Dehradun (Uttarakhand), Chennai (TN), and Tumkur (Karnataka). The company is listed on the BSE and NSE. TVSE’s business consists of two revenue segments, viz., (a) Products & 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 (QSR). 

Mr. Gopal Srinivasan is the Chairman and Mrs.Srilalitha Gopal is the Managing Director of the company.

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 20-21
(Audited)
FY 19-20
(Audited)
Operating Revenue Rs.Crs. 224.60 258.72
EBITDA Rs.Crs. 8.55 10.91
PAT Rs.Crs. 0.77 0.39
Tangible Net Worth Rs.Crs. 63.79 63.90
Total Debt/Tangible Net Worth Times 0.06 0.32
Current Ratio Times 1.28 1.21
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

N.A.

ANY OTHER INFORMATION

Nil

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 25.00
BWR A-/Stable to Positive
(Reaffirmation and change in Outlook)
23Jun2021
BWR A- Stable
(Reaffirmation)
19Jun2020
BWR A- Stable
(Reaffirmation)
02May2019
BWR A- Stable
(Upgrade)
Non Fund Based ST 21.00
BWR A2+
(Reaffirmation)
23Jun2021
BWR A2+
(Reaffirmation)
19Jun2020
BWR A2+
(Reaffirmation)
02May2019
BWR A2+
(Upgrade)
NFB SubLimit ST (10.00)
BWR A2+
(Reaffirmation)
NA
NA
NA
NA
NA
NA
Grand Total 46.00 (Rupees Forty Six 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
TVS Electronics 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 IDFC First Bank Limited Cash CreditSanctioned 15.00 _ 15.00
2 IDFC First Bank Limited ILC/FLC/BGSanctioned _ 20.00 20.00
3 RBL Bank Cash CreditSanctioned 10.00 _ 10.00
Sub-Limit (BG/LC) Sanctioned (10.00)
4 RBL Bank Credit Exposure Limit (CEL)Sanctioned _ 1.00 1.00
Total 25.00 21.00 46.00
TOTAL (Rupees Forty Six 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.