NGEF (Hubli) Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.13.00 Crs. of NGEF (Hubli) Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Proposed	10.00	Long Term	BWR B + (Stable)
Sub Total	10.00
Non-Fund Based
Bank Guarantee - Proposed Inland Letter of Credit (ILC) - Proposed	01.00 02.00	Short Term	BWR A4
Sub Total	03.00
Grand Total	13.00	(Rupees Thirteen Crores Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I
Note: Existing bank loan facilities for Rs. 7.75 crs RATING ACTION / OUTLOOK : Stable

BWR believes that NGEF (Hubli) 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 revisd to 'Negative' if the revenues go down and profit margins show lower than expected figures.

KEY RATING DRIVERS

Credit Strengths:

• Vast management experience in the relevant industry :

  Promoter directors are qualified have more than three decades of experience in the electrical equipment industry. All the directors are qualified with vast industrial experience of more than 3 decades and are appointed by Government of Karnataka.

• Significant growth in operating revenue for FY19 :

  Revenue from operations has increased substantially for FY19. It stood at Rs. 130.54 crs as against Rs. 31.11 crs in FY18.

• Improved Debt protection matrix :

  ISCR of the company was at 1.13 times for FY19 as compared to 2.06 times in FY18 and (4.84) times in FY17; while DSCR was at 0.47 times in FY19 as against 0.42 times in FY18 and (2.48) times in FY17.

• Work on hand for FY2019-20 and operating revenue estimates during the year :

  As per the management, projects on hand for FY2019-20 has been estimated at Rs. As per the management, Work order in hand for FY2019-20 was estimated at Rs. 205.33 crs , out of which projects of Rs. 144.23 crs have been completed; while balance work is under process. Further, estimated revenue from sale of transformers, motors and repair services was at Rs. 28.31 Crs.

Credit Risks:

• Low/ negative financial risk profile of the company :

  Debt Equity ratio of the company has been negative for 3 audited financial years. It stood at (1.04) times for FY19 as compared to (1.09) times in FY18 and (1.05) times in FY17. Current ratio of the company has been low Y-o-Y at an average of 0.92 times with slightly high receivable for FY19 at ~ 90 days.

• Negative net worth of the company :

  Net worth of the company has been eroded mainly due to adjustment of previous year losses.

• High competition and intensive working capital requirement :

  The company faces high competition from many small and medium transformers and electrical units in the region. Intensive requirement of working capital is indicative with its modest liquidity position.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For ariving 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).

LIQUIDITY POSITION

Liquidity position of the company has been modest Y-o-Y with Current ratio for FY19 at 0.97 times. Net cash accruals of the company have been moderate at Rs. 0.63 crs as per audited financials for FY19. High working capital requirement is depicted in the loan utilization pattern of ~90 percent of the limit.

PROFILE

NGEF Limited was incorporated as a public limited company during October 1970 at Bangalore for the manufacture of pumps, electrical motors and switch gears with German technology. During 1984, NGEF Hubli unit was established to carry on similar line of activities in the region. The unit was fully operational from 5th July 1989 under the Indian Companies Act 1956 as a 100% subsidiary of NGEF Ltd at Rayapur, Dharwad, Karnataka. The unit comprises of 10 acres of developed land allotted by KIADB measuring 1,02,000 Sq.ft. built-up plant. NGEF (HUBLI) LTD., has made significant contribution since 3 decades for supplying of Electric Motors & Transformers of high quality and reliability as per national and international standards which have various industrial applications operating across the country and abroad. Presently, the company is constituted by eleven directors. All the directors are qualified with more than 3 decades of experience in the relevant industry and are appointed by Government of Karnataka. Mr. Kiran R Adavi, is the managing director of the company and he is further supported by a team of qualified and experienced personnel. NGEF has employed 112 nos of permanent employees and 11 nos of temporary workers. NGEF's list of clientele majorly includes public sector units and electricity boards viz., GESCOM, BESCOM, MESCOM etc. and few private sector units in the Northern and Western regions of the country. While, raw materials are procured mainly from suppliers in and around the state of Karnataka. As per the management, Work order in hand for FY2019-20 was estimated at Rs. 205.33 crs , out of which projects of Rs. 144.23 crs have been completed; while balance work is under process. While, Sales revenue till August 2019 is estimated at Rs. 28.31 crs. Further, the management has entered into repair contract with ESCOMS for repair of distribution transformers to carried out at its repair centers at Hubli, Belgaum, Tarikere and Koppal and estimates revenue outflow of Rs. 25.00 crs from the activity. 

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 18-19	FY 17-18
Operating Revenue	Rs.Crs.	130.54	31.11
EBITDA	Rs.Crs.	0.55	1.18
PAT	Rs.Crs.	0.53	0.39
Tangible Net Worth	Rs.Crs.	-15.69	-16.21
Total Debt/Tangible Net Worth	Times	-1.04	-1.09
Current Ratio	Times	0.97	0.95

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2019)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2018	2017	2016
Fund Based
1	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Proposed	Long Term	10.00	BWR B+ (Pronounced as BWR Single B plus) (Outlook: Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Proposed Inland Letter of Credit (ILC) - Proposed	Short Term	1.00 2.00	BWR A4 (Pronounced as BWR A Four )	NA	NA	NA
Total			13.00	(Rupees Thirteen Crores 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
Suma Giridhara Ratings Analyst B : +91 80 4040 9940 Ext : 345 suma.g@brickworkratings.com	Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com
Nagaraj KS Associate Director - Ratings B : +91 80 4040 9940 nagaraj.ks@brickworkratings.com
1-860-425-2742

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Open Cash Credit / Cash Credit (Hypothecation/Pledge) - Proposed	10.00	_	10.00
2	Bank Guarantee - Proposed	_	1.00	1.00
3	Inland Letter of Credit (ILC) - Proposed	_	2.00	2.00
Total				13.00
TOTAL (Rupees Thirteen Crores Only)

Note: Existing bank loan facilities for Rs. 7.75 crs