Rating Rationale

Brickwork Ratings (BWR) assigns the long-term rating of BWR BBB- with Stable outlook for the bank loan facilities of Rs. 69.00 Crs of Mehai Technology Ltd.

The rating draws strength from the entity's operational track record, supported by experienced management team led by Mr. Jugal Kishore Bhagat (Chairman & Managing Director), who brings over two decades of corporate and supply chain experience. The rating also factors in the firm’s multi-segment business model spanning electronic goods trading, IT services, Petroleum & Lubricants distribution, Packaged Drinking Water and Government utility projects.
The rating considers the entity's steady operating performance, with total operating income increasing from Rs. 99.95 Crs in FY25 to Rs. 101.85 Crs in FY26 & an operating margin of 11.96% with net profit (PAT) of Rs. 7.36 Crs. The entity has a Tangible Net Worth base of Rs. 219.23 Crs in FY26 and low financial leverage with Total Debt/TNW at 0.24 times. The rating further considers comfortable debt coverage indicators, with ISCR at 4.14 times and DSCR at 3.51 times in FY26, alongwith satisfactory banker feedback received from Punjab National Bank, UCO Bank and Indian Overseas Bank.

However, the rating is constrained by high revenue geographic concentration, with West Bengal contributing approximately 98% of FY26 revenues, intense competition and fragmented market dynamics and a working-capital-intensive cycle. The rating is further constrained by substantial capital tie-ups in long-term loans and advances amounting to Rs. 90.02 Crs (which includes Rs. 61.06 Crs in related-party advances) and dilution in promoter shareholding from 71.95% to 36.45% post-rights issue.

The Stable outlook indicates the entity's moderate risk profile and is expected to be maintained over the medium term, backed by steady revenue and a healthy receivable position. The entity will continue to maintain its capital structure and healthy debt coverage indicators. BWR expects the firm to enhance its scale of operations, improve profitability margins, strengthen its working capital cycle and maintain robust cash management, all of which could lead to a positive outlook. However, significant underperformance in revenue, deteriorating profitability, or liquidity challenges could result in a revision to a negative outlook.

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

• Qualified and Experienced Promoters :

  The entity is led by Mr. Jugal Kishore Bhagat as Chairman and Managing Director, who has multiple decades of corporate and business experience. The management successfully completed the structured management takeover during October 2021 to February 2022 and transitioned operations without disruption to the business. Mr. Bhagat is also associated with Dynamic Services & Security Limited as its main promoter and has experience across supply chain operations, logistics management and asset management. The promoter's operating experience supports management oversight and execution of the entity's business operations.

• Diversified Operations :

  The entity has multiple operating segments comprising distribution and trading of electronic goods and electrical equipment through its physical stores and online e-commerce platforms, assembly and maintenance services, and IT-related business services. The entity also undertakes projects such as the Bihar streetlight programme, providing an additional source of operating revenue outside the electronic goods trading segment. The presence across trading, assembly, maintenance and IT services reduces dependence on a single business activity and provides some diversification in the revenue profile.

• Moderate Financial Risk Profile :

  The risk profile of the firm remains moderate. The entity’s revenue has grown from Rs. 15.99 Crs in FY24 to Rs. 101.85 Crs in FY26 over the three years. While the firms leverage has increased from 0.09 times in FY24 to 0.24 times in FY26 with increase in the short-term borrowings, the leverage ratios remain manageable with its Tangible net worth base of Rs. 219.23 Crs. in FY26 growing through profit retention & no dividend payouts. However, equity dilution of promoter's stake remains key monitorable. The coverage ratios remain in the comfortable range of 4.14 times & 3.51 times in FY25.

• Geographical Concentration :

  The entity's operations are concentrated in Eastern India, with West Bengal contributing over 98% of FY26 revenue, while contribution from other states such as Bihar remains limited. The concentration exposes the entity's operations to regional demand conditions and economic developments and limits diversification of its revenue base. The entity has initiated online sales of electronic products through e-commerce platforms such as Amazon, which provides access to customers beyond its physical operating geography. However, the contribution from such channels remains limited and does not materially reduce the existing geographical concentration.

• Fragmented Market with Intense Competition :

  The entity operates in the electronic goods trading, assembly and allied services segments, which face competition from established distributors, manufacturers and organised players. The electronic goods trading segment is characterised by commoditised products and price-based competition, which limits pricing flexibility and places pressure on operating margins. The entity's relatively limited operating scale and brand presence restrict its ability to compete with larger organised players on procurement, pricing and distribution reach. Competition from established distributors and direct manufacturers may further constrain margins and customer acquisition.

Positive / Upward Factors:

• Growth in scale of operations in line with projections, with improvement in EBITDA & PAT margins from current levels.

• Sustained accretion to Tangible Net Worth through retention of profits, with TNW remaining above FY26 level of Rs.219.23 cr.

• Debt protection metrics to be maintained at the levels of ISCR above 4 times and DSCR above 3 times.

• Successful execution of the ongoing project with commencement of envisaged commercial operations within the projected timelines, resulting in optimal reliance on internal accruals and strengthening of the liquidity & leverage profile.
   

Negative / Downward Factors:

• Decline in the scale of operations and profitability below existing levels, leading to compressed profit margins and lower cash accruals.

• Deterioration in debt protection metrics with ISCR below 2 times and DSCR below 1.5 times.

• Any material delay in implementation on ongoing project execution vis-a-vis the envisaged completion timelines and/or substantial cost overruns beyond the estimated project cost, resulting in higher-than-expected reliance on bank debt leading to deterioration in leverage & liquidity profile.

• Promoter holding to remain at the current level of 36.45%, with no further dilution.

Adequate liquidity is characterized by sufficient cushion in accruals vis-a-vis repayment obligations and moderate cash balance of Rs. 1.07 Crs in FY26 (Prov.). The company does not envisage any near time capex. Bank-funded working capital limits averaged 74% utilization across three banks. The current ratio of 2.69 times in FY26 (Prov.) indicates a healthy state of affairs. During FY26 the company has generated net cash accruals of Rs.7.60 Crs. The company projects the net cash accrual of Rs.20.50 Crs in FY27 which is sufficient to cover upcoming term loan obligations of Rs 1.07 Crs thus indicating adequate liquidity.

The company demonstrates a Satisfactory ESG profile based on its environmental, social, and governance practices.

Environmental: Environmental risks in trading companies are primarily related to energy use, emissions from logistics and operations, waste generation, water consumption, and compliance with environmental regulations. Key disclosures include energy usage, waste handling and recycling practices, and no past violations or penalties.

Social: Social factors focus on labour practices, workforce welfare, diversity and inclusion, training and development, and community engagement. Metrics include workforce composition 10 permanent employees (all males), employee safety and training programs, adherence to labour laws, and initiatives supporting social equity and employee growth (CSR expenditure of Rs. 5.45 Lakhs contributed to Yug Sanskriti Nyas Charitable Trust).

Governance: Governance assessment emphasizes board structure (Board consists of 8 Directors: 1 Managing Director, 3 Non-Executive Directors, and 4 Non-Executive Independent Directors), independence, and expertise, risk management and compliance frameworks, ethical conduct and anti-corruption policies (Vigil Mechanism / Whistleblower Policy established with direct access to Audit Committee Chairman; Board members affirmed compliance with the Code of Conduct), stakeholder engagement practices, data security and cybersecurity measures (Accounting software utilizes an audit trail / edit log facility throughout the year), and compliance with trading regulations.

Mehai Technology Limited was incorporated on December 2013. The firm is involved in trading of consumer electronic goods through online e-commerce platform & its own retail chain. The firm also provides services to government related prgrammes. The company is publicly listed on the Bombay Stock Exchange (BSE) under the scrip code 540730. Its current management and promoter group are led by Mr. Jugal Kishore Bhagat (Managing Director) alongside family members like Rekha Bhagat. The firms registered corporate location is situated at 144, Dakshindari Road, Sreebhumi, Kolkata, West Bengal: 700048, with an additional registered workspace in Jaipur, Rajasthan.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

Not Applicable

BWR Board of Directors have no influence over rating decisions, nor do they sit on the rating committee or review, discuss or evaluate any credit rating during the Board meetings.

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI]. BWR is the 5th agency to get a credit rating registration in India in 2009 and its corporate office in Bengaluru. It has a country-wide presence with representatives in 150+ locations. Canara bank is an institutional investor in Brickwork.

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