RATING RATIONALE

18Dec2024

Marks Engineering Works

Brickwork Ratings revises the ratings for the Bank Loan Facilities of Rs. 124.96 Crs. of Marks Engineering Works

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (30 Nov 2023)	Present
Fund Based	62.97	83.46	Long Term	BWR BB/Stable Continues to be in ISSUER NOT COOPERATING* category/Downgraded	BWR BBB - /Stable removal from ISSUER NOT COOPERATING* category/Upgraded
	(0.00)	(20.00)
	(0.00)	(6.50)
	15.50	35.50	Short Term	BWR A4 Continues to be in ISSUER NOT COOPERATING* category/Downgraded	BWR A3 removal from ISSUER NOT COOPERATING* category/Upgraded
	(0.00)	(29.50)
	(0.00)	(29.50)
	(0.00)	(29.50)
Non Fund Based	0.00	6.00	Short Term		BWR A3 Assignment
Grand Total	78.47	124.96	(Rupees One Hundred Twenty Four Crores and Ninety Six lakhs 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

Brickwork Ratings has upgraded the long-term rating to "BWR BBB-/Stable" from "BWR BB/Stable" and the short-term rating to "BWR A3" from "BWR A4" and a new short-term rating has been assigned of 'BWR A3" and removed the ratings from the Issuer Not Cooperating* category for the bank loan facilities of Rs 124.96 Cr. for Marks Engineering Works.

The operations of the firm have remained streamlined with stable earnings in FY 2024. BWR has essentially relied upon the Audited financials of FY2022, FY2023, and FY2024 and information provided by the firm and bank. The ability of the firm to increase revenues, improve its profitability margins, and strengthen its financial risk profile will remain the key rating sensitivities.

The rating outlook has been assigned as "Stable" as BWR believes that Marks Engineering Works' 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 revenue and profitability margins show sustained improvement. The rating outlook may be revised to 'Negative' if the financial risk profile goes down.

KEY RATING DRIVERS

Credit Strengths:

Locational Advantage :
The Firm is located in the Coimbatore cluster and thus has a competitive advantage in terms of skilled labor, logistics, production knowledge, and vendors making the firm more efficient and cost-effective.
Company Existence :
The firm is in existence for 25 years and has seen complete business cycles.
Revenue from Operations :
The firm`s revenue from operations has grown substantially by 29.61 % in the FY 24
Networth :
The net worth of the firm is increasing Y-O-Y due to the retention of profits
Return on capital employed :
The firm’s Return On Capital Employed at 18.12 % is reasonable.

Credit Risks:

Constitution(For Proprietorships and Partnership cases) :
withdrawal of capital by the Partners for any personal contingency would adversely affect the capital structure of the firm.
Competition in the Industry :
Entry barriers in the industry are low on account of limited capital and technology requirement and also low differentiation in the end product leading to intense competition and limiting the pricing power resulting in low profitability
Account Receivables :
The firm’s Account Receivable days of 125 is a concern.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone performance of Marks Engineering Works. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Going forward, the ability of the firm to increase its scale of operations, improve the revenue and efficiently manage its working capital requirements thereby strengthening its overall credit profile would be the key rating sensitivities.

Positive

Going forward the company’s ability to improve the scale of operations, improve and maintain profitability, the debt servicing capability & liquidity, and manage its working capital efficiently will be the key rating sensitivities.
Upward:

The ratings may be revised upwards if the firm is able to generate a significant improvement in profit margins and with other metrics such as debt coverage ratios above 2.00x. and the Current ratio is 1.75x

Negative

The outlook may be revised to Negative if the firm reports significantly lower-than-expected performance, resulting in lower-than-estimated coverage indicators and a weaker liquidity position

LIQUIDITY INDICATORS - Adequate

The EBITDA of the firm has been sufficient to cover the interest charges. The debt protection metrics of the firm are at a comfortable level with ISCR and DSCR at 6.01 and 1.90 times respectively. The balance of cash and cash equivalents stood at Rs. 4.05 Crores. The current ratio of the firm is comfortable with a ratio above 1.5 for the past two years and the same trend is seen in projections also.

ABOUT THE ENTITY

Macro Economic Indicator	Sector	Industry	Basic Industry
Industrials	Capital Goods	Industrial Manufacturing	Industrial Products

Marks Engineering Works is an ISO 9001:2015, The International Automotive Task Force (IATF) 16949:2016 certified partnership firm which was established in 1999 and is headquartered in Coimbatore, Tamil Nadu. Mr. K Velusamy and his brother Mr. K Chellamuthu and their sons Mr. V. Dinesh and Mr. C. Subhash are the partners of the firm. The firm is engaged in the manufacturing of precision machine components and sub-assemblies for various industrial segments. The firm's products are used in different industries like Hydraulics, Automotive, Agriculture, Transmission, and General Engineering. The firm's products include bearing support, housing valve, Housing motor, endcap tandem, E-02, and S-05 covers amongst others for the hydraulics industry, valve housing, side cover, gear housing for automotive, side shift housing, manifold, timing cover, etc for the agricultural industry. The firm also produces Brake pistons, gear boxes, spindles, serve control, pump housing etc.

They also provide third-party logistics support to their customers such as bonded warehouses, local transportation, etc. They also operate VMI warehouses in Chicago, Ankeny (Lowa), Savanna (South Carolina, USA,) and Senec (Slovakia). CMI type warehousing at Rogersville (Tennessee, USA) and Pamplona (Spain). Through constant developments in manufacturing technology and with the help of experienced staff, they stand out from its competitors. They have a world-class manufacturing facility with a systematic workflow being carried out right from procuring castings from leading countries to finish machining to customer print requirements. Their state-of-the-art floor is 80,000 Sq Ft in size and equipped with CMC labs, Washing and debugging facilities, and an in-house warehouse.

Note: As per information available till Nov 2024 in firm website.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21 - 22 (Audited - Annual)	FY 22 - 23 (Audited - Annual)	FY 23 - 24 (Audited - Annual)
Operating Revenue	Rs.Crs.	151.96	159.78	203.01
EBITDA	Rs.Crs.	29.82	25.57	40.35
PAT	Rs.Crs.	8.17	9.75	20.28
Tangible Net Worth	Rs.Crs.	59.09	66.97	85.45
Total Debt / Tangible Net Worth	Times	1.57	1.14	1.14
Current Ratio	Times	1.65	1.52	1.62

KEY COVENANTS OF THE FACILITY RATED

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

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Creadit Rating Agency Status and Reason for Non-Cooparation Date of Press Release
ICRA The ICRA Ratings has reaffirmed the Bank Loan Ratings of Marks Engineering Works under the Issuer Not Co-operating category in the absence of adequate information from the Firm. 29Sep2023

Creadit Rating Agency	Status and Reason for Non-Cooparation	Date of Press Release
ICRA	The ICRA Ratings has reaffirmed the Bank Loan Ratings of Marks Engineering Works under the Issuer Not Co-operating category in the absence of adequate information from the Firm.	29Sep2023

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2024)			2023		2022		2021
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	83.46	BWR BBB-/Stable (removal from ISSUER NOT COOPERATING* category/Upgraded)	30Nov2023	BWR BBStable (Continues to be in ISSUER NOT COOPERATING* category/Downgraded)	16Sep2022	BWR BB+ Stable (ISSUER NOT COOPERATING* /Downgrade)	21Jun2021	BWR BBB-Stable (ISSUER NOT COOPERATING* /Reaffirmation)
		0.00	NA	NA	NA	NA	NA	30Nov2021	BWR BBB-Stable (Reaffirmation)
FB SubLimit	LT	(20.00)	BWR BBB-/Stable (removal from ISSUER NOT COOPERATING* category/Upgraded)	NA	NA	NA	NA	NA	NA
		(6.50)	BWR BBB-/Stable (removal from ISSUER NOT COOPERATING* category/Upgraded)	NA	NA	NA	NA	NA	NA
Fund Based	ST	35.50	BWR A3 (removal from ISSUER NOT COOPERATING* category/Upgraded)	30Nov2023	BWR A4 (Continues to be in ISSUER NOT COOPERATING* category/Downgraded)	16Sep2022	BWR A4+ (ISSUER NOT COOPERATING* /Downgrade)	21Jun2021	BWR A3 (ISSUER NOT COOPERATING* /Reaffirmation)
		0.00	NA	NA	NA	NA	NA	30Nov2021	BWR A3 (Reaffirmation)
FB SubLimit	ST	(29.50)	BWR A3 (removal from ISSUER NOT COOPERATING* category/Upgraded)	NA	NA	NA	NA	NA	NA
		(29.50)	BWR A3 (removal from ISSUER NOT COOPERATING* category/Upgraded)	NA	NA	NA	NA	NA	NA
		(29.50)	BWR A3 (removal from ISSUER NOT COOPERATING* category/Upgraded)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	6.00	BWR A3 (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		124.96	(Rupees One Hundred Twenty Four Crores and Ninety Six lakhs Only)

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Navyashree S P Ratings Analyst navyashree.sp@brickworkratings.com	V Ramachandra Director - Ratings ramachandra.v@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Marks Engineering Works

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.)	Complexity of the Instrument
1	Federal Bank	Term Loan - Out-standing	7.09	_	7.09	Simple##
2	Federal Bank	Term Loan - Sanctioned	20.00	_	20.00	Simple##
3	Federal Bank	Packing Credit (PC) - Sanctioned	_	29.50	29.50	Simple##
	Sub-Limit (EBRD) - Sanctioned		(29.50)
	Sub-Limit (FD/UBP (LC/Order)) - Sanctioned		(29.50)
	Sub-Limit (PCFC) - Sanctioned		(29.50)
4	Federal Bank	Forward Contract - Sanctioned	_	6.00	6.00	Simple##
5	Federal Bank	GECL - Sanctioned	_	_	0.00	Simple##
6	Federal Bank	Cash Credit - Sanctioned	0.75	_	0.75	Simple##
7	Federal Bank		_	_	0.00	Simple##
	Sub-Limit (FCTL amt in EURO 26.92 Lakhs) - Sanctioned	(20.00)
8	HDFC Bank	Cash Credit - Sanctioned	0.60	_	0.60	Simple##
9	HDFC Bank	PC/PCFC - Out-standing	_	6.00	6.00	Simple##
10	HDFC Bank	Term Loan - Out-standing	12.88	_	12.88	Simple##
11	Indian Overseas Bank	Term Loan - Out-standing	14.14	_	14.14	Simple##
12	Indian Overseas Bank	Term Loan - Sanctioned	25.00	_	25.00	Simple##
13	Indian Overseas Bank	Cash Credit - Sanctioned	3.00	_	3.00	Simple##
14	Indian Overseas Bank		_	_	0.00	Simple##
	Sub-Limit (LC for import) - Sanctioned	(6.50)
Total			83.46	41.50	124.96
TOTAL (Rupees One Hundred Twenty Four Crores and Ninety Six lakhs Only)

## 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.

ANNEXURE-II

INSTRUMENT DETAILS

Instrument	Issue Date	Amount (Rs.Crs)	Coupon Rate (%)	Maturity Date	ISIN Particulars	Complexity of the Instrument
Nil	Nil	Nil	Nil	Nil	Nil	Nil

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
Nil	Nil	Nil	Nil

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