RATING RATIONALE
20Sep2022
G Surgiwear Ltd.
Brickwork Ratings reaffirms/revises the ratings for the Bank Loan Facilities of Rs. 90.54 Crs. of G Surgiwear Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (16 Jul 2021) |
Present | ||
| Fund Based | 60.00 | 90.54 | Long Term |
BWR BBB /Stable
Reaffirmation |
BWR BBB
/Stable Reaffirmation |
| Grand Total | 60.00 | 90.54 | (Rupees Ninety Crores and Fifty Four lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
Brickwork Rating (BWR) has reaffirmed the long-term rating of BWR BBB (Stable) for the bank loan facilities of Rs. 90.54 crores of G Surgiwear Limited on the basis of experienced promoters, average financial risk profile, and established relations with customers. The rating also takes into account the surgical instrument manufacturing business with stable demand due to the essential nature of the product. Although there has been a slight dip in the performance of the company, there is an improvement in tangible net worth with healthy profitability and strong coverage indicators during FY22. However, the rating is constrained by a fragmented industry structure characterised by intense competition, the working capital-intensive nature of the operations, modest scale of operations, and regulatory risk.
The outlook has been retained Stable as BWR believes that the business risk profile of the Company will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term. The rating outlook may be revised to Positive in case of significant improvement in its topline and its credit metrics, or to Negative if there is any substantial decrease in the operating income or deterioration in the financial parameters.
For assigning the rating, BWR has relied upon the last 3 years of audited financials till FY21, provisional financials of FY22 projected financials for FY23 & FY24, and publicly available information and clarification provided by management.
KEY RATING DRIVERSCredit Strengths:
-
Networth :
The net worth of the company is increasing on year on year basis
-
Extensive experience of promoters :
The company is promoted by Dr. G. D. Agrawal and his wife Mrs. Renu Agrawal. Dr. G. D. Agrawal is an MS in General Surgery. He has been working on silicone implantable devices for the last 38 years. He owns more than a dozen Indian patents and one USA patent in his name. Ms Renu Agrawal is associated with the company since its incorporation. She looks after the finance and day to day work.
-
Healthy profitability :
The total operating income in FY22 (on a provisional basis) stood at Rs. 134.48 Crs. The operating profit margins decrease from 32.77% in FY21 to 30.39% in FY22(provisional) and net profit margins increase from 17% in FY21 to in 26.78% in FY22(provisional) respectively.
-
Diversified customer profile :
GSL's customer profile is well diversified with its top 5 customers driving ~32% of the company’s revenues in FY2022. It has established relationships with its customers, which have continued down the years. The company supplies its products across India and also in overseas markets.
-
Quality certifications and product patents :
The company is Member of (CII) Confederation of Indian Industries Association for the advancement of Medical Instrumentation, Indian Industries Association and Delhi Chamber of commerce.The company is ISO:13485 :2020 certified and WFNS (World Federation Neurosurgical Society certified ). The company also holds patents of more than 50 products and has applied for several others.
-
Robust financial risk profile with strong coverage indicators :
In FY22 (on a provisional basis), the company had a strong tangible net worth of Rs. 108.22 cr. In FY22, the company stood with a gearing of 0.47x, ISCR (interest service coverage ratio) of 7.84x, DSCR (debt service coverage ratio) of 3.12x and a current ratio of 1.54x, each of these parameters has shown strong improvement as compared to FY21.
-
Fragmented industry structure characterized by intense competition :
The medical equipment and devices sector is fragmented with multiple domestic and international players, exposing GSL to intense competition. However, each company has its niche product offerings and customers. Similarly, GSL remains competitive because of its established market position as well technical expertise.
-
Working capital intensive nature of operations :
The company has a working capital intensive nature of operations with inventory holding of 164 days and cash conversion cycle of 160 days in FY 22(on a provisional basis).
-
Modest scale of operations :
With an estimated turnover of Rs 143.00 crore in fiscal 2023, the scale of operation remains modest. However, the revenue has slightly decreased in FY22 on account of decreased demand of medical and surgical products, but the numbers are expected to remain stagnant in the medium term.
-
Regulatory risk :
GSL remains exposed to regulatory risk faced by the healthcare industry. Government policy on capping of prices for medical procedures and devices may adversely impact the revenue and profitability of players. Select state governments have also capped treatment charges for Covid patients. Regulatory actions and their impact will remain monitorables.
BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Upward: BWR may revise the ratings upward, in case of sustained improvement in total operating income along with sustenance of adequate debt coverage indicators.
Downward: BWR may revise the rating downward, in case of significant reduction in the operating income, deterioration in liquidity position of the company and significant decline in debt protection metrics and fall in operating profitability margins.
LIQUIDITY INDICATORS - Adequate
In FY22 (on a provisional basis), the company is estimated to have generated an internal cash accrual of Rs. 29.01 crores with an annual repayment obligation of 9.71 crores while in FY23, the company is projected to generate an internal cash accrual of 30.98 crores with an annual repayment obligation of Rs. 11.56 crores. The average utilization in fund-based accounts stood at around 80.50% during the last 14 months from June 2021 to August 2022. The current ratio in FY22 (on a provisional basis), stood at 1.54x.
ABOUT THE ENTITYG. Surgiwear Ltd was incorporated as a Public limited company in 1995. It initially commenced its operations as a partnership firm in 1982 by a qualified surgeon, Dr. G D Agrawal. The company is engaged in the manufacture of various medical products which primarily include implants and disposables such as silicone implantable surgical devices (e.g. hydrocephalus shunt systems etc.) disposable drapes etc. which are sold under the brand “Surgiwear”. The company also exports its products to several countries around the world, majorly developing countries.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 21-22 (Provisional) |
FY 20-21 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 134.48 | 139.41 |
| EBITDA | Rs.Crs. | 40.86 | 45.69 |
| PAT | Rs.Crs. | 20.49 | 23.69 |
| Tangible Net Worth | Rs.Crs. | 108.22 | 87.47 |
| Total Debt/TNW | Times | 0.47 | 0.62 |
| Current Ratio | Times | 1.54 | 2.06 |
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 | 90.54 |
BWR BBB/Stable
(Reaffirmation) |
16Jul2021 |
BWR BBB Stable
(Reaffirmation) |
09Apr2020 |
BWR BBB Stable
(Reaffirmation) |
17Jan2019 |
BWR BBB Stable
(Upgrade) |
| Grand Total | 90.54 | (Rupees Ninety Crores and Fifty Four 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.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Pallav Kumar Goel Ratings Analyst pallavkumar.g@brickworkratings.com |
Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | State Bank Of India (SBI) | Term LoanOut-standing | 27.94 | _ | 27.94 | |
| 2 | State Bank Of India (SBI) | Term LoanProposed | 20.00 | _ | 20.00 | |
| 3 | State Bank Of India (SBI) | Cash CreditSanctioned | 31.00 | _ | 31.00 | |
| 4 | State Bank Of India (SBI) | Standby Line of CreditSanctioned | 4.00 | _ | 4.00 | |
| 5 | State Bank Of India (SBI) | vehicle loan Sanctioned | 1.03 | _ | 1.03 | |
| 6 | State Bank Of India (SBI) | GECLSanctioned | 6.57 | _ | 6.57 | |
| Total | 90.54 | 0.00 | 90.54 | |||
| TOTAL (Rupees Ninety Crores and Fifty Four lakhs Only) | ||||||
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