CRISIL has assigned its rating of ‘BB-/Stable’ to the bank facilities of Shriniwas Machine Craft Pvt Ltd (SMCPL), which is part of the Rewale group. The rating reflects the Rewale group’s weak financial risk profile, and exposure to risks relating to customer concentration in revenue profile, and small scale of operations with limited track record, in the highly fragmented generator-set canopy industry. These weaknesses are partially offset by the group’s strong relationships with its customers, and the benefits that SMCPL derives from healthy growth prospects in the end-user industry-the telecom industry.

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of SMCPL, Rewale Engineering Pvt Ltd (REPL), and Venkatesh Engineering Equipments Pvt Ltd (VEEPL). This is because the three companies, collectively referred to as the Rewale group are in same line of business, under the same management, and have strong operational and financial linkages. Moreover, REPL and VEEPL jointly hold majority stake in SMCPPL; and REPL is a contract manufacturer for SMCPL; VEEPL has also given corporate guarantee to the bank loan facilities of SMCPL.

Outlook: Stable
CRISIL expects the Rewale group to benefit from its strong relationships with its main customers and healthy growth prospects of the end-user telecom industry over the near-to-medium term. The outlook may be revised to ‘Positive’ if there is substantial improvement in the group’s capital structure and its scale of operations, while maintaining its profitability. The outlook may be revised to ‘Negative’ if the group undertakes a large debt-funded capex programme, or if its operating margin deteriorates significantly.

About the Group
Promoted by Mr Vilas Rewale in 2003, SMCPL is part of the Rewale group, which started operations under REPL in 1983. SMPCL manufactures sheet metal canopies for gensets for original equipment manufacturers (OEMs) such as Mahindra and Mahindra Ltd (M&M) and Ashok Leyland Ltd (ALL), which ultimately find application in the telcom industry. At present SMCPL subcontracts its entire manufacturing operations to REPL. SMCPL plans to manufacture and market gensets under its ‘Radix’ brand, in partnership with Same Deutz Fahr Germany. In 2005, Mr. Vilas Rewale set up VEEPL, which does assembling for M&M’s gensets on jobwork basis.

The Rewale group reported a profit after tax (PAT) of Rs.66.7 million on operating income of Rs.1.023 billion for 2008-09 (refers to financial year, April 1 to March 31), as against a PAT of Rs.22.2 million on net sales of Rs.0.56 billion for 2007-08.