Rating Rationale
December 06, 2024 | Mumbai
Advait Energy Transitions Limited
Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2'
 
Rating Action
Total Bank Loan Facilities RatedRs.110 Crore
Long Term RatingCRISIL BBB+/Stable (Upgraded from 'CRISIL BBB/Stable')
Short Term RatingCRISIL A2 (Upgraded from 'CRISIL A3+')
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its ratings on the bank facilities of Advait Energy Transitions Ltd (AETL; Formerly known as Advait Infratech Limited) to ‘CRISIL BBB+/Stable/CRISIL A2’ from ‘CRISIL BBB/Stable/CRISIL A3+’.

 

The upgrade reflects the diversification in business risk profile with introduction of new products under the company’s power transmission and solution division, which is expected to drive growth in existing business, in addition to expected growth from the new renewable energy (NRE) division. The company is setting up an electrolyser manufacturing capacity under its NRE division at a capital outlay of Rs 75 crore, timely completion of which with successful ramp up in operations will remain monitorable over the medium term. The operating revenue increased to Rs 208 crore in fiscal 2024 from Rs 102 crore in fiscal 2023, while operating margin sustained at a healthy 16.84%(17.3% in fiscal 2023).

 

The financial risk profile remains robust with networth of Rs 176 crore, gearing of 0.24 time and total outside liabilities to adjusted networth (TOLANW) ratio of 0.41 time, as on September 30, 2024. Liquidity continues to be strong, with moderately utilised bank limit, healthy expected cash accrual against negligible debt obligation, and promoters’ need-based funding support to meet the incremental working capital requirement.

 

The ratings reflect the extensive experience of the promoter in the electrical equipment and engineering, procurement, and construction (EPC) business. Financial risk profile is likely to remain strong, with comfortable debt protection metrics. These strengths are partially offset by the working capital-intensive operations, exposure to risks related to the tender-driven nature of business and intense competition, and timely completion of capex and ramp up in operations.

Analytical Approach

CRISIL Ratings has changed its analytical approach from standalone to consolidation as AETL formed two subsidiaries, Advait Greenergy Private Limited (AGPL) and A&G Hydrogen Technologies Private Limited, to execute proposed electrolyser manufacturing capacities of 100 megawatt (MW) and 200 MW, respectively.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive industry experience of the promoter: The two-decade-long experience of the promoter in the EPC business, strong understanding of market dynamics and established relationships with suppliers and customers will continue to support the business risk profile. These factors will help AETL scale up its revenue and build a strong order book.

 

  • Significant growth in the business risk profile and profitability: Operating income increased an impressive 104% to Rs 207.55 crore in fiscal 2024, while operating margin was 16.8%. The rise in turnover was due to a large order book and the commencement of the company’s manufacturing units related to Aluminum Clad Steel Wire (ACS), Emergency Restoration System (ERS) and stringing tools. The order book is growing consistently and stood at Rs 270 crore as on date. Revenue is likely to increase by more than 50% in the current fiscal while margin will remain steady. The order book is expected to grow further while ramp up in operations will remain consistent over the medium term.

 

  • Healthy financial risk profile: Lower reliance on external debt led to strong gearing and TOLANW ratio of 0.48 time and 1.22 times, respectively, as on March 31, 2024. Debt protection metrics were comfortable due to leverage and healthy profitability, with interest coverage and net cash accrual to total debt ratios of 5.67 times and 0.65 time, respectively, for fiscal 2024. The financial risk profile is expected to improve further over the medium term with accretion to reserve and lower dependence on external debt.

 

Weaknesses:

  • Working capital-intensive operations: Gross current assets were 188 days as on March 31, 2024, due to total receivables of 122 days (comprising of 71 days of receivable and 51 days of retentions) and moderate inventory of 38 days. The GCAs may remain high over the medium term due to commencement of manufacturing facilities along with carrying out EPC contracts.

 

  • Exposure to risks related to the tender-driven nature of business and intense competition: The EPC industry is intensely competitive due to low entry barrier. Furthermore, operations are concentrated in installation and construction work. Also, there is high dependence on tenders floated by the government, semi-government and other entities; these are awarded through competitive bidding.

 

  • Timely completion of capex and ramp up in scale: The company plans to incur capex of Rs 75 crore over the next two fiscals to set up 100 MW electrolyser manufacturing capacity in two phases. The capex will be largely funded through equity and hence, will have marginal impact on gearing, considering the strong networth and healthy internal accrual. However, timely completion of capex with no major cost overrun and successfully ramp up in operations will be monitorable.

Liquidity: Adequate

Bank limit utilisation was moderate at around 60.79% for the nine months through August 2024. Expected annual cash accrual of over Rs 35-55 crore will be sufficient to meet yearly term debt obligation of Rs 2-4 crore, over the medium term; and the remaining will cushion liquidity.

 

Current ratio was healthy at 1.41 times as on March 31, 2024. Cash and bank balance stood at around Rs 73.8 crore as on September 30, 2024. Strong gearing and moderate networth support financial flexibility and provide the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

The company is likely to continue to benefit from the extensive experience of its promoter and  established relationships with clients.

Rating sensitivity factors

Upward factors:

  • Sustained revenue growth along with healthy profitability generating accrual of more than Rs 60 crore
  • Better working capital management with moderation in GCAs
  • Timely completion of capex without cost overrun and successful ramp up in operations

 

Downward factors:

  • Decline in profitability below 12% along with further stretch in the working capital cycle
  • Delay in execution of orders weakening the market position
  • Delay in completion of project affecting return on capital employed

About the Group

Incorporated in 2010 and promoted by Mr. Shalin Seth. AETL provides products and solutions for power transmission, power substation and telecommunication infrastructure fields. The company is setting up a 100 MW electrolyser manufacturing capacity under its NRE division through its subsidiary company AGPL.

Key Financial Indicators

As on/for the period ended March 31

Unit 

2024

2023

Operating income

Rs,Crore

207.55

101.61

Reported profit after tax (PAT)

Rs.Crore

21.33

10.00

PAT margin

%

10.28

9.84

Adjusted debt/adjusted networth

Times

0.48

0.26

Interest coverage

Times

5.31

7.06

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs.Crore) Complexity Levels Rating Outstanding with Outlook
NA Bank Guarantee NA NA NA 70.00 NA CRISIL A2
NA Cash Credit NA NA NA 17.00 NA CRISIL BBB+/Stable
NA Letter of Credit NA NA NA 12.96 NA CRISIL A2
NA Letter of credit & Bank Guarantee NA NA NA 6.00 NA CRISIL A2
NA Term Loan NA NA 31 Sep-27 4.04 NA CRISIL BBB+/Stable

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Advait Greenergy Private Limited

Full

Operational & financial fungibility and parent & subsidiary relationship

A&G Hydrogen Technologies Private Limited
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 21.04 CRISIL BBB+/Stable   -- 20-11-23 CRISIL A3+ / CRISIL BBB/Stable 10-08-22 CRISIL BBB-/Stable   -- --
      --   -- 07-11-23 CRISIL BBB/Stable 30-07-22 CRISIL BBB-/Stable   -- --
Non-Fund Based Facilities ST 88.96 CRISIL A2   -- 20-11-23 CRISIL A3+ 10-08-22 CRISIL A3   -- --
      --   -- 07-11-23 CRISIL A3+ 30-07-22 CRISIL A3   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 20 Axis Bank Limited CRISIL A2
Bank Guarantee 50 State Bank of India CRISIL A2
Cash Credit 2 YES Bank Limited CRISIL BBB+/Stable
Cash Credit 5 State Bank of India CRISIL BBB+/Stable
Cash Credit 10 Axis Bank Limited CRISIL BBB+/Stable
Letter of Credit 12.96 Axis Bank Limited CRISIL A2
Letter of credit & Bank Guarantee 6 YES Bank Limited CRISIL A2
Term Loan 4.04 State Bank of India CRISIL BBB+/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation

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