| Air Works India (Engineering) Private Limited | ||||||
| Ratings continues on 'Watch Developing' | ||||||
| Rating Action | ||||||
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| 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 continues its ratings on the bank facilities of Air Works India (Engineering) Private Limited (Air Works) on ‘Rating Watch with Developing Implications’.
The rating were placed on watch on January 3, 2025 following the announcement by Adani Enterprise Ltd (AEL) that Adani Defence Systems & Technologies Ltd (ADSTL, a 100% subsidiary of AEL) has executed a share purchase agreement (SPA) to acquire 85.8% stake in Air Works for an enterprise value of Rs 400 crore.
While the contours of the agreement are not yet known, the Air Works management has communicated that the SPA has been signed for this transaction and some key approvals are under process. The condition precedent as per the SPA agreement is expected to be completed by April 15th, 2025, along with other regulatory approvals. Crisil Ratings will resolve the rating watch once there is clarity regarding the new shareholders philosophy to support Air Works both on business and financial front and company’s future growth plans post change in existing shareholders
The ratings continue to reflect the established position of Air Works in the domestic maintenance repairs and overhaul (MRO) industry and the company’s diversified revenue mix from multiple segments such as commercial, private and defence. These strengths are partially offset by modest, albeit improving scale of operations and financial risk profile.
The business risk profile of Air Works is expected to remain healthy, supported by ~60% growth in operating revenue to approximately Rs 540-550 crore in fiscal 2025 from Rs 356 crore in the previous fiscal. The revenue rose 60% to Rs 281 crore in the first half of fiscal 2025 duly supported by higher re-delivery checks.
The financial risk profile is expected to improve, too, due to improved profitability. The operating margin is expected to improve by approximately 70 basis points (bps) in fiscal 2025 and ~100 bps in medium term mainly on account of higher revenue contribution from high-margin re-delivery checks and better operating leverage with higher utilisation of the company’s facilities in Kochi (Kerala) and Hosur (Tamil Nadu). The debt protection metrics are expected to improve in the medium term with increase in revenue and recovery in operating margin. In the past, Air works has reported modest financial risk profile -low networth, high gearing levels and modest interest coverage ratios owing to subdued operating performance. The liquidity position remains adequate with free cash and equivalents of ~Rs 43 crore as on March 31, 2024 and around 20% unutilised fund-based bank limits. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of Air Works and its subsidiaries, which are strategically important to, and have significant operational integration with, the company. All the companies, together referred to herein as Air Works, operate in similar businesses.
Unsecured loan from the related party (Rs 33 crore as on March 31, 2024) is treated as neither debt nor equity. Out of this 33 Cr, 7 Cr has been paid in Q4 FY’25
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:
Weaknesses:
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Liquidity: Adequate Cash balance and liquid investments stood at Rs 43 crore as on March 31, 2024, and fund-based limits were utilized around 80% on average over the six months through September 2024. Net cash accrual post lease payment is expected at Rs 35-40 crore in fiscal 2025 and above Rs 60 crore per annum over the medium term which will adequately cover yearly principal debt obligation of Rs 15-16 crore and capital expenditure requirement of Rs 15-20 crore. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1951, Air Works provides engineering, asset management, flight safety and technology solutions to commercial airlines and business aviation sectors. The company has five key business segments: MRO engineering services, aircraft painting and finishing, technical services to lessors, business jet management services and flight safety. The company owns 50% stake in Acumen, which provides end-to-end technical audit and data management services for leased aircraft. |
Key Financial Indicators (Crisil Ratings-adjusted numbers)
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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