Rating Rationale
December 08, 2020 | Mumbai
Amber Enterprises India Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities Rated Rs.935 Crore (Enhanced from Rs.650 Crore)
Long Term Rating CRISIL A+/Positive (Reaffirmed)
Short Term Rating CRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its rating on the bank facilities of Amber Enterprises India Limited (Amber; part of the Amber group) at 'CRISIL A+/Positive/CRISIL A1'.
 
CRISIL, on November 30, 2020, had revised outlook on long-term bank facilities of Amber to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL A+'. The short-term rating had been reaffirmed at 'CRISIL A1'.
 
The ratings continue to reflect the Amber group's established market position as a vendor for leading air conditioner (AC) manufacturers, the group's diversified customer base, high operating efficiency, and strong financial risk profile. These strengths are partially offset by exposure to risks related to seasonal business and the group's large working capital requirement.

Analytical Approach

For arriving at the ratings, CRISIL had combined the business and financial risk profiles of Amber, Sidwal, PICL, IL JIN and Ever, together referred to as the Amber group. CRISIL has combined the business and financial risk profiles of Amber with PICL and Sidwal as both are wholly owned subsidiaries and Amber holds 70% each in Ever and IL Jin. All these entities have significant business and operational synergies.

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:
* Established market position and diversified clientele
The Amber group has a strong market position in the AC segment, which contributes over 60% to revenue. The group supplies to leading brands, such as Voltas, Panasonic, LG, Daikin, Hitachi, Whirlpool, Godrej, and Blue Star, which account for nearly 75% of the domestic refrigeration and air conditioning (RAC) market. Amber's clientele is fairly diversified, with the top five customers accounting for 57% of revenue in fiscal 2020.
 
* High operating efficiency
Integrated operations, with in-house manufacturing of components (heat exchangers, multi flow condensers, sheet metal components and plastic mouldings, system tubing, printed circuit boards, and electric motors), enhances operating efficiency. Thus, the group's operating margin has been adequate at 8% and should remain in the range of 8-9% over the medium term.
 
* Healthy financial risk profile
The financial risk profile is strong as reflected in low total outside liabilities to tangible networth ratio (TOLTNW) of 1.5 times as on March 31, 2020 which is expected to remain less than 1 times as on March 31, 2021 driven by recent fund raise through QIP route worth Rs 400 crore.
 
The funds raised are expected to be utilized majorly for setting up of 2 new manufacturing facilities, one in Pune and one near Chennai, for a new customer cluster arising in Southern part of India. The mentioned capital expenditure (capex) is expected to be completed in phases in next 2 years and hence group is continue to maintain healthy liquidity during the capex period.
 
Debt protection metrics are comfortable as reflected by interest coverage and net cash accrual to adjusted debt (NCAAD) of 7.4 times and 0.68 times respectively for fiscal 2020. Despite moderation in profitability in fiscal 2021, debt protection metrics are expected to remain comfortable.
 
Weaknesses:
* Exposure to risks related to seasonal business
Over 60% of the group's revenue comes from ACs, demand for which is seasonal (from January to May). The seasonal business leads to uneven cash flow during the year and affects liquidity and working capital management.
 
The impact of the seasonal nature was witnessed in the sales of ACs during summer season of calendar year 2020 because of the Covid-19 induced lockdown. Since the entire distribution chain in the AC industry has high volumes in month of March, hence the lockdown impacted the distributors negatively in H1 FY20. However, with inventory levels estimated to having been normalized by end of October, 2020 the upcoming summer season is expected to register significant growth for the AC industry.
 
* Large working capital requirement
Operations are working capital intensive in nature as reflected by inventory and receivables of 67 and 80 days, respectively, as on March 31, 2020. The large working capital requirements as on year end are on account of higher sales in the fourth quarter of fiscal 2019 because of the seasonal nature of business.
Liquidity Strong

Liquidity of the parent entity (Amber) is strong as reflected by healthy unencumbered cash and bank balance of Rs 247 crore outstanding as on September 30, 2020 aided by fund raised through QIP route in September, 2020 itself. Bank lines were moderately utilized at 25% for last 15 months ending September, 2020. 

Outlook: Positive

CRISIL believes Amber group's business risk profile will benefit significantly over the medium term due to expected increase in market share and favourable government policies.

Rating Sensitivity factors
Upward Factors
* Significant improvement in revenue and profitability in upcoming season of fiscal 2021
* Sustenance of financial risk profile with TOLTNW remaining below 1.2 times as on March 31, 2021
 
Downward Factors
* Substantial debt-funded capital expenditure
* Operating profitability declining to less than 7% on a sustainable basis
About the Group

Incorporated in 1990, Rajpura-based Amber started operations in 1992. It manufactures and assembles majorly RACs and key functional and reliable components, such as heat exchangers (coils), multi flow condensers, sheet metal components, injection-moulding components, system tubing, inner case liners, washing machine tub assembly, and other consumer durables. The manufacturing facilities are in Dehradun (Uttarakhand), Rajpura (Punjab), Jhajjar (Haryana), Kala Amb (Himachal Pradesh), Greater Noida (Uttar Pradesh), and Pune (Maharashtra). In January 2018, Amber came out with an initial public offering (IPO). Its shares are listed on the Bombay Stock Exchange and National Stock Exchange. Mr Jasbir Singh and Mr Daljit Singh are the promoters.
 
PICL, incorporated in 1994, manufactures AC motors at its unit in Faridabad, Haryana. Amber acquired PICL in 2013.
 
In December 2017, Amber acquired a 70% stake in Greater Noida-based IL Jin. In March 2018, Amber acquired a 19% stake in Ever, and later increased its stake to 70%. Both Ever and IL Jin are engaged in manufacturing, assembling, dealing, importing, and exporting electronic assembled printed circuit boards for RACs and other consumer durables.
 
Amber acquired Sidwal in May 2019. Sidwal manufactures heating, ventilation, air conditioning, and refrigeration equipment for mobile applications such as railway coaches, metro coaches, buses, as well as commercial refrigeration and related components. Effective September, 2020, Sidwal is a wholly owned subsidiary of Amber.

Key Financial Indicators - (Consolidated)
Particulars Unit 2020 2019
Revenue Rs crore 3966 2755
Profit after tax (PAT) Rs crore 163.9 94.5
PAT margin % 4.1 3.4
Adjusted debt/adjusted networth Times 0.32 0.24
Interest coverage Times 7.4 8.2

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon
rate (%)		 Maturity date Issue size
(Rs crore)		 Complexity
Level		 Rating assigned with outlook
NA Cash Credit & Working Capital demand loan NA NA NA 25.0 NA CRISIL A+/Positive
NA Term Loan NA NA Mar-26 50.0 NA CRISIL A+/Positive
NA Fund-Based Facilities NA NA NA 230.0 NA CRISIL A+/Positive
NA Letter of credit & Bank Guarantee NA NA NA 75.0 NA CRISIL A1
NA Non-Fund Based Limit NA NA NA 375.0 NA CRISIL A+/Positive
NA Non-Fund Based Limit NA NA NA 180.0 NA CRISIL A1
 
 
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Amber Enterprises India Ltd Full Parent company
PICL (India) Pvt Ltd Full Wholly owned subsidiary of Amber; Significant business and operational synergies
Sidwal Refrigeration Industries Pvt Ltd Full Wholly owned subsidiary of Amber; Significant business and operational synergies
IL Jin Electronics India Pvt Ltd Full 70% owned by Amber; Significant business and operational synergies
Ever Electronics Pvt Ltd Full 70% owned by Amber; Significant business and operational synergies
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  305.00  CRISIL A+/Positive  30-11-20  CRISIL A+/Positive  16-09-19  CRISIL A+/Stable  05-11-18  CRISIL A+/Stable  21-12-17  CRISIL A-/Positive/ CRISIL A2+  CRISIL A-/Negative/ CRISIL A2+ 
            27-08-19  CRISIL A+/Stable  20-03-18  CRISIL A+/Stable/ CRISIL A1  23-03-17  CRISIL A-/Stable/ CRISIL A2+   
            24-06-19  CRISIL A+/Watch Developing  22-01-18  CRISIL A-/Positive/ CRISIL A2+       
            02-04-19  CRISIL A+/Watch Developing  04-01-18  CRISIL A-/Positive/ CRISIL A2+       
Non Fund-based Bank Facilities  LT/ST  630.00  CRISIL A+/Positive/ CRISIL A1  30-11-20  CRISIL A1  16-09-19  CRISIL A1  05-11-18  CRISIL A1  21-12-17  CRISIL A2+  CRISIL A2+ 
            27-08-19  CRISIL A1  20-03-18  CRISIL A1  23-03-17  CRISIL A2+   
            24-06-19  CRISIL A1/Watch Developing  22-01-18  CRISIL A2+       
            02-04-19  CRISIL A1/Watch Developing  04-01-18  CRISIL A2+       
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit & Working Capital demand loan 25 CRISIL A+/Positive Cash Credit & Working Capital demand loan 178 CRISIL A+/Positive
Fund-Based Facilities 230 CRISIL A+/Positive Letter of credit & Bank Guarantee 412 CRISIL A1
Letter of credit & Bank Guarantee 75 CRISIL A1 Proposed Non Fund based limits 10 CRISIL A1
Non-Fund Based Limit 375 CRISIL A+/Positive Term Loan 50 CRISIL A+/Positive
Term Loan 50 CRISIL A+/Positive -- 0 --
Non-Fund Based Limit 180 CRISIL A1 -- 0 --
Total 935 -- Total 650 --
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
Rating Criteria for Consumer Durable Industry
CRISILs Approach to Recognising Default
CRISILs Bank Loan Ratings
CRISILs Criteria for Consolidation
The Rating Process

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