Detailed Rationale

Crisil Ratings has assigned its ‘Crisil BBB/Stable/Crisil A3+’ ratings to the bank facilities of Axis Solutions Ltd (ASL; part of ASL group).

 

The ratings reflect ASL's healthy market presence, benefit of global collaborations, extensive experience of the promoter in the engineering and capital goods industry, sound operating efficiency, well-established customer base, moderate orderbook providing revenue visibility, diversified end-user industry base, and healthy financial risk profile. These strengths are partially offset by moderate scale of operations, large working capital requirement and susceptibility of the operating margin to volatility in raw material prices and susceptibility to cyclicality in demand from core end-user industries.

Analytical Approach

For arriving at the ratings, Crisil Ratings has combined the business and financial risk profiles of ASL and its three subsidiaries and two group companies, collectively referred to herein as the ASL group. This is because all the entities have significant operational integration and financial interlinkage with each other and are being promoted by similar promoters.

 

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 presence, extensive industry experience of the promoter and benefit of global tie-ups: ASL was founded in 1985 by Dr Bijal Dineshchandra Sanghvi. The promoter has experience of around three decades in the engineering and capital goods industry. This has given him an understanding of the market dynamics and enabled them to establish relationships of over 20 years with suppliers and customers. The company’s strong relationship with its reputable customers has allowed it to obtain a continuous flow of repeat orders from them owing to its ability to produce supplies in accordance with their specifications, standards and timelines. Further, it seeks to adapt to the varied requirements of customers by continuously expanding its product range.

 

Also, ASL has from time to time entered into tie ups with global entities to strengthen its technical know-how and establish a marketing network in the overseas market. For instance, ASL collaborates with over 14 well-renowned global brands such as Knick, Hoffman, ADFWeb, Seneca and Stego to increase the product-based solutions in specific industries and this has also resulted in their better operarting efficiencies, however sustenance of the same shall be monitorable.

 

Diversified end-user industry base, well-established customer base and moderate orderbook providing revenue visibility: ASL has long-standing relationships with its customers and suppliers.  It provides industrial automation and design engineering solutions for oil & gas, water & infrastructure segment, petrochemicals, refineries, power plants, cement, minerals & other engineering verticals. A diversified end-user industry base allows it overcoming the risk of slowdown in a particular industry and achieving high growth.

 

ASL has long-standing relationships with its customers and suppliers. Its customers include some of the well-established players in various industries such as Reliance Industries Ltd, Larsen & Toubro Ltd, Indian Oil Corporation, Bharat Heavy Electricals Ltd, Hindustan Petroleum Corporation Ltd, Afcons Infrastructure Ltd and ISGEC Heavy Engineering Ltd. Also, the company had orders of Rs 292 crore (Rs 170 crore and Rs 120 crore in the pipeline) as of May 2025 to be executed over the next 6-12 months, providing revenue visibility over the medium term.

 

Healthy financial risk profile: The capital structure has been healthy owing to moderate reliance on external funds yielding gearing of 0.33 time and total outside liabilities to adjusted networth ratio of 0.73 time as on March 31, 2025, on a consolidated basis. Debt protection metrics were also comfortable owing to leverage and healthy profitability. The interest coverage and net cash accrual to total debt ratios were at 11.3 times and 0.91 time, respectively, in fiscal 2025 on a consolidated level. These are expected to remain at a similar level over the medium term. The overall financial risk profile is expected to remain comfortable on account of steady accretion to reserve and schedule debt repayment.

 

Weaknesses:

Moderate scale of operations and large working capital requirement: Despite y-o-y growth of ~47% in revenue over the last two fiscals through 2025 on a standalone basis of ASL, it remained moderate at Rs 201 crores in fiscal 2025 (Rs 136 crore in fiscal 2024). In fiscal 2025, the group achieved an operating income of ~Rs 203 crores. Continued focus on adding customers base and diversifying the product mix will yield high realisation, thereby enhancing the operating income. Steady growth in the operating income, aided by high volume amid sustenance of operating margin over 18% will be a key rating sensitivity factor.

 

The intensive working capital management is reflected in gross current assets (GCA) of 269 days as on March 31, 2025. The large working capital requirement arises from high receivables and inventory typically owing to project linked business. It is required to extend long credit period and it is also driven by higher sales being booked at the year end. Inventory remained elevated at 80-90 days owing to the group’s project-based nature of operations, where advanced procurement of material is required to ensure timely project execution. The working capital limit is adequately supported by credit from suppliers and moderate utilisation of bank limits. The working capital requirement will increase with sustained growth in the operating income. Efficient working capital management with low reliance on bank limits will therefore be monitorable. Considering the nature of the industry, the operations of ASL group will remain working capital intensive.

 

Susceptibility of the operating margin to volatility in raw material prices and susceptibility to cyclicality in demand from core end-user industries: The operating margin is exposed to volatility in raw material prices, moreover raw material cost accounts for 55-60% of the operating revenue. Revenue and operating margin have fluctuated over the four fiscals through March 2025 due to muted capex undertaken by core industries such as power, oil refineries and petrochemicals. ASL group operates in the capital goods industry, which is highly dependent on the capital expansion plans of such core industries, which are cyclical in nature and depend on industry prospects and growth scenario. The operating margin thus moderated to 18.75% in fiscal 2025 from 18.90% in fiscal 2024, though improved from fiscal 2022 on a standalone level of ASL and on consolidated level it remained at 18.39% on a consolidated level. The business risk profile may also remain constrained by sectoral concentration, however, the same is mitigated by the group’s initiatives, which are currently under R&D stage, however, it remains monitorable until the commissioning of the same.

Liquidity: Adequate

Bank limit utilisation (FB) was moderate at 79% on average for the 12 months ended May 31, 2025.  Annual cash accrual is expected to be over Rs 35 crore against term debt obligation of Rs 3-4 crore in fiscal 2026 and Rs 1-2 crore from fiscal 2027 onwards and will cushion liquidity. The current ratio was at 2.07 times as on March 31, 2025.

Outlook: Stable

Crisil Ratings believes ASL group will continue to benefit from the extensive experience of its promoter and established relationships with clients.

Rating sensitivity factors

Upward factors

• Sustained increase in revenue over 25% and sustenance of operating margin, leading to higher than expected cash accrual
• Improvement in working capital cycle and financial risk profile

 

Downward factors

• Decline in revenue or operating profitability, leading to net cash accrual below Rs 15 crore
• Large debt-funded capex, weakening the capital structure
• Substantial increase in working capital requirement, weakening liquidity and financial risk profile

About the Group

Headquartered in Ahmedabad, Gujarat, ASL manufactures analytical and analyser system solutions, CEMS (Continuous Emission Monitoring System), SWAS (Steam and Water Analysis System), HVAC (Heating, ventilation, and air conditioning) systems, and water sensors, among others to a wide range of industries. ASL has three facilities for manufacturing, integration, testing and inventory in Ahmedabad, Gujarat.

 

The company Asya Infosoft Ltd (AIL, amalgamated company) had undergone CIRP proceedings under Insolvency and Banking Code. The Honourable court – NCLT Ahmedabad has passed an order of reduction of capital, and reverse merger of the company AIL with M/s Axis Solutions Pvt Ltd (ASPL, amalgamating company) as per the approved resolution plan. ASPL had applied for a resolution plan as co-applicant before NCLT in the case of corporate debtor and the auditee company AIL and ASPL was successful in bidding for the company. The old board of directors of AIL has resigned and new board of directors has joined AIL after March 31, 2024.

 

ASL is listed on BSE Ltd and Bijal Sanghvi is the managing director and Purvi Bijal Sanghavi (executive director/chief executive officer) of ASL.

Key Financial Indicators (Standalone) – Crisil Ratings – adjusted numbers

As on / for the period ended March 31		2025	2024
Operating income	Rs crore	200.86	136.33
Reported PAT	Rs crore	29.53	26.26
PAT margin	%	14.70	19.26
Adjusted debt/adjusted networth	Times	0.32	0.60
Interest coverage	Times	11.40	9.10

 

Key Financial Indicators (Consolidated*) – Crisil Ratings – adjusted numbers

As on / for the period ended March 31		2025
Operating income	Rs crore	203.22
Reported PAT	Rs crore	28.01
PAT margin	%	13.78
Adjusted debt/adjusted networth	Times	0.33
Interest coverage	Times	11.30

*Pl. note - ASL started merging all the group companies and subsidiaries from FY25

Any other information: Not Applicable