Rating Rationale
July 04, 2023 | Mumbai
Bajel Projects Limited
Ratings removed from ‘Watch Developing’; Ratings Reaffirmed; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.1200 Crore (Enhanced from Rs.500 Crore)
Long Term RatingCRISIL A/Stable (Removed from 'Rating Watch with Developing Implications'; Rating Reaffirmed)
Short Term RatingCRISIL A1 (Removed from 'Rating Watch with Developing Implications'; Rating Reaffirmed)
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 removed its ratings on the bank facilities of Bajel Projects Limited (BPL) from ‘Rating Watch with Developing Implications’ and has reaffirmed the ratings at ‘CRISIL A/CRISIL A1’ while assigning a ‘Stable’ outlook to its long-term rating.

 

The company has received the NCLT approval for demerger of the EPC division into a separate entity, BPL and consequently the watch has been removed. The rating was earlier placed on watch because of impending demerger process as announced by Bajaj Electricals Limited (BEL) (CRISIL AA-/Stable/ CRISIL A1+). The engineering, procurement and construction (EPC) business of BEL is proposed to be demerged and transferred to BPL. Post demerger, the shareholding of BEL shall be mirrored in Bajel Projects. While the demerger has been approved by majority of the stakeholders and regulatory bodies including NCLT, the signed copy of the NCLT order was awaited. Now, the confirmation from NCLT has been received as per the corporate announcement made by BEL at the stock exchanges.

 

The rating reflects the improving business risk profile of the EPC business and an adequate financial risk profile. The business risk profile is expected to improve in the medium term with focus of the company in increasing the scale of operations through prudent order selection. The order book has doubled to above Rs. 1,600 crores as of March 2023 from around Rs 800 crores, the last fiscal, indicating adequate revenue visibility for the next 1.5-2 years. Diversified order book and presence of strong counterparties also lend strength to the order book position.

 

The operating profits have turned positive in fiscal 2023 after losses for the last 2-3 years, due to descaling of operations and some cost inefficiencies. The operating margins are expected to improve further, with steady revenue growth and cost efficiency measures. The improvement in revenue and operating margin shall remain a key monitorable.

 

The EPC business faced working capital challenges in the past due to pending receivables from past orders. The management has focused on recovery of receivables over the past two years and the same is reflected in steady improvement in working capital position. Efficient working capital management remains critical going forward.

 

The financial risk profile is supported by comfortable net worth and low debt. The profile is further expected to improve with improving profitability.

 

The rating also factors in the benefit of the company being a part of Bajaj Group and expected financial support, as may be required, from one of the group holding companies, Jamnalal Sons Private Limited (JSPL). JSPL has robust financial flexibility, as reflected in its holding in various companies of Bajaj Group and low debt obligations or contingent liabilities.

 

The strengths are partially offset by muted profitability, exposure to competition and working capital intensive nature of operations.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has analysed business risk and financial risk of the EPC business of Bajaj Electricals Ltd proposed to be transferred to BPL.

 

CRISIL Ratings has also applied its criteria for notching up of ratings for financial support provided by Jamnalal Sons Private Limited (JSPL) which is one of holding companies of the Bajaj Group.

Key Rating Drivers & Detailed Description

Strengths:

  • Track record in the EPC business: The EPC business has been in existence for more than 15 years and due to the track record, it is qualified to execute complex projects.

 

The company has been able to increase the order book to ~Rs 1600 crore as on March 31, 2023 from reputed customers like Power Grid Corporation of India Ltd ensuring revenue visibility for the next 1.5 to 2 years. Wide range of qualification in execution of projects comprising of turnkey projects execution of transmission line towers (TLT) carrying extra high voltage (EHV), power distribution lines carrying high voltage (HV), sub-stations, feeder separators etc enable the company to bid and tap various applications in the T&D segment.

 

The company is also backward integrated through its manufacturing of towers and  poles, which can help the company improving cost efficiencies going forward.

 

  • Comfortable capital structure: The company is expected to remain debt free in the near term and healthy liquidity is expected to support the financial risk profile.

 

  • Expected financial support from parent: The Bajaj group is among the largest business groups in India and ranks top 5 in terms of market capitalization in India. The company is expected to get financial support from the strong profile of the Bajaj group and expected financial support, as may be required from one of the group holding companies, Jamnalal Sons Private Limited (JSPL). JSPL has a healthy financial flexibility as reflected in its holding in various companies of Bajaj Group and low debt obligations or contingent liabilities.

 

Weaknesses:

  • Modest but improving profitability: Power T&D business is exposed to intense competition due to low entry barriers. Additionally, cost overruns in the past and some inefficiencies impacted profitability of the company. The company has taken several corrective actions which is expected to improve the performance going forward. Cost efficiency improvements, prudent selection of counter parties and robust pre-bid assessment of contracts are expected to support the margins going forward. While the EPC business has achieved breakeven in fiscal 2023, material expansion in profitability remains a key monitorable.

 

Furthermore, any large-scale project deferrals or slow project execution could lead to cost overruns impacting profitability. However, these risks are mitigated by the execution capabilities of the company in the power T&D EPC segment.

 

  • Working capital-intensive operations: Operations of BPL are working capital intensive owing to the inherent nature of the business and the long project execution cycle of 18-24 months. Receivables are typically high in the business due to the sizeable retention money blocked in completed projects till the defect liability period is over. Receivable recovery risk is partially mitigated as majority of projects are backed by central public sector undertakings. Efficient working capital management, especially with growing scale of operations will remain a key monitorable.

Liquidity: Adequate

Liquidity is estimated to remain adequate pursuant to estimated collection of receivables in line with the track record in the recent past. Unutilised Bank limit, sufficient unencumbered cash coupled with no long term debt will result in adequate liquidity position.

Outlook: Stable

CRISIL Ratings believes company will benefit from increasing scale of operations and strong inflow of order book. Improving financial risk profile will also continue to benefit the credit risk profile. The company is also expected to be benefitted from support, as may be required received from JSPL which has strong financial flexibility as reflected in its holding in various companies of Bajaj Group and low debt obligations or contingent liabilities.

Rating Sensitivity factors

Upward factors:

  • Significant scale up of operations along with improvement in operating margins (EBIDTA) above 5% on a sustained basis
  • Material improvement in working capital cycle

 

Downward factors:

  • Weak operational performance, with operating profitability (EBIDTA) remaining below 2% on a sustained basis
  • Lack of improvement in working capital cycle
  • Change in stance of support from JSPL or change in criticality of the company for JSPL

About the Company

BPL, incorporated in January 2022 is presently a wholly owned subsidiary of Bajaj Electricals Ltd (BEL). The EPC business currently operated under BEL is proposed to be transferred to BPL as a part of a scheme of demerger announced by BEL. Post demerger, BPL will be listed on stock exchanges and the shareholding of BEL will be mirrored in it.

About the Group

Bajaj Group, is a globally renowned & trusted group, founded by Late Jamnalal Bajaj and presently managed by the third generation of promoters and is among top 5 business group in terms of market capitalisation in India.

Key Financial Indicators

As on / for the period ended March 31

 

2023

2022

Revenue

Rs crore

NM*

NM*

EBIDTA

Rs crore

NM*

NM*

PAT margin

%

NM*

NM*

Adjusted interest coverage

Times

NM*

NM*

Adjusted debt/Networth

Times

NM*

NM*

* The EPC business segment of Bajaj Electricals Ltd is proposed to be demerged and transferred to Bajel Projects Ltd. Pending demerger, the operations are not there in Bajel Projects Ltd and the existing financials of Bajel Projects Ltd are not meaningful.

 

Key financial indicator for the EPC division of Bajaj Electricals Ltd

As on / for the period ended March 31

 

2023

2022

Revenue

Rs crore

540

417

EBIT

Rs crore

7

-40

 

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 the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Proposed Long Term Bank Loan Facility NA NA NA 100 NA CRISIL A/Stable
NA Proposed Short Term Bank Loan Facility NA NA NA 1,100 NA CRISIL A1
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 1200.0 CRISIL A1 / CRISIL A/Stable 20-06-23 CRISIL A1/Watch Developing / CRISIL A/Watch Developing   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Proposed Long Term Bank Loan Facility 100 Not Applicable CRISIL A/Stable
Proposed Short Term Bank Loan Facility 700 Not Applicable CRISIL A1
Proposed Short Term Bank Loan Facility 400 Not Applicable CRISIL A1
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Engineering Sector
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Mohit Makhija
Senior Director
CRISIL Ratings Limited
D:+91 124 672 2000
mohit.makhija@crisil.com

Anand Kulkarni
Director
CRISIL Ratings Limited
D:+91 22 3342 3000
anand.kulkarni@crisil.com

Prateek Kasera
Team Leader
CRISIL Ratings Limited
B:+91 22 3342 3000
Prateek.Kasera@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html