Rating Rationale
October 22, 2020 | Mumbai
Bemco Hydraulics Limited
Ratings reaffirmed at 'CRISIL BB- / Stable / CRISIL A4+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.35 Crore
Long Term RatingCRISIL BB-/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank facilities of Bemco Hydraulics Limited (Bemco) at 'CRISIL BB-/Stable/CRISIL A4+'.

The ratings reflect Bemco's established market position in niche product profile and its promoters' extensive industry experience and moderate financial risk profile. These rating strengths are partially offset by the company's modest scale of operations and working capital intensive nature of operations.

Key Rating Drivers & Detailed Description
Strengths:
* Established market position in niche product profile and its promoters' extensive industry experience: Bemco was founded in the late 1930s as a proprietorship concern to meet the requirements of the British army. Since then, the company has developed highly sophisticated machinery and machinery equipment for Hindustan Aeronautics Ltd, Indian Railways, and auto companies. The company remains the sole manufacturer of re-railing products for Indian Railways.
 
* Average financial risk profile: The company's financial risk profile is average; as reflected from a moderate capital structure and modest debt protection metrics. Total outside liabilities to tangible networth ratio was moderate of around 1.02 times as on March 31, 2020. The debt protection metrics are however modest; marked by an interest coverage and net cash accruals to total debt ratio of around 1.95 times and 10 percent respectively for fiscal 2020. In the absence of any major debt funded capital expenditure, the financial risk profile is expected to remain average over the medium term.
 
Weakness:
* Modest scale of operations: Bemco's scale of operations remain modest, with revenues of about Rs.32 crore for fiscal 2010. Despite being in the industry from several years, the company's scale remains small, constraining the business risk profile
 
* Working-capital-intensive operations: Bemco's operations are marked by large working capital requirements, reflected in gross current asset days (GCA) of 414 days as on 31 March, 2020. The GCA remains high on account of large inventory holding necessary to meet the orders in hand and higher debtors' outstanding days.
Liquidity Adequate

Bemco's liquidity remains adequate marked by more than adequate cash accruals against maturing debt obligations and moderate bank limit utilisation. The company is expected to generate cash accrual of over Rs 2 crore per annum over the medium term, against modest repayment obligations, during the corresponding years. The company's bank limit utilisation is around 50-60 over the past 11 months through September 2020. In the absence of major debt funded capital expenditure, the liquidity is expected to remain adequate over the medium term.

Outlook: Stable

CRISIL believes that Bemco will continue to benefit over the medium term its promoters' extensive industry experience.
 
Rating Sensitivity factors
Upward Factors

* Improvement in turnover by more than 25 percent while sustaining the operating margins
* Improvement in working capital management
 
Downward Factors
* Decline in cash accrual to less than Rs.1.5 crore
* Any large debt funded capital expenditure; adversely impacting the financial risk profile; particularly liquidity

About the Company

Bemco was incorporated as New Bemco Engineering Products Company Ltd in 1957; it got its current name in 1976. The company manufactures hydraulic presses and equipment used in the automotive, defense, railways, and other heavy engineering sectors.
 
The company is listed on Bombay Stock Exchange.

Key Financial Indicators
As on / for the period ended March 31   2020 2019
Operating income Rs crore 32 47
Reported profit after tax Rs crore 1 2
PAT margins % 2.6 3.4
Adjusted Debt/Adjusted Net worth Times 0.47 0.33
Interest coverage Times 1.95 2.1

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. 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 Assigned with Outlook
NA Bank Guarantee NA NA NA 16 NA CRISIL A4+
NA Cash Credit NA NA NA 12.5 NA CRISIL BB-/Stable
NA Inland/Import Letter of Credit NA NA NA 2 NA CRISIL A4+
NA Letter of Credit NA NA NA 2 NA CRISIL A4+
NA Proposed Long Term Bank Loan Facility NA NA NA 1.5 NA CRISIL BB-/Stable
NA Term Loan NA NA Mar-21 1 NA CRISIL BB-/Stable
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  15.00  CRISIL BB-/Stable      12-07-19  CRISIL BB-/Stable  31-07-18  CRISIL BB-/Stable  10-07-17  CRISIL B/Stable  CRISIL B-/Stable 
Non Fund-based Bank Facilities  LT/ST  20.00  CRISIL A4+      12-07-19  CRISIL A4+  31-07-18  CRISIL A4+  10-07-17  CRISIL A4  CRISIL A4 
All amounts are in Rs.Cr.
 
Annexure - Details of Bank Lenders & Facilities
Facility Name of Lender Amount (Rs.Crore) Rating
Bank Guarantee Bank of Maharashtra 5.5 CRISIL A4+
Bank Guarantee YES Bank Limited 10.5 CRISIL A4+
Cash Credit Bank of Maharashtra 5.5 CRISIL BB-/Stable
Cash Credit YES Bank Limited 7 CRISIL BB-/Stable
Inland/Import Letter of Credit YES Bank Limited 2 CRISIL A4+
Letter of Credit Bank of Maharashtra 2 CRISIL A4+
Proposed Long Term Bank Loan Facility Not Applicable 1.5 CRISIL BB-/Stable
Term Loan Bank of Maharashtra 1 CRISIL BB-/Stable

This Annexure has been updated on 7-Sep-2021 in line with the lender-wise facility details as on 3-Aug-2021 received from the rated entity.

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
CRISILs Criteria for rating short term debt

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