Rating Rationale
March 03, 2022 | Mumbai
Butterfly Gandhimathi Appliances Limited
Ratings placed on watch 'Watch Positive'
 
Rating Action
Total Bank Loan Facilities RatedRs.366.85 Crore
Long Term RatingCRISIL A-/Watch Positive (Placed on 'Rating Watch with Positive Implications')
Short Term RatingCRISIL A2+/Watch Positive (Placed on 'Rating Watch with Positive Implications')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has placed its ratings on the bank facilities of Butterfly Gandhimathi Appliances Limited (BGAL) on 'Rating Watch with Positive Implications'.

 

The ratings for BGAL have been placed on watch with positive implications following the announcement by Crompton Greaves Consumer Electricals Limited (CGEL; rated CRISIL AA+/Stable/CRISIL A1+) that it has entered into agreements for the acquisition of 55% (approximately) of the paid up equity share capital of BGAL from its promoters and 26% as an offer for sale; subject to requisite regulatory approvals on 22nd March 2022. CRISIL Ratings will continue to be in discussions with BGAL’s management on the status of this acquisition and will resolve the watch once there is full clarity of the impact on the financial and business risk profile of BGAL.

 

CRISIL Ratings on the bank facilities of Butterfly Gandhimathi Appliances Limited (BGAL) continue to reflect BGAL's established brand and diversified product profile, along with its comfortable financial risk profile. These strengths are partially offset by intense competition in the cookware/kitchen appliance industry and susceptibility of operating profitability to volatility in raw material prices.

Key Rating Drivers & Detailed Description

Strengths:

  • Established brand, and diversified product profile: The company sells liquefied petroleum gas (LPG) stoves, pressure cookers, mixer grinders, and vacuum flasks under the Butterfly brand, which has been highly popular in India for over 20 years. Business is catered to retail and institutional segments

 

  • Comfortable financial risk profile: BGAL has a comfortable financial risk profile with a improved capital structure and debt protection metrics. The gearing has been comfortable at around 0.1 times as on September 30, 2021. Interest coverage has remained comfortable at over 5 times. Supported by the absence of major debt funded capital expenditure, the financial risk profile shall remain comfortable over the medium term.

 

Weaknesses:

  • Intense competition in the cookware/kitchen appliance industry: The branded kitchen appliance industry is highly competitive, marked by players such as TTK Prestige Ltd (TTK; CRISIL AA/Stable/CRISIL A1+), Philips India Ltd (PIL; CRISIL AA+/Stable/CRISIL A1+), Hawkins Cookers Ltd, Maharaja Appliances Ltd, and Panasonic India Pvt Ltd. Some competitors, such as TTK and PIL, have pan-India presence, and have established brand recall across product categories. Intense competition is likely to constrain business risk profile over the medium term.

 

  • Susceptibility of operating margin to volatility in raw material prices: Operating margin is susceptible to volatility in prices of steel and aluminium, which form one of the key input materials. Any sharp movement in their prices could impinge on the overall margin.

Liquidity: Strong

Liquidity is likely to remain strong over the medium term. Cash accrual is projected at Rs.75-85  crore for the next two fiscals against yearly maturing debt of around Rs 10-11 crore. Average utilisation on the fund based working capital limit of Rs 135 crore, was 45-50% over the 12 months through January 2022. Absence of debt funded capital expenditure further supports liquidity.

Rating Sensitivity factors

Upward Factors:

  • Completion of acquisition by CGEL
  • Geographical and product diversification in revenue profile leading to improvement to more than 12 percent

 

Downward Factors:

  • Deterioration in TOLTNW to more than 2 times and/or interest coverage less than 2.5 times.
  • Stretch in working capital cycle, with GCA higher than 200 days.
  • Any large debt funded capital expenditure, adversely impacting the financial risk profile.

About the Company

BGAL is the flagship company of the Butterfly group. It manufactures traditional kitchen appliances under the Butterfly brand. The company is listed on National Stock Exchange and BSE Ltd.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

870

679

Reported profit after tax (PAT)

Rs crore

36

4

PAT margin

%

4.2

0.6

Adjusted debt / adjusted net worth

Times

0.15

1.09

Interest coverage

Times

4.67

1.75

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 Level Rating assigned with outlook
NA Cash Credit NA NA NA 145 NA CRISIL A-/Watch Positive
NA Letter of Credit NA NA NA 80 NA CRISIL A2+/Watch Positive
NA Term Loan NA NA Mar-2023 20.5 NA CRISIL A-/Watch Positive
NA Proposed Long Term Bank Loan Facility NA NA NA 111.35 NA CRISIL A-/Watch Positive
NA Proposed Cash Credit Limit NA NA NA 10 NA CRISIL A-/Watch Positive
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 286.85 CRISIL A-/Watch Positive   -- 01-04-21 CRISIL A-/Stable 22-09-20 CRISIL BBB+/Stable 27-12-19 CRISIL BBB+/Stable CRISIL A3+ / CRISIL BBB/Positive
      --   -- 24-03-21 CRISIL A-/Stable   -- 31-01-19 CRISIL A3+ / CRISIL BBB/Positive Withdrawn
Non-Fund Based Facilities ST 80.0 CRISIL A2+/Watch Positive   -- 01-04-21 CRISIL A2+ 22-09-20 CRISIL A2 27-12-19 CRISIL A2 CRISIL A3+
      --   -- 24-03-21 CRISIL A2+   -- 31-01-19 CRISIL A3+ --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Cash Credit 15 CRISIL A-/Watch Positive
Cash Credit 105 CRISIL A-/Watch Positive
Cash Credit 8 CRISIL A-/Watch Positive
Cash Credit 17 CRISIL A-/Watch Positive
Letter of Credit 5 CRISIL A2+/Watch Positive
Letter of Credit 10 CRISIL A2+/Watch Positive
Letter of Credit 5 CRISIL A2+/Watch Positive
Letter of Credit 60 CRISIL A2+/Watch Positive
Proposed Cash Credit Limit 10 CRISIL A-/Watch Positive
Proposed Long Term Bank Loan Facility 111.35 CRISIL A-/Watch Positive
Term Loan 20.5 CRISIL A-/Watch Positive
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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