Rating Rationale
March 24, 2021 | Mumbai
Butterfly Gandhimathi Appliances Limited
Ratings upgraded to 'CRISIL A- / Stable / CRISIL A2+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.356.85 Crore
Long Term RatingCRISIL A-/Stable (Upgraded from 'CRISIL BBB+ / Stable')
Short Term RatingCRISIL A2+ (Upgraded from 'CRISIL A2 ')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded the ratings on the bank facilities of Butterfly Gandhimathi Appliances Limited (BGAL) to ‘CRISIL A-/Stable/CRISIL A2+’ from ‘CRISIL BBB+/Stable/CRISIL A2’.

 

The upgrade reflects CRISIL Ratings’ belief that BGAL shall sustain the improvement in its business performance over the medium term. The turnover has improved at a compounded annual growth rate (CAGR) 20 percent over the last 4 years through March 2020 supported by strong brand recall and increased penetration in its major products. Despite pandemic led disruptions, the growth continued and revenues for the 9 month ended December 2020 increased by around 17 percent to Rs.664 crore, over the corresponding period of the previous fiscal. This is largely on account of company’s ability to increase the product offerings and expand its distribution channels. Increase in scale of operations and cost efficiencies across its product offering is expected to result in better profitability for this fiscal. Already the company has reported improved margins of about 10% during the period Apr-Dec 2020 of current fiscal and expected to continue this in the next fiscal.

 

Better profitability has resulted in higher cash accrual, which will result in lower reliance on bank borrowings to fund working capital requirements over the medium term.  Further, the company has been working on reducing its gross current asset (GCA) days which will result in efficient working capital management. This coupled with no major investment in capacity expansion, should keep the debt levels between Rs 60-70 crores in the medium term. The company reported total outside liability to tangible networth (TOLTNW) of 1.3 times as on 30 September, 2020. Better accretions and reduction in debt, will result in improved debt protection metrics over the medium term. The company reported interest coverage of about 4.5 times (from 2.5 times in the corresponding period of last fiscal) during 9 month ended December 2020. High cushion in bank limits, reducing term debt obligations along with higher cash equivalents, will support the liquidity over the medium term.

 

The ratings 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 total outside liability to tangible net worth (TOLTNW) was at around 1.3 times as on September 30, 2020 (1.9 times as on March 31, 2020).Aided by improved operating profitability, the interest coverage improved to over 4.5 times for the 9 month ended December 2020, as against 2.5 times for the same period during the previous fiscal. Steady accretion to reserves and absence of debt funded capital expenditure should strengthen the financial risk profile 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: Adequate

Liquidity is likely to remain adequate over the medium term. Cash accrual is projected at Rs 50-70 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 37% over the 12 months through January 2021. Liquidity shall also supported by unencumbered cash and bank balances of Rs.30-35 crore that shall be maintained at any point in time.

Outlook: Stable

CRISIL believes BGAL’s business risk profile will improve over the medium term, backed by its established position in the domestic kitchen appliance industry.

Rating Sensitivity factors

Upward Factors

  • Improvement in cash accrual to more than Rs.75 crore
  • Geographical and product diversification in revenue profile
  • Further improvement in financial risk profile, with interest coverage over 5 times and TOLTNW less than 1 times.

 

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

Particulars

Unit

2020

2019

Revenue

Rs crore

676

647

Profit After Tax (PAT)

Rs Crore

4

9.5

PAT Margin

%

0.05

1.5

Adjusted debt/adjusted networth

Times

0.79

1.03

Interest coverage

Times

1.7

2.12

 

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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-/Stable

NA

Letter of Credit

NA

NA

NA

80

NA

CRISIL A2+

NA

Term Loan

NA

NA

Mar-22

20.5

NA

CRISIL A-/Stable

NA

Proposed Long Term

Bank Loan Facility

NA

NA

NA

111.35

NA

CRISIL A-/Stable

 

 

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 276.85 CRISIL A-/Stable   -- 22-09-20 CRISIL BBB+/Stable 27-12-19 CRISIL BBB+/Stable 28-12-18 CRISIL A3+ / CRISIL BBB/Positive CRISIL A3+ / CRISIL BBB/Negative
      --   --   -- 31-01-19 CRISIL A3+ / CRISIL BBB/Positive 31-03-18 CRISIL A3+ / CRISIL BBB/Stable CRISIL BBB+/Negative / CRISIL A2
Non-Fund Based Facilities ST 80.0 CRISIL A2+   -- 22-09-20 CRISIL A2 27-12-19 CRISIL A2 28-12-18 CRISIL A3+ CRISIL A3+
      --   --   -- 31-01-19 CRISIL A3+ 31-03-18 CRISIL A3+ --
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 145 CRISIL A-/Stable Cash Credit 145 CRISIL BBB+/Stable
Letter of Credit 80 CRISIL A2+ Letter of Credit 80 CRISIL A2
Proposed Long Term Bank Loan Facility 111.35 CRISIL A-/Stable Proposed Term Loan 40.91 CRISIL BBB+/Stable
Term Loan 20.5 CRISIL A-/Stable Proposed Working Capital Facility 82.49 CRISIL BBB+/Stable
- - - Term Loan 8.45 CRISIL BBB+/Stable
Total 356.85 - Total 356.85 -
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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