| C.R.I. Pumps Private Limited | ||||||
| Ratings upgraded to 'CRISIL AA-/Stable/CRISIL A1+' | ||||||
| Rating Action | ||||||
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| 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 upgraded its ratings on the bank loan facilities of C.R.I. Pumps Private Limited (CRI) to 'CRISIL AA-/Stable/CRISIL A1+' from 'CRISIL A+/Positive/CRISIL A1’
The rating upgrade follows expectation of sustained healthy improvement in CRI’s performance over the near to medium term, supported by steady demand from agricultural & household pumps segment and increasing traction of solar pumps. The ratings are also driven by CRI’s established market position in a largely unorganized pump sector with a healthy market share of 17-18%, robust distribution network both in India and overseas along with strong brand recall for CRI brand and the company’s diversified product portfolio, with complementary products to pumps such as pipes, wires and cables. Besides, the rating also benefits from CRI’s improving operating efficiency as reflected in its operating margins improving to ~12%, rising cash generation and healthy financial risk profile, with only working capital debt outstanding at present. While CRI is expected to step up its capex spend to Rs.1000 crores between fiscals 2026-28, which will involve part debt funding, steady cash generation from operations will ensure debt protection metrics remain at comfortable levels. For instance, the company’s interest cover is expected to remain over 12-13 times, while gearing is expected to remain below 1 time over the medium term.
In fiscal 2024, CRI reported better than expected and healthy on-year revenue growth of 33% registering revenues of ~Rs.2377 crore, driven by strong growth of 30% from pumps and pipes segment (~88% of its revenues) and 56% growth in wires & cable segment, which together constituted 93% of CRI’s overall revenue. This growth was aided by continued higher demand from key end user segments like residential & agricultural pumps and higher traction for solar powered pumps. The growth momentum has continued in the current fiscal and CRI has recorded a healthy growth of 33% during the first quarter of fiscal 2025 over corresponding period of previous year. CRI is expected to sustain its healthy revenue growth over medium term backed by positive farm sentiments driven by optimism from normal monsoon, revision in MSP for rabi crops, increased traction in construction activities, growing urbanisation and higher budgetary allocation for government schemes in water supply, irrigation, housing etc. This along with expected increase in orders for solar powered pumps through KUSUM scheme with steady increase in implementation by various state government will augur well for CRI over the medium term.
Operating margins improved by 260 basis points to 11.9% in fiscal 2024, from 9.3% in fiscal 2023, majorly aided by softening of raw material prices, steady pump realizations and improved business performance of subsidiaries along with closure of few loss-making subsidiaries with higher overheads. Operating margins further improved to 12.6% in the first quarter of fiscal 2025, and overall operating profitability is expected to stabilize at 12-12.5% over the near to medium term, due to better operating leverage, better product mix in favour of higher margin products, stable input prices and continued cost reduction initiatives.
Besides, CRI’s financial risk profile is also on an improving trajectory with healthy cash generation, progressive repayment on term debt, and prudent working capital management. Gearing remained comfortable at 0.34 times at March 31, 2024 (0.43 times on March 31, 2023). Other debt metrics, such as interest cover, debt/EBITDA and net cash accruals to total debt improved to 19.28 times, 0.99 times and 0.71 times respectively in fiscal 2024, from 8.78 times, 1.78 times and 0.37 times in fiscal 2023. Net worth was also sizeable at over Rs.800 crores, at March 31, 2024 and is expected to cross over Rs. 1000 crores in fiscal 2025. CRISIL Ratings expects CRI’s debt metrics will remain at healthy levels in the near to medium term despite partly debt funded capex (total capex of Rs.1000 crore) planned over fiscals 2026-28 towards capacity enhancement, automation and technology upgradation in its foundries.
The ratings continue to reflect the healthy business risk profile of CRI supported by its established market position in a largely unorganized pump sector, robust distribution network both in India and overseas, strong brand recall for CRI brand, diversified product offerings and improving operating capabilities. The ratings are further supported by the company’s healthy financial risk profile and comfortable debt metrics. These strengths are partially offset by susceptibility to volatility in raw material prices and intense competition from unorganized players, moderately working capital intensive operations and moderate scale of operations in new product segments. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of CRI and its foreign subsidiaries as the entities have common management and significant operational and financial linkages. Vendor Financing outstanding and first loss default guarantee(FLDG) outstanding given by CRI to dealers under dealer financing scheme at the year end has been considered as debt.
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 position and healthy complementary product profile: CRI is a leading player in the submersible and surface pumps segment with presence of around 62 years and strong brand equity through its CRI brand. It has more than 1,000 varieties of pumps, including over 400 models rated by the Bureau of Energy Efficiency (BEE). The company manufactures niche products, such as stainless steel submersible pumps that are corrosion resistant. The company also has presence in PVC pipes and wires, which at present contribute less than 10% of revenues, however has been scaling up steadily recording a growth of 63% & 56% respectively.
Besides, company is the second largest player in solar pumps and has benefitted from the PM-KUSUM scheme issued by Solar Energy Corporation of India and has a strong order book of over Rs.1500 crore which is to be executed in fiscals 2025 and 2026, thereby ensuring high revenue growth over the medium term. CRI expects to receive further additional orders from new tenders in fiscal 2025 under KUSUM scheme which remains a key rating monitorable.
Strong distribution network and improving geographic diversity: The company has a strong pan-India network of 5,000 dealers, 1,500 service centres and 38 sales outlets both India and overseas. CRI has an established position in overseas with presence in 120 countries across key markets like US, Canada, Mexico, Central America, Caribbean, Africa, Lebanon, Jordan Dubai, Egypt etc. Company has its wholly owned subsidiaries in key markets like China, Brazil, US, Indonesia, Italy, South Africa, Spain, Philippines etc. Export sales (direct exports by CRI India and sales from subsidiaries accounted for ~13% of revenue in fiscal 2024)
Improving operating efficiency: CRI’s operating profitability has seen good improvement to 11.9% in fiscal 2024, from 9.3% in fiscal 2023, due to benefits of better operating leverage, focus on profitable products in its mix, stable input prices and cost reduction initiatives. The company is one of the few pump companies which has integrated backwards and has strong research and development (R&D) capability. Besides an in-house foundry with production capacity of more than 30,000 tonne per annum, it has tie-ups with feeder units, which cater exclusively to its requirement of silicon steel stamping, balancing and other processes. Strong focus on R&D helps add variety to the product portfolio every year. Moreover, the company has consolidated some of its manufacturing units and has been undertaking several cost cutting measures like closure of loss-making subsidiaries which has aided and will continue to aid in enhancing operating profitability.
Healthy financial risk profile: CRI’s financial risk profile is healthy, and has been improving over time. The company has used its strong cash accruals and prudently funded capex which has enabled it to retire all long term debt. Networth is expected to cross Rs.1000 crores in fiscal 2025. Besides, prudent management of working capital has also helped keep working capital debt under control. Progressive debt repayment has resulted in reduction of debt to ~Rs.280 crores at March 31, 2024, from ~Rs.758 crores at March 31, 2019.
Resultant lower interest cost and better profitability have benefitted the debt protection metrics. The interest coverage and net cash accrual to total debt ratio improved to 19.28 times and 0.71 times, respectively, in fiscal 2024 from 8.78 times and 0.41 time, respectively, in fiscal 2023. Capex is expected at under Rs.100 crore in fiscal 2025, and will be funded from annual accruals. Despite company planning partly debt funded capex and with working capital cycle expected to increase over the medium term as Kusum project related orders are implemented (subsidy from government takes long time to get released), gearing is expected to moderate but remain below 1 time over the medium term. Besides, interest cover and debt/EBITDA ratio are also expected to remain above 12-13 times and ~ 1-1.2 times over the medium term. Any higher than expected elongation of working capital cycle or more than expected debt for capex or acquisitions will be a monitorable.
Weaknesses: Susceptibility to volatility in raw material prices and intense competition: Prices of primary raw materials, stainless steel and copper, and PVC resins are inherently volatile and depend largely on global as well as local demand and supply. Cost of these raw materials accounts for around 60% of the manufacturing cost, and hence, volatility in prices may impact profitability. While CRI periodically implements price hikes to pass on the increasing cost of raw materials, complete pass on will be restricted, given the intense competition in the industry, emanating from surplus capacity.
Suboptimal scale of operations in new product segments: New segments such as pipes, cables and wires could take longer to scale up owing to intense competition. While some of these segments have achieved breakeven, continued increase in revenue and consequent improvement in operating profitability will be key monitorables. Presently, CRI caters majorly to south India, however, has minor presence in northern states like Punjab, Ghaziabad and plans for further geographical expansion over medium term. The performance of Wires & Cable segment has improved with steady offtake in pumps segment as these are being sold by its dealers as ancillary products
Moderately working capital intensive operations: CRI’s operations are working capital intensive given the diverse product segments of the company and uncertainty prevailing around the timing and value of orders due to which company needs to maintain a larger inventory, a part of which is also utilised to meet its distribution channel requirements. Further CRI has started to adopt cash and carry model for the domestic pump sales which has also helped in effectively managing the receivables. Although company adopts cash and carry policy, CRI enables their dealers in availing dealer financing by providing first loss default guarantee (FLDG) with a credit period of 60 days thereby facilitating working capital management effectively for the dealers.
While company is able to adopt cash & carry policy in pump segment due to its established market position, company has to give longer credit period in pipes & wires business as it is is a relatively new entrant in the segment. With expected increase in share of revenue from Solar pumps under PM-KUSUM scheme and given the tender-based nature of the business and a time lag in the receipt of payment from government entities for sales, working capital intensity is expected to remain elevated over medium term. |
Liquidity: Strong The company also has strong headroom in the form of fund-based limit which was utilised 51% on average over the 12 months through September 2024. Cash and equivalent stood at ~Rs 21 crore as on March 31, 2024. Estimated annual cash accruals of over Rs.250 crore over the medium and will be sufficient to cover moderate capex in fiscal 2025, incremental working capital requirement and repayment of term loan obligations (proposed to be availed for capex) of Rs.40 crore and Rs.80 crore in fiscals 2027 and 2028 respectively. CRI is expected to raise debt to partly fund sizeable capex between fiscals 2026-2028. |
Outlook Stable CRISIL Ratings believes that CRI will continue to benefit from its established market position in the domestic pumps segment, diversified product offerings, steady demand prospects, and improving operating capabilities. The company’s financial risk profile is also expected to remain healthy, supported by steady cash generation, even as capex spend is expected to increase over the medium term. |
Rating sensitivity factors Upward factors
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About the Company CRI Pumps was set up by the late Mr K Gopal in 1961 in Coimbatore, Tamil Nadu. The company commenced operations by manufacturing irrigation equipment on small scale. Over the years, it has established its position in the household and agricultural pumps industry. Apart from this, company manufactures castings. In fiscal 2016, company forayed into manufacturing of pipes and subsequently ventured into cables & wires in fiscal 2017 as a natural extension to its core product—pumps. |
Key Financial Indicators (consolidated)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instruments
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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