Rating Rationale
September 28, 2020 | Mumbai
C.R.I. Pumps Private Limited
'CRISIL A+/Stable' assigned to NCD
 
Rating Action
Total Bank Loan Facilities Rated Rs.880 Crore
Long Term Rating CRISIL A+/Stable (Reaffirmed)
Short Term Rating CRISIL A1 (Reaffirmed)
 
Rs.100 Crore Non Convertible Debentures CRISIL A+/Stable (Assigned)
Rs.55 Crore Commercial Paper CRISIL A1 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL A+/Stable' rating to the Non-Convertible Debenture (NCD) programme of C.R.I. Pumps Private Limited (CRI Pumps). CRISIL has also reaffirmed its 'CRISIL A+/Stable/CRISIL A1' ratings on bank facilities and commercial paper of the company.
 
CRI Pumps' performance was significantly impacted in April 2020 due to the Covid-19 pandemic and the resultant countrywide lockdown. Performance however started improving significantly from May 2020 onwards; sales in June-August 2020 period was 70-80% of the corresponding period of previous fiscal. Company has also significantly reduced costs including sales promotion, employee costs, as well as renegotiated lease rentals benefitting margins. Operating margin in April-August 2020 was around 13-14% as against 11% in corresponding period of previous fiscal. Additionally, company has also taken 3% price increase from September onwards which should further benefit margins going forward.
 
Company's agricultural pumps business has been doing well. Further, residential pumps business is expected to pick up from December onwards. Gradual pick-up in demand in the second half, should enable the company maintain its revenues in fiscal 2021 similar to that in fiscal 2020. Operating margins should remain healthy (~11-12%) supported by the various cost saving initiatives. The company also has adequate liquidity in the form of unutilised bank lines of Rs 260 crore and cash surplus of ~Rs. 30 crore as of June 2020.
 
Over the medium term CRI Pumps is expected to benefit from steady demand for its pumps from agricultural and domestic segments, increasing product diversity, and greater geographic penetration. Revenue should grow at a healthy rate of 10-12%. Operating profitability will remain stable with increasing scale of operations especially in new businesses such as pipes, and cables and wires, and cost savings through backward integration into castings.
 
Financial risk profile and liquidity is expected to improve gradually over the medium term driven by rising cash accrual, moderation in capital expenditure (capex), and pruning of working capital requirement. The proposed NCD issuance is expected to replace existing working capital loan.
 
The ratings continue to reflect CRI Pumps' established market position in the organised pumps segment, diversified product portfolio, healthy operating efficiency, and strong distribution network. These strengths are partially offset by susceptibility to volatility in raw material prices, large debt-funded capex, working-capital-intensive operations, and sub-optimal scale of operations in new product segments.

Key Rating Drivers & Detailed Description
Strengths:
* Established market position and healthy product profile in the organised pumps segment: CRI Pumps is a leading player in the submersible and surface pumps segment with presence of about 45 years and strong brand equity. It has more than 1000 varieties of pumps, including over 400 models rated by the Bureau of Energy Efficiency (BEE). The group also manufactures niche products, such as completely stainless steel submersible pumps that are corrosion resistant. Its market position is reflected in healthy revenue growth of 20% over the five fiscals ended March 31, 2019.
 
* Healthy operating efficiency: The group's operating efficiency is supported by backward integration and strong research and development (R&D) capability. Besides an in-house foundry with production capacity of more than 12,000 tonne per annum, the group has tie-ups with feeder units, which cater exclusively to its requirement of silicon steel stamping, balancing, and other processes. Its strong focus on R&D helps it add varieties of pumps to its product portfolio every year.
 
* Strong distribution network and improving geographic diversity: The company has a strong pan-India network of 4500 dealers. It also owns 29 sales outlets, and has an established position abroad. Export accounted for 20% of its revenue in fiscal 2019, and is expected to increase further with increasing penetration into new markets.
 
* Adequate financial risk profile: The financial risk profile continues to be supported by healthy cash accrual and adequate debt protection metrics. Gearing is expected to be in the range of 0.9-1.0 time over the medium term, despite working capital intensive operations. Debt protection metrics remain adequate for the rating category.
 
Weaknesses:
* Susceptibility to volatility in raw material prices and to intense competition: The primary raw materials used for the manufacturing of pumps include stainless steel, copper, etc. The prices of these materials are inherently volatile and are driven largely by global as well as local demand and supply conditions. These raw materials account for around 50% of the total manufacturing cost of CRI pumps and hence any volatility in the prices of these materials may impact the profitability.
 
* Sub-optimal scale of operations in new product segments impacting profitability: Products in new segments such as pipes, and cables and wires, could take longer to find market acceptance due to the presence of established players. Hence, higher overheads compared to revenue contribution will continue to constrain profitability.
Liquidity Adequate

CRI Pumps has adequate liquidity driven by expected cash accrual of Rs 100-130 crore per year in fiscals 2021 and 2022. Company has access to fund based limits of Rs 665 crore, utilized to the tune of 74% on an average over the 8 months ended August 2020. Company also had cash and cash equivalents of Rs 31 crore as on June 30, 2020. In the absence of any major capex expected over the next 2 years, cash accrual should be sufficient to meet long term repayment obligations of Rs 70 crore each in fiscal 2021 and 2022 respectively, as well as part of the incremental working capital requirement.

Outlook: Stable

CRISIL believes that CRI Pumps will continue to benefit over the medium term from its established market position and expected revival in demand from its end-user segments. Healthy cash generation and prudent capex spend will also ensure steady improvement in credit metrics, from currently adequate levels.

Rating Sensitivity factors
Upward factors
* Sustained revenue growth of over 15% y/y while maintaining healthy operating margin of over 12%, resulting in better than expected cash generation.
* Prudence in working capital management restricting significant debt addition
* Improvement in credit metrics; gearing of 0.7-0.9 times

Downward factors
* Significant decline in revenues by over 15% and deterioration of operating margin to 7-8%, affecting cash flows
* Large debt funded capex or acquisition or significant elongation of working capital cycle leading to deterioration of key credit metrics - gearing in excess of 2 times
About the Company

CRI Pumps was set up by the late Mr K Gopal in 1961 in Coimbatore, Tamil Nadu. It commenced operations by manufacturing irrigation equipment on a small scale. Over the years, the CRI Pumps has expanded operations and now has an established position in household and agricultural pumps.

Key Financial Indicators
As on / for the period ended March 31   2019 2018
Revenue Rs crore 2029 1748
PAT Rs crore 59 59
PAT margin % 2.9 3.4
Adjusted debt/adjusted networth Times 1.82 1.65
Interest coverage Times 3.22 3.65

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon rate (%) Maturity Date Issue size (Rs Cr) Complexity level Rating Assigned
with Outlook
NA Non-Convertible Debentures# NA NA NA 100 Simple CRISIL A+/Stable
NA Commercial Paper NA NA 7-365 days 55 Simple CRISIL A1
NA Cash Credit NA NA NA 565 NA CRISIL A+/Stable
NA Letter of Credit NA NA NA 55 NA CRISIL A1
NA Bank Guarantee NA NA NA 50 NA CRISIL A1
NA Long Term Loan NA NA Sep-23 210 NA CRISIL A+/Stable
#Yet to be issued
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
Commercial Paper  ST  55.00  CRISIL A1  02-04-20  CRISIL A1  02-01-19  CRISIL A1  19-01-18  CRISIL A1  12-01-17  CRISIL A1  CRISIL A1 
        31-01-20  CRISIL A1          10-01-17  CRISIL A1   
Non Convertible Debentures  LT  0.00
28-09-20  		CRISIL A+/Stable    --    --    --    --  -- 
Fund-based Bank Facilities  LT/ST  775.00  CRISIL A+/Stable  02-04-20  CRISIL A+/Stable  02-01-19  CRISIL A/Positive  19-01-18  CRISIL A/Positive  12-01-17  CRISIL A/Stable  CRISIL A/Stable/ CRISIL A1 
        31-01-20  CRISIL A+/Stable          10-01-17  CRISIL A/Stable   
Non Fund-based Bank Facilities  LT/ST  105.00  CRISIL A1  02-04-20  CRISIL A1  02-01-19  CRISIL A1  19-01-18  CRISIL A1  12-01-17  CRISIL A1  CRISIL A1 
        31-01-20  CRISIL A1          10-01-17  CRISIL A1   
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
Bank Guarantee 50 CRISIL A1 Bank Guarantee 50 CRISIL A1
Cash Credit 565 CRISIL A+/Stable Cash Credit 565 CRISIL A+/Stable
Letter of Credit 55 CRISIL A1 Letter of Credit 55 CRISIL A1
Long Term Loan 210 CRISIL A+/Stable Long Term Loan 210 CRISIL A+/Stable
Total 880 -- Total 880 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Engineering Sector
CRISILs Approach to Recognising Default
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt
The Rating Process

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

 Anuj Sethi
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 44 6656 3100
anuj.sethi@crisil.com

Sameer Charania
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8025
sameer.charania@crisil.com

Biswa Sukla
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 44 6656 3137
Biswa.Sukla@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. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are 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

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets 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 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
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 forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of 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 providing or intending to provide any services in jurisdictions where CRISIL 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 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 or otherwise 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 Rating 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 assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL 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 or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL 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 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 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. CRISIL’s public ratings and analysis 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 web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING 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 a prior written consent of CRISIL.

All rights reserved @ CRISIL