| Dipty Lal Judge Mal Private Limited | ||||
| Rating reaffirmed at 'CRISIL BBB+ / Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB+/Stable’ rating on the long-term bank facilities of Dipty Lal Judge Mal Pvt Ltd (DLJM).
The rating reflects DLJM’s established market position as vendor to leading white goods manufacturers; strong financial risk profile and steady revenue growth. These strengths are partially offset by customer concentration in revenue and moderate operating margin.
The nation-wide lockdown announced by the central government in March 2020, to contain the spread of the Covid-19 pandemic, impacted the company, which reported lower revenue in the first quarter of fiscal 2021. However, recovery has been healthy since then, as indicated by net sales of above Rs 455 crore in fiscal 2021 (Rs 428.3 crore in fiscal 2020). Healthy order flows from existing customers offer revenue visibility for the medium term. |
Key Rating Drivers & Detailed Description Strengths: Established market position as vendor to leading white goods manufacturers: DLJM has a strong market position in the washing machine segment, which contributes to half of the revenue, and customers include leading brands such as LG and Samsung. Integration of operations has also enhanced efficiency. The company, which used to manufacture components through the injection and blow-moulding processes earlier, now offers value-added services such as painting and assembly of washing machine components, and water treatment reverse osmosis machines for Kent. The facility has around 100 high-end injection moulding machines of 75-1400 tonne, including Haitian, Ferromatik Milacron and Cinpres gas injection machines.
Further company is setting up new unit for manufacturing chimney components for Hindware which is expected to provide additional revenue over the medium term and strengthen market position.
Steady revenue growth while maintaining healthy profitability: Revenue registered a compound annual growth rate of 12% and increased to Rs 455 crore in fiscal 2021, from Rs 327.4 crore in fiscal 2017. The company could sustain its topline even amidst the pandemic, supported by repeat orders from existing customers and addition of new customers over the years. While achieving growth, the company has been able to maintain a healthy operating margin of 6.5-7.5% per annum. Return on capital employed has also been comfortable at 12-19% over the past three fiscals. The company’s ability to scale up operations and maintain a healthy margin of 6.5-7.5% are key rating monitorables.
Strong financial risk profile: The total outside liabilities to adjusted networth ratio is low at an estimated 0.81 time, as on March 31, 2021. The interest coverage and net cash accrual to adjusted debt ratios are comfortable, estimated at 7.2 times and 0.47 time, respectively, in fiscal 2021. The financial risk profile is expected to remain healthy over the medium term.
Weakness: Customer concentration in revenue, and limited growth prospects: DLJM faces significant concentration risk, with the top five customers—LG Electronics India Ltd, Symphony India Ltd, Maruti Suzuki Ltd (CRISIL AAA/Stable/CRISIL A1+), Samsung India Electronics Pvt Ltd, and Kent Ro System Ltd contributing 60% of revenue in fiscal 2021. The company has been associated with LG for a decade, and with Samsung and Kent for more than five years, and receives repeat orders from them. However, it remains vulnerable to changes in their business plans, or slowdown in their performance. Higher dependence on few players further constrains the ability to seek compensation for volatility in raw material prices or limit credit offered to customers.
Moderate operating margin: Operating margin has remained moderate at 6.5-7.5% in the three fiscals ended March 31, 2021. Operating margin is expected at over 7% in fiscal 2022 owing to lower share of conversion business and addition of new customers. Uptick in operating margin will remain a monitorable. |
Liquidity: Adequate Sufficient cash accrual is expected to be generated annually over the medium term against fixed yearly debt repayment obligation. The low utilisation of working capital limits—a mere 19% in the 12 months through March, 2021—supports liquidity. Also, free cash and liquid investments stood at Rs 8 crore as on March 31, 2021. |
Outlook Stable CRISIL Ratings believes the financial risk profile will remain healthy over the medium term, supported by steady cash accrual. |
Rating Sensitivity factors Upward factors * Stable operating margin of 6.5-7.5% and steady improvement in revenue, leading to healthy cash accrual. * Improvement in the financial risk profile.
Downward factors * Decline in scale of operations leading to fall in revenue by 25% and profitability margin below 6%, hence leading to lower net cash accrual. * Large debt-funded capital expenditure weakens capital structure |
About the Company Incorporated in 1984, DLJM manufactures injection-moulded and blow-moulded plastic components, used in consumer durables. In August 2011, the company carved out its auto division (excluding land and building) into Sekisui DLJM Molding Pvt Ltd (SEDM), a joint venture between DLJM (49%) and Sekisui Chemical Co Ltd (51%). SEDM manufactures plastic injection-moulded parts for the automobile industry, mainly for two-wheelers & four-wheelers and home appliances. |
Key Financial Indicators
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| 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)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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Criteria Details
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