| Eco Fuel Systems (India) Private Limited | ||||||
| Long-term rating upgraded to 'CRISIL BB+/Stable'; short-term rating reaffirmed; rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the long-term bank loan facilities of Eco Fuel Systems (India) Private Limited (EFSPL) to ‘CRISIL BB+/Stable’ from 'CRISIL BB/Stable’. The rating on the short-term bank loan facilities have been reaffirmed at ‘CRISIL A4+'.
The upgrade reflects the strong growth in revenue on the back of healthy demand sentiment for CNG/LPG kits. Company is estimated to achieve revenue of around Rs.164 cr in fiscal 2022, a 157% y-o-y growth from Rs.63.73 crore in fiscal 2021. The strong revenue growth is driven by the healthy demand sentiment for CNG/LPG kits amid the rising petrol prices which has resulted in more people opting for conversion of diesel and petrol run vehicles to CNG/LPG run vehicles. This is while maintaining a moderate operating margin of around 8.5% estimated for fiscal 2022. This trend in revenue is expected to continue in current fiscal as well due to the continued increase in petrol/diesel prices. The working capital requirements have improved with gross current asset days estimated to improve to around 147 days as on March 31, 2022 (driven by debtors and inventory moderating to around 70 days and 60 days) from 351 days as on March 31, 2021 (with debtors and inventory of 219 days and 111 days).
The ratings reflect a comfortable financial risk profile denoted by a comfortable networth, strong capital structure and healthy debt protection metrics, and the extensive experience of its promoters and established relationships with principal supplier and customers. These strengths are partially offset by large working capital requirements and exposure to cyclicality in the end-user industry. |
Key Rating Drivers & Detailed Description Strengths:
The promoters have been in the industry for more than two decades, resulting in strong relationships with its principal supplier (Lovato Gas S.p.A.) and its customers. EFSPL is the sole distributor in India for CNG/LPG kits for Lovato Gas S.p.A, an Italy-based company. It has 90-100 exclusive distributors across India. This has continued to support the business risk profile of EFSPL.
Networth is comfortable and estimated to be around Rs 52 crore as on March 31, 2022. Capital structure is healthy, with gearing and total outside liabilities to tangible networth ratios estimated to be around 0.3 and 0.5 time, respectively as on March 31, 2022, and the same is backed by the continued controlled reliance on external debt and a comfortable networth. Debt protection metrics are comfortable, with interest coverage and net cash accrual to adjusted debt ratios estimated at around 8 times and around 0.6 time, respectively, in fiscal 2022. Financial risk profile will remain stable over the medium term on the back of continued accretion to reserves and controlled reliance on external funds.
Weaknesses:
Working capital requirements though have improved, continue to remain high as reflected in GCAs estimated at around 147 days as on March 31, 2022, driven by debtors and inventory of around 70 days and around 60 days, respectively. Going forward, GCA days are expected to be around 200-230 days. Inventory level is high because the company imports majority of its materials, which takes around 45 days to reach the warehouse. Also, it extends credit of about 90-120 days to distributors.
Company is catering to automotive sector. Demand will remain cyclical in the auto industry as it is linked to monsoon and economic conditions. Hence, scale of operations has fluctuated in the last six fiscals through 2022. Company is estimated to achieve revenue of around Rs 164 cr in fiscal 2022. A track record of sustained and improved operating performance amid cyclical demand remains a rating sensitivity factor. |
Liquidity: Adequate Company has access to bank lines of Rs 18 crore, which have been utilized at an average of 82% over the 12 months ended February-2022. Net cash accruals are expected to be Rs 7.5-9.0 cr per fiscal against repayments of Rs 0.3 crore in fiscal 2022 and nil repayments thereafter, and hence the same supports the liquidity. Current ratio is estimated to be around 2.8 times as on March 31, 2022. Free cash & bank balance is expected to be around Rs 4 cr as on March 31, 2022. |
Outlook: Stable CRISIL Ratings believes EFSPL will continue to benefit from the extensive experience of its promoters and established relationships with customers and suppliers. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company Incorporated in 2003 and promoted by Mr Virendra Vora and Ms Vibha V Vora, EFSPL is the sole distributor of Lovato Gas S.p.A. Company sells CNG and LPG kits for both commercial and passenger vehicles. |
Key Financial Indicators
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Status of non cooperation with previous CRA: EFSPL has not cooperated with Acuite Ratings and Research Ltd, which has classified the company as issuer not cooperative through a rationale dated March 06, 2020, on account of non-furnishing of information for the monitoring of ratings. |
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)
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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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This Annexure has been updated on 22-Apr-2022 in line with the lender-wise facility details as on 22-Apr-2022 received from the rated entity.
Criteria Details
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