| Eimco Elecon India Limited | ||||||
| Rating outlook revised to ‘Positive’; Ratings Reaffirmed; Rated amount enhanced for Bank Debt | ||||||
| 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 revised its rating outlook on the long-term bank facilities of Eimco Elecon India Ltd (Eimco) to ‘Positive’ from ‘Stable’ and reaffirmed the rating at ‘CRISIL A-’; The short-term rating has been reaffirmed at ‘CRISIL A1’.
The outlook revision factors in the expectation of a sustained improvement in business risk profile, supported by expected increase in orders from Coal India Ltd (CIL, rated 'CRISIL AAA/Stable/CRISIL A1+') following its efforts to enhance output from the underground (UG) mines and focus on reducing import of coal mining machineries. After the downturn in output from the UG mining segment, benefited by technological progress undertaken over the years, CIL aims to increase production of UG coal from ~35 million tonne (MT) in fiscal 2023 to 100 MT in fiscal 2028 and 120 MT in fiscal 2030. The benefit to Eimco’s operations is evident from the growth in its order book to Rs 152 crore (highest ever increase; executable over the next two fiscals) as on December 31, 2023, from ~Rs 50 crore in March 2023.
Revenue rose ~30% on-year to Rs 143 crore in the first nine months of fiscal 2024 due to rise in sales of new products (continuous miner package components), as well as its existing marquee products (side dump loaders and load haul dumpers). A mid-to-high double-digit trend in growth could continue as the UG coal mining industry shifts towards newer, technologically advanced products such as continuous miner packages. Operating margin also improved to 16.3% from 14.5% in fiscal 2023 due to improved operating leverage and better product mix. That said, while the company has been able to reduce its dependence on the UG coal mining segment (wherein output has faced a downturn in the past) to less than 80% in fiscal 2024 from over 90% in the years leading up to 2022, traction in new order inflows along with sustenance in margin will remain monitorable.
Financial risk profile remains comfortable with no debt obligation, and supported by sufficient liquidity of more than Rs 180 crore built over the years. Prudent working capital management results in nil bank limit utilisation despite large gross current assets. |
Analytical Approach CRISIL Ratings has assessed the standalone credit profile of Eimco. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Strong The absence of any maturing debt enables the entire cash accrual – projected at Rs 30-45 crore per annum over the medium term – to aid financial flexibility. Cash and marketable securities stood at over Rs 184 crore as on December 31, 2023. Fund-based limit of Rs 3 crore remained unutilised for the 12 months through December 2023. Also, moderate annual capital expenditure (capex) of Rs 3-5 crore is expected to be funded through internal accrual. Liquidity is expected to remain stable over the medium term. |
Outlook: Positive Eimco is well-poised to capitalise on the industrial tailwinds in the UG coal mining industry, which is likely to be further supported by its healthy financial risk profile over the medium term. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Eimco was incorporated in 1974 as a joint venture between the Elecon group and Sandvik AB (rated 'A-/Stable /A-2' by S&P Global Ratings), the world’s leading manufacturer of rock-drilling tools and mining equipment. Eimco produces a wide range of mining machinery, such as air-powered rocker shovels, electro-hydraulic side-dump loaders, and electro-hydraulic and air-powered load-haul dumpers that are used as loading machines in coal mines. Facilities are in Vallabh Vidyanagar, Gujarat.
For the nine months ended December 31, 2023, the company clocked revenue of Rs 143 crore and profit after tax (PAT) of Rs 26 crore; against Rs 108 crore and Rs 11 crore, respectively, in the corresponding period previous fiscal. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable with bank guarantee **Sublimit: Letter of credit Rs.20 cr, SBLC for BC issuance Rs.20 cr, Cash Credit Rs.5 cr and Working capital Demand Loan Rs.5 cr |
| 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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*Interchangeable with bank guarantee
**Sublimit: Letter of credit Rs.20 cr, SBLC for BC issuance Rs.20 cr, Cash Credit Rs.5 cr and Working capital Demand Loan Rs.5 cr
Criteria Details
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