Detailed Rationale

Crisil Ratings has upgraded its rating on the long-term bank facilities of Eimco Elecon India Ltd (Eimco) to ‘Crisil A/Stable’ from ‘Crisil A-/Positive’. The short-term rating has been reaffirmed at ‘Crisil A1’.

 

The rating upgrade factors in the sustained improvement in the business risk profile of the company, through healthy double-digit growth in revenues and significant improvement in the operating margins for a third consecutive fiscal year. This is aided by Eimco’s developing market presence in the technologically advanced products such as continuous miner package and tunneling loaders amid healthy industry prospects following Coal India Ltd’s 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’s UG production was around 25 MT, and it aims to increase it to 100 MT by fiscal 2035. The benefit to Eimco’s operations is evident from the continued steady order book size of Rs 86 crore as on March 31, 2025, executable during this fiscal against Rs 75 crore as on Dec’24 besides its product offerings in the UG mining industry.

 

Revenue rose ~10% on-year to Rs 246 crore in fiscal 2025 against Rs 228 crore in previous fiscal from the increasing sales of its technologically advanced products (continuous miner package components), as well as its existing marquee products (side dump loaders and load haul dumpers). In the near term, a mid-teen 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 where Eimco is developing a healthy presence. Operating margin have also demonstrated consistent improvement at 22.78% in the fiscal 2025 from 17.55% in previous fiscal and 14.48% in fiscal 2023 through aided by healthy product mix an improving mix of customer portfolio with higher share of private companies amid improved operating leverage. Going forward, operating margins are expected to remain steady at 18-20% aided by benefits of higher scale and its 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 75-80% in fiscal 2025 from over 90% in the years leading up to 2022, traction in new order inflows along with sustenance in margin will remain monitorable.

 

The financial risk profile remains comfortable with no debt obligation and supported by sufficient liquidity of Rs 228 crore as on March 31, 2025, built over the years. Prudent working capital management results in nil bank limit utilisation despite large gross current assets.

 

These strengths are partially offset by the risk related to regulatory changes and competition in the underground mining segment, ability to timely scale-up the operations and large working capital requirement.

Analytical Approach

Crisil Ratings has assessed the standalone credit profile of Eimco.

Key Rating Drivers & Detailed Description

Strengths:

• Established market position in the UG coal mining equipment segment: Eimco has a near monopoly in the UG coal mining intermediate technology equipment industry in India, backed by an extensive after-sales service network. Longstanding relations with CIL and The Singareni Collieries Company Ltd (SCCL) also help sustain leadership position. Furthermore, as CIL aims to reduce its import dependence, Eimco is expected to further gain as it is an indigenous developer of mining machinery. With the Ministry of Coal’s awarding of mines to private players, the company has been able to reduce its client concentration from CIL and SCCL. Strong in-house research and development team enables continuous improvement in the effectiveness of equipment, while catering to diverse applications further aids established market position.

 

• Sustained growth in scale of operations and operating margins: Revenues grew by 10% on year in fiscal 2025 and 32% in fiscal 2024 aided by improvement in sales in its technologically advanced products through a healthy mix of value and volume. The revenue growth shall continue to see a healthy momentum in going forward as the UG coal mining industry shifts towards newer, technologically advanced products such as continuous miner packages. While Eimco has looked to diversify its revenue, 75-80% continues to accrue from the UG coal mining segment wherein the industry is undergoing a positive change. The operating margins in fiscal 2025 improved by a record high margin of 22.78% aided by an improving mix of customer portfolio with higher share of private companies. Margins are also supported by Eimco’s strong market position and leadership in some products where it has competitive pricing.. Going forward, the operating margins are expected to maintain a steady state range of 18-20% in the medium term driven by improved operating leverage and improved product mix.

 

• Healthy financial risk profile: The financial risk profile is backed by nil debt obligation and sufficient liquidity of Rs 228 crore (mainly comprising investments in short-term mutual funds) as on March 31, 2025.

 

Weaknesses:

• Susceptibility of business risk profile to the performance of the UG coal mining segment: The UG coal mining segment has been sluggish over the past decade, which has been one of the key impediments to the company’s revenue growth in the past. However, opening of the commercial coal mining sector, transformation plan of CIL to operationalize closed/abandoned mines through engagement of mine developer cum operator (MDO), and its plan of increasing production through UG coal mining as well as reducing imports of mining machinery augur well for the sector. Eimco has been able to reduce its dependence on the UG coal mining segment (wherein output has faced a downturn in the past) to 75-80% in fiscal 2025 from over 90% in the years leading up to 2022, traction in new order inflows along with sustenance in margin will remain monitorable. This has also led to diversification in clientele with equipment being supplied to MDOs, as well as diversification into non-coal mining segments that is expected to decrease client concentration on CIL and its subsidiaries.

 

• Large working capital requirement: Inventory remained large at around 216 days as of March 31, 2025, against 167 days as of March 31, 2024, on account of spares, higher lead time on imported components and introduction of new products. Receivables have, however, improved to 101 days as on March 31, 2025, against 152 days as on March 31, 2024. High receivables are usually because of higher public sector unit clients while the requirement to maintain spares and higher lead time on imported components keeps the working capital requirement high.

Liquidity: Strong

The absence of any maturing debt enables the entire cash accrual – projected over Rs 45 crore per annum over the medium term – to aid financial flexibility. Cash and marketable securities stood at over Rs 228 crore as on March 31, 2025. Fund-based limit of Rs 3 crore remained unutilised for the 12 months through March 31, 2025. Also, moderate annual capital expenditure (capex) of Rs 25 crore is expected to be funded through internal accrual. Liquidity is expected to remain stable over the medium term.

Outlook: Stable

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:

• Sustained healthy double-digit growth in turnover supported by diversification of revenue streams with sustained steady operating margins of over 18-20%
• Continued healthy financial risk profile and liquidity

 

Downward factors:

• Sustained deterioration in operating profile viz. revenue and or, profitability impacting cash generation below Rs 25-30 crore
• Continuous elongation in the working capital cycle or any large unanticipated debt-funded capex
• Depletion of financial profile by any substantial dividend payout, any sizeable acquisition, or financial support extended to group companies

About the company

Eimco was incorporated in 1974 as a joint venture between the Elecon group and Sandvik AB (rated ‘BBB+/Stable /A-2' by S&P Global Ratings), the world’s leading manufacturer of rock-drilling tools and mining equipment. However, from April 23, 2025, Eimco announced the termination of shareholding agreement with Sandvick group and the promoters. Currently, Sandvick continues to be a shareholder and the changes in shareholding has not been finalised. 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.

Any other information: Not applicable