| Elin Electronics Limited | ||||||
| 'CRISIL A/Stable/CRISIL A1' assigned to 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 assigned its ‘CRISIL A/Stable/CRISIL A1’ ratings to the bank facilities of Elin Electronics Ltd (EEL).
The ratings reflect the company’s healthy business risk profile in the form of diversified product portfolio, long-term relationships with key customers, and comfortable financial risk profile, as reflected in low gearing and adequate interest coverage ratio. These strengths are partially offset by high competitive intensity in the contract manufacturing space. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of EEL and its wholly owned subsidiary, Elin Appliances Pvt Ltd (EAPL) on account of strong business and financial linkages.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths Diversified product range and longstanding relationships with key clients EEL has a wide product range covering motors, lighting, medical devices, and mouldings and sheet metal fabrication. It manufactures motors under its own brand name while other products are manufactured under contract manufacturing. Motor manufacturing has been critical to the growth of the company, with segmental contribution growing from 12% in fiscal 2018 to 27% in fiscal 2021. Additionally, uptake of other key products and introduction of new products under contract manufacturing have supported strong revenue growth. Furthermore, the company has longstanding relationships of more than 10 years with its key customers that reduces the offtake risk substantially. Key clients include Signify Innovations India Ltd, Phillips India Ltd, Havells India Ltd, Eveready Industries India Ltd, Usha International Ltd and Panasonic India Pvt Ltd. The revenue contribution from its top customer was 25% in fiscal 2021, down from 32% in fiscal 2018 and CRISIL Ratings expects this to reduce further over the medium term.
Comfortable financial risk profile The financial risk profile remains comfortable due to high reliance on internal funds, resulting in strong interest coverage ratio of around 7 times and gearing of 0.5 time as of March 2021. Additionally, favorable terms of trade with customers helps manage working capital efficiently with gross current assets (GCAs) of 100-120 days. This helps to keep in check the overall indebtedness in the form of total outside liabilities to tangible networth (TOLTNW) ratio at 1.1 times. Going forward, sustained profitability and funding of capital expenditure (capex) by internal accrual will keep overall financial risk profile healthy.
Weaknesses High competitive intensity in the contract manufacturing space The contract manufacturing industry, wherein a company is hired to produce the product based on the hiring firm’s design and quality standards, is fragmented and competitive. It relies on relationships with customers, market reputation and past experience. With value addition being relatively low by the contract manufacturer, possibility of replacement is high which can expose it to the risk of stranded manufacturing lines. EEL’s operating margin of 7-8% is constrained by relatively lower operating margin in the contract manufacturing segment. But the company has demonstrated its ability to pass on commodity price and foreign exchange fluctuations to customers, which helps maintain fairly stable operating margin. Furthermore, increasing share of its own branded products helps mitigate the risk |
Liquidity: Adequate Liquidity remains healthy, driven by expected net cash accrual of Rs 50-60 crore, against scheduled term debt maturity of about Rs 20 crore and estimated capex of Rs 20-25 crore in fiscal 2022. Additionally, the moderate utilisation of fund-based bank limits averaged 46% in the 12 months through August 2021, strengthening the liquidity profile. As on August 31, 2021, the unencumbered cash balance stood at Rs 5 crore in the form of bank account and deposits. |
Outlook: Stable CRISIL Ratings believes EEL will continue to post steady revenue growth and stable operating margin, backed by strong product uptake and longstanding relationships with key customers. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company Incorporated in 1982, EEL manufactured electric motors. Thereafter, the company forayed into manufacturing of tape-recorders. Presently, EEL has a wide range of products, including universal motors, electrical appliances, light-emitting diodes (LEDs), sheet metals and mouldings, among others. EEL has three manufacturing facilities at Ghaziabad, Uttar Pradesh; Baddi, Himachal Pradesh; and Goa.
EEL is part of the Sethia group, with the group holding 91.32% in the company as on March 31, 2021. |
Key Financial Indicators
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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 - List of Entities Consolidated
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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 5-Oct-2021 in line with the lender-wise facility details as on 5-Oct-2021 received from the rated entity
Criteria Details
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