Rating Rationale
July 13, 2018 | Mumbai
Elpro International Limited
Rating migrated to 'CRISIL BBB-/Stable'; Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities Rated Rs.52 Crore (Enhanced from Rs.34 Crore)
Long Term Rating CRISIL BBB-/Stable (Migrated from 'CRISIL BB+/Stable ISSUER NOT COOPERATING'*)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*Issuer did not cooperate; based on best-available information
Detailed Rationale

Due to inadequate information, CRISIL, in line with Securities and Exchange Board of India guidelines, had migrated the rating on the long-term bank facilities of Elpro International Limited (EIL) to 'CRISIL BB+/Stable/Issuer Not Cooperating' through its rationale dated May 18, 2018. However, the management has subsequently started sharing the requisite information for carrying out a comprehensive review of the rating. Consequently, CRISIL is migrating the rating from 'CRISIL BB+/Stable/Issuer Not Cooperating' to 'CRISIL BBB-/Stable'.
 
The rating reflects improvement in EIL's business risk profile, driven by increase in rental income from various commercial projects and with complete realization of its real estate projects. There are few agreements whose tenure is ending over next two years, the renewal of such agreement or ability of company to find new tenant would remain a key monitorable over medium term. CRISIL also expects project risk for Elpro mall to remain moderate. Further, rental from this mall would support business risk profile. Liquidity may improve post right issue and stake sale in PNB MetLife India Insurance Co, which would be utilized to redeem preference share, pay off inter corporate borrowings and to meet construction expenses of mall. Liquidity should remain supported by healthy debt service coverage ratio (DSCR) of over 2 times, debt service reserve account for three month of debt and interest servicing obligation and escrow mechanism. Gearing and debt protection metrics are expected to improve post redemption of preference share and repayment of ICD which would lead to savings in interest cost.
 
The rating also reflects the company's longstanding track record in executing real estate development projects, and steady cash flow from its lease rental agreements. These strengths are partially offset by EIL's exposure to risks related to its ongoing commercial project, and susceptibility to cyclicality in the real estate sector.

Analytical Approach

For arriving at its rating, CRISIL has considered the consolidated financials of EIL along with its wholly owned subsidiary Elpro Estates Ltd (EEL) since both companies are into similar business activities and EEL is proposed to be merged with EIL going ahead.

Key Rating Drivers & Detailed Description
Strengths
* Longstanding track record in executing real estate development projects
EIL manufactures surge arresters; over a period of time, it diversified its business activity by undertaking real estate development projects. The company has also developed a residential project spread across 22 acres. The company is currently undertaking development of the Elpro mall at Pimpri-Chinchwad, Pune. In a short time, EIL has been able to leverage on its land holdings and build a reputation by timely execution of projects. Benefits from a successful track record should continue to support the business.
 
* Healthy DSCR
Steady stream of rental from all properties will ensure that overall DSCR remains healthy above 2 times throughout the loan tenure.
 
Weakness
* Exposure to risks related to ongoing commercial projects
EIL is currently undertaking construction of a mall of 0.5 million square feet at Chinchwad, for Rs 140 crore. Any significant delays in implementation, could lead to subdued customer interest on this project. Project-specific risks and the geographic concentration risk will continue to restrict business risk profile.
 
* Susceptibility to cyclicality in the real estate sector
EIL is susceptible to risks pertaining to the real estate sector such as long gestation period of projects. Any time or cost overruns or delay in obtaining necessary approvals could affect the realizations and profitability of projects. Apart from the above-mentioned macroeconomic factors, the EIL's business and financial risk profiles are expected to be driven by the level of economic activity and the outlook for the real estate sector across Pune.
Outlook: Stable

CRISIL believes EIL will continue to benefit from steady flow of lease rentals, and expected cash inflow from completed and largely sold residential project. The outlook may be revised to 'Positive' if substantial increase in revenue from ongoing projects strengthens financial risk profile. Conversely, the outlook may be revised to 'Negative' if there is any disruption in rental flow, delay in execution/sales of projects, or more-than-expected debt.

About the Company

EIL was incorporated in July 1962 as a public limited company. The company manufactures surge arresters and undertakes real estate development. Its multi-manufacturing facilities are in Pune and Hyderabad. Mr Rajendra Kumar Dabriwala and Mr Surbhit Dabriwala are the key promoters.
 
EEL; formerly known as Trump Properties Limited It is wholly owned subsidiary of EIL. It is currently undertaking construction of a mall.

Key Financial Indicators
Particulars Unit 2018  2017
Revenue Rs crore 61.1 48.2
Profit after tax (PAT) Rs crore 4.1 3.6
PAT margin % 6.8 7.5
Adjusted debt/adjusted networth Times 1.95 3.06
Interest coverage Times 1.1 1.3
*Standalone

Any other information: Not applicable

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)
ISIN Name of instrument Date of Allotment Coupon
Rate (%)
Maturity
Date
Issue Size
(Rs Cr.)
Rating Assigned
with Outlook
NA Term Loan NA NA Jan-27 52 CRISIL BBB-/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  52.00  CRISIL BBB-/Stable  18-05-18  CRISIL BB+/Stable (Issuer Not Cooperating)*      01-12-16  CRISIL BB+/Stable  20-03-15  CRISIL BB+/Stable  CRISIL BB+/Stable 
Non Fund-based Bank Facilities  LT/ST      18-05-18  CRISIL A4+ (Issuer Not Cooperating)*      01-12-16  CRISIL A4+  20-03-15  CRISIL A4+  CRISIL A4+ 
All amounts are in Rs.Cr.
*Issuer did not cooperate; based on best-available information
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Term Loan 52 CRISIL BBB-/Stable Bank Guarantee 1.5 CRISIL A4+/Issuer Not Cooperating
-- 0 -- Cash Credit 2 CRISIL BB+/Stable/Issuer Not Cooperating
-- 0 -- Letter of Credit 1 CRISIL A4+/Issuer Not Cooperating
-- 0 -- Proposed Long Term Bank Loan Facility 3.5 CRISIL BB+/Stable/Issuer Not Cooperating
-- 0 -- Term Loan 26 CRISIL BB+/Stable/Issuer Not Cooperating
Total 52 -- Total 34 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs criteria for rating debt backed by lease rentals of commercial real estate properties
Rating criteria for manufaturing and service sector companies

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