Rating Rationale
September 19, 2022 | Mumbai
Eximius Infra Tech Solutions LLP
'CRISIL BBB/Stable/CRISIL A3+' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.296 Crore
Long Term RatingCRISIL BBB/Stable (Assigned)
Short Term RatingCRISIL A3+ (Assigned)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has assigned its 'CRISIL BBB/Stable/CRISIL A3+' ratings to the bank facilities of Eximius Infra Tech Solutions LLP (EIS LLP; part of the Badve group).

 

The rating reflects the group's market leadership in the two- and three-wheeler auto component business, longstanding relationships with large original equipment manufacturers, increasing product diversity, moderate working capital management and comfortable financial risk profile. These strengths are partially offset by customer concentration in revenue and exposure to cyclicality in the domestic automobile (auto) industry.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of Badve Engineering Ltd (BEL) with Badve Autotech Pvt Ltd (BATPL), Badve Autocomp Pvt Ltd (BAPL), Sumedh Tools Pvt Ltd (STPL), Creative Tools & Press Components Pvt Ltd (CTPL), SEPL, Eximiius Autocomps Pvt Ltd (EAPL), Eximius Infratech Solutions LLP (EIS LLP), Badve Engineering Trading FZE (FZE) and Swami Ashirwad Engimech Pvt Ltd (SAEPL), collectively referred to as the Badve group. This is because the entities have a common promoter, are in the same business, and have significant operational, managerial and financial linkages.

 

Unsecured loans from the promoters of Rs 87.97 crores has been treated as 75% equity and 25% debt as it is expected to remain in the business over the medium term. Also, unsecured loans from others of Rs 168 crores as on March 2022 has been treated as debt, however, this is expected to remain in the business over the medium term.

 

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:

  • Established position in the auto components industry: Around three decades ago, the Badve group started by manufacturing auto components, predominantly for Bajaj Auto Ltd (BAL; ‘CRISIL AAA/Stable/CRISIL A1+’). Currently, Badve group is among the leading suppliers in the auto components sector. The group has developed a diversified product portfolio, which includes chassis for two-wheelers, three-wheeler chassis, silencers & components, and plastic moulded as well as metal-pressed and painted components. This has helped revenues to increase to over the past five fiscals ended 2022. The growth momentum is expected to continue with addition in new clients (EV), and optimization of capacity utilization at some of the recently commissioned units in the group.

 

  • Established customer relationship: The group has an established & diversified customer base and a long track record of business relationships with its key customers, which include automotive OEMs. The group is the key supplier of auto components to Bajaj Auto Ltd (BAL), Honda Motorcycle and Scooter India Pvt Ltd (HMSIL), Hero MotoCorp Ltd (‘CRISIL AAA/Stable/CRISIL A1+’), Tata Motors Ltd (‘CRISIL AA-/Stable/CRISIL A1+), Exide Industries Ltd, LG Electronics India Pvt Ltd, Piaggio Vehicles Pvt Ltd and Jaguar Land Rover Ltd.

 

  • Moderate working capital management: The working capital cycle is moderate, as reflected in gross current assets estimated at 165 days as on March 31, 2022. The group offers credit of 45-60 days to its key customers and maintains low inventory as production is order backed and raw material is easily available. Furthermore, the group is entitled for Mega Project benefits (State Government Subsidies) in various states for the capital investments done in the Projects. There have been delays in receiving the subsidy which has also led to an increase in the working capital cycle for the group.

 

  • Comfortable financial risk profile: With increasing working capital requirements and delay in receipt of subsidies, the group’s reliance on bank debt has gone up in fiscal 2022. This has resulted into gearing and total outside liabilities to adjusted networth (TOLANW) ratio to be at 1.77 times and 2.2 times, respectively, as on March 31, 2022, however, the ratios improved from last year of 1.9 times and 2.5 times supported by higher accretion to reserves. Networth is estimated to be strong at Rs 2,535 crore as on March 31, 2022. Debt protection metrics were adequate, reflected in interest coverage and net cash accrual to total debt ratios at 3.5 times and 0.2 times, respectively, for fiscal 2022. The Badve group management is committed to improve its capital structure through a mix of equity and subsidy receipts that would be utilized to reduce the bank borrowings. This coupled with large repayments during the year will improve the gearing to below 1.5 times in the near term, there by strengthening the overall financial risk profile.

 

Weaknesses:

  • Exposure to cyclicality in the domestic auto industry: The auto industry accounts for the entire revenue of the group. The performance of the auto industry is linked to financing costs and overall macroeconomic scenario. The group will remain susceptible to cyclicality in the auto industry over the medium term.

 

  • Customer concentration in revenue: The Badve group generates over 75% of its revenue from three customers, BAL (around 46%), HMSIL (around 11%) and Hero MotoCorp Ltd (18%), which makes it vulnerable to downturns in the customers’ business or vendor rationalization. Although the group has diversified its clientele, it will remain highly dependent on BAL over the medium term.

 

  • Moderate scale of operations and high gearing: Although EIS LLP revenues has been steadily increasing in line with the group performance, overall scale of operations remain moderate with a revenue base of about Rs 424 crores in fiscal 2022 (as compared to Rs 208 crores, a year ago), which accounts for about 5% of the total group revenues. In addition, EIS LLP’s gearing levels are high at above 2 times on standalone basis.

Liquidity: Adequate

Expected cash accrual of Rs 900-1000 crores per annum in fiscals 2023 and 2024 will comfortably cover debt obligation of Rs 500 crore and Rs 520 crores, respectively. Cash and equivalent are estimated at Rs 90 crore as on March 31, 2022. Fund-based limits remained utilised to the extent of 80% for 12 months ended June 2022. The promoter will continue to provide financial support by way of unsecured loans. CRISIL Ratings expects internal accruals, cash & cash equivalents, fund support from promoters and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements.

Outlook: Stable

CRISIL Ratings believes the Badve group will maintain its position in the auto components industry backed by the extensive experience of the promoter, established customer relationships and diversified product portfolio.

Rating Sensitivity Factors

Upward factors

  • Improvement in the financial risk profile, with sustained gearing below 1 time and TOLANW ratio below 1.2 times
  • Steady revenue and stable operating margin, strengthening business profile

 

Downward factors

  • Inability to correct the gearing to below 1.5 times
  • Significant decline in revenue (beyond 20%) or profitability or further delay in subsidy receipts impacting overall liquidity.

About the Group

Mr. Shrikant Badve, promoter of the Badve group, set up the flagship company of the Badve Group' BEL in September 1996. The Badve Group is engaged in the manufacture of chassis and frame assembly, sheet metal, exhaust systems (silencers), plastic moulded & painted parts and assemblies mainly for the auto and consumer durables segment. The group has more than 30 manufacturing units across India.

 

EIS LLP is engaged in manufacturing of auto components for two wheelers.

Key Financial Indicators

As on/for the period ended March 31

Unit 

2021

2020

Operating income

Rs crore

4435

4337

Reported profit after tax

Rs crore

250

377

PAT margins

%

5.6

8.7

Adjusted Debt/Adjusted Networth

Times

1.91

1.83

Interest coverage

Times

2.9

3.4

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size
(Rs.Cr)

Complexity Levels

Rating assigned
with outlook

NA

Bill Discounting

NA

NA

NA

49.82

NA

CRISIL A3+

NA

Cash Credit

NA

NA

NA

1.18

NA

CRISIL BBB/Stable

NA

Proposed Fund-Based Bank Limits

NA

NA

NA

0.68

NA

CRISIL BBB/Stable

NA

Term Loan

NA

NA

Mar-26

244.32

NA

CRISIL BBB/Stable

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Swastid Engineering Private Limited

Full

Operate in similar lines of business, have a common management team, and have significant operational linkages

Badve Engineering Limited

Full

Creative Tools and Press Components Private Limited

Full

Eximiius Autocomps Private Limited

Full

Eximius Infra Tech Solutions LLP

Full

Swami Ashirwad Engimech Private Limited

Full

Sumedh Tools Private Limited

Full

Badve Engineering Trading FZE

Full
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST/LT 296.0 CRISIL A3+ / CRISIL BBB/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bill Discounting 14.82 Saraswat Bank CRISIL A3+
Bill Discounting 35 IndusInd Bank Limited CRISIL A3+
Cash Credit 1.18 Saraswat Bank CRISIL BBB/Stable
Proposed Fund-Based Bank Limits 0.68 Not Applicable CRISIL BBB/Stable
Term Loan 164.06 Saraswat Bank CRISIL BBB/Stable
Term Loan 43.83 Saraswat Bank CRISIL BBB/Stable
Term Loan 36.43 Janata Sahakari Bank Limited CRISIL BBB/Stable

This Annexure has been updated on 19-Sep-2022 in line with the lender-wise facility details as on 19-Sep-2022 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
Criteria for rating entities belonging to homogenous groups
Understanding CRISILs Ratings and Rating Scales

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