Rating Rationale
June 18, 2021 | Mumbai
Expo Gas Containers Limited
Ratings reaffirmed at 'CRISIL BB- / Stable / CRISIL A4+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.40 Crore
Long Term RatingCRISIL BB-/Stable (Reaffirmed)
Short Term RatingCRISIL A4+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its CRISIL BB-/Stable/CRISIL A4+ ratings on the bank facilities of Expo Gas Containers Limited (EGCL).

 

The ratings continue to reflect the extensive experience of the promoters in the industry, the company’s reputed clientele and comfortable capital structure. These strengths are partially offset by working capital-intensive nature of operations and susceptibility of the operating performance to risks inherent in tender-based business and cyclicality in capital expenditure (capex) in the end-user industries.

Analytical Approach

For arriving at the ratings, CRISIL Rating has treated unsecured loans of Rs 5 crore as on March 31, 2021 extended to EGCL by its promoters as neither debt nor equity as the loans are expected to be retained in the business over the medium term.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters and reputed clientele: The promoters are in the fabrication and EPC construction business for more than 3 decades. The company has an established track record for manufacturing of wide range of process plant equipment and it also undertakes turnkey projects. Because of technical and project management abilities, the company has forged relations with reputed clientele from oil and gas and petrochemicals industries.

 

  • Comfortable capital structure: Moderate networth estimated above Rs.24 crore and comfortable total outside liabilities to tangle networth ratio of estimated in range of 1.2-1.4 times as on March 31, 2021 reflect comfortable capital structure. In absence of debt funded capex, company’s capital structure is expected to remain comfortable over medium term.

 

Weaknesses:

  • Working capital-intensive operations: The large working capital requirement is reflected in gross current assets of above 450 days estimated as on March 31, 2021, due to high debtors and sizable inventory. The receivables are on account of significant contractual deposits retained with customers due to the nature of business.

 

  • Susceptibility of operating performance to the risks inherent in tender-based business and cyclicality in capex in end-user industries: The scale has remained modest in range of Rs 48-60 crore over past 4 years ended fiscal 2021 while operating profits has remained in range of 9.7-11.7% for same period. Company’s operating performance is susceptible to tender based nature of business and cyclical demand from end-user industries (oil and gas, and petrochemicals). This is partially offset by healthy unexecuted order-book of around Rs 114 crore which provides revenue visibility.

Liquidity: Stretched

The liquidity is stretched indicated by almost full bank limit utilisation at around 99.6 percent for the past twelve months ended March 2021 on account of working capital intensive operations. Cash accrual are expected to be over Rs 1.1-1.5 crore per annum in fiscal 2022 and fiscal 2023 which are sufficient against term debt obligation of Rs 0.03 crore per annum in fiscal 2022 and fiscal 2023. Improvement in working capital management thus utilization of bank limits to remain monitorable. Company has no major capex plans.

Outlook: Stable

EGCL will continue to benefit from the extensive experience of its promoters and their funding support, and its established clientele.

Rating Sensitivity factors

Upward factors:

  • Sustained improvement in scale of operation by 20% leading to increase in net cash accrual to over Rs 1.8 crore
  • Significant improvement in working capital cycle backed by reduced debtors leading to moderate utilisation of working capital limits

 

Downward factors:

  • Decline in net cash accrual to below Rs 0.50 crore on account of decline in revenue.
  • Increase in working capital requirement, or larger-than-expected, debt-funded capex or acquisition or dividend payout, weakening the financial risk profile and liquidity

About the Company

EGCL was established in 1982 and is promoted by Mr Murtuza S Mewawala, Mr Hasanain S Mewawala, Mr S M Nathai and Mr Shailesh Shah. The company manufactures a wide range of process plant equipment such as coded pressure vessels and deaerators, and undertakes turnkey projects and in-plant piping. It is based in Mumbai.

Key Financial Indicators

As on / for the period ended March 31

 

2020

2019

Operating income

Rs crore

49.10

60.06

Reported profit after tax

Rs crore

0.33

0.81

PAT margins

%

0.73

1.67

Adjusted Debt/Adjusted Net worth

Times

1.36

1.19

Interest coverage

Times

1.27

1.46

 

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)

Complexity

Level

Rating assigned 

and outlook

NA

Bank Guarantee

NA

NA

NA

14.0

NA

CRISIL A4+

NA

Cash Credit

NA

NA

NA

12.0

NA

CRISIL BB-/Stable

NA

Letter of Credit

NA

NA

NA

0.35

NA

CRISIL A4+

NA

Overdraft Facility

NA

NA

NA

13.65

NA

CRISIL BB-/Stable

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 25.65 CRISIL BB-/Stable   -- 19-06-20 CRISIL BB-/Stable 10-05-19 CRISIL BB-/Stable / CRISIL A4+ 01-03-18 CRISIL BB-/Stable / CRISIL A4+ --
      --   -- 26-05-20 CRISIL A4+ / CRISIL BB- /Stable(Issuer Not Cooperating)*   --   -- --
Non-Fund Based Facilities ST 14.35 CRISIL A4+   -- 19-06-20 CRISIL A4+ 10-05-19 CRISIL A4+ 01-03-18 CRISIL A4+ --
      --   -- 26-05-20 CRISIL A4+ (Issuer Not Cooperating)*   --   -- --
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
Bank Guarantee 14 CRISIL A4+ Bank Guarantee 14 CRISIL A4+
Cash Credit 12 CRISIL BB-/Stable Cash Credit 12 CRISIL BB-/Stable
Letter of Credit 0.35 CRISIL A4+ Letter of Credit 0.34 CRISIL A4+
Overdraft Facility 13.65 CRISIL BB-/Stable Overdraft Facility 13.66 CRISIL BB-/Stable
Total 40 - Total 40 -
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
The Rating Process
Understanding CRISILs Ratings and Rating Scales
CRISILs Bank Loan Ratings

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