Rating Rationale
November 25, 2021 | Mumbai
Forbes Marshall Private Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities RatedRs.245 Crore (Enhanced from Rs.235 Crore)
Long Term RatingCRISIL A+/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A+/Stable/CRISIL A1+’ ratings on the bank facilities of Forbes Marshall Private Limited (FMPL; part of the Forbes Marshall group).

 

The ratings continue to reflect the group's established market position in the steam engineering and control instrumentation segments, supported by strong technical capabilities and marketing set-up; the ratings also factors in the strong financial risk profile. These strengths are partially offset by medium scale of business, moderate working capital requirement and exposure to intense competition.

 

On a consolidated basis, as anticipated earlier, operating income have declined marginally during fiscal 2021 compared to the previous fiscal with moderation in operating margins due to higher raw material and overhead costs. The Covid-19 pandemic and the resultant lockdown had contracted overall economic activity in fiscal 2021 and companies have increasingly shelved capital expenditure (capex) plans, which resulted in a decline in revenue and margins. For the current fiscal, the performance is expected to improve driven by strong recovery of demand in the end user industries as seen in the first half of this fiscal.

 

The group is widening its overseas presence as it has set up a subsidiary in Singapore to act as a hub for the South-Asian market.

 

Financial risk profile is healthy, driven by low gearing and strong debt protection metrics. Liquidity was also comfortable as on September 30, 2021. Expected cash accrual should suffice to cover minimal long-term debt, regular capex and incremental working capital requirement.

Analytical Approach

For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of FMPL and its subsidiaries and joint ventures (JVs). This is because all these entities, referred to as the Forbes Marshall group, are in the similar line of business and have operational synergies, inter-party transactions, and common management and clientele.

 

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 market position: The group has an established position in the steam engineering and control instrumentation segment, backed by its diversified customer base, technological expertise through longstanding tie-ups with reputed JV partners, and a robust marketing network. The group provides a one-stop solution to its customers and has been able to garner repeat orders from various clients. Since orders have short cycles, they provide near-term revenue visibility. Clients include Reliance Industries Ltd (rated ‘CRISIL AAA/Stable/CRISIL A1+’), Larsen and Toubro Ltd (rated ‘CRISIL AAA/FAAA/Stable/CRISIL A1+’), Indian Oil Corporation Ltd (rated ‘CRISIL AAA/Stable/CRISIL A1+’) etc.

 

  • Strong financial risk profile: Financial risk profile is marked by low gearing, and strong debt protection metrics, and will continue to be aided by healthy cash accrual and small term debt.

 

Weaknesses:

  • Working capital-intensive operations: Gross current assets as on March 31, 2021, were estimated to remain at a level similar to the one in fiscal 2020, continuing to remain high. This is because a part of the group supplies components that are used at various stages of a customer’s project life cycle, and hence a portion of receivables remains exposed to project completion timelines. The group also maintains adequate inventory to ensure timely supplies adding pressure to the working capital cycle. However, working capital intensity is partially eased by credit received from suppliers and advances from customers, and unsecured loans.

 

  • Exposure to intense competition: The group operates in a market where most of the demand is met by large organised players, and the balance is covered by small local players. Large domestic and international players have high technical expertise and strong market position in all product offerings. Extent of value addition differs between the products and hence, profitability tends to vary with any change in the product mix. In the unorganized segment, the group faces competition from several small players offering products with lesser technological expertise. Slowdown in the capex cycle or growth of end-user industries worsens the situation and exerts additional pricing pressure. However, the large portfolio of high quality products and services helps the group provide a one-stop solution for its customers.

Liquidity: Strong

Net cash accrual should suffice to meet minimal term debt repayment and incremental working capital requirement, and also fund regular capex for fiscal 2022. Healthy cash and cash equivalent as on March 31, 2021, and low fund-based bank limit utilisation over the 6 months through September 2021 to provide additional buffer.

Outlook: Stable

CRISIL Ratings believes the Forbes Marshall group will continue to benefit over the medium term from its established market position, healthy capital structure, and robust debt protection metrics.

Rating Sensitivity factors

Upward factors:

  • Substantial and sustainable increase in revenue over Rs 1500 crore while maintaining its profitability
  • Liquidity improves on account of easing working capital requirement

 

Downward factors:

  • Any large capital expenditure or inorganic growth, stretch in working capital cycle weakens liquidity
  • Substantial and sustainable decline in revenue below Rs 700 crore along with lower EBITDA margin

About the Group

The Forbes Marshall group has been in the steam engineering and control instrumentation segment for over seven decades. Its products are used across sectors such as power, cement, metals and mining, fertilisers, pharmaceuticals, food and beverages, and oil and gas. The manufacturing facilities are in Pimpri, Kasarwadi and Chakan near Pune (Maharashtra). The group has technological tie-ups under JVs with large global players such as Krohne Messtechnik GmbH (Germany), Arca Regler (Germany), and Prometheus N.V. Belgium (Vyncke) in various stages of the steam processing and process control value chain.

 

FMPL was promoted by Mr Darius Forbes in 1985. It manufactures steam systems, piston valves, stop and safety valves, controllers, instrumentation systems, vibration monitoring systems, steam and water analysis products and systems, and boiler systems.

Key Financial Indicators - (Consolidated) – CRISIL Ratings adjusted numbers

Particulars

Unit

2021

2020

Operating Income

Rs crore

1006

1093

Adjusted debt/adjusted networth

Times

0.19

0.19

Interest coverage

Times

10.4

16.5

 

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

(Rs Cr)

Complexity

level

Rating outstanding

with Outlook

NA

Bank Guarantee

NA

NA

NA

130

NA

CRISIL A1+

NA

Cash Credit

NA

NA

NA

85

NA

CRISIL A+/Stable

NA

Letter of Credit

NA

NA

NA

30

NA

CRISIL A1+

 

Annexure – List of entities consolidated

Name of the entities consolidated

Extent of consolidation

Rationale for consolidation

Krohne Marshall Private Limited

Full

Similar line of business, operational synergies, inter-party transactions, and common management and clientele

Forbesvyncke Private Limited

Full

Forbes Marshall Arca Private Limited

Full

Forbes Marshall (Hyd) Private Limited

Full

Gold Coin Maritronics Private Limited

Full

Forbes Solar Private Limited

Full

Forbes Marshall Lanka (Private) Limited

Full

Forbes Marshall Canada Inc.

Full

Codel International Limited

Full

FMC Electronics Limited (Step Down Subsidiary)

Full

Combustion Developments Limited (Step Down Subsidiary)

Full

Forbes Marshall Malaysia SDN BHD (Step Down Subsidiary)

Full

Forbes Marshall Egypt for Marketing and Trading (Step Down Subsidiary)

Full

Forbes Marshall Inc.

Full

Forbes Marshall Pvt Ltd, Bangladesh

Full

PT Forbes Marshall Indonesia

Full

 

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 85.0 CRISIL A+/Stable   -- 21-08-20 CRISIL A+/Stable 06-05-19 CRISIL A+/Stable 01-03-18 CRISIL A+/Stable CRISIL A+/Stable
Non-Fund Based Facilities ST 160.0 CRISIL A1+   -- 21-08-20 CRISIL A1+ 06-05-19 CRISIL A1+ 01-03-18 CRISIL A1+ CRISIL A1+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 10 HDFC Bank Limited CRISIL A1+
Bank Guarantee 10 Standard Chartered Bank Limited CRISIL A1+
Bank Guarantee 110 Bank of Maharashtra CRISIL A1+
Cash Credit 55 Bank of Maharashtra CRISIL A+/Stable
Cash Credit 10 Standard Chartered Bank Limited CRISIL A+/Stable
Cash Credit 20 HDFC Bank Limited CRISIL A+/Stable
Letter of Credit 10 HDFC Bank Limited CRISIL A1+
Letter of Credit 10 Bank of Maharashtra CRISIL A1+
Letter of Credit 10 Standard Chartered Bank Limited CRISIL A1+

This Annexure has been updated on 25-Nov-2021 in line with the lender-wise facility details as on 25-Nov-2021 received from the rated entity.

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
CRISILs Criteria for Consolidation

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