| Hitachi Hi-Rel Power Electronics Private Limited | ||||||
| Long-term rating upgraded to 'CRISIL AA/Stable'; short-term rating reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the long-term bank facilities of Hitachi Hi-Rel Power Electronics Pvt Ltd (HHPE) to ‘CRISIL AA/Stable’ from ‘CRISIL AA-/Stable’ and reaffirmed its ‘CRISIL A1+’ rating on the short-term bank facility.
The upgrade reflects a sustained improvement in the business risk profile of the company, supported by significant ramp-up in revenue and improvement in the operating profitability supported by economies of scale. Revenue growth is expected to be robust, supported by healthy order bookings from end customers. Furthermore, the financial risk profile remains strong on the back of healthy cash generation, improving capital structure amid nil debt and prudent cash flow management.
Operating income grew at compound annual growth rate (CAGR) of ~20% over the three fiscals through fiscal 2024. Revenue is estimated at Rs 600 crore in fiscal 2024 (Rs 412 crore in the first nine months of fiscal 2024) compared to Rs 467 crore in the previous fiscal, which is 30% on-year growth. The growth was largely driven by improved volume offtake and increased demand for its key products, such as medium voltage (MV) drives and industrial uninterrupted power supply (UPS) from end-user industries. The operating margin has also improved to 13% estimated for full fiscal 2024, up from 11% in fiscal 2023, from better passthrough of input costs to customers and cost optimisation measures amid benefits of economies of scale. Operating performance shall continue to remain healthy with revenue growth estimated at 10-12% supported by strong order book and growing demand for its key products. The operating margin is expected to be stable at 12-13% amid economies of scale and controlled fixed costs.
The ratings continue to reflect the strong operational and need-based financial support provided by the parent, Hitachi Ltd (Hitachi; rated ‘A/Stable/A-1’ by S&P Global Ratings), and the established market position of HHPE in the power electronics industry. These rating strengths are partially offset by large working capital requirement and exposure to intense competition. |
Analytical Approach CRISIL Ratings has applied its parent notch-up criteria to factor in the operational, technological and need-based financial support that HHPE receives from Hitachi. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
The working capital cycle has improved with gross current asset days (GCA) of 187 days as on March 31, 2024, against previous highs of 200-300 days during fiscals 2021-2023. This was driven by timely collections from customers and prudent inventory management.
The on-going capex of Rs 60-65 crore, which is to be incurred over 2-3 years, is planned to be funded internally. With moderate capex and sustenance of improved profitability, the credit metrics are expected to improve further over the medium term.
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Liquidity: Strong Liquidity is driven by expectation of support from the parent in case of exigencies. On a standalone basis, HHPE has moderate liquidity. Cash and equivalent were modest at around Rs 32 crore as on March 31, 2024. Cash accrual of Rs 60-70 crore is expected per annum against nil term debt. Thus, internal accrual, cash and equivalent, and unutilised bank limit should comfortably cover incremental working capital requirement and moderate capex in fiscal 2025. |
Outlook: Stable CRISIL Ratings believes HHPE will maintain a healthy credit risk profile, driven by strong support from the parent and gradual improvement in revenue and profitability. The financial risk profile is also expected to improve steadily. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated in 1990, HHPE (formerly, Hi-Rel Electronics Pvt Ltd) manufactures single-phase and three-phase online UPS systems of up to 500 kilovolt amperes for the power, oil and gas, railways, and other industries. It also manufactures automation drives, variable frequency drives, rotary machine controls, industrial automation products and solar inverters. |
About the parent Hitachi, founded in 1910, is headquartered in Japan. It is one of the largest diversified electronics manufacturers, with about 1,000 consolidated subsidiaries in nine business segments, including information and telecommunication systems, social infrastructure and industrial systems, electronic systems and equipment, construction machinery, high-functional materials and components, automotive systems, smart life and eco-friendly systems, logistics and financial services. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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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Criteria Details
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