Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB/Stable’ rating on the long-term bank facilities of INDIC EMS Electronics Private Limited (Indic).
CRISIL Ratings had on October 10, 2022, upgraded its rating on the long-term bank facilities of Indic to ‘CRISIL BBB/Stable’ from 'CRISIL BBB-/Stable'.
The rating continues to reflect Indic’s established market position and comfortable financial risk profile. The rating also factored in the improved business risk profile marked by steady growth in revenues and operating profitability, mainly backed by the global push towards electromobility and renewable energy sectors. Indic’s revenue had grown steadily during the last 2 fiscals with a growth of 83% and 46% in fiscals 2021 and 2022 respectively, on YoY basis. Revenue achieved during April-August 2022 is estimated to be over Rs. 250 crore. Supported by a confirmed order book of around Rs.1000 crore and with Indic’s plans to expand its customer base, the revenues are expected to grow further at a healthy growth rate over the medium term, while sustaining the operating profitability around 14-15 percent. These rating strengths are partially offset by significant customer concentration and susceptibility to raw material price volatility and forex fluctuations.
As per the available information, Electronica ITEL SA (Spain), which currently holds around 33% stake in Indica, has been dissolved. Based on the understanding received from management, there has been no adverse impact on the operations of the company; while no material impact is foreseen currently, any adverse impact that may unfold in the future on account of the aforesaid development continues to be a key monitorable. |
Key Rating Drivers & Detailed Description Strengths: Established market position: Indic is engaged in the manufacturing of printed circuit board (PCB) assembly for over a decade and has established long-standing relationship with its key customers. This has enabled steady growth in revenues to Rs. 476 crores in fiscal 2022 from Rs.52 crores in fiscal 2016. The company would continue to benefit from the strong technical background and longstanding industry experience of its promoter, Mr.Vivek Khanna, who handle the day to day operations of Indic.
Comfortable financial risk profile: The company’s financial risk profile continues to be comfortable with strong capital structure and robust debt protection metrics, largely on account of its minimal reliance on external debt. Further, networth is healthy at Rs 111 crore as on March 31, 2022. Financial risk profile is likely to remain strong, with no major debt addition plans over the medium term. Efficient working capital cycle of the company further aids improvement in financial risk profile over the medium term.
Weakness: Significant customer concentration: Indic’s customer profile is marked by its large reliance on a single customer which contributes majority of revenue. Although the company has a long relationship with this customer, any adverse development concerning this customer or a strain in business ties with this customer could materially affect the operations of Indic.
Susceptibility of margins to volatility in raw material fluctuations and forex fluctuations Indic’s margins are susceptible to any large fluctuations in raw material prices, despite its ability to partially pass on input price hikes, as was witnessed over the past few years. Nevertheless, margin has increased to about 16.8% in fiscal 2022 from 6.21% in fiscal 2018, largely on account of automation in operations and better fixed cost absorption. Further, large exposure to exports renders its operations susceptible to forex fluctuations. CRISIL Ratings believe that any large volatility in raw material prices and/or forex rates could have a material impact on the profitability and therefore, will be a key monitorable. |
Liquidity Adequate Indic’s bank limits remained largely unutilised during the past twelve months ended July 2022. Cash accruals are expected to be over Rs 50 crore against no term debt obligation over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio is moderate at 1.16 times on March 31, 2022. Unencumbered cash and bank balance of around Rs. 69 crore as on March 31, 2022, which is expected to remain, shall support liquidity over the medium term. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believes that Indic will benefit from the established market position in PCB assembly manufacturing |
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About the Company Incorporated in 2007, Indic is an Indo-Spanish joint venture between Spanish partners, Digiproces SA and Electronica ITEL SA and India-based Indic. It is an end-to-end electronics manufacturing and services company, with offerings including PCB assemblies, electronic switches, boards, electronic assemblies and circuit lines. Day-to-day operations are managed by Mr Vivek Khanna. |
Key Financial Indicators
*Provisional |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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This Annexure has been updated on 28-Oct-2022 in line with the lender-wise facility details as on 10-Oct-2022 received from the rated entity
Criteria Details
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