| ITL Industries Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB / Stable / CRISIL A3+ ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
CRISIL Ratings has reaffirmed its 'CRISIL BBB/Stable/CRISIL A3+' ratings on the bank facilities of ITL Industries Limited (ITLIL).
The ratings continue to reflect extensive industry experience of the promoters, stable market position and comfortable financial risk profile. These strengths are partially offset by susceptibility of the operating margin to volatility in commodity prices and intensive nature of working capital operations. |
Key Rating Drivers & Detailed Description Strengths: * Extensive industry experience of the promoters: The company is promoted by Mr. Manohar Singh Jain, who has an industry experience of over 5 decades. He is assisted by his two sons, Mr. Rajendra Singh Jain and Mr. Mahendra Singh Jain (Joint MDs), who look after the day-to-day business of the company. The promoters, along with the board of directors and the senior management have rich experience in the engineering industry and has been instrumental in shaping the business risk profile.
* Stable market position: The company has a long-standing presence of close to 30 years in the industry. Over the years, the company has established healthy relationships with customers across various industries such as general engineering, auto components, forging, power, metals etc. Concentration risk is minimal as its customers are located across India, and top 5 customers contribute to less than 10% of overall revenue. The company has its own R&D center, which is engaged in development of new products and improvement of existing ones. Supported by the quality of products, the company has been receiving repeat orders from its customers. Company reported operating income of Rs.89.50 crore in fiscal 2021, a 11.7% y-o-y growth. In current fiscal, company has achieved revenue of Rs.47.48 crore during H1 FY22. The company has outstanding orders of over Rs.32.79 crore to be executed over the next 2-3 months which provides near term revenue visibility.
* Comfortable Financial Risk Profile: Financial risk profile is supported by healthy capital structure, as reflected in gearing of 0.29 time and comfortable networth of Rs. 47.68 crore as on March 31, 2021. Debt protection metrics are comfortable with interest coverage ratio of 6.89 times and net cash accruals to adjusted debt ratio of 0.45 time for fiscal 2021.
Weaknesses: * Susceptibility of the operating margin to volatility in commodity prices: Operating margins are exposed to volatility in raw material prices. Raw material costs accounts for 65-70% of the operating revenue. Any sharp deviation in raw material prices is likely to impact the operating margin of the company.
* Large working capital requirements: Company has high working capital requirements as reflected in GCA days of 219 days as on March 31, 2021, driven by inventory and debtors of 135 days and 87 days, respectively. To ensure smooth execution of orders, company maintains inventory of around 90-120 days due to high lead time of raw materials. Company sells its products against advances and open credit of 60-120 days. As against this, company receives credit period of 60-90 days from dealers and distributors. |
Liquidity: Adequate Liquidity is adequate driven by expected cash accruals of more than Rs.6.5-8.0 crore per fiscal against repayment obligations of Rs 0.9-2.2 crore per fiscal over the medium term. ITLIL also has access to fund-based limits of Rs.14 crores, utilized to the tune of 63% on an average over the 12 months ended October 2021. Cash and bank balance was Rs.0.90 crore as on March 31, 2021. Current ratio was 1.72 times as on March 31, 2021. |
Outlook Stable CRISIL Ratings believe ITLIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward factors * Healthy revenue growth and sustenance of operating margin at around 10% resulting in net cash accruals of over Rs.7.5 crore * Improvement in working capital cycle
Downward factors * Decline in revenue and operating margin, leading to net cash accrual lower than Rs 4 crore * Further stretch in working capital cycle * Higher-than-expected, debt-funded capital expenditure impacting the financial profile and liquidity |
About the Company ITLIL, incorporated in 1989 at Indore, Madhya Pradesh. ITLIL is engaged in manufacturing of band saw and circular saw machinery (used in metal cutting), blade for band saw and circular saw, and pipe and tube manufacturing. ITL is also an authorized distributor for Eaton hydraulic systems and Siemens India. |
Key Financial Indicators
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| 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)
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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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