| Innovative Tyres and Tubes Limited | ||||||
| Rated amount enhanced | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has reaffirmed its rating on the long-term bank facilities of Innovative Tyres and Tubes Limited (ITTL). at 'CRISIL BBB+/Stable' and assigned its 'CRISIL A2' rating on the short term bank facility. Earlier on September 29, 2018, CRISIL had assigned its 'CRISIL BBB+/Stable' rating on the long-term bank facility of ITTL. |
| Key Rating Drivers & Detailed Description |
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Strengths * Healthy market presence with diversified customer profile in both domestic and export market ITTL is expected to benefit from the growth in domestic market marked by increasing demand in automobile sector. Increasing capacities (from 12000 TPA to 20000 TPA) are expected to supplement the growth by fulfilling the increasing demand in tyre market in the markets it is present. Revenue from domestic and exports contributed almost equally to the total sales of the company in FY 18. ITTL supplies tyres to major players like Apollo International Limited, Eastman Industries Limited, Tionale Pte Ltd., etc. Also, ITTL has been doing job-work for CEAT Limited since 1996. * Healthy financial profile supported by capital structure ITTL is expected to maintain the healthy capital structure as there is no major debt funded capex planned over medium term. ITTL underwent an IPO in September 2017 and issued 62,97,000 Equity Shares aggregating up to Rs 28.33 crores for funding of its capacity expansion. ITTL also converted preference shares to common equity. As a result, the capital structure has strengthened with gearing of 0.16 times in FY18 against 0.76 times in FY17. Also, Net cash accruals to total debt improved from 0.14 times in FY17 to 0.59 in FY18. Current expansion plan is being executed with Debt/Equity ratio of 20:80. * Promoters' extensive experience and established standing in the industry Promoters of the company Mr. Mukesh Desai and Mr. Pradeep Kothari have more than 20 years of experience in the business. The promoters have financed the company over the years in time of need. Support from experienced promoters is expected to continue in future and drive growth of the company. Weaknesses * Exposure to intense competition in tyres industry Tyre industry in India is dominated by few large players. This exposes the ITTL to intense competition and pricing pressures. However, being a supplier to some of these players, ITTL can grow with these players but have limited bargaining power. Despite widespread presence across domestic and export markets, ITTL's scale of operations remained modest with revenue of around Rs.141 Cr. registered for FY 2018. CRISIL believes that the modest scale of operation and exposure to intense competition in industry is expected to keep operating margins range bound. * Susceptibility of the operating margin to raw material price fluctuation ITTL's profitability is vulnerable to the price movement in the key raw material. The raw materials form 60 to 70 per cent of the total cost structure of the company. The price of key raw materials for the company, rubber and carbon black, saw volatility in past. CRISIL believes that the company's profitability will remain susceptible to raw material price fluctuation over the medium term. |
| Outlook: Stable |
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CRISIL believes that ITTL's business risk profile is expected to stay stable over the medium term supported by growth in both domestic and export markets and increased capacity while maintaining healthy financial profile. CRISIL also believes ITTL will continue to benefit from its promoters' experience in the industry. |
| About the Company |
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ITTL, one of the leading manufacturers and exporters of bias tyres in India, has an experience of 20 years in manufacturing field. ITTL offers a wide range of products in the Truck / Bus, Agricultural & OTR and Motorcycle / 3-wheeler segments. In addition to domestic presence in Gujarat, Maharashtra, Delhi and Punjab, ITTL sends tyres to more than 40 countries spread across 5 continents. ITTL's manufacturing plants are located at Halol, Gujarat. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Status of non cooperation with previous CRA |
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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) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
*Includes sublimit of Rs. 12.25 crore for export packing credit, packing credit in foreign currency, foreign bill discounting and rediscounting of export bills abroad, interchangeable with Letter of Credit upto Rs. 5.00 cr |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
*Includes sublimit of Rs. 12.25 crore for export packing credit, packing credit in foreign currency, foreign bill discounting and rediscounting of export bills abroad, interchangeable with Letter of Credit upto Rs. 5.00 cr | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| For further information contact: | ||||||
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