| Jash Engineering Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB+/Stable/CRISIL A2 ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ratings on the bank loan facilities of Jash Engineering Limited (JEL, part of Jash group) at 'CRISIL BBB+/Stable/CRISIL A2'.
The ratings continue to reflect its established market position in manufacturing of water control systems, established customer base and healthy financial profile. These strengths are partially offset by working capital intensive operations and vulnerability to cyclicality in end-user industry. |
Analytical Approach For arriving at the ratings, CRISIL has consolidated the business and financial risk profiles of JEL and its wholly-owned subsidiaries - Shivpad Engineers Private Limited (SEPL), Jash USA Inc, Mahr Maschinenbau GmbH (MMG), Engineering and Manufacturing Jash Limited (EMJL) and Rodney Hunt Inc (RHI). This is because all these entities, together referred to as the 'Jash Group', are strategically important to, and have a significant degree of operational integration with JEL. CRISIL considers these entities as being strategic to JEL in view of their strong integration with JEL's operations.
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:
With presence of over four decades, Jash group has established a strong market position in the gates and screens segment in the water and waste water management industry. It has consistently added new products and entered into technical collaborations for products, strengthening its product portfolio. The group has hence established long-standing relationships with its customers leading to repeat orders and hence, revenue growing at a CAGR of 17% over the four fiscals ended 2021. Group recorded an operating income of Rs.300.2 crore in fiscal 2021. Group has generated a revenue of Rs 210.35 crore in 9M FY22 and further group had a healthy order book of Rs 514 crore as on March 01, 2022 which provides medium term revenue visibility.
Jash manufactures various products like gates (47% of revenue), valves (17% of revenue), screens (18% of revenue), hydropower & pumping, process equipment and others (18% of revenue). The products are used in diverse industries such as human drinking water cycle and wastewater cycle, industrial usage, renewable energy generation and storm water cycle. It has a diversified customer base in the domestic and international markets (over 45 countries- majorly Germany, the US, Hong Kong, Canada, and Singapore). The top 5 customers contribute to around 20-30% of the total revenue.
Group has a strong networth, expected at around Rs 150 crore as on March 31, 2022, driven by healthy accretion to reserves. Capital structure is healthy and the same is reflected in sub-1 gearing over the past five fiscals ended 2021. Gearing is expected to be below 0.55 time as on March 31, 2022. Debt-protection metrics continue be comfortable, with interest coverage and net cash accruals to adjusted debt ratios of around 5.5 times and over 0.4 time, respectively for fiscal 2022. Going forward, the metrics will improve further with improvement in profitability. Group does not have any debt-funded capex plans going forward.
Weaknesses:
Operations remain working capital-intensive, as reflected in gross current assets (GCA) of 216 days as on March 31, 2021, driven by high debtors of 119 days as it is required to extend long credit period to its customers and large inventory of 105 days, due to customized nature of its products. This is partly supported by bank lines, and partly by company's ability to stretch its creditors, which stood at 119 days as on March 31, 2022. GCA days are expected to be around 210-220 days over the medium term.
With significant portion of Jash's revenue coming through sales EPC players executing projects for state and central government agencies, any change or deferment in government policies regarding spending on projects related to water management will have a significant effect on the topline. |
Liquidity: Adequate Liquidity is adequate, marked by expected cash accrual of over Rs 30 per fiscal, against term debt obligations of Rs 5.0-7.0 crore per fiscal over the medium term. Bank lines have been utilized at an average of 78% over the 12 months ended February 2022. Free cash & bank balance is expected to be around Rs.6 crore as on March 31, 2022. CRISIL expects internal accruals, cash & bank balance and unutilized bank lines to be sufficient to meet its incremental working capital requirements and capital expenditure over the medium term. |
Outlook: Stable CRISIL believes the group will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward Factors:
Downward Factors:
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About the Company JEL, incorporated in 1973 by the late Mr. Navin Patel and Mr. Laxmi Nandan Amin, is engaged in the manufacturing of varied engineering products such as water control gates, mechanized screening systems, screening conveying and washing systems, knife gate valves and water hammer control valves. Its manufacturing facilities are located in Indore (Madhya Pradesh). Daily operations are managed by third-generation entrepreneur Mr. Pratik Patel (son of Mr. Navin Patel).
JEL acquired SEPL, MMG and RHI in 2011, 2014 and 2016, respectively while Jash USA and EMJL were setup in USA and Hong Kong, respectively, to enhance its product offerings and market reach. |
Key Financial Indicators (consolidated)
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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)
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Annexure – List of entities consolidated
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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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