| Jash Engineering Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB+/Stable/CRISIL A2'; Rated amount enhanced for Bank Debt | ||||||
| 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 reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2’ rating on the bank facilities of Jash Engineering Limited (JEL, part of Jash group).
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 Ratings 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 Ratings 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: Six Decades of experience in same industry: With presence of over five decades across the major geographies, Jash group has established a strong market position in the gates and screens segment in the water and waste water management industry. Group 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. Group recorded an operating income of Rs.368.18 crore in fiscal 2022. further group had a healthy order book of Rs 700 crore as on Dec.2022 which provides medium term revenue visibility.
Established track record of satisfactory execution of projects coupled with satisfactory technical know-how: Group has well-established track record of five decades in the water and waste water equipment industry. In past years group have developed in house manufacturing facility by collaborating with other players for technical know-how. Group many foreign companies - Mahr Maschinenbau - Austria (in FY15), 176 years old “Rodney Hunt” brand, IP and designs from VAG USA LLC, USA (in FY17) .Foreign acquisitions have helped company to achieve technical expertise in various products.
Diversified product and customer base: 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.
Healthy financial risk profile: Group has a strong networth, at around Rs 156.34 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 2022. Gearing was 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 6.15 times and 0.45 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: Working capital intensive operations: Operations remain working capital-intensive, as reflected in gross current assets (GCA) of 215 days as on March 31, 2022, driven by high debtors of 138 days as it is required to extend long credit period to its customers and large inventory of 88 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 114 days as on March 31, 2022. GCA days are expected to be around 220 days over the medium term.
Susceptibility of revenue to slowdown in end user industry: 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.
Susceptibility of profitability to volatile raw material prices: Prices of its major raw materials such as steel and castings are volatile in nature. This, along with high competition in the industry and tender-based order system for government contracts limits the price passing power of company. Thus, Group’s profitability remains exposed to volatile raw material prices |
Liquidity: Adequate Liquidity is adequate, marked by expected cash accrual of over Rs 35 crore per fiscal, against term debt obligations of Rs 8-9 crore per fiscal over the medium term. Bank lines have been utilized at an average of 69% over the 12 months ended November 2022. Free cash & bank balance is around Rs.3.76 crore as on March 31, 2022. CRISIL Ratings 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 Ratings believes the group will continue to benefit from the extensive experience of its promoter, and established relationships with clients. |
Rating Sensitivity factors Upward Factors * Sustained growth in revenue along with operating margin sustaining at healthy level of over 15% * Enhancement in working capital limits or improved cushion in the existing working capital limits driven by the improvement in working capital management with GCA days below 210 days
Downward Factors * Stretch in gross current assets to more than 250 days, weakening the financial risk profile * Significant decline in revenue and operating profitability, leading to accruals of less than Rs. 15 crores |
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
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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 – 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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This Annexure has been updated on 27-Jan-2023 in line with the lender-wise facility details as on 25-Jan-2023 received from the rated entity.
Criteria Details
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