| Kiswok Industries Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB+/Stable/CRISIL A2' | ||||||
| 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' on the bank loan facilities of Kiswok Industries Private Limited (KIPL)
The ratings continue to reflect established position in the auto component business and healthy operating efficiency and comfortable financial risk profile. These strengths are partially offset by large working capital requirement and exposure to intense competition, volatility in raw material prices and significant customer concentration. |
Key Rating Drivers & Detailed Description Strengths: Established position in the auto component business and healthy operating efficiency: The promoters have been in the auto components industry since 1957; their expertise, strong understanding of market dynamics and healthy relationships with suppliers and customers should continue to support the business. Kiswok manufactures high-precision auto components and is the major supplier for large auto manufacturers such as Tata Motors Limited (CRISIL AA-/Stable /CRISIL A1+), Daimler India Commercial Vehicles Pvt Ltd (‘CRISIL AA+/Stable), Dana India Pvt Ltd and Bonfiglioli Transmissions Private Limited. Post Covid-19, as commercial vehicle production improved starting fiscal 2022, demand for auto-casting products have also witnesses growth over a low base, resulting in improvement in scale of operations of KIPL.
Comfortable financial risk profile: Strong networth of Rs 148 crore as on March 31, 2022 continue to support KIPL’s capital structure, yielding gearing and total outside liabilities to total networth ratios of 0.78 times and 0.92 times respectively for the fiscal. Debt protection metrices are also comfortable with interest coverage and net cash accrual to adj det ratio of 6.03 times and 0.27 times respectively as on March 31, 2022. In absence of large, debt funded capex, financial risk profile is expected to strengthen with healthy accretion to reserves as production of heavy commercial vehicles remain steady over medium term.
Weaknesses: Large working capital requirement: The working capital cycle is likely to remain stretched and will be closely monitored. Gross current assets (GCAs) were sizeable at 179 days as on March 31, 2021, driven by high debtors of around 59 days. GCAs are projected at 137-179 days over medium term.
Exposure to intense competition and volatility in raw material prices: The auto ancillary industry is highly fragmented, and the consequent intense competitive pressure may continue to constrain scalability, pricing power and profitability. Further, since cost of procuring the key raw material (pig iron) accounts for a bulk of production cost, even a slight variation in price can drastically impact the operating margin. Though the company passes a part of the price hike to customers, restricts the profit margin for that quarter and which can be realized when the prices come down in forthcoming quarters.
Significant customer concentration: Kiswok derives around 60% of its revenue from a single customer, Tata Motors Limited, which however has decreased from more than 80% in the past. Risk of client concentration is likely to reduce further over the medium term, with addition of new customers and gradual diversification into the railway segment. However, the risk is mitigated by the company having received orders and developing parts for tractors, industrial castings and also for engineering machined castings for exports along with railways. |
Liquidity: Adequate Cash accrual expected to be more than Rs 50 crore per fiscal, sufficient to meet the yearly debt obligation of Rs 11-15 crore; the surplus cash will aid financial flexibility. 12-month average bank limit utilization was moderate at 77% through October 2022. Current ratio was healthy at 1.29 times on March 31, 2022. The promoters are likely to continue extending funds (equity and unsecured loans) to aid operations. Low gearing and moderately strong networth also boost liquidity. |
Outlook: Stable Kiswok will continue to benefit from extensive experience of the promoters, strong relationship with customers and healthy financial risk profile. |
Rating Sensitivity factors Upward Factors • Sustenance of improved scale of operations with operating margin above 12% • Lower dependence on external borrowings
Downward Factors • Steep decline in topline or profitability, resulting in cash accrual lower than Rs 13 crore • Any large, debt-funded capex weakening liquidity |
About the Company Set up in 1957 as Kejriwal Iron & Steel Works by Late Mr Shyam Sundar Kejriwal, the firm got reconstituted into a private-limited company with the current name in 1997. Mr Raj Kejriwal (son of Late Mr Shyam Sundar Kejriwal) manages the business. Mr. Mayank Kejriwal is also a part of the current management of the company. Kiswok manufactures ductile and cast-iron products and is one of the major suppliers of Axle parts, brake drums, hubs and housings for the heavy commercial vehicle segment of TML for its plant in Jamshedpur (Jharkhand). The company also produces agricultural casting, pipe fittings, manhole covers and track components for the Indian Railways. It further generates around 5% of its revenue from export of agricultural and drainage casting to the European markets. |
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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 17 | Kotak Mahindra Bank Limited | CRISIL A2 |
| Cash Credit | 15 | Citibank N. A. | CRISIL BBB+/Stable |
| Cash Term Loan | 8.42 | Kotak Mahindra Bank Limited | CRISIL BBB+/Stable |
| Cash Term Loan | 16.35 | Kotak Mahindra Bank Limited | CRISIL BBB+/Stable |
| Composite Working Capital Limit | 67.55 | Kotak Mahindra Bank Limited | CRISIL BBB+/Stable |
| Foreign Exchange Forward | 0.5 | Kotak Mahindra Bank Limited | CRISIL A2 |
| Letter of Credit | 4 | Kotak Mahindra Bank Limited | CRISIL A2 |
| Working Capital Term Loan | 11.18 | Kotak Mahindra Bank Limited | CRISIL BBB+/Stable |
This Annexure has been updated on 09-Feb-23 in line with the lender-wise facility details as on 20-Jan-23 received from the rated entity.
Criteria Details
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