| Lizmontagens India Private Limited | ||||||
| Rating migrated to 'CRISIL BB+ / Stable / CRISIL A4+ ' | ||||||
| Rating Action | ||||||
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| & *Issuer did not cooperate; based on best-available information^ *Issuer did not cooperate; based on best-available information | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Due to inadequate information, CRISIL Ratings, in line with SEBI guidelines, had migrated the rating of Lizmontagens India Private Limited (LIPL) to ‘CRISIL BB+/Stable/CRISIL A4+ Issuer Not Cooperating'. However, the management has subsequently started sharing requisite information, necessary for carrying out comprehensive review of the rating. Consequently, CRISIL Ratings is migrating the rating on bank facilities of LIPL to ‘CRISIL BB+/Stable/CRISIL A4+’ from ‘CRISIL BB+/Stable/CRISIL A4+ Issuer Not Cooperating’.
The ratings reflect the extensive experience of LIPL’s management in the engineering and capital goods industry, technical support received from the parent and above average financial risk profile. These strengths are partially offset by susceptibility of the operating margin to volatility in input costs and large working capital requirements. |
Analytical Approach: Unsecured loans from promoter, outstanding at Rs 1.74 crore as on March 31, 2020, are treated as neither debt nor equity as they are expected to remain in the company over the medium term. |
Key Rating Drivers & Detailed Description Strengths: Extensive experience of the management: The promoter, Mr. Sanjeev Prabhu has an experience of more than three decades in the industry, his understanding of the dynamics of the market enabled the company to establish relationships with suppliers and customers. This led to steady increase in revenues to Rs 153.5 crore for fiscal 2020 from Rs 37.2 crore in fiscal 2016, although expected to moderate in fiscal 2021 on account of pandemic led disruptions.
Technical support received from the parent: The company receives strong technological support from its parent – Lizmontagens Thermal Technologies SA, which is a large assembler of industrial furnaces for various industries globally. LIPL's association with its parent has resulted in better access to the global market because of the former's presence in more than 25 countries across five continents.
Above average financial risk profile: Capital structure is moderate as reflected in total outside liabilities to adjusted networth (TOLANW) of 2.15 times as on March 31, 2020, against 2 times, a year ago, on account of increased reliance on short term borrowings and decline in profitability. Debt protection measures are adequate as reflected in interest coverage of 3.34 times and net cash accruals to adjusted debt ratio of 0.20 time in fiscal 2020 (7.38 times and 0.55 times, respectively, in fiscal 2019). The overall financial risk profile is expected to remain at similar levels over the medium term owing to moderate reliance on external debt.
Weaknesses: Susceptibility of operating margins to volatility in input costs: Operating margins are exposed to volatility in input costs mainly employee cost and wages. The wage rates are fixed as per the government norms, which affects the operating costs and thus results in volatile margins. The operating margins of LIPL have declined from 23% in fiscal 2018 to 7% in fiscal 2020 partly due to company taking up projects in the steel sector.
Large working capital requirements: Gross current assets (GCAs) are high at 186 days as on March 31, 2020, driven by high debtors at 86 days, inventory of 56 days and various deposits required to be maintained with customers. This leads to nearly full utilization of bank lines. Operations are expected to remain working capital intensive over the medium term. |
Liquidity: Adequate LIPL has adequate liquidity driven by expected to cash accruals of Rs. 5-5.5 crore for fiscal 2021 and fiscal 2022, which will be sufficient to meet its maturing term debt obligations of Rs. 0.9 crore annually over the medium term. The fund-based bank limits of Rs. 28.4 crore have been highly utilized at more than 90% on an average over past 10 months ended September-2020. It had unencumbered cash and bank balance of Rs 1.03 crore as on March 31, 2020. LIPL had availed COVID-19 moratorium relief allowed by Reserve Bank of India. |
Outlook Stable CRISIL Ratings believes LIPL will continue to benefit from the extensive experience of its promoter, and healthy relationships with clients. |
Rating Sensitivity factors Upward Factors
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About the Company LIPL, incorporated in 2010, is engaged in the supply, construction and repair of industrial furnaces and chimneys, for various industries such as iron and steel, glass, cement and power generation. It also undertakes supply of composite materials for repairs of pipelines and tanks. Mr Sanjeev Prabhu manages the operations.
The company is a 51% step down subsidiary of Lizmontagens Thermal Technologies SA, which is an assembler of industrial furnaces in various industrial sectors globally. The remaining 49% is owned by Sunag Corporation (USA), which is a group concern of Maco Corporation (India) Pvt. Ltd. It provides industrial equipments, solutions and services. |
Key Financial Indicators
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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)
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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 various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||
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