| Maco Corporation India Private 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 ‘CRISIL BBB+/Stable/CRISIL A2+’ ratings on the bank facilities of Maco Corporation India Private Limited (MCIPL).
The ratings continue to reflect the extensive experience of the promoters in the engineering industry, their established relationships with suppliers and customers, and the company's healthy financial risk profile. These strengths are partially offset by working capital-intensive operations.
The company was impacted in fiscal 2021 by the Covid-19 pandemic. Operations were suspended for around a month and resumed in May 2020, but with slow flow of orders and realisation. This gradually improved from July 2020. Revenue is estimated around Rs 119 crore for the first nine months of fiscal 2021 as against Rs 125 crore in the corresponding period of the previous fiscal. Revenue is expected to dip by around 15% in fiscal 2021 year-on-year but operating profitability should sustain at 15-16% supported by profitability from turnkey projects. |
Key Rating Drivers & Detailed Description Strengths: * Extensive experience of the promoters, and established relationships with suppliers and customers The promoters have been engaged in turnkey projects and trading activities for over four decades, and have built strong relationships with suppliers and customers. Timeliness and quality of project execution have helped MCIPL bag repeat orders from customers. Its clientele includes reputed entities such as Steel Authority of India Ltd, Tata Steel Ltd, Oil and Natural Gas Corporation Ltd, Reliance Industries Ltd, and Oil India Ltd. The promoters have also established presence overseas through associate companies Sunag Corporation (USA) and Sunag Corporation (Europe). MCIPL also has joint ventures and consortium agreements with foreign partners. The global network of operations ensures proximity to suppliers, enhances the ability to source raw material, and has helped establish a strong commercial background.
* Healthy financial risk profile The financial risk profile is supported by adequate networth, low gearing and robust debt protection metrics. Networth was Rs 180.38 crore as on March 31, 2020, driven by a healthy operating margin and sizeable accretion to reserve. Working capital requirement, though large, is mostly covered by internal cash accrual and credit from suppliers. Thus, gearing was low at 0.08-0.12 time over the three fiscals through 2020 (0.12 time as on March 31, 2020). Healthy operating margin and low external debt have resulted in strong debt protection metrics, reflected in interest coverage ratio of 12.1 times and net cash accrual to total debt (NCATD) ratio of 0.19 times in fiscal 2020 (16.74 times and 1.46 times, respectively, in fiscal 2019). The NCATD ratio declined in fiscal 2020 because of the steep increase in dividend payout to Rs 29.88 crore from Rs 5.92 crore in the previous fiscal. Such large dividend payout is not likely going forward.
Weakness: * Working capital-intensive operations Gross current assets were at 195-321 days over the three fiscals through 2020, driven by receivables of 124-217 days. Receivables were stretched mainly because revenue is booked on despatch of the product, while payment is received in stages. Also, 5-10% of project receivables are withheld as retention money and released only 9-12 months after commissioning of the project. |
Liquidity: Adequate Liquidity is expected to remain adequate. Cash accrual declined to Rs 4.21 crore in fiscal 2020 from Rs 21.9 crore in fiscal 2019 because of the large dividend payout. Accrual should revive to Rs 20-25 crore annually with dividend payout expected at Rs 5-10 crore per annum over the medium term. MCIPL does not have any debt obligation, and the accrual will be used for capital expenditure (capex) and working capital, with the surplus likely to be parked in liquid investments. Current ratio was 3.49 times as on March 31, 2020, backed by moderate unencumbered cash and bank balance and large liquid investments of Rs 50.01 crore. The company had sizeable liquid funds, in the form of cash and bank balance, short-term liquid funds, debt mutual funds, and bonds worth Rs 67.14 crore as on December 31, 2020 (market value with no accumulated notional loss). Being risk-averse, the management invests any surplus cash only in mutual funds/bonds and the company has no sizeable equity investment. Working capital requirement is met through net cash accrual and credit from suppliers, resulting in limited reliance on debt. Non-fund-based limits of Rs 35 crore were used 55% on average and fund based facilities of Rs 25 crore were used 74% on average over the 12 months through December 2020. |
Outlook Stable MCIPL will continue to benefit from the extensive experience of its promoters, its healthy operating capability, and longstanding customer relationships. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company MCIPL was set up as a partnership firm in 1968 by Mr Managlal Ambavi Tilva and Mr Ramesh Vithaldas Patel, and was reconstituted as a private limited company in 2002. It undertakes turnkey projects, including design, manufacture, supply, erection, and commissioning, for the steel, oil and gas, and refinery sectors. Mr Nagesh Patel is the managing director. The registered office is in Kolkata. |
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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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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