Detailed Rationale

Due to inadequate information, Crisil Ratings, in line with SEBI guidelines, had migrated the rating of NHB Ball and Roller Limited (NHB) 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 Rating is migrating the rating on bank facilities and corporate credit rating of NHB to ‘Crisil BBB-/Stable/Crisil A3’ from 'Crisil BB+/Stable/Crisil A4+ Issuer Not Cooperating’.

 

The rating reflects NHB's extensive experience as a promoter in the ball bearing segment, established market position with integrated nature of operations, geographical diversification in revenues and comfortable financial profile. These strengths are partially offset by its working capital intensive nature of operations, vulnerability to cyclicality in end-user industry and susceptibility of operating margin to fluctuations in forex rates.

Analytical Approach

Crisil Ratings has evaluated the standalone business and financial risk profiles of NHB.

Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of promoter in ball bearing segment: The founding promoter Mr. M D Mehta incorporated the company in 1961. NHB is currently managed by 3rd generation family members who have over 2 decades of experience in the precision balls industry and have developed an understanding of industry dynamics. The promoter, along with professional management set up over the course of his presence in the industry has developed an extensive network of suppliers and customers in domestic as well as export markets. This has resulted in repeat orders from existing customers and the addition of new customers which can be seen from the reduction in customer concentration in the current fiscal compared to fiscal 2023.

 

Established market position with integrated nature of operations and diversified product base: NHB has its presence of about 80% of overall market of precision balls used in bearings and which are manufactured in India. It has integrated nature of operations with presence in industry with the capacity to meet requirements. Its integrated nature of business supports the market position compared to other manufacturers. The company has booked revenue of Rs.365 Crores in fiscal 2025.

 

A well-established customer base along with geographical diversification in revenues: NHB has long-standing relationships with its customers and suppliers. Its customers include some of the well-established players in various industries such as SKF India Limited (SKF), Schaeffler India Limited (SIL), Autoliv India Pvt Ltd etc. The company is having 5 years binding contract from its major customers. NHB has received prestigious awards from its customer including SKF, SIL, Nexteer Automotive etc. for the best supplier, best business support, best quality & reliability among others, consistently over the last three to four years indicating strong relations with its customers.

 

Also, NHB caters to a wide number of clients, both in India and overseas. While the top 5 customers generate revenue of about 70% resulting in customer concentration risk, it is partly mitigated by established relationship with them. Further, the revenue from exports and sales is expected to further improve above 35% over the medium term due to ongoing capability expansion plans where additional capacity is dedicated to the exports. Diversity in geographic reach and clientele should continue to support the business risk profile.

 

Comfortable financial profile: NHB’s capital structure has been at moderate level indicated by total outside liabilities to adj networth (TOL/ANW) in range of 1.84-2.17 for last 3 years through March 31, 2025. NHB’s debt protection measures have also been at a comfortable level despite leverage due to moderately healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio are at 2.61 times and 0.20 times for fiscal 2025. Interest coverage ratio is expected to improve above 2.5 times in fiscal 2026.

 

Weaknesses:

Working capital intensive nature of operations: Improving still working capital intensive operations with Gross current assets (GCA) at 222 days as on March 31, 2024. GCA were at 251-202 days over the three fiscal periods ending March 31, 2025. The debtors’ days have remained in the range of 91-74 days in the past five years ended March 31, 2025, and are expected to improve further going forward. It is required to extend the long credit period. This has resulted in high utilization of fund based limits from banks.  Furthermore, due to its business need, it does large work in process inventory. However, order backed inventory and ability to pass on to customers, partly mitigates the exposure raw material price volatility risk.

 

Susceptibility of operating margin to fluctuations in forex rates: Since most of the procurement comes from the international market, any sharp fluctuation in forex rates affects realizations and accrual. This exposes the operating margin to fluctuations in forex rates. It is partly mitigated by the exports, which gives the natural hedge to a certain extent. Further, the company can pass on forex fluctuations to customers based on a pre-determined formula which has been in existence for more than 3 decades. Because of market volatility, the company also has forward contract limits of Rs 2 crore from the banks. The prices for all existing customers are revised on a quarterly basis, which allows the company to price in the forex rate fluctuation and raw material price fluctuations, although with a potential quarter lag.

 

Raw Material Price is decided by the customer after discussion with the sourcing vendor. The same is also mentioned in the contract with vendors. The operating margin for fiscal 2025 was 12.42% and the company is expected to sustain margins backed by management’s ability to sustain a strong business profile despite dependence on auto industry performance and volatility in raw material and forex fluctuations. Operating margins are expected to increase further over the medium term due to the expected increase in the scale of operations.

 

Vulnerability to cyclicality in end-user industry: NHB’s performance is closely linked with the investment climate in its end-user industry which is cyclical in nature. The scale of operations determines the negotiating power with suppliers and customers, and ability to withstand business downturns.

Liquidity: Adequate

Bank limit utilization is high at around 92.43 percent for the past twelve months ended March 2025. Cash accruals are expected to be over Rs 25 crore which are sufficient against term debt obligation of Rs 15-16 crore over the medium term. In addition, it will act as a cushion to the liquidity of the company. The company has no major capex plans. The current ratio is low at 1.00 times on March 31, 2024

Outlook: Stable

Crisil Ratings believe the NHB’s operating performance will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating sensitivity factors

Upward factors

• Sustained improvement in scale of operations and sustenance of operating margin leading to accruals above Rs 30 crore.
• Improvement in the working capital cycle or enhancement in working capital limits leading to better liquidity.

 

Downward factors

• Decline in scale of operations by 10% leading to lower net cash accruals.
• Large debt-funded capital expenditure or substantial increase in its working capital requirements thus weakening its liquidity & financial profile.

About the Company

NHB was incorporated in 1994 and promoted by Mr. M D Mehta and his family. The company is engaged in manufacturing and exporting of precision balls made up of chrome steel, stainless steel, aluminum, brass and other materials, NHB has manufacturing facilities in Amalsad & Bilimora in Gujarat, with multiple warehouses across the globe to ensure just in time delivery for its customers spanning over 20 countries. It supplies its products to various industries like automobiles, engineering, pharmaceuticals, cosmetics etc and has a strong presence in noise sensitive & other critical applications which require premium categories of balls.

Status of non cooperation with previous CRA

NHB has not cooperated with Brickwork Ratings India Private Limited, which published their ratings as ‘issuer not co-operating’ through release dated 16-Nov-2023. The reason provided by them was absence of adequate information/non-submission of No Default Statement.

Any other information: Not Applicable