Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Established market position and sound operating capabilities: Benefits from the group's established presence of four decades, high quality products, superior operational capabilities, and enduring relationship with customers should continue to support the business. The group has established clientele, which includes reputed customers in both auto and non-auto sectors and diversified end-user industries and geographical presence mitigate the impact of slowdown in a particular segment and region. The operating performance of fiscal 2025 was driven by revenue growth of 35% year on year which is mostly caters to established customers in , banking, renewables and automobiles. While the improvement in business risk profiles is expected to be sustained over the medium term, control on profitability, control over employee costs, scalability of the new project and economic downturns in the market remain a key monitorable

Strong financial risk profile: The financial risk profile may remain strong over the medium term owing to robust networth, comfortable gearing, and healthy debt protection metrics, supported by controlled reliance on external bank debt. Expected Networth was strong at Rs 532 crore and expected gearing comfortable at 0.98 time as on March 31, 2025. With better accretion to reserve and no sizeable debt-funded capex plan over the medium term, the capital structure should improve. Debt protection metrics will remain robust, backed by expected improvement in operating profitability, and reduction in interest cost. Interest coverage and net cash accrual to total debt ratios are at 4.74 times and 0.28 time, respectively, in fiscal 2024.

Weaknesses:

Moderate customer concentration risk in revenue and volatility in raw material prices: The group derives close to 60% of its revenues from its top 5 customers. Most of its major customers belong to Automotive, ATM hardware and Power and Electricals segments. Consequently, revenue flow is exposed to risks related to moderate customer concentration. However, the diversification into new segments such as clean energy will help the group reduce its customer concentration going forward. Maintaining an inventory of 85 - 95 days exposes the group to fluctuations in prices of key raw materials, steel and copper. However, this risk is partly mitigated by the sales contract with a price variance clause to pass on fluctuations in raw material prices to customers.

Project Risk associated with Nash Energy (I) Private Limited: Company has set up a Lithium Ion phosphate cell manufacturing with a capacity of 600 MW for a project cost of Rs 130 crore including debt of Rs 80 crore. The plant was operational from Q3FY25 and is expected to generate revenue in fiscal 2026 with customer acquisition on going. Customer acquisition in the 2 wheeler/3 wheeler and 4 wheeler segment and timely scale up of the project will remain a critical monitorable for the group.