Rating Rationale
January 29, 2021 | Mumbai
Paharpur Cooling Technologies (Singapore) PTE. Limited
Ratings reaffirmed at 'CRISIL A+(CE)/Stable/CRISIL A1+(CE)'
 
Rating Action
Total Bank Loan Facilities RatedRs.230 Crore (Reduced from Rs.450 Crore)
Long Term RatingCRISIL A+ (CE) /Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (CE) (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A+(CE)/Stable/CRISIL A1+(CE)’ ratings on the bank facilities of Paharpur Cooling Technologies (Singapore) PTE. Limited (PCTS). The rating on the long-term bank facilities of Rs 77 crore and short-term bank facilities of Rs 143 crore have been withdrawn following a request from the company. The rating action is in line with the withdrawal policy of CRISIL Ratings.

 

The ratings continue to reflect the strength of the credit enhancement (CE) provided by an unconditional and irrevocable guarantee from the parent Paharpur Cooling Towers Limited (PCTL: rated 'CRISIL A+/Stable/CRISIL A1+'). The business risk profile of PCTS is expected to remain moderate over the medium term due to its modest operating performance. However, CRISIL Ratings takes comfort from the strong financial and operational support it receives from the parent, PCTL.

 

PCTS is a wholly-owned subsidiary of PCTL, and it manages the parent’s overseas dry cooling business, which accounted for nearly 32% of the consolidated revenue in fiscal 2020. Hence, PCTS will remain strategically important to PCTL. These strengths are however partially offset by its modest operating performance and high gearing.

Analytical Approach

CRISIL Ratings has applied its criteria for rating instruments backed by guarantees. CRISIL Ratings has also combined the business and financial risk profiles of PCTS and its subsidiaries, having common businesses and financial fungibility.

 

Please refer Annexure – List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths

  • Unconditional and irrevocable guarantees from the parent covering the entire rated amount

The ratings are based on the strength of the credit enhancement provided by a comprehensive, unconditional, and irrevocable guarantees without demur or protest for the entire rated amount. 

 

  • Operational and financial support from the parent

PCTS acts as the holding company for the dry cooling business entities that PCTL had acquired from SPX Cooling Technologies Inc (SPX Technologies). Hence, operational, managerial, and financial requirements are entirely controlled by the parent. PCTL has also been servicing its debt until now, and will continue to do so until the dry cooling business generates sufficient cash flow.

 

Weaknesses

  • Modest operating performance: Operating performance of PCTS continues to remain modest. In fiscal 2020, operating performance was weak with revenue de-growth of around 40%, resulting in operating losses. The weaker performance was on the back of delays in receipt of few orders coupled with lower execution on account of disruptions caused by the pandemic. However, the segment is expected to report a topline in the range of US$ 180-200 million (over Rs 1,350 crore) and operating margin of 3-4% in fiscal 2021.

 

  • Large debt and small networth: Total consolidated debt was Rs 434 crore (including loans of around Rs 87 crore from the promotors), against equity of Rs 82 crore as on March 31, 2020. PCTS holds the entire debt availed for acquiring the dry cooling business of SPX Technologies and its subsidiaries.

Liquidity: Strong

Liquidity of PCTS remains weak, with cash accrual likely to be insufficient to cover maturing debt over the medium term. However all the borrowings have been guaranteed by PCTL. CRISIL Ratings centrally factors in the expectation of timely support for PCTS from the parent in the event of an exigency. PCTL has superior liquidity, its sizeable quoted investment portfolio had a market value of over Rs 900 crore as on December 31, 2020.

Outlook Stable

CRISIL Ratings believes that the subdued demand for dry cooling tower business is likely to constrain the group’s operating performance over the medium term. However, CRISIL Ratings drives comfort from the credit quality of its parent PCTL.

Rating Sensitivity factors

Upward factors

  • Sustained improvement in the operating performance
  • Upward movement in the parent’s rating by one of more notches

 

Downward factors

  • Downward movement in the parent’s rating by one or more notches
  • Change in stance of support by the parent.

Adequacy of credit enhancement structure

PCTL has provided unconditional and irrevocable guarantee for the bank facilities of PCTS. The well-defined T-structure, ensures timely payment of the interest and principal obligations.

Unsupported ratings ; CRISIL A

CRISIL Ratings has introduced the 'CE' suffix for instruments having an explicit credit enhancement feature, in compliance with the circular of the Securities and Exchange Board of India dated June 13, 2019

Key drivers for unsupported ratings

For arriving at the unsupported ratings, CRISIL Ratings has applied its parent notch-up framework to factor in the support that PCTS receives from PCTL.

About the Company

PCTS is a wholly-owned subsidiary of PCTL, and was formed when the parent acquired the dry cooling business of SPX Technologies for USD 55 million (around Rs 360 crore). PCTS is domiciled in Singapore and acts as the holding company for all step-down subsidiaries of the acquired business. It also holds all the foreign debt availed for the acquisition.

Key Financial Indicators

Particulars

Unit

2020

2019

Revenue

Rs crore

684

1135

Profit After Tax (PAT)

Rs crore

-40

-30

PAT Margin

%

NM

NM

Adjusted debt/Adjusted networth

Times

10.3

5.2

Interest coverage

Times

NM

0.60

CRISIL Adjusted

List of covenants

The material covenants of the instruments are as follows

  • PCTL irrevocably and unconditionally guarantees punctual payment of the facility to each finance party on behalf of PCTS.
  • PCTL undertakes that whenever PCTS does not pay any amount when due under or in connection with any finance document, it will as an independent and primary obligation indemnify that finance party immediately on demand against any cost, loss or liability it incurs.
  • This guarantee given by PCTL is continuing in nature and will extend to the ultimate balance of sums payable by PCTS under the finance documents, regardless of any intermediate payment or discharge in whole or in part.
  • PCTS must notify PCTL in writing (copying the Facility Agent) no later than 15 days before any payment falls due if PCTS does not have, or estimates that it shall not on the relevant payment date have, sufficient funds to make the necessary payment.
  • No later than 15 days after the shortfall notice is delivered to PCTL and in any event no later than the relevant payment date, PCTL must transfer an amount not lower than the shortfall amount to an account of the company which is secured in favour of the offshore security trustee. PCTS can only and shall use the shortfall amount towards the payment due on the payment date.

 

Disclaimer: “Nothing in the letter is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities.”

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)

ISIN

Name of Instrument

Date of Allotment

Coupon
Rate (%)

Maturity
Date

Issue Size
(Rs.Cr)

Complexity Level

Rating Assigned with Outlook

NA

Fund based facilities

NA

NA

NA

83

NA

CRISIL A+(CE)/Stable

NA

Non-fund based limit

NA

NA

NA

147

NA

CRISIL A1+(CE)

NA

Fund based facilities

NA

NA

NA

77

NA

Withdrawn

NA

Non-fund based limit

NA

NA

NA

143

NA

Withdrawn

 

Annexure – List of entities consolidated

Name of entities

Extent of consolidation

Rationale for consolidation

Paharpur Cooling Technologies (Singapore) Pte Limited

Full

Strong managerial, operational, and financial linkages

SPG Dry Cooling Belgium Sprl

Full

Strong managerial, operational, and financial linkages

SPG Dry Cooling Technologies (Beijing) Co. Ltd

Full

Strong managerial, operational, and financial linkages

SPG Dry Cooling Technologies (Zhangjiakou) Co. Ltd

Full

Strong managerial, operational, and financial linkages

Paharpur SPG Dry Sogutma Ticaret Limited Sirketi

Full

Strong managerial, operational, and financial linkages

SPG Dry Cooling USA LLC

Full

Strong managerial, operational, and financial linkages

SPG Dry Cooling Italia SRL

Full

Strong managerial, operational, and financial linkages

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 83.0 CRISIL A+ (CE) /Stable   -- 10-01-20 CRISIL A+ (CE) /Stable 17-10-19 CRISIL A+/Watch Developing 15-11-18 CRISIL A+/Watch Developing --
      --   --   -- 24-07-19 CRISIL A+/Watch Developing 14-08-18 CRISIL A+/Watch Developing --
      --   --   -- 30-04-19 CRISIL A+/Watch Developing 17-05-18 CRISIL A+/Watch Developing --
      --   --   -- 06-02-19 CRISIL A+/Watch Developing 14-03-18 CRISIL A+/Watch Developing --
Non-Fund Based Facilities ST 147.0 CRISIL A1+ (CE)   -- 10-01-20 CRISIL A1+ (CE) 17-10-19 CRISIL A1 15-11-18 CRISIL A1 --
      --   --   -- 24-07-19 CRISIL A1 14-08-18 CRISIL A1 --
      --   --   -- 30-04-19 CRISIL A1 17-05-18 CRISIL A1 --
      --   --   -- 06-02-19 CRISIL A1 14-03-18 CRISIL A1 --
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Fund-Based Facilities 83 CRISIL A+ (CE) /Stable Fund-Based Facilities 160 CRISIL A+ (CE) /Stable
Fund-Based Facilities 77 Withdrawn Non-Fund Based Limit 290 CRISIL A1+ (CE)
Non-Fund Based Limit 147 CRISIL A1+ (CE) - - -
Non-Fund Based Limit 143 Withdrawn - - -
Total 450 - Total 450 -
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Engineering Sector
CRISILs Criteria for Consolidation
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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