| Polycab India Limited | ||||||
| Long-term rating upgraded to 'CRISIL AA+/Stable'; short-term rating reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its rating on the long-term bank facilities of Polycab India Limited (PIL) to ‘CRISIL AA+/Stable’ from ‘CRISIL AA/Positive’ and reaffirmed its ‘CRISIL A1+’ rating on the short-term bank facilities. CRISIL Ratings has also withdrawn its rating on various long-term bank facilities amounting to Rs.497 crore, at company's request and on receipt of no dues certificate for term loan facility from respective lenders. This is in line with the policy of CRISIL Ratings on withdrawal of bank loan ratings. The upgrade reflects CRISIL Ratings’ expectation that PIL’s business risk profile will improve in the near term on the back of its market leadership position in the wires and cables industry in India, revenue diversification with robust growth in the fast moving electrical goods (FMEG) segment and growing business-to-consumer (B2C) mix coupled with improving operating efficiencies. Growing free cash flow would result in further strengthening of the financial risk profile. While operating performance was impacted in the first quarter of fiscal 2021 owing to prolonged nationwide lockdown to contain the Covid-19 pandemic; it improved significantly in the next two quarters led by strong demand across business segments. Operating income grew 3% year-on-year during this period (July-December) and the company registered earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 14% compared to 12.9% in the corresponding period of the previous year. This was supported by cost optimisation measures undertaken by the company. Operating margin is likely to remain at 12-13% for fiscal 2021. PIL registered healthy operating performance in fiscal 2020, with year-on-year growth of over 11% in operating income to Rs 8,830 crore (on consolidated basis) and improvement in the operating margin to 12.9% from 12.6% in fiscal 2019, led by healthy performance across business segments. The financial risk profile is supported by healthy networth (Rs 3,850 crore as on March 31, 2020), and low term debt and working capital borrowings. Moreover, liquidity strengthened in fiscal 2021, with unencumbered cash equivalents and liquid investments at Rs 1,391 crore as on December 31, 2020. The ratings continue to reflect the established brand and fully integrated operations of PIL, and its healthy financial risk profile. These strengths are partially offset by susceptibility to economic downturn, and intense competition. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of PIL and all its subsidiaries and joint venture (JV), as these entities, collectively referred to as PIL, have strong business and financial linkages. 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:
PIL acquired the balance 50% in Ryker in May 2020, thus making it a wholly owned subsidiary. This is will strengthen backward integration and working capital management going forward.
Working capital intensity is higher than industry peers as reflected in gross current asset days in the range of 150-200 days over last few years.
Weakness:
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Liquidity: Superior Liquidity is backed by unencumbered cash equivalent and liquid investments of Rs 1,391 crore and unutilised fund-based bank lines of Rs 329 crore as on December 31, 2020. Available liquidity and expected annual cash accrual of over Rs 750 crore per annum in fiscals 2022 and 2023, will comfortably cover term debt obligation of Rs 50-60 crore per annum and capex plan of Rs 300 crore per annum. |
Outlook: Stable PIL will continue to benefit from its market leadership position in wires and cables segment, growing FMEG business, established distribution network, and backward integrated operations. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Incorporated in 1996, PIL operates in the electrical industry and is the market leader in Indian wires and cables industry, as well as a fast growing FMEG player. The company is also present in Engineering, Procurement and Construction (EPC) business and executes limited projects. The company has 25 manufacturing facilities located across Gujarat, Uttarakhand, Maharashtra, and Daman.
For the nine months ended December 31, 2020, operating income and reported profit after tax (PAT) were Rs 5,889 crore and Rs 603 crore, respectively, against Rs 6,701 crore and Rs 550 crore, respectively, for the corresponding period of the previous fiscal. |
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 – List of Entities Consolidated
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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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Criteria Details
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