Rating Rationale
March 19, 2024 | Mumbai
Rashi Peripherals Limited
Long-term rating upgraded to 'CRISIL A+/Positive'; short-term rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.1700 Crore
Long Term RatingCRISIL A+/Positive (Upgraded from 'CRISIL A/Positive')
Short Term RatingCRISIL A1 (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
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 Rashi Peripherals Limited (RPL; Erstwhile Rashi Peripherals Private Limited) to ‘CRISIL A+/Positive’ from ‘CRISIL A/Positive’. The rating on the short term bank loan facilities has been reaffirmed at ‘CRISIL A1’.

 

Rating action reflects improvement in financial risk profile and sustenance of healthy business risk profile which is expected to improve further over the medium term.

 

Company’s total outside liabilities to adjusted networth has improved backed by infusion of ~Rs 750 crore of equity through public offerings deployed towards reduction in working capital debt and payment of creditors. Company’s debt protection metrics continues to remain healthy backed by steady operating margins. Sustenance of improved financial risk profile will remain monitorable over the medium term.

 

Company has also added new principals which has supported the revenue growth apart from healthy demand for IT products and services resulting. Company has reported revenue growth of 11.8% in 9MFY 24 as compare similar period in FY23.

 

CRISIL Ratings expects RPL will continue to sustain healthy growth in revenues over the medium term, supported by improving product basket and geographical diversification, as well as healthy demand for the IT and peripheral products, which will help RPL further solidify its established market position in these product segments, where it is among the market leaders.

 

CRISIL Ratings has also taken into consideration the RPL’s strong risk management policies and efficient working capital management. CRISIL ratings expect RPL continue to have strong financial risk profile backed by steady accretion to reserves and comfortable capital structure. While operating margins should remain stable around 2.7% to 3%, sustenance of scale while maintaining efficient working capital cycle along with sustenance of financial risk profile remain key monitorable.

 

The ratings continue to factor RPL's solid and established market position in the IT and peripheral products distribution business, improving product and geographical diversification in revenues, and its strong risk management practices. The rating is also supported by the company's healthy financial risk profile. The above rating strengths are partially offset by its modest though improving operating margins and working capital-intensive nature of the distribution business.

Analytical Approach

CRISIL Ratings has treated unsecured loan of Rs 27.36 crore from Promoter family as on 31st March 2023 as neither debt nor equity since these are expected to remain in business in near term.

Key Rating Drivers & Detailed Description

Strengths:

  • Collaborating with industry leading principals for more than 2 decades: RPL has collaborated with 53 global technology brands. Major principals include many world-renowned names in the IT industry, like San Disk, Lenovo, HP, Dell, Asus, Western Digital etc. Further, the company is working towards expansion of its portfolio in both IT segment, by venturing into new brands, this is further expected to support revenue growth going ahead. The established relationship with industry’s leading principals helps RPL towards favourable credit terms. Also, better collaboration with principals’ de-risk RPL from any risks of product and technology related obsolescence.

 

  • Strong market position backed by Diversified revenue mix: RPL ranks among the major five IT hardware distributors in India with significant market share. The company has a healthy network of 50 branches, 50 service centers and 65 warehouses covering 733 locations in India through an ecosystem of 9000 plus Channel Partners, as of September 30, 2023. RPL not only enjoys diversified and strong product profile but also principal profiles. CRISIL Ratings believes that RPL will further improve its business risk profile over the medium term, on the back of its established market position in the domestic IT hardware distribution business and continued healthy demand for its products.

 

  • Strong financial risk profile: The RPLs financial risk profile is strong indicated by a strong networth of Rs. 680 crore as on March 31, 2023 and it is expected to over Rs.1600 Crores by fiscal year end 2024 backed by equity infusion and healthy accretion to reserves. TOLANW though has on similar levels for past two years ended on 31st March 2023. With incremental working capital requirement being partially funded through internal cash accruals, in the absence of any large debt-funded capital expenditure (capex) or acquisition, TOLANW ratio is expected to improve to around 1 times and would remain a key monitorable over the medium term. Debt protection metrics are comfortable marked by interest coverage ratio of 2.7 times in fiscal 2023 and is expected to remain healthy over the medium term due to limited reliance on external debt levels.

 

Weaknesses:

  • Operating margins constrained by intense competitive dynamics: The IT product distribution business, although oligopolistic, it is a low operating margin business. Further, RPL faces stiff competition from larger and more established players in getting distributorship rights for lucrative geographies from principals. Moreover, products from newer, less-established brands could face price competition from the established principals that in turn can affect the profitability of their distributors. However, operating margin has remained around 3 % over last 2 years ended fiscal 2022 and was at 2.9% for 9MFY24.

 

  • Susceptibility to the performance of principals: Lenovo, Asus, Hewlett-Packard, SanDisk and Western Digital contribute around 70-71% to the sales of RPL. Deterioration in the performance of these suppliers especially drop in their market share could adversely impact the business of RPL. Similarly, product categories such as personal-computing devices, peripherals, and components contribute over 85% to sales. Although RPL continues to add principals and product categories, their contribution to revenue is not yet significant however they are on increasing trend. Any major disruptive change in technology and intense competition among principals may however impact the business risk profile materially.

Liquidity: Strong

Bank limit utilization is moderate at around 84 percent for the past twelve months ended Feb 2024. Cash accrual are expected to be over Rs 190 crore which are sufficient against term debt obligation of Rs 16 crore over the medium term. In addition, it will act as cushion to the liquidity of the company. Current ratio are moderate at 1.3 times on March 31, 2023. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations.

Outlook: Positive

CRISIL Ratings believes RPL will continue to maintain its healthy growth backed by strong market position in the technology products distribution business, strong financial risk profile and experienced management team.

Rating Sensitivity factors

Upward factors

  • Diversification in revenue profile and revenue growth of over 20% while maintaining operating margin resulting in higher accruals.
  • Sustenance of improved financial risk profile with total outside liabilities to adjusted networth remaining below 1.5 times.
  • Improvement in working capital cycle.

 

Downward factors

  • Significant fall in revenue and operating margin leading to decline in net cash accruals.
  • Stretch in the working capital cycle, significant debt-funded acquisition or capex, or any change in risk management policies, resulting in increase in total outside liabilities to tangible net worth above 2 times.

About the Company

RPL was incorporated in 1989 by chartered accountants, Mr. Suresh Pansari and Mr. K K Choudhary. The company is a distributor of, and after-sales service provider for, personal computers and notebooks, mobile phones, wearable, IT consumables, printers, peripherals, networking products, storage products, UPS and invertors.

Key Financial Indicators

As on/for the period ended March 31

Unit 

2023

2022

Operating income

Rs.Crore

9,263.24

9,161.63

Reported profit after tax

Rs.Crore

123.07

180.45

PAT margins

%

1.33

1.97

Adjusted Debt/Adjusted Networth

Times

1.53

1.48

Interest coverage

Times

2.74

5.23

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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.Crore)

Complexity 
levels

Rating assigned
with outlook

NA

Fund-Based Facilities

NA

NA

NA

1486.3

NA

CRISIL A+/Positive

NA

Non-Fund Based Limit

NA

NA

NA

83

NA

CRISIL A1

NA

Overdraft Facility

NA

NA

NA

34.2

NA

CRISIL A+/Positive

NA

Working Capital Term Loan

NA

NA

Mar-2026

63.2

NA

CRISIL A+/Positive

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

33.30

NA

CRISIL A+/Positive
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 1617.0 CRISIL A+/Positive   -- 31-03-23 CRISIL A/Positive 04-11-22 CRISIL A/Positive 23-09-21 CRISIL A/Stable Withdrawn
      --   -- 08-03-23 CRISIL A/Positive   -- 31-08-21 CRISIL A/Stable --
Non-Fund Based Facilities ST 83.0 CRISIL A1   -- 31-03-23 CRISIL A1 04-11-22 CRISIL A1 23-09-21 CRISIL A1 Withdrawn
      --   -- 08-03-23 CRISIL A1   -- 31-08-21 CRISIL A1 --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities 120 IndusInd Bank Limited CRISIL A+/Positive
Fund-Based Facilities 80 IndusInd Bank Limited CRISIL A+/Positive
Fund-Based Facilities 80 Axis Bank Limited CRISIL A+/Positive
Fund-Based Facilities 161 HDFC Bank Limited CRISIL A+/Positive
Fund-Based Facilities 1.1 HDFC Bank Limited CRISIL A+/Positive
Fund-Based Facilities 75 Citibank N. A. CRISIL A+/Positive
Fund-Based Facilities 186.7 HDFC Bank Limited CRISIL A+/Positive
Fund-Based Facilities 30 Standard Chartered Bank Limited CRISIL A+/Positive
Fund-Based Facilities 100 Axis Bank Limited CRISIL A+/Positive
Fund-Based Facilities 80 ICICI Bank Limited CRISIL A+/Positive
Fund-Based Facilities 127.5 Standard Chartered Bank Limited CRISIL A+/Positive
Fund-Based Facilities 95 ICICI Bank Limited CRISIL A+/Positive
Fund-Based Facilities 125 Citi Bank CRISIL A+/Positive
Fund-Based Facilities 200 The Hongkong and Shanghai Banking Corporation Limited CRISIL A+/Positive
Fund-Based Facilities 25 ICICI Bank Limited CRISIL A+/Positive
Non-Fund Based Limit 8 HDFC Bank Limited CRISIL A1
Non-Fund Based Limit 75 Axis Bank Limited CRISIL A1
Overdraft Facility 34.2 HDFC Bank Limited CRISIL A+/Positive
Proposed Long Term Bank Loan Facility 33.3 Not Applicable CRISIL A+/Positive
Working Capital Term Loan 36.22 HDFC Bank Limited CRISIL A+/Positive
Working Capital Term Loan 16.05 Standard Chartered Bank Limited CRISIL A+/Positive
Working Capital Term Loan 10.93 Axis Bank Limited CRISIL A+/Positive
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating trading companies
CRISILs Criteria for rating short term debt
Understanding CRISILs Ratings and Rating Scales

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