Rating Rationale
April 12, 2021 | Mumbai
Shivalik Bimetal Controls Limited
Ratings reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.71 Crore
Long Term RatingCRISIL A-/Stable (Reaffirmed)
Short Term RatingCRISIL A2+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable/CRISIL A2+’ ratings on the bank facilities of Shivalik Bimetal Controls Ltd (SBCL).

 

The ratings continue to reflect the longstanding presence of the promoters of SBCL in the bimetal industry, and the company’s leading market position and comfortable financial risk profile. These strengths are partially offset by the working capital-intensive operations and volatility in input prices and foreign exchange (forex) rates.

Key Rating Drivers & Detailed Description

Strengths:

Strong market position in the niche linear bimetals segment: Being one of the few manufacturers of bimetal parts and shunt resistors in India, SBCL faces limited competition. The company caters to a broad spectrum of applications, including switchgears, energy meters, and electrical applications, and automotive and electronic devices. Thus, growth remains correlated with the performance of the electrical, electronics, and automotive industries. Turnover remained moderate in fiscal 2020, at Rs 188.66 crore. Operating income stood at Rs 136.8 crore for the first nine months of fiscal 2021, and is estimated to be above Rs 200 crore for the whole fiscal.

 

Strong track record of key management: Presence of over three decades in the niche and highly specialised bimetal industry, has enabled the promoters to ensure sustained revenue growth, despite industry downturns.


Comfortable financial risk profile and adequate liquidity: Networth was large at Rs 114.53 crore, as on March 31, 2020 and at Rs 122.05, as on 30 September 2020, driven by steady accretion to reserve while gearing was healthy at 0.22 time. Debt protection metrics were robust, with interest coverage and net cash accrual to total debt ratios of 8.61 times and 0.63 time, respectively, for fiscal 2020.

 

Weaknesses:

Susceptibility to volatility in raw material prices and forex rates: With metals such as nickel and copper forming around 50% of overall cost, operating margin remains susceptible to volatility in commodity prices. Though metal prices may continue to fluctuate, this risk is mitigated by order-backed processing undertaken by SBCL on highly customised products.

 

Working capital-intensive operations: Gross current assets stood at 168 days as on March 31, 2020, because of sizeable inventory and large receivables. Raw materials inventory of around 120 days is maintained as procurement is imported, and includes a variety of alloys.

Liquidity: Strong

Net cash accrual, estimated at Rs 24.9-30.5 crore in fiscal 2021 and expected around similar levels in fiscal 2022 should comfortably cover maturing debt of Rs 1.78-4.77 crore and the surplus will support liquidity. Need-based funding support from the promoters in the form of unsecured loans (Rs 8.67 crore as on March 31, 2020) is expected to continue. Utilisation of the fund-based and non-fund based facilities averaged 36% and 18%, respectively, for the 12 months ended January 2021. Current ratio was comfortable at 2.75 times as on March 31, 2020.

Outlook: Stable

CRISIL Ratings believes SBCL will continue to benefit from its established market position and experienced management.

Rating Sensitivity factors

Upward factors

  • Sustained growth in revenue (by 20%) and operating margin (by 200 basis points [bps])
  • Better working capital management

 

Downward factors

  • Decline in profitability by 250 bps or stretch in working capital cycle
  • Large debt-funded capital expenditure, weakening the capital structure

About the Company

Incorporated in 1984, SBCL is promoted by Mr. S S Sandhu and Mr. N S Ghumman. The company manufactures thermostatic bimetal/trimetal strips, components, shunt resistors and clad metals. Its units are in Chambaghat, Himachal Pradesh. It is listed on the Bombay Stock Exchange.

Key Financial Indicators

As on / for the period ended March 31

 

2020

2019

Operating income

Rs crore

188.66

195.19

Reported profit after tax

Rs crore

12.76

23.08

PAT margin

%

6.8

11.8

Adjusted debt/adjusted networth

Times

0.22

0.43

Interest coverage

Times

8.61

11.63

 

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 crore)

Complexity level

Rating assigned with outlook

NA

Cash credit &

NA

NA

NA

26.0

NA

CRISIL A-/Stable

NA

Letter of credit & Bank guarantee

NA

NA

NA

20.0

NA

CRISIL A2+

NA

Working capital facility^

NA

NA

NA

25.0

NA

CRISIL A-/Stable

& - Interchangeable upto Rs 20 crore Packing Credit

^ - Interchangeable to Letter of Credit, Packing credit, Sub limit Cash Credit of Rs 7.5 crore, Bank Guarantee of Rs 5 crore

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 51.0 CRISIL A-/Stable   -- 16-04-20 CRISIL A-/Stable 28-03-19 CRISIL A-/Stable   -- --
      --   --   -- 14-03-19 CRISIL A-/Stable   -- --
Non-Fund Based Facilities ST 20.0 CRISIL A2+   -- 16-04-20 CRISIL A2+ 28-03-19 CRISIL A2+   -- --
      --   --   -- 14-03-19 CRISIL A2+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit& 26 Indian Bank CRISIL A-/Stable
Letter of credit & Bank Guarantee 20 Indian Bank CRISIL A2+
Working Capital Facility^ 25 DBS Bank India Limited  CRISIL A-/Stable

This Annexure has been updated on 29-Dec-2021 in line with the lender-wise facility details as on 13-Dec-2021 received from the rated entity.

& - Interchangeable upto Rs 20 crore Packing Credit
^ - Interchangeable to Letter of Credit, Packing credit, Sub limit Cash Credit of Rs 7.5 crore, Bank Guarantee of Rs 5 crore
Criteria Details
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

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